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SIAS queries Hyflux on operations, valuation and accountability matters in open letter

Samantha Chiew

SINGAPORE (Feb 11): The Securities Investors Association Singapore (SIAS) has sent Hyflux an open letter, containing some 23 questions concerning the group’s operations, valuation and accountability, which the association said had not been addressed by the water treatment company which is currently undergoing debt restructuring.

The open letter, addressed to Hyflux founder Olivia Lum and its board members, started by highlighting that almost every Hyflux asset had material faults and defects which were not announced in the group’s latest annual report.

The group’s Qurayyat and Magtaa projects were said to have operational defects and cannot operate at or close to capacity and the Tuaspring and Tianjin Dagang projects were loss-making and could not service their debt with cashflow from operations. Meanwhile, the Tuasone and Tlemcen projects have not yet even been completed.

Among the other questions, SIAS asked how Hyflux had put to use the $500 million and $400 million raised from the issue of perpetual securities and preference shares respectively and whether they were used accordingly as set out in the respective prospectuses.

SIAS asked how Hyflux could continue to pay dividends and accumulate more debt given it had recorded losses since 2018 and generated negative cashflow since 2019 and whether this was highlighted to bondholders and shareholders at all.

Hyflux was also asked to justify the remuneration for its top executives, given its current financial position and performance.

In its FY17 annual report, SIAS noted that Hyflux key executives were paid $2.70 million, with founder Olivia Lum receiving between $0.75 million and $1.0 million.

While Hyflux had attributed its financial woes to the low electricity prices in Singapore, which caused Tuaspring to record losses, SIAS said this is doubtful and asked whether there were other factors involved.

SIAS also asked Hyflux whether its operations and maintenance (O&M) business is a source of future value for its stakeholders as its seemed to have a large orderbook of future revenues.

In the open letter, SIAS urged Hyflux to publish its responses as the answers would help securities holders have a better understanding of the group’s current state and make an informed choice, with respect to the group’s restructuring.