(Apr 20): SM Investments (SMI) has terminated its rescue agreement with Hyflux, it announced on Friday. Hyflux, on its part, had already on April 4 terminated the same agreement with SMI.
SMI claims it has thus far abided by the agreement. “To clarify, SMI does not accept the purported termination of the Restructuring Agreement by Hyflux on 4 April 2019. This is because the termination was not in accordance with the terms of the Restructuring Agreement," said SMI.
Under the agreement reached last October, SMI, led by Indonesian tycoon Anthoni Salim, was to have invested $530 million into the debt-laden water treatment company.
Differences surfaced subsequently. SMI claims it wasn’t aware of certain other issues with Hyflux’s assets, such as its existing projects at Tuaspring and another plant in Algeria.
SMI also said its rescue agreement was conditional on Hyflux obtaining approval from its creditor and investors. They were supposed to vote on April 5 but the meetings were cancelled after Hyflux terminated the agreement with SMI on April 4, citing SMI’s repeated refusal to give assurances that the rescue is going ahead.
SMI also said on April 19 that it has commenced legal action against Hyflux.
Maybank moves to protect its claim
In an earlier and separate announcement just after midnight on April 19, Hyflux said that its creditor Maybank wants to appoint its own receivers to take over the power generating portions of the Tuaspring plant.
Just on April 17, national water body Public Utilities Board terminated a water supply agreement with Hyflux, which gives PUB, in the name of national water security, the right to take over the Tuaspring plant with 30 day’s notice.
The Tuaspring plant both generates power, and filters seater into fresh water. Power generated by the plant was to help fuel the desalination process. Excess power generated was to be sold to Singapore’s national grid. Prices of power, have dropped and thereby leading to the operating losses at Tuaspring.
News of PUB’s move to nationalise Tuaspring sent Maybank shares down 2.28% to close at RM9 on April 18 – its lowest level year to date.
With an exposure of nearly RM 2 billion, Maybank is the single largest creditor hit in the whole saga.
Since the middle of last year, Hyflux, weighed down with unserviceable debt of some $2.95 billion, has sought for court protection as it attempts a restructuring.
Maybank and other creditors have thus far agreed to give Hyflux the breathing room.
When the agreement with SMI having fallen through, it has given Maybank, citing breaches in prior agreements, the reason to assert its rights over Tuaspring.