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Hyflux mulls over rescue financing, recognises ‘lessons to be learnt’

SINGAPORE — Beleaguered water-treatment company Hyflux is mulling over rescue financing as a possible option to get out of its cash flow crisis.

Hyflux CEO Olivia Lum said she started the company some 30 years ago and the current situation was "not something I ever envisioned nor is it something I ever wanted".

Hyflux CEO Olivia Lum said she started the company some 30 years ago and the current situation was "not something I ever envisioned nor is it something I ever wanted".

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SINGAPORE — Beleaguered water-treatment company Hyflux is mulling over rescue financing as a possible option to get out of its cash flow crisis.

Other measures include divesting a stake in its Tuaspring project — an effort that has proved fruitless since early last year — and recalibrating its risk position, the company said on Thursday (May 24) in response to TODAY’s queries.  

The company also addressed criticism by corporate governance experts about its risk management practices and the influence wielded by its founder and group chief executive Olivia Lum — who is also the executive chairman — over its board of directors. 

“Ms Lum, and the Hyflux organisation, are committed to operating a sustainable business in accordance with sound principles of corporate governance, and to optimise value for all of Hyflux’s stakeholders,” said the company, adding that its decision to engage in a reorganisation of its liabilities was “a step taken in furtherance of this objective”.

Still, it acknowledged that there were lessons to be learned from the past “as with any business”.

“In charting this next phase of Hyflux’s journey, we believe in being receptive, and not dismissive, whether within the boardroom, or when engaging external stakeholders,” it added.

Once a market darling, the company’s fall from grace prompted experts to question its risk management practices, noting that its committee overseeing this area met only once in the 2017 financial year. 

Speaking to TODAY, Associate Professor Mak Yuen Teen of the National University of Singapore, for example, had pointed out that one yearly meeting was inadequate for a risk management committee. He also cast doubt on whether Hyflux's board of directors had asked the right questions and challenged corporate decisions in the face of a dominant figure in Ms Lum.

Hyflux announced on Tuesday that it was seeking court protection to reorganise its business and deal with its liabilities.

On Thursday, it stressed that it was “looking forward”, and in a process to “effectively engage with stakeholders to formulate a strategy that will bridge the temporary cash gap it faces and optimise the value of the group”.

Hyflux said the “holistic” process would take stock of worst-case scenarios when projecting cash flows, as well as the future value of its business that can be secured through the process. This includes the S$750 million TuasOne waste-to-energy plant due to be completed next year, which it is developing with its Japanese partner Mitsubishi Heavy Industries.

“All decisions will be made in accordance with the principles of corporate governance, involving all relevant and independent decision-making bodies of the Hyflux organisation, and in consultation with Hyflux’s legal and financial advisers,” the company added.

Over the years, Hyflux has had to deal with snowballing debt. As of March 31, the company chalked up S$1.3 billion in net borrowings, compared with S$1 billion in equity.

In particular, the Tuaspring project, which combines South-east Asia's largest water desalination plant with a gas turbine power plant, has put a dent in its bottomline.

Hyflux reiterated that the problem of low electricity prices, which it blamed as “much of the trigger for the current liquidity crunch”, has been around for a while.

It was in recognition of this that Hyflux’s board had approved efforts to divest part of its stake in the project since early last year, the company said.  

While it continues to undertake efforts to obtain a reasonable price from potential purchasers, it said what it needs now is “time to reorganise liabilities and ensure the ongoing projects continue to be sufficiently financed and protected”.

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