SINGAPORE  - National  water agency PUB is expected to unveil, within weeks, the winner of a S$400-500 million contract for the construction of Singapore' s fourth desalination plant under a design, build, own and operate (DBOO) arrangement.

In April, PUB had announced the tender for the 30 million gallon plant to be built in Marina East. The Business Times understands that the tender drew six bids - four were from Singapore-listed entities Hyflux, United Engineers (UE), Sembcorp Industries and the infrastructure business unit of Keppel Corporation two others were from the China-linked MCC Land Pte Ltd and Spain' s Tedagua.

The tender is understood to entail a two-stage evaluation of the commercial and technical elements of the proposals from the bidders.

After the first-stage evaluation, UE was leading by a wide margin, based on its proposed tariffs for the plant. But informed sources said that technical parameters such as the energy efficiency of the proposed plant would weigh in in the second stage.

A factor that could also influence the outcome of the tender is if any of the bidders (potentially Hyflux, Keppel Corp and Sembcorp Industries) proposes tapping the excess power generated by its existing projects to enhance the overall competitiveness of its proposal.

All four Singapore-listed contenders have previously bagged water-treatment projects from PUB. Hyflux won the contracts for Singapore' s first two desalination plants, SingSpring and Tuaspring Keppel-Seghers, Sembcorp Industries and UE bagged contracts for three NEWater plants.

Sembcorp Industries confirmed to BT its participation in the tender for the Marina East plant.

A Keppel spokesman said, without commenting directly on the tender, that the conglomerate is " regularly evaluating opportunities to grow its businesses" . Hyflux and UE did not respond.

Between the two other bidders, Spain' s Tedagua is supporting HSL Constructor Pte Ltd in the delivery of a process solution for Singapore' s third desalination plant in Tuas.

MCC Land is the Singapore-based property development unit of Shanghai-listed Metallurgy Corporation of China' s subsidiary in Singapore, MCC Singapore. MCC Singapore has been involved in the construction of HDB projects, including the main lift-upgrading programmes.

The Marina East desalination plant will add another 137,000 cubic metres (about 30 million gallons) of desalinated water a day to Singapore' s water supply.

The award of the contract is expected in October, with construction of the plant projected for 2019.

PUB is aiming to expand its desalination and NEWater capacities to meet up to 85 per cent of Singapore' s water needs by 2060.

Singapore is drawing 100 million gallons a day, about a quarter of its daily water demand, from the two desalination plants already in use.

PUB' s third desalination facility in Tuas will have a capacity of 30 million gallons per day and begin operations by 2019. After the Marina East plant, a fifth plant, also with a capacity of 30 million gallons, is on the table for Jurong Island it will be completed around 2020.

Hyflux&rsquo s shares, preference shares, perps suffer selloff

     

By: 

Goola Warden

SINGAPORE (Aug 23): Securities issued by Hyflux have been under selling pressure since Aug 12. Besides its shares falling 5.7% to 50 cents, a tranche of perpetual securities the company issued only in May with a coupon of 6% have fallen 6.5% below par to 93.7 cents. On top of that Hyflux&rsquo s preference shares have fallen 5.8% to $94.37 on relatively high volume, sparking a query from Singapore Exchange on Aug 19 about unusual trading activity. Hyflux promptly responded to the query, stating that it &ldquo is not aware of any information not previously announced concerning the company or its subsidiaries which explain the trading&rdquo .

In fact, announcements from Hyflux over the last few months explain a lot about its current situation. The issue of perps in May was upsized from an initial $300 million to $500 million due to strong demand at time from investors hunting for yield. Yield instruments issued by companies like  Aspial  and  Perennial Real Estate Holdings  around that time were also warmly received by investors. Hyflux said that the funds it raised would be partly used for the redemption of $100 million of 3.5% bonds, and some $175 million of 4.80% perps. The company still has some $300 million of 5.75% perps issued in January 2014 outstanding. This tranche of perps are also trading below par.

Since May, however, the mood in the market has changed, with investors becoming more concerned about defaults and financial stress at companies with large debt burdens and looming debt maturities. In the case of Hyflux, its debt costs are also on the rise following the issue of its latest tranche of perps in May. Annual interest on the $500 million would top some $30 million, which it is to pay semi-annually. The first payment is in November. It also pays some $12 million annually on its preference shares. The next semi-annual payment is in October. However, these financing costs will be mitigated somewhat by the redemption of its 3.5% bonds and 4.80% perps.

On Aug 4, Hyflux reported a 174% increase in revenue to $260 million, helped by contributions from Quarayyat independent water project in Oman and the TuasOne waste-to-energy project in Singapore. However, earnings slumped 84% to $4.2 million due to higher raw material costs, subcontractor costs and amortisation charges. Free operating cash flow for the quarter was negative $97 million. As at June 30, the company had a net gearing of 49% excluding the perps, . Its shareholders&rsquo funds stood at $1.7 billion including some $964 million of perpetual securities. It had a net asset value of 44.3 cents per share as at June 30, down 18% y-o-y.   Its Ebitda coverage has fallen to 2.52 times as at June 30, compared with four times a year ago.

In the months ahead, Hyflux sees continued contributions from the Qurayyat and TuasOne projects as well as projects in Saudi Arabia. However, it expects weak financial performance from its Tuaspring power plant due to weak electricity prices. In the meantime, Hyflux is moving into the consumer space by producing ELO drinking water in Singapore from 3QFY2016.

Credit Suisse is forecasting a net loss of $11.1 million at Hyflux for 2016, versus earnings of $41.3 million last year.

What can Hyflux do to avoid the risk of financial stress? Interestingly, some companies are turning to banks to redeem their bonds. On Aug 19,  Mencast Holdings  said United Overseas Bank has agreed to provide it with a secured loan facility of up to $50 million and secured facilities of up to $24.9 million, comprising term loan facility, trade facility and money market credit facility. Some of these loans will be used to redeem $50 million of outstanding Mencast bonds due on Sept 12, and to refinance existing loan facilities and general working capital. The UOB loans are secured by mortgages over several properties, and guarantees from Mencast and its subsidiaries.

Hyflux has 31 banks including the three local banks listed in its annual report. DBS Group Holdings was the sole lead manager of the most recent perp offering and also of its preference shares back in 2011. If these preference shares are not redeemed by Apr 25, 2018, their dividend rate will be stepped up to 8% per annum.

SINGAPORE  - National  water agency PUB is expected to unveil, within weeks, the winner of a S$400-500 million contract for the construction of Singapore' s fourth desalination plant under a design, build, own and operate (DBOO) arrangement.

In April, PUB had announced the tender for the 30 million gallon plant to be built in Marina East. The Business Times understands that the tender drew six bids - four were from Singapore-listed entities Hyflux, United Engineers (UE), Sembcorp Industries and the infrastructure business unit of Keppel Corporation two others were from the China-linked MCC Land Pte Ltd and Spain' s Tedagua.

The tender is understood to entail a two-stage evaluation of the commercial and technical elements of the proposals from the bidders.

After the first-stage evaluation, UE was leading by a wide margin, based on its proposed tariffs for the plant. But informed sources said that technical parameters such as the energy efficiency of the proposed plant would weigh in in the second stage.

A factor that could also influence the outcome of the tender is if any of the bidders (potentially Hyflux, Keppel Corp and Sembcorp Industries) proposes tapping the excess power generated by its existing projects to enhance the overall competitiveness of its proposal.

All four Singapore-listed contenders have previously bagged water-treatment projects from PUB. Hyflux won the contracts for Singapore' s first two desalination plants, SingSpring and Tuaspring Keppel-Seghers, Sembcorp Industries and UE bagged contracts for three NEWater plants.

Sembcorp Industries confirmed to BT its participation in the tender for the Marina East plant.

A Keppel spokesman said, without commenting directly on the tender, that the conglomerate is " regularly evaluating opportunities to grow its businesses" . Hyflux and UE did not respond.

Between the two other bidders, Spain' s Tedagua is supporting HSL Constructor Pte Ltd in the delivery of a process solution for Singapore' s third desalination plant in Tuas.

MCC Land is the Singapore-based property development unit of Shanghai-listed Metallurgy Corporation of China' s subsidiary in Singapore, MCC Singapore. MCC Singapore has been involved in the construction of HDB projects, including the main lift-upgrading programmes.

The Marina East desalination plant will add another 137,000 cubic metres (about 30 million gallons) of desalinated water a day to Singapore' s water supply.

The award of the contract is expected in October, with construction of the plant projected for 2019.

PUB is aiming to expand its desalination and NEWater capacities to meet up to 85 per cent of Singapore' s water needs by 2060.

Singapore is drawing 100 million gallons a day, about a quarter of its daily water demand, from the two desalination plants already in use.

PUB' s third desalination facility in Tuas will have a capacity of 30 million gallons per day and begin operations by 2019. After the Marina East plant, a fifth plant, also with a capacity of 30 million gallons, is on the table for Jurong Island it will be completed around 2020.