Hyflux takes S$916 million impairment hit for first nine months of 2018

Water treatment firm Hyflux has taken a S$916 million (US$676.76 million) impairment charge for the nine months ended September 30th, 2018, to adjust to the carrying value of the Tuaspring water and power plant and other write-downs.

The firm submitted its latest statement of financial position to the High Court of the Republic of Singapore on Saturday where the impairment figure was disclosed.

This is the first time the embattled firm had revealed any financial numbers since it applied for a moratorium in May to prevent it from being wound up.

The impairment loss ‘relates predominantly to the impairment loss arising from the assessment of the carrying value of Tuaspring and the impairment of receivables for previously completed projects," Hyflux said in the unaudited statement of financial position.

Company to get further valuation

Hyflux is in the process of a court-supervised reorganization, after it had applied to the High Court in May to protect it from creditors while it restructures its debt.

According to a court affidavit filed in June last year, the firm’s chief executive and founder Olivia Lum said the Tuaspring plant had a book value of S$1.3 billion.

While the firm has taken the current valuation in the unaudited financials, it intends to get another valuation from another valuer as the current valuation is ‘significantly lower’ than in 2016.

‘As the carrying value is a reflection of the current depressed market, in the event that the Singapore power market recovers to provide generation companies with sufficient spark spread margins, the valuation might then be revised,’ Hyflux said.

The firm's Tuaspring plant posted a net loss of S$81.9 million for the full year ended December 31st, 2017, and has been contributing to the group’s losses since 2001. As of April 30, 2018, the plant’s total liabilities snowballed to S$537 million.

Working out its restructuring plans

In October last year, Hyflux said Indonesia’s Salim Group and Medco Group (forming a consortium called SM Investments) agreed to inject a S$400 million equity investment in exchange for a 60% stake in the water treatment company to help finance its restructuring and debt problems. The deal also includes two separate loans: a shareholder’s loan of S$130 million and a debtor-in-possession loan of S$30 million.

Last month, the group received the green light from Singapore’s High Court to hold scheme meetings in April for creditors to vote on its restructuring plan.

The group will be conducting a town hall meeting with retail stakeholders on March 13th to discuss about its restructuring scheme.

Hyflux needs to get an agreement from the majority of its creditors and another court approval by mid-April before the S$530 million lifeline from SM Investments expires.

Hyflux's shares remain suspended on the Singapore Exchange.