Singapore seizes water plant from Hyflux after launching accounts probe

Hyflux subsidiary Tuaspring in Singapore. (AFP pic)

SINGAPORE: Singapore moved to take control of debt-laden Hyflux’s key water treatment plant on Wednesday, a day after authorities said they were reviewing the company’s disclosures to see if it has breached any laws.

Once lauded as a national champion running a strategically important water source for the city-state, Hyflux is now under a court-supervised restructuring process that could wipe out the holdings of tens of thousands of retail investors.

Singapore’s national water agency, PUB, issued a notice to Hyflux on Wednesday saying it would take over the company’s Tuaspring desalination plant in 30 days and terminate its water supply deal.

Hyflux said in a statement late on Wednesday that the move “is expected to have a material impact on the financial performance” of the company and its subsidiaries.

The PUB notice followed an announcement late on Tuesday that authorities were “reviewing Hyflux-related disclosure issues, as well as compliance with accounting and auditing standards”.

The review was “to determine if there have been breaches of listing rules and/or the relevant laws and regulations,” said the Monetary Authority of Singapore, the Accounting and Corporate Regulatory Authority and the Singapore Exchange Regulation.

A spokeswoman for Hyflux told Reuters in an email on Tuesday that the firm will be “cooperating fully” with their queries.

The Securities Investors Association of Singapore, representing security holders, had previously questioned how Hyflux’s auditors signed off on its annual report just two months before it filed for court protection.

The association also queried how it was able to report profit prior to 2017 despite lacking cash.

Hyflux’s debt stood at about S$1.67 billion (US$1.2 billion) at the end of September.

Earlier this month, Hyflux said a lifeline deal with prospective Indonesian investor, SM Investments, a consortium of Indonesia’s Salim Group and Medco Group, had collapsed.

On Monday, Hyflux took legal action against SM Investments. Hyflux’s Tuaspring plant is the largest of three desalination plants in Singapore, an island city of 5.6 million people that is trying to become less reliant on neighbouring Malaysia for water supplies.

According to a Hyflux affidavit last year, Tuaspring, had a book value of S$1.3 billion and can meet up to 17.5% of Singapore’s water demand. But Hyflux took an impairment loss of S$916.5 million mainly related to the plant in its January-September 2018 results reported last month. ($1 = 1.3539 Singapore dollars)