Chances of a new white knight for Hyflux low, say experts
Troubled water treatment company Hyflux may have had to offload its failed Tuaspring desalination plant, but its survival still depends on the appearance of a new white knight investor.
Experts told The Straits Times that the chances of one are low despite the removal of a loss-making asset from its books.
Singapore Management University law don Eugene Tan called the emergence of a new white knight investor "a big if".
With each passing day, the chances of getting the requisite and urgent fresh injection of funds are getting lower, he said.
National water agency PUB yesterday issued a notice to Tuaspring to terminate its water purchase agreement with the company. It will subsequently take over the desalination plant after a 30-day notice period. Tuaspring's power plant will remain under Hyflux's charge.
Hyflux walked away from a $530 million restructuring deal by Indonesian white knight investor SM Investments earlier this month.
They could not agree on how much to allocate between paying Hyflux's debtors and boosting the firm's ability to operate, which led to a tense relationship.
Hyflux filed a lawsuit in the Singapore High Court for the alleged repudiation of the rescue deal, and is claiming the $38.9 million deposit.
Associate Professor Tan said: "After the SM Investments debacle and with Hyflux now taking legal action... any white knight investor will be even more wary unless it knows exactly what it is getting itself into."
Associate Professor Lawrence Loh of the National University of Singapore said: "Even if the PUB takeover removes a toxic asset... the rest of Hyflux is not plain sailing."
He pointed out that Hyflux is saddled with problems with its overseas water plants, particularly in Algeria.
Tuaspring's power plant is also unattractive, given the poor market conditions, added Prof Loh, who is also the director of the Centre for Governance, Institutions and Organisations.
Nanyang Business School's Associate Professor Kevin Koh said that a factor that will affect investors' willingness to rescue Hyflux is whether they could find synergy with the Tuaspring power plant.
Tuaspring is at the heart of Hyflux's financial problems. The integrated water and power plant was meant to enable profits from the power plant to be used to subsidise the desalination plant's operation costs.
But the weak electricity market, coupled with operating losses from the desalination plant, sank Hyflux into debt.