Hyflux

(24-06-2018, 12:05 AM)sgdividends Wrote: Hi Weijian,

Regarding the 18 months and still unsold and about the veracity of the book value,

Sometimes I wonder if the 58% power generator being currently owned by foreign entities could result in a smaller market for buyers of Tuaspring if they are restricted to local buyer's only due to security reasons. Who knows.

Already the restriction of not one generator being able to own 25% of the power is already a restriction if say one of the current generators owning already near 25% wants to buy. Who knows.

Join the retail investors group for updates on hyflux if u own perpetual securities , preference shares or hyflux stock

https://t.me/hyflux_retail

I doubt. Check our major Electrical power supply since 1970, is a Japanese consortium.

Who and which are the parties at fault in this Hyflux fiasco? Think hard about this question, and do share your considered views here, and hopefully we can all draw some good conclusions which will serve us well to avoid similar major corporate/business failures and investment mistakes.

Were the management of Hyflux awared this was a regulated biz when they decided to go into it ?

In 2016, the original offering size of the 6% PCS was 300m. It was upsized to 500m due to oversubscription. Hyflux can do with 300m 6%PCS, it also did not mind taking 500m 6%PCS....that to me was unrestrained debts commitment with little regards to sustainability of servicing or repayment.

In the Electricity market, not all gencos exported to the national grid at a loss. One, YTL PowerSeraya, managed to stay profitable. EMA's stand is power generation capacity are commercial decisions and as such, the current overcapacity is the result of these commercial decisions. And the one profitable genco may just convince EMA their USEP pricing is just about "right".

(24-06-2018, 12:05 PM)ACTIVIST SPEAKS Wrote: In 2016, the original offering size of the 6% PCS was 300m.  It was upsized to 500m due to oversubscription.  Hyflux can do with 300m 6%PCS, it also did not mind taking 500m 6%PCS....that to me was unrestrained debts commitment with little regards to sustainability of servicing or repayment.

In the Electricity market, not all gencos exported to the national grid at a loss.  One, YTL PowerSeraya, managed to stay profitable.  EMA's stand is power generation capacity are commercial decisions and as such, the current overcapacity is the result of these commercial decisions.  And the one profitable genco may just convince EMA their USEP pricing is just about "right".

didn't really follow hyflux all these while. have always tot hyflux is a water desalination business that sung along with the theme that to drink recycled toilet water is good...why did it diversify into power generation?

If i recall, when Hyflux bidded for Tuas spring, the mgmt realized that the electrical prices then would form a significant cost for desalinating water. So Hyflux probably thought, if electricity cost so much in Singapore, why not I produce it in my plant and sell back the excess. This too would enable me to subsidize my water plant since back then in 2012, electricity power generation was a profitable business. Olivia thought she had stumbled upon a new model of cross subsidy.

https://www.valuebuddies.com/thread-810-page-14.html

However, electrical prices has halved since their Tuas bid, mainly due to overcapacity created by all gencos. Hyflux had been banking Tuas plant will be profitable from electrical sales price in 2011/2012 while selling its water cheaply to PUB. It is simply down to a business mistake by Hyflux. The second mistake was taking on such a big project like Tuas spring project which contributes to 30% of your entire asset. It was a concentration risk which is worsened by leverage. If you notice in land sales bidding in Singapore, for many land bidding, developers do not bid alone but form JVs, there is a reason and that is not to be too concentrated in a condo project which may kaput on them.

Fast forward to the present, I think there is value in the current Tuas Spring plant (definitely price lower than book value). However the new bidder has to (i) fulfill Hyflux's low water prices agreement to PUB and (ii) contend with an electrical overcapacity industry. All these means losses.

Singapore is suffering from an overcapacity of electricity because there is too much power generators being built (commercial decision by the entire industry). In fact, it will take probably 20 more years of demand growth to meet the excess supply built. And power consumption demand greatly depends on a growing population which Singapore can only do so by importing more foreigners.

Also managed to find the vesting price data (current price $0.1591/kwh). Link can be found here: https://www.openelectricitymarket.sg/abo...sting-data

Tonylim, it depends on whether it was communicated clearly to the gencos during their decision or negotiation stage that the vesting contracts would be reduced or even if reduced , what is the extent etc... This we won't know.

I do not that such a big investment decision to go ahead will be made if it was communicated very clearly . I mean these are smart people I would assume.

Activist speaks, actually if u look at the consultarive feedbacks with the gencos, it is quite clear that the gencos were very vocal about many things, such as , the inputs used to calculate some formula ( I don't understand ) to determine the vesting price ..but whether the regulator choose to listen, I think if u are interested, u can go look at their replies to judge for yourself .
https://www.google.com.sg/search?q=vesti...e&ie=UTF-8


Join the retail investors group for updates on hyflux if u own perpetual securities , preference shares or hyflux stock
https://t.me/hyflux_retail

(24-06-2018, 10:27 AM)dydx Wrote: Who and which are the parties at fault in this Hyflux fiasco? Think hard about this question, and do share your considered views here, and hopefully we can all draw some good conclusions which will serve us well to avoid similar major corporate/business failures and investment mistakes.

That's a good question.
I would start to say the investors ( myself ), management ..

Anyone else?

Join the retail investors group for updates on hyflux if u own perpetual securities , preference shares or hyflux stock
https://t.me/hyflux_retail

http://www.eco-business.com/news/hyflux-...ted-water/

https://www.globalwaterintel.com/insight...s-ambition


Tuaspring was never meant to be Hyflux’s project. The tender specified that there would be no pass-through on the cost of power for the project. That is to say, the owner of the plant would not be compensated with higher water tariffs if electricity tariffs rose. The implication of this specification was that the project was meant for one of the island’s power generators (such as Keppel or Sembcorp) who could use the slack in their generating capacity to deliver the lowest cost water.


Ironically, if the electrical tariff has risen, hyflux will be fine.

So, apparently, both PUB and EMA have done Hyflux in.
By promising the cheapest desalination water in the world at 45cts per m3 for the first year, hyflux is not going to make money from water and at the current electrical price, they are also not going to make money by selling electricity.

With the 2nd round of increase in water tariff by PUB, the price per m3 of portable water has risen to $2.74.
So, the moral of the story is that the gov bodies are quite shrewd and therefore, it may not be a good idea to strike a low margin deal with them.

(24-06-2018, 02:16 PM)sgdividends Wrote:

(24-06-2018, 10:27 AM)dydx Wrote: Who and which are the parties at fault in this Hyflux fiasco? Think hard about this question, and do share your considered views here, and hopefully we can all draw some good conclusions which will serve us well to avoid similar major corporate/business failures and investment mistakes.

That's a good question.
I would start to say the investors ( myself ), management ..

Anyone else?

Join the retail investors group for updates on hyflux if u own perpetual securities , preference shares or hyflux stock
https://t.me/hyflux_retail

You might want to add PUB and EMA since these two entities( ultimately Singaporeans ) benefit the most from the the low water price and the low cost of power generation with over ample power generation capability.

I thought Tuaspring problem is relatively easy to solve if PUB and EMA can sit down with hyflux or buyer of Tuaspring to work out a deal. I can understand that it is a business decision but to be fair, if there is too much short change, the parties that derive the most benefit should give some leeway to the suffering party.