Hyflux

[karlmarx]

I was surprised to learn that Olivia still believes that Tuaspring can be sold at or above book value. It reminded me of the Ngs of China Fishery, who refused to be low-balled. For the sake of stakeholders, I hope Olivia's optimism of a good sale price is not without good reason. Perhaps she could also sense a state bailout?

Conversion of debt to equity will be what management will push for; no need to repay debt and equity will be raised. But banks and senior lenders will not want it. The group most vulnerable to this is PCS and CPS holders. They may be offered options that are similar to Ezion note holders. Even if Hyflux offers to extend call date and reduce coupons, it does not mean that the PCS/CPS holders are certain to get back their monies in the further future. This is why a lot of Ezion note holders are converting to equity and selling. For shareholders, get ready to lose almost all of the value of your shares through massive dilution.

The best way to approach this, or any major/seemingly irreversible loss, is to:
1) Let go and write off your investment completely. You will feel much better.
2) Accept that you have not been thorough in your due diligence.
3) Learn to do more thorough due diligence when prospecting for your future investments.
4) Go on and continue in your investing journey.

Activism is good too, especially if you're quite the charmer. But do note that the benefits which a subordinated debt holder can get is limited to what the senior debt holders are getting. In other words, don't expect a sweeter deal than the bankers.

I apologise if anyone finds this offensive.

[karlmarx]

Hyflux Lum is framing this as a liquidity issue. But some VBs are calling the bluff and believe that the assets on the BS have to be written down, and when it is written down, it obviously becomes a solvency issue instead.

Weijian, how did the VBs find out its a bluff ?

We won't know as numbers are held confidential as a P3 state by the judge.

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

https://t.me/hyflux_retail

Nobody knows for sure, perhaps not even OL herself. VBs can only speculate based on reasoning.

The issue surrounds an asset which losses a lot of money, and whether there are willing buyers of such an asset, at or above book value. 

Why would anyone want to buy a loss-making asset at book value? It doesn't make sense. Unless it's a bailout.

There will certainly be buyers at lower prices. It will make a lot of sense for the state to buy Tuaspring at a big discount, since water security is one of its concern. But OL has stated that she is not willing to consider below book value prices. 

Yet while water security is an important local issue, it should be noted that Tuaspring is not the only desalination plant in Singapore.

[ACTIVIST SPEAKS]

Olivia Lum attributed the poor performance of Tuaspring mainly to the low retail price of electricity. Now with the knowledge that the Tuaspring's electricity output is only 3% of Singapore power and desalinated water is contracted to PUB, it begs the question whether Tuaspring was ever commercially feasible. What price must electricity be priced before Tuaspring can be profitable? How much would one pay for a loss-making asset with a limited lifespan? Not willing to consider price below book value....sound more like an excuse rather than a statement.

[CY09]

As said previously, the power generation industry in Singapore is moving towards a market model where power generation companies are now free to sell their electricity to households. However, based on prices presented to Jurong residents, Keppel and Sembcorp are selling electricity at a lower rate than Hyflux's. If our country continues to be oversupplied by electricity, logically it means Hyflux will not clinch much sign ups with consumers. It is back to square one for Hyflux.

SIAS statement on perp holders is a tad too late. Ezion perp holders were also "killed" but were fortunate that they could exchange for Ezion shares at the same price as unsecured bondholders. Hyflux can offer the same deal where unsecured bondholders and perp holders get to exchange shares at the same share price rate, this allows for equal treatment; however, it is likely these groups of people will only be able to sell their shares at a price lower than they exercised (aka a haircut)

If we were to move to a competitive industry, Hyflux pricing means it will not be able to compete with Keppel or Sembcorp who are selling electricity at a lower rate (about $0.168 per kwh). Based on current vesting rates, Sembcorp and Keppel is selling only about 10-20% above the current rate all Gencos are selling into the grid (current vesting rate: $0.15-$0.15857 per Kwh).

[cif5000]

As said previously, the power generation industry in Singapore is moving towards a market model where power generation companies are now free to sell their electricity to households. However, based on prices presented to Jurong residents, Keppel and Sembcorp are selling electricity at a lower rate than Hyflux's. If our country continues to be oversupplied by electricity, logically it means Hyflux will not clinch much sign ups with consumers. It is back to square one for Hyflux.

SIAS statement on perp holders is a tad too late. Ezion perp holders were also "killed" but were fortunate that they could exchange for Ezion shares at the same price as unsecured bondholders. Hyflux can offer the same deal where unsecured bondholders and perp holders get to exchange shares at the same share price rate, this allows for equal treatment; however, it is likely these groups of people will only be able to sell their shares at a price lower than they exercised (aka a haircut)

If we were to move to a competitive industry, Hyflux pricing means it will not be able to compete with Keppel or Sembcorp who are selling electricity at a lower rate (about $0.168 per kwh). Based on current vesting rates, Sembcorp and Keppel is selling only about 10-20% above the current rate all Gencos are selling into the grid (current vesting rate: $0.15-$0.15857 per Kwh).

Is there a weblink to this figure, or do you have to derive it from multiple observations/data?

[CY09]

Iirc multiple observation. I was reading some links in this hyflux thread from page 25-29 and stumbled upon the price

[sgdividends]

Actually , the price can be inferred from the prices that Jurong residents are getting now which is up to 20% lower that the SP regulated tariffs.

Of note is that most of them offer quite similar discounts off SP regulated tariffs

[BRT]

Olivia Lum attributed the poor performance of Tuaspring mainly to the low retail price of electricity. Now with the knowledge that the Tuaspring's electricity output is only 3% of Singapore power and desalinated water is contracted to PUB, it begs the question whether Tuaspring was ever commercially feasible.  What price must electricity be priced before Tuaspring can be profitable?  How much would one pay for a loss-making asset with a limited lifespan?  Not willing to consider price below book value....sound more like an excuse rather than a statement.

i went to the EMC website (https://www.emcsg.com/marketdata/pricein...ceDataView) to check historical electricity prices. since tuaspring started operations some time in 2015 (https://www.waterworld.com/articles/2015...pring.html), whatever price projection/extrapolation should be done in 2014 or before. i think they sell the generated electricity to the grid, which means WEP or USEP is the relevant price. i dont know what the diff is but they're about the same anyway.

1 jun 2014: WEP - 13.7c, USEP = 13.6c
1 jun 2018: WEP - 10.2c, USEP = 10.2c
all values are averaged.

could shed some light on the level prices need to be for profitability.

[weijian]

Hyflux Lum is framing this as a liquidity issue. But some VBs are calling the bluff and believe that the assets on the BS have to be written down, and when it is written down, it obviously becomes a solvency issue instead.

Weijian, how did the VBs find out its a bluff ?

We won't know as numbers are held confidential as a P3 state by the judge.

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

https://t.me/hyflux_retail

hi sgdividends,
I dont know what confidential numbers you are talking about. VBs generally look at what the numbers tell them, not what others tell them.

You can refer to forummer AQ post that sums up the issue: https://www.valuebuddies.com/thread-810-...#pid147542. What Behappyalways and CY09 has been saying, also make a lot of sense.

I will add my small piece here:
- If you refer to Hyflux's 1Q18 statements, it's 1.1 bil of equity (including treasury shares) is basically funded by 600mil capital + 500mil perpetuals. Retained earnings is basically negligible or slightly negative.
- All this means that the moment Tuaspring cannot be sold at current value on the books (which is the key point that VB folks have recognized), there is no cushion at all from retained earnings and capital/perpetuals have to take a hit. This means that that this turns into a solvency problem - To resolve a solvency problem without liquidation, it calls for either/both capital (equity owners) and perpetual (the bond holders) to take a hit - shareholders (capital) suffer a dilution and bond holders (perpetual) take a cut.

[sgdividends]

Thanks all for your insights! 😃

The retail investors are compiling a list of questions to ask Olivia hyflux on 19/20 July.
A draft has been done.

If you are an affected retail investor and would like to suggest questions or maybe improve any of the questions pls join the telegram group.

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

https://t.me/hyflux_retail