Hyflux

[weijian]

The bitter pill is:

1)Why were 6 bidders rejected by PUB who allowed only 2 local companies to bid. Sembcorp and Keppel. Sembcorp bidded below Maybank loan which is approx 500 mil. Keppel abstained.

But Salim  is allowed by PUBPto bid 400 million for controlling stake at the group level which includes Tuaspring , Singspring , Tuasone, e.tc?

I don't see any rationale but the effect is, the hampering of the bidding process would surely have resulted in a lower return to the investors . I am of the view that the Sembcorp deal is better than the Salim deal.

2) it was stated there was no default or a legal demand for payment , yet Hyflux entered into a voluntary court protection . To me, this was ill timed. CFO stated that before the court protection , the price talked about for Tuaspring was still around book value in Feb /march ( 1.3 billion ) . Court protection was seeked in may. September/Oct, it was then revealed that Sembcorp bidded and it was around  below 500 million. It is reasonable to think that the voluntary court protection resulted in this up to 800 million of value lost .
Why not wait till a legal demand of payment , fight in court, lost , then apply for court protection , at least there is more time to sell Tuaspring ...besides, entering court protection could have triggered more defaults and legal payments ....

3) OL stated she was given an 8 million projection and she therefore thought it was feasible with her advisors. This is such an irresponsible statement and up till now, there is no clarification.

4) it is very ridiculous when u look at the power market and why there is a glut in electricity and also why we are are seemingly enjoying low electricity prices up to 30% off ( or rather,whywe have been paying high electricity prices previously). This is a long story ....but is interesting to know.

Anyway, I have lost faith in our market, lost faith in SIAS.

When a company is allowed to conduct a Townhall under a without prejudice setting ( and it seems it quite common), irresponsible statements without accountability can be thrown about ..a complete waste of time

hi sgdividend,


(2) IMHO, the voluntary court protection was never a factor that affected the price of TS. TS was an "asset for sale" for ~1.5years on the balance sheet at 1.4bil and there was no takers. We could also debate about the "ill timing" but this is simply delaying the inevitable. Hyflux faces a solvency problem, not a liquidity problem. Only a liquidity issue is highly affected by timing, but a solvency issue for a company that runs on long lock-in period contracts will probably not be affected by timing.

https://www.valuebuddies.com/thread-810-...#pid148083

(3) We have seen too many cases where "advisors" are there to fill in the standard answer so that they will continue to get business/find favor with the one who pays for it.

(4) Keep your chin up. We need to take ownership of our losses. Faith, maybe was misplaced in the first place and it might eventually be a "blessing" to lose it. I finished reading this book recently and i would recommend it to you (It can also be borrowed at NLB)

https://www.amazon.com/Learned-Million-C...0231164688

[sgdividends]

The bitter pill is:

1)Why were 6 bidders rejected by PUB who allowed only 2 local companies to bid. Sembcorp and Keppel. Sembcorp bidded below Maybank loan which is approx 500 mil. Keppel abstained.

But Salim  is allowed by PUBPto bid 400 million for controlling stake at the group level which includes Tuaspring , Singspring , Tuasone, e.tc?

I don't see any rationale but the effect is, the hampering of the bidding process would surely have resulted in a lower return to the investors . I am of the view that the Sembcorp deal is better than the Salim deal.

2) it was stated there was no default or a legal demand for payment , yet Hyflux entered into a voluntary court protection . To me, this was ill timed. CFO stated that before the court protection , the price talked about for Tuaspring was still around book value in Feb /march ( 1.3 billion ) . Court protection was seeked in may. September/Oct, it was then revealed that Sembcorp bidded and it was around  below 500 million. It is reasonable to think that the voluntary court protection resulted in this up to 800 million of value lost .
Why not wait till a legal demand of payment , fight in court, lost , then apply for court protection , at least there is more time to sell Tuaspring ...besides, entering court protection could have triggered more defaults and legal payments ....

3) OL stated she was given an 8 million projection and she therefore thought it was feasible with her advisors. This is such an irresponsible statement and up till now, there is no clarification.

4) it is very ridiculous when u look at the power market and why there is a glut in electricity and also why we are are seemingly enjoying low electricity prices up to 30% off ( or rather,whywe have been paying high electricity prices previously). This is a long story ....but is interesting to know.

Anyway, I have lost faith in our market, lost faith in SIAS.

When a company is allowed to conduct a Townhall under a without prejudice setting ( and it seems it quite common), irresponsible statements without accountability can be thrown about ..a complete waste of time

hi sgdividend,


(2) IMHO, the voluntary court protection was never a factor that affected the price of TS. TS was an "asset for sale" for ~1.5years on the balance sheet at 1.4bil and there was no takers. We could also debate about the "ill timing" but this is simply delaying the inevitable. Hyflux faces a solvency problem, not a liquidity problem. Only a liquidity issue is highly affected by timing, but a solvency issue for a company that runs on long lock-in period contracts will probably not be affected by timing.

https://www.valuebuddies.com/thread-810-...#pid148083

(3) We have seen too many cases where "advisors" are there to fill in the standard answer so that they will continue to get business/find favor with the one who pays for it.

(4) Keep your chin up. We need to take ownership of our losses. Faith, maybe was misplaced in the first place and it might eventually be a "blessing" to lose it. I finished reading this book recently and i would recommend it to you (It can also be borrowed at NLB)

https://www.amazon.com/Learned-Million-C...0231164688

Thank you Weijian for the reply .Always good to hear from you as I learn something everytime.

Regarding point (2) , whether it's a solvency or liquidity issue, I'm not sure but it was mentioned in the latest Townhall that it was a liquidity issue. But of cos , let's take what is beinf said with a pitch of salt...

But I do think that the voluntary court protection did affect because in the annual report 2017, under the auditors report page 55, it was mentioned 

"For Tuaspring, we reviewed management’s basis 
for the classification and examined supporting 
documents, including divestment plan and indicative 
bid received."

This meant there was a basis for the valuation for Tuaspring under assets held for sale. So the market price before the court protection shouldn't be so far off from the book value

[weijian]

hi sgdividends,

Thanks for your kind words.

As Activist Speaks questioned earlier, if Hyflux needed Salim's money even after the conversion of current liabilities, then what does that mean? If it was only a liquidity issue, then Hyflux could have opted for only a loan, not an equity injection+loan from Salim. As OPMIs, we need to differentiate clearly between what is been said, and what is been done. The latter always has more weight as the former.

Thanks for digging out the details in AR17 (I have to admit i didn't go into such details). Accounting details are actually just 4 snap shots of what happens in 365days, and it is clearly open for interpretation without more details since this is a Level2 asset. Maybe you could find out more details from Mgt/Auditor on the "indicative bid". I have to admit, based on the numbers and common sense, i am sceptical.

[BRT]

still, it could be argued that it's only "indicative".

---

did some random digging around. pac light runs a 800mw plant in sg and it lists meralco and first pacific as owners [1]. for first pacific, wiki lists its key ppl as Anthoni Salim (Chairman) and Manuel V. Pangilinan (Managing Director, CEO) [2]. meralco is a subsid of metro pacific [3] which has pangilinan as chairman. from an industry source, medco and metro pac have cross ownership (i cant back this up).

medco is majority owned by panigoro family. any link from panigoro to salim/pangilinan? sure seems like something's cooking in the power sector.

1 - https://www.pacificlight.com.sg/about-us/who-we-are
2 - https://en.wikipedia.org/wiki/First_Pacific
3 - https://en.wikipedia.org/wiki/Metro_Paci...orporation

[Shiyi]

Some bondholders and shareholders are clamoring for government bailout.
That would set a dangerous precedent if the government yielded to the pressure.

[BRT]

"During this divestment process, the sole bid yielded from the two parties that were pre-qualified
by the regulatory authorities to submit binding offers was still subject to conditions and even
if those conditions could be met, the bid would not have been sufficient to pay in full the
secured bank debt owing to Maybank. The relevant deadlines under the collaborative
divestment agreement with Maybank have been extended so if any interested party in
Tuaspring makes an offer, the board will assess it. To- date, no other offers have been received."

https://links.sgx.com/FileOpen/Announcem...eID=541716

[weijian]

"During this divestment process, the sole bid yielded from the two parties that were pre-qualified
by the regulatory authorities to submit binding offers was still subject to conditions and even
if those conditions could be met, the bid would not have been sufficient to pay in full the
secured bank debt owing to Maybank. The relevant deadlines under the collaborative
divestment agreement with Maybank have been extended so if any interested party in
Tuaspring makes an offer, the board will assess it. To- date, no other offers have been received."

https://links.sgx.com/FileOpen/Announcem...eID=541716

hi sgdividends,

Mgt seemed to have caught what you and I were speculating and came up with the PR yesterday afternoon to clarify (using BRT's link)

The Company would like to clarify that while there were preliminary confidential discussions with certain interested parties in relation to a potential divestment of Hyflux’s interest in Tuaspring in early 2018, no formal or binding offers were actually received from any party. Any indicative numbers discussed by interested parties were purely in the context of exploratory discussions and were based on a valuation of Tuaspring derived from a financial model of future cash flows for the project as developed by an independent consultant at that time and prior to the completion of any due diligence or negotiations with such interested parties.


Unfortunately, Mgt seems to have confirmed our skepticism here. You probably might lose more faith. But as i mentioned, there should be more lessons to be learnt than faith to be lost (what are the things that you shouldn't put your faith on? what is the mental model that you can put on faith on instead?)

[BRT]

"Regulated assets are subject to approval of regulator who doesn't need to explain why this or that ."
> yeah sucks to think how much SP has creamed off SG residents over the last ten years and beyond

"3) OL stated she was given an 8 million projection and she therefore thought it was feasible with her advisors. This is such an irresponsible statement and up till now, there is no clarification."
> sorry i may have missed things, but what's this 8M projection?

Apparently it wasn't SP that was creaming ...

It was the LNG vesting scheme by EMA which the Gencos thought was a form of subsidy by fixing a price for a specified quantity that the Gencos can sell their electricity for. So they all rushed to built power plants that using LNG to run on. This resulted in the oversupply and expensive electricity previously.

Read http://singaporepowerdesk.com/vesting-co...st-4-years

And YET olivia Lum and BOD was so daring to enter a new business without such a "subsidy", by betting solely on USEP price, while others went with the "subsidy".

EMA reduced the number of vesting quantities later which the other gencos were not happy about . EMA clarified that it was not meant as a subsidy .

YTL power seraya said:" if generators had understood that this was the case ,they would have been more reluctant to support the LNG terminal"

About the 8 million population, it was from Olivia lums own words during the Townhall.....still seeking clarification from Hyflux... perhaps, it was why she went in without the "subsidy" under the LNG vesting scheme which the Gencos thought was a "subsidy" but EMA said it wasn't

youre right. if any party was benefitting it would be the gencos under the schemes which allow them to sell energy at those prices. the article below helped clarify some of my misunderstandings.
https://www.channelnewsasia.com/news/sin...p-11208792

[ACTIVIST SPEAKS]

https://www.businesstimes.com.sg/compani...operations

This is refreshing!!! SIAS is doing the things it was set up to do. Maybe we were wrong about them all these time. 莫忘初衷。。加油！！！

[AQ.]

The replies to the Q&A for the 2nd townhouse are out:

https://www.hyflux.com/qa-from-second-to...ce-shares/

https://www.hyflux.com/qa-from-second-no...-meetings/

Mostly expected replies but some "new" stuff as extracted:

1. As a result of this exercise, the company received several preliminary non-binding bids, all of which were subject to agreement on the investment structure, regulatory and other approvals, and completion of detailed due diligence. Three of these indicative bids attributed an enterprise value of S$1.4 bn to the Tuaspring project. These came from a PRC SOE, a private UAE party and a subsidiary of a Singapore listed company.  

To conduct further due diligence (which required obtaining access to more confidential information relating to Tuaspring) and to make a binding offer, an interested party needed to be approved by PUB to be granted access to such confidential information. 
 
By May 2018, none of these parties had completed their due diligence processes.

2.  SMI’s offer was initially lower.The investment agreement was the result of aggressive negotiations by the Board and advisors.