SINGAPORE: Hyflux executive chairman and CEO Olivia Lum said on Friday (Feb 15) that she is "deeply saddened for the pain and loss suffered" by investors and lenders.
Despite the company's continued efforts, it was unable to "succeed in the manner we had intended', Ms Lum said, on behalf of Hyflux's board of directors.
The remarks were made in an 18-page reply to Securities Investors’ Association (Singapore) (SIAS), which on Monday had raised more than 40 questions about, among others, the "large remuneration" enjoyed by Ms Lum amid the company's financial troubles.
In the letter, the board also said that Ms Lum will also "suffer a significant loss", as her personal net worth is tied inextricably to her stake in Hyflux.
With the ongoing restructuring, Ms Lum's stake in Hyflux will be "diluted substantially" as with other stakeholders, and she will lose her controlling position in the company, the letter continued.
"She has also volunteered to relinquish all rights to any management retention shares that would otherwise be awarded to her pursuant to this restructuring process," it said.
In SIAS' letter on Monday, it charged that despite reporting losses of S$115.6 million in 2017, Hyflux spent about S$2.7 million on remuneration for its key executives, with Ms Lum receiving between S$750,000 and S$1 million in salary, benefits and bonuses.
In addition to this "large remuneration", Ms Lum also received more than S$60 million in dividends "in the time that shareholders and bond holders have seen their entire investment destroyed", SIAS said.
In its reply on Friday, Hyflux said that Ms Lum received about S$58 million "in proportional cash dividends declared and paid to shareholders" between 2007 and 2016. She did not receive any cash dividend in 2017.
Ms Lum's salary has remain unchanged since 2011, the letter said.
Additionally, key executives salaries have been frozen and no variable bonuses paid out since 2016, and their total remuneration fell from S$2.9 million in 2016 to S$2.7 million in 2017.
Their stock options, which are part of their remuneration, "are now worthless and likely to be extinguished as part of the restructuring".
"As such, these executives are in similar straits as that of the stakeholders," the letter said.
FAILURE TO DIVEST TUASPRING BLAMED FOR LIQUIDITY ISSUE
In 2017, Hyflux embarked on a divestment exercise of Tuaspring Integrated Water and Power Project - the company's largest asset - "in line with its asset light strategy", but was unable to finalise any binding bids.
It said that "despite strong initial interest in this project", losses from electricity generation, lack of understanding of Singapore power market by potential buyers and delayed regulatory approval led to "a protracted sale process".
As Tuaspring continued to operate at a loss, Hyflux recorded its first full year of loss in 2017. When losses were also reported in the first quarter of 2018, some lenders expressed concerns over their credit exposures to the company.
"This, coupled with the uncertainty of Tuaspring divestment or entry of a strategic investor, raised a significant spectre of an upcoming liquidity crunch," said the letter.
Hyflux then made an application for a moratorium order at the advice of its legal and financial advisers, to arrive at the current situation.
The company further highlighted that when the Tuaspring project was first awarded in 2011, the Singapore power market had a "very favourable" outlook.
"The Tuaspring power plant was projected to turn in profits from day one," the letter said.
Due to oversupply of gas in the market, the projected reserve margin for electricity demand in Singapore increased to 70 per cent in 2017 from 30 per cent in 2011, it said. The reserve margin measures the excess capacity at peak electricity demand.
This resulted in the fall of the wholesale electricity price.
"The average wholesale electricity price has dropped from about SGD220 per MWh in 2011 when the Tuaspring project was awarded to an average of SGD81 per MWh in 2017, resulting in significant losses from electricity generation," the letter said.
Hyflux also said that Ms Lum is "happy and willing to take on a role in Hyflux following the restructuring".
"She remains committed to the continued success of Hyflux and to ensuring a smooth implementation of the transition and the restructuring plan."