SINGAPORE: National water agency PUB said on Friday (March 29) that its decision to issue the default notice to Tuaspring was driven by its need to ensure water security, and not the petition by Hyflux's investors or the date of the scheme meetings.
PUB said this in a letter to investor watchdog Securities Investors Association Singapore (SIAS), two days after its president David Gerald had questioned the timing of PUB's announcement earlier this month that it would take over Tuaspring's desalination plant should the company fail to remedy its defaults by Apr 5.
"In the event PUB terminates the Water Purchase Agreement (WPA), PUB will purchase the Tuaspring Desalination Plant (TSDP) and its main priority is to quickly restore the TSDP to good operating condition so that it is able to supply desalinated water reliably," said the letter, which was signed by PUB chief executive Ng Joo Hee.
In a separate statement on Friday, PUB said it had agreed to Tuaspring's request to extend the default notice period to Apr 30, "subject to conditions". It did not elaborate on what those conditions are.
In his letter on Wednesday, Mr Gerald had posed a series of questions on Mar 26 to Mr Ng, including how the zero-dollar purchase price was determined, and if the purchase price should instead be "the equivalent replacement cost of building or an equivalent plant".
In PUB's response on Friday, Mr Ng said that based on the current valuation of the desalination plant, the purchase price is negative - meaning Tuaspring (TPL) would have to pay PUB a compensation sum.
"TPL itself has stated that there is a high likelihood for this. The desalination plan has been and will likely continue to lose money for the next few years," said PUB, stating that more costs will be incurred to make good the plant and ensure that it operates reliably for its remaining lifespan.
"However, given TPL's current financial position, PUB is unlikely to recover the compensation sum from TPL. Therefore, PUB has informed TPL that it is willing to waive the compensation sum and to purchase the TSDP for zero dollars."
Mr Ng stated that PUB would not take over Tuaspring's loans and liabilities, such as its loan from Maybank.
READ: Hyflux’s Tuaspring plant: The ‘noose around the neck’ that needs to be sold, but can it be done?
In the letter, Mr Ng also highlighted that Hyflux, of which Tuaspring is a subsidiary, stated the "high likelihood" that Tuaspring would have to pay PUB a compensation sum under the WPA.
"Hyflux has also noted that PUB's actions, in the event PUB elects to terminate the WPA, would alleviate the pressure on the rest of the Hyflux group, and also positively impact Hyflux's value and hence the value of the Hyflux shares being offered.
"It is beneficial to all stakeholders, including about 50,000 retail investors as well as about 3,000 CPF members who used their monies to purchase Hyflux ordinary and preference shares. This will also increase the chances of Hyflux being successfully restructured," said Mr Ng.
"Therefore, PUB's actions would be favourable to TPL, and should not be used as the basis for SM Investment's decision to withdraw from the restructuring agreement."
Mr Ng concluded his letter by reiterating that PUB's role was to safeguard Singapore's water security, and that PUB will "do what it takes" to ensure that Singapore and Singaporeans continue to enjoy a diversified and sustainable supply of water.