SINGAPORE: National water agency PUB on Wednesday (Apr 17) issued a notice to Hyflux subsidiary Tuaspring to terminate the water purchase agreement and take over the Tuaspring Desalination Plant (TSDP).
"The termination notice provides a 30-day notice period before PUB takes over the TSDP," said the agency in a statement.
PUB will, however, retain existing employees who have the relevant operational capabilities to run TSDP, the agency told CNA.
"We will work out the implementation details and timeline ... to facilitate a smooth transition," it added.
PUB had given Tuaspring until Apr 30 to remedy defaults related to the water purchase agreement. The deadline was extended from Apr 5, and was "subject to conditions" although PUB did not state what they were.
Under the water purchase agreement signed with PUB in 2011, Tuaspring has to deliver up to 70 million gallons of desalinated water per day to PUB for a 25-year period from 2013 to 2038.
However, Tuaspring has failed to keep the plant reliably operational as required, PUB said last month.
The agency had also said it is willing to waive the compensation sum it is entitled to under the agreement, and purchase the desalination plant at zero dollars.
When asked about its plans to finance its takeover of Tuaspring, PUB said it is currently focused on putting in place "necessary measures and upgrading works to ensure that Tuaspring Desalination Plant is able to produce desalinated water reliably".
It added: "The extent of the measures and upgrading works will be determined after PUB conducts a more in-depth engineering assessment."
In an announcement on Wednesday, Hyflux said: "The termination of the water purchase agreement is expected to have a material impact on the financial performance of the group.
"The company will make the appropriate announcements as and when there are any further material developments on this matter."
Bogged down by a staggering debt load, Hyflux announced last May that it is embarking on a court-supervised reorganisation process and halted trading in all of its SGX-listed shares, leaving tens of thousands of investors reeling.
According to an affidavit on Mar 1, Hyflux chalked up a net loss of S$1.1 billion for the nine months ended Sep 30, 2018, after taking a S$916 million impairment on the carrying value of Tuaspring and other projects.
Last October, Hyflux found a white knight in SM Investments, which said it would invest S$530 million in exchange for a 60 per cent stake.
However, cracks in the partnership started to surface by mid-March when the Indonesian consortium said it could walk away from the deal after Hyflux's subsidiary was slapped with a default notice from PUB.
With just weeks to go before its court-approved debt moratorium expires at the end of this month, Hyflux on Apr 4 terminated the restructuring agreement, citing that it has “no confidence” in SM Investments to complete the deal.