21 November, 2018

Singapore's Hyflux has PPP concession for Algerian desalination plant terminated

Company says it does not agree with the action taken by Sonatrach and Algerienne des Eaux, and will “seek advice on enforcement and protection of its rights”

Image used for illustrative purpose only. Reverse osmosis filters are seen as construction continues on the Western Hemisphere's largest seawater desalination plant in Carlsbad, California April 14, 2015.

Image used for illustrative purpose only. Reverse osmosis filters are seen as construction continues on the Western Hemisphere's largest seawater desalination plant in Carlsbad, California April 14, 2015.

REUTERS/Mike Blake

21 November 2018
Hyflux, the Singapore-headquartered global developer and operator of power and water plants, announced on Tuesday that it has been served a termination notice for a sea water desalination project in Algeria.

The company said in a press statement that it received a notice of termination for its Souk Tleta Desalination Plant in the Wilaya of Tlemcen.

The 200,000 cubic metres per day (m3/day) plant, Hyflux's first water treatment project in the Middle East, was developed in a joint venture with the state-owned Algeria Energy Company (AEC) and Malaysia's Malakoff Berhad, according to the company's website. The JV was awarded a 25-year concession for the project in 2006, with full operations commencing in 2011.

The press statement said "the purported notice" was issued by the project's offtakers, Sonatrach and Algérienne des Eaux (ADE), to Almiyah Attilemcania SpA (AAS), the project developer and Tlemcen Desalination Investment Company (TDIC), which was the 51 percent shareholder in AAS. Hyflux owns 30 percent of TDIC, the statement noted.

The Singaporean firm said in the statement that it "does not agree with or accept the allegations made in the purported notice and will seek advice on enforcement and protection of its rights in the project," noting that the termination is not expected to have any material impact on the company's financial performance for the year ended 31 December 2018.

The company is currently operating the 500,000 m3/day Magtaa Desalination Plant in Algeria for the same client under a 25-year concession, according to a June 2016 fact sheet.

In October, debt-laden Hyflux had said in a press statement that it signed a binding agreement with SM Investments, a consortium between the local Salim Group and Indonesia's Medco Group, for an S$530 million rescue investment in exchange for a 60 percent stake in the company.

Local newspaper The Straits Times reported in June that the entire Hyflux group had a total bank debt of about $1.84 billion and subordinated debt of $900 million.

In June, Hyflux announced that it was exiting a desalination project in Saudi Arabia after the client, Saline Water Conversion Corporation (SWCC), said it would convert the project from the originally-envisaged Design, Build, Supply, Test and Commission structure to a Build-Own-Transfer (BOT) structure, which would have required the company to inject capital to fund the development of the project.

According to a 'Financial Reorganisation Exercise' section on Hyflux's website, the current liquidity crunch is mainly the result of its flagship Tuaspring Integrated Water and Power Project's adverse financial performance in 2017 and the first quarter of 2018 as gas oversupply in the Singapore market pushed electricity prices down.

Other factors included increasing amounts requested for performance bonds in support of ongoing projects and also restrictions on the repatriation of monies into Singapore from completed overseas projects.

In May, Singapore-based newspaper The Business Times reported that Al Mawakab National Trading and Contracting filed an arbitration suit against a Hyflux subsidiary in connection with three sub-contracts at the 200,000 m3/day Qurayyat Independent Water Project (IWP) in Oman.

A consortium of Hyflux and National Power and Water Company was awarded a 20-year concession for the project in 2014.

The IWP was scheduled to start operations in the second quarter of 2018, according to Oman Power and Water Procurement Company's recent 7-year statement 2018-2024.

(Reporting by Anoop Menon; Editing by Michael Fahy)

(anoop.menon@refinitiv.com)


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