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Posts Tagged ‘Hyflux’

Hyflux revisited: Got profits but cash flows out

In Accounting, Corporate governance, Financial competency on 13/08/2019 at 11:51 am

Muddy Waters (Temasek helped Olam see off an attack from them yrs ago: see this*): has written a really nasty report about a UK company Burford Capital,a litigation funder. The shares collapsed. because muddy waters has a more than decent track record despite having its balls crushed by Temasek over Olam.

Carson Block, the boss of Muddy Waters, had been speaking to BBC Radio 4’s Today Programme about his concerns.

One of his concerns is that the profits did not result in positive cashflow, rather negative cashflow.

He makes a great analogy about an accounting trick (OK OK OK, a legitimate accounting practice that ‘s perfectly legal): realised gains not reflected in the income statement (and hence cashflow). Think Hyflux: the profits were there, but there was no positive cash flow, rather cashflow was negative.

“Hyflux Group has generated negative operating cashflow in every year since 2009. Was this highlighted to bondholders and shareholders? If so, in what form? Why did the Board continue to pay dividends, when the operating cashflow was negative and accumulate more debt during this time?”

The investor watchdog also highlighted that Hyflux, despite the negative operating cashflow, reported profits in each year before 2017 and asked how this was possible.
Legitimate accounting tricks practices allowed this. See box for detailed explanations.

Hyflux’s Worrying Cash Flow Situation

https://www.theedgesingapore.com/portfolio/total-compliance-financial-reporting-was-it-misleading

———————————————————————————————–

As Carson Block put it, “The analogy I like is if I say ‘I’m going to take you on vacation, meet me at the airport oh Hawaii is amazing, it’s got great beaches, my favourite hotel is this one’ and then you meet me at the airport and I say ‘we’re going to Ireland’. Hawaii has nothing do with Ireland and all that discussion about Hawaii has nothing to do with where we were going.

“And that’s basically what all this discussion about realised gains in the investment materials is. It has nothing to do with – or very little to do with – what flows into the income statement.”

Want to know more about what went wrong at Hyflux?

Hyflux on investor losses: “Not our fault, banksters at work”

Did Hyflux’s auditors mislead?

Hyflux fiasco shows why “book value” is BS


*https://atans1.wordpress.com/2013/11/26/temasek-tales-tlc-overpaid-olam-cheong-wont-read-this-in-tre-toc/

Olam: Hang on, buy for the ride?

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Hyflux is Big Flush

In Corporate governance, Financial competency on 12/07/2019 at 6:20 am

The latest news that Huflux is talking to the camel drivers (Hyflux: Can believe or not?) after telling them to go f**k their camels reminded me of a comment I once saw on TRE:

Hyflux will be known as Big Flush?

Hyflux auditor in s*** house yet again

In Accounting, Corporate governance on 12/06/2019 at 11:18 am

Must be KPMG again

India is pushing for a five-year ban on Deloitte and KPMG over allegations the firms helped conceal bad loans at Infrastructure Leasing & Financial Services, a major infrastructure and finance group whose default last year triggered a credit crisis.

FT

Related posts:

Time investors to put pressure on Hyflux’s auditor?

Hyflux: “going concern” BS/ KPMG again and again

Hyflux on investor losses: “Not our fault, banksters at work”

Hyflux: Can believe or not?

In Corporate governance, Financial competency on 28/05/2019 at 7:31 am

Earlier this month, Utico, a UAE water utility offered to invest S$400 million in Hyflux, offering a binding agreement. But Oliver Lum and her board kaki are playing hard to get, telling the Arabs to go f*** a camel.

So Utico has gone on a massive PR exercise to put pressure on the Hyflux board via the retail holders of perpetual securities and preference shares.

In a media statement, after a meeting with SIAS, chief executive of Utico, Richard Menezes, made an offer to the retail investors in Hyflux perpetual securities and preference shares, if Hyflux accepted his offer, of a

“part cash redemption and also a hope for full redemption with a plan and exit option” …

“Full details can only be revealed later but as part of the overall deal, small investors of up to S$2,000 to S$3,000 could get 50 per cent cash redemption along with full redemption opportunity, while the rest of the investors could get a similar but staggered and cascade deal.”

“All investors will have an opportunity to get their money back … if they support the deal,” he added.

Read more at https://www.channelnewsasia.com/news/business/utico-offers-hyflux-s-small-investors-part-cash-redemption-as-11567048

He’s also scoring a lot of PR points for explaining why the company is making this offer to Hyflux’s junior creditors with perpetual securities and preference shares, instead of senior creditors.

“(Senior creditors) took an active business risk with ringside view, whereas (perpetual securities and preference shares) investors took a passive blind faith risk,” he said in the statement.

He said neither coupon nor principal was guaranteed in the offer prospectus and while trading at SGX, and morally there remains some responsibility from Hyflux for the predicament of the perpetual securities and preference shareholders.

To score even more points, he says:

Meanwhile, Utico said it could consider a listing in Singapore and “put some skin into the game” if it gets investors’ support for the deal.

As to the reality of the offer to retail perpetual securities and preference shares , it sounds like an extend and pretend game: both sides agree that the debt will be repayable sometime in the distant future, if at all. Tan ko ko.

Related posts

Hyflux: Sue those with money

Hyflux: “going concern” BS/ KPMG again and again

Hyflux on investor losses: “Not our fault, banksters at work”

Time investors to put pressure on Hyflux’s auditor?

In Accounting, Corporate governance on 22/05/2019 at 7:03 am

Lim Tean has said he’s been talking to a group of Hyflux investors who lost money. Well they should and other Hyflux investors should take note that KPMG (their watchdog)

——————————-

KPMG’s role in Hyflux

“When KPMG issued an unqualified opinion on the full year results for the Hyflux Group in March 2018, there were no events or conditions that individually or collectively, cast significant doubt on the going concern assumption as at the balance sheet date of 31 December 2017, or at the audit report date of 22 March 2018.”

Then according to Hyflux, everything went wrong when in May, there was a run on Hyflux by its banksters. Because of its bad (and unexpected?) Q12018 results announced on 9 May: “certain financiers expressed concerns over their ability to continue with existing credit exposures to the group.”* They tot halal Hyflux had transmuted into haram Hyflux.

Hyflux on investor losses: “Not our fault, banksters at work”

——————————————————————————-

is in more trouble in the UK. British regulators have called for KPMG to be fined at least a record £12.5m for misconduct in its work for Bank of New York Mellon.

(It’s other UK troubles: Hyflux: “going concern” BS/ KPMG again and again)

Time to shakedown KPMG for $.

 

Hyflux: Don’t know if to laugh or cry

In Financial competency on 24/04/2019 at 4:27 am

For the perpetual securities and preference shareholders, they get nothing if there’s no plan. They wanted something reasonable so the company will now keep (them) whole on the book and they will not be asked to take a haircut.

David Gerald of SIAS (Emphasis mine)

Read more at https://www.channelnewsasia.com/news/business/hyflux-has-credible-revival-plan-to-file-for-moratorium-11468284

Given that there’s no white knight on the horizon (David Gerald said so), MayBank deciding to appoint receivers and managers over the assets of Tuaspring (Hyflux: Good Friday cruxification), and the desalination plant set to be taken over by PUB for free in May, what is David Gerald going on about? A credible restructuring plan without a white knight after the last one rode away? Pull the other leg, it’s got bells on it.

Super massive rights issue with pref and perpetual securities allowed to take part? Ownself pay ownself?

Another wannabe stand-up comedian, like Tharman (Tharman talks cock yet again)? Indians like to be comedians it seems?

Hyflux: Good Friday cruxification

In Corporate governance, Financial competency, Infrastructure on 20/04/2019 at 4:15 am

Christ and the two thieves were not the ones crucified yesterday.

Yesterday (yes on a public holiday), Hyflux said that MayBank had decided to appoint receivers and managers over the assets of Tuaspring, except for the desalination plant and shared infrastructure, and not to extend an agreement whereby it would not enforce its rights over Tuaspring to allow Hyflux to time to conclude a binding agreement with a successful bidder or investor for the plant. The agreement had been extended several times and expired on 16 April.

The integrated asset’s desalination plant is set to be taken over by PUB at zero dollars in May, after PUB issued a notice to Hyflux on 17 April to terminate the parties’ water purchase agreement.

But Hyflux is not dead. It’s juz hanging onto life on a cross

Hyflux said the termination of the collaboration agreement “is expected to have a material impact on the financial performance of the group”.

In the interim, the power plant at the Tuaspring integrated facility is expected to continue operations as usual, it added.

Read more at https://www.channelnewsasia.com/news/business/sm-investments-moves-to-terminate-hyflux-rescue-deal-in-11460852

Btw, can’t stop laughing:

Hyflux said the termination of the collaboration agreement “is expected to have a material impact on the financial performance of the group”

The “financial performance of the group” is one fat zero before this event.

Further reading:

Hyflux: Sue those with money

Hyflux: “going concern” BS/ KPMG again and again

Hyflux on investor losses: “Not our fault, banksters at work”

 

 

 

 

Hyflux: Sue those with money

In Accounting, Corporate governance on 16/04/2019 at 10:47 am

This means going after the directors and mgrs (Remember MD Oliver Lum has a Dalvey Rd house and her motorcycles), the auditors, and the valuers of Tuaspring.

I was inspired to suggest this after reading the very droll Mr Lombard

Get claws in to auditors

A probe into Grant Thornton’s audit of collapsed contractor Interserve suggests a scandalous anomaly, and a possible deterrent. Advisers to the company were paid more in fees than its market value before administration. It happened at Carillion and Patisserie Valerie, too. If fees could be clawed back in the event of shareholders being wiped out, it might improve the quality of both audits and advice.

Here’s why the directors, mgrs and auditors could be liable:

So in the light of the loss in 2017, it’s reasonable to ask why the book value of Tuaspring was not looked at again before the auditors blessed the 2017 accounts in March 2018,

Hyflux directors, mgt & auditors kooning from 2016 onwards?

Here’s why the valuers are worth shaking down.

When Hyflux was first awarded the Tuaspring project in 2011, based on the financial model which modeled the cashflow projections from the project, the power plant was expected to generate profits from day one. This financial model was audited by an external financial model auditor and furnished to the offtaker. In 2013 when Tuaspring was able to secure a non-recourse project financing loan, the lender commissioned an independent market study of the project which arrived at similar conclusions supporting the book value of approximately SGD1.4 billion.

Hyflux fiasco shows why “book value” is BS

But

“This valuation [Done in 2018 which showed that the book value was BS: my comment]  is based on the most recent market study conducted by K4K Training & Advisory SL, the same consultant who did a similar market study in 2016 (which supported the valuation then). The view taken in this most recent market study is significantly different from that in 2016 due to . . . the losses in the electricity market in the recent years and the projected lower spark spreads for the remaining concession period.”

Noting that the current valuation is “significantly lower” than that adopted in 2016, Hyflux said that it intends to commission a further valuation to be undertaken by a different valuer for the purposes of finalising the 2018 full-year financial results.

“As the carrying value is a reflection of the current depressed market, in the event that the Singapore power market recovers to provide generation companies with sufficient spark spread margins, the valuation might then be revised.”

Hyflux as reported by BT

Hopefully, ACRA do more than watching (but don’t hold yr breath): Hyflux: “going concern” BS/ KPMG again and again.

 

DBS should take leaf from Temask’s book

In Corporate governance, Financial competency, Temasek on 10/04/2019 at 10:51 am

Too bad Hyflux and DBS (the bank issuing it’s securities) didn’t have in 2016, Temasek as a precedent to follow. Temasek in a letter to ST’s Forum (Ownself praise ownself) talked about its disclosure format for its bonds’ issues in 2018

The question is: Do people read those disclosures? Are they accessible and understandable to a lay reader?

Our research led us to a different approach in respect of our first Temasek Retail Bond.

We took a leaf from the issue of Astrea IV Private Equity Bonds, and made a special effort to provide a more accessible format of risk disclosures via a gatefold.

The gatefold supplemented the offering documents, and was intended to be retail-friendly and easy to understand.

In particular, the gatefold highlighted the associated risks in an accessible manner.

Feedback was very positive on the presentation of pictorials, flowcharts of fund flows, credit ratios and FAQs for both the Astrea IV and Temasek gatefolds.

We believe it would be a welcome step if issuers and their advisers consider an accessible style of gatefold, to highlight the key credit risks of their businesses, especially when they issue bond and bond-like offers to retail investors.

Temasek letter to ST’s Forum (Full text below)

Now go tell DBS how to try harder make sure greedy people read: though pigs will surely fly first. Perp investors were warned: Hyflux: Don’t cry for the investors

The letter in full:

Bond issues should be easy to understand for retail investors

Dr Jeremy Teo Chin Ghee raised interesting points in his letter (Timely to encourage retail bond market, April 5).

Our research showed that Singapore retail investors have very different risk capacities and appetites.

Younger investors look for growth, while older retirees may prefer a steady income stream. Others seek higher risk-reward opportunities.

We believe retail investors should have access to a wider range of risk-reward products, rather than be cut from riskier products through tighter regulations – the current regulations already require comprehensive disclosures of risks.

The question is: Do people read those disclosures? Are they accessible and understandable to a lay reader?

Our research led us to a different approach in respect of our first Temasek Retail Bond.

We took a leaf from the issue of Astrea IV Private Equity Bonds, and made a special effort to provide a more accessible format of risk disclosures via a gatefold.

The gatefold supplemented the offering documents, and was intended to be retail-friendly and easy to understand.

In particular, the gatefold highlighted the associated risks in an accessible manner.

Feedback was very positive on the presentation of pictorials, flowcharts of fund flows, credit ratios and FAQs for both the Astrea IV and Temasek gatefolds.

No two businesses will be the same, and all will have different risk and credit parameters.

We believe it would be a welcome step if issuers and their advisers consider an accessible style of gatefold, to highlight the key credit risks of their businesses, especially when they issue bond and bond-like offers to retail investors.

Stephen Forshaw

Head, Public Affairs

Temasek International

Temasek cares. Vote wisely.

Hyflux: “going concern” BS/ KPMG again and again

In Accounting, Corporate governance, Financial competency on 08/04/2019 at 10:46 am

The constructive, nation-building media report that the Accounting and Corporate Regulatory Authority (Acra) is watching the Hyflux fiasco closely. And this is newsworthy? It’s ACRA job to investigate, not watch, cock-ups like these.

But then being a regulatory bureaucrat is one good way of getting a very expensive free lunch. The other is being a minister.

ACRA is watching because Hyflux investors (who never bothered to read the issue documents or Hyflux’s financials) are asking why Hyflux’s auditor KPMG failed to flag the risks of Hyflux earlier. Like real given they didn’t bother to read: Hyflux: Don’t cry for the investors. So even if accounts were qualified, what could the investors? Only KPKB earlier because the shares etc would have been suspended on a haram certification.

Seriously, this “news” reminded me that UK’s accounting watchdog Financial Reporting Council (FRC) made public, several weeks ago, plans to make auditors apply more robust checks when reviewing whether a company was likely to continue operating in response to several high-profile corporate failures that have undermined confidence in business.

Two recent UK corporate failures were similar in nature to what happened at Hyflux.

To recap: KPMG on 22 Match 2018, said the 2017 accounts were halal, but on 22 May 2018, the company sought court protection from its creditors: Did Hyflux’s auditors mislead? and Hyflux directors, mgt & auditors kooning from 2016 onwards?.

——————————————

Hyflux’s BS explanation:

“When KPMG issued an unqualified opinion on the full year results for the Hyflux Group in March 2018, there were no events or conditions that individually or collectively, cast significant doubt on the going concern assumption as at the balance sheet date of 31 December 2017, or at the audit report date of 22 March 2018.”

Then according to Hyflux, everything went wrong when in May, there was a run on Hyflux by its banksters. Because of its bad (and unexpected?) Q12018 results announced on 9 May: “certain financiers expressed concerns over their ability to continue with existing credit exposures to the group.”* They tot halal Hyflux had transmuted into haram Hyflux.

Hyflux on investor losses: “Not our fault, banksters at work”

Hyflux should have remembered

A Banker Lends You His Umbrella When It’s Sunny and Wants It Back When It Rains

(Often attributed to Mark Twain)

———————————–

Coming back to the FRC: it wants auditors to do more when reviewing whether a company was a “going concern” and likely to remain in business for another year, highlighting the collapses of construction group Carillion (auditor KPMG) and retailer BHS as key factors behind the decision.

It said auditors should challenge corporate management teams “more robustly” and “thoroughly test” the adequacy of the evidence put forward by company directors. It also wants auditors to say whether they believed management assessments with respect to going concern judgments were appropriate, and to explain how they came to that conclusion.

It said the collapse of BHS, Carillion, and failed UK bank HBOS during the financial crisis, had “brought into question why such companies had clean auditor’s opinions, which included no warnings that the companies were at risk of collapse”. Sounds like Hyflux?

Mike Suffield, the FRC’s acting executive director of audit regulation

Recent corporate failures and the FRC’s own enforcement work has shown the existing [going concern requirements] needs to be strengthened.

Our proposals will significantly expand the work required of auditors — however, we believe this to be an important investment in the quality of the work that underpins what is a cornerstone of audit.”

Karthik Ramanna, professor of business and public policy at the University of Oxford’s Blavatnik School of Government

The implication of these proposals is that auditors missed key red flags due to weak auditing standards. The real issue isn’t that the auditors need more technical guidance but rather that they are conflicted in their dual roles as watchdog and consultant.

(Emphasis mine)

Hyflux shareholders should be angry to learn that KPMG (their auditor which audited Carillion and HBOS), said it had (in the UK) already increased how much information it provided in audit reports this year by highlighting the key risks the firm considered when “carrying out work on the going concern basis of accounting”.

KPMG added: “It is vital that as a profession, we examine all possible avenues to improve public trust both in audit, and the wider corporate landscape. We welcome the FRC’s consultation into the standards governing our work around going concern, and how we report on that work to shareholders.”

Will KPMG also provide this info for us natives for SGX listcos?

Btw, KPMG is the forensic auditor whose report the Aljunied Town Council is relying on in take the Wankers Three to the cleaners: “Peanuts”: WP MPs’ liability. KPMG is also Temasek’s auditor: TOC misrepresents facts yet again.

Hyflux: Don’t cry for the investors

In Financial competency on 02/04/2019 at 11:59 am

Perpetuals buyers were warned, while pref share investors made money in the 2011 pref shares issue.

Tan Kin Lian in Hong Leong Park on Saturday

shared that he was aware how some of them became Hyflux perpetual securities and preference shareholders despite not being financially “savvy”.

“They were just ordinary investors wanting to have a reasonable rate of interest without taking too much risk. If they wanted to take risk, they would have bought shares,” said Mr Tan, who donated funds to organise the protest event.

Read more at https://www.channelnewsasia.com/news/singapore/we-have-not-lost-faith-hundreds-of-hyflux-investors-gather-to-11395566
He couldn’t be more wrong (as is usual) about “They were just ordinary investors wanting to have a reasonable rate of interest without taking too much risk.” But then he’s the talk cock, sing song king who (together with his partner in that crime, Goh Meng Seng) deprived us of President Tan Cheng Bock, allowing the PAP’s preferred candidate to win.

Well it seems he never bothered to read document offering the perpetual securities to the public. Pg 37 of the perpetual securities issue document had this warning (Emphasis mine) which the investors ignored

RISKS ASSOCIATED WITH AN INVESTMENT IN THE SECURITIES
The Securities may not be a suitable investment for all investors.
The purchase of the Securities involves certain risks including market risk, interest rate risk,
foreign exchange risk, credit risk and liquidity risk. Investors should ensure that they fully
understand the nature of all these risks before making a decision to invest in the Securities. Each potential investor in the Securities must also determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should:
• have sufficient knowledge and experience to make a meaningful evaluation of the Securities,
the merits and risks of investing in the Securities and the information contained or
incorporated by reference in this Offer Information Statement and the Product Highlights
Sheet;
• have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of
its particular financial situation, an investment in the Securities and the impact such
investment will have on its overall investment portfolio;
• have sufficient financial resources and liquidity to bear all of the risks of an investment in the
Securities;
• understand thoroughly the terms of the Securities; and
• be able to evaluate (either alone or with the help of a financial adviser) possible scenarios
for economic and other factors that may affect its investment and its ability to bear the
applicable risks.
The Securities are complex financial instruments. Sophisticated institutional investors generally
do not purchase complex financial instruments as stand-alone investments. They purchase
complex financial instruments as a way to reduce risk or enhance yield with an understood,
measured, appropriate addition of risk to their overall portfolios. A potential investor should not invest in the Securities which are complex financial instruments unless it has the expertise (either alone or with the help of a financial adviser) to evaluate how the Securities will perform underchanging conditions, the resulting effects on the value of such Securities and the impact this investment will have on the potential investor’s overall investment portfolio.
This Offer Information Statement and the Product Highlights Sheet are not and do not purport to
be investment advice. Investors should conduct such independent investigation and analysis
regarding the Securities as they deem appropriate. Investors should also consult their own legal,
tax, accounting, financial and other professional advisers to assist them in determining the
suitability of the Securities for them as an investment. Investors should make an investment only
after they have determined that such investment is suitable for their financial investment
objectives. Investors should consider carefully whether the Securities are suitable for them in light
of their experience, objectives, financial position and other relevant circumstances.

Pretty comprehensive and in reasonably simple English. So either the perpetuals investors ignored the warning or never bothered to read: just buy.

Kee chiu if you still sympathise with them? After all they must be PAP voters, Will Oliver Lum and other Hyflux investors still vote for the PAP?, because we know the cybernuts don’t have money to even fund their favourite alt media sites.

Interestingly (I stand corrected because I may have missed it because I was getting tired), I can’t find such a provision in the offer document of the Cumulative Non-voting Non-convertible Perpetual Class A Preference Shares .

Wonder why? An honest mistake? No, most likely because Hyflux pref shares had been issued before (Hyflux: Qns to ask?) to the public, and nothing went wrong: in fact investors made money. And preference shares are shares (“You die, yr problem”) while the Perpetual Securities could according to Chris K be mistaken for bonds, hence the warnings. Don’t anyhow say PAP govt don’t care?

Still, if I were a pref share holder, I’d ask SIAS to KPKB about the lack of warning: nothing to lose further, since lost everything except underwear. Anyway, Morocco Mole (Secret Squirrel’s side kick) tells me that his second cousin removed working in DBS’s investment bank tells him that most of the 2016 buyers had made money in the 2011 issue: issue traded above par. They were hoping for a repeat killing. Kee Chiu if you think they deserve sympathy.

Btw, an interesting read: http://thefinance.sg/2019/03/11/when-exactly-did-tuasprings-operational-problems-start-hyflux/

The is the kind of stuff TOC and other anti-PAP alt media publications should be publishing instead of the rants of anti-PAP types like Goh Meng Seng and his wind bag kaki. I did forward the piece to TOC: no pix, no sound. Sad.

Related posts:

Hyflux directors, mgt & auditors kooning from 2016 onwards?

Hyflux on investor losses: “Not our fault, banksters at work”

Hyflux fiasco shows why “book value” is BS

A really curious incident

========================

*Did TKL read the other offer document? And did Meng Seng, other anti-PAP cybernuts, and other alt media experts read the 2016 securities issue documents? Or even Hyflux’s recent reply to SIAS. Somehow I don’t think so going by their comments. Sad.

 

Hyflux forgot that Tuaspring is in S’pore

In Uncategorized on 26/03/2019 at 6:26 am

All governments are monopoly buyers, able to demand tough conditions: which is why smart companies prefer to do biz in countries like M’sia and China where the authourities can be persuaded not to demand tough conditions in a spirit of mutual benefits.

Motor-cycling, M’sian-born Oliver Lum forgot this was S’pore when she agreed to sell water (juz below cost, I think I read somewhere: if anyone can find me the reference or point out if I’m wrong, I’ll be grateful) under a 25-yr agreement to the govt, planning to make lots of money by selling electricity to said govt.

Well in early March, national water agency PUB issued a default notice to Hyflux subsidiary Tuaspring Pte Ltd (TPL), which owns Singapore’s second and largest desalination plant, to remedy defaults arising under a 25-year water purchase agreement between them.

The defects:

It is understood that the plant had been experiencing operational issues since early 2017 and Tuaspring was unable to replace the facility’s poor-performing membranes promptly, affecting the quality and quantity of its water. There were numerous occasions when Tuaspring was unable to supply PUB with the required 70 million gallons of desalinated water.

https://www.todayonline.com/singapore/pub-take-over-hyfluxs-tuaspring-plant

Then PUB said on Thursday (Mar 21) it will terminate the water purchase agreement with Hyflux subsidiary Tuaspring Pte Ltd (TPL) and start taking over its desalination plant, if the company does not remedy its defaults by Apr 5.

Ms Lum also forgot govts can also blame suppliers when contracts go wrong: Will Oliver Lum and other Hyflux investors still vote for the PAP?

Never mind, the M’sian in her got Hyflux to pay her over S$60m (salary + dividends).

Hyflux directors, mgt & auditors kooning from 2016 onwards?

In Accounting, Corporate governance on 13/03/2019 at 10:57 am

And will Hyflux retail investors still vote for the PAP? (Reference: Will Oliver Lum and other Hyflux investors still vote for the PAP?)

So

HYFLUX has taken a S$916 million impairment for the nine months ended Sept 30, to adjust for a fall in carrying value of the Tuaspring water and power plant and other write-downs.

This figure was released … after Hyflux submitted its latest statement of financial position to the High Court.

“The impairment loss . . . relates predominantly to the impairment loss arising from the assessment of the carrying value of Tuaspring and the impairment of receivables for previously completed projects,” …

Hyflux had asked a valuer to conduct an up-to-date valuation of the Tuaspring plant, but no exact figure was shared in the submission.

BT report in early March

But

When Hyflux was first awarded the Tuaspring project in 2011, based on the financial model which modeled the cashflow projections from the project, the power plant was expected to generate profits from day one. This financial model was audited by an external financial model auditor and furnished to the offtaker. In 2013 when Tuaspring was able to secure a non-recourse project financing loan, the lender commissioned an independent market study of the project which arrived at similar conclusions supporting the book value of approximately SGD1.4 billion.

Hyflux fiasco shows why “book value” is BS

And when it did its 6% Perpetuals in 2016, the book value attributed Tuaspring was around this value.

So in the light of the loss in 2017, it’s reasonable to ask why the book value of Tuaspring was not looked at again before the auditors blessed the 2017 accounts in March 2018,

When KPMG issued an unqualified opinion on the full year results for the Hyflux Group in March 2018, there were no events or conditions that individually or collectively, cast significant doubt on the going concern assumption as at the balance sheet date of 31 December 2017, or at the audit report date of 22 March 2018.

Hyflux on investor losses: “Not our fault, banksters at work”;

if not earlier in 2017 when signs of trouble may have become apparent. Unless of course maybe Hyflux’s finance and accounting departments were staffed by Wankers or their relatives and friends? See: Wankers’ Party still blur on audits and accounting and What the US army and WP have in common?.

OK, OK, juz joking.

I’ll end with more extracts from BT report to give an idea of how big the hole caused by the drop in book value of Tuaspring and how the banksters are getting their money back while PAP voters are being screwed (anti-PAP voters got no money according to TRE cybernuts):.

At the end of September 2018, the value of Hyflux’s held-for-sale assets was S$651 million, or S$824 million lower.

Hyflux said: “This valuation is based on the most recent market study conducted by K4K Training & Advisory SL, the same consultant who did a similar market study in 2016 (which supported the valuation then). The view taken in this most recent market study is significantly different from that in 2016 due to . . . the losses in the electricity market in the recent years and the projected lower spark spreads for the remaining concession period.”

Noting that the current valuation is “significantly lower” than that adopted in 2016, Hyflux said that it intends to commission a further valuation to be undertaken by a different valuer for the purposes of finalising the 2018 full-year financial results.

“As the carrying value is a reflection of the current depressed market, in the event that the Singapore power market recovers to provide generation companies with sufficient spark spread margins, the valuation might then be revised,” Hyflux said.

Banksters take their money and run:

However, if creditors consent to haircuts under its proposed restructuring scheme, Hyflux will return to a net asset position of S$1.1 billion, according to the group’s pro forma calculations. Mr Gerald said: “This means that the company may have positive value post restructuring.”

Post-restructuring, Hyflux’s pro-forma net tangible assets (NTA) per share would be 4.2 Singapore cents, based on an NTA of S$815.3 million distributed across an enlarged share base after an equity injection and various debt-for-equity swaps.

Indonesia’s Salim Group and Medco Group had earlier agreed to give Hyflux a S$400 million equity injection in exchange for a 60 per cent stake in the company post-restructuring. Effectively, Salim-Medco is buying into Hyflux at 3.4 Singapore cents a share.

If the Salim-Medco deal goes through, Hyflux’s debt securities holders and senior unsecured lenders will be cleaned off the balance sheet.

PAP voters get shafted:

Retail perpetual and preference share holders will have their S$900 million in claims swapped for S$27 million in cash and S$69.2 million shares, assuming that the shares are valued at 3.4 cents apiece. That works out to a 10.7 per cent recovery rate on their principal.

And there’s the retail shareholders.

Will they still vote for the PAP?  Double confirm, ground not sweet for PAP.

Vote wisely. But the problem is Mad Dog, Lim Tean and Meng Seng. 

Sad.

 

Hyflux on investor losses: “Not our fault, banksters at work”

In Accounting, Banks, Financial competency on 27/02/2019 at 5:08 am

OK, OK, Hyflux never said this. But going by what it has said publicly (See below), one can reasonable infer that this is the message it’s trying to imply: the motor-cycle riding Ms Lum, other investors, employees etc are suffering because Hyflux’s banksters were scared of losing their money, making a run at Hyflux, trying to squeeze money from Hyflux’s hard assets.

Let me explain.

According to Hyflux everything was fine financially in March when it’s auditors chanted everything was halal, not haram.

When KPMG issued an unqualified opinion on the full year results for the Hyflux Group in March 2018, there were no events or conditions that individually or collectively, cast significant doubt on the going concern assumption as at the balance sheet date of 31 December 2017, or at the audit report date of 22 March 2018.


Must be joking, right?

Auditors are supposed to assess continual use of going concern assumptions over the next 12 months as per the Singapore Auditing Standards SSA 570. With the (bankruptcy) protection filing date being two months after KPMG’s sign-off date, what are the material variances which have not been contemplated resulting in this failed assessment?

BT quoting an investor who lost $ in Hyflux

—————————————————————————————————-

Then according to Hyflux, everything went wrong when in May, there was a run on Hyflux by its banksters. Because of its bad (and unexpected?) Q12018 results announced on 9 May: “certain financiers expressed concerns over their ability to continue with existing credit exposures to the group.”* They tot halal Hyflux had transmuted into haram Hyflux.

Reminds me of the joke which Hyflux should have quoted:

A Banker Lends You His Umbrella When It’s Sunny and Wants It Back When It Rains

(Often attributed to Mark Twain)

But to be fair to its banks, did Hyflux tell its banks post December 2017 results, that everything was oh so fine financially, so that the 1Q 2018 results came as a big surprise to its lenders?

To be continued.

But I’ll leave you with what a top banking lawyer** once told other lawyers about bankers

Just remember this: if bankers were as smart as you, you would starve to death

(Henry Harfield addressing a meeting of lawyers in 1974)

Remember MayBank (the non-recourse lender) according to Hyflux really believed that Tuaspring was worth more than $1bn.

When Hyflux was first awarded the Tuaspring project in 2011, based on the financial model which modeled the cashflow projections from the project, the power plant was expected to generate profits from day one. This financial model was audited by an external financial model auditor and furnished to the offtaker. In 2013 when Tuaspring was able to secure a non-recourse project financing loan, the lender commissioned an independent market study of the project which arrived at similar conclusions supporting the book value of approximately SGD1.4 billion.

Related post: Hyflux fiasco shows why “book value” is BS

———————————————-

*This is what Hyflux said:

The operating losses of Tuaspring drove Hyflux to record its first full year of loss in 2017. When losses were also reported in its first quarter 2018 results released on 9 May 2018, certain financiers expressed concerns over their ability to continue with existing credit exposures to the group. This, coupled with the uncertainty of Tuaspring divestment or entry of a strategic investor, raised a significant spectre of an upcoming liquidity crunch. Accordingly, subsequent to discussions with its legal and financial advisors, the Hyflux Board was advised to proactively take steps to make an application for a moratorium order, which is where events stand today. At that point in time, the company was in full compliance with its financial covenants and was not in default of any financing facility.

https://www.hyflux.com/wp-content/uploads/2019/02/Hyflux-responses-to-SIAS-letter.pdf

**From NYT’s obituary

Mr. Harfield spent his entire career at the New York law firm of Shearman & Sterling, where he helped develop the legal and regulatory framework for the international banking business after World War II. He represented the firm’s lead bank client, Citibank.

Many of the issues he worked on were esoteric, but important. He developed the legal basis for negotiable certificates of deposits, creating a legal way for commercial banks to pay interest on deposits. Citibank introduced certificates of deposit as a product in 1961.

 

 

 

Hyflux: Details of $1.165bn debt securities

In Financial competency on 26/02/2019 at 5:04 am

 

Ignore the last column because these were indicative prices from DBS Securities, sometime last year. Borrowed graphic from BT.

My comment

Hyflux reflects the old broker’s truism that high yields and good news do not go together.

Hyflux is warning of investing in high dividend yield stocks

also applies to buyers of junk debt of cos that have high dividend yields.

Hyflux is warning of investing in high dividend yield stocks

In Financial competency on 22/02/2019 at 1:24 pm

Its share dividend yield over the yrs

2017 1.19%
2016 5.71%
2015 10.95%
2014 10.95%
2013 15.24%
2012 13.33%
2011 19.86%
2010 28.57%
2009 16.33%
2008 9.00%
2007 6.43%
2006 6.43%
2005 6.05%
2004 3.33%
2003 2.38%
2002 4.76%
2001 2.38% S

Trouble is that a high yield and low dividend cover (the ratio of a company’s net profits to the total sum allotted in dividends to ordinary shareholders) doesn’t leave a company much room to invest or as a buffer against market shocks.

Hyflux reflects the old broker’s truism that high yields and good news do not go together.

For investors in Reits pls remember that Reits have no cover for distributions, unlike normal cos.

Will Oliver Lum and other Hyflux investors still vote for the PAP?

In Financial competency, Infrastructure, Political governance, Public Administration on 18/02/2019 at 7:21 am

Amid all the KPKBing by SIAS, Hyflux investors aided and abetted by the anti-PAP cybernuts, why doesn’t anyone from this mob of born losers point out the “honest mistake” made by an agency of the PAP govt that led Hyflux to build Tuaspring? The Electricity Market Authority (EMA) got a key economic projection wrong, badly wrong, by 50 percentage points: see bits I bolded below.

[I]t is important to highlight that when the Tuaspring project was first awarded in 2011, the outlook for the Singapore power market was very favorable. The Tuaspring power plant was projected to turn in profits from day one. At that time, new power generation plants were planned to support the country’s projected electricity demand with a reserve margin of 30%. Today, however, due to oversupply of gas in the market, the projection by Electricity Market Authority (EMA) in their Singapore Electricity Market Outlook 2017 showed an increase in reserve margin to 80% in 2018. By way of illustration,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.

https://www.hyflux.com/wp-content/uploads/2019/02/Hyflux-responses-to-SIAS-letter.pdf

Blame the all seeing, all wise PAP govt that a minister was praising in SunTimes.

Vote wisely. As though it’ll make a difference. With Tan Kin Lian, Mad Dog, Lim Tean and Meng Seng opposing them, the PAP don’t need friends. Sad.

Related posts:

A really curious incident

Did Hyflux’s auditors mislead?

Hyflux fiasco shows why “book value” is BS

Hyflux fiasco shows why “book value” is BS

In Accounting, Corporate governance, Financial competency on 17/02/2019 at 1:12 pm

And why audited accounts are juz another genre of fiction: science fiction is closer to reality.

I tot these tots when I read Hyflux’s response to a question from the Securities Investors Association of S’pore (SIAS) which read:

On what basis was Tuaspring being valued at SGD1.4 billion? This has proven to be overstated by at least SGD900 million as Hyflux has confirmed any bids received in the 2018 sale process for Tuaspring were for less than Maybank’ s outstanding project finance debt of approximately SGD500 million?

This is what Hyflux said:

When Hyflux was first awarded the Tuaspring project in 2011, based on the financial model which modeled the cashflow projections from the project, the power plant was expected to generate profits from day one. This financial model was audited by an external financial model auditor and furnished to the offtaker. In 2013 when Tuaspring was able to secure a non-recourse project financing loan, the lender commissioned an independent market study of the project which arrived at similar conclusions supporting the book value of approximately SGD1.4 billion.

When the Tuaspring power plant entered into commercial operations in 2016, the lender commissioned another independent market study before the drawdown of the second tranche of the project finance loan, which valuation also then supported the book value ascribed to the Tuaspring project. However, while the 2017 divestment process attracted three preliminary non-binding bids that also supported the book value of the project, the 2018 sale process for Tuaspring during the moratorium did not yield a similar bid due to the limited number of parties pre-qualified to perform due diligence at such time. Please refer to https://www.hyflux.com/qa-from-second-noteholders-townhall-meetings/ for further details on the Tuaspring divestment process.

https://www.hyflux.com/wp-content/uploads/2019/02/Hyflux-responses-to-SIAS-letter.pdf

So book value is what Hyflux or any company says it is. To be fair, this can only happen with the approval of the accounting prostitutes profession and other prostitutes experts.

Think I’m unfair?

This is Hyflux’s response as to how the major assets of Hyflux were valued, and in particular why no impairment write-downs were made:

All major assets of Hyflux are measured at fair value, in accordance with the Financial Reporting Standard (“FRS”) 39 –Financial Instruments: Recognition and Measurement and FRS 105 –Non-current Assets Held for Sale and Discontinued Operations. These assets are assessed at the end of each reporting period to determine whether there is objective evidence that they are impaired, in accordance with FRS 36 –Impairment of Assets.

In accordance with the Group’s accounting policies (set out in the Annual Reports), an impairment loss, once determined, is recognised in the Income Statement in the relevant period.

Impairment losses recognised in respect of all non-derivative financial assets and non-financial assets, including investments, (if any) have been disclosed in the Annual Reports in the respective years.

The financial statements of Hyflux, as in all general purpose financial statements, have been prepared using the going concern basis of accounting.Under the going concern basis of accounting, the financial statements are prepared on the assumption that the entity is a going concern and will continue its operations for the foreseeable future.

https://www.hyflux.com/wp-content/uploads/2019/02/Hyflux-responses-to-SIAS-letter.pdf

But Hyflux and the prostitutes accountants and other experts, can point out that the non-recourse lender (Maybank) “commissioned an independent market study of the project which arrived at similar conclusions supporting the book value of approximately SGD1.4 billion.”

If a leading Asean bank could screw up so badly, anti-PAP types shouldn’t be too upset that retail investors lost money.

Related posts:

A really curious incident

Did Hyflux’s auditors mislead?

 

Did Hyflux’s auditors mislead?

In Accounting, Corporate governance, Financial competency on 16/02/2019 at 11:44 am

Further to A really curious incident, where I criticised SIAS for not KPKBing early, here’s one criticism it got right, though why didn’t it raise this earlier, much earlier?

“On Mar 22 2018, KPMG provided a clean a clean audit report for Hyflux Group for the financial year 2017. On May 22 2018, Hyflux Limited and a number of subsidiaries filed for court protection from creditors,” SIAS said, asking what transpired between Mar 22 and May 22 in 2018.

Read more at https://www.channelnewsasia.com/news/singapore/hyflux-questioned-over-ceo-olivia-lum-remuneration-financial-11229034

Really shumething must be done about the audit prostitutes profession. Very related post:

A really curious incident

In Corporate governance, Financial competency on 15/02/2019 at 4:54 am
The silence of a self-proclaimed watchdog: only KPKBing when Hyflux was bust.
SIAS raises questions about Hyflux CEO’s remuneration amid financial troubles

Despite reporting losses of S$115.6 million in 2017, troubled water treatment firm Hyflux spent about S$2.7 million on remuneration for its key executives, with CEO Olivia 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”, according to the Securities Investors’ Association (Singapore) (SIAS).

Highlighting these points, SIAS asked why the Hyflux founder – which has 34 per cent ordinary shareholding in the company – did not contribute her gains to the restructuring process. The investor watchdog also asked if Ms Lum would have any role in the Hyflux group after the firm’s restructuring.

These were just two of more than 40 questions put to Ms Lum and the Hyflux board by the investor watchdog in a letter issued on Monday (Feb 11) and signed off by its President and CEO David Gerald.

“SIAS, representing the interests of the numerous stakeholders of various securities, is seriously concerned that many questions regarding the operations, valuation and accountability of the board of directors of Hyflux have not been addressed, so as to help securities holders make an informed decision, with respect to the restructuring,” Mr Gerald said.

Read more at https://www.channelnewsasia.com/news/singapore/hyflux-questioned-over-ceo-olivia-lum-remuneration-financial-11229034

Like real, barking after things went wrong. Not when things were going wrong and things could possibly be done to rectify the situation. Talk of bolting the stable door after the horse bolted.

 

If SIAS was my watchdog, I’d have shot it. The audited accounts raised many red flags. It’s not as though, the debts, and cashflow issues were hidden. All public knowledge. So was thisBS?

“Hyflux Group has generated negative operating cashflow in every year since 2009. Was this highlighted to bondholders and shareholders? If so, in what form? Why did the Board continue to pay dividends, when the operating cashflow was negative and accumulate more debt during this time?”

The investor watchdog also highlighted that Hyflux, despite the negative operating cashflow, reported profits in each year before 2017 and asked how this was possible.

Whatever, I’ll return to the fact that it kept quiet earlier: why?

Gregory (Scotland Yard detective): “Is there any other point to which you would wish to draw my attention?”

Holmes: “To the curious incident of the dog in the night-time.”

Gregory: “The dog did nothing in the night-time.”

Holmes: “That was the curious incident.”

Silver Blaze by  Sir Arthur Conan Doyle

So why so cock?

In CPF, Financial competency, Financial planning on 22/07/2018 at 3:59 am

“I’m retired so this was going to be a key part of my income but now, not just the income, I have to be worried about my capital. My kids are going to university soon so I have to figure another way out.”Read more at https://www.channelnewsasia.com/news/business/hyflux-shareholders-townhall-meet-management-first-time-10545662

So why did he buy Hyflux debt in the first place?

A fool and his money are soon parted.

Btw, remember to use yr CPF normal account as yr savings account

Using yr CPF OA as a savings account

Oldies use yr CPF acct as savings, fixed deposit account

Hyflux: Qns to ask?

In Infrastructure on 19/04/2011 at 12:23 pm

Why is Hyflux willing to pay out dividends of 6% per annum on the pref shares when it can borrow at 3.85% annum? This is a premium of 56%.

Is it lowering its debt to equity ratio from 75% to 25%, only to raise it again in the near future? If it does this would affect the risk premium of the preference share in future, thereby affecting its yield.

Six per cent is a gd rate but think of the risks which includes projects in the Middle East.

Water, the new oil

In Infrastructure on 02/02/2011 at 2:45 pm

AGRICULTURE and water investments will be the best performers over the next 10 years, according to BlackRock founder and CEO Larry Fink.

“Go long agriculture and water and go to the beach,” said Mr Fink, whose creation was now the biggest funds manager in the world, with $US3.5 trillion ($3.07 trillion) under management — more than the GDP of Germany.

“Put those investments in the bottom drawer for 10 years. It’s unlike anything else we have in the world.”

Agriculture and water would even beat energy investments, he said.

“They’re finding lots of ways to find new energy — Israel’s going to be an exporter of natural gas and I’m hearing there’s more oil under Iraq than Saudi Arabia, for instance, although it’s not secure.”

Part of WSJ story

Well on SGX, we got Hyflux and at the shitty end of water plays we got CitySpring and Asia Water.