Hyflux

Hyflux: will start up its $1.05b Tuaspring desalination plant in 2H13 with power purchased from Singapore's main power grid in the interim. This is because Tuaspring's in-house power plant, which is integral to the energy-intensive plant, will not be ready by then. Business Times notes this stems from firstly, construction-related issues, including late award in Dec ‘11 of the EPC contract for the 411-MW power plant, construction of which typically takes two to three years. Apart from powering Tuaspring's 70 m gallons (265 m litres) per day desalination plant, the power plant - marking Hyflux's foray into the power business - is also expected to export some 300 MW of its excess capacity to the main grid. But there are also delays related to the plant's connection to the main power grid here, tipped to be at least 6-12 mths. Hyflux explained that while it had committed to PUB, under its water supply contract, to deliver the Tuaspring desalination plant in 2013, "Hyflux has no contractual deadline for the delivery of the power plant", and declined to say exactly when it will be ready, except that it "is on track". After earlier saying that it would develop the Tuaspring project off its own balance sheet, Hyflux said in Jan that it will commence discussions with financial institutions to secure non-recourse project financing for the $1.05 b facility. Thus far, it has secured only a $150 m financial package from DBS, Mizuho and Sumitomo Mitsui Banking Corp for the desalination plant. There has reportedly been some concern by lenders that while the desalination portion of Tuaspring is covered by its 25-year purchase agreement with PUB, the electricity portion does not have similar customer guarantees, as the gencos here have to compete to supply into the market. Furthermore, the recent proliferation of new generating plants here means that power newbie Hyflux will be stepping smack into an already oversupplied electricity market here. Despite the news, Hyflux shares are up 1.8% at $1.44. They trade at 31.9x P/E, 2.5x P/B.