TR EMERITUS

1. Someone said that Hyflux incurred large losses on their overseas projects on on underquoting for the supply of water in the Tuaspring project.

2. Hyflux invested in the following overseas project

Tianjin Dagang Newspring – loan of $121 million taken from a China bank
Oman Quarayyat IWP – $250 m project awarded to Hyflax
Hydrochem Saudi – $72 million awareded to Hyflux

The total investment by Hyflux in these three overseas projects was $450 SGD. There are no information about the losses, if any. If we assume that the loss is 20%, it would amount to $100 million.

3. Hyflux invested $1,300 million in the Tuaspring project. The book value was reported to be $1,470 million. I guess that interest and management expenses must be added to the original project cost.

The water plant was handed to the Public Utilities Board for free, on the termination of the long term water agreement. The power plant was sold to the Francis Yeoh of the YTL group for $270 million.

Hyflux incurred a loss of over $1,000 million on Tuaspring.

4. If Hyflux had underquoted for the water that is provided under the long term contract, how much would that be?

Hyflux was awarded a 25 year contract to produce 318,500 cubic meters of water a day at $0.45 pcm. The total contract value is $52 million a year of $1,300 million over 25 years.

If Hyflux had underquoted by 20% for the production of water, the loss would be $10 million a year or $250 million over 25 years.

5. From the above information, I conclude as follows:

a) The loss (if any) on the overseas contracts would be less than $100 million.
b) The loss (if any) from underquoting of the water price would be less than $250 million
c) The bulk of the loss could be attributed to the generation of electricity at a time when the price had collapsed due to oversupply.

Tan Kin Lian

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