Dear All,
If you vote "Yes", all lapses pertaining to Hyflux, PUB, EMA, DBS, Auditors, Valuers etc will most likely be buried and nothing will be fixed or changed. In future, the next innocent victim could be any of your loved ones and it may very well include those who said we should be just silent losers as all investments carry risk and also those that said Govt should not use tax-payers money to "bail-out" Hyflux with or without knowing what have gone wrong and need to be put right.
It is sad that after we have hand-delivered and emailed our petition to our Govt leader(s) on 1 March 2019, none of them or their representatives till now has come out to reply, persuade, solve or explain. If they have done so, there would not be a need for us to go Hong Lim Park this Saturday.
To add to what we all may know so far, and based on what I know from the media and the Ministry of Finance website on "Public Private Partnership Handbook" (PPPH) containing guidelines which all Govt Procuring Entities (GPE) such as PUB should comply with, it would appear that in the case of the Public Private Partnership between PUB & Hyflux, PUB does not seem to be complying with the following "PPPH" guidelines:
1. Paras 2.3.1 and 2.3.3 of PPPH : PPP projects must be structured to benefit both the public sector and the private sector.....for the private sector, there should be sufficient revenue, either from Govt or directly from the users, to recover the initial investment and the costs incurred by the private sector.
2. Para 2.3.10 of PPPH: Appropriate risk mitigation measures should be put in place to ensure the private financiers of the viability and bankability of the PPP deal.
3. Para 4.3.2 of PPPH: The commercial arrangement under the PPP contract must be acceptable to both parties - offering value for money for the GPE and adequate profit for the PPP provider.
4. Para 2.3.12 of PPPH: .. Govt is also committed to a payment stream over the long contract period. If no variation provisions are included in the PPP contract, the PPP contract will be too inflexible to handle unforseen circumstances...
5. Para 2.3.13 of PPPH: ...it is important to build a flexible PPP contract to allow for variations in specifications and requirements, with appropriate changes in payment to the private sector. The variation provisions should be fair to both the public and private sector. In addition, termination clauses should also be included to allow both parties to terminate the contract under exceptional circumstances, with fair compensation (to either party), where necessary.
6. Para 2.3.4 a) of PPPH: ...PPP should only be applied to projects where the private sector has the competencies......
7. Para 1.3.7 of PPPH: Govt will also ensure that public interest is protected in all PPP projects and that service deliveries will meet public needs....In particular, the public sector will ensure that (d) Confidentiality of information will be observed. We will protect the personal data and information of the public agency's customers.
8. Para 1.3.2c or PPPH: In a PPP project, Govt and private sector share the risks of delivering a service. Typical risks that are allocated to the private sector include design, construction and financing risks......the public sector may take on political and regulatory risks...
9. Para 3.1.10 of PPPH: ... GPEs should work with their advisor to ensure that the PPP contract is a viable one before they issue the PPP tender.
My comments: It is questionable why PUB who has no jurisdiction over energy matters would allow a costly power plant to be included in the PPP contract with Hyflux. Energy matters should be under EMA. Could this also be the reason why PUB wants to take-over the Tuaspring water plant and not the power plant ? In so doing, it is unclear whether PUB will continue to pay Hyflux the cost of building the power plant as per the PPP contract and which they want to terminate.
If items 1 to 3 and 8 above are complied with by PUB, Tuaspring should never run into losses. Items 4 to 5 should take care of unforseen circumstan ces such as the prolonged weak power market. Item 5 also provides for fair compensation in the event of termination. This means it is ruthless for PUB to take-over the water plant at zero cost.
If items 6 and 9 above are complied with by PUB, Hyflux which has no competencies, experience and track record for building and running a power plant should in the first place never be awarded the Tuaspring project as we now know that the financial viability and sustainability of the water plant depends largely on the power plant.
As regards item 7, the PPP project does not protect public interest at all. The confidentiality obligations of the Tuaspring PPP contract does not allow retail investors access to material information such as cashflow forecasts, breakdown of guaranteed and non-guaranteed payments pertaining to the water and power plants etc. This non-disclosure of material information means that retail investors have no means to assess the investment risk. As this is not in line with acceptable market and commercial norms, any related bonds and securities should never be allowed to be issued to retail investors. It is also this confidentiality obligation and the fact that all bidders for Tuaspring divestment by Hyflux have to be first approved and pre-qualified by PUB that caused the valuation of the plants to be depressed and Hyflux not being able to divest the Tuaspring at an acceptable price.
For those that say additional tax-payer monies will be incurred in a Govt "bail-out" of Hyflux, please read Para 3.1.9 of PPPH: " ... GPEs should seek the needed funding commitments and management approval for the PPP project, before inviting private sector participation in PPP tenders." In other words, PUB should have gotten the funding for the Tuaspring project before calling of tenders.
As regards the existing Scheme of Arrangement which Perps retail investors would be given 3% cash upfront, please note that SMI has disagreed with Hyflux on the allocation of $271M out of the $400M from SMI to be used for payments to creditors. This has introduced another uncertainty in our 3% if we vote "Yes". If you look at the existing Restructuring Agreement, there is no mention at all as to the agreed allocation of $400M from SMI to creditors and working capital. Therefore, it will be a case of your word against my word. I recalled asking PWC in one of the night sessions for Perps investors, why the $271M was not increased since there is no mention of any allocation of the $400M in the Restructuring Agreement. The answer was that the allocation has already been agreed with SMI. It would appear now SMI wants more to be allocated to working capital and less for creditors including us. As it stands now, most of us are very unhappy with the 3%. The current dispute between SMI and Hyflux makes it worse.
Regards,
TS Lim
