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What Happened To Hyflux And Why You Should Care

3 min read

So, you may have heard of the recent Hyflux protests.

Ok cool. So a bunch of people lost money to a company because it was once backed by the gahment. 

In fact, we’ve even had some of our community members talking about it on our Seedly Q&A platform.

hyflux discussion

So why should you care?

You SHOULD care because there are lessons we can learn from this particular incident. With the biggest being: don’t blindly invest your money into something that you don’t have a full understanding of.


TL;DR: Hyflux Happened And This Is What We’ve Learnt

  • Do your due diligence! Always do adequate research into the areas you decide to invest in!
  • Never assume that any investment is safe simply because the government ONCE invested in it
  • You are solely responsible for your own choices and actions. No one owes you anything, more specifically in this case, not even PUB.

The History Of Hyflux

Hyflux Sign Outside Office
Image Credit: Nikkei Asian Review

Let’s begin with a brief history and timeline of Hyflux Ltd.

With its humble beginnings in 1989, Hyflux started as Hydrochem (S) Pte Ltd with $20,000, a 3 person team, and an idealistic dream. In fact, Ms Olivia Lum, CEO of Hyflux, sold her apartment and car in order to raise money for her start-up.

All in the name of solving the world’s water problems.

YearEvent
1992Hydrochem obtains exclusive rights from a supplier to distribute membranes and membrane filtration plants to industrial customers
1994Hydrochem breaks into the Chinese market as China opens up foreign investment
2000March: Hyflux Pte Ltd becomes incorporated in preparation for a public listing
2000December: Hyflux Pte Ltd converts to a public limited company, changes name to Hyflux Ltd
2001January: Hyflux launches its initial public offering
2001January: Shares begin trading on the secondary board of the SGX; the company is awarded its first municipal water treatment project at Bedok NEWater Plant
2002Hyflux secures a project to design, construct, and commission the NEWater plant in Seletar. Hyflux also wins its 3rd project, Chestnut Avenue Waterworks -Singapore's first waterworks that uses membrane-based filtration to produce potable water
2003April: Hyflux is promoted to the SGX mainboard
2011Hyflux raises S$400 Million; Executive Chairman and Group CEO Olivia Lum wins the Ernst & Young World Entrepreneur of the Year; Hyflux expands from water to electricity, and clinches a deal to build a 411-megawatt co-generation power plant in Tuaspring
2013January: Hyflux proposes talks on outside financing for the S$1.05 billion Tuaspring facility
2013September: Tuasping is officially open but experiences delays in its commissioning of the power grid
2015Tuaspring gas turbine power plant is connected to the national grid
2016Tuaspring starts electricity production but experiences amortisation (the process of gradually writing off the initial cost of an asset)
2017February: Hyflux announces plans for the partial divestment of the Tuasping Plant
2017April: Hyflux appoints financial advisers to explore options for the proposed Tuasping partial divestment
2017August: Hyflux reports losses from the Tuaspring plant
2018February: Hyflux will not redeem its preference shares until it divests the unprofitable Tuaspring project.
2018May: Hyflux petitions to the High Court for supervision of its business and debt reorganisation, citing "increasing strain on the group's finances" and "short-term liquidity constraints"
2018October: Maybank gives the firm until October 15, 2018, to find a buyer for Tuaspring, in order to pay 29 lenders and other creditors
2018October: Hyflux requests for a 2-week extension to find a buyer.
2019February: David Gerald, head of Securities Investors Association (Singapore) or Sias, calls for answers as Hyflux has not presented a clear restructuring plan to their investors. Investors later learn about their losses under a proposed restructuring plan.
2019March: PUB issues default to Hyflux in the name of water security. Hyflux investors protest at Hong Lim Park, calling for PUB to bail out Hyfluxin the name of "moral obligation or goodwill". 

Here Are Some Questions Which You Might Have

Q1) What is Hyflux’s problem and how did they go from the Singaporean dream to paying investors only 3% in cash and 7% in equity?

Essentially, Hyflux was way too ambitious for their own good. Poor risk management and unsuccessful risk investments led to the mess that they are in now. It didn’t help that the company took on multiplying risks which accelerated its snowballing mountain of debt.

Q2) Why are their investors so unagreeable to the proposed payout plan?

Shareholders went from receiving regular dividends to nothing at all and are now at risk of only having a recovery rate of 10.7% of their capital. Shareholders have stopped receiving dividends and many are slowly but surely losing their capital, so it’s understandable why so many are upset.

Q3) Was the government ever involved with Hyflux?

The government’s investing arm, Temasek Holdings, has not had a stake in Hyflux since 2006. There were, however, previous investments during the early 2000s under the SMEs investment initiative. This was to promote and support growth in encouraging sectors, such as water technology.

Q4) Why are the shareholders demanding that PUB bailout Hyflux?

Most investors who participated in the Hong Lim Park protest only invested in Hyflux due to the government’s support back in the day, arguably “without doing their own due diligence”. They ‘blindly’ invested with the belief that if the gahment support this company, it should be safe and okay to invest right? Invest la!

Wrong.

 

hyflux protest sign
Image Credit: Alex Leong | Straits Times

These investors made the mistake of assuming that Hyflux was a government-backed company through and through. And made the ultimate mistake of investing in something that they did not fully comprehend.

This is a really hard lesson for a lot of people that: ultimately you are responsible for your own choices and you have to do your due diligence. Also, PUB really has no business in bailing out Hyflux for the sake of “moral obligation” or “goodwill”.


Other Questions Asked By The Seedly Community

Here are some other questions asked by members of the Seedly community on our Seedly Q&A platform:

Q1) For the average Singaporean, how does one avoid another Hyflux incident?

Q2) Do you think that Hyflux will get nationalised? And if so, will the government help to pay off the bad debt?

Q3) I invested a large sum of money into Hyflux. I am hoping to seek advice on what I should vote for in the Scheme of Arrangement. Can anyone give me some advice?


Lesson Learnt From This Hyflux Incident

Hyflux Signs By Angry Mob
Image Credit: The Independent Singapore

Let’s recap:

  1. Never blindly invest in something that you do not fully understand – whether it is a big or small amount of money – you have to make a conscious choice and decision
  2. You and only yourself are in full responsibility for your own actions especially when it comes to investing and protecting your own money: no one cares about your money more than you do

If you’re thinking of investing in ANYTHING, here’s a simple checklist we created to help you decide whether and how you should proceed.

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