Maybank slips on exposure to Hyflux

Pic by Straits Times, Singapore

KUALA LUMPUR: Shares of Malayan Banking Bhd (Maybank) fell to a low of RM9.01 on Wednesday in a knee-jerk reaction to news that Singapore's PUB would take over  Hyflux's Tuaspring desalination plant in the island nation.

At 3.23pm, it was down 19 sen to RM9.02 and the decline weighed on the FBM KLCI. 

The KLCI was down 9.89 points or  0.61% to 1,619.57. Turnover was 2.28 billion shares valued at RM1.17bil. Decliners beat advancers four to one or 691 losers to 159 gainers and 301 counters unchanged.

Affin Hwang Research said in a research note on Tuesday Malayan Banking Bhd (Maybank) is a major financier of Hyflux’sTuaspring and TuasOne.

To recap, Maybank has a total exposure of RM1.95bil (S$658.6mil) to Hyflux since September 2013, which covers project financing for: i) Tuaspring’s Integrated Water and Power Plant (IWPP) (S$602.4m) and ii) TuasOne Waste-to-Energy Plant (SGD56.2m, to be ready by May 2019).

As at 2Q18, Maybank had set aside collective provisions totaling RM315.1mil. 

"Nonetheless, we keep our earnings forecasts unchanged pending more developments and clarity from the situation. Based on a worst-case-scenario, the Public Utilities Board of Singapore will take over the loss-making Tuaspring Desalination Plant without any compensation for Tuaspring," said Affin Hwang Research.

Sinagpore's Public Utlities Board will be taking over the Tuaspring desalination plant, Singapore's Straits Times reported.

It issued a notice to Tuaspring on Wednesday to terminate its water purchase agreement with the company, PUB said in a press statement.

The national water agency will subsequently take over the desalination plant after a 30-day notice period.

Tuaspring is at the heart of its parent company Hyflux's financial problems. The once shining star of Singapore companies had liabilities amounting to $2.95 billion as of March 31 last year.

Below is the statement issued by PUB:

Singapore, 17 April 2019 – To safeguard Singapore’s water security, PUB, Singapore’s National Water Agency issued a notice to Tuaspring Pte Ltd (TPL) on 17 April 2019 to terminate the Water Purchase Agreement (WPA) and take over the Tuaspring Desalination Plant (TSDP). 

The termination notice provides a 30-day notice period before PUB takes over the TSDP.

PUB is a statutory board under the Ministry of the Environment and Water Resources. It is the national water agency, and manages Singapore’s water supply, water catchment and used water in an integrated way.