Monday, April 08, 2019

Solutions to Solve Hyflux Saga

Solutions to Solve Hyflux Saga

There are a couple of ways to solve the Hyflux saga but the PUB getting FREE water plant is definitely NOT one of them.

As I have put it, PAP government has played a big role in manipulating the market which eventually result in the Hyflux crisis. Hyflux also tried to be Smart Alec, thinking they could undercut others in pricing their water by cross subsidies from selling electricity.


Whoever takes over the integrated plant will face the same problem because the contracts have been fixed while the oversupply of electricity due to EMA’s irresponsible manipulation is here to stay.

The only way to get out of this situation is to change the terms of the contracts. PUB should not fix water price for 25 years because this is totally unreasonable terms as energy price is volatile and nobody could possibly hedge it without incurring huge cost over 25 years.

A new pricing formula which will allow Hyflux to earn a reasonable profit should be renegotiated.

On the other hand, the Vesting Contract which EMA gave other power plants should be made available to Hyflux. Or that, Hyflux will have to renegotiate it’s contract on gas purchase.

The only way for Hyflux to stay afloat is to have consistency in all the pricing... from water, gas to electricity pricing. To have a mix of fixed and high volatility in some pricing will be a perfect formula for disaster. Worse, thinking that one could fixed a lower than cost water price while betting on cross subsidizing it via a volatile energy market.

By reconstruction or renegotiating water and gas contracts, government do not need to come up with huge amount of money to buy over the plant. It will just have to settle with a lower profit from dealing with Hyflux.

Hyflux will earn a reasonable profit (covering depreciation for 25 years) from this new arrangement but its profitability may be fixed within a range.

This is the viable option available but need political will to execute it.

Retail investors will not lose all or most of their investment. They could even continue to get their yearly interest when the new formula of contracts allow Hyflux to earn profits from its Tuaspring.

Goh Meng Seng

4 comments:

Anonymous said...

The AGC also noted that Mr Lee Hsien Yang had PUBLICLY said the last will was drafted by Ms



Kwa Kim Li of law firm LEE & LEE. Ms Kwa had DENIED this.


LOW CLASS!

Anonymous said...

We may have superstar airport; if the people are fugly; the country will still be considered ugly! A kind and gracious population will deliver beautiful results.

Anonymous said...

World class airport and facilities. Caning and death sentence sure not world class? Hypocrites!

Anonymous said...

Sunday visit to Lucky Plaza. Walk across to Paragon.