Sei sulla pagina 1di 3

4/5/2019 Hyflux's problems due to its own commercial decisions: EMA, Companies & Markets - THE BUSINESS TIMES

COMPANIES & MARKETS 

SUBSCRIBE LOG IN

Hyflux OCBC 16 Samsung's


disputes chief warning New
Salim- Samuel signs of a Galaxy
Medco Tsien gets company Sponsored
Watch
Samsung Galaxy Watch Active

Recommended by

http://www.businesstimes.com.sg/companies-markets/hy uxs-problems-due-to-its-own-commercial-decisions-ema-0

HYFLUX SAGA

Hyflux's problems due to its own commercial decisions: EMA


 WED, APR 03, 2019 - 5:50 AM

VIVIENNE TAY  vtay@sph.com.sg  @VivienneTayBT

The Energy Market Authority (EMA) of Singapore said on Tuesday that Hy ux's present nancial situation was the "result of its own commercial
decisions". ST PHOTO: LIM YAOHUI

Singapore

https://www.businesstimes.com.sg/companies-markets/hyfluxs-problems-due-to-its-own-commercial-decisions-ema-0 1/6
4/5/2019 Hyflux's problems due to its own commercial decisions: EMA, Companies & Markets - THE BUSINESS TIMES

THE Energy Market Authority (EMA) of Singapore said on Tuesday that Hy ux's present nancial situation was the "result
of its own commercial decisions".

The gas industry regulator was responding to a reader's letter "Time for a close look into why Hy ux tanked. This was no
typical business failure", published in The Business Times on March 26.

In the letter, reader Leong Mun Wai suggested that vesting contracts and policy changes led to lower electricity prices
which in turn was a key contributory factor to Hy ux's current situation.

TRAVELEASY

Get 50%* off Single


Trip Plans or 20% off
Annual Plans

Buy now
*Promo T&CS apply.

In its letter to BT - signed by Dorcas Tan, director of Market Development and Surveillance Department - EMA said Mr
Leong "had drawn the wrong conclusions".

SEE ALSO: EMA: Hy ux’s nancial situation 'a result of its own commercial decisions'

It said: "Hy ux's present nancial situation is a result of its own commercial decisions, with full knowledge of the gas
supply situation and electricity generation market."

On the vesting contracts, EMA said that in 2009, it o ered the lique ed natural gas (LNG) vesting scheme to generation
companies (gencos) as a voluntary option to encourage the uptake of LNG. It said the gencos opted into the scheme
"based on their own commercial considerations".

While EMA o ered only up to 1.2 million tonnes per annum of LNG under vesting contracts, the gencos had bought more
than twice as much LNG. They then made their commercial decisions to build additional generation capacity to consume
the LNG that they had bought.

At that time, wholesale electricity prices were high but the subsequent increase in generation capacity led to a decline in
wholesale electricity prices in recent years.

The agency added that Hy ux does not have any LNG vesting contracts and had decided to build its power plant after the
LNG vesting contracts were awarded to other gencos. Thus, when Hy ux made its decision, it would also have been
aware of other gencos' plans to increase their generation capacity as this was publicly available information published by
EMA, it said.

ADVERTISING

https://www.businesstimes.com.sg/companies-markets/hyfluxs-problems-due-to-its-own-commercial-decisions-ema-0 2/6
4/5/2019 Hyflux's problems due to its own commercial decisions: EMA, Companies & Markets - THE BUSINESS TIMES

EMA also said it was incorrect for Mr Leong to claim that Hy ux's nancial problems were caused by "an unexpected
domestic policy change".

It added there is also no justi cation for EMA to "render relief" to Hy ux using public resources, as Mr Leong had
suggested.

The spokesman added: "EMA will continue to promote economic e ciency and competition, and ensure a level playing
eld for stakeholders in the electricity market."

In his letter, Mr Leong had suggested that Hy ux's management was perhaps "blinded by the potential huge pro ts if
electricity prices had stayed at around S$200 per MWh, the price level in 2012 when the decision was made".

The company committed to a high-priced gas supply contract with no corresponding mechanism to protect the company
against the decline of the electricity price, he added.

Mr Leong also said the collapse in electricity price was the "direct result of the vesting contracts given to the other gencos
in return for their support to sign long-term take-or-pay gas supply contracts from the LNG terminal, itself another
national project".

He said as a result of the vesting contracts, existing gencos expanded their capacity rapidly.

This resulted in a reserved margin of 80 per cent instead of the normal 30 per cent, precipitating the price collapse.

The letter added that EMA "did not render relief to Hy ux at an early stage" to bu er it from the unintended results of
the vesting contracts.

On Monday, Minister for the Environment and Water Resources Masagos Zulki i said the government cannot use
taxpayer money to help retail investors recoup losses from the beleaguered water treatment rm.

Hy ux faces the prospect of selling its biggest asset, its Tuaspring desalination plant, to PUB for zero dollars if it fails to
rectify defaults at the plant by April 30.

PUB will take over only the desalination plant, and not the power plant which sits on the same site.

The Hy ux make-or-break scheme meetings when the rm's restructuring plan will be put to a vote are set for April 5.

READ MORE: Letter from Energy Market Authority

Enjoy full access

Read all exclusive articles


Get two weeks of free access to The Business Times and get the latest business and nancial updates.
No credit card required.

Gain access now


The Business Times

https://www.businesstimes.com.sg/companies-markets/hyfluxs-problems-due-to-its-own-commercial-decisions-ema-0 3/6