Hyflux Water Trust secures 20-year China concession

HYFLUX Water Trust’s (HWT) wholly owned subsidiary, Hyflux NewSpring (Yangzhou) Co Ltd, has been granted an exclusive 20-year concession by the government of Jiangsu Province to build, own, operate and transfer an expansion plant next to HWT’s existing waste-water treatment plant in the Yangzhou Chemical Industrial Park.

Upon expiry of the concession agreement, HWT has a first right to negotiate for an extension of the concession term, Hyflux Water Trust Management, the trustee-manager of HWT, said in a statement yesterday.

With a design capacity of 20,000 cu m/day, and an estimated project cost of 50 million yuan (S$9.9 million), the expansion plant is HWT’s second plant in the Yangzhou Chemical Industrial Park – the first being the existing waste-water treatment plant, which was acquired by HWT as part of its initial portfolio at the time of its recent listing.

The combined design capacity of the two plants will be 40,000 cu m/day.

The expansion plant is required to meet the growing industrial demand for waste-water treatment in the concession area. Construction of the expansion plant is expected to begin in the second quarter of 2008. Operation is expected to commence in mid-2009, with full capacity utilisation by 2011.

The Yangzhou expansion plant will contribute to the growth of the HWT portfolio. This is in addition to the expected organic expansion of the initial portfolio, and future acquisitions of assets from parent group Hyflux Ltd, the trust’s manager said.

The expansion plant will be funded by bank credit facilities available to HWT, and is expected to be yield-accretive. It is, however, not expected to have a material financial impact on HWT for the financial year ending December 2008.

Issue statistics:

Offer size: 165.0m units
Public Tranche – 30.0m units
Placement Tranche – 135.0m units
Price: S$0.78
NAV per Unit (post-IPO): S$0.73
Forecast DPU: 4.46 cents (FY08)
5.26 cents (FY09)
Market Cap (post-IPO): S$217.9m
Open: 24 Nov 2007
Close: 28 Nov 2007, 12.00noon
Trading: 3 Dec 2007, 2.00p.m. (on “ready” basis)
Lead Manager: JP Morgan

Overview

Hyflux Water Trust (HWT) is the first pure-play global water business trust to be listed on a securities exchange in Asia that provides investors with an opportunity to invest in water-related infrastructure assets (including, but not limited to, water treatment plants (“WTPs”), wastewater treatment plants (“WWTPs”), water recycling plants (“WRPs”), desalination plants (“DPs”) and water distribution companies) in the People’s Republic of China (“PRC”), India, the Middle East and North Africa region (“MENA”) and other high-growth markets globally.

The Trustee-Manager believes that the overall positive outlook on the global water sector, the strong market fundamentals of the PRC water sector, together with long-term, regular and predictable cash flows from a high quality Initial Portfolio, are several key highlights for investing in HWT.

The Trustee-Manager plans to capitalise on the synergistic business models of HWT and Hyflux Ltd (“Sponsor”), the sponsor of HWT, the continuing commitment of the Sponsor to HWT, and the extensive water-related infrastructure expertise and wide networking contacts of the Trustee- Manager to acquire water-related infrastructure assets from the Sponsor through the right of first offer, right of first refusal and right to match granted by the Sponsor (“ROFOAR”) and from third parties. It also plans to increase the distribution of HWT organically through an improvement in utilisation and from the “inbuilt” capacity expansion potential of the Initial Plants.

Upon completion of the Offering, HWT will acquire the entire issued share capital of Hyflux Utility Ltd (“HUL”) from SinoSpring Utility Ltd. (“SUL”), a subsidiary of the Sponsor. HUL owns the entire issued share capital of 11 special purpose companies (“SPCs”), with each SPC owning one or more water infrastructure assets in the form of a WTP, WWTP and/or a WRP. Immediately upon Listing, HWT will have 13 Plants, comprising three WTPs, eight WWTPs and two WRPs (“Initial Plants” and the business undertakings carried on through such Plants, “Initial Portfolio”).

Seven of the Plants have commenced commercial operations as at the date of HWT’s Prospectus (“Operating Plants”) and six of the Plants are expected to commence commercial operations by the end of FY2008 (“Completing Plants”). Each of the SPCs owning the Plants has entered into a long-term Concession Agreement with the relevant Administrative Authorities of between 20 to 30 years. In addition, Yangkou SPC (which owns a WTP) and Liaoyang SPC (which owns a WWTP with recycled water output) has each entered into a Water Supply Agreement with various users.

Please refer to the Prospectus for risk factors and other details of the IPO.

Hyflux trust sets IPO price range

A BUSINESS trust backed by Singapore water treatment firm Hyflux has set an indicative price range of $0.78 to $0.91 a unit for its Singapore listing, potentially raising $150.15 million, a source told Reuters yesterday.

Hyflux Water Trust, which is based on 13 water treatment plants in China, is selling 165 million units in its stockmarket listing, according to its prospectus. JPMorgan is handling the deal.

At the indicative price, the trust would offer a yield of 4.9 to 5.7 per cent, the source said.

China is thirsty for more clean water to feed its economic growth. For plant builders such as Hyflux, injecting the completed factories into a trust frees up capital for it to expand elsewhere. — Reuters

Hyflux to list trust based on China water plants

SINGAPORE – Water treatment firm Hyflux said on Thursday it will set up a business trust that includes 13 China water treatment plants to be floated on the stock market in a deal that a source said would be worth more than US$100 million.

Hyflux plans to list the trust on the Singapore stock market by the end of this year. Called Hyflux Water Trust (HWT), the entity will own 13 plants with a total daily capacity of 445,000 cubic metres. The trust will also have right of first refusal on all other water assets owned by Hyflux, the Singapore company said in a statement.

Hyflux will retain between one-quarter and one-third of the trust after the IPO, it added.

The spinoff of the plants into a business trust will enable Hyflux to achieve its asset-light strategy and allow it to use its capital for expansion elsewhere, Hyflux Chief Executive Olivia Lum said.

Hyflux had previously assigned first right of refusal to CitySpring Infrastructure Trust, which earlier on Thursday said the agreement had been called off by mutual consent.

HWT will be headed by Saud Ibne Siddique, while Hyflux Chief Financial Officer Grace Goh Bee Kheng will take care of the trust’s finances after resigning from Hyflux.

Shares of Hyflux rose as much as 4.12 per cent to a two-year high of $3.56 with 2.3 million shares traded when they resumed trading at 2pm. — REUTERS