HYFLUX has suspended a contract for a seawater reverse osmosis desalination package in Iran, which the company said on Friday is expected to have a material adverse effect on its financial performance. NAVIN SREGANTANnavinsre@sph.com.sg@NavinSreBT
The contract was signed in April between Hyflux subsidiary Hyflux International and Iran's Asia Water Development Engineering Company (AWDEC) for a seawater reverse osmosis desalination package in Bandar Abbas, Iran. In July, AWDEC indicated - through a letter of intent - for a second contract for the project.
Hyflux, which has its shares suspended on the Singapore Exchange (SGX), cited that it was unable to maintain the requisite banking support to receive payment from AWDEC for works to be performed under the contract. This is a result of the US's decision to withdraw from October 2015's implementation of the Joint Comprehensive Plan of Action (JCPOA) and to reinstate the US sanctions that were in force before the implementation of the JCPOA.
In its filing with the SGX on Friday, Hyflux said that after having discussions with AWDEC, it notified the Iranian company on Dec 11 of its decision to suspend the contract with effect from Oct 16. As a result of these geopolitical developments, Hyflux said that it has also taken no further step to "formalise and/or execute the second contract with AWDEC".
Separately, Hyflux terminated a joint venture (JV) agreement signed in March 2014 with Tolaram Corporation for the development of membrane-based water treatment plants in Nigeria.
Established in 1948, Tolaram conducts business in manufacturing, energy, real estate, digital services and infrastructure.
As part of the JV agreement, Yewa Water (Singapore) was set up, which both Tolaram and Hyflux had an equal stake in. The Singapore-registered entity owned the majority stake in Yewa Water Company (Nigeria), a company incorporated in Nigeria that was intended to be used to undertake water projects in the country.
The termination of the JV, and the liquidation and striking off of the Yewa Water entities with Tolaram is not expected to have a material adverse effect on the financial performance of Hyflux.
The termination of the JV with Tolaram is not expected to have a material adverse effect on the financial performance of Hyflux.
Trading in Hyflux shares remains suspended.