Hyflux in talks over Tuaspring power plant

Hyflux, which is developing Singapore’s second and largest desalination plant, ‘is now in advanced discussions with reputable contractors’ to develop the core power portion of the project.

But a Hyflux spokesman yesterday declined to comment on when the EPC deal for the S$890 million project is expected to be sealed, though earlier sources had indicated construction would begin in Q4.

The Tuaspring facility, which is slated to start operations in 2013, will produce 70 million gallons of desalinated water per day, to be supplied to the PUB under a 25-year agreement. The 411-megawatt cogeneration plant marks the company’s first foray into power.

Asked about the cost of the power portion, which industry sources put at around US$500 million, the Hyflux spokesman would only say that as the integrated Tuaspring desalination and power project has some common facilities, ‘it is not appropriate to compare costs with an independent stand-alone power plant due to the synergies from the combined facilities’.

On project financing, Hyflux announced at the July groundbreaking for Tuaspring that it had secured a S$150 million financial package for the desalination plant from DBS, Mizuho Corporate Bank and Sumitomo Mitsui Banking Corporation, adding that it was ‘on track’ to secure financing for the power plant as well.

Group president and CEO Olivia Lum had also said at that time she was confident that financing for both the desalination portion and the ancillary power plant would be secured on schedule in four months’ time, that is around October.

While industry publication Water Desalination Report published a report this week headlined ‘Hyflux fails to finance Tuaspring power plant’, the Hyflux spokesman pointed to its Singapore Exchange announcement on Oct 31, that it ‘will rely on corporate funding to complete the development and construction of the desalination plant and the power plant facility’.

This notwithstanding, industry observers say that the 411-MW cogen plant – which has already secured gas feedstock from LNG aggregator BG Group – may be too large for Hyflux’s own power needs.

They reckon, for instance, that the SingSpring desalination plant – Singapore’s first desalination plant, in which operator Hyflux has a 30 per cent stake – probably needs just about 40 MW of power.

This suggests that the two desalination plants together, including the upcoming Tuaspring complex next door, may take up just about one-quarter of the cogen plant’s capacity.

While Hyflux itself had indicated that any excess power from the plant will be sold to the power grid, this means that the desalination group will be entering a highly-competitive and currently over-supplied electricity market here, the industry observers said.

Having a single large power unit also means that it will not have back-up supplies when the unit is taken down for maintenance – which typically takes 14 days to a month – and this will mean that Hyflux will then have to buy electricity from the pool.

When asked yesterday whether Hyflux is considering a tie-up with an existing genco here to operate the power facility, the spokesman said: ‘We are currently focusing on construction of the project. We will evaluate suitable business collaborations to decide on the optimal strategy.’

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