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    Singapore's Hyflux wins contracts for desalination plants in Tlemcen and Oran

    SINGAPORE (Reuters) - Singapore water treatment firm Hyflux Ltd. said on Thursday that it was in a joint venture to build a desalination plant in Algeria for $238 million.

    A company statement said Hyflux and Malaysia's Malakoff Bhd entered into an agreement with Algerian Energy Company (AEC) to form a project firm to design, build, finance and run a seawater desalination plant at Tlemcen for 25 years.

    AEC will hold 49 percent of the project, which is expected to be completed within 24 months. The balance of the project will be held by Malakoff and Hyflux.

    Hyflux said its effective equity interest of 10.2 percent is estimated to be $5 million.


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    additionally to these millions they will sales the salt
    A government that robs Peter to pay Paul can always depend on the support of Paul.
    By: George Bernard Shaw

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    ALGIERS, March 31, 2008 (Thomson Financial) - Singaporean company Hyflux Ltd. will build a water desalination plant for an investment of $468 million in the Oran region, western Algeria, within the next 36 months with a capacity of 500,000 cubic metres per day, APS press agency reported.

    A joint venture company, MTM Spa, will be set up to ensure all the phases of the project are carried out. It will be 51 percent owned by Hyflux and 49 percent owned by Algerian Energy Company, which was created in 2001 by Algeria's state oil company Sonatrach and state electricity and gas company Sonelgaz.

    AEC chairman Amanallah Sari said the plant will be the biggest desalination project in the world, in terms of volume of production.

    Algeria has launched the construction of 13 desalination plants which are to be built between now and 2010 to provide drinking water for urban centres. They are to ensure supplementary production of drinking water of about 2.3 million cubic metres per day.

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    Lundi 31 Mars 2008 -- Le groupement singapourien Hyflux va réaliser en Algérie dans un délai de 36 mois une méga-station de dessalement d'eau de mer dans la région d'Oran d'une capacité de 500 000 m3 par jour pour un montant de 468 millions de dollars, a annoncé l'agence de presse APS.

    Une société mixte, MTM Spa, sera créée pour assurer le suivi de toutes les étapes de ce projet. Elle sera détenue à 51% par Hyflux et 49% par l'Algerian Energy Compagny (AEC), une entreprise créée en 2001 par le groupe pétrolier public Sonatrach et la société publique de l'électricité et du gaz Sonelgaz.

    Cette station est considéré comme le projet de dessalement "le plus important au monde" sur le plan du volume de production (500 000 m3), selon le PDG d'AEC Amanallah Sari.

    L'Algérie a lancé la construction de 13 stations de dessalement qui doivent être achevées d'ici à 2010 pour l'approvisionnement en eau potable des agglomérations urbaines. Elles doivent assurer une production supplémentaire d'eau potable de l'ordre de 2,3 millions de mètres cubes par jour.

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    SINGAPORE, April 22, 2008 (Reuters) - Singapore water treatment company Hyflux said on Tuesday it had won an order worth $468 million for a seawater desalination plant in the Oran region in western Algeria with a capacity of 500,000 cubic metres a day.

    The company said in a statement that the deal would double its order book to S$1.5 billion ($1.1 billion).

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    Grace Ng:


    April 22, 2008 -- HYFLUX has clinched a major deal to build what it says is the world's largest seawater desalination plant in Algeria with a project value of US$468 million (S$632 million).

    The deal is an important boost to the home-grown water treatment company's ambitions to become a top global player, analysts said.

    Hyflux announced on Tuesday that it had won the bid from the Algerian state-owned firm Algeria Energy Co (AEC), which handles power and water privatisation in the country.

    The plant, located in the Oran region of western Algeria, will have a capacity of 500,000 cubic metres a day. It will use Hyflux's reverse osmosis membrane technology to supply water to the state-owned national public water group and the national oil company of Algeria.

    Hyflux won the bid because it offered competitive pricing and had a 'proven track record in delivering large-scale desalination projects', said Ms Olivia Lum, Hyflux chief executive at a media and analyst briefing yesterday.

    The massive project will almost double Hyflux's total order book to about S$1.5 billion as at April this year.

    Its unit MenaSpring Utility will hold a 51 per cent stake, with the rest held by AEC. The project will be 70 per cent financed with loans from local Algerian banks, and 30 per cent equity. Hyflux will invest $80 million in the project.

    The project is not expected to have a material impact on Hyflux's financial performance this financial year. But it is a 'very profitable', partly because it enjoys 'low interest rates' of 3.75 per cent a year on the project financing offered by the Algerian banks, said Mr Sam Ong, deputy CEO. He added that the project satisfies Hyflux's target of 12 to 15 per cent returns for each project in its global portfolio.

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    May 27, 2008:


    MAY, 2005. Hyflux announces net profit for the quarter to March is up 219 per cent to $8.98 million. Revenue doubles year-on-year to $24.2 million; 72 per cent of sales come from the Middle East and the company expects hundreds of millions of dollars worth of projects from the region. Share price? Roughly $3.65.

    May, 2008. Hyflux announces net profit is up five-fold to $5.7 million. Revenue, at $89.6 million, is five times the restated $17.5 million in the year-ago quarter. North Africa and the Middle East account for 56 per cent of sales and Hyflux has just secured a $630 million desalination contract in Magtaa, Algeria. Share price after the announcement? Roughly $3.65, and going on to hit $3.71 as of yesterday.

    But investors probably still remember what happened after 2005. Within ten months, Hyflux was trading down at around $2.70 after it sold its stake in a Middle East joint venture to its Dubai partner, Istithmar, in March 2006. Hyflux said that it made a 20 per cent gain from the whole affair but investors, who had hoped for millions of dollars worth of new Middle East projects, sold the stock down viciously. One analyst said that only a quarter of the anticipated orders materialised.

    Will Algeria be Dubai redux? At the current moment, with Hyflux on the rise, once-burnt investors have yet to turn shy again. Perhaps they should. The Magtaa plant has not yet contributed revenue to Hyflux, but there are some troubling omens.

    According to Global Water Intelligence, an industry publication, Hyflux's bid for Magtaa included a remarkably low engineering, procurement and construction (EPC) cost - just US$441 million for a 28-month construction period. The closest rival bid was for US$457 million over 36 months.

    And the desalinated water price, which provides recurring revenue for the company, was just 55.77 US cents per cubic metre - possibly the lowest tariff in the world, according to GWI.

    The low EPC cost should be a worry, going by Hyflux's latest profit statement. According to its Q1 results, construction profit from an earlier 200,000 cubic metre per day desalination plant in Tlemcen, Algeria is coming below expectations.

    CIMB's Jessie Lai calculated that Tlemcen contributed $49.8 million in sales but overall, gross margins contracted 26 percentage points year-on-year on higher construction costs.

    Ms Lai noted that Hyflux's Q1 core earnings, after stripping out one-off items and a $5 million forex gain, was just $0.9 million, despite the surge in revenue.

    In May 2005, DBS Vickers made much the same point about Hyflux - core earnings, after taking out a $5.5 million fair value gain, was just $3.5 million due to lower EPC profits. Nevertheless, some analysts remain bullish on the stock. JPMorgan, for example, is retaining an 'overweight' call, saying that it expects positive news flow from project wins in China and Algeria.

    It's likely that Hyflux's pipeline of new deals isn't drying up any time soon. For the past year, it has been announcing 200 to 300 million yuan (S$39-59 million) worth of new orders every few months. That's going to add a lot to headline revenue numbers, even without considering the mammoth Magtaa contract. Hyflux says that it hopes to book EPC revenue from that deal of $600 million from 2009 to 2011.

    But high sales don't necessarily translate into good earnings if costs shoot up. The Tlemcen precedent is worrying; CIMB's Ms Lai notes too that higher construction costs were incurred at an unnamed China water project due to changes in design specifications. Higher recurring income should help earnings, but as noted, Hyflux may have had to slice its tariff rates to the bone to secure new contracts.

    And margins will also depend on cost of capital. Hyflux said that it secured 75 per cent of the funding for Magtaa at a 'very low' rate of 3.75 per cent. The remainder could be borrowed for Libor + 1.5 per cent, according to management.

    Those rates are astonishingly low. Some say that this could be due to Hyflux's good relationship with the Algerian government. An Algerian Energy Company (AEC) source told GWI that 'we had instructions from the government' to award Hyflux the smaller Tlemcen deal (Magtaa was won in an open tender put out also by AEC). And the Algerian banking sector, which is providing the 3.75 per cent loan line, is dominated by state banks.

    Investors will remember that Istithmar, Hyflux's old Dubai partner, is an investment holding company owned by the United Arab Emirates government. Algeria, embroiled just ten years ago in a bloody civil war, will hopefully prove to be different.

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