Hyflux Water Trust: First Water Business Trust in Asia. Saud Siddique, CEO. 8 December 2008 Macquarie Asia Infrastructure Conference - Macau

Transcription

1 Hyflux Water Trust: First Water Business Trust in Asia Saud Siddique, CEO 8 December 2008 Macquarie Asia Infrastructure Conference - Macau 0

2 Agenda 1 Opportunities in Asia Water 2 Overview of Hyflux Water Trust 1

3 1 Opportunities in Asia Water 2

4 2 Overview of Hyflux Water Trust 3

5 HWT First pure-play global water business trust First pure-play global water business trust listed on a securities exchange in Asia Investment Mandate Sponsor Support Initial Portfolio Pipeline Management Team and Board Focus on water-related infrastructure assets including WTPs, WWTPs, WRPs, DPs and water distribution companies Mandate over high-growth markets globally with primary focus on China, India, the Middle East and North Africa region ( MENA ) Invest in assets which provide long-term, regular and predictable cash flow Hyflux Ltd a 31.5% Unitholder in HWT Hyflux is the O&M Operator and MS Provider of the portfolio ROFOAR over Hyflux water projects which Hyflux has sole power to dispose HWT can leverage on the ROFOAR and Hyflux s strengths, including its extensive industry and market network, on-the-ground presence, sectoral expertise, technology resources and capabilities, and relationships with businesses and government authorities in the key target markets of HWT Waiver and subordination of Sponsor s distribution entitlements for FY08 HWT is being established by Hyflux to pursue its asset-light strategy, recycle its capital and continue to expand and develop its business High quality diversified Initial Portfolio comprising of 13 Plants in the PRC Potential acquisition pipeline through ROFOAR from Hyflux 1,105,000m3/d, 2.5 times initial portfolio Acquisition of other third party assets Full-time and experienced Management Team with track record in deal origination, structuring, execution and project financing, equity investing and managing water and other infrastructure assets Strong and experienced Board of Directors and Management Team Investors in HWT will receive regular and predictable distributions 4

6 Key growth drivers in the global water sector Environmental Environmental Drivers Drivers More stringent environmental laws Societal Societal Drivers Drivers Rapid industrialisation Increasing urbanisation Deteriorating water quality Growing public sophistication + Ramping-up of environmental investment targets Technological Technological Drivers Drivers Growth of high-technology manufacturing Yield and costs concerns Growing ability to detect water contaminants Strong growth in the water infrastructure asset sector 5

7 PRC Environmental policies drive investments in the water sector China s urban wastewater discharge, wastewater treatment China s urban wastewater discharge, wastewater treatment capacity and capacity shortfall (millions m capacity and capacity shortfall (millions 3 3 /day) /day) Municipal wastewater treatment rates in China and for the Municipal wastewater treatment rates in China and for the five reference provinces five reference provinces 2006 treatment rate 2010 treatment rate 82% 81% 82% 83% 75% 70% 49% 52% 40% 42% 33% 23% PRC Tianjin Hebei Liaoning Jiangsu Zhejiang Value of potential municipal and industrial wastewater Value of potential municipal and industrial wastewater treatment contracts to 2020 (RMB billions) treatment contracts to 2020 (RMB billions) Municipal Industrial Discharge volumes Treatment capacity Capacity shortfall Source: Scott Wilson Water Sector Industry report Significant growth potential - investment of US$50bn estimated to achieve just 50% treatment rater 6

8 PRC Strong tariff growth potential Opportunity for tariff increase China charges much less for its water than much of the developed world Water tariffs in China increased by approximately 60% in total between 2003 and 2007 Total Total Domestic Domestic Water Water Tariffs Tariffs (US$/m (US$/m 3 ) Average = ~ US$3.00/m Denmark Germany Netherlands Australia Japan UK USA Spain Sweden Italy China Source: Scott Wilson Water Sector Industry Report 7

9 HWT s Initial Portfolio is located in high growth coastal provinces in the PRC Initial Initial Portfolio Portfolio of of HWT HWT Liaoning Liaoyang WWTP Hebei Zunhua WTP Langfang WWTP Langfang WRP Tianjin Beichen WWTP Beichen WRP Jiangsu Taizhou WWTP Dafeng WTP Yangzhou WWTP Wuxi WWTP Yangkou WTP Changshu WWTP Zhejiang Tiantai WWTP Zunhua WTP Langfang WWTP and WRP Taizhou WWTP Yangzhou WWTP Wuxi WWTP Tiantai WWTP Assets are located in two coastal regions of Assets are located in two coastal regions of China China Strong economic growth: all five provinces have experienced extremely strong nominal GDP growth between 2001 and 2005, with average annual growth rates ranging from 12.4 to 18.2 per cent Water supply issues in the region 1 : Large-scale pollution issues in Jiangsu and Zhejiang Water scarcity in Tianjin, Hebei, and Liaoning Hyflux track record: over 10 years presence in the PRC, with strong relationships and market reputation at government and industrial levels Close relationship between Tianjin Government and the Government of Singapore Source: Scott Wilson Water Sector Industry Report Diversified by assets types, industries and locations Legend: WWTP: Wastewater Treatment Plant; WTP: Water Treatment Plant; WRP: Water Recycling Plant 8

10 Long-term, regular and predictable cash flows Relatively new plants By the end of FY2008, all but one of the Plants would have been in commercial operations for less than three financial years Long-term concessions Between 20 to 30 years Right to increase Design Capacity up to Concession Capacity for four Plants Exclusive right in Concession Area Right of first refusal to extend Concession Period, renew Concession Agreement or construct additional plants in the Concession Area for eight SPCs Minimum off-take provisions 1 Provides protection and certainty over minimum earnings Long-term, regular and predictable cash flows from a high quality Initial Portfolio Tariff Tariff adjustment adjustment mechanisms mechanisms Protects operating margins in Increasing the event profit higher margins operating the event costs of higher operating costs Note: 1.In respect of all of WWTPs and WTPs (except Zunhua WTP) O&M Agreements and MS Guaranteed under Agreements provide cost certainty O&M and MS agreements O&M Operator will not adjust O&M Fees Guaranteed except under efficiencies certain conditions and guarantees the consumption efficient for Certainty of performance from a certain costs reputable O&M operator MS Provider will not adjust MS Fees except under certain conditions and guarantees corporate manpower costs Good quality off-takers Good quality off-takers Relatively Relatively low low risk risk of of default defaults on in payments payments by the off-takers Availability of security arrangement from off-takers Security arrangement (such as, but not limited to bankers guarantee and/or deposits in escrow accounts) to secure tariff payments under the Concession Agreements 9

11 Advantages of a Business Trust A relatively new listed asset class in Singapore Unlike companies, a business trust is not restricted to paying dividends out of accounting profit, but can pay distributions out of operating cash flow Transparency on distribution policy long term regular distributions like a fixed income instrument Liquidity of an equity instrument 10

12 Distribution Per Unit (DPU) 8% 5.26 cents 4.88 cents 4% 2.17 cents 2.09 cents 2.17 cents 1H FY2008 PROJECTED DPU 1H FY2008 ACTUAL DPU FY2008 PROJECTED DPU FY2009 PROJECTED DPU 11

13 Growth in ROFOAR Pipeline 1,200,000 1,100,000 1,105,000 m3/day Capacity m3/day 1,000, , , , ,000 m3/day 45% 600, ,000 As at Listing Date Current 12