Hyflux partners with JBIC for big water deals
SINGAPORE (Reuters) - Singapore's Hyflux Ltd said on Tuesday it would partner with the Japan Bank for International Cooperation (JBIC) to target water treatment projects worth over S$1 billion ($723 million) in China and elsewhere.
Hyflux, the builder of the largest membrane-based desalination plant in China, failed to seal a new contract in the mainland in the last year, partly because of the credit crunch which slowed the economy and dried up funding for projects.
"With this so-called big giant behind us, our footsteps are more secured," Deputy Chief Executive Sam Ong told Reuters in an interview, adding that JBIC could participate either as a lender or equity shareholder in Hyflux projects.
"As we are developing projects we are no longer constrained by the size of the projects. We develop projects in the millions of dollars, but right now it can be billions," he said.
Singapore's largest water treatment firm is in talks with a number of companies, among them Chinese firms and Japanese suppliers of components and technology, as it evaluates over 60 potential deals in China, Middle East, Africa and the rest of Asia.
The company, which holds a market share of less than 1 percent in China, expects its partnership with JBIC to bolster its bid to win more projects in its key markets including the mainland, where it gets about 40 percent of its revenue.
Middle East and North Africa are Hyflux's other key markets contributing about 60 percent to total turnover.
PROFIT GROWTH SLOWS
Hyflux expects annual profit growth at 20 percent over the next five years on the back of increased spending by governments on treatment and desalination facilities to conserve scarce water supplies, Ong said.
"The company is poised to pace record earnings in 2008 this year," said Ong. Hyflux's order book value for engineering and construction projects, at more than S$1 billion, should sustain earnings growth over the next two years.
Hyflux's expected rise in profit compares with the company's 40 percent average annual expansion in earnings over the last decade, during which Hyflux widened application of its membrane technology for desalination plants and clinched numerous deals in China, Middle East and Africa.
But increasing competition over a number of profitable deals in China's water sector and huge capital needed for projects has slowed its growth.
Hyflux, which has a market cap of $1.2 billion, competes with firms such as General Electric, France's Veolia and Japan's Mitsui for water treatment projects.
(Editing by Lincoln Feast)
