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It’s So Clear

Full Year 2005 Results Review

16 Feb 2006

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AgendaAgendaAgendaAgenda

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2

Financial Review

Corporate Updates

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4

Growth Strategies

Business Outlook

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Financial Review

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Financial HighlightsFinancial HighlightsFinancial HighlightsFinancial Highlights

0.710.05

Net Debt-to-Equity

Ratio (including PF loan)

1 pt23%24%ROE

66%5.55cents9.21centsEPS

77%S$26.1mS$46.3mPATMI

76%S$27.9mS$49.2mPAT

48%S$88.7mS$131.5mSales

+ / (-) %2004 2005

Source: Hyflux

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5

Strong Revenue Growth Strong Revenue Growth Strong Revenue Growth Strong Revenue Growth

000020202020404040406060606080808080100100100100120120120120140140140140

2004200420042004 2005200520052005IndustrialIndustrialIndustrialIndustrial MunicipalMunicipalMunicipalMunicipal2004200420042004 19%19%19%19%

81%81%81%81%74.2

57.4

16.6

72.0

S$’m

200520052005200556%56%56%56% 44%44%44%44%48%

Change in revenue mix

Municipal

Industrial

Industrial

Municipal

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Strong Revenue GrowthStrong Revenue GrowthStrong Revenue GrowthStrong Revenue Growth

2005200520052005

SG

26%

ME/OTH

18%

China

56%

2004200420042004

SG

10%

ME/OTH

8%

China

82%

� Revenue Drivers : Sustainable growth markets

– China, Middle East

4

7

11 1937 30

4314

27

44 59

88

0

20

40

60

80

100

120

140

2001 2002 2003 2004 2005

1H 2H

Strong Revenue GrowthStrong Revenue GrowthStrong Revenue GrowthStrong Revenue Growth

CAGR 40%

S$’m

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Strong Earnings GrowthStrong Earnings GrowthStrong Earnings GrowthStrong Earnings Growth

7.47.47.47.4 12.312.312.312.3 19.519.519.519.5 26.126.126.126.1 46.346.346.346.300001010101020202020

3030303040404040505050502001200120012001 2002200220022002 2003200320032003 2004200420042004 2005200520052005

PATMI

2.802.802.802.80 3.603.603.603.60 5.085.085.085.08 5.555.555.555.55 9.219.219.219.210000222244446666888810101010

2001200120012001 2002200220022002 2003200320032003 2004200420042004 2005200520052005

EPS

S$’m

CAGR 44%

Scts

CAGR 27%

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9

PATMIPATMIPATMIPATMI

PATMI improved by 77% to S$46.3m

� Higher municipal sales from China, Singapore and Middle East

� After providing for investment for higher personnel and development costs to build future businesses

� Gains from divestments as part of asset-light strategy

� Implementation of FRS 39

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Consistent Returns on EquityConsistent Returns on EquityConsistent Returns on EquityConsistent Returns on Equity

23%23%23%23% 23%23%23%23% 23%23%23%23% 23%23%23%23% 24%24%24%24%0%0%0%0%10%10%10%10%20%20%20%20%30%30%30%30%40%40%40%40%

2001200120012001 2002200220022002 2003200320032003 2004200420042004 2005200520052005

ROE ROE ROE ROE

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Strong Cash PositionStrong Cash PositionStrong Cash PositionStrong Cash Position

Strong Cash position of Strong Cash position of Strong Cash position of Strong Cash position of S$96.4mS$96.4mS$96.4mS$96.4m

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Cash flow analysisCash flow analysisCash flow analysisCash flow analysis

(53%)137.864.7

Net cash generated from financing

activities

(58%)(114.7)(47.7)Net cash used in investing activities

158%7.018.0

Net cash generated from/ (used in)

operations

NM(0.0)0.1Payment of tax

156%7.017.9Cash generated from operations

(7%)33.330.8

Profit before working capital

changes adjusted for non cash

item

ChangeFY2004FY2005In S$’million

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Healthy Cash flowHealthy Cash flowHealthy Cash flowHealthy Cash flow

� Net cash generated from operations increased 156% to S$18.0m

� Net cash used in investing activities decreased by 58% to S$47.7m– Proceeds from divestment and sale of building of S$44.6m– Offset by investment in associates, plant and equipment and

intangibles

� Net cash from financing activities decreased by 53% to S$64.7m– Proceeds from issuance of shares S$38.7m– Drawdown of project finance loan of S$35.1m– Partially offset by dividend payment and payment of short

term loans

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Healthy Debt Equity RatioHealthy Debt Equity RatioHealthy Debt Equity RatioHealthy Debt Equity Ratio

0.710.05Net debt to equity ratio (including

PF loan)

Net cashNet cashNet debt to equity ratio (excluding

PF loan)

-71.382.010.7Net borrowings

+35.1(61.3)(96.4)Less: Cash & cash equivalents

-36.2143.3107.1Total borrowings

-2.32.40.1Short term

+29.81.531.3Long term

-63.6139.475.8PF Loan*

Change

Restated

FY 2004FY 2005In S$’million

* * Limited resource project financingLimited resource project financing

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Impacts

– Understate earnings

– Volatility

– Understating of revenue

– Proportionate earnings recognition over economic life of assets

Implication on Accounting StandardsImplication on Accounting StandardsImplication on Accounting StandardsImplication on Accounting Standards

� FRS 102 Share-based payment

� FRS 39 Financial Instruments: Recognition and Measurement

� FRS 31 Interests in Joint Ventures

� FRS 27 Consolidated and Separate Financial Statements

� FRS 28 Investment in Associates

NO IMPACT

ON

CASHFLOW

Corporate Updates

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Singapore:Singapore:Singapore:Singapore: Tuas Seawater Desalination PlantTuas Seawater Desalination PlantTuas Seawater Desalination PlantTuas Seawater Desalination Plant

First Seawater Desalination Plant in Singapore

� 136,380 m3/day

�Total project cost – about S$200m

�Completed and delivered water into

PUB system since 4Q05

�Recurring income from sale of

water and O&M revenue for 20 years

from 4Q05

� Lowest water tariff price of S$0.78 cents/m3 in the world for desalinated water

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Divestment of SingSpringDivestment of SingSpringDivestment of SingSpringDivestment of SingSpring

� Completed the divestment of 50% equity stake in SingSpring Pte Ltd in 3Q05

� Financials of SingSpring would be consolidated proportionately into Hyflux’s Group accounts

� Reduce project finance debt

� Able to consolidate 50% of revenue from SingSpringand O&M income into Group’s account

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China: Desalination Plant (China: Desalination Plant (China: Desalination Plant (China: Desalination Plant (LiaoningLiaoningLiaoningLiaoning))))

LIAONING: Seawater Desalination

Plant in China

�50,000 m3/day, project cost about S$80 mil

�Supply of industrial grade water and potable water to municipality of Huludao for 30 years

�Construction commenced 3Q05 but is now on

hold due to

�Local government is reviewing site location for the plant

�Impact :-

�Completion target will be postponed till the local government finalise the site location

�No delay damages

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China: Desalination Project (China: Desalination Project (China: Desalination Project (China: Desalination Project (TianjinTianjinTianjinTianjin))))

TIANJIN: Largest Seawater

Desalination Plant in China

� 100,000 m3/day, project cost about S$154 mil

� Cooperative Agreement signed with People’s government of District of Dagang, Tianjin

�Ground breaking – Oct 05

�Target completion - end 2007/early 2008

�Plant expandable to 150,000 m3/day

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Middle EastMiddle EastMiddle EastMiddle East

Palm Jumeriah� 32,000 m3 /day x 2 desalination plants –

US$80 million

� Detailed engineering substantially

completed and procurement on-going

� Target completion – end 2006/mid 2007

DMCC

� 40,000 m3 /day sewerage treatment plant

for production of irrigation quality water

� Project on hold as customer is reviewing

the capacity requirement for the project Artist Impression of a RO Plant at Palm Jumeirah Island

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IndiaIndiaIndiaIndia

� Office set up in 2005, with 9 headcount in sales and marketing

� Potential Markets :– Desalination

– Waste Water Reclamation

– Consumer Product Sales

– Process and Filtrations ( Sugar, Pharmaceutical, Organic Acids, etc)

� Short term strategy: Focus on industrial projects and consumer products

� Medium term strategy: selective in undertaking municipal projects

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Awards and Accolades 2005Awards and Accolades 2005Awards and Accolades 2005Awards and Accolades 2005

Commendation at the Global Water Awards 2005Commendation at the Global Water Awards 2005Commendation at the Global Water Awards 2005Commendation at the Global Water Awards 2005The Seletar NEWater plant and the Chestnut Avenue Waterworks were highly commended at the Global Water Awards 2005, by Global Water Intelligence, UK.

Fastest Growing 50, 2005Fastest Growing 50, 2005Fastest Growing 50, 2005Fastest Growing 50, 2005Hyflux was awarded the “Fastest Growing 50” at the Fastest Growing (FG) 50 Certification Awards 2005, organized by DP Information Group, Ernst and Young, IE Singapore, and SPRING Singapore.

Winner of the Most Transparent Company Award 2005Winner of the Most Transparent Company Award 2005Winner of the Most Transparent Company Award 2005Winner of the Most Transparent Company Award 2005Hyflux netted the Most Transparent Company Award for the services/utilities/agriculture sector, at the Securities Investors Association Singapore (SIAS) Investors Choice Awards in 2005

Forbes Asia Forbes Asia Forbes Asia Forbes Asia –––– Best Under a Billion List 2005 Best Under a Billion List 2005 Best Under a Billion List 2005 Best Under a Billion List 2005 Hyflux was among 11 local firms that were ranked as one of 200 best

small companies in the region, by Forbes Asia magazine.

Growth Strategies

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Building for the FutureBuilding for the FutureBuilding for the FutureBuilding for the Future

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Building for the FutureBuilding for the FutureBuilding for the FutureBuilding for the Future

� Implement sustainable growth strategy

� Positioning to build on recurring income stream

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Building for the FutureBuilding for the FutureBuilding for the FutureBuilding for the Future

Sustainable Growth Strategy– Identify and develop growth markets

• China, ME, India

– Build resources to tap growing markets• Funding growth

• Investment in human capital and setting up infrastructure

– Invest in R&D to develop and acquire new technology and niche applications

• Market expansion

• Remain competitive

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Low Debt Equity

Ratio of 0.04

Raise Equity (when needed)

to Increase Capacity to Fund Large

Projects

Set up vehicle for

post-completion

funding

�Such as business trust

or infrastructure

fund

Funding through

Mezzanine Entity

Optimize Capital

Structure

Debt � Asset light strategy

� Reduce risk exposure during construction

�Redeployment of capital

� Debt

� Asset light strategy

� Divest completed projects into trust/fund vehicle

� Allow redeployment of capital

� Debt

Funding GrowthFunding GrowthFunding GrowthFunding Growth

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SinoSpringSinoSpringSinoSpringSinoSpring

� Asset-light strategy

� Ease capital outlay

� Enable Group to build up portfolio of BOO/BOT projects

� Revenue from large turnkey projects

� Building up recurring revenue stream

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Personnel ResourcesPersonnel ResourcesPersonnel ResourcesPersonnel Resources

68268268268246546546546500002002002002004004004004006006006006008008008008002004200420042004 2005200520052005

No. of No. of No. of No. of HeadcountHeadcountHeadcountHeadcount���� 47%47%47%47% Non Non Non Non EngineersEngineersEngineersEngineers30%30%30%30% EngineersEngineersEngineersEngineers70%70%70%70%

DiplomaDiplomaDiplomaDiploma22%22%22%22%Below Below Below Below DiplomaDiplomaDiplomaDiploma30%30%30%30% PHDsPHDsPHDsPHDs2%2%2%2% General General General General DegreeDegreeDegreeDegree34%34%34%34%

Masters Masters Masters Masters DegreeDegreeDegreeDegree12%12%12%12%� ���� Sales & Sales Support HC ���� 38% to 90

� ���� R&D HC ���� 33% to 85

� ���� Operations and Production HC ���� 47%to 405

477

205

207

84

13

226

152

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Building for the FutureBuilding for the FutureBuilding for the FutureBuilding for the Future

Positioning to build on recurring income stream

– Focus on BOO/BOT projects with long term recurring income

– Reduce revenue volatility

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Building up Recurring IncomeBuilding up Recurring IncomeBuilding up Recurring IncomeBuilding up Recurring Income

0%0%0%0%10%10%10%10%20%20%20%20%30%30%30%30%40%40%40%40%50%50%50%50%

NowNowNowNow Medium TermMedium TermMedium TermMedium Term Long TermLong TermLong TermLong Term

% of Recurring Income to Total % of Recurring Income to Total % of Recurring Income to Total % of Recurring Income to Total RevenueRevenueRevenueRevenue10% 10% 10% 10% ---- 20%20%20%20% 30% 30% 30% 30% ---- 40%40%40%40%

2%2%2%2% 3333---- 5 yrs5 yrs5 yrs5 yrs > 5 yrs> 5 yrs> 5 yrs> 5 yrs

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Portfolio of BOO / BOT ProjectsPortfolio of BOO / BOT ProjectsPortfolio of BOO / BOT ProjectsPortfolio of BOO / BOT ProjectsSecured Projects Target Completion

Singapore

1 Desalination Plant 136,380 m3/day Completed

China

4 Wastewater Treatment Plants 90,000 m3/day 2006

2 Desalination Plants 150,000 m3/day 2007 - 2008

1 Water Clarification / Recycling 20,000 m3/day 2006 - 2007

260,000 m3/day

Dubai

1 Wastewater Treatment Plant 40,000 m3/day on hold

2 Desalination Plants 64,000 m3/day 2006 - 2007

104,000 m3/day

Total (11 projects ) 500,380 m3/day

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Portfolio of BOO/BOT projectsPortfolio of BOO/BOT projectsPortfolio of BOO/BOT projectsPortfolio of BOO/BOT projects

When all the plants (500,380 m3/day) are fully operational in 1 – 3 years time, recurring income stream approx S$ 80 – 90 million/year for the next 20 – 30 years

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Portfolio of BOO/BOT projectsPortfolio of BOO/BOT projectsPortfolio of BOO/BOT projectsPortfolio of BOO/BOT projects

TARGETTARGETTARGETTARGET

To achieve operation of To achieve operation of To achieve operation of To achieve operation of 1,000,000 m3/day 1,000,000 m3/day 1,000,000 m3/day 1,000,000 m3/day

in 3 in 3 in 3 in 3 –––– 4 years4 years4 years4 years

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How did we progress in 2005How did we progress in 2005How did we progress in 2005How did we progress in 2005

� Expanded portfolio of municipal projects globally

� Invested in human capital

� Funding growth – divest assets

� Built up recurring income stream

� Commercialize certain R&D applications

Organic acid industry

China and Middle East

Personnel increase from 465 to 682 employees

Building sale, Singspring and Sinospring

Completed Singspring and Changshu project

Progress achieved in 2005

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Building for the FutureBuilding for the FutureBuilding for the FutureBuilding for the Future

In the short term,

� revenue may continue to be lumpy on a quarter to quarter basis

� earnings will be affected due to investment costs in building up resources to generate future income

Business Outlook

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China Water China Water China Water China Water

CrisisCrisisCrisisCrisis

China is "facing a water crisis moresevere and urgent than any other country in the world."

-Qiu Baoxing, Vice-minister of Construction International Conference for China Urban Water Development Strategies

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Decreasing Water SupplyDecreasing Water SupplyDecreasing Water SupplyDecreasing Water Supply

� Water shortage and water pollution are the two major problems in China’s urban water supply.

� Shortages cost US$24.2 billionin estimated losses in industrial output a year

� Pollution costs China 8-12% of its GDP annually through direct damage etc.

China Water Sector Report

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Recent Industrial AccidentsRecent Industrial AccidentsRecent Industrial AccidentsRecent Industrial Accidents

� String of Water Pollution Crises recently:

– Benzene spill in SonghuaRiver, Harbin, Nov 2005

– Cadmium pollution in BeiRiver, Guangdong, Dec 2005

– Diesel oil leak in Yellow River, Henan Province, Jan 2006

– Cadmium pollution in XiangRiver, Hunan Province, Jan 2006

� Served to heighten urgency of need to protect water resources

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Cohesive PolicyCohesive PolicyCohesive PolicyCohesive Policy

� Policy on water conservation transcends all government levels:

� State Council’s “7 Key Missions” released on 14 Feb 2006 highlighted ‘drinking water safety as highest priority

– Central government’s most explicit directive

� National Development and Reform Commission (NDRC)– “Water Conservation Policy Outline”

– Products made from wastewater (liquid) could enjoy reduced tax rates according to national policies

– Enterprises that produce fresh water from recycled water and seawater are entitled to enjoy preferential policies

– Water conservation techniques and equipments could receive government funding

http://en.ndrc.gov.cn/policyrelease/t20050621_8427.htm

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Water Diversion (Water Diversion (Water Diversion (Water Diversion (南水北调南水北调南水北调南水北调))))

� Water Inequality:

– North is very arid, South is slightly better but has of late suffered from pollution as well

� US$59 billion dollar project underway to divert southern water to northern cities

� Meant to deliver 44.8 billion cubic meters of water upon completion in 2050

� High costs - More than US$1.32 per m3 even before treatment.

� Announced that water would cost Beijing 7 yuan per tonne when project completed*

� Water prices for desalinated water from our Tianjin Dagang Desal Plant are lower.

*Zai Houhai, Deputy Minister, MOH

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India Water India Water India Water India Water

MarketMarketMarketMarket

“India faces a turbulent water future.The current water development and water management system is not sustainable”

-John Briscoe,Senior Water Specialist World Bank

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India India India India –––– Alarming shortageAlarming shortageAlarming shortageAlarming shortage

<1000 m32025

2,464 m31990

5,277 m31955

Est. renewable fresh waterYear

Categorization:Renewable fresh water availability < 1700 m3/ per capita/ annum: Water Stress

Renewable fresh water availability < 1000 m3/ per capita/ annum: Chronic Water Scarcity

Alarming decline

Source: Water Privatization and Implications, Sampath et al, JPMorgan

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India India India India –––– Compelling Growth StoryCompelling Growth StoryCompelling Growth StoryCompelling Growth Story

� Great demand for water:

– 2nd largest population in the world

– 4th largest economy in the world (PPP)

– Rapid growth in economy and population

� Indian PM, Dr Manmohan Singh, most recently called for PPP to fund US$250bn worth of infrastructure projects, over the next five years to feed such demand

TWSJ 13/01/06

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India India India India –––– Growth DriversGrowth DriversGrowth DriversGrowth Drivers

� Recent water supply cut to South Delhi due to raw water shortage from Haryanan source serve to heighten urgency

� Industry water withdrawal estimated to hit 118 cubic km in 2020, roughly 236 times Singapore’s current water needs

� Hyflux well poised to serve industrial sector. We target:

– Petrochemical industry

– Textile industry

– Sugar Industry

– Pharmaceutical industry

The Times of India 16/02/06Global Water Intelligence

MembraneMembraneMembraneMembrane

MarketMarketMarketMarket

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MembranesMembranesMembranesMembranes

� Market research points to 15% growth in global membrane market through to 2020

� Growth to be especially strong in municipal and industrial sectors

� Hyflux’s key markets – India and China poised for robust growth

� Annual sales of China’s membrane market projected to hit $2.47 bn in 2015, 10% – 15% of world market

– Ultrafiltration (UF) and microfiltration(MF) together account for 20%revenueGlobal Water Intelligence-McIlvane-Frost & Sullivan-Membrane Industry Association of China

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High Temperature Solvent Resistant

Eg. Sugar Juice Purification

Ethanol / Water Separation

High Temperature High Corrosive

Eg. Lubricant & Paper Mills

Solvent Purification In Pharmaceutical & Electronic Industries

Eg. Methanol IPA

Disposable Filter

Eg. Lab Use

Critical Filtration

Eg. Lab Use in Medicine & Semiconductor Industries

Organic Acid Purification

MBR Membrane Contactor Degassing

Pre-filtration Waste Water Treatment

HyfluxHyfluxHyfluxHyflux Membrane ApplicationsMembrane ApplicationsMembrane ApplicationsMembrane Applications

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Growing Order BookGrowing Order BookGrowing Order BookGrowing Order Book

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Growth in Order BookGrowth in Order BookGrowth in Order BookGrowth in Order Book

234234234234 4654654654656262626200001001001001002002002002003003003003004004004004005005005005006006006006002003200320032003 2004200420042004 2005200520052005

Order Book $’m

� Municipal = S$327 mil

(Outstanding project cost : S$395 mil)

� Industrial = S$138 mil

� Recurring = S$20 mil –––– S$30 mil

� MOU

� ME - S$498 mil

� China - Harbin - S$ 700 mil

- Chang Chun - S$ 160 mil

���� 99%99%99%99%

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On track to deliver another On track to deliver another On track to deliver another On track to deliver another year of growthyear of growthyear of growthyear of growth

Thank YouThank YouThank YouThank You

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Q&AQ&AQ&AQ&ASessionSessionSessionSession