1. Hyflux:
Strategies for Growth
Will Fang
Sheldon McCormick
Michael Portner Gartke
Jenny Wang

2. Context
GROWTH
Priorities Targets

3. Agenda
§ Measures of Success
§ Recommendation
§ Analysis of Alternatives
§ Implementation Plan
§ Risk Assessment
§ Conclusion

4. Measures of Success
§ Maintain growth momentum
§ Double enterprise value in 5 years
§ Ensure stable, recurring revenue
§ Exceed replacement rate for O&M order book
§ Extend global reach
§ Increase regional diversification
SUCCESS | RECOMMENDATION | ALTERNATIVES | IMPLEMENTATION | RISK | CONCLUSION

5. Recommendation
Build core business: Water
§ Reallocate resources away from specialty materials,
energy recovery, and consumer products
§ Segment US$460 bn water utilities market by
geographic, demographic, and behavioral factors
§ Target municipalities within MENA and East Asia
§ Position Hyflux as the leading water infrastructure
solutions provider
SUCCESS | RECOMMENDATION | ALTERNATIVES | IMPLEMENTATION | RISK | CONCLUSION

6. Analysis of Alternatives
§ Alternative #1:
§ Focus on emerging concepts
§ Alternative #2:
§ Rebuild industrial manufacturing processes business
§ Alternative #3:
§ Leverage core of water utilities
SUCCESS | RECOMMENDATION | ALTERNATIVES | IMPLEMENTATION | RISK | CONCLUSION

7. 1. Emerging Concepts
§ Strong momentum from environmental movement (+)
Energy § Small scale, virtually non-existent industry base (-)
Recovery § Dependant on volatile oil prices (-)
§ Fragmented competition (+)
Specialty
Materials § Small scale (-)
SUCCESS | RECOMMENDATION | ALTERNATIVES | IMPLEMENTATION | RISK | CONCLUSION

8. 1. Emerging Concepts (Cont’d)
§ Large unserved market in developing world (+)
§ Extension of JV partnership with Marmon (+)
§ Ability to impact the lives of ordinary people (+)
Consumer
Products § Dilution of brand and managerial focus (-)
§ No expertise outside B2B market (-)
§ Questionable financial feasibility (-)
§ Limited reach of impact (-)
SUCCESS | RECOMMENDATION | ALTERNATIVES | IMPLEMENTATION | RISK | CONCLUSION

9. 2. Industrial Manufacturing
(+) § Strong momentum from environmental movement
(-) § Dependant on unpredictable regulatory changes Water
(-) § Small scale compared to municipal projects Treatment
(-) § Less likely to include O&M contract
( +) § Large, growing industrial markets
(-­‐) § Ambiguity in that growth’s benefit to Hyflux Liquid
§ Limited link to core competency Separation
(-)
SUCCESS | RECOMMENDATION | ALTERNATIVES | IMPLEMENTATION | RISK | CONCLUSION

10. 3. Water Utilities
§ Recognized expertise in industry (+)
§ Large and growing market (+)
Desalination
§ Scale of individual projects (+)
§ Environmental concerns (-)
§ Large and growing market (+)
Treatment & § Strong momentum from environmental movement (+)
Recovery
§ Relatively smaller scale (-­‐)
SUCCESS | RECOMMENDATION | ALTERNATIVES | IMPLEMENTATION | RISK | CONCLUSION

11. Financial Viability
2008-2013 2006-2008 Forecasted
Return on Return on
Required Actual Industry
Assets Equity
CAGR CAGR Growth
Emerging
2.7% 3.0% 248.3% -60.6% 15-27%
Concepts
Industrial
0.5% 0.6% 52.5% -8.0% Various
Manufacturing
Water Utilities 13.4% 22.0% 16.7% 224.5% 13-20%
SUCCESS | RECOMMENDATION | ALTERNATIVES | IMPLEMENTATION | RISK | CONCLUSION

12. Analysis of Alternatives
Financial Market Growth Level of
Market Size
Viability Saturation Potential Expertise
Emerging
Concepts
Industrial
Manufacturing
Water Utilities
SUCCESS | RECOMMENDATION | ALTERNATIVES | IMPLEMENTATION | RISK | CONCLUSION

13. Implementation Plan
• By region and by country
Segment Global
• Based on geographic, demographic, and
Market
behavioral factors
Countries with:
• Water needs
Target the • Low, flat, hot geographies
Segments • Stable political environment
• Willingness and ability to pay
SUCCESS | RECOMMENDATION | ALTERNATIVES | IMPLEMENTATION | RISK | CONCLUSION

14. Targeted Locations
Targeted
desalina/on
countries
Targeted
water
treatment
and
recovery
countries
SUCCESS | RECOMMENDATION | ALTERNATIVES | IMPLEMENTATION | RISK | CONCLUSION

15. Implementation Plan
• By region and by country
Segment Global
• Based on geographic, demographic, and
Market
behavioral factors
Countries with:
• Water needs
Target the • Low, flat, hot geographies
Segments • Stable political environment
• Willingness and ability to pay
• Position
as high-tech provider of
Develop
water solutions to emerging and
Superior Offering
developing economies
SUCCESS | RECOMMENDATION | ALTERNATIVES | IMPLEMENTATION | RISK | CONCLUSION

16. Developing a Superior Offering
Contract Type Ownership Structure
D-B-O-O • Expand alone when
possible
• Capture entire value
chain • Usejoint ventures
when required by
• Re-occurring
political
revenues circumstances
SUCCESS | RECOMMENDATION | ALTERNATIVES | IMPLEMENTATION | RISK | CONCLUSION

17. Developing a Superior Offering
§ Create and articulate a value proposition
§ Leverage past experience
§ Capitalize on our understanding of emerging markets
§ Communicate flexible approach (D-B-O-O/JV partnerships)
§ Continue to develop superior technologies
§ Growth relies on technological capabilities
§ Re-focus R&D spending on improving core business
SUCCESS | RECOMMENDATION | ALTERNATIVES | IMPLEMENTATION | RISK | CONCLUSION

18. Financial Summary
2006A 2007A 2008A 2009E 2010E 2011E 2012E 2013E
Realistic Scenario
Revenues 142.4 192.8 554.2 697.8 841.3 984.9 1,070.3 1,155.7
% growth NM 35.4% 187.5% 25.9% 20.6% 17.1% 8.7% 8.0%
Implied EV 1,857.8 3,874.1
Optimistic Scenario
Revenues 142.4 192.8 554.2 841.3 1,128.4 1,415.5 1,586.3 1,757.2
% growth NM 35.4% 187.5% 51.8% 34.1% 25.4% 12.1% 10.8%
Implied EV 1,857.8 5,890.3
Pessimistic Scenario
Revenues 142.4 192.8 554.2 697.8 697.8 841.3 783.2 926.7
% growth NM 35.4% 187.5% 25.9% 0.0% 20.6% -6.9% 18.3%
Implied EV 1,857.8 3,106.6
Assumptions:
- Realistic scenario: 1 new project per year
- Optimistic scenario: 2 new projects per year
- Pessimistic scenario: 1 new project every 2 years
- Model plant capacity of 300,000 cubic metres per day
- O&M operating fees of S$0.78 per cubic metre
- EPC value of S$435.0 mm
- 3 year completion period
- Existing projects under construction and order books remain in place
SUCCESS | RECOMMENDATION | ALTERNATIVES | IMPLEMENTATION | RISK | CONCLUSION

19. Timeline
Year 1 Year 2 Year 3 Year 4 Year 5
FOCUS
• Divest non-core
businesses
• Reallocate R&D to core
POSITION
• Understand Gov’t
procurement processes
• Network with Gov’t
officials
GROWTH
• Initiate new projects
• Invest R&D in core
SUCCESS | RECOMMENDATION | ALTERNATIVES | IMPLEMENTATION | RISK | CONCLUSION

20. Risk Assessment
Potential Risks Mitigating Factors
• Pursue joint ventures
Political uncertainty in • Diversification of
host country portfolio
• Negotiate flexible
Rising cost for D-B-O-O
desalination contracts contract
• Hedge energy cost
Greater environmental • Greater technology
scrutiny • Invest in R&D
• Mostcosts are variable
“Lumpiness” of revenues • Enhance market
positioning
SUCCESS | RECOMMENDATION | ALTERNATIVES | IMPLEMENTATION | RISK | CONCLUSION

21. Review of Success Measures
§ Maintain growth momentum
§ Double enterprise value in 5 years
§ Ensure stable, recurring revenue
§ Exceed replacement rate for O&M order book
§ Extend global reach
§ Increase regional diversification
SUCCESS | RECOMMENDATION | ALTERNATIVES | IMPLEMENTATION | RISK | CONCLUSION

22. Thank You
SUCCESS | RECOMMENDATION | ALTERNATIVES | IMPLEMENTATION | RISK | CONCLUSION

23. Appendix A – Financials
2008 2007 2006
Municipal Industrial Others Municipal Industrial Others Municipal Industrial Others
Revenues 476.8 76.4 1.1 89.0 102.3 1.5 45.3 90.1 7.0
EBIT 75.3 0.8 1.4 27.3 10.3 -1.2 5.3 15.5 -1.5
EBITDA 81.4 2.3 3.5 31.7 11.2 0.7 6.3 18.6 -0.6
EBITDA - CapEx 74.5 -9.6 3.5 19.0 -9.8 -0.8 -4.3 10.2 -2.7
Assets 561.9 165.8 51.6 267.8 112.6 13.1 276.9 121.7 15.9
Liabilities 219.9 37.4 5.1 69.0 33.1 1.0 125.7 19.4 1.5
CapEx 6.9 11.9 0.0 12.6 21.1 1.4 10.6 8.4 2.1
D&A 6.1 1.5 2.1 4.3 1.0 1.9 1.0 3.1 0.9
Revenue Contribution 86.0% 13.8% 0.2% 46.2% 53.1% 0.8% 31.8% 63.3% 4.9%
Profit Contribution 97.2% 1.0% 1.8% 75.1% 28.2% -3.3% 27.4% 80.4% -7.9%
Return on Assets 13.4% 0.5% 2.7% 10.2% 9.1% -9.1% 1.9% 12.7% -9.6%
Return on Equity 22.0% 0.6% 3.0% 13.7% 12.9% -9.8% 3.5% 15.2% -10.6%

24. Appendix A – Financials
2006A 2007A 2008A 2009E 2010E 2011E 2012E 2013E 08-13 CAGR
Market Capitalization 1,680.0
Total Debt 258.2
Cash 90.7
Minority Interest 10.4
Enterprise Value 1,857.8 3,715.7
EV/Revenues 3.4x 3.4x
EV/EBITDA 21.3x 21.3x
EV/EBIT 24.0x 24.0x
Revenues 142.4 192.8 554.2 636.6 731.3 840.0 965.0 1,108.4 14.9%
% growth NM 35.4% 187.5% 14.9% 14.9% 14.9% 14.9% 14.9%
EBITDA 24.3 43.6 87.2 100.1 115.0 132.1 151.8 174.3 14.9%
% growth NM 79.6% 100.1% 14.9% 14.9% 14.9% 14.9% 14.9%
EBIT 19.3 36.4 77.5 89.0 102.2 117.4 134.9 154.9 14.9%
% growth NM 88.6% 113.0% 14.9% 14.9% 14.9% 14.9% 14.9%

25. Appendix A – Financials
2006A 2007A 2008A 2009E 2010E 2011E 2012E 2013E 06-08 CAGR 08-13 CAGR
Municipal
Revenues 45.3 89.0 476.8 556.3 649.1 757.3 883.6 1,031.0 224.5% 16.7%
% growth NM 96.6% 435.9% 16.7% 16.7% 16.7% 16.7% 16.7%
EBITDA 6.3 31.7 81.4 94.2 108.9 126.0 145.8 168.6 260.0% 15.7%
% growth NM 403.8% 157.2% 15.7% 15.7% 15.7% 15.7% 15.7%
EBIT 5.3 27.3 75.3 86.8 99.9 115.1 132.6 152.8 277.3% 15.2%
% growth NM 416.0% 175.8% 15.2% 15.2% 15.2% 15.2% 15.2%
Industrial
Revenues 90.1 102.3 76.4 116.5 177.7 271.1 413.4 630.6 -8.0% 52.5%
% growth NM 13.5% -25.4% 52.5% 52.5% 52.5% 52.5% 52.5%
EBITDA 18.6 11.2 2.3 4.7 9.9 20.6 42.9 89.4 -65.0% 108.5%
% growth NM -39.5% -79.8% 108.5% 108.5% 108.5% 108.5% 108.5%
EBIT 15.5 10.3 0.8 1.9 4.9 12.3 31.0 78.2 -77.7% 152.0%
% growth NM -33.9% -92.5% 152.0% 152.0% 152.0% 152.0% 152.0%
Others
Revenues 7.0 1.5 1.1 3.8 13.1 45.8 159.4 555.3 -60.6% 248.3%
% growth NM -78.9% -26.2% 248.3% 248.3% 248.3% 248.3% 248.3%
EBITDA -0.6 0.7 3.5 6.7 12.8 24.6 47.2 90.7 NM 91.9%
% growth NM NM 421.3% 91.9% 91.9% 91.9% 91.9% 91.9%
EBIT -1.5 -1.2 1.4 3.1 7.0 15.6 35.1 78.8 NM 124.7%
% growth NM -21.8% NM 124.7% 124.7% 124.7% 124.7% 124.7%

26. Appendix A – Financials
Sample Plant Assumptions: Tlemcen Seawater Desalination Plant
Daily Plant Capacity 300,000 cubic metres
Annual Plant Capacities 109,500,000 cubic metres
Operating Fees 0.78 S$ per cubic metre
Annual O&M Revenues 85,410,000 S$
O&M Contract Length 25 years
EPC Value 435,000,000 S$
Plant 1 143,550,000 143,550,000 143,550,000 85,410,000 85,410,000
Plant 2 143,550,000 143,550,000 143,550,000 85,410,000
Plant 3 143,550,000 143,550,000 143,550,000
Plant 4 143,550,000 143,550,000
Plant 5 143,550,000
2006A 2007A 2008A 2009E 2010E 2011E 2012E 2013E
Realistic Scenario
Revenues 142.4 192.8 554.2 697.8 841.3 984.9 1,070.3 1,155.7
% growth NM 35.4% 187.5% 25.9% 20.6% 17.1% 8.7% 8.0%
Implied EV 3,874.1
Optimistic Scenario
Revenues 142.4 192.8 554.2 841.3 1,128.4 1,415.5 1,586.3 1,757.2
% growth NM 35.4% 187.5% 51.8% 34.1% 25.4% 12.1% 10.8%
Implied EV 5,890.3
Pessimistic Scenario
Revenues 142.4 192.8 554.2 697.8 697.8 841.3 783.2 926.7
% growth NM 35.4% 187.5% 25.9% 0.0% 20.6% -6.9% 18.3%
Implied EV 3,106.6

27. Appendix B - Research
Total Worldwide Water Treatment Market
Country / Territory Population % of World Population Market Value ($USD)
World 6,784,800,000 $ 394.00
China 1,333,030,000 19.65% $ 77.41
India 1,169,090,000 17.23% $ 67.89
Pakistan 167,463,500 2.47% $ 9.72
Bangladesh 162,221,000 2.39% $ 9.42
Philippines 92,222,660 1.36% $ 5.36
Vietnam 85,789,573 1.26% $ 4.98
Thailand 63,389,730 0.93% $ 3.68

28. Appendix B - Research
GDP (2008 2010 GDP Growth Federal Gov't Spending (2008 Gov't Spending as
Country / Territory $USB) (Projected) $USD) % of GDP
World
China $ 7,800.0 9.5% $ 850.5 10.90%
India $ 3,267.0 7.5% $ 205.3 6.28%
Pakistan $ 452.7 4.0% $ 32.1 7.09%
Bangladesh $ 223.4 7.2% $ 24.2 10.83%
Philippines $ 320.6 6.0% $ 26.8 8.34%
Vietnam $ 246.6 7.0% $ 24.2 9.81%
Thailand $ 553.4 3.5% $ 55.8 10.08%