DARCO Water Technologies Darco Water Tech : BLR 0% has decided not to proceed with its investment in a water treatment asset proposed as an alternative to the Gaoyi project.

 

Both the investments in the alternative asset and the Gaoyi project were proposed by the group' s former non-executive deputy chairman Wang Zhi - who decided to retire from the post last year.

 

In its latest bourse filing on Monday (Mar 21), Darco Water said its board had determined that such an investment would not be in the interest of or beneficial to the company.

 

It will reach out to Wang over the compensation sum of S$2 million payable once its notice of rejection is delivered.

 

The move comes nearly 6 months after Darco Water rejected an earlier proposal by Wang for the proposed investment in a Gaoyi domestic wastewater treatment project.

 

In 2018, the company had announced that it had signed a non-binding letter of intent with Wang for the Gaoyi project, which holds a 30-year concession on a wastewater treatment plant.

 

Darco Water Tech, which is involved in the business of water and wastewater treatment solutions, issued a notice of rejection to Wang on Sep 23, 2021, after its board assessed that the Gaoyi project was not a suitable asset for asset injection.

 

The board said at the time that it was unable to obtain certain critical information, documents and data points to assess the investment' s suitability. There was also some uncertainty in terms of the tariffs and capacity requirements that the local government would impose in the future.

 

Following the rejection of the Gaoyi project, Wang was required to offer an alternative water treatment asset.

DARCO Water Technologies (Darco Water Tech: BLR 0%) on Friday said its board of directors is still assessing whether to proceed with its proposed investment in the Gaoyi domestic wastewater treatment project.

 

In a filing to the Singapore Exchange, Darco said the company and its former non-executive deputy chairman Wang Zhi - who had in 2018 signed a non-binding letter of intent for the project - have until March 23, 2022 to determine if the company will proceed with its investment in either the Gaoyi project or any other alternative water treatment asset.

 

The group said it intends to use all the time available to assess whether the Gaoyi project or any other investment is feasible.

 

Darco said it is currently awaiting the provision of outstanding information from Mr Wang. Should this information be provided to the company and its board of directors by Sept 30, the company will be able to commence legal and further technical and economic due diligence to facilitate the acquisition of the Gaoyi project by March 2022.

 

In the event the information provided and due diligence investigations are satisfactory, and if the Gaoyi project meets the company' s investment criteria, Darco' s board of directors said it anticipates that it is likely to proceed with its investment in the Gaoyi project.

 

If the information is not provided or unsatisfactory, or if the project does not meet the company' s investment criteria, the board is then likely to issue a notice of rejection to Mr Wang. This will then trigger Mr Wang' s obligations under the supplemental agreement and supplemental deed to provide the alternative water treatment asset.

 

Darco also said it has formed a committee to liaise with Mr Wang and his team on the provision of the outstanding information.

 

The outstanding information includes certificates from the Environmental Protection Bureau and the Ministry of Housing & Urban Redevelopment that indicate the approval of commencement of commercial operation of the Gaoyi project, copies of receipts of monthly tariffs for the past 12 months, as well as historical financial and operational performance for the project since January 2020.

SGX RegCo issues notice of compliance to Darco for detailed report on Gaoyi projectSINGAPORE Exchange regulators (SGX RegCo) on Friday ordered Darco Water Technologies to disclose a detailed report on the status of its proposed investment in the Gaoyi domestic waste water treatment project with input from its legal advisers by Sept 17.

 

The company is to disclose details of the current ownership structure in the Gaoyi project, including those of former non-executive deputy chairman Wang Zhi, special purpose vehicle for the project Huize, He Bei Kai Yuan Cheng He Water Engineering Co (HKC) and Wo De Si Yuan Group Co (WDSY), as well as the relationships between these parties.

 

In 2018, the company had announced that it had signed a non-binding letter of intent with Mr Wang in respect of a proposed investment in the Gaoyi project, which holds a 30-year concession on a waste water treatment plant.

 

It was disclosed then that Mr Wang will transfer 100 per cent of his equity interest in the Gaoyi project to the group, which he held through HKC. Mr Wang was the controlling shareholder of HKC.

 

The company said that HKC had signed a cooperation agreement with WDSY, the Chinese company that had successfully won the project in an open tender from the Gaoyi County Government in December 2016.

 

SGX RegCo is ordering the company to disclose details of the water treatment asset that is supposed to be transferred to it, as well as the facts and circumstances surrounding the extension of deadline for the transfer of the Gaoyi project, including the board' s assessment and bases for the extension of the deadline.

 

In addition, SGX RegCo is requiring Darco to disclose details of legal recourse available to the company under the placement agreement and supplemental agree, including the recovery of the deposit of 6 million yuan and potential compensation sum of S$2 million from Mr Wang if the deed of undertaking is not fulfilled.

 

SGX RegCo is also seeking key findings and recommendations by Binnies, which was appointed as Darco' s independent third-party technical and economic due diligence consultant on June 3.

 

Darco is expected to provide details of key information, documents and data points requested for the due diligence that remain outstanding from Mr Wang and the deadline to provide such information.

 

In addition, SGX RegCo is seeking the board' s assessment of whether it will be proceeding with the proposed investment in the Gaoyi project, and any concerns that were highlighted to the board to reject the project and the key findings and recommendations by Binnies.

 

It is also seeking the board' s assessment of the timeline and information required for a definitive conclusion to be made on the Gaoyi Project in order for the company to secure the legal recourse.

DARCO Water Technologies has received a letter from a group of shareholders who collectively hold substantial interest, urging the company to commence legal action against non-executive deputy chairman Wang Zhi.

 

Darco Water, in its regulatory statement on Wednesday, disclosed that a group of shareholders with total stakes of 16.1 per cent has called for legal action against Mr Wang and one other person - unnamed in the statement - over allegations of various wrongdoings.

 

The complainants alleged that the duo have breached their duties in transactions pertaining to payments for a consultancy agreement entered into by the company, the undertaking by Mr Wang to procure the transfer of a water treatment asset or concession, and the now-aborted acquisition of a majority stake in PT Panghegar Energy Indonesia in relation to a waste-to-energy project in West Java.

 

The complainants also threatened that they would apply to the court to commence legal proceedings in the name of the company, if the board fails to take out legal action as called for within 14 days. Further, they will claim the litigation fees and expenses incurred in such legal proceedings from the company.

 

Darco Water is consulting the lawyers on this matter and will take actions where necessary in response to the letter. It stated any director who is in a position of conflict with regard to the allegations will be asked to recuse from participating in any deliberations and decision-making concerning such allegations.

DARCO Water Technologies has filed a writ of summons and statement of claim against its former director and executive officer Thye Kim Meng, claiming relief for his breach of duties in two projects.

 

In a filing to the Singapore Exchange on Wednesday, Darco said the writ of summons and statement of claim were filed last Friday, but its legal counsel' s attempts to serve the legal documents on Mr Thye on Sept 4 and Sept 6 were unsuccessful. Darco said it would continue with its efforts to effect service.

 

Mr Thye has also failed to respond to a letter of demand issued against him by Darco on Aug 12, for US$1.6 million in losses and damages suffered by the company due to his breach of duties in respect of the same two projects.

DARCO Water Technologies said on Friday that despite further discussions, the West Java government has reiterated that it is not agreeable to a re-negotiation of the terms of the cooperation agreement for the group&rsquo s proposed Indonesia waste-management project.

 

Darco took a 75 per cent stake in Panghegar Energy Indonesia (PEI) this year. PEI in turn owns 80 per cent of Jabar Bersih Lestari (JBL), which inked the agreement with the government to provide waste-management services in certain parts of the province.

 

Darco' s third-party consultant, who was engaged to perform due diligence, had recommended that certain terms of the agreement be renegotiated so that the project can be viable. Darco said on June 25 that the West Java government said it is not agreeable to a renegotiation and that JBL should commence operation of the project.

 

The group said on Friday that is deliberating its next steps and is expected to come to a decision in a week. This includes a decision on whether the reversal option will be exercised.