Hyflux's Tuaspring news release edited to omit key electricity sales reference after input from Olivia Lum, CFO: Witness

CNA

a day ago

SINGAPORE: A news release on the new Tuaspring project by water treatment firm Hyflux was edited a few times until a portion about a new electricity sales business was taken out, a court heard on Tuesday (Aug 19).
A fourth draft of the release was edited to "play down" the energy portion after input from then-chief executive officer Olivia Lum Ooi Lin and then-chief financial officer Cho Wee Peng.
This was alleged in court by the prosecution's second witness, Ms Winnifred Heap Ah Lan, who was Hyflux's head of corporate communications and investor relations at the time, in late 2010 and early 2011.
She was testifying against her former bosses and colleagues on day four of the trial of Lum, 64, Cho, 56, and four former independent directors.
Cho faces only one charge under the Securities and Futures Act, while the other five are contesting two charges each linked to omitting details about electricity sales in the Tuaspring project from investors and the Singapore Exchange (SGX).
According to the prosecution, Hyflux had pitched the Tuaspring project to the public as its second and largest seawater desalination plant in Tuas, while hiding the fact that it would fund the sale of water at a very low price to national water agency PUB, with a new business of selling electricity from a power plant it would build.
When the project ran into financial problems due to weak electricity sales, Hyflux suffered losses and eventually entered liquidation, with 34,000 investors owed S$900 million (US$700 million).
MS HEAP'S BACKGROUND
Ms Heap told the court that she had been working as head of research for Singapore at JP Morgan Singapore before moving to Hyflux after Lum had asked her to "join her a few times".
At the time, she felt the management team was "very driven" and Hyflux was one of the few water treatment companies around.
She has since left Hyflux and has been with DBS Bank for about 10 years, with her current title being executive director.
The court heard that Ms Heap joined Hyflux in January 2009 to cover several roles including Hyflux's water trust and business in India.
Deputy Chief Prosecutor Christopher Ong told her that he would be focusing only on her role in regard to Hyflux's corporate communications for this trial.
She said that she handled investor relations, quarterly results announcements, the preparation of annual reports and organising events and launches as part of her role. She had help from a corporate communications team.
Ms Heap testified in a low voice, at times haltingly, and was reminded multiple times by Mr Ong to speak up and into the microphones provided.
She said at various points that the events occurred a long time ago and she could not recall what had happened.
Mr Ong, who is senior counsel, showed her various slides, emails and documents from 2010 and 2011 and questioned her about them.
Ms Heap testified that when it became known at the time that Hyflux had the most competitive or lowest bid in response to a tender by PUB, there was a "sense of excitement".
Although Hyflux had not won the bid yet, she said there was a sense of excitement just knowing Hyflux had the most competitive bid, and because the company could move into power generation as part of its next business model.
Mr Ong showed the court an email thread in early December 2010. Cho sent an email to Hyflux energy expert Camille Hurn and Hyflux finance staff member Tien Liang Nah, copying in Ms Heap and others.
In it, Cho asked Mr Nah to contact someone to set up a time for a meeting with representatives from DBS, as they "would like to better understand our power strategy". The court heard earlier that DBS was one of the banks Hyflux had sought loans from for the Tuaspring project.
After Mr Nah replies to say he would do so as soon as possible, Lum replied: "Need to do a lot of convincing job (sp) in energy strategy to the banks. Apparently Island Power is still having financing challenge."
Questioned about this, Ms Heap said she had no background knowledge of this.
Asked if she knew why the bank would require "a lot of convincing", she said: "I would imagine the key reason is (Hyflux's) insufficient track record with regards to power generation."
DRAFTS OF NEWS RELEASE ANNOUNCING THE AWARD OF THE PROJECT
Mr Ong then took Ms Heap through various drafts of a news release she was involved in preparing to announce Hyflux being awarded the contract of the Tuaspring Desalination plant.
The first draft was circulated to relevant personnel via email in late December 2010. Ms Heap explained that she and her team were preparing for the news release ahead of time, even though it was announced only in March 2011 that Hyflux was the preferred bidder.
This was because it was public information that Hyflux had put in the lowest bid and had high chances of winning the project, so the team had to prepare for the announcement.
Mr Ong flashed the draft news release on a screen in court.
On the second page of the announcement, it stated: "Integrated within the design of Tuas II desalination plant is a 350MW combined cycle gas turbine power plant which will supply electricity directly to the desalination plant. The remaining capacity will be retailed through Singapore's wholesale electricity market, the National Electricity Market of Singapore, to electricity retailers and subsequently sold to contestable consumers."
The paragraph after this read: "(To this end, Hyflux will set up separate entities to undertake the power generation and energy retailing businesses. The investment in the power plant is estimated at approximately XXX million and will be funded XXX.)"
Ms Heap explained that the "XXX" portions were to be filled in later.
She said the target audience for the news release was the stock exchange and the public, with analysts and fund managers likely to be "the people that will read this announcement more carefully".
In ensuing email exchanges, comments were given to edit parts of the news release, such as increasing the capacity of the power plant to 411MW.
The second draft of the news release retained information about the sales of the electricity, with a quote from Lum at the end: "The integration of a power plant within a water project will help us drive higher efficiency and cost effectiveness in operations and maintenance of the desalination plant.
"We look forward to partnering PUB to deliver another world-class desalination plant in our home market and to help Singapore become a hydrohub."
Another email sent from Ms Heap to Lum and Cho and Hyflux's legal counsel on Jan 19, 2011, included a third draft of the news release.
In her email, Ms Heap said she had made the changes following input from Lum and Cho, adding that "we still need to discuss on how much we need to disclose on the funding aspect".
She explained in court that this email was to show the legal counsel the document so she was aware that the changes by Lum and Cho had been incorporated.
This draft no longer had any mention to the sale of electricity, lead prosecutor Mr Ong said. Ms Heap confirmed this.
Mr Ong asked why the line about the sale of electricity had been taken out in this third draft.
Ms Heap thought for a while, before saying that the changes "would have been directed from Olivia and Wee Peng".
She said she and her colleague "would not have the authority" to take out such "key points" from the news release.
Asked by Mr Ong why the sale of electricity was a "key point", Ms Heap said it would be sold to the grid and investors and analysts would want to know "how much they want to sell to the grid, how you're going to do it, whether you have a track record, (and) whether you have the people with know-how to be able to execute that strategy".
Mr Ong then tried to ask Ms Heap what the impact of an announcement stating that Hyflux was going to be selling electricity alongside its new water project be, in her role as the person in charge of corporate communications and investor relations.
However, Lum's lawyer, Senior Counsel Davinder Singh, objected, saying that such a question would be for an expert witness.
The judge allowed Ms Heap to answer the question to the best of her ability as a person in charge of corporate communications and investor relations.
Ms Heap answered softly, with parts of her answer inaudible over the court speakers. She said there would be questions relating to the expertise and know-how that Hyflux had, and whether the company had the "relevant people to execute the strategy".
She said she "really cannot recall" why Lum and Cho wanted the line about the sale of electricity taken out of the news release draft.
Mr Ong then showed Ms Heap an email sent to Lum, Cho and others in early February 2011, just before Hyflux was announced as the preferred bidder for the project.
In the email, Ms Heap wrote: "Hi all, attached is the cleaned up draft for (1) news release and (2) presentation following input from Olivia and Wee Peng. The key is to play down energy while highlighting our expanded bench strength and core capabilities."
The email had two attachments: a powerpoint presentation for analysts at a briefing on the announcement of the Tuaspring Project and the fourth draft of the news release.
Mr Ong asked her what she meant by "the key is to play down energy".
Ms Heap said: "To play down the power generation part of the contract ... power generation being integrated into the contract."
She said this was "key to the change" in the presentation and news release.
"And whose idea or instruction was it to play down energy?" asked Mr Ong.
Ms Heap hesitated. "Um. It is stated in the email, that, following the input from Olivia and Wee Peng."
She said that "core capabilities" meant water desalination, while "expanded bench strength" was the power generation part of the announcement.
She agreed that the announcement made no mention of the sale of electricity, just like in the third draft.
The trial continues with Ms Heap still on the stand.
If convicted of consenting to Hyflux's intentional failure to disclose the electricity sale information to the securities exchange, Lum could be jailed for up to seven years, fined up to S$250,000 or both.