Singapore's biggest corporate scandal - the criminal trial of Hyflux founder Olivia Lum and five others starts on Moday (Aug 11)
Already, one of the defendants has thrown in the towel.
In total, seven individuals have been charged over Hyflux's intentional failure to disclose information relating to the Tuaspring Integrated Water and Power Project, among other things. But six are contesting their charges in a 56-day trial scheduled to run from Aug 11 to Feb 5, 2026.
The charges were filed more than a year after the failed water treatment firm was approved for winding up in 2021, leaving about 34,000 investors of perpetual securities and preference shares, who had sunk in a combined S$900 million, with nothing.
On Aug 11, the prosecution will proceed on 11 charges against the six defendants.
This includes two of the six charges Lum faces. The remaining four charges against Lum are stood down.
The two charges proceeding against Lum relate to her consenting to Hyflux omitting information relating to Tuaspring , when disclosure was required under Singapore Exchange (SGX) listing rules. This information was necessary to avoid the establishment of a false market in Hyflux's securities, the charge said.
According to the charge, she consented to intentionally failing to notify SGX that the Tuaspring project was Hyflux's expansion into a new business of selling electricity, and that the plant's profitability was contingent on electricity sales revenue, which was projected to make up a significant proportion of its overall revenue.
This had implications for Tuaspring's resulting exposure to market risks arising from the volatility of electricity prices.
If convicted of this charge, Lum, 64, faces up to seven years' jail, a fine of up to S$250,000, or both.
She was also charged over Hyflux's omission to disclose the information about Tuaspring in the offer information statement issued for the offer of $200 million, 6 per cent preference shares on April 13, 2011.
If convicted of this charge, she faces up to two years' jail, a maximum fine of $150,000, or both.
Cho, 56, who was also Hyflux's group executive vice-president, was charged with conniving in Hyflux's omission to disclose the information about Tuaspring .
The former Hyflux independent directors (IDs) also charged with disclosure-related offences are: Teo Kiang Kok , 69; Christopher Murugasu , 66; Gay Chee Cheong, 69; and Lee Joo Hai, 69.
The four men were charged with two counts each – one for neglect relating to Hyflux's failure to disclose information relating to Tuaspring as required, and another for omitting material information in the 2011 offer information statement.
But one other independent director, Rajsekar Kuppuswami Mitta, on Aug 7 pleaded guilty to a charge of neglect in relation to an announcement by Hyflux to the Singapore Exchange on March 7, 2011.
The announcement stated that Hyflux had been named the 'preferred bidder' by national water agency PUB to build and operate Singapore's second and largest seawater desalination plant in Tuas for a concession period of 25 years.
It also mentioned that a power plant would be built to supply electricity to the desalination plant, and that excess power would be sold to the power grid.
But it did not disclose that Hyflux was going into the business of selling electricity for the first time.
A second charge, for non-disclosure related to Hyflux's offer on April 13, 2011, was taken into consideration during sentencing.
Rajsekar , a 68-year-old Australian citizen and Singapore permanent resident, was fined S$90,000 over the company's failure to disclose information relating to the Tuaspring project in 2011 as required.
He was also barred from acting as a company director for five years.
Corporate governance advocate Mak Yuen Teen said that Rajsekar's sentence 'may be a combination of lower culpability and his guilty plea' before trial.
In seeking the S$90,000 fine for Rajsekar , Deputy Public Prosecutor Kevin Yong noted that the harm caused was high while Rajsekar's culpability was low. The prescribed sentence is a fine of up to $250,000, a jail term of up to seven years, or both.
Corporate finance lawyer Robson Lee, a partner at Kennedys Law, noted that: 'The fact that one independent director pleaded guilty before the start of trial does not affect the legal positions of the other IDs or executive director and CFO to defend the charges against each of them.'
The charges against the seven followed a joint probe in June 2020 by the Commercial Affairs Department, the Monetary Authority of Singapore and the Accounting and Corporate Regulatory Authority.
The probe was initiated after a review of Hyflux's compliance with accounting and auditing standards, as well as disclosure rules. It looked at whether there were lapses in Hyflux's disclosures concerning the Tuaspring project, and non-compliance with accounting standards between 2011 and 2018. - The Straits Times/ANN
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Malay Mail
4 days ago
- Malay Mail
Singapore Hyflux trial opens as prosecutors detail Tuaspring risk omissions, S$900m investor losses
SINGAPORE, Aug 11 — Hyflux's troubled Tuaspring water-and-power project, which ended in a collapse wiping out nearly S$900 million (RM2.97 billion) of retail investor funds, was financed through an oversubscribed preference share issue after banks refused to back its electricity-linked business model, prosecutors told a Singapore court Monday at the start of a 56-day trial of the company's former executives. As reported by The Straits Times, Deputy Chief Prosecutor Christopher Ong said that in 2011, a consortium of banks raised 'serious concerns' after learning Hyflux planned to sell electricity from Tuaspring's power plant to offset losses from water sales to the Public Utilities Board (PUB). Hyflux had secured the tender for Singapore's largest desalination plant by bidding just S$0.45 per cubic metre — a price at which the 'plant would operate at a loss', Ong told the court. The company planned to make up the shortfall by selling most of its electricity to the national grid, despite having no prior experience in the power market. Only three banks later offered limited financing, which Hyflux declined. 'Lum was determined that Hyflux had to win the bid and cement its status as a global leader in the water treatment and desalination industry. Hyflux was facing setbacks in its Middle Eastern ventures, and winning the Tuaspring bid was critical for strengthening the company's order book,' Ong was quoted as saying, referring to founder and then-CEO Olivia Lum. With bank funding out of reach, Hyflux raised S$400 million in April 2011 through an oversubscribed preference share issue. Prosecutors allege the offer documents omitted key risks about Tuaspring's power market exposure — information Lum allegedly withheld to avoid spooking investors. Tuaspring's desalination plant began operating in 2013, but its power plant was delayed until 2015. By then, electricity prices had plunged, contributing to a US$115.6 million after tax loss in 2017. The strain culminated in Hyflux's 2018 collapse, leaving about 34,000 perpetual securities and preference shareholders facing combined losses of roughly S$900 million. Six former directors and executives, including Lum, deny charges of failing to disclose material information. The prosecution is proceeding on 11 charges, with testimony expected from former employees, bankers, PUB officials and market experts. The trial is set to run until February 2026.
The Star
4 days ago
- The Star
Hyflux issued preference shares to fund Tuaspring as it had problems getting bank loans: Prosecution
SINGAPORE: Hyflux issued preference shares to fund its Tuaspring project because it had trouble getting bank loans, the prosecution said on the first day of the trial involving former senior executives of the failed water treatment plant. Deputy Chief Prosecutor Christopher Ong noted that a consortium of banks had raised concerns in 2011 over Hyflux's strategy of selling electricity to subsidise the sale of water to PUB. This led Hyflux to consider other avenues of raising funds. Its eventual collapse left about 34,000 investors of perpetual securities and preference shares, who had sunk in a combined $900 million, with nothing. Former Hyflux employees and bank representatives who were involved in negotiations on financing the Tuaspring integrated water and power project are expected to testify for the prosecution. In total, seven people have been charged over Hyflux's intentional failure to disclose information relating to Tuaspring, among other things. Six of them – Hyflux founder and former chief executive Olivia Lum Ooi Lin, former chief financial officer Cho Wee Peng, and former independent directors Teo Kiang Kok, Christopher Murugasu, Gay Chee Cheong, and Lee Joo Hai – are contesting their charges in a 56-day trial scheduled to run from Aug 11 to Feb 5, 2026. The prosecution will proceed on 11 charges, including two of the six charges Lum faces. The remaining four charges against Lum are stood down. The prosecution, in an opening statement to the State Court on Aug 11, said Hyflux won the tender for Singapore's second and largest desalination plant with the lowest submitted bid. It had proposed to sell water to PUB at a first-year tariff price of $0.45/m3, undercutting its competitors by at least 27 per cent. 'At this price, the desalination plant would operate at a loss,' Ong said. 'To make the project financially viable, and also fulfil PUB's requirement to procure or produce electricity for the desalination plant at Hyflux's cost, Hyflux intended for the power plant to supply electricity to the desalination plant, while actually selling the vast majority of the power that it generated to the national grid.' It was only from this sale that Hyflux would be able to make up for the desalination plant's losses and make the project profitable. But Hyflux had no prior experience in power generation, much less selling electricity. The Tuaspring Project would be the first time Hyflux entered the electricity market, the prosecution said. How it all unfolded To finance the Tuaspring project, which was initially projected to cost $890 million, Hyflux sought a term loan of about $527 million from a consortium of banks. Six banks signed in-principle commitment letters in October 2010 indicating their willingness to finance the project. But they had not been told of Hyflux's plan to build a power plant and sell excess electricity to the grid at the time, Mr Ong noted. In November 2010, when they found out about Hyflux's power strategy, they 'raised serious concerns'. In January 2011, they told Hyflux that they could not lend it money on the terms previously indicated, as the power plant introduced new 'merchant sale risk and operational risk'. On July 4, only three of the original six banks - DBS, Mizuho Corporate Bank and Sumitomo Mitsui Banking Corporation - extended Hyflux financing of $150 million for the construction of the desalination plant. This financing was eventually terminated by Hyflux. Tuaspring was ultimately financed by a shareholder's loan of $840.4 million by Hyflux in October 2011, which was in turn refinanced with Maybank Singapore and Maybank Kim Eng Securities in September 2013. In January 2011, in the midst of their negotiations with the banks, Hyflux's management began to contemplate issuing of preference shares to raise funds. On Jan 19 2011, Hyflux senior vice president, legal (business) Yang Ai Chian informed the Board of the need to issue preference shares to 'increase our funding options' for 'several new major projects' that Hyflux was expected to win that year. In reality, this money was meant to fund Tuaspring because of the challenges Hyflux faced in getting bank financing. On April 13, Hyflux lodged an offer information statement with the Monetary Authority of Singapore to issue up to $200 million in 6% preference shares. These were oversubscribed and the offer amount was increased. Hyflux ultimately raised $400 million. But the statement did not mention risks arising from Hyflux's entry into the electricity business, or those associated with Hyflux's strategy for Tuaspring, which could affect the company's financial position or results, the prosecution said. The information was omitted because Lum wanted to downplay Tuaspring's significant exposure to the electricity market, both in Hyflux's announcement that it had been named the 'preferred bidder' for the desalination project, as well as in the offer information statement, the prosecution said. 'Lum was determined that Hyflux had to win the bid and cement its status as a global leader in the water treatment and desalination industry. Hyflux was facing setbacks in its Middle Eastern ventures and winning the Tuaspring bid was critical for strengthening the company's order book,' Ong said. 'She did not want to detract from the positive news of winning a landmark water project, by revealing the Tuaspring Project's reliance on electricity sales, and the fact that the low tariff price – the key to winning the tender – was only viable because of such electricity sales.' The prosecution also said Lum was well aware of the banks' negative reactions regarding the power plant component of the project, and feared that full disclosure might deter investors and compromise Hyflux's ability to raise funds through the planned preference shares. This, in turn, could jeopardise financial close for the project and potentially result in losing the bid, the prosecution said. The desalination plant of the Tuaspring Project became operational on Sept 18, 2013. But its power plant only became operational nearly two years later, on or around August 2015. It began selling electricity commercially on Feb 18, 2016. In March 2011, the average Uniform Singapore Energy Price had been around $187 per megawatt hour (MWh). By February 2016, this had fallen to around $49.10 per MWh. As the profitability of Tuaspring depended on electricity sales, this fall in electricity prices hit Hyflux hard. In its 2017 annual report, it reported a $115.6 million after tax loss. The report stated that the weak power market in Singapore drove losses for the first time in Hyflux's history, with the Tuaspring Project accounting for the majority of the losses. On May 21, 2018, Hyflux suspended trading of its shares. The next day, Hyflux announced that it had applied to seek court protection for debt reorganisation. On May 18, 2019, PUB took over the Tuaspring desalination plant. On June 1, 2022, a wholly owned subsidiary of Malaysia-based YTL Power International, YTL Powerseraya, completed its acquisition of the Tuaspring power plant. By Nov 16, 2020, Hyflux entered judicial management and into liquidation on Jul;u21 July 2021. Other witnesses include a lawyer from Stamford Law Corporation, who was Hyflux's external legal counsel on the April 2011 offer information statement; an SGX representative who will provide evidence on the sequence of events that led to this case being investigated; and a PUB representative, who will testify to PUB's dealings with Hyflux and its employees and management during the tender and award process for Tuaspring. The Prosecution will also adduce evidence from a securities expert, Kevin Gin who will address why the omitted information ought to have been disclosed by Hyflux. The hearing continues. - The Straits Times/ANN
The Star
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- The Star
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