The trial of Olivia Lum, the founder, former chairman and CEO of Hyflux, will begin on Monday, Aug 11.
Lum, who was for years celebrated as a rags-to-riches entrepreneur, is charged under the Securities and Futures Act for failing to disclose key information about the Tuaspring Integrated Water and Power Project.
Besides Lum, Hyflux's former CEO Cho Wee Peng, and several former board members are facing trial as well.
When the economics of the ambitious Tuaspring project failed, it caused the company to be over-geared and it went under subsequently.
Besides water desalination, which Hyflux is known for, Tuaspring plant has a power generation component too and that excess electricity is to be sold to the power grid and is expected to generate the majority of the plant's revenue instead of the 25-year contract to sell desalinated water.
According to the prosecution, Hyflux did not disclose that the profitability of the power plant was contingent on revenue from the sale of electricity and that the company downplayed this matter.
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According to the Straits Times, citing the prosecution, by doing so, investors were likely influenced in deciding whether to buy or sell Hyflux’s shares, as it would have revealed that the company was entering a new business outside its core competency of desalination.
In its last financial year FY2017, the company suffered a loss of more than $115 million.
Singapore power prices dropped after the market was liberalised and Hyflux struggled to service its debt load of up to $3 billion at one point.
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Trading of Hyflux shares was suspended on May 21 and it was placed under judicial management on Nov 16 2020, affecting thousands of retail investors who had subscribed to Hyflux's perpetual securities and preference shares.
According to the Straits Times, one former independent director has already pleaded guilty but six others including Lum and Cho are contesting the charges.
One of the charges Lum faces is that she consented to Hyflux withholding information about Tuaspring when disclosure was required under Singapore Exchange rules to prevent a false market in its securities.
Lum faces a maximum penalty of seven years in prison, or a $250,000 fine, or both.
Lum's second charge alleges that she omitted the same information in Hyflux’s April 2011 offer statement for $200 million worth of preference shares, which dangled an interest rate of 6% to potential investors. This offence carries up to two years’ jail, a $150,000 fine, or both.
According to a joint statement in Nov 2022 by the Singapore Police Force, Monetary Authority of Singapore and the Accounting and Corporate Regulatory Authority, besides Lum and Cho, four other IDs have been charged as well.
They are Teo Kiang Kok, Gay Chee Chong and Murugasu Christopher. The fourth ID to be charged, Rajskar Kuppuswami Mitta, has already pleaded guilty and was fined $90,000, according to the Straits Times.
see also: Hyflux: Down the slippery slope
