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.