Prosecution, defence spar over request for evidence on how banks reacted to Hyflux power strategy
Hyflux building in Kallang Bahru in 2020. The prosecution and defence had a war of words in the Hyflux criminal trial on Sept 3.
Sep 03, 2025
SINGAPORE - A war of words erupted between the prosecution and defence in the Hyflux criminal trial on Sept 3, following a surprise request by Senior Counsel Davinder Singh for correspondence between Hyflux and all the banks it had asked for financing.
Mr Singh, who is representing
Hyflux founder Olivia Lum, had sought evidence on whether Maybank and other banks had issues with Hyflux’s power strategy when they considered financing the Tuaspring project.
Tuaspring was ultimately financed by a shareholder’s loan of $840.4 million in October 2011. The loan, in turn, was refinanced with Maybank Singapore and Maybank Kim Eng Securities in September 2013.
The prosecution had alleged that Hyflux “had motive” to downplay material information because it knew that the six original banks from which it had sought $527 million in financing had concerns about its power strategy.
It was referring to information about the Tuaspring project’s electricity sales component in a March 2011 announcement, as well as in the offer information statement (OIS) for the issuance of preference shares in April 2011.
Mr Singh had challenged these allegations.
Lum, Hyflux’s former chief financial officer, Cho Wee Peng, and four independent directors – Teo Kiang Kok, Christopher Murugasu, Gay Chee Cheong and Lee Joo Hai – are contesting charges relating to non-disclosures of material information about the project in the March 2011 announcement and the April 2011 preference shares issue.
According to the prosecution, six banks had signed in-principle commitment letters indicating their willingness to lend, but raised “serious concerns” after they learnt of Hyflux’s plan to build a power plant and sell excess electricity to the grid. In January 2011, Hyflux was told that they could not lend money on the terms previously indicated, as the power plant introduced new “merchant sale risk and operational risk”.
In the end, Hyflux only managed to secure a $150 million bank loan. This was because the banks estimated that cash flows from the desalination plant would support only around $150 million to $170 million of debt.
But
the prosecution’s third witness, Mr Nah Tien Liang, told the court in his cross-examination that the $150 million financing was “very likely” meant “to meet the financial close deadline set by PUB”. Mr Nah was Hyflux’s former vice-president of investment.
After the $150 million was offered, the banks were still continuing to look at financing for the entire project, including the power plant, Mr Singh said.
This came after a spat between Mr Singh and Deputy Chief Prosecutor Christopher Ong, when Mr Singh asked for communications between Hyflux and all the banks.
“The prosecution considers it relevant to its case to set out how the six banks reacted. But they are refusing to let us have the exchanges between Hyflux, Maybank and the other banks,” Mr Singh said.
Mr Ong said he was not expecting the defence to bring this up.
Mr Singh said he requested this information because the prosecution had asked Mr Nah about “the financing arrangements and the impression that the banks were reluctant, and Hyflux was having difficulty raising funds”.
District Judge Toh Han Li pointed out: “But Maybank gave a loan of $720 million. So factually, some banks have reservations, and Maybank gave a loan.”
Mr Singh argued: “You can’t just pick a few letters from the banks to say there were concerns without showing whether there were any remaining concerns after due diligence was done.
“Maybank lent much later, but Hyflux was talking to Maybank and other banks.”
But Mr Ong countered: “In no way was (the) prosecution being selective. This is clearly in the context of what led to the March 2011 announcement coming out the way it did.”
It was these six banks that gave the in-principle commitment letter that Hyflux submitted to PUB for its bid, and “supported Hyflux in whatever way they are willing to”, he said.
“So these are the relevant banks,” he added.
During the hearing, Mr Singh took Mr Nah through a June 17, 2011 letter from Hyflux to PUB that showed that it was proposed that financing of the project be structured in two phases.
When asked about the link between the $150 million and the financial close deadline, Mr Nah said: “Based on a requirement that X months after signing, there is a financial close where there has to be financing to show PUB that there are funds for the project.”
He acknowledged that there was an approaching deadline for submission of financing from early-2011 to mid-2011 under PUB’s terms, and that Hyflux was also in discussions with other banks apart from the six banks in January and February of 2011.
Mr Singh said: “I suggest to you that the six banks in January 2011 said they needed more time, and that’s not unusual at all. They were prepared to submit a letter to Hyflux to be passed on to PUB, but as the banks were still assessing Hyflux’s requested financing, and the deadline for (submission of financing) was coming up, Hyflux couldn’t just sit and wait for the six banks, it had to do something.
“And one of the things it did was to have PUB agree to the $150 million financing first, and, in the meantime, continue to talk to the six banks and other banks. Ultimately, financing was obtained.”
In trying to debunk the prosecution’s case that
Hyflux senior management downplayed the fact that the power plant would sell electricity to the grid and that Tuaspring’s profitability depended on these electricity sales, Mr Singh argued that it would not be possible for Hyflux to deliver desalinated water to PUB without the power plant.
“In fact, the power plant and the desalination plant were like conjoined twins. And it was fundamental and inherent to the entire model that was presented to the PUB?” he asked.
Mr Nah agreed.
The prosecution’s case is that Tuaspring was pitched as a desalination plant to investors, and the power plant’s main purpose was to supply electricity to the desalination plant, when in fact nearly 92 per cent of power produced by the plant was projected to be sold to the national grid and only 3 per cent was meant for powering the desalination plant.
Because Tuaspring’s revenue was a big component of the group’s strategy, its failure due to weak electricity sales led to Hyflux’s collapse.
“If you had a power plant like Tuaspring where you were going to sell excess power to the electricity grid, your exposure lies in the event of electricity prices going down, right?” Mr Singh asked.
Mr Nah replied: “It is more if the spark spread reduces, and if the electricity price also drops, that would impact the power plant financially.”
Spark spread refers to the difference between selling price of electricity and the short-run marginal costs of fuel, or the costs of production using gas.
In the afternoon of the hearing, Mr Nah’s evidence was given in camera, with the public and media not allowed in, as it touched on issues of national security involving Singapore’s water security.
