Ex-Hyflux director fined over firm’s failure to disclose Tuaspring info

A former independent director of Hyflux was fined $90,000 on Aug 7 over the company’s failure to disclose information relating to the Tuaspring integrated water and power project in 2011 as required under Singapore Exchange (SGX) listing rules.

The fine was handed down to Rajsekar Kuppuswami Mitta by a district court after he pleaded guilty to a charge of neglect in relation to an announcement by the company to the SGX on March 7 that year.

Rajsekar, a 68-year-old Australian citizen and Singapore permanent resident, was also barred from acting as a company director for five years.

Six others who have also been charged with disclosure-related offences – including Hyflux founder and former chief executive Olivia Lum Ooi Lin – are contesting their charges in a trial scheduled from Aug 11 to Feb 5, 2026.

Hyflux, once a celebrated water treatment company in Singapore, officially collapsed in 2021 after facing financial woes from its foray into the energy business through the Tuaspring plant.

On Aug 7, Deputy Public Prosecutor Kevin Yong told the court that Hyflux intentionally failed to disclose information in the March 7, 2011 announcement that would have allowed investors to make fully informed decisions.

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.

The announcement also stated that the cost of the Tuaspring project was $890 million.

It 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.

However, it did not disclose that Hyflux was going into the business of selling electricity for the first time.

The company also failed to disclose that the profitability of the power plant was contingent on revenue from the sale of electricity, which was projected to make up the significant majority of Tuaspring’s revenue.

DPP Yong said drafts and e-mails leading up to the release of the final version of the announcement showed an intention by Hyflux to downplay the power plant component of Tuaspring, and to instead focus on the desalination plant component.

In particular, information on Tuaspring being Hyflux’s entry into the energy retail business in the first draft of the announcement was removed in subsequent drafts.

The prosecutor said this information would be likely to influence investors 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.

The information would also have revealed that the profitability of Tuaspring was contingent on the revenue from electricity sales, rather than from the sale of water to PUB over the 25-year concession contract.

“This would have exposed Tuaspring to significant market risks due to the volatility of electricity prices,” he added.

The final draft was circulated by e-mail to Hyflux’s five independent directors before the announcement was made.

Rajsekar did not respond.

DPP Yong said the other four directors responded, but none of them made any comments regarding the omission of the relevant information.

As it turned out, the risks did materialise when electricity prices fell sharply some time in 2015 and remained suppressed through 2017, he said.

Because the profitability of Tuaspring hinged on electricity revenue, the fall in electricity prices ultimately led to Hyflux falling into the red for the first time in the company’s history.

In Hyflux’s annual report for 2017, the company reported a loss of more than $115 million after tax.

On May 21, 2018, Hyflux suspended trading of its shares.

The company then filed for a debt moratorium, which was granted by the High Court on June 19, 2018. 

On Nov 16, 2020, Hyflux was placed under judicial management.

Its share price was wiped to zero. The company had 16,936 ordinary shareholders and 20,104 preference shareholders as at March 14, 2018.

On July 21, 2021, the High Court approved Hyflux’s winding up.

DPP Yong sought a fine of $90,000 for Rajsekar, saying that the harm caused was high while Rajsekar’s culpability was low.

He said the sentence meted out must send a clear signal that company directors are ultimately responsible for the company’s compliance with continuous disclosure requirements.

The prescribed sentence is a fine of up to $250,000, a jail term of up to seven years, or both.

Defence counsel Suresh Damodara noted that his client was not copied on any of the earlier drafts.

Rajsekar had invested his own money in Hyflux and lost $1 million, said Mr Damodara, adding that his client believes the investment indicated his honest belief that the Tuaspring project was commercially viable.

Mr Damodara added that his client has decided to give up corporate life altogether.

In sentencing, District Judge Chay Yuen Fatt agreed with the prosecution’s submission that deterrence was the main consideration.

The judge also accepted that neglect was the lowest degree of responsibility for such offences.

A second charge, for non-disclosure related to Hyflux’s offer of $200 million worth of shares on April 3, 2011, was taken into consideration during sentencing.

Source: The Straits Times © SPH Media Limited. Permission required for reproduction.

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