Request for evidence on how banks reacted to Hyflux power strategy sparks verbal duel

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.

- Grace Leong

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.