Hyflux’s legal head did not raise issues over non-compliance of listing rules for draft announcement, says witness
That draft for the announcement that Hyflux was ahead in the bid for the Tuaspring project is now central to the case of alleged non-disclosure
[SINGAPORE] The legal head of Hyflux did not raise any issues of non-compliance with Singapore Exchange (SGX) listing rules regarding a draft announcement, the court heard on Thursday (Aug 21). The draft was for the announcement of the company being named the preferred bidder for the Tuaspring integrated water and power project.
Winnifred Heap, Hyflux’s head of corporate communications and investor relations at the material time, said under cross-examination by the counsel for the defence that, aside from the legal head, the company secretary also had no issues with the draft that is now the subject of the case involving the water-treatment company’s alleged non-disclosure of material information.
Thursday was Day 6 of the trial. Hyflux’s founder and former chief executive Olivia Lum and five others – former chief financial officer Cho Wee Peng and independent directors Teo Kiang Kok, Gay Chee Cheong, Christopher Murugasu, and Lee Joo Hai – are contesting one or more charges of Hyflux’s alleged non-disclosures in its Mar 7, 2011 announcement to SGX and also in the Apr 13, 2011 document for the offer of preference shares.
The company is said to have failed to disclose in those two instances that it was entering the power business for the first time, that the Tuaspring project would draw the bulk of its top line from the sale of electricity, and that the project’s profitability hinged on electricity sales.
Heap told the district court on Thursday that none of the accused persons (except Lee), along with then legal head Yang Ai Chian and company secretary Lim Poh Fong had, as at Jan 21, 2011, raised concerns about the draft dated Jan 19, 2011 for the Mar 7, 2011 announcement.
Lee was absent from the risk management committee meeting on Jan 21, 2011.
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Lum’s lawyer Davinder Singh asked Heap: “(Is it) fair to say, as of Jan 21, 2011, those who knew about the Jan 19 (2011) draft and attended the risk management committee meeting on Jan 21 (2011), did not have or voice any concern about the legitimacy, propriety, lawfulness and compliance of the draft?”
She responded: “Correct.”
The witness also agreed with the senior counsel that the senior management would have been entitled to take the view that there was no issue with that draft, since it had been vetted by Heap, the legal head and the company secretary.
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She also testified that she finalised the draft in the usual way, and added that edits to drafts – refinements, changing of structure and moving of paragraphs – were not unusual.
Heap earlier testified when asked by the prosecution that she was told by Lum and Cho to “play down” the power plant of the Tuaspring project in a February 2011 announcement draft.
When she was cross-examined about this on Thursday, she acknowledged that playing down the energy part of the project, and highlighting Hyflux’s expanded bench strength and core capabilities encapsulated the substance of her investor-relations strategy for Hyflux.
But she disagreed with the defence that this was done because of the strategy that she had been advocating.
The witness had recommended as part of her investor-relations strategy that Hyflux position itself as a growth company rather than a utility company, because the latter attracts a lower valuation.
In addition, she was taken through the questions and answers (Q&As) she and some colleagues had prepared in anticipation of questions from analysts over Hyflux’s Mar 7, 2011 announcement of being national water agency PUB’s preferred bidder for the Tuaspring project.
The questions included whether Hyflux had the necessary competence, since the Tuaspring project was its maiden power project, and if Hyflux had the intention to sell surplus power from the power plant of the project.
Singh pointed out that the list of Q&As showed that the team was not holding back any information, including that excess power would be sold in the wholesale market as well as in the retail market to consumers. Heap concurred.
She had initially said that it was not very clear from the Q&As that the project would derive the bulk of its revenue from the power plant, but eventually agreed with Singh that the analysts would be able to work out from the Q&As that the power plant would contribute the majority of the revenue to subsidise the sale of desalinated water to PUB at low rates.
It also emerged during the hearing that the Hyflux senior management had come up with a 10-year vision for the company – to achieve an order book size of S$10 billion, S$10 billion of assets under management, and a market capitalisation of S$10 billion by the year 2020.
Its market value was about S$2 billion in early 2011 when this vision emerged.
The Tuaspring project dashed that vision, as it caused the majority of Hyflux’s first net loss, in 2017. Trading in Hyflux shares was suspended in 2018. The once-celebrated company entered judicial management in November 2020, and was wound up in July 2021.
Hearing has been adjourned to early September.
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