Hyflux's Controversial Desalination Project: A High-Stakes Gamble

The ongoing trial of Hyflux has unveiled the intense pressures and risks associated with its ambitious desalination plant project. Awarded by the Public Utilities Board (PUB), the contract stipulated that the winning bidder had to shoulder the costs of producing or procuring electricity—a significant factor in determining water pricing.

Hiding in Plain Sight: The True Nature of Tuaspring Project

While Hyflux marketed the Tuaspring Project primarily as a desalination plant, the prosecution argues that it deliberately downplayed the power plant's role, which was essential for sustaining the entire operation's profitability by selling electricity back to the grid. Essentially, the project’s financial future hinged on these electricity sales, despite Hyflux presenting its power plant merely as a supporting feature.

Eye-Popping Discounting Strategies: A Competitive Edge?

In a dramatic twist, it was revealed that Hyflux submitted the lowest water tariff bid at S$0.45000 per cubic meter, significantly undercutting competitors like Leighton Engineering and Keppel Seghers. Mr. Nah, a key witness, suggested that for bidders to offer such low tariffs, they likely needed to give discounts on electricity sales to keep their bids attractive. This strategic maneuvering exposed bidders, including Hyflux, to volatile electricity market risks.

Navigating the Power Market: A Complex Risk Landscape

Mr. Nah emphasized the inherent risks for bidders in this project. If electricity prices soared post-bid, companies without an in-house power plant would face serious challenges having to purchase electricity at inflated rates. Conversely, those with power plants could still suffer from decreased revenues when market prices fell, especially if there was an oversupply of energy.

Transparency Under Fire: Hyflux’s Financial Model Scrutinized

During the proceedings, it was highlighted that Hyflux's financial model—deemed essential for loan approvals—was shared transparently with banks and other stakeholders. Witnesses confirmed that this openness extended to consultations with PUB and its advisors, raising questions about whether the prosecution is selectively interpreting financial communications.

The Banks' Confidence: A Critical Element of the Prosecution's Case

Mr. Singh, Hyflux's defense attorney, argued that to build a robust case, the prosecution must present comprehensive exchanges with the six banks involved, which had voiced concerns during the financing process. He stressed that selectively revealing correspondence could mislead the court regarding the banks' ultimate backing of the project.

Consequences Looming: What’s Next for Hyflux's Leaders?

As the trial progresses, the stakes are high: if convicted, Hyflux executives could face up to seven years in prison and substantial fines for failing to properly disclose vital information about electricity sales. The courtroom drama continues to unfold, with the potential to reshape perspectives on corporate transparency and accountability in the energy sector.