Hyflux’s ex-director pleads guilty to disclosure-related charge, fined S$90,000 and barred from directorships

[SINGAPORE] A former independent director of Hyflux pleaded guilty on Thursday (Aug 7) to being negligent in the insolvent water treatment firm’s failure to disclose to the Singapore Exchange (SGX) relevant information related to the Tuaspring integrated water and power project.

Rajsekar Kuppuswami Mitta’s plea of guilt came ahead of the trial against six others, including founder and former chief executive Olivia Lum, scheduled for the coming Monday.

He was fined S$90,000, and has been barred from becoming a director in any company. He also cannot take part, directly or indirectly, in the management of any company for five years, effective Thursday.

The statement of facts indicated that, at the board of directors’ meetings on Nov 4, 2010 and Feb 22, 2011, Mitta was briefed by the Hyflux management on the company’s bid to design, build, own and operate Tuaspring, Singapore’s second and largest seawater desalination plant.

Hyflux then released an announcement to SGX on Mar 7, 2011, about having been named the “preferred bidder” for the project, which was to have a concession period of 25 years, during which the desalinated water produced at the plant would be sold to PUB.

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

Hyflux added that it would build a 411MW combined-cycle, gas-turbine power plant to supply electricity to the desalination plant.

However, it failed to disclose that Tuaspring was Hyflux’s expansion into a new business of selling electricity, which was outside its core competency area of desalination.

It also did not mention that the revenue from the sale of electricity from Tuaspring’s power plant was projected to make up the significant majority of Tuaspring’s turnover.

Neither was it disclosed that the profitability of Tuaspring was to be contingent on revenue from the sale of electricity from the power plant, and this had implications for Tuaspring’s resulting exposure to market risks arising from the volatility of electricity prices.

The statement of facts said it would have been necessary for the listed firm to make this disclosure to avoid the establishment of a false market in relation to Hyflux’s securities, because the material information could influence investors’ decisions on whether to trade in its securities.

Mitta was a non-executive, independent director of Hyflux from April 2007 to December 2013. The 68-year-old Australian, who has permanent residency in Singapore, was chairman of the board’s risk-management committee.

Hyflux reported about S$115.5 million in net losses for 2017, and attributed its first loss to the weak power market in Singapore, on the back of Tuaspring contributing to the bulk of the losses.

Hyflux suspended trading in its stock in May 2018, and was placed under judicial management in November 2020.

To the prosecution’s seeking general deterrence in the sentencing, the district court handed down that S$90,000 fine and the mandatory five-year disqualification order.

Mitta could have been fined up to S$250,000, jailed for up to seven years, or both.

One other charge against him was taken into consideration during sentencing; he had been accused of being liable for Hyflux’s omission to state the material information regarding Tuaspring in the 2011 Offer Information Statement issued for the offer of S$200 million, 6 per cent preference shares in April 2011.