<div id="readability-page-1"><div><figure><div><div><img src="https://imageproxy.pbkrs.com/https://s.yimg.com/ny/api/res/1.2/RKd7JT43y_oKsjMUYq9kmA--/YXBwaWQ9aGlnaGxhbmRlcjt3PTEyNDI7aD05MzQ-/https://media.zenfs.com/en/straits_times_442/a71879e6cbf8052e0cd9a94b5407e41b?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="1242" height="934" original-src="https://imageproxy.pbkrs.com/https://s.yimg.com/ny/api/res/1.2/RKd7JT43y_oKsjMUYq9kmA--/YXBwaWQ9aGlnaGxhbmRlcjt3PTEyNDI7aD05MzQ-/https://media.zenfs.com/en/straits_times_442/a71879e6cbf8052e0cd9a94b5407e41b"/></div></div><figcaption>On Day 18 of the criminal trial on Sept 22, Mr Ong told the court that the desalination plant can be subsidised as “the power tariff is, quantum wise, higher than the water tariff”.</figcaption></figure>SINGAPORE – Former Hyflux deputy chief executive Sam Ong Eng Keang was aware that the water treatment firm was going into the business of selling electricity in the Tuaspring project, but maintained that he wasn’t aware of the “magnitude of losses and profits”.Mr Ong, who is the eighth prosecution witness to take the stand in the criminal trial of Hyflux founder and former chief executive Olivia Lum, former chief financial officer Cho Wee Peng, and four independent directors, was asked about his understanding of how revenue generated from the power plant can subsidise the desalination water plant by both the prosecution and the defence.On Day 18 of the criminal trial on Sept 22, Mr Ong told the court that the desalination plant can be subsidised as “the power tariff is, quantum wise, higher than the water tariff”.When asked by the Deputy Chief Prosecutor (DCP) Christopher Ong to explain his answer fully, Mr Ong said: “As an integrated project, it would be viable.”When asked the same question in his cross-examination by Lum’s lawyer, Senior Counsel Davinder Singh, Mr Ong said: “I don’t have a lot of information. I was away from Singapore. I’m not sure if I was in Libya, Algeria or Singapore. Subsidising could mean subsidising profits or optimising of cost savings.”When grilled further on how profit subsidisation works, Mr Ong said: “I don’t know the details ... (and) assume power profits to offset water costs.”Mr Singh said: “Therefore it is clear from these words that revenue and profits from power would subsidise the cost of desalinated water?”Mr Ong replied: “Correct, but I don’t know the extent of it.”While Mr Ong agreed that the financial model is that revenue and profit from electricity sales would be used to subsidise the water tariff from the desalination plant, he said he didn’t have “details of the model and how over a 25-year lifecycle, (inflationary) adjustments will impact the subsidy”.Hyflux’s wholly-owned subsidiary, Tuaspring Pte Ltd, signed a 25-year water purchase agreement with national water agency PUB in 2011 to supply 70 million gallons of desalinated water daily from 2013 to 2038.“The model is very sensitive to water production capacity. If PUB calls for zero capacity to be despatched, the model would be very different. ...I am not part of the task force for this project. My focus was on the Middle East and North Africa,” Mr Ong said.Mr Ong joined Hyflux in 2006 as its chief investment officer, and had served in various capacities, including as chief financial officer and deputy CEO. In his role as deputy CEO, he was tasked with managing the Middle East and North Africa region, which accounted for 80 per cent of the company’s business at one point.He told the court that the Tuaspring project was “an important project as it would enable Hyflux to diversify away from the Middle East and North Africa market to 50 per cent from 80 per cent”.When asked by the prosecution why the task force was set up to handle Tuaspring, Mr Ong said that it was a “monumental project that was close to $1 billion in project size. For confidential purposes, only a limited number of people were assigned to the task force”.DCP Ong asked: “You were not aware of the extent and significance of electricity sales to the project? As deputy CEO, someone in your position was not aware of the particulars of this project?”Mr Ong replied: “That’s how the company works. ... it’s accepted by all parties that the deputy CEO helps with projects outside Singapore, not with the Tuaspring project.”When asked about Lum’s management style, Mr Ong described her as “a very tough boss, who demanded a lot from the team. She is intellectually and emotionally involved in all aspects of the company. This is her baby.”When asked about his dealings with Cho, Mr Ong, who had been finance director with Dow Chemical company before joining Hyflux, said he “was my able and capable right-hand person, and succeeded me as chief investment officer, and most of my roles in Dow Chemical.”Mr Ong added that Cho joined Hyflux after him, and that he was the one who hired Cho from Dow Chemical.Lum, Cho and four independent directors are contesting charges relating to non-disclosures of material information about the Tuasspring project’s electricity sales component in the March 2011 announcement and the April 2011 preference shares issue.The prosecution’s case is that Tuaspring was pitched as a desalination plant to investors, and the power plant’s main purpose was to supply electricity to the desalination plant, when in fact nearly 92 per cent of power produced by the plant was projected to be sold to the national grid and only 3 per cent was meant for powering the desalination plant. Because Tuaspring’s revenue was a big component of the group’s strategy, its failure due to weak electricity sales led to Hyflux’s collapse.When asked by DCP Ong if he had any concerns about Hyflux’s power strategy, Mr Ong said: “I don’t have enough details to have concerns. But as a senior member of the leadership team, I did mention to Olivia that we have to make sure that we look at earnings, and the multiple of earnings.”By that, Mr Ong said he meant that the “stock price is the function of earnings (multiplied by) PE (price earnings ratio). We look at earnings in terms of quantum and multiple of earnings for the valuation of the company... and in maximising shareholders’ value.”The price earnings ratio is a measure of how many times of earnings the company’s share price is, DCP Ong explained.When asked why the selling of electricity to the grid necessitated looking at the multiple of earnings, Mr Ong said: “Based on my understanding, electricity sales, earnings are different from water technology earnings in how they are rewarded in the market place.”“Hyflux’s earnings are 20 times multiple and the power plant company’s earnings are 10 times multiple,” he added.“So the power aspect is valued less than the water technology aspect?” DCP Ong asked.Mr Ong replied: “That’s based on my observation, at the time, of the SGX.”Source: The Straits Times © SPH Media Limited. Permission required for reproductionDiscover how to enjoy other premium articles here</div></div>

Former Hyflux deputy CEO Sam Ong testified in a criminal trial that while he was aware of the company's involvement in the Tuaspring project, he was not informed about the extent of its financial losses and profits. Ong stated that the desalination plant could be subsidized by the power tariff, which is higher than the water tariff, but he lacked detailed knowledge of the financial model and its implications over time. He emphasized that his focus was on projects outside Singapore, particularly in the Middle East and North Africa, and described the Tuaspring project as significant for diversifying Hyflux's market presence.

Ex-Hyflux deputy CEO Sam Ong not aware of ‘magnitude of losses and profits’ of Tuaspring project