Hyflux's Collapse: The Unspoken Risk That Cost S'poreans $900M

At the heart of this corporate tragedy lies the Tuaspring Integrated Water and Power Project, an ambitious venture that ultimately became the company's downfall. Hyflux's foray into the energy market, a sector in which it had no prior experience, proved to be a fatal misstep. The ongoing trial of Olivia Lum and former key executives, which started in August 2025, continues to unravel the complex web of decisions that led to the firm's demise, bringing to light allegations of omitted details in disclosures to the Singapore Exchange and the investing public.

However, this business model was entirely dependent on a favourable electricity market. The prosecution in the ongoing trial alleges that the investing public was led to believe the project was primarily about desalination, downplaying the fact that its profitability hinged almost entirely on electricity sales. This venture into the volatile energy market represented a significant and undisclosed risk for a company whose core expertise was in water treatment. By the time the power plant became fully operational in 2016, the energy market had drastically changed due to an oversupply of gas, causing wholesale electricity prices to plummet from around $220 per MWh in 2011 to an average of $81 per MWh in 2017.

This severe downturn in the power market had a devastating impact on Hyflux's finances. The Tuaspring project, once hailed as a symbol of the company's ambition, began to incur massive losses, leading to the company's first-ever full-year loss in 2017. The once-celebrated project had become what analysts described as a "noose" around Hyflux's neck.

This shift in funding strategy is a critical point in the company's history. Banks had reportedly raised "serious concerns" in 2011 upon learning about Hyflux's model of using electricity sales to subsidise the water tariff. The subsequent $400 million raised from an oversubscribed preference share issue allegedly contained offer documents that omitted the crucial risks associated with the power market exposure. This omission is central to the charges faced by Lum and the other former directors.

The fallout from Hyflux's collapse has been immense, extending beyond the courtroom. The company, which once had a market value of around $2.1 billion in 2010, saw its worth plummet to $165 million by 2018. The liquidation in July 2021 marked the end of an era for a homegrown corporate darling, leaving thousands of investors with near-total losses on their perpetual securities and preference shares. The Tuaspring desalination plant was eventually taken over by PUB in 2019, and the power plant was sold off, closing a painful chapter in Singapore's corporate history.

Ultimately, the search for a savior proved fruitless. Proposed rescue packages, including a notable deal with Indonesian consortium SM Investments that later fell through, failed to materialize. This left liquidation as the only remaining path. The final court order in July 2021 to wind up the company was a devastating conclusion for the 34,000 retail holders of perpetual and preference shares, confirming that their investments were now practically worthless as they stood last in the line of creditors to be paid.

Furthermore, the saga highlights the inherent risks of complex financial instruments like perpetual securities and preference shares. These products, often offering attractive yields, also carry a higher risk, ranking lower in the pecking order for claims in the event of liquidation. For the many retirees and individual investors who put their faith and savings into Hyflux, this became a harsh and costly lesson in risk management.

Looking ahead, the Hyflux case serves as a crucial case study in corporate governance and investor education. It reinforces the need for clear, transparent, and comprehensive disclosure from companies, especially when they undertake significant strategic shifts. For investors, it is a powerful reminder that diversification is not just a buzzword but a fundamental principle of sound personal finance. The painful losses suffered by so many have ignited a renewed conversation about financial literacy and the importance of questioning the narrative, no matter how compelling it may seem.