Singapore—Many hold CEO Olivia Lum responsible for the rise and fall of embattled water treatment firm Hyflux, whose 34,000 retail investors stand to lose 90 percent of the funds they invested in the company – according to a report on Bloomberg.
These investors, many of whom put in CPF funds, staged a rare protest last month, even though the government has said it will not bail out the company. And just last week, plans for a white knight Indonesian consortium to bail out the beleaguered firm came to nothing.
As it stands, Hyflux’s S$2.8 billion debt due to default notices and unsecured claims has the company at the edge of insolvency, and many investors are wondering if they will recover any of their investments at all.
The Public Utilities Board (PUB) is set to take over the company for zero dollars.
But who exactly is Ms Lum? And how did the multi-award winning entrepreneur end up bringing a once promising company to the lows it is experiencing today?
The CEO’s backstory
From her humble beginnings as an orphan who lived in poverty, Ms Lum rose to become a figure that some Singaporeans have compared to Elon Musk.
Ray Ho, an investor who had joined Hyflux’s protest in March, told Bloomberg, “She was like an Elon Musk of Singapore. You have not-so-sophisticated investors who buy into a leap of faith because they buy into Olivia Lum.”
Even Prime Minister Lee Hsien Loong had nothing but praise for Ms Lum at the launch of the company’s desalination plant six years ago, the largest one in Singapore.
However, while Hyflux is floundering, Ms Lum’s personal fortune is currently valued at $200 million.
Ms Lum, an orphan, was abandoned by her birth mother in Kampar, a small town in Perak, Malaysia. She was eventually adopted by a widow. Although a kind person whom Ms Lum called ‘grandmother,’ this woman also had a gambling problem, which affected the family’s financial situation, to the point of having to move from a regular home to a hovel.
As a young girl, Ms Lum started earning her money early, through selling sandwiches at school, playing the clarinet for funerals, and weaving baskets.
She also excelled in her academics, leading her teacher to encourage her to go to Singapore to get a better education. There, she roomed with some migrant workers from Perak, and because of hard work, she earned a place in one of the top senior high schools, supporting herself as a tutor and doing promotional work in malls.
On weekends, she would go home to visit her foster mother, who passed away while Ms Lum was taking her final exams.
After graduation Ms Lum studied chemistry at the National University of Singapore, ending up as a chemist in Glaxo Pharmaceuticals, where she earned enough to buy her old apartment.
The website of Hyflux says that she sold the apartment for S$20,000 after three years, using this money to start her own company, Hydrochem.
Ms Lum went door to door at various factories in Singapore and Malaysia, offering third-party water-treatment equipment. Her company later started selling to China as well and developed its own technology for water treatment through the use of hollow-fiber ultrafiltration membranes.
This innovation proved to be the breakthrough that would create Ms Lum’s fortune. She told Bloomberg in 2005, “Everything comes from membrane technology. We use membrane to treat wastewater; we use membrane to desalinate seawater; and we use membrane to purify water from the air.’’
By 2001 she re-named her firm Hyflux Ltd., which held its first public share offering and S$6.8 million.
In the three weeks after the trading began, shareholders doubled up what they invested.
Hyflux simultaneously won its first contract for a municipal water treatment plant in Singapore.
Ms Lum’s star was definitely on the rise by then, even to the point of becoming a nominated member of parliament in Singapore. Her net worth grew to $500 million.
And while she enjoyed a more luxurious lifestyle, she still worked 16 hour days and kept on managing the research and development arm of her company, which was worth $1.6 billion by 2011. In the same year, she won the prestigious Ernst & Young’s World Entrepreneur of the Year award, and Hyflux was awarded the Tuaspring combined desalination and power plant, its most important project.
Two years later the firm was expanding in the Middle East. However, the price of oil dropped, affecting Hyflux’s progress.
Meanwhile, the company was amassing huge debts, borrowing over S$1.4 billion in bank loans, perpetual bonds and an issue of preferred shares in order to build the Tuaspring plant.
Bloomberg reports Mak Yuen Teen, associate professor at National University of Singapore Business School, as saying, “While she is undoubtedly a brilliant entrepreneur, she failed to recognize the need to hire a strong CEO. These contributed to the company growing too fast in diverse markets, taking on too much debt and without proper risk management.’’
And then, the Government lowered the price of power in Singapore, which perhaps signalled the beginning of the end for Hyflux and its investors. From the Bloomberg report:
“The Tuaspring project was conceived with the idea that the plant would earn revenue by selling excess power to the nation’s electricity grid. But as power prices fell, the plant began to lose money.”
Experts believe that Ms Lum could have exercised more prudence in the Tuaspring bid, and to have been more conservative in the bidding, which would have protected investors better.
The report also cites Simon Jong, head of fixed-income research at DBS Group Holdings Ltd., as saying, “Olivia Lum could have been more prudent as a manager in particular with Hyflux’s decision to bid for Tuaspring. It might have been better to have been more conservative when bidding for the project, to allow for buffers for execution risk and market weakness.”
As things are, Ms Lum stands to lose the company she built, even though she herself is still personally wealthy. Liquidation may be io the cards for Hyflux, as the clock dwindles on the court protection deadline.
Hyflux’s rise and fall, as well as Ms Lum’s, has caused questions to arise concerning the business culture in Singapore, and how investors seemingly jump at the chance to place their money in projects that they feel the Government would approve of or back, disregarding the inherent risks of any investment.
According to Mal Yuen Teen, “Corporate governance in Singapore is not as good as we would like to believe. Other companies dominated by founders who are unwilling to let go and bring in the right people may go the same way.’’
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