POSCO Engineering & Construction has suspended construction at 103 sites nationwide, while the mediation regarding an operating fund of 210 billion won with Gwangju has also been temporarily halted. Practical discussions are expected to continue for the time being, but as finding common ground seems difficult, there is a high likelihood of it leading to legal disputes. In the construction industry, there are concerns that POSCO Engineering & Construction is in a state of temporary suspension of construction due to continuous accidents and that financing costs are also increasing, making it a case of 'adding insult to injury.'
According to Gwangju and POSCO Engineering & Construction on the 12th, the 8th mediation hearing by the Korean Commercial Arbitration Board scheduled for the 25th regarding the operating cost dispute of the solid recovery fuel (SRF) power facility has been temporarily suspended. In light of the situation where 'business suspension' and 'license revocation' are mentioned due to continuous accidents at POSCO Engineering & Construction, this decision is interpreted as being influenced by public opinion from the political circles and civic groups.
Former POSCO Engineering & Construction President Jeong Hee-min met with Gwangju Mayor Kang Ki-jeong on the 4th to discuss matters but expressed his intention to resign the next day. The 4th was the day when a worker of Myanmar nationality suffered an electrocution accident at the construction site of the extension of the Gwangmyeong-Seoul Expressway by POSCO Engineering & Construction. It was understood that President Jeong and the responsible employees learned of this news while heading to the meeting place.
A senior official in the construction industry said, "I understand that no significant discussions have been conducted regarding the operating cost issue with Gwangju by POSCO Engineering & Construction," adding, "The current public sentiment is so poor that mediation has been halted."
The conflict between Gwangju and POSCO Engineering & Construction began eight years ago. 'Clean Biko-eul,' which POSCO Engineering & Construction represents, signed a contract with Gwangju in 2017 to crush and dry certain municipal waste and manufacture solid fuel products. Additionally, Gwangju agreed to pay handling fees to Clean Biko-eul until January 2032, for a period of 15 years.
However, the Gwangju SRF was shut down for four years due to various lawsuits from January 2018 to March 2022. In response, Clean Biko-eul requested 1.1 billion won in operating costs from Gwangju and applied for arbitration from the Korean Commercial Arbitration Board. Initially, POSCO Engineering & Construction requested 7.8 billion won in operating costs, but after changing the basis for the application, they asked for 210 billion won. This reflects the losses incurred due to the long-term shutdown, maintenance costs, and financial expenses, according to POSCO Engineering & Construction.
Gwangju has stated that at this point, where mediation is temporarily suspended, they will proceed with practical negotiations, and if no results are forthcoming, they are inclined to pursue litigation in court. They had originally conveyed this position to POSCO Engineering & Construction, but it was not accepted.
A Gwangju official said, "Since the claims being made by both sides differ significantly, we are in a position to discuss it for now," adding, "If we cannot find common ground, considering the complexity of the amount and the project details, and the lengthy mediation period, we will seek a definitive judgment through litigation."
POSCO Engineering & Construction is in a position to seek arbitration if they fail to reach an agreement with Gwangju. Unlike the general civil and criminal trials, which are three-instance systems, and the administrative litigation, which is a two-instance system, arbitration is a single-instance system that concludes with one judgment. The suspension of arbitration also requires mutual agreement.
A spokesperson for POSCO Engineering & Construction said, "If the case goes to court up to the third instance, we will incur losses for an extended period, increasing the burden," and added, "The company's position is to reach a conclusion through arbitration."
Meanwhile, it has been determined that POSCO Engineering & Construction has incurred losses exceeding 10 billion won per day as they suspended all construction projects nationwide. Recently, with the possibility of 'business suspension' increasing, major credit rating agencies in Korea, including Korea Credit Rating and Korea Ratings, have issued reports expressing concerns about POSCO Engineering & Construction's creditworthiness. In the financial sector, the interest rates for financing for POSCO Engineering & Construction have been raised, and when refinancing, additional funding is being required.