CHANGWON — The "liquefied hydrogen plant crisis," which threatened to leave the city of Changwon in South Gyeongsang Province shouldering roughly 30 billion won ($21.6 million) a year in hydrogen purchase costs, has entered a new phase. After a court sided with the city last month in an appeal over debt liability, a city-affiliated agency has now won the first trial in a payment claim case.
The Fifth Civil Division of the Changwon District Court, presided over by Chief Judge Son Tae-won, dismissed on the 23rd a supply payment claim filed by the liquefied hydrogen plant's lender group against the Changwon Industry Promotion Agency. The court also ordered the plaintiffs to bear the litigation costs. The bench did not, however, explain in court the specific grounds for the dismissal.
Citing a supply guarantee agreement, the lender group filed suit in January this year seeking about 10.3 billion won for four months' worth of purchases — 615 tons — covering July 16 to Nov. 15 of last year. The agreement stated that the agency was obliged to buy five tons a day, worth about 2.5 billion won a month, from Hy Changwon, the special purpose company operating the facility. The lenders, who had approved a project financing loan of about 71 billion won, declared an event of default in March last year after operations were delayed, and have since taken over the equity in Hy Changwon and been claiming payment directly.
The agency has argued that it was unreasonable to require it to fulfill purchase obligations when no liquefied hydrogen had been produced, and the court appears to have accepted that argument. Because the written ruling has not yet been served on the parties, the detailed reasoning is expected to emerge later.
The lender group is expected to file an appeal. If the outcome holds at the higher court, the city and the agency will be freed from the immediate need to repay the debt, buying time to bring the facility into normal operation.
Last month, the city also won an appeal in a suit it had filed against the lender group seeking confirmation that no debt existed, overturning the lower court ruling. The first trial had found that the city was a guarantor backing the agency's entire purchase commitment under the supply guarantee agreement, but the appeals court ruled that even if the city bore a compensation obligation, it was invalid because it had not been approved by the city council. The lenders appealed to the Supreme Court on the 8th, leaving that decision pending.
Even if the city ultimately prevails, the agency's financial condition means the city will have little choice but to intervene in the facility. Securing buyers also remains a long-term challenge.
