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Failed Overseas Projects Drive Up Hyundai Rotem’s Provisions to Record High
Troubles in Overseas sales
Failed Overseas Projects Drive Up Hyundai Rotem’s Provisions to Record High
  • By Jung Min-hee
  • March 31, 2017, 03:30
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Hyundai Rotem’s electric train.
Hyundai Rotem’s electric train.

 

It is said that hundreds of billions of won in repair costs was incurred at Hyundai Rotem due to the suspension of the operation of SEPTA trains delivered to the United States and international arbitration on the ASEEB Sewage Treatment Plant in Oman.

In 2006, Hyundai Rotem won a contract for the delivery of trains amounting to about 310 billion won (US$269 million) from the Southeastern Pennsylvania Transportation Authority in Pennsylvania of the USA. But in July of last year, a parts problem was found in the trains, and the operation was stopped to find out the cause. It is expected that 12 billion won (US$10 million) will be needed for repair, replacement, and compensation for damages.

In addition, Hyundai Rotem received an order to build a large-scale sewage treatment plant from Oman Wastewater Services Company (OWSC) in 2008 and completed it. But the Oman government demanded additional supplementation work, posing problems. The cost increased more than originally planned, resulting in a loss of about 42 billion won (US$36 million) for two years. The two sides failed to hammer out a deal, and the matter eventually went to international arbitration. Hyundai Rotem has set a provision of 32.1 billion won (US$28 million) with respect to this matter.

According to the industry source recently, Hyundai Rotem's provisions reached 128 billion won (US$111 million) as of the end of last year. Hyundai Rotem announced that the volume of provisions will swell if and when problems concerning SEPTA train repair and ASEEB Sewage Treatment Plant in Oman are prolonged in the future.