A Countermove
POSCO Energy claimed damages of US$800 million with the International Court of Arbitration of the International Chamber of Commerce against FuelCell Energy, its power generation fuel cell business partner.
On June 28 this year, FuelCell Energy claimed damages of US$200 million, along with license contract termination, with the same court against POSCO Energy and Korea Fuel Cell. “The termination claimed by FuelCell Energy is unilateral and invalid,” POSCO Energy said on Oct. 9, adding, “It is FuelCell Energy that breached the contract and the U.S. company must pay damages of US$800 million.”
POSCO Energy and FuelCell Energy have done molten carbonate fuel cell business together since 2007 based on the license contract and equity investment. In 2016, POSCO Energy attempted to set up a joint venture and overhaul the structure of their business but FuelCell Energy, which owns the source technology, did not cooperate.
According to POSCO Energy, FuelCell Energy’s uncooperative stance is because it is planning to directly enter the South Korean market. The license contract allows POSCO Energy’s exclusive rights in Asia until 2023 and their negotiations must be completed before FuelCell Energy’s South Korean market entry. “FuelCell Energy requested international arbitration in June in order to nullify the rights and do business on its own in the South Korean market, the largest in the world,” POSCO Energy explained, adding, “We tried to establish the joint venture in order protect our domestic client in the interest of business continuity.”
POSCO Energy actively participated in the joint business by investing US$29 million in FuelCell Energy in February 2007 and then increasing the investment by US$55 million. However, defects in fuel cell stacks led to large costs and business losses. Specifically, POSCO Energy’s losses attributable to the fuel cell business amounted to 44.7 billion won in 2014, 83 billion won in 2015, 92.5 billion won in 2016 and 64.5 billion won in 2017.
Korea Fuel Cell, in the meantime, is POSCO Energy’s subsidiary in the fuel cell industry. POSCO Energy split off its fuel cell business unit into Korea Fuel Cell in November last year.