Posco Energy to sue FuelCell Energy

Posco Enery's fuel cell factory in Pohang, North Gyeongsang Province / Courtesy of Posco Energy

By Kim Jae-heun

Posco Energy said Sunday it will sue FuelCell Energy (FCE) for providing a defective component and power-conditioning (stabilization) equipment that caused it nearly 1 trillion won ($809 million) in economic loss.

The local private energy supplier noted that it had been working to address the issue with the American hydrogen fuel cell manufacturer. However, the company said negotiations can no longer settle the problem and so it will now take legal action.

According to Posco Energy, FCE has been supplying them with modular fuel cell stacks for converting hydrogen into electricity, but key components turned out to be defective. The local energy firm has already suffered economic losses from the faulty power-conditioning equipment, which is used to stabilize power across fuel cell stacks and affects the efficiency of the generators.

In January and March, Posco Energy filed compensation suits with the Seoul Central District Court for 2 billion won in losses resulting from the faulty power-conditioning equipment and 8.6 billion won in losses from the faulty fuel cells.

Every year, Korea Southern Power Co., Ltd. pays approximately 8 billion won to the American firm for maintenance of operations at the energy facility.

A Posco Energy official said the energy producing company will suggest mediation by International Chambers of Commerce in Singapore.

"The amount raised at arbitration is 10 billion won," a Posco Energy official said.

In response, FCE warned that it would also take legal action against Posco Energy saying the firm violated a licensing contract Feb. 20. The American firm added if the matter was not resolved within 60 days, it will cancel the deal.

However, Posco Energy denied the allegation and claimed the fuel cell manufacturer attempted to enter the Korean market without prior negotiations with them.

A source aware of the matter said FCE's argument that Posco Energy violated their contract was absurd considering the nearly 1 trillion won in losses the American firm caused by providing defective parts and equipment.

"Posco Energy needs to take legal action over this and this is the right decision for the local fuel cell market too," the source said.

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