ASIA NEWS NETWORK
WE KNOW ASIA BETTER
Australian firm quitting Seoul subway’s line 9 project over fare dispute
Publication Date : 08-08-2013
Australia’s Macquarie Group and other large shareholders will withdraw from the subway business in Seoul after a year-long dispute over fares, city officials said Wednesday.
Three Korean insurance companies, including a major life insurer, will take over the controversial Seoul Metro Line 9 Corp. owned by a consortium of Macquarie Korea Asset Management Co. and Hyundai Rotem.
The potential investors are expected to inject around 700 billion won (US$630 million) while not being directly involved in subway operation, unlike current shareholders.
Seoul Metropolitan Government is also negotiating a revision of the enforcement agreement with the insurance companies.
The city will stick to its policy of giving no minimum revenue guarantees while lowering the profit rate from 8.9 to 5 per cent. The government will also keep discretion in setting the fare rate.
When the agreement is officially decided at the end of this month, it will be reported to the city council next month.
Once Macquarie sells off its shares, it will be the first withdrawal of an investor from Seoul’s privately financed business.
The Australian infrastructure fund company has been in discord with the city government over the fare rate.
So far, the subway No. 9 has originally been operated under a minimum revenue guarantee system which assures shareholders’ a certain profit rate by the government.
The MRG system has been under fire as the city is required to compensate the consortium with tens of billions won of every year.
The subway corporation filed a lawsuit last year against the city government which objected to its plan to raise the fare. The action was dismissed by a local court.