Uijeongbu City Refutes Claims of Excessive Losses by Light Rail Project Operator

Uijeongbu City released its position on a press release distributed by the Uijeongbu Light Rail project operator on the 18th.

Regarding the operator's claim of cumulative losses of 424 billion won as of the end of 2016, the city pointed out that according to the Business Operation Conditions Adjustment Proposal submitted in November 2015, the operator's cumulative losses as of September 2015 were 207.8 billion won, and based on the December 2015 audit report, approximately 320 billion won.

In particular, the city noted that of this amount, actual cash losses are approximately 100 billion won, while the remaining 220 billion won does not represent actual cash losses but rather depreciation costs of the intangible asset—the management and operation rights of the light rail. Of the approximately 100 billion won in cash losses, 60 billion won consists of principal and interest on loans borrowed from financial institutions to finance private investment, meaning actual operating losses are 400 million won or less.

Accordingly, Uijeongbu City's proposal of approximately 5 billion won in operating cost shortfalls and reasonable additional costs was intended to prevent bankruptcy by analyzing the loss structure in this manner: having the operator repay loan principal and interest independently while the city supports the operating losses portion, the city explained.

However, the city pointed out that the operator has shown no willingness or self-help efforts to normalize operations, instead maintaining a position of seeking support from Uijeongbu City to resolve loan principal and interest payments that should be repaid by the operator itself.

Additionally, Uijeongbu City stated that the operator's mention of PIMAC findings favoring the operator's proposal—claiming the city could reduce expenditures by more than 150 billion won by accepting the proposal—represents only the operator's one-sided claim.

The city explained that PIMAC's review report on the operator's proposal contains matters for Uijeongbu City to consider during negotiations and recommended that it not be disclosed to the operator.

Furthermore, PIMAC conducted financial analysis comparing acceptance of the operator's proposal versus Uijeongbu City's direct operation, concluding that direct operation by Uijeongbu City is advantageous in terms of actual nominal value investment. The city stated that PIMAC also reached the same conclusion when converting to present value, finding that Uijeongbu City's operation is advantageous when applying a realistic present value discount rate.

The city expressed its view that the operator's claim that, even with Uijeongbu City's annual support of 14.5 billion won, the operator would incur losses of approximately 400 billion won over the next 25.5 years appears to be an attempt to assert the validity of the operator's proposal by adding unclear additional costs to self-proposed content.

In the Business Operation Conditions Adjustment Proposal, the operator itself analyzed and proposed that with Uijeongbu City's annual support of 14.5 billion won, the operator would require an additional 173.6 billion won in funding over 25.5 years.