Today, I am very happy to bring you good news. A vernacular newspaper said, “Seoul Mayor Park Won Soon against Macquarie Korea Infrastructure Fund (MKIF) in the 1st round of battle, which was started with MKIF’s surprise fare hike on Subway Line 9.” Today, the Seoul Administrative Court judged in favor of Seoul Metropolitan Government for a lawsuit filed by Metro 9, whose major shareholder is MKIF, asking for the cancellation of Seoul Metropolitan Government’s rejection of the planned raise of subway fare.
Last April, Metro 9 made a surprise announcement of its plan to raise the subway fare by 500 won (currently 1,050 won). As Seoul Mayor, I made it clear that I would never accept such unilateral step. In response, Metro 9 said it would withdraw its surprise announcement and strive to reach an amicable agreement on the need for fare hike. Note, however, that the company contradicted itself by filing the aforesaid lawsuit.
Seoul Metropolitan Government’s victory in the first battle is only the start of a bigger battle. The contract, signed by former Mayor Lee Myung-bak, includes clauses that are severely advantageous to MKIF, and it should be set right. Major shareholders of Metro 9 are MKIF (equity share: 24.5%) and Hyundai Rotem (25%). MKIF is earning high interest profit of 15% per annum on its KRW 33-billion subordinated loan to Subway Line 9. The thing is, MRG (minimum revenue guarantee) is included in the contract. Seoul Metropolitan Government is obligated to pay to ensure that Metro 9 does not incur a deficit.
At the negotiation with MKIF, we at Seoul Metropolitan Government informed the company that the level of revenue guarantee should be reset somewhere close to 5% in step with the loan rate offered by commercial banks from the current 8.9%; the right to fix the fare should be returned to Seoul Metropolitan Government. The restructuring of the project will help Seoul Metropolitan Government ease its financial burden concerning Metro 9 and enable people to enjoy stable, efficient service. If an amicable agreement cannot be reached, Seoul Metropolitan Government will be forced to make the final choice. We will never let taxpayers’ hard-earned money be wasted.