[2025 Audit] Hangang Bus Profit Structure Controversy... Oh Sehoon Says "Safeguards in Place, No Issues"

Concerns Raised Over Excessive Profits for Private Investors
Seoul City: "Safeguards Prevent Profits Without Investment Risks"
"SH Permitted to Participate in Various Development Projects Under Ordinance"

Concerns have been raised that private investors are taking excessive profits due to the operational structure of Seoul's Hangang Bus. It has also been claimed that there are additional conditions such as rights to ancillary facilities and deficit compensation. However, the Seoul Metropolitan Government stated, "We have implemented safeguards to prevent investors from taking profits without bearing any investment risk."

On October 20, the Seoul Metropolitan Government addressed questions about the Hangang Bus fund management structure raised by Assemblyman Lee Geontae of the Democratic Party, who is a member of the National Assembly Land, Infrastructure and Transport Committee. The city stated, "According to the business agreement, profits are to be determined by a review committee."

Seoul Mayor Oh Sehoon is responding to questions from committee members during the National Assembly Land, Infrastructure and Transport Committee's audit on Seoul City held at Seoul City Hall on the 20th. Photo by Yonhap News

On this day, Assemblyman Lee's office argued that while approximately 70% of the 175.6 billion won invested in the Hangang Bus project comes from public funds, a private company that invested only 2.8% of the total capital is reaping disproportionately high returns compared to its investment.

According to Assemblyman Lee's office, the funds raised for the Hangang Bus project consist of the following: 87.6 billion won in loans from Seoul Housing & Communities Corporation (SH), 50 billion won in loans from financial institutions, 4.7 billion won in eco-friendly vessel subsidies, 10 billion won in equity capital (5.1 billion won from SH and 4.9 billion won from E-Cruise), and 23.26 billion won from the Seoul Metropolitan Government for pier and accessibility improvements. Of these, the private company E-Cruise, a cruise business affiliate of E-Land Group, contributed only 4.9 billion won, accounting for just 2.8% of the total. Nevertheless, under the profit-sharing structure where profits are split 50-50 between the Seoul Metropolitan Government and Hangang Bus Co., Ltd., E-Cruise is said to be taking an excessive share of the profits.

However, the Seoul Metropolitan Government argued that of the total 120.6 billion won categorized as public funding, 87.6 billion won is a loan from SH that must be repaid with interest, so it is not appropriate to describe this as a "public burden." Regarding the profit structure, the city emphasized, "When the equity agreement was established, structural safeguards were put in place to ensure that E-Cruise could not take profits without bearing investment risk." It was also confirmed that if E-Cruise fails to invest as planned in the future, SH has the option to buy E-Cruise's shares through a call option.

A Seoul Metropolitan Government official added, "It is stipulated that external borrowings must be repaid before any shareholder dividends are distributed when profits are generated," and "Profits are also determined by a review committee under the business agreement, so we plan to manage the amounts at an appropriate and sustainable level."

On the same day, Assemblyman Lee also claimed that SH provided a loan of 87.6 billion won to Hangang Bus without collateral, arguing that "this constitutes a violation of the Local Public Enterprises Act and could be considered a breach of trust." Assemblyman Jeon Yonggi, also of the Democratic Party, pointed out that SH issued a comfort letter when securing a 50 billion won loan from a bank, stating, "If Hangang Bus fails, SH has guaranteed to purchase all the vessels and repay the debt."

In response, Mayor Oh Sehoon countered, "Under the ordinance, SH is permitted to participate in various development projects. The claim that participating in Hangang-related projects violates the law is not accurate." He further explained, "While there is no collateral, a legal structure is in place to ensure repayment. The bank loans are secured by the vessels themselves, and if there was no possibility of recovery, the bank would not have provided the loans."

This content was produced with the assistance of AI translation services.