The state-run Korea Hydro & Nuclear Power (KHNP) said Tuesday it will file a major lawsuit by December to gain compensation from JS Cable for supplying faulty cables to two new nuclear reactors.
The move could do irreparable damage to the firm and its parent, LS Group.
"After preparing all documents, we will file the case with a court as soon as possible," a KHNP official told The Korea Times by telephone. "We will ask JS Cable to pay all the costs for the removal of existing cables, the purchase and installment of new ones, and for the power-production losses incurred by the delay in reactor operations."
The official said that KHNP is seeking far more than 9 billion won ($8.5 million) it sought in a previous lawsuit filed in September. "The compensation does not stay at 9 billion won and it will rise as the trial proceeds," he said.
The suspension of reactor operations has already cost KHNP around 450 billion won since May when three reactors were taken offline for cable replacement.
Currently, six reactors are affected by the scandal which erupted last year. Their combined power-generation capacity is 6.8 million kilowatts.
On top of paying compensation, JS Cable is likely to be barred from bidding for supply contracts with the government for up to two years, the official said.
Nose-diving credibility, falling share prices and poor business performances are adding to the woes of the LS Group, the country's 13th-biggest conglomerate by assets.
Shares in JS Cable have fallen 25 percent this month to Monday, underperforming the broader Kospi's 2.8 percent gain. The company swung to a net loss of 295 million won in the April-June quarter, compared to a net profit of 2.5 billion won a year earlier.
In response to the government move, JS Group said it is considering all possible options, including a countersuit against KHNP, if the state firm files the second damages suit. KHNP has already asked for a provisional attachment to prevent JS Cable from selling its assets.
Meanwhile, the government seems to be doing the right thing according to remarks from Jeffrey Jones, a lawyer at Kim & Chang law firm.
"The primary difference between the U.S. and Korean legal systems is the amount of damages that can be collected from the supply of defective products," Jones said in an emailed message sent to The Korea Times.
"In Korea, the losses are limited to the actual losses incurred by the company as a result of the supply of the defective product, i.e., the cost of replacement, whereas in Korea lost profits are generally not considered actual damages," he said. "In the U.S., however, damages are much broader than actual damages and reasonably foreseeable damages can also be recovered to include lost profits that would have been generated if electricity could have been supplied during the time the plant was inoperable."
However, Jones said "it is questionable under Korea's legal system whether KHNP will be able to recover lost profits that could have been generated during the period that plants were shut down."
Korea has 23 commercial nuclear reactors, generating about 30 percent of its electricity. The country will push forward plans to build 11 more reactors by 2024 to meet a growing local power demand though it aims to its reliance on nuclear power energy to 22 to 29 percent by 2035 from 41 percent currently.