A city government in South Korea is reportedly facing a lawsuit that could result in some of its hydrogen refuelling stations being seized, if it does not pay a billion-won bill for liquid H2 that its lenders say it owes.

The lawsuit, filed on 2 January according to multiple Korean news sites, is demanding seizure of the assets — eight small-scale hydrogen refuelling stations and ten other properties owned by Changwon city authorities — in lieu of a 10.3bn won ($7m) payment from the city.

The bill is for grey liquid hydrogen (made from unabated fossil gas) produced between July and November 2025 at the Changwon Liquid Hydrogen plant, formerly 50%-owned by the Korean government but now owned by its project finance lenders, known as the “Daejoo Group”.

Seoul-based private equity fund Mirae Asset Global Investments is reported to be one of the Daejoo Group, however the identity of the other lenders has not been revealed.

The Changwon city government, via its funding arm the Changwon Industrial Promotional Agency (CIPA), had previously promised to buy all production from the liquid hydrogen plant, which it was at the time developing in conjunction with government agency Korea Industrial Complex Corporation (KICC) and engineering firm Doosan Enerbility.

This legal offtake agreement was put up as collateral for a 71bn-won project financing loan from the Daejoo Group in order to get the 105bn-won plant built, with the aim of supplying local research firms and the local hydrogen transport refuelling network.

Hi Changwon, the company set up for this purpose, was at this point owned 50% by KICC, 30% by CIPA and 20% by Doosan Enerbility, the latter of which ultimately completed construction of the plant in 2024.

However, the LH2 plant, which was the first in South Korea, was then beset by problems, the chief of which was sluggish demand. This meant that commercial operations had still not begun in March 2025 when the Daejoo Group declared a default and sought debt recovery.

This appears to have been in response to the city’s efforts to get the debt nullified by the courts — a case that it ultimately lost.

The Daejoo Group then took over Hi Changwon and begun operations at the liquid hydrogen plant in June 2025, sending CIPA the bill for all the H2 it produced, ie, calling in the collateral on the original debt.

The city of Changwon, which has already paid up for some of the liquid hydrogen produced at the plant, then lost a court case aiming to get the offtake agreement nullified on the basis that it was made by its subsidiary CIPA, not the city itself.

It is now appealing this decision, however in the meantime it is legally required to pay for all liquid hydrogen produced by the plant, regardless of whether anyone is buying it. Reportedly, this puts the city on the hook for around 30 billion won ($20.6m) per year.

The city was last year slammed by an internal investigation over the decision-making that led to the investment in the plant being signed off.

A specially convened committee called the plant a “total failure” that should have been scrapped from the outset, especially as CIPA was found to have rubber-stamped the offtake agreement collateral deal before city authorities had agreed to it.