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The sources said the two firms were in discussions about ways to attract investors to fund the restructuring of POSCO Energy's sluggish fuel cell business in Korea, but those negotiations were frustrated in their early stages as the companies failed to narrow their differences over several prerequisites for reorganization.
"POSCO Energy spoke of the risky status of the domestic fuel cell power generation industry and suggested detailed options to deal with the situation, but the U.S. fuel cell firm did not give a concrete response," one of the sources said.
"Recently, POSCO Energy offloaded 70 percent of its total shares in FuelCell Energy," the source added. "If the negotiations fail to achieve a breakthrough, POSCO Energy will likely sell the remaining shares it has and end the 10-year-old partnership."
POSCO Energy is the leader of the domestic molten carbonate fuel cell (MCFC) power generation market, with its market share reaching 54 percent. MCFC is a kind of fuel cell, which operates at temperatures of 600 degrees Celsius and above.
The company invested $84 million in the U.S. fuel cell firm and acquired the license for its MCFC technology in Korea in 2007.
But their partnership began to crack, after POSCO Energy accumulated losses when several defects were found in a key component of the U.S. partner's fuel cell generator.
POSCO Energy's losses in the fuel cell business stood at 44.7 billion won in 2014 and quickly grew to 64.5 billion won in 2017. Adding its total investments in fuel cell power generation facilities, POSCO's accumulated losses since 2007 will likely snowball to 1 trillion won, the sources said.
If their partnership ends, it will bring about a huge restructuring in the entire domestic fuel cell power generation market.
"Recently, many fuel cell power generator makers in and outside of Korea are reaching out to POSCO Energy, and the company seems to be considering the withdrawal of its MCFC facilities and establishing new facilities for other types of fuel cells," another industry source said.
Along with MCFC, Korean fuel cell power generation firms are mostly using phosphoric acid fuel and solid oxide fuel cells. If POSCO Energy abandons MCFC, the domestic market for MCFC will likely collapse, given the company's share in the market, the source said.
