7 Construction Companies Owe Over 1 Trillion Won
Unpaid Construction Fees Due to Local Unsold Units
Also Unpaid for Overseas Projects
When crossing the Banpo Bridge in Seoul, you can see new apartments, old apartments, and apartments under construction all at once in the Sinbanpo area. The new apartments on the left are Acro Riverview Sinbanpo, the low old apartments on the right are Sinbanpo 2nd Complex, and the apartments under construction in the back are the Maple Xi construction site. Photo by Younghan Heo younghan@
It has been revealed that the amount of unpaid money owed to the top 10 domestic construction companies for construction work both domestically and internationally reached 17 trillion won as of the third quarter. Five companies, including Hyundai Engineering & Construction and Daewoo Engineering & Construction, saw an increase in their outstanding receivables compared to the end of last year, indicating worsening financial conditions.
According to the Financial Supervisory Service and the Ministry of Land, Infrastructure and Transport on the 18th, as of the third quarter, the outstanding receivables?including construction receivables, pre-sale receivables, and accounts receivable?of nine construction companies that clearly disclosed these items among the top 10 domestic construction companies by construction capability evaluation amounted to 17.637 trillion won. This is a 4.2% increase from the end of last year (16.9336 trillion won).
The company with the largest amount of construction receivables was Hyundai Engineering & Construction, with 4.0999 trillion won, a 47.7% increase compared to the end of last year (3.3233 trillion won). Hyundai Engineering & Construction’s pre-sale receivables were 196.7 billion won, up 84.5% from 106.6 billion won at the end of last year. Hyundai Engineering & Construction’s pre-sale receivables increased by 84.5% to 196.7 billion won from 106.6 billion won at the end of last year.
Daewoo Engineering & Construction’s accounts receivable, including construction and pre-sale receivables, amounted to 2.5344 trillion won, a 36.6% increase from 1.856 trillion won at the end of last year.
Hyundai Engineering saw a 22.0% increase to 2.2307 trillion won, POSCO E&C rose 11.6% to 1.3515 trillion won, and Lotte Engineering & Construction increased 8.5% to 1.5625 trillion won. SK Eco Plant reduced its construction receivables by 59.5% to 401.3 billion won.
Samsung C&T recorded 1.7946 trillion won, down 30.2% from the end of last year, GS Engineering & Construction decreased 29.3% to 1.9901 trillion won, and HDC Hyundai Development Company dropped 19.2% to 642.8 billion won.
The construction companies explained that most of the outstanding receivables are amounts agreed to be received, and the structure is such that the more construction orders they have, the more these receivables naturally increase, so it is not a major problem. Due to the nature of the construction industry, such as apartment pre-sales, payments are often fully completed only after a certain period following the completion of construction, meaning that as order volume increases, outstanding receivables inevitably rise. In the case of the Dunchon Jugong reconstruction project, Hyundai Engineering & Construction currently has 214.1 billion won in outstanding receivables, but since all apartments have been sold, the outstanding receivables are expected to be resolved once the remaining payments are deposited.
There are also cases where payments have not been received for a long time after completing overseas construction. Daewoo Engineering & Construction’s oil refinery project in Kuwait, contracted in 2012, has been 100% completed, but 12.4 billion won remains unpaid. The Zwitina combined cycle power plant project in Libya, contracted in 2013, has only reached 35.2% progress due to the Libyan civil war and other issues, with outstanding receivables amounting to 16.4 billion won.
It is reported that Daewoo Engineering & Construction was unable to recover over 20 billion won while pursuing construction projects in Manhattan, New York, with then U.S. President-elect Donald Trump in the early 2000s. Trump owed Daewoo 20 million dollars (approximately 26.2 billion won) but was unable to repay it, instead compensating with claims on nine business sites including Florida and Phoenix. However, most of these projects were unprofitable, and Daewoo eventually wrote off this debt as a loss after Trump was elected the 45th President of the United States around 2017.
SK Eco Plant also contracted a coal-fired power plant project in Panama in 2011 and completed the construction but was unable to collect 3.9 billion won, which was written off as a bad debt provision. Hyundai Engineering & Construction’s petrochemical plant in Poland, which began in 2019, had a construction deadline of August 31 last year and is currently 99% complete. However, 5 billion won remains unpaid. Separately, unbilled amounts related to this project, which arose from issues during the billing stage, total 169 billion won.
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