The construction of a liquefied natural gas (LNG) combined cycle power plant in Texas is being considered as the first major investment project under the recent U.S.-Korea tariff agreement. This project is seen as a viable option due to the increasing electricity demand driven by the expansion of artificial intelligence (AI) data centers in the U.S., which can ensure stable revenue and commercial viability.
According to industry sources, the South Korean government is in discussions with U.S. officials regarding a plan to build a 6GW gas combined cycle power plant in Encinada, Texas, with a total project cost of $19.8 billion (approximately 29 trillion won).
Previously, South Korea committed to a total investment of $350 billion in the U.S., which includes $150 billion for shipbuilding cooperation and $200 billion for strategic investments, as part of tariff negotiations. The government plans to utilize the Korea-U.S. Strategic Investment Fund to invest in special purpose vehicles (SPVs) for each project, recovering principal and interest through project revenues.
Commercial viability, particularly the ability to recover investment, is a key criterion in the project selection process. As a result, energy projects are considered strong candidates for the first U.S. investment. Kim Jeong-kwan, Minister of Trade, Industry and Energy, stated on July 23 in Washington, D.C., "From our perspective, projects that can generate stable cash flow are preferable. We believe energy-related projects are advantageous and are focusing discussions on them."
Among the candidates for the first U.S. investment were the Louisiana LNG export terminal, gas fields, large nuclear power plants, small modular reactors (SMRs), and LNG combined cycle power plants. The LNG combined cycle power plant is viewed as the most feasible option due to its relatively quick commercialization in terms of construction time and securing demand.
Texas is considered a prime location for AI data center investments by global tech giants due to its robust power grid and ample land. This indicates a long-term demand for purchased power, which can lead to stable revenue. Additionally, the shorter construction time of LNG combined cycle power plants compared to nuclear power plants, along with their more stable output compared to renewable energy sources, is also seen as an advantage.
The potential participation of domestic companies is a significant consideration in advancing the project. There is a possibility that not only the design, procurement, and construction of the power plant but also key equipment will be sourced from South Korea. This could result in U.S. investment funds translating into exports for domestic companies.
However, the government is taking a cautious approach regarding the decision on the first U.S. investment. The Ministry of Trade, Industry and Energy stated, "We are closely consulting with the U.S. regarding the investment project, and the specific details and timing of the announcement for the first project have not yet been determined."
* This article has been translated by AI.
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