Texas Gas Combined Cycle Power Plant Likely First U.S. Investment Project

The U.S. gas combined cycle power plant in Encinada, Texas, is being considered as the first investment project by the South Korean government in the United States. The government plans to finalize and announce the project following consultations with the U.S. side and a report to the National Assembly.

On September 7, Park Jeong-sung, head of the Trade Negotiation Bureau at the Ministry of Trade, Industry and Energy, and the working negotiation team reported the progress of the U.S. investment negotiations to members of the Democratic Party in the National Assembly's Finance and Economy Planning Committee and the Industry, Trade, and Small and Medium Enterprises Committee.

According to the Special Act on U.S. Investment, the government must report the outline, scale, and future procedures of the negotiation results to the National Assembly before concluding the negotiations. This report is seen as a step to comply with domestic procedures before confirming the U.S. investment project.

The Encinada gas combined cycle power plant project in Texas is being discussed as the first U.S. investment project. It is reported that the U.S. and South Korea are in the final stages of negotiations regarding the project costs, investment structure, and profit distribution methods.

The project may be pursued by establishing a special purpose vehicle (SPV) that oversees the total investment, with separate special purpose companies (SPCs) for individual projects. The investment from South Korea will be funneled through an investment SPV (I-SPV) into individual projects, with profits distributed according to an agreement between the two countries.

There are also expectations that additional investment projects may be announced alongside the first project. Given that Japan has announced U.S. investment projects in two phases, South Korea may outline further projects to expedite tariff negotiations with the U.S.

Potential candidates for subsequent projects include energy and infrastructure initiatives such as nuclear power plant construction in the U.S. and LNG development in Alaska. The demand for electricity is surging in the U.S. due to the expansion of AI data centers and semiconductor factories, increasing the need for new nuclear plants and small modular reactors (SMRs).

The Alaska LNG development project involves transporting natural gas produced from gas fields in northern Alaska through a 1,300-kilometer pipeline to Nikiski in the south, with plans to export it to Asia, including South Korea. The total project cost is estimated at around $44 billion.

However, the government has clarified that both the first project and subsequent initiatives are still under negotiation between South Korea and the U.S.

A Ministry of Trade, Industry and Energy official stated, "As discussions are ongoing between South Korea and the U.S., we cannot confirm specific details. The government plans to finalize and announce the project following the necessary domestic procedures and consultations with the U.S. side."