The first strategic investment project from South Korea in the United States will involve the construction of a $22.3 billion gas-fired combined cycle power plant in the Encinada region of Texas. The two countries have established a framework for cooperation to build eight large nuclear power plants in the U.S., including two APR1400 reactors, and have also begun reviewing the Alaska liquefied natural gas (LNG) development project.
On October 1, the Ministry of Trade, Industry and Energy announced the details of the Korea-U.S. strategic investment project plan. This comes approximately 11 months after the signing of a $350 billion strategic investment memorandum of understanding (MOU) last November.
The first project, dubbed 'Project Star,' aims to construct and operate a gas-fired combined cycle power plant with a capacity of 6.5 gigawatts in Texas. The generated electricity will be supplied directly to a nearby artificial intelligence (AI) data center, with the goal of commencing commercial operations in 2029 and fully operating the facility by 2032.
The project is being led by U.S. real estate developer Related Companies and power operator NextEra Energy. The natural gas supplier, Lewis Energy Group, will provide the site and related infrastructure, including natural gas and water.
Despite uncertainties in the early stages of the project, the government has determined that the commercial viability is supported by the capabilities of the participating companies, the increasing power demand in Texas, and anticipated electricity prices. Opportunities for domestic companies to participate in all phases of the project, including equipment supply, design, construction, and long-term operation and maintenance, will also be expanded.
Minister of Trade, Industry and Energy Kim Jeong-kwan stated during a pre-briefing on September 22, "The participation of globally renowned companies as project partners, the expected average annual growth of 13.6% in the Texas power market from 2025 to 2030, and the reasonable electricity prices within the range of similar projects indicate commercial viability. We will also ensure thorough post-management by utilizing information rights and intergovernmental consultations to prepare for any deterioration in key assumptions."
A key issue will be securing power purchase agreements (PPAs), as demand sources for the Texas power plant have not yet been identified. Regarding this, Minister Kim noted, "There is significant demand from data centers, which puts electricity suppliers in a favorable position. Negotiations will be necessary to determine how to secure higher electricity prices. Rather than rushing, we will proceed with PPAs with suppliers that offer favorable conditions among various demand sources."
The subsequent nuclear power project, 'Project Power,' involves the construction of two APR1400 reactors from Korea Hydro & Nuclear Power and six AP1000 reactors from Westinghouse in the U.S. This framework includes the governments of both countries, as well as Korea Electric Power Corporation, Korea Hydro & Nuclear Power, and Westinghouse.
The funding for the construction of the eight nuclear reactors is expected to reach up to $120 billion, comprising approximately $100 billion for construction costs and a $20 billion contingency fund for cost overruns. Even if costs exceed $30 billion per reactor, additional burdens will not be placed on the Korea-U.S. strategic investment fund.
The two countries are also discussing a plan to make an initial payment of up to $10 billion by the end of the year to secure key equipment such as reactor vessels and steam generators, which require long lead times for production. However, this is contingent upon a review of commercial viability and compliance with domestic legal requirements.
Minister Kim clarified that this framework does not signify the finalization of individual nuclear projects. The final decision on whether to proceed with each project will be made after clarifying the site, project structure, and construction schedule, followed by a review of commercial viability and legislative procedures.
Investment in Westinghouse shares is also being pursued. Minister Kim mentioned, "While the final figures need to be negotiated, we are considering a stake of around 5-10%. The nuclear power framework establishes a broad basis for Korea-U.S. nuclear cooperation, and once specific details such as site, project structure, and construction schedule are confirmed, we will determine the final push for individual projects through commercial viability reviews and legislative processes."
The Alaska LNG development project, 'Project North,' involves constructing a pipeline to transport natural gas from the northern region to the south and building an export LNG terminal. The two countries will first initiate a project review and decide on the feasibility of proceeding based on commercial viability and compliance with domestic legal requirements.
If the project moves forward, the U.S. will provide tariff reductions on related materials such as steel and guarantee long-term LNG purchase contracts under economically viable conditions. South Korea will also be granted priority access to the LNG produced from the project.
The key issue remains the commercial viability of the Alaska LNG development project. Minister Kim has previously emphasized uncertainties surrounding this project during initial discussions on the U.S. investment project. However, he noted that recent conflicts in the Middle East have changed the situation.
Minister Kim stated, "With the difficulties in navigating the Strait of Hormuz, LNG from Qatar is not reaching us, and there are uncertainties in the Malacca Strait and the Taiwan Strait. We believe there is a need to review strategic aspects. We will carefully consider various issues such as permitting delays, labor, weather, and technology."
Common safety measures have also been established for the recovery of investment funds. All investments and profits from the projects will be managed under a single umbrella investment purpose company (I-SPV), and the profit-sharing ratio between Korea and the U.S. will remain at 50-50 until Korea recovers all principal and interest from the overall project. Consequently, the transition to a 10-90 profit-sharing ratio will be postponed until after the full recovery of principal and interest.
The annual investment limit of $20 billion and a total of $200 billion will be specified in legally binding operating contracts. If the project is deemed unviable, adjustments to the project plan, budget, and profit-sharing ratio can be discussed through intergovernmental consultations. The Korean side's consent rights will also be reflected in significant changes to the project scope or issues such as equity issuance and transfer.
Importantly, the government views this as not merely a follow-up to Korea-U.S. tariff negotiations. A prime example is nuclear power. The introduction of Korean-style nuclear power in the U.S., the home of nuclear power, could facilitate subsequent nuclear exports.
Minister Kim emphasized, "As taxpayer money is being invested, we will adhere to the principle of investing only in commercially viable projects that prioritize national interests. We aim to create a virtuous cycle that enhances the growth and competitiveness of our companies through Korea-U.S. strategic investments."
* This article has been translated by AI.
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