South Korea's first strategic investment project in the United States is expected to take shape this week. As discussions around increasing project costs and early fund disbursement arise, the effectiveness of safety measures for investment recovery and loss mitigation has become a key issue.
According to the Ministry of Trade, Industry and Energy, Minister Kim Jeong-kwan met with U.S. Secretary of Commerce Howard Rutnik from September 10 to 12 (local time) in New York to negotiate the target, scale, and conditions of the U.S. investment project.
The total investment promised by South Korea amounts to $350 billion, including $150 billion for shipbuilding cooperation and $200 billion for strategic investments. The energy projects currently under discussion, such as the Ensignal gas combined cycle power plant in Texas and nuclear power plants, fall under the strategic investment category.
While specific details of the negotiations have not been disclosed, reports indicate that both sides are nearing an agreement centered on large-scale energy investments. The Wall Street Journal, citing multiple sources, reported that South Korea and the U.S. are in the final stages of agreeing to invest over $100 billion in energy projects, including up to eight nuclear power plants and natural gas generation facilities in the U.S. The agreement could be announced as early as this week.
The crux of the negotiations lies in how well safety measures to reduce investment risks are maintained amid discussions of increased project costs and early fund disbursement. The Ensignal power plant was initially estimated at around $20 billion but has reportedly been adjusted to about $22 billion due to U.S. demands for cost increases.
Last year, South Korea stipulated in a memorandum of understanding (MOU) with the U.S. that only commercially viable projects would be recommended. Commercial viability is assessed based on whether the project can generate sufficient cash flow to repay principal and interest during the investment period. However, even if the investment committee recommends a project after consultations with the South Korean side, the final investment decision rests with President Donald Trump.
Measures to alleviate the burden of fund disbursement have also been established. The MOU limits annual remittances to $20 billion and stipulates that funds can only be transferred at least 45 business days after notification of the selected investment destination.
However, speculation has arisen that the first investment of $2.2 billion (approximately 3 trillion won) could be transferred by the end of this month, raising questions about the actual application of the 45-business-day clause. The Ministry of Trade has stated that the amount and timing of the first remittance have not yet been confirmed.
The operational method of a special purpose vehicle (SPV) for integrated management of profits and losses across projects is also a variable. It has been reported that discussions are underway to settle profits and losses on a project-by-project basis. In this case, the risk diversification function of offsetting losses from one project with profits from another may weaken. However, the revenue distribution structure is still under discussion between South Korea and the U.S., according to government sources.
Minister Kim is scheduled to report the results of the negotiations to the National Assembly in a closed session on September 17. When asked about specific negotiation details upon entering the U.S., Minister Kim stated, "I cannot confirm anything yet. I will provide information once the final results are available."
* This article has been translated by AI.
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