Ministry of Economy and Finance and MOTIE report to the National Assembly: “Up to $46.5 billion to be recovered with $22.5 billion investment”
Subsequent consultations on nuclear power and Alaska LNG
Ruling and opposition parties demand thorough management and verification
The government reported the current status of its $200 billion U.S. investment projects to the National Assembly on September 22. There are three projects in total: the construction of the Encinal combined-cycle gas power plant in Texas, the construction of large-scale nuclear power plants in the U.S., and the Alaska liquefied natural gas (LNG) development project. However, it reported that unlike the Encinal power plant construction project, which was confirmed as the No. 1 project, negotiations and reviews are still underway for the large-scale nuclear power plant and Alaska LNG projects.
Kim Jung-kwan, minister of trade, industry and energy, and Lee Hyung-il, deputy prime minister and minister of economy and finance, attended the plenary sessions of the National Assembly's Trade, Industry, Energy, Small and Medium Enterprises, and Startups Committee and the Economy and Finance Planning Committee, respectively, on the same day and reported these U.S. investment plans behind closed doors.
According to the National Assembly, the Encinal project, selected as the No. 1 U.S. investment, involves constructing power plants with a total capacity of 6.3 GW in Texas, where power demand is skyrocketing due to a concentration of advanced semiconductor factories and AI data centers (AIDCs). The method involves first constructing a 1.4 GW gas turbine power plant to confirm demand and economic viability, and then sequentially expanding 4.9 GW combined-cycle power facilities. It was reported that the government holds the position that it has sufficiently secured commercial rationality by investing approximately $22.3 billion to recover $43.29 billion to $45.403 billion over 20 years. It appears to have judged that the investment principal and interest can be safely recovered, thereby replacing approval with a report without the need for National Assembly consent procedures under the Special Act.
The National Assembly, centered around the opposition People Power Party (PPP), pointed out the uncertainties of the early development stage and demanded thorough ex-post verification. Rep. Bae June-young of the PPP, the opposition party's ranking member of the Economy and Finance Planning Committee, told reporters, “Commercial rationality means keeping the principle of principal recovery, but it is regrettable to report as if making it a fait accompli the day before the announcement while contracts or documents proving this remain reserved.”
Rep. Kim Sung-won, chairman of the Trade, Industry, Energy, Small and Medium Enterprises, and Startups Committee, and Rep. Koo Ja-keun, the opposition ranking member of the committee, both belonging to the same party, also urged, “As it is still in the development stage, possible variables must be carefully examined,” adding, “Special attention must be paid to securing commercial rationality.” In particular, in the reporting document to the committee on that day, a note saying 'PPA refusal' was confirmed regarding long-term power purchase agreements, a key prerequisite for generating stable profits, fueling controversy over profitability.
The ruling Democratic Party of Korea also cautioned against unconditional endorsement and asked for meticulous management. Rep. O Gi-hyoung of the Democratic Party, the ruling party's ranking member of the Economy and Finance Planning Committee, stated, “This does not mean we will condone projects lacking commercial rationality, but rather that we will strictly review them as they are in the early stages,” adding, “For areas lacking rationality, the concerns of the National Assembly must be conveyed as they are in future ROK-U.S. consultations.”
Regarding the commercial rationality controversy, the government explained, “We approached this from a comprehensive national interest perspective, beyond simple fund recovery, to expand the entry of Korean companies into the U.S. and establish a stepping stone to enter global markets.” In addition, it reiterated its principle to thoroughly manage the total execution size of the U.S. investment fund so that it does not exceed the limit of $200 billion.
Projects No. 2 and No. 3, classified as topics for subsequent consultation, were identified as the construction of eight large nuclear power plants in the U.S. and the Alaska LNG development project. Rep. Choi Soo-jin of the PPP met with reporters after the closed-door briefing and said, “It seems (the acquisition of Westinghouse shares) has not been decided yet, but it appears to be between 5% and 10%,” adding, “I was reported that negotiations are still ongoing.” It is known that a plan is being pursued to configure six of the eight new nuclear power plants to be built in the U.S. with Westinghouse's AP1000 model and two with the APR1400 developed by South Korea. Alaska LNG development also appears to be undergoing additional review over large-scale investment risks and whether commercial rationality can be secured.
The specific timing for signing a memorandum of understanding (MOU) was not reported on the day. Chairman Kim Sung-won added, “Under the Special Act, it is supposed to be determined after negotiations with the U.S.,” adding, “I think it will take place soon, but a date has not been set yet.”
