[Editorial] U.S. investment takes shape; profitability must be secured to the end

The outline of the government’s strategic investment plan in the United States has emerged. On the 22nd, the government told the National Assembly that it would pursue construction of the Encinal gas-fired combined-cycle power plant in Texas as its first investment project. The construction of eight large nuclear power plants in the United States and the development of liquefied natural gas (LNG) in Alaska were presented as the second and third projects for negotiation. In the follow-up talks, the national interest must remain the top priority to the end.
Regarding the first project, the Encinal gas power plant, the government reportedly concluded after reviewing its feasibility that it would be sufficiently profitable. The rapid increase in power demand in Texas, where artificial intelligence (AI) data centers and advanced semiconductor plants are being built one after another, is also a positive factor. The government estimates that investing $22.3 billion in total project costs could generate $43.29 billion to $45.4303 billion in revenue over 20 years, making it possible to recover the principal and interest. Starting with 1.4 GW and expanding in stages after assessing actual demand and economic feasibility, rather than building all 6.3 GW at once, could also serve as a safeguard to reduce risks.
However, it is too early to conclude that the project’s feasibility has been sufficiently verified. A power purchase agreement (PPA) guaranteeing stable revenue over the long term is a key variable. The National Assembly briefing document released that day also contained a memo reading ‘PPA refusal.’ The government must clearly explain what this means and how it will secure stable revenue if a long-term purchase agreement proves difficult. Moreover, although South Korea would bear all the construction costs, the U.S. side reportedly initially demanded a 50-50 ownership split and, in the long term, a 90% stake for the United States and 10% for South Korea. Although negotiations are still underway, these terms would be difficult to accept as they stand.
The bigger tests are nuclear power and Alaska LNG. The government initially sought to secure a stake of around 20% in Westinghouse Electric Company, but it is now negotiating a stake in the 5% to 10% range. The government explained that it could secure voting rights even with a stake of less than 10%, but whether that alone is sufficient requires further scrutiny. No agreement has yet been reached on a plan to apply the Korean APR-1400 design to two of the eight nuclear reactors to be built in the United States, while applying Westinghouse’s AP1000 design to the remaining six.
If South Korea invests vast sums of money but fails to secure the expansion of Korean-designed nuclear reactors into the U.S. market and the participation of domestic design and equipment companies, it will have no choice but to ask what the investment is for. Investment in Westinghouse must also serve as leverage to expand the overseas expansion of South Korean nuclear power in the future. It must not result in a structure that grants only formal voting rights while restricting meaningful participation in management.
Even greater caution is needed with Alaska LNG. It is a mega-project involving the construction of a gas pipeline spanning more than 1,300 kilometers and liquefaction facilities, and concerns over its feasibility have continued because of the enormous upfront costs and lack of price competitiveness. The government also told the National Assembly that the project had not yet taken concrete enough shape to assess its commercial viability. Japan previously excluded Alaska LNG from its investment projects in the United States because of profitability concerns. There is no reason to take on projects whose economic feasibility has not been established simply to rush the conclusion of negotiations on investment in the United States.
It is only natural that the government reaffirmed that it would not exceed an annual investment limit of $20 billion or a total strategic investment limit of $200 billion. But protecting the total amount alone does not protect the national interest. Even if the signing of a memorandum of understanding (MOU) is delayed somewhat, the government must not accept unfavorable terms just to paper over the differences. Strategic investment in the United States should not mean providing South Korean funds for projects the United States wants; it must be an investment from which both countries benefit.