South Korea Puts Alaska on the Negotiating Table, Secures Conditions for Investment in the United States

[Financial News] South Korea has strengthened safeguards, including priority recovery of its investment and profit sharing, in exchange for placing the Alaska LNG Project, which the United States has demanded, under consideration as a strategic investment in the United States. South Korea has not finalized its investment in the Alaska LNG Project. Instead, it partially accepted the United States' demands while revising the investment terms in the existing South Korea-U.S. memorandum of understanding (MOU) in South Korea's favor.
According to political sources on the 23rd, South Korea and the United States coordinated issues including whether to include the Alaska LNG Project among the projects for follow-up review and the terms for recovering the investment during detailed negotiations on strategic investment in the United States. South Korea had remained reluctant to participate in the Alaska LNG Project until the final stage because its commercial viability was unclear. However, as the United States continued to demand South Korean participation, South Korea reportedly agreed to consider whether to make the actual investment.
A ruling-party source said, "We renewed several MOUs in exchange for putting Alaska on the table," adding, "That was the deal."
The safeguards secured by South Korea include a liquidation preference under which it would recover its investment first if the project were liquidated. Until the investment principal and interest have been fully recovered, South Korea and the United States will split the project's profits 50-50. South Korea also secured the right to access information related to the investment project.
Because the United States has substantial authority over the selection and operation of projects within the total $200 billion investment in the United States, equivalent to approximately 270.56 trillion won, the key issue for South Korea was how reliably it could recover its investment. In effect, these safeguards were incorporated into the MOU in exchange for placing the Alaska LNG Project under consideration for follow-up review.
Unlike the first investment project, the Texas Encinal gas-fired combined-cycle power generation project, the Alaska LNG Project has not yet been finalized for investment. The Encinal project was deemed commercially viable and went through the 'reporting to the National Assembly' procedure. The Alaska LNG Project, however, must undergo additional reviews of its project structure and profitability before receiving 'approval from the National Assembly.'
If the project fails to establish commercial viability in the future, the scale of the investment or the form of participation could be reduced or adjusted. Under the Korea-U.S. Strategic Investment Act, pursuing a project that is not deemed commercially viable requires approval from the National Assembly. Therefore, if the project does not prove viable, the investment itself could fall through.
Accordingly, the ruling camp explained that including the Alaska LNG Project among the projects under consideration does not itself mean that South Korea has committed to investing. The government plans to keep the possibility of reviewing the project open in response to the United States' request, while deciding whether to make an actual investment after assessing its commercial viability.
[email protected] Kim Kyung-min Reporter