[Editorial] Now is “the companies’ time” for investment in the U.S.; the burden must not be shifted onto them

The business communities of South Korea and the United States pledged to work together to ensure the successful implementation of strategic investment in the U.S. The Federation of Korean Industries (FKI) and the U.S. Chamber of Commerce adopted a joint declaration at the Korea-U.S. Business Council’s general meeting on the 15th, urging both governments to expedite approvals and resolve visa issues, among other things. FKI Chairman Ryu Jin stressed that strategic investment in the U.S. had entered the full-scale implementation phase, saying, “Now is the time for companies.” The point is that investment plans drawn up through negotiations between the two governments must produce results through actual execution by businesses. The key is the viability and profitability of the projects. The public and private sectors must scrutinize these thoroughly through to the end.
The two countries had earlier finalized construction of a gas-fired combined-cycle power plant in Texas as the first U.S.-bound investment project, and reached a broad agreement on cooperation to build eight nuclear reactors in the United States. Up to $120 billion in strategic investment funds could be put into nuclear power projects. Separately from investment in nuclear plant construction, major South Korean conglomerates including SK, Samsung, Hyundai and Doosan are considering forming a consortium with public enterprises such as KEPCO and KHNP to acquire a 5–10% stake in U.S. nuclear power company Westinghouse Electric Company. As SK considers an investment worth trillions of won, the total cost of acquiring the stake is reportedly as much as 4 trillion won.
Expectations are high because this lays the groundwork for entering the U.S. nuclear market amid surging electricity demand driven by advances in artificial intelligence (AI). South Korean companies could expand their business into areas such as nuclear plant design and construction and the supply of key equipment. However, Westinghouse Electric Company is the party that was embroiled in a lengthy legal dispute with KEPCO and KHNP over intellectual property rights related to Korean-designed nuclear reactors. The dispute ended last year, but controversy over the terms of the settlement, including technology royalties and the allocation of work, continues. Given this history, companies cannot invest trillions of won on the basis of expectations alone. Valuations of Westinghouse Electric Company, which is pursuing an initial public offering (IPO), also vary widely.
It is said that a stake can be acquired at a price 10% below the offering price, but that price too must be assessed for fairness. It is also unclear what tangible benefits a minority stake would bring in securing nuclear power contracts or participating in management. It must be confirmed again whether companies will be guaranteed voting rights and opportunities to participate in projects commensurate with the size of their investment. Profit-sharing arrangements and terms for recovering the investment must also be made clear. Without rights and returns commensurate with their investment, companies could end up with huge sums of money tied up.
The government may encourage private companies to participate in order to carry out investment in the U.S. But companies’ independent decisions must be respected. Minister of Trade, Industry and Energy Kim Jung-kwan has said that equity investment would be pursued in a way that reduces the financial burden on KEPCO and KHNP. That does not mean the burden on public enterprises should be shifted to the private sector or that the government should pressure companies to invest. Companies should decide whether to participate only after weighing all the factors, including the expected profits from winning nuclear power contracts, returns on equity investment and potential losses.
U.S. pressure over the Alaska liquefied natural gas (LNG) development project is also concerning. On the 14th, U.S. President Donald Trump again insisted that South Korea had agreed to invest $50 billion in the project. The South Korean government, however, says it will decide whether to proceed after reviewing the project’s economic viability and legal requirements. The Alaska project requires the construction of a massive gas pipeline and LNG export facilities, entailing enormous investment costs from the outset.
Even if the project itself is not very profitable, should the government conclude that investment is necessary in light of its strategic value and other considerations, it must clearly explain what South Korea would receive in return and persuade the public. The country must not be pushed by the U.S. political timetable into accepting one-sided disadvantages. The government must take full responsibility for reducing investment risks through to the end.