Korean-designed nuclear reactors head to the U.S.…A closer look at the three major projects in the $200 billion investment pledge - 경향신문

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Barakah Nuclear Power Plant Unit 2, UAE. Provided by Korea Electric Power Corporation

South Korea’s pledged $200 billion strategic investment in the United States is expected to be effectively filled by three large projects: a gas-fired power plant in Texas, nuclear power plants, and Alaska liquefied natural gas (LNG).

U.S. President Donald Trump on the 1st (Korean time) announced South Korea’s strategic investment projects in the United States as the Encinal combined-cycle gas power plant in Texas, construction of eight U.S. nuclear reactors, and the Alaska LNG project. A simple sum of the stated project sizes comes to $196.3 billion. That amounts to about 98% of the $200 billion strategic investment cap South Korea pledged under the trade agreement.

Initially, the government finalized only the Encinal combined-cycle gas power plant in Texas as the first investment project, classified the construction of eight nuclear reactors as subject to additional commercial feasibility review, and categorized the Alaska LNG project as at the stage of ‘initiation of review’. However, with President Trump definitively announcing all three, the likelihood has grown that the nuclear and Alaska LNG projects will also move forward in earnest.

■Korean-designed nuclear reactors enter the U.S. market

The largest of the three projects is the construction of eight large nuclear reactors in the United States. The project will proceed in three phases. First, two of Westinghouse’s AP1000 units will be built; in phase two, two more AP1000 units and two APR1400 units, South Korea’s reactor design, will be constructed together. In the final phase, two additional AP1000 units will be added, completing a total of eight.

If the two APR1400 units are built as planned, it will mark the first case of a foreign reactor design being deployed in the United States. Although entry of the APR1400 into the U.S. market had been effectively blocked by a settlement reached last year when KEPCO and Korea Hydro & Nuclear Power ended their intellectual property dispute with Westinghouse, the parties have decided to amend the existing agreement to open the way for the Korean design to enter the U.S. The government expects that securing a performance record for the APR1400 in the United States, the original nuclear power nation, will aid bids to win reactor orders in third countries.

Of the total project cost of up to $120 billion, about $100 billion is allocated for construction and $20 billion is set aside as contingency against factors such as construction cost escalation. Even if not actually used, the contingency is counted toward the $200 billion strategic investment amount South Korea has pledged. Given the long manufacturing lead times for nuclear equipment, a plan is also being pursued to front-load up to $10 billion by year-end to secure long-lead items in advance.

A 5~10% acquisition of a stake in Westinghouse by Korean companies is also under consideration. KEPCO and KHNP plan to participate at a symbolic level in view of financial burdens, while encouraging investment by domestic nuclear firms. The stake size has been reduced from the initial concept during negotiations. Industry Minister Kim Jung-kwan said, “A 10% stake is the minimum threshold for participating on the board,” adding, “Domestic companies want to invest more, but Westinghouse was uneasy about the Korean side participating up to the board level.”

The biggest risk factor is construction cost. Large nuclear projects have long build times, and delays can cause project costs to exceed the original plan. Minister Kim explained that if construction costs exceed $120 billion, responsibility for the excess would be determined based on attributable fault under the contract. However, there remains the possibility of disputes arising over responsibility for cost overruns during actual project execution.

Construction of the Encinal combined-cycle gas power plant in Texas is the first project to be executed. Aimed at meeting the surging power demand of artificial intelligence (AI) data centers, the project will build around 6 GW of generation capacity, with phase-one commercial operation starting in 2029 and full operation targeted for 2032.

The government judged the project to be commercially rational, considering growing electricity demand in Texas and the competitiveness of participating firms. The calculation is that principal and interest on the investment can be recovered within the project’s lifetime.

However, the long-term power purchase agreement (PPA) that will determine profitability has not yet been finalized. Large-scale power projects typically sign PPAs in advance with stable off-takers to reduce investment risk, but the Encinal project has decided to proceed before off-takers are secured. The government’s view is that, because electricity demand in Texascentered on AI data centersis growing rapidly, it will be possible to contract later on more favorable terms rather than rushing to lock in customers now.

It also remains undecided to what extent Korean companies will participate in equipment supply and engineering·procurement·construction (EPC). The government is consulting with the U.S. side on ways to expand Korean companies’ participation.

Presented as a $54 billion project, Alaska LNG is the most debated in terms of commercial viability among the three. It would transport natural gas produced on the North Slope in northern Alaska southward through about 1300㎞ of pipeline, then liquefy it for export to Asia.

The South Korean government has consistently questioned the project’s economics. This is because enormous upfront investment, long-distance pipeline construction, permitting, labor shortages, and extreme cold could significantly inflate costs, and the project may lack price competitiveness compared with existing LNG suppliers such as Qatar.

On the 22nd of last month, Minister Kim Jung-kwan also said, “It is true that commercial rationality is lacking,” and “The United States also knows that the rationality is lacking.”

However, considering the RussiaUkraine war, instability in the Middle East, and the geopolitical risks to major LNG shipping routs such as the Malacca Strait and the Taiwan Strait, the government judged that there is strategic merit in sourcing LNG directly from Alaska in the United States, making it worth review.

Incentives offered by the United States also underlie South Korea’s decision to begin reviewing the project. If the project proceeds, the U.S. side has agreed to provide tariff exemptions on Korean steel and other equipment, ensure long-term LNG purchase contracts on economical terms, and guarantee Korea priority access.

At the time, Minister Kim said, “Even with strategic benefits (such as securing stable LNG shipping routes), if there is no commercial rationality, we will not proceed,” adding, “We will engage in intensive discussions with the United States so that the Alaska project is commercially acceptable and also meets strategic needs from our standpoint.”

However, with President Trump including Alaska LNG as part of South Korea’s strategic investment projects in this announcement, the situation has changed. Since the U.S. side has officially designated it as an investment project ahead of South Korea’s determination based on commercial rationality, a key issue now is the extent to which the South Korean government can preserve its room for choice during the forthcoming feasibility review.