Major progress made in the US-South Korea $350 billions investment agreement; the first project targets a $22.3 billions gas power plant in Texas

Zhitong Finance APP has learned that, according to reports, U.S. President Donald Trump and South Korean President Lee Jae-myung jointly praised the “significant progress” made on a long-stalled investment agreement between the two countries. South Korean lawmakers revealed that the first project under this agreement is a $22.3 billion natural gas power generation project in Texas.

South Korea's National Security Advisor Wi Seung-ro said that Trump and Lee Jae-myung met for about 30 minutes during the United Nations General Assembly in New York. He added that they “welcomed the significant progress made in discussions on strategic investment projects between the two countries.”

Last week, Lee Jae-myung said that South Korea reached a trade agreement with the United States last year and pledged $350 billion in investment, but the selection of specific projects was keeping him “up at night.” Seoul insists that any project must have commercial viability.

According to South Korean lawmakers who attended a closed-door meeting and received a briefing from the Ministry of Trade, Industry and Energy on Tuesday, the two countries have now selected a natural gas power project in Texas as their first cooperative project.

This breakthrough comes almost a year after the two countries reached an agreement aimed at avoiding U.S. high tariffs. Previous slow progress drew criticism from Trump, who repeatedly urged Seoul to speed up and warned that if Seoul failed to do so, it would face new tariffs.

South Korean lawmakers said that the $22.3 billion development project in Encinal, Texas, will construct and operate a gas-fired power plant. The first phase is expected to begin commercial operations in 2029. One lawmaker stated that Related Companies Inc., NextEra Energy (NEE.US), and Lewis Energy Group will participate in the project.

Lawmakers added that two other projects are still under review. One is a plan to build up to eight nuclear reactors, and the other is the Alaska liquefied natural gas pipeline project, which will transport natural gas from the state's North Slope to an LNG export terminal in the south.

Both projects still require approval from South Korean lawmakers and must be commercially viable; this is a condition that Seoul insisted on including when negotiating with Washington. One lawmaker said that the nuclear reactor project was seen as more commercially feasible and closer to finalization, but the formal announcement timeline remains unclear.

However, former South Korean trade negotiator Choi Byung-il said that, for South Korea, commercial viability is just one of many objectives. He added that by providing technology, expertise, and funding exceeding 10% of its annual GDP, South Korea aims to acquire “a strategic asset to enhance its leverage against U.S. protectionist policies in future negotiations with the United States.” Choi Byung-il is currently head of the trade strategy team at Bae, Kim & Lee LLC.

According to the investment commitment, the annual cap on outbound funds is set at $20 billion to avoid putting pressure on South Korea’s foreign exchange reserves. Of the $350 billion pledged by South Korea, $150 billion is earmarked for shipbuilding projects. In July, South Korea set up a shipbuilding cooperation center in Washington to help revive the U.S. shipbuilding industry.