Invest1 publisher2 min readPublished
At $20 billion a year, Korea's $350 billion US package takes 17.5 years to fund
The trade ministry takes the program to two National Assembly committees behind closed doors on the 22nd, five days later than planned, with a Texas gas plant, large reactors and Alaska LNG on the agenda.
The Investor · Invest desk
What happened
- The Ministry of Trade and Industry is due to report on the Korea-US talks and the $350 billion investment program to the National Assembly's industry committee at 9:30 a.m. on the 22nd, behind closed doors.
- The government had meant to brief both standing committees on the 17th and moved the session back five days because detailed consultations with Washington were unfinished.
- The Finance and Economic Planning Committee is in talks to take its own closed-door briefing the same day, either before or after the industry committee sits.
- The briefing is expected to set out investment sizes and timelines for the Encinal combined-cycle gas plant in Texas, large-scale nuclear reactors and Alaska LNG.
Compiled by The InvestorSomething wrong?How this is made
Why it matters
- constraint Every project on the list draws on the same $20 billion of remittances in the year it is funded, so the size agreed for the first one sets how much room large reactors and Alaska LNG have in that year.
- exposure The question of whether the negotiated terms moved the scale or the burden onto Seoul gets answered to lawmakers in a room the public cannot enter, ahead of anyone pricing Korean sovereign or utility risk.
- precedent If Encinal is the first project, a Texas gas plant sets the template for how sizes and timelines in this program are put to the Assembly, before the nuclear equity stake or Alaska LNG are settled.
Of the three figures the trade ministry has put on the record, one has a time unit attached. Strategic investment inside the package will not exceed $200 billion and annual remittances are capped at $20 billion, the ministry has said [9]. At that ceiling, the full $350 billion takes 17.5 years to send [10], and the strategic portion alone takes ten [11]. The two caps differ by $150 billion [12], a remainder the report leaves unexplained.
What kept the schedule open was late coordination with Washington over the economic viability of the Alaska LNG project and over an equity investment in a US nuclear power company [5]. Both are valuation problems. One turns on the price a buyer will commit to for gas over the life of an export project; the other on what Korea pays for shares and what those shares earn afterwards.
The session is expected to focus on the first project under the program and on plans for funding it [14]. A cap on remittances limits how fast money leaves the country; raising the money is a separate exercise, and the caps do not address it.
The 17.5-year figure is wrong if part of the $350 billion is counted as loans, guarantees or contributions in kind: the $20 billion cash cap then governs only a slice of the headline, and the total gets booked faster than the remittance line implies [9]. It is also wrong if remittances run below the ceiling in the early years, in which case the schedule runs longer than 17.5 years [10]. Both readings are answerable from the investment sizes and timelines the ministry is expected to present [6].
What to watch
- Whether the Finance and Economic Planning Committee's own closed-door session goes ahead the same day and gives a different account of funding.
- A disclosed dollar size for Encinal, which would show how much of a single year's $20 billion allowance is already spoken for.
- Whether the committees are told that the $150 billion outside the strategic ceiling is loans, guarantees or trade finance.