South Korea has taken the first step in its $350 billion investment in the United States by selecting a gas-fired power plant with a capacity of 6.3 gigawatts in Encinal, Texas. This investment, valued at $22.3 billion, aims to provide energy for data centers and chip manufacturing plants.
Details of the Encinal Project
This facility, located in an area with a population of 540, will be built in two phases. The first phase includes the installation of 1.4 gigawatts of simple gas turbines, and in the second phase, an additional 4.9 gigawatts of combined cycle power generation will be added. No power purchase agreements have been finalized yet, and the goal is to sign a contract by 2027.
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Economic Analysis and Investment Implications
South Korean officials have predicted that this project could generate revenues of $43 to $45 billion over 20 years. This revenue will average about $2.2 billion annually. However, this figure is before deducting fuel, operational, maintenance, and financing costs, and it seems that recovering the principal investment and profit will be challenging for South Korea.
According to the November 2025 agreement, South Korea must provide $200 billion in initial capital for strategic industry projects, which has been capped at $20 billion per year. After repaying the principal and interest, South Korea's share of the revenue will drop to 10%, with 90% going to the United States.
This project will not only help supply energy for data centers but will also aid in the development of South Korean industries in the U.S. market. According to the South Korean Minister of Industry, negotiations for acquiring profitable business projects are ongoing, with the goal of enabling South Korean companies to enter the U.S. market.
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