South Korea is preparing to fund a $22 billion gas-fired power plant in Texas, marking an initial step toward fulfilling its $350 billion investment commitment to the United States under a deal struck with the Trump administration. According to sources in Washington and Seoul, the two governments are close to announcing the agreement, which would designate the Encinal facility as the first project to materialize from the broader investment package. The White House could unveil the initiative as early as Wednesday, with President Donald Trump potentially making the announcement personally.
Seoul this week selected the Encinal, Texas site for the $22.3 billion gas power complex, designed to meet surging electricity demand from data centers and chip manufacturing plants in the state. The transaction still requires final approval from US authorities. South Korean President Lee Jae-myung met with Trump in Washington on Tuesday for roughly 30 minutes on the sidelines of the UN General Assembly in New York, with both sides welcoming what Seoul described as significant progress in investment and cooperation within the bilateral economic and security relationship.
South Korea pledged $350 billion in US investment last year in exchange for reduced tariffs, but had yet to identify specific projects, drawing frustration from Washington. Lee said last week he had suffered sleepless nights while negotiating to finalize the first investment project. Japan, which made a similar $550 billion investment pledge, has already announced multiple projects, including a $33 billion gas plant in Ohio and up to $40 billion in small modular nuclear reactors across Tennessee and Alabama.
Reports this month indicate the proposed Encinal project will have a total installed capacity of 6.3 gigawatts, developed in phases. Initial construction would add 1.4 gigawatts of gas turbine capacity, followed by roughly 4.9 gigawatts of more efficient combined-cycle capacity. No specific customers have been identified for the facility yet.
Under the November 2025 agreement, South Korea will provide $200 billion in upfront capital for strategic industry projects, with an annual cap of $20 billion in actual investment. Cash flows from the projects will be split evenly between South Korea and the US until Seoul recoups its principal and interest. After that, South Korea's share drops to 10%, with the US taking 90%. An additional $150 billion is earmarked for shipbuilding investments. South Korean officials told parliament on Tuesday that the Encinal project is expected to generate between $43 billion and $45 billion in revenue over 20 years, sufficient to recover principal and interest.
The government has repeatedly stressed that any investment project must demonstrate commercial viability. However, Haeyoon Kim of Korea Tech and Trade Watch argues the safeguard clause carries less weight than it appears. Under the 2025 agreement, the US-led investment committee holds final authority over what qualifies as commercially reasonable, she said. Kim added that Trump will have the final say on which projects gain approval. While South Korea can raise objections, doing so risks triggering higher US tariffs, making it an impractical option in practice. She noted that the security relationship between the two countries further complicates evaluating these investments purely on commercial returns.
The agreement arrives amid mounting pressure in the bilateral relationship. South Korea is seeking US support to build nuclear-powered submarines. Washington agreed last year to cooperate on technical requirements and nuclear fuel, but sources say little progress has been made since. One South Korean official, speaking anonymously, said the US has signaled that nuclear submarine cooperation will only advance once Seoul formally announces some of its previously pledged investment projects.
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