Key facts
- South Korea will invest $22.3 billion in a 6.3-gigawatt gas-fired power complex in Encinal, Texas.
- The plant is intended to supply electricity for data centers and chip manufacturing.
- The project follows Japan's $36 billion investment in a similar gas plant in Ohio.
- No customers have been confirmed for the Texas plant, with a power purchase agreement targeted for 2027.
- The US-Korea deal includes a 50/50 split of project cash flow until South Korea recovers its principal and interest.
- Large gas turbines are effectively sold out through 2030, posing a supply constraint for the project.
South Korea has committed $22.3 billion to build a 6.3-gigawatt gas-fired power complex in Encinal, Texas, a move that follows a similar investment pledge by Japan and aims to bolster electricity supply for the burgeoning data center and chip manufacturing sectors in the US. The deal, which still requires final US approval, was reportedly a result of intense negotiations and pressure from the Trump administration.
The project, envisioned to be built in stages with an initial 1.4GW of simple-cycle gas turbines followed by 4.9GW of combined-cycle generation, faces significant hurdles. Notably, no customers have been confirmed, and a power purchase agreement is not expected until 2027. Furthermore, the availability of large gas turbines is a constraint, with orders effectively sold out through 2030.
Under the terms of the November 2025 agreement, South Korea will provide upfront capital for projects in strategic industries, with project cash flow split 50/50 until South Korea recovers its principal and interest. Revenue projections of $43 billion to $45 billion over 20 years are considered gross and do not account for fuel, operations, maintenance, and financing costs, leading to questions about the commercial viability of the arrangement.
This investment comes amid broader strains in US-South Korea relations, including disagreements over support for the war in Iran and stalled progress on nuclear-powered submarine cooperation. Some South Korean officials have suggested that progress on submarine talks is linked to the announcement of these investment projects.