South Korea Follows Japan's Playbook With $22.3 Billion Texas Gas Bet
South Korea has selected a proposed $22.3 billion, 6.3-gigawatt gas-fired power complex in Encinal, Texas, as the first project from its pledge to invest in the United States. The project — designed to supply electricity for data centers and chip fabs — still requires final U.S. approval and lacks a signed power purchase agreement.
Why It Matters
The deal is the opening implementation of South Korea's large U.S. investment pledge and mirrors an earlier Japanese approach, putting foreign capital behind U.S. power capacity at a time when electricity supply is a growing bottleneck for hyperscalers and chipmakers. The financing structure and supply-chain constraints raise questions about who benefits and how quickly the plant could be delivered.
Key Facts
- Project selected: $22.3 billion, 6.3 GW gas-fired complex in Encinal, Texas
- Encinal population: 540
- Plant build plan: Initial 1.4 GW simple-cycle turbines, followed by ~4.9 GW combined-cycle generation
- Power purchase agreement status: No PPA yet; signing targeted for 2027
- Possible project expansion: U.S. asked for ~25% increase, which could raise cost to about $25 billion
South Korea has picked a proposed gas-fired power complex in Encinal, Texas as the first project under its multi-hundred-billion-dollar U.S. investment pledge. The plant is priced at about $22.3 billion and would deliver 6.3 gigawatts of capacity, with an initial 1.4 GW of simple-cycle gas turbines followed by roughly 4.9 GW of more efficient combined-cycle generation. The selection still awaits final U.S. approval and, according to reports, could be announced by the White House imminently.
The financing follows an agreement in November 2025 under which Seoul provides $200 billion of upfront capital for so-called strategic projects (capped at $20 billion per year) plus a separate $150 billion for shipbuilding. Project cash flow is split 50/50 with the U.S. until Korea recovers principal and interest, after which Korea's share falls to 10% and the U.S. receives 90%. Korean officials estimate Encinal could generate $43 billion to $45 billion in revenue over 20 years, figures that Seoul says would allow recovery of principal and interest.
Key commercial and delivery questions remain. There is no confirmed buyer for the plant's output and no signed power purchase agreement; Korea's KED Global reported a PPA signing target of 2027. Industry observers also point to a severe supply constraint for large gas turbines, with manufacturers effectively sold out through 2030 and some orders only delivering into the early 2030s. That tight equipment market could lengthen construction timetables and raise costs.
The Encinal decision echoes Japan's opening tranche, where Tokyo led with a large gas plant in Ohio and later backed small modular reactors. The per-kilowatt cost of the two gas projects is very similar, and both are notably higher than pre-AI-boom combined-cycle plant costs. Independent research cited by Goldman suggests electricity availability is becoming a direct constraint on datacenter expansion, and anticipates greater use of behind-the-meter and on-site gas generation by 2030. Analysts named likely equipment winners — GE Vernova, Siemens Energy, Mitsubishi Heavy and INNIO — none of which are Korean, highlighting questions over how much of the supply-chain spending will accrue to Korean firms.
Officials in Seoul say projects must be "commercially reasonable," but the U.S.-led Investment Committee decides that standard and the U.S. administration has final approval authority. South Korean ministers acknowledged intense negotiations with U.S. counterparts and described the talks as difficult; President Lee Jae Myung said the process had caused him "sleepless nights."
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