Lawmakers criticized the government's U.S. investment program during a parliamentary audit, saying large sums were paid out before the profitability of the projects had been properly verified. They said $2.4 billion was wired before any power buyers had been secured, and that internal risk reviews were conducted only after the money was sent, pointing to weak risk management across the program.
According to political sources on the 21st, lawmakers at the National Assembly's Finance and Economic Planning Committee hearing on the 20th pressed the Korea-U.S. Strategic Investment Corporation over whether its first investment payment of $2.4 billion, wired on the 1st to the Encinal combined-cycle gas power plant project in Texas, was appropriate.
The People Power Party said the money was disbursed before key sources of demand, including a power purchase agreement (PPA) and artificial intelligence data centers, had been confirmed. "How did you conclude the project was viable when neither a PPA nor AI data center demand had been secured?" Rep. Lim Yi-ja of the People Power Party said. "Support for land and water from the U.S. government is only a matter of arrangement under the memorandum of understanding, not a binding obligation. How will you manage the risk if interest rates rise or construction costs increase?" Park Jong-won, president of the Korea-U.S. Strategic Investment Corporation, said the corporation would continue to pursue major contracts including the PPA, adding that a review based on local power demand and price forecasts in Texas found the project's viability to be at a reasonable level.
Lawmakers also said the corporation's internal risk screening took place only after the money had been sent. "The risk management committee was not convened until Oct. 13, after the $2.4 billion had already been wired," Rep. Lee Jong-wook of the People Power Party said. "Skipping prior review at the most important stage, the selection of an investment project, runs counter to the purpose for which the corporation was established by law."
It also emerged that no on-site due diligence had been conducted before the investment. "There was not a single site visit for either the Encinal plant or the Alaska LNG project," Rep. Lee Jun-seok of the Reform Party said. "This is a project funded by a huge amount of taxpayers' money, and the investment decision was made without even checking the site in person."
The Democratic Party called for measures to address staffing gaps at the corporation and its limited capacity to handle contract risk. "Eighteen of the 50 authorized positions are vacant, a 36% shortfall, and even the head of the strategic investment division and the auditor posts are empty," Rep. Jung Sung-ho of the Democratic Party said. He proposed that the corporation immediately hire lawyers specializing in international contracts and investment experts to prepare for complex disputes with U.S. state governments and local partners.
"The corporation should re-examine whether there are poison-pill clauses that shift all additional costs from royalties or permit delays onto the corporation in nuclear and energy projects," Rep. Moon Jin-seok of the Democratic Party said. "The corporation should not remain a mere equity investor but should exercise its right to renegotiate contract terms on the basis of commercial rationality." Park said the corporation would move quickly to hire international legal experts and begin negotiations immediately to secure participation rights for Korean companies.
Democratic Party lawmakers also advised spreading risk by raising funds jointly with U.S. financial institutions. "Rather than relying solely on foreign exchange reserves and foreign exchange stabilization bonds, the corporation should combine project finance loans from U.S. commercial banks such as JPMorgan for at least a set share of total funding," Rep. Lee Kwang-jae of the Democratic Party said. "A structural safeguard that makes U.S. financial firms verify project viability and power demand themselves in order to recover their money is urgently needed."