[E-Daily Reporter Kim Sang-yoon ] It has been confirmed that South Korea and the United States have agreed to maintain a “risk-pooling” structure for their $200 billion investment in the U.S., whereby profits from various projects are pooled and managed collectively. Although the U.S. demanded during negotiations that profits be allocated separately by project, the existing principle—where profits from successful projects are used to offset shortfalls in capital recovery from underperforming ones—has been upheld.

According to a comprehensive report by Edaily on the 7th, the Korea-U.S. Strategic Investment Steering Committee meeting held that day included a report on the $22.3 billion Encinales Gas Combined Cycle Power Plant project in Texas—the first investment project in the U.S.—as well as a draft operating agreement for the Investment Special Purpose Vehicle (I-SPV). While determining the first investment target, the meeting also examined the operational framework of a “joint fund”—which will determine where funds generated from future investments in the U.S. will be pooled and how they will be distributed.
Controversy arose when the U.S. demanded during subsequent negotiations that profits be allocated separately for each project. If this proposal were accepted, it would become difficult to offset shortfalls with profits from other projects even if investment funds were not fully recovered from a single project. Concerns were raised that every time a single project failed, South Korea would have to shoulder the loss of the corresponding investment, potentially undermining the government’s safety net for principal recovery.
However, it was ultimately confirmed that the basic principles of the Strategic Investment Memorandum of Understanding (MOU) signed by South Korea and the U.S. last November were maintained. According to the MOU, the U.S. will establish an umbrella-type I-SPV to oversee all projects, with separate project SPVs established for each individual project under it. Funds contributed by South Korea are channeled through the I-SPV into each project, and profits generated by the projects flow back up through the project SPVs to the I-SPV. The I-SPV consolidates the profits from multiple projects and distributes them annually in U.S. dollars to both South Korea and the U.S.
A government official familiar with the matter stated, “Our understanding is that the basic structure of the MOU—where profits from individual project SPVs are distributed by the umbrella-type I-SPV—will remain unchanged,” adding, “The principles outlined in Article 15 of the MOU, such as annual distribution and the umbrella-type SPV structure, should be considered to have been upheld.”
For example, suppose the Encinal Gas Combined Cycle Power Plant (Project No. 1) is generating profits, but the CCUS project (expected to be Project No. 2) is incurring losses. Under the risk-pooling mechanism, the revenue generated by Encinal flows through the project SPV to the umbrella I-SPV. The I-SPV manages these funds as a source to recover principal and interest not only for Encinal but for all investments in the U.S., including the CCUS project. While Encinal’s profits are not directly reinvested into the CCUS project to cover operational losses or debt, they can serve to supplement the principal and interest that South Korea has been unable to recover from its CCUS investment.
Conversely, if Encinal performs poorly and CCUS generates significant profits, the CCUS profits will support the recovery of the total investment. Rather than calculating the recovery of principal and interest for individual projects entirely separately, this structure pools the profits generated from various projects into a single pool, thereby increasing the likelihood of recovering Korea’s total investment.

However, it is reported that differences of opinion between South Korea and the U.S. still remain regarding the specific terms. Article 15 of the MOU merely stipulates that the I-SPV must distribute “all distributions” received from any project SPV to South Korea and the U.S. annually; it does not specify exactly which cash flows are considered distributions.
Until Korea recovers the “deemed distribution” amount corresponding to the principal and agreed-upon interest, profits are distributed 50% each to Korea and the U.S. After full recovery, the U.S. receives 90% and Korea 10%.
To calculate the actual distribution amount, it must be determined exactly which portion of the cash generated by the project constitutes “all distributions.” The amount received by the I-SPV varies depending on at what stage and to what extent operating expenses and financing costs are deducted, as well as which point in time the cash is considered eligible for distribution.
The specific calculation method for the “net of U.S. taxes” applied to South Korea’s share is also a key issue. The actual amount received by South Korea is expected to vary depending on at what stage U.S. taxes are factored into the calculation and whether the distribution amount is adjusted to account for the tax burden.
A government official explained, “The principle that the I-SPV distributes funds to South Korea and the U.S. annually is clear,” adding, “What exactly constitutes ‘all distributions’ and how they will be calculated are matters that still need to be determined.”