The South Korean government has secured a profit-sharing structure that gives priority to recovering the principal and interest on Korea's share of a $350 billion investment package in the United States. Even if an individual project recovers its principal and interest early, the profit-sharing structure will remain in place until all of the investment projects have done so, preventing the U.S. side's share of profits from rising on the strength of one project's early payback.
The government explained the repayment and investor protection mechanisms at a closed-door plenary session of the National Assembly's Trade, Industry, Energy, SMEs and Startups Committee on the 22nd, according to political sources.
Under the government's account, profits from the strategic investment projects in the U.S. will be split evenly between the two countries until Korea has recovered all of its principal and interest. After that, the split shifts to 1-to-9 in favor of the U.S. Even if an individual project recovers its principal and interest first, however, the shift to the 1-to-9 split will be held off until every project has recovered its principal and interest.
Korea's principal and interest will also be recovered first if a project is liquidated. The provision is designed to keep the recovery of Korean investment from being pushed back as profit-sharing terms shift with the performance of individual projects.
If a project's viability is significantly impaired, the two sides can revise the business plan and budget and discuss remedial measures through intergovernmental talks. The arrangement allows the two governments to consult and respond if costs rise far beyond expectations or profitability deteriorates during a project.
After the briefing to the National Assembly, the government plans to wrap up detailed negotiations with Washington and finalize the individual investment projects. Differences are said to remain, however, over some detailed terms, including Westinghouse's stake in nuclear power projects.
