South Korea’s electricity utility asks Samsung and SK Hynix to prepay $18bn

South Korea’s majority state-owned electric utility, Korea Electric Power Corporation (KEPCO), has proposed the country’s chip giants pay for five years of power generation up front to cover the cost of AI-focused grid upgrades.

KEPCO has asked Samsung and SK Hynix to pay a combined 25 trillion won ($18.3 billion), a future revenue prepayment the utility will use to build transmission networks for planned semiconductor clusters in the Yongin and the Honam.

Under the proposals, Samsung would pay 20 trillion won ($14.7 billion) and SK Hynix would pay 5 trillion won ($3.67 billion) in instalments over the next year.

KEPCO already accepts prepayments from customers, paying interest back depending on the length of time the payment covers. Seoul Economic Daily reported that the chip deal could see KEPCO pay Samsung and SK Hynix interest on their payments every six months, or discount future bills.

Samsung and SK Hynix declined a request for comment by Reuters.

The government confirmed power supply for the new sites in August, with the Honam cluster expected to receive 3GW of power by 2029 and eventually raise this to 6GW. Each company is also building a semiconductor complex in in Yongin, Gyeonggi Province, which will receive a combined 14GW by 2041.

AI data centres in the regions will add an additional 7.9GW of power demand, per Seoul Economic Daily.

South Korea is pouring billions of dollars into its domestic semiconductor and AI sector, with Samsung and SK Hynix two of the world’s biggest companies in the space.

In June, the South Korean government announced a $576 billion industrial strategy targeting the rapid expansion of the country’s AI chip production, and on Monday doubled down on this with plans to spend 21.3 trillion won ($15.5 billion) on AI projects in 2027.

It has also pledged to fund youth projects using tax windfalls driven by excess chip profits.