Hungary: EC approval increased the cost of NPP Paks expansion

, SEE Energy News

Hungarian Minister of Economy Mihaly Varga said that over 32 million euros has been allocated to this year’s budget for the preparations for the expansion of Hungary’s sole nuclear power plant Paks, but, according to him, the recent approval of the project by the European Commission (EC) could lead to increase in costs.

Minister Varga conveyed the statement of the Chief of the Cabinet of the Hungarian Government Janos Lazar, who said that after the EC’s approval the costs for 2017 could rise to about 64 million euros, adding that in that case the Government will have to tap into budget reserves or draw on Russian credit for the project.

Earlier this week, the EC has granted its approval to the Hungarian state providing a subsidy for the project of the expansion of NPP Paks. According to the statement, the EC concluded that Hungary’s financial support for the construction of two new reactors at NPP Paks involves state aid, but it has approved this support under EU state aid rules on the basis of commitments made by Hungary to limit distortions of competition.

The EC said that according to the agreement to avoid overcompensation of the operator of NPP Paks, any potential profits earned by the two new reactors will be either used to pay back Hungary for its investments or to cover normal costs of the plant’s operation. Profits cannot be used to reinvest in the construction or acquisition of additional generation capacity. To avoid market concentration, new reactors will be functionally and legally separated from NPP Paks operator (MVM Group) and any of its successors or other state-owned energy companies. In order to ensure market liquidity, Hungary also agreed that NPP Paks II will sell at least 30 % of produced electricity on the open power exchange. The rest of plant’s electricity output will be sold by the company on objective, transparent and nondiscriminatory terms by way of auctions.

On 14 January 2014, Hungarian Government has signed deal with Russia`s atomic energy corporation – Rosatom, with a goal to increase output of the power plant, from current 2,000 MW to 4,400 MW by adding two more reactors. Under the agreement, Russia will provide 10 billion euros loan for the construction of new unit in existing NPP, which is around 80% of estimated construction cost. First unit is expected to become operational in 2023.