Hungary fears Paks nuclear project might go the same way as South Stream

By bne IntelliNews December 4, 2014

bne IntelliNews -

Hungary might have to scrap its Russian-backed project to expand the Paks nuclear plant if the EU blocks it, a government official has admitted. 

Hungary hopes the European Commission will make a decision within a year on whether the planned expansion of the country's sole nuclear power plant meets EU rules on state aid. Budapest could yet scrap the project if Brussels fails to give it the nod, Attila Aszodi, the government official that heads the Paks scheme, said on December 3, according to Reuters.

"We are preparing the contract in a way that if the European Commission does not approve the project we could quit," Aszodi told a conference. The official stressed that he firmly believes the project is free of state aid.

Brussels could demand changes to the project if it believes there is an element of state aid. In October, the European Commission revived the hopes on new-build nuclear projects across Europe when it approved an adapted state guarantees scheme on the UK's planned Hinkley Point C. Aszodi noted Hungary could look to follow that model on Paks if the current project raises objections.

Raised hackles

However, with energy a major element in the stand off with Russia, the EU is unlikely to offer the project any breaks. Budapest is under huge pressure from Brussels and Washington over its percieved lean towards Moscow.

Hungary's halt of transporting EU gas to Ukraine in September, as it agreed on raised imports from Gazprom, was the spark for a Western hardening of approach to Budapest in which Hungarian officials have been blocked from entry to the US for alleged corruption.

Until the project was ditched in early December due to stiff resistance from the EU, Hungary was also raising hackles by insisting it would continue with its section of Russia's gaint South Stream gas pipeline. Meanwhile, Washington is pushing to prevent partially state-owned Mol from selling its stake in Croatian oil and gas company INA to a Russian company.

Russian leverage to the tune of €10bn in Paks is unlikely to cheer the West up then, let alone potential control of an EU nuclear plant by Moscow. Local media claims that recent changes to Hungary's bill on nuclear energy opened the way for foreign ownership, and referred to the possible sale of the plant. 

The EU has taken its time in reacting to the surpise signing of the deal with Russia in January, after the sudden halt to an international tender by Hungary. Prime Minister Viktor Orban met with counterpart Vladimir Putin and came away with a €10bn loan from Moscow in return for handing Russian state-owned nuclear company Rosatom the contract.

Russian push

The deal is part of a push in Central Europe by Rosatom. It is a major contender for the expected revival of a tender to expand nuclear capacity in the Czech Republic, after a previous competition was scrapped in April in which it was squaring off against Japanese/US firm Westinghouse. It is also thought to be pushing to take some part in the sale of Slovenske Elektrarne, with other suitors wary of the Slovak utility's project to expand the Mochovce nuclear plant.

The Hungarian project envisages two new reactors of 1,200 MW capacity each be built at Paks, more than doubling capacity. Currently Paks runs four Russian VVER-type reactors with a combined capacity of about 2,000MW. The first new block could become operational in 2024.

Earlier this month, the Hungarian government submitted a bill seeking to make the expansion of Paks a priority project. That status would take the project out of public oversight as it would not be subject to public procurement legislation. Moreover, the bill sets special rules over companies involved and the publicity of project data.

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