Hungary’s nuclear power plant expansion reportedly delayed

Hungary’s nuclear power plant expansion reportedly delayed
Constructions of new blocks at Paks may only be completed in 2032.
By bne IntelliNews November 13, 2018

The Hungarian government has denied reports that the construction of two new blocks at the Paks nuclear facility may only be completed in 2032, five to six years behind schedule, local media reported on November 12.

The Paks expansion, the largest ever investment in Hungary, will see Russian state atomic energy group Rosatom build two new reactors for €12.5bn, doubling capacity. The power plant accounts for half of Hungary's electricity production and a third of the consumption.

However, left-wing daily Nepszava reported on Monday, citing experts involved in the project, that the expansion of the nuclear power plant will only be completed in 2032, instead of the planned 2026-27 deadline.

The conservative government of Viktor Orban argues that the investment is necessary to meet Hungary's rising energy needs as two of the four existing blocks will be shut down in the 2030s after they reach maturity.

There was no official target date for the completion of the new blocks specified in the 2014 inter-governmental agreement signed by Orban and Russian President Vladimir Putin in January 2014 in Moscow. Soon after inking the deal, government officials spoke of a 2023 completion date for the first block.

Under the financing part of the agreement, there is a 2026 date specified for the first block to go operational. This is the date from which Hungary would have to start repaying the €10bn Russian loan, which initially carries a 3.95% interest, which rises incrementally to 4.95% over the next 21 years. The government hoped to start refinancing the loan when the first block goes operational.

Hungary has not publicly raised the prospect of modifying the contract. Instead, it took out loans to refinance the costly Russian loan on the international markets, as monetary conditions improved substantially since 2014 allowing Hungary to raise funds at more favourable conditions.

According to Nepszava’s sources, the content and quality of the Russian plans do not meet EU standards and were rejected for failing to conform to strict standards. The lack of skilled workers is also a very pressing issue, it adds.

The delay in the Paks expansion was on the table at talks between Putin and Orban in Moscow in September, which observers characterised as rather tense for this specific reason. Orban said the importance of the project “goes far beyond Hungary”. 

He noted "technical difficulties" in the implementation of the project and blamed the bureaucratic practices of the European Union. In fact, the Hungarian authorities have been slow to issue major licences for the project as well. The contractor is still trying to obtain the construction licence. 

The European Union gave the green light for the implementation of the project in March 2017. In a probe that opened in 2015, the European Commission looked into whether the construction of two new nuclear reactors had received illegal state aid. 

EU regulators concluded that the project cannot be financed solely on market conditions and needs state aid, to which the commission agreed under three conditions. After the decision, Hungarian and Russian officials were talking about a 2026-2027 date for the completion of the project.

It seems there are compliance problems with Rosatom’s VVER-1200 reactors, Hungarian media report. In Russia and some former Soviet republics, Rosatom has installed such reactors, but these do not conform to EU standards. Finland is also building a nuclear reactor. The Hanhikivi-1 nuclear power plant will also be equipped with the Russian-designed VVER-120 pressurised water reactor.

According to Nepszava, significant cultural, technical, and safety disputes have arisen between Hungarians and Russians during the process of obtaining the first building permits. Rosatom is responsible for the development, unlike in the case of the currently operational reactors at Paks, which were built by Hungarians with Russian help

Attila Aszodi, the state secretary overseeing the expansion, rejected the claims that the project is delayed, stressing that the 2026-27 deadline can be met.

When he was asked specifically about a scenario where delivery would have to be postponed until 2032, he said that the main aim is to create a high quality power plant capable of safe production until the end of the century.

Regarding the loan agreement, Aszodi said that the two parties may negotiate any modifications in case of delays.