EC clears Hungary’s Paks nuclear expansion

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The European Commission (EC) has approved Hungaryʼs financial support for the construction of two new reactors at its sole nuclear power plant in Paks (Paks II), saying it conforms to EU rules on state aid on the basis of commitments made by Hungary to limit distortion of competition, according to a press statement issued by the EC today.

“Hungary has decided to invest in the construction of the Paks II nuclear power plant, its right under the EU Treaties,” said Margrethe Vestager, the European Commissioner for Competition. “The Commissionʼs role is to ensure that the distortion of competition on the energy market as a result of the state support is limited to a minimum. During our investigation the Hungarian Government has made substantial commitments, which has allowed the Commission to approve the investment under EU state aid rules,” she added.

After investigating the tender, which is a regular practice of the EC, the body found that Hungary has demonstrated that the measure avoids undue distortion of the Hungarian energy market, and has made a number of substantial commitments to limit potential distortions of competition:

a) To avoid overcompensation of the operator of Paks II, any potential profits earned by Paks II will either be used to pay back Hungary for its investment or to cover normal costs for the operation of Paks II. Profits cannot be used to reinvest in the construction or acquisition of additional generation capacity.
b) To avoid market concentration, Paks II will be functionally and legally separated from the operator of the Paks Nuclear Power Plant (the incumbent MVM Group) and any of its successors or other state-owned energy companies.
c) To ensure market liquidity, Paks II will sell at least 30% of its total electricity output on the open power exchange. The rest of Paks IIʼs total electricity output will be sold by Paks II on objective, transparent and non-discriminatory terms by way of auctions.

On the basis of the above, the Commission has approved the measure under EU state aid rules because the amount of aid is limited and proportionate to the objectives pursued, while the distortion of competition caused by the state support is minimized.

“The Commissionʼs state aid investigation found that the Hungarian State will accept a lower return on its investment than a private investor would do. The investment therefore involves state aid within the meaning of Article 107(1) of the Treaty on the Functioning of the European Union (TFEU). These rules require state aid to be limited and proportionate to the objectives pursued in order to be approved,” the EC stated.

Under a deal announced about two years ago, while Orbán was in Moscow, Russian nuclear corporation Rosatom would build two new reactors at the Paks plant for €12.5 billion, with €10 billion in financing provided by the Russian state. The deal was awarded without a competitive bidding process.

Meanwhile, as reported late last week, Hungary’s green party LMP (Politics Can Be Different) will be initiating a referendum on the expansion of the nuclear plant in Paks, according to Hungarian online news portal index.hu.

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