Monday

18th Dec 2017

EU gives green light to Hungary's nuclear plant

  • Building the Paks II plant is Hungary's "right under the EU treaties," said the European Commission. (Photo: Akos Bodajki / Paks Nuclear Power Plant Co. Ltd.)

[UPDATED on Monday at 17.10] The European Commission on Monday (6 March) gave the final green light to Hungary's controversial extension of the Paks nuclear plant, which is being financed and built by Russia.

In a probe that opened in 2015, the EU commission looked into whether the construction of two new nuclear reactors in Paks had received illegal state aid.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

The 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.

Firstly, Paks II will have to fall under a new company, and needs to be legally separated from the current owner, the MVM Group, Hungary's largest power company, so that losses cannot be absorbed or hidden in the parent company.

Secondly, Paks II will sell at least 30 percent of its total electricity output on the open power exchange, with equal access to all market players. "The rest of Paks II's total electricity output will be sold by Paks II on objective, transparent and non-discriminatory terms by way of auctions," the press release of the Commission noted.

The third and final condition stated that if the project is profitable, the operator cannot reinvest the profits for further developments, and they can only be used to pay the investment back to Hungary, and on maintenance or operational costs.

The Hungarian government has previously argued that no state aid is needed for Paks II to operate, but the Commission did not agree. However, it allows the state aid under these conditions.

The Hungarians in the end referred to to Euratom treaty, also cited by the UK in the case of the Hinkley Point nuclear plant, which states that member states need to "facilitate investment and ensure the establishment of the basic installations necessary for the development of nuclear energy in the EU".

With the closure of this investigation, the EU commission has given the green light to the €12.5 billion project, which will be built from a Russian-financed loan that accounts for at least 80 percent of the costs, and by the Russia state-owned Rosatom company.

The decision, based on state aid rules, did not delve into the origin of the funds, nor into whether building a new nuclear plant is consistent with EU's common policies on energy.

Building Paks II is Hungary's "right under the EU treaties," EU competition commissioner Margrethe Vestager said in a statement. "During our investigation the Hungarian government has made substantial commitments, which has allowed the commission to approve the investment under EU state aid rules."

'Irresponsible'

Environmentalists criticised the Commission's decision.

Greenpeace EU legal adviser Andrea Carta called the EU executive "spectacularly irresponsible".

"It’s allowing massive subsidies for a project backed by a government that openly challenges the importance of independent oversight for nuclear safety," he said in a statement.

Green MEP Benedek Javor also voiced concern over the decision.

"Despite the Hungarian government’s repeated denials, the European Commission has confirmed that the Paks II project will benefit from state Aad. By doing so, the Commission effectively concedes the underlying economic weakness of the project," he said, adding that the project will distort regional markets.

The Hungarian MEP told Euobserver that with the decision the Commission also sends the signal that nuclear energy enjoys a special status among energy sources, which might dissuade supporters of the energy union from actually working together.

"It goes against the fair market that citing the Euratom treaty gets member states away with pumping money into the nuclear sector," he added.

An earlier infringement procedure looking into whether the project was in line with EU procurement rules, as it was initiated without a tender, was closed last year and stated that Hungary did not break EU rules.

Citing the so-called technical exclusivity exemption, which means that when the technical and safety requirements of the project can only be met by one company, it can be compatible with EU laws to award the contract directly to that company. However, tenders will have to be open for subcontractors.

The project is viewed by critics as another example of Hungary's prime minister, Viktor Orban, cosying up to Russian president Vladimir Putin.

MEP Javor said that while the Commission's original probes were quite forceful, yet the outcomes are weak. He said he can only speculate what has changed the Commission's mind.

But Javor claimed that "a dark lobby network could be drawn up" behind the scenes. He cited the example of companies such as Almstrom possibly getting a piece of the subcontracts, and shady lobbyists like Klaus Mangold, who has Russian ties, works for the Hungarian government and shuttles an EU commissioner in a private jet.

Investigation

The mysterious German behind Orban's Russian deals

Klaus Mangold, a German businessman with good connections in Russia, and who provided a jet for Commission vice-president Guenther Oettinger, played a crucial role in Hungary's controversial Paks nuclear deal with Russia, Direkt36's investigation has found.

Investigation

Commission still silent on Hungarian nuclear contract

The EU executive has still not explained why it accepted that a contract with Russia to extend the Paks plant could be awarded without a public tender, and why commissioner Oettinger travelled with a lobbyist working for the Hungarian government.

Showdown EU vote on asylum looking likely for next June

Divisions on relocating asylum seekers remain entrenched following an EU summit. The east-west divide opens up the possibility of relying on a majority vote for a key asylum in June, further exacerbating disputes among opposing capitals.

News in Brief

  1. EU adopts 'track-and-trace' tobacco system
  2. Luxembourg appeals Amazon tax decision
  3. EU leaders agree to open phase 2 of Brexit talks
  4. Juncker: May made 'big efforts' on Brexit
  5. Merkel took 'tough' line on Russia at EU summit
  6. EU leaders added line supporting 'two-state' solution
  7. EU leaders agree to 20 European Universities by 2024
  8. Belgian courts end legal proceedings against Puigdemont

Stakeholders' Highlights

  1. Dialogue PlatformThe Gülen Community: Who to Believe - Politicians or Actions?" by Thomas Michel
  2. Plastics Recyclers Europe65% plastics recycling rate attainable by 2025 new study shows
  3. European Heart NetworkCommissioner Andriukaitis' Address to EHN on the Occasion of Its 25th Anniversary
  4. ACCACFOs Risk Losing Relevance If They Do Not Embrace Technology
  5. UNICEFMake the Digital World Safer for Children & Increase Access for the Most Disadvantaged
  6. European Jewish CongressWelcomes Recognition of Jerusalem as the Capital of Israel and Calls on EU States to Follow Suit
  7. Mission of China to the EUChina and EU Boost Innovation Cooperation Under Horizon 2020
  8. European Gaming & Betting AssociationJuncker’s "Political" Commission Leaves Gambling Reforms to the Court
  9. AJC Transatlantic InstituteAJC Applauds U.S. Recognition of Jerusalem as Israel’s Capital City
  10. EU2017EEEU Telecom Ministers Reached an Agreement on the 5G Roadmap
  11. European Friends of ArmeniaEU-Armenia Relations in the CEPA Era: What's Next?
  12. Mission of China to the EU16+1 Cooperation Injects New Vigour Into China-EU Ties

Latest News

  1. Catalonia, Brexit, and Uber on EU agenda This WEEK
  2. Macron and Merkel take tough line on Poland
  3. Eurozone future needs structural reforms, EU leaders told
  4. Showdown EU vote on asylum looking likely for next June
  5. EU stresses unity as it launches next phase of Brexit talks
  6. Polish PM ready for EU sanctions scrap
  7. Dutchman to lead powerful euro working group
  8. EU mulls post-Brexit balance of euro and non-eurozone states

Stakeholders' Highlights

  1. EPSUEU Blacklist of Tax Havens Is a Sham
  2. EU2017EERole of Culture in Building Cohesive Societies in Europe
  3. ILGA EuropeCongratulations to Austria - Court Overturns Barriers to Equal Marriage
  4. Centre Maurits CoppietersCelebrating Diversity, Citizenship and the European Project With Fundació Josep Irla
  5. European Healthy Lifestyle AllianceUnderstanding the Social Consequences of Obesity
  6. Union for the MediterraneanMediterranean Countries Commit to Strengthening Women's Role in Region
  7. Bio-Based IndustriesRegistration for BBI JU Stakeholder Forum about to close. Last chance to register!
  8. European Heart NetworkThe Time Is Ripe for Simplified Front-Of-Pack Nutrition Labelling
  9. Counter BalanceNew EU External Investment Plan Risks Sidelining Development Objectives
  10. EU2017EEEAS Calls for Eastern Partnership Countries to Enter EU Market Through Estonia
  11. Dialogue PlatformThe Turkey I No Longer Know
  12. World Vision7 Million Children at Risk in the DRC: Donor Meeting to Focus on Saving More Lives