State aid for Hungary’s Paks 2 Nuclear Plant breaches rule of law multiple times

The planned financing of the new Paks nuclear plant constitutes an unlawful state aid, and breaches the European rule of law multiple times, says Energiaklub and Greenpeace. Therefore, Energiaklub filed a submission to the Directorate-General for Competition of the European Commission, asking them to investigate the subsidy plan the Hungarian government constructed, and to take the necessary measures if needed. Greenpeace also filed a complaint to the Commission back in April.

The Paks-2 case: facts and analysis

Status report and short analysis on the planned two new units of the Paks Nuclear Power Plant. So far only limited and controversial information have appeared on the project, aiming to build two new units at Paks Nuclear Power Plant. In our analysis we summarize this information, and give an overview on the issue.

Possibilities for future Hungarian governments to back down from the agreement

The intergovernmental framework agreement can be cancelled by both parties without any consequences. In this case, some parts of the agreement remain in force, but the obligation concerning planning, delivering and constructing the new units will be ceased.

To date there is no definite information on the content and conditions of the finance agreement and the contracts between ROSATOM and MVM Paks II are not public, so the options of the parties for quitting cannot be measured.

Remaining legal options to prevent the extension

The above mentioned EU investigations can mean effective tools to prevent the investment. Besides EU investigations there are options to prevent the investment within the Hungarian legislation. However, it has to be emphasized that these options mainly exist in theory. There are ways to put a stop to the contracts and thus to the project, but it is most likely these legal tools will not work (see explanation at each option).

Possible EU objections

The EU can make investigations on at least two issues, possibly three:

Correspondence between Hungarian Government and the Commission

Hungary sent a communication to DG ENER on 10th of December 2013 under Article 103 of the Euratom Treaty. The communication included the draft of the Hungarian-Russian intergovernmental agreement. DG ENER on 14th January 2014 replied that they did not find any element that would as of itself impede the application of the Euratom Treaty in the meaning of Article 103.

Role of the MVM Ltd.

A project company, named as MVM Paks II Ltd. was created in 2012, under the MVM Ltd., for implementing the Paks 2 project. This company would manage the construction project, after that the units would be taken over for operation by the Paksi Atomerőmű Zrt., the operator of the existing units of the NPP.

Impact of the extension for the Hungarian economy and energy market

The government stated that the Paks 2 project will mean 1% increase per year of the GDP in the construction period (10 billion euro is more or less equal to 10% of the Hungarian GDP, and roughly 20% of the yearly state budget). However, the 1% increase was disputed by economic papers, and concluded that this is valid only for the first year of the investment.