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Economy minister: gov’t may need to double Paks expansion cost from this year’s budget, EC gives greenlight

Almost 100 billion forints (EUR 32.3 million) is allocated in this year's budget to prepare for the upgrade of the Paks nuclear power plant, but the European Commission's recent approval of the project could raise costs, Economy Minister Mihály Varga said.

Government office chief János Lázár believes spending on preparations for the upgrade could come to about 200 billion forints this year, Varga said. If these costs materialise, the government will have to tap budget reserves or call down the Russian credit for the project. The government will use domestic resources to cover the costs as long as they are available, he said.
The European Commission has concluded its investigation into whether Hungary's decision to expand the Paks II nuclear plant would require restricted state aid, ruling that the expansion does not violate European regulations, according to a press release. As far as the EC is concerned, Hungary has a green light to move forward with the project, ending its investigation which has been ongoing since November 2015.
As part of its decision, in order to limit potential distortions of the competition the Commission secured commitments from the Hungarian government:
•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 of operation of the facility. Profits cannot be used to reinvest in the construction or acquisition of additional energy generation capacity.
•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.
•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 II's total electricity output will be sold by Paks II on objective, transparent and non-discriminatory terms by way of auctions.
According to, the third condition may pose the greatest risk to Hungary's state budget.
The online daily reports that several studies have found that the energy produced at the Paks II plant will be more expensive than the market rate in the region. The investment would only be recouped if in ten years (when the first new reactor is expected to go online) the price of energy in the region exceeds EUR 55 MWh.
In 2016, the price of energy was EUR 41 MWh in Hungary but only EUR 29.45 in Germany and the Czech Republic, and EUR 32.4 in Slovakia.
In other words, if the Hungarian government's projection that the price of energy will increase significantly does not come true, then no one in the region will buy the energy produced at Paks II at auction unless it is sold for less than it costs to produce.
Economists have criticized the government's energy price projections on grounds that it is unrealistic for the price of energy to increase so dramatically in coming years. Recent declines to energy prices and the increased use of renewable energy lend legitimacy to such claims.
Despite moves on behalf of Germany to close nuclear plants and expand wind and solar energy investments, the Hungarian government is expecting the demand for more energy to increase in the region.
Benedek Jávor, a green party MEP from Hungarian opposition party Párbeszéd, says the Commission's decision "only confirms that Hungary has a fundamental right to make stupid decisions.
According to Jávor, the Hungarian government's "right to make stupid decisions" will empower it to "spend trillions of Forint of Hungarian taxpayer money on outdated technology which damages the environment and endangers human life".
In related news, Prime Minister Viktor Orbán called Russian President Vladimir Putin to discuss issues around the planned upgrade on Tuesday, the prime minister's press office told MTI. The call came in the wake of the European Commission's giving the green light to the upgrade project on Monday. Putin and Orbán welcomed the EC decision, which has "removed obstacles from adding two new blocks to Hungary's Paks Nuclear Plant, involving Russian state company Rosatom," kremlin. ru , Putin's official site said.
Pro-government Magyar Hírlap's Mariann Őry hopes that there will be no referendum on the Paks nuclear plant construction project. Őry recalls a recent poll by Publicus pollster company, which suggests that Hungarians' views on the Paks II project are clearly determined by political sympathies rather than opinions on nuclear energy.
Writing in Magyar Nemzet, the former MSZP MEP Gyula Hegyi also finds it sad that the Paks II project has become a subject of partisan ideological contention. The left-wing columnist thinks that the construction of the new nuclear plant is reasonable in terms of economic feasibility, energy security and environmental considerations. Hegyi recalls that the plans for the new plant were first announced by the former Socialist government led by PM Gyurcsány in 2009. In light of this, Hegyi finds it peculiar that the Left, including Ferenc Gyurcsány, now oppose the project. In conclusion, Hegyi recommends that the Left should call for more transparency rather than opposing the project on grounds of 'unsubstantiated claims' and 'fear-mongering'.
In late 2015, the government published an "independent" economic analysis of the Paks II expansion project that it had commissioned from Rothschild & Co. The analysis essentially unpinned the government's earlier estimates.
In 2016, then-European Commissioner Günther Oettinger took a plane to Budapest to meet Prime Minister Viktor Orbán. The plane was owned by Klaus Mangold, a German lobbyist (and executive at Germany's Rothschild's Bank) sometimes referred to as "Mr Russia" for endorsing favorable treatment of Russia despite its invasion of Ukraine and annexation of the Crimea.
The incident sparked controversy as Oettinger failed to declare the trip and the meeting in accordance with Commission rules, and further questioned efforts on behalf of the EU to maintain transparency in EU lobbying.
Source:;; Hungary Matters

Last Updated on Wednesday, 08 March 2017 20:38

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