Procurement of Hungarian nuclear reactors 'did not comply with EU rules'

posted by Marino Donati
in Law
29 November 2015

The European Commission (EC) has started an infringement procedure against Hungary over concerns about whether the award of contracts to build reactors at a nuclear plant was in line with procurement rules.

The commission said that after assessing the terms of the award for construction work at the Paks nuclear power plant in central Hungary, it had concerns about its compliance with EU procurement regulations.

In a letter of formal notice, the EC said: “The Hungarian government has directly awarded the construction of two new reactors and the refurbishment of two additional reactors of the Paks II nuclear power plant without a transparent procedure.”

The EC said that the direct award did not comply with EU legislation. The commission said: “These principles seek to ensure that all economic operators have fair chances to participate in a call for tender and to win a contract.”

The EC has sent a letter of formal notice to Hungary requesting information, which is the first step in an infringement procedure. The Hungarian authorities have two months to respond.

In December last year, MVM Paks II Nuclear Reactor signed three implementation agreements with Nizhny Novgorod Engineering Company, an affiliated company of Russian state corporation Rosatom, for two new 1200 megawatt nuclear reactor units to be constructed at the Paks plant.

This followed on from the Hungarian-Russian intergovernmental agreement and the Hungarian-Russian loan agreement last year, which will see Russia provide a loan for 80 per cent of the project costs to build the new reactors.

A statement from the office of the Hungarian prime minister Viktor Orbán said that both the Hungarian-Russian intergovernmental agreement and the engineering, procurement and construction contract complied with the EU rules.

The EC has also opened an investigation into Hungary’s plans to provide financing for the reactors to determine whether it constitutes state aid.

The commission said that the investigation would asses whether a private investor would have financed the project on similar terms or whether Hungary's investment constitutes state aid. If it does, it will investigate potential distortions of competition in the Hungarian energy market.

According to the Paks power plant website, in 2013 the facility accounted for more than 50 per cent of of Hungary’s electricity. It currently has four power units but they will have to be shutdown between 2032 and 2037 due to their age. Two new units will be built under the Hungarian–Russian deal. The new units will have a capacity of 1200 MW each and are expected to start operation in the late 2020s.

Hungary has only small amounts of domestic energy sources from coal, petroleum and natural gas and around 70 per cent of energy is imported.


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