Hungary Awards 14 Billion Nuclear Project to Russia

Hungary Awards $14 Billion Nuclear Project to Russia

Jan. 14, 2014
The agreement signed after talks between Hungary's visiting Prime Minister Viktor Orban and Russian President Vladimir Putin is likely to draw criticism both at home and from EU officials because it came without a formal bidding process.

MOSCOW -- Hungary today tasked Russia's atomic energy corporation to more than double production at the EU nation's only nuclear power plant in a contract worth nearly $14 billion.

The agreement signed after talks between Hungary's visiting Prime Minister Viktor Orban and Russian President Vladimir Putin is likely to draw criticism both at home and from EU officials because it came without a formal bidding process.

The deal also comes amid increasing concern in several eastern European countries and Brussels about undue reliance for energy on Russia, which enjoys a dominant position in providing natural gas to a number of states.

"We value the progress achieved by your leadership," the conservative Hungarian premier told the Russian leader. "In the area of trade, our progress is unparallelled, and the signature of these documents should serve as another step in this direction."

Putin said the deal would help "improve Hungary's energy independence and help solve issues associated with energy security."

The head of Russia's Rosatom said Moscow would lend Budapest up to 10 billion euros ($13.7 billion) for Hungary to boost production at its Paks facility to 4,400 MW from 2,000 MW.

"The loan's agreement between our finance ministries is now in its closing stages," the Prime news agency quoted Rosatom chief Sergei Kiriyenko as saying.

The Paks plant -- located about 60 miles south of Budapest -- produces 40% of the energy consumed in Hungary.

The facility is operated by Hungary's state-owned MVM -- a group that also imports natural gas from Russian energy giant Gazprom (IW 1000/16) and would like to negotiate a price cut.

The Hungarian parliament approved a decision in 2009 to add two more reactors to the four already running at the site.

France's Areva and U.S. electric company Westinghouse along with Japanese and South Korean power suppliers had previously expressed interest in bidding for a contract of the Hungarian plant's expansion.

But Hungary's Nepszabadsag daily reported that Russia's Rosatom was the only bidder to offer pre-financing.

The deal with Russia could prove controversial for Orban because no formal bidding process for the plant's expansion had ever been launched.

Rules Require Bidding

European Union rules stipulate that any state project must be awarded through a bidding process.

But some experts believe Orban could try to sidestep the regulation by arguing that the Russian contract was awarded for the expansion of an existing facility and not the construction of a new plant.

"In this case, we are only talking about the expansion of an existing plant and not the construction of a new one," the unnamed source told Gazeta. "Based on this, we can hope that the EU leadership will not have substantial complaints about the tender's annulment."

Paks was launched by Soviet nuclear power engineers in the early 1980s, and its first reactor's life span expires within the next 15 years.

Analysts note that the complicated process of winning the necessary licences and environmental oversight approvals -- as well as the length of the construction itself -- means Hungary must act quickly to meet its future energy demand.

Russia is currently Hungary's most important trade partner outside the European Union.

But Hungary suffers from a big trade imbalance which favours Moscow and would like to broaden its agricultural sales to Russia to close the gap.

In Budapest, Janos Lazar, Orban's chief of staff, said the deal means greater energy independence for Hungary.

The deal has been slammed for its lack of transparency by opposition parties in Hungary who called for its terms to be made fully public.

Bernadett Szel of the LMP party said Orban has "effectively sold Hungary to the Russians."

"In a normal country social and political debates would take place about this issue, but in Hungary this didn't happen," she told state news agency MTI.

"A deal without the authority of parliament, made in secret, and with unknown terms is invalid," said Benedek Javor, an independent member of parliament.

Copyright Agence France-Presse, 2014

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