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€130 Billion Nuclear Dream in Europe Meets Financial Reality

Eastern European governments from Prague to Sofia have grand plans to build new plants, but the question is who will pay for them.

The explosion at the Chernobyl plant in 1986 slowed the Soviet-era flurry of nuclear projects in Eastern Europe, and then the fall of communist regimes reduced it to a trickle.

Now as the west of the continent focuses on upgrading or replacing old reactors, its east is uniting behind the biggest drive for new capacity in decades. The question, though, is who will pay for it and how much of it becomes reality.

From the Czech Republic down to Romania, nations are drawing up plans for what some have called the “biggest project of the century.” They want to build at least a dozen new nuclear units to the tune of almost €130 billion ($139 billion), based on the latest projections gathered by Bloomberg. The first could be operational within a decade.

Trucks and excavators work at the Paks Nuclear Power Plant in Hungary in September 2022. The facility is one of two under construction in the region at the moment.Photographer: Attila Kisbenedek/AFP/Getty Images

Former communist states largely inherited existing plants from the proliferation that came online in the 1970s and 1980s. Those are running on borrowed time, though. Governments have harnessed the political support for new facilities as the countries grapple with the European Union’s push for greener energy and after nations were forced to wean themselves off cheaper Russian gas.

The challenge is that countries don’t possess the engineering knowhow and are struggling to fund the scope of their ambitions, according to officials. Because no private investor will assume the risk of building a new plant alone, governments need to step in. Key will be EU subsidies, yet there will be competition for that money, too.

“Financing is by far the most important issue,” Nuclear Energy Agency economist Jan Horst Keppler told a room full of Eastern European energy executives at a Prague meeting in June. “It’s at the heart of the decision.”

Trying to Turn Nuclear

Source: Bloomberg; World Nuclear Association

Note: The map isn’t showing projects already under construction; Sweden, Netherlands and France, which are not in Eastern Europe, also plan expansion.

The picture in Western Europe, meanwhile, is mixed. Belgium and Spain, for example, plan to phase out nuclear power, though the timeframe has been pushed back because of concern about energy supply since Russia’s invasion of Ukraine.

Others are steadfast. Austria rejected nuclear power in a 1978 referendum. Germany has gone ahead with abandoning it since the government took the decision following the Fukushima disaster in Japan in 2011.

Belgium, France, Finland and Sweden continue to generate at least a third of their power needs from reactors for more than 100 million citizens combined. The newest reactor in the EU — Olkiluoto 3 in Finland — started generating power last year. France’s latest addition will begin producing electricity this summer at its long-delayed Flamanville-3 EPR reactor.

Eastern Europe Seeks to Catch Up in Nuclear Output

Nuclear-generated power output by EU countries in 2022

Source: Eurostat; World Nuclear Association; Bloomberg

Note: Highlighted countries have planned or proposed projects for new nuclear units; Poland and Estonia, which have no existing nuclear units, also want to build plants

While government subsidies to get the new reactors underway will almost certainly get EU approval, their scale is intimidating. Take Poland, whose energy production was long dominated by coal and new nuclear plants would be the country’s first.

The government remains locked in negotiations on how to finance Westinghouse Electric Co. reactors destined for its first plant, whose cost may exceed $30 billion — a sum equivalent to the country’s entire 2023 defense budget, or 3.9% of gross domestic product.

“Nuclear is different from other sources of electricity,” said Marcin Kaminski, the risk manager helping to build Poland’s first reactors at Polskie Elektrownie Jadrowe. “There is a vast need for state involvement.”

Energy pole seen at the area where the construction of a
The site of a planned nuclear power plant near Slajszewo, Poland.Photographer: SOPA Images/LightRocket

Eastern European countries don’t expect to take investment decisions anytime soon. They’re waiting for the EU to authorize aid under its 2028-34 budget cycle, likely to be approved next June. The EU’s green energy plans include nuclear.

Poland could consider a so-called contract for difference agreement, a form of state subsidy used by Electricite de France SA and the UK government for their projects. Romania is creating a special purpose vehicle and looking at combination of green bonds, state loans and contracts for difference, said Vasile Dascalu, finance chief at state-owned Nuclearelectrica.

The Czechs, meanwhile, will decide by the end of August on which company will become the supplier of at least one reactor. The deputy minister of economy and trade, Tomas Ehler, said during the June meeting in Prague that “there’s no competitive supply of financing” and that government loans are likely to cover the 90% of the costs.

The industry contrasts with the state-owned model in China and Russia, which are building the most reactors. European nuclear projects are also notorious for construction delays and ballooning costs. In Slovakia, for example, a new unit at the Mochovce site was delayed by a decade and cost twice as much as the projected €2 billion.

Eastern Europe Plans Almost €130 Billion of Nuclear Spending

New projects have been announced across the region

Source: Latest government estimates

Note: Excludes Hungary because the Paks plant is already under construction. Estimates for Czech Republic and Slovenia are for upper end of proposals.

The region’s first reactor was in Slovakia (then Czechoslovakia) and went into commercial operation in 1972. While neighboring Austria has shunned nuclear power, Slovakia has retained public and political support. There just hasn’t been enough investment, according to Branislav Strycek, the chief executive officer of Slovakia’s biggest utility.

“We got into the crisis because electricity was extremely cheap for 15 years and no one invested in new sources,” he said. “So, when the war suddenly started, we had nothing to switch to because all sources were being used and nothing new was coming in.”

A Nuclear Future Hinges On Resurrecting This Communist Ghost Town
The entrance of the nuclear construction site near Belene, Bulgaria, in 2018. The project was abandoned in favor of two new planned reactors at Kozloduy.Photographer: Oliver Bunic/Bloomberg

At the moment, the only new nuclear power plants within the EU that are being built are the one in Slovakia and one to the south in Hungary, where Russia is financing the construction of Paks II nuclear power plant by Rosatom Corp., the world’s dominant supplier of nuclear fuel.

But while Hungarian Prime Minister Viktor Orban is an ally of Russian President Vladimir Putin, Rosatom has been crossed off from the list of possible future suppliers elsewhere because of the war in Ukraine.

For Strycek in Slovakia, the issues also go beyond money. There’s the tight supply chain and shortage of experts and contractors. France’s program to build new reactors will take up European resources and personnel, for example. “Though you may start” building, said Strycek, “you’re just treading water.”

Source: Bloomberg