- Orban government signed €12.5 billion Rosatom deal in 2014
- Paks nuclear plant expansion has faced delays over past decade
Hungary is moving toward allowing an increase in the cost of a contract with Russia to expand its sole nuclear power station a decade after the deal was signed.
The European Union nation agreed to a €12.5 billion ($13.2 billion) accord with Russia’s Rosatom Corp. in 2014 for the delivery of two new units to its existing plant at Paks, about an hour’s drive south of Budapest. The expansion has been plagued by delays, including over permits, the Covid-19 pandemic and Western sanctions imposed on Russia after Moscow’s invasion of Ukraine.
Prime Minister Viktor Orban’s government this week filed a bill that allows the Hungarian state project company managing the expansion to agree to an increase in the contractual price to stave off further delays. It cites the time elapsed since the signing of the deal, as well as other factors that may have contributed to higher costs for Rosatom.
“The investment contract was agreed more than 10 years ago and in the past 10 years everything has changed,” the Foreign Ministry in Budapest said Wednesday in a statement to Bloomberg. It called the planned changes an “adjustment to a new reality.”
The ministry didn’t say when negotiations with Rosatom might conclude, what the new price would be or how the cash-strapped government would finance it. Rosatom didn’t respond to a Bloomberg request for comment.
Orban has doubled down on economic links with Moscow, even as others in the EU moved to wean themselves off Russian energy following the invasion of Ukraine. Hungary has carved out an exemption from the bloc’s oil sanctions on Russia and has expanded an agreement for imports of Russian gas.
Even indexing for inflation under the nuclear deal could lead to a substantial increase in costs for Hungary, which in the past two years recorded average price-growth of just below 15% and 18%, respectively. Wages have also more than doubled in the elapsed period.
Hungary, which is targeting the early 2030s for the new blocks to come online, has in the meantime moved to extend the lifespan of the existing four units by 20 years to bridge the delays. Paks accounts for about 40% of the nation’s electricity consumption.
Power demand is projected to rise sharply due to Orban’s efforts to make Hungary a major hub for electric-vehicle production. Some of the world’s largest battery producers have set up shop in the country in recent years, adding pressure on the government to expand energy capacities, including its nuclear plant.
Source: Bloomberg
