Paks expansion project gets contract boost

09 December 2014

UPDATED This article has been updated to include details of the agreements, according to statements issued by Rosatom on 9 December and the government commissioner responsible for the Paks II project on 11 December.

The project company set up to oversee the expansion of the Paks nuclear power plant in Hungary today signed three "implementation agreements" with Russia's Nizhny Novgorod Engineering Company Atomenergoproekt for two new 1200 MWe nuclear power reactors.

The contracts were signed by Sandor Nagy, the CEO of MVM Paks Nuclear Power Plant Ltd, and Vladimir Savushkin, senior vice president and head of NIAEP's Moscow branch.

MVM Paks Nuclear Power Plant Ltd is a subsidiary of state-owned Magyar Villamos Művek (MVM), while Nizhny Novgorod Engineering Company Atomenergoproekt is a subsidiary of Russian state nuclear corporation Rosatom.

According to a statement by the Hungarian prime minister's office, the agreements formalize the design, procurement and construction parameters for the new units, conditions related to their operation and maintenance support, and details regarding fuel supply and the handling and storage of used nuclear fuel.

"The Hungarian state has entered into a favourable agreement keeping within the financing resources available for the project," it said.

Paks is the only operating nuclear power plant in Hungary. The 2 GWe plant accounts for 42% of electricity generated in the country. A Soviet-era nuclear power plant, Paks has four pressurized water reactors of the VVER-440 type, which started up between 1982 and 1987. Though originally 440 MWe gross, the units have been upgraded and will be modified further to give 500-510 MWe gross.

In early 2014, Hungary and Russia signed a cooperation agreement which included the construction of two new VVER reactors of up to 1200 MWe each at Paks. The first new unit is to be commissioned in 2023, with the second following about two years later.

MVM said in October that MVM Paks II Atomerőmű Fejlesztő would be sold to the state. Hungarian National Asset Management Company (MNV) will buy the project company, MVM Paks II Atomerőmű Fejlesztő, for more than HUF 10.2 billion ($41.9 million) MVM said. Consultants Deloitte and Ernst and Young calculated the purchase price. MVM Paks II was established in 2012 with a start-up capital of HUF 9 billion ($37 million).


Rosatom said on 9 December the first document is an engineering, procurement, construction contract for two new power units, which sets forth targets for the next 12 years. The second document regulates the terms and conditions of service support for the would-be power units. The third document is about the fuel supply terms.

"These are extremely important contracts, which have been prepared by the parties over the last five months," Attila Aszodi, the government commissioner for the Paks II project, said in the Rosatom statement. Aszodi stressed that the power units will remain the property of the Hungarian state, and the total investment will not exceed €12.5 billion.

In 2009 the Hungarian parliament consented in principle to preparations for the construction of a new reactor unit (or units) on the current site in Paks (with 330 votes in favour, 6 against and 10 abstentions). The National Energy Strategy adopted in October 2011 also highlighted the importance of nuclear energy when it identified the three main pillars of supply for the domestic electricity system as coal, renewables and nuclear energy, Aszodi said in a separate statement issued on 11 December.

The three agreements signed on 9 December detail the key conditions of the Paks II project, on the basis of the Hungarian-Russian intergovernmental agreement of 14 January and the Hungarian-Russian loan agreement of 1 April.

According to the loan agreement – ratified in the Hungarian parliament on 23 June (with 110 votes in favour, 29 against and 19 abstentions) - the Russian contractual party will offer credit worth up to €10 billion, Aszodi said. Representing 80% of the total project budget, this will be "offered at a very favourable interest rate, and will be supplemented by the Hungarian Party’' capital contribution". Thus €12.5 billion will be made available for works, services and equipment acquisition related to the engineering, construction and commissioning of units 5 and 6 at Paks nuclear power plant, he said.

The signing of the three implementation agreements is the "culmination of extensive and thorough negotiations" involving specialists from Rosatom companies, the Hungarian Prime Minister's Office and MVM Paks II. Zrt, Aszodi said. The Hungarian contractual party has devoted about 100,000 working hours to the negotiation and preparation process for the implementation agreements. The Hungarian party has at all times kept the European Commission informed of its negotiations with its Russian counterpart, and will continue to do so in the future, he said.

Under the so-called EPC agreement for the engineering, procurement and construction of the new reactor units, the Russian contractual party shall build a turn-key power plant in Paks, the operational life of which is designed to be 60 years. Following the agreement's entry into force, the Russian contractor will start to design the new units in accordance with site specific conditions and the technical specifications contained in the agreement.

"In the course of this, the main emphasis must be placed on safety, but another important consideration is that the new units should operate with the lowest possible generation costs," Aszodi said. At the same time, the agreement also envisages that the parties will "make their best efforts" to reach 40% localization level during construction. According to guarantees in the contract, both parties "have a shared interest" in adhering to the project timetable. The agreement contains the necessary guarantees, he said.

The operation and maintenance support contract "specifies the conditions of assistance" for operation of the completed units and future maintenance tasks. Future operation and maintenance is planned to be carried out by Hungarian workers, and the operator of the new units will be the wholly state-owned Paks nuclear power plant.

The agreement detailing fuel supply and the handling of used fuel states that Hungary will buy nuclear fuel from Russia for twenty years; the price of this fuel is to be determined using a formula agreed in advance by the parties. The fuel price calculation is based on the spot market price of uranium, enrichment and assembling the fuel, where the Russian party has guaranteed a discount to the owner of the plant, in light of the agreement’s timeframe. The parties also agreed that used fuel can be stored in Russia for 20 years or reprocessed by them before being returned to Hungary.

"The acquisition of several permits is needed before construction work starts in 2018, and specialists from MVM Paks II. Zrt. are working on this continuously," Aszodi said.

The Hungarian Atomic Energy Authority granted the site investigation and evaluation licence in November 2014, and the environmental licensing process is ongoing at present. Submission of the Environmental Impact Assessment will take place this year. This will be followed, as part of the environmental licensing procedure, by Hungarian public hearings and, in line with the Espoo Convention, other countries registered in advance will also participate in the process.

The two new nuclear reactor units are scheduled to start commercial operation from 2025 to 2026. Repayment of the loan provided by the Russian party will start after commissioning is complete (but no later than 15 March 2026), and this process will run for 21 years, Aszodi said.

The Hungarian and Russian parties continue to provide full information to the public, naturally taking into account the protection of commercial interests, he said.

Russia and Hungary's nuclear regulators yesterday signed an agreement to cooperate in nuclear energy and nuclear safety. The agreement is an updated version of a similar document Rostechnadzor signed with the Hungarian Atomic Energy Authority in 2001.

Researched and written
by World Nuclear News