CONSULTING

concluded that when making assumptions on the market price of power in the order of €65/MWh
(which they describe as in the “low end”),
the operational revenues generated from the sale of the power output envisaged on benchmarked
load factor assumptions can be expected to generate sufficient cash flows to cover the operational
costs of running the nuclear plant, as well as contributions towards returning the invested capital. 881
This raises serious questions for the economics of the project as the operational costs are
relatively low for nuclear power plants and the report states that investment cost can only be
partially covered in their scenario, which make up a significant share of the cost of nuclear
electricity. Furthermore, the report has been criticized for taking “outdated and overstated price
expectations” and that under more realistic assumptions the project is “uneconomic in each tested
scenario and would have to be significantly subsidized by Hungarian taxpayers”. 882 The current
market price for power (baseload future markets 2017) in Hungary is around €30-40/MWh. 883
Credit-rating agency Standard & Poor’s, March 2016 confirmed Hungary’s BB+ (“junk”)
commenting:
Downside risks to our base-case fiscal forecast could arise from further state acquisitions, an
expansion of fiscal programs to support a slowing economy, electoral considerations, budgetary
spending on large projects such as the PAKS nuclear power project (...). 884
Romania has one nuclear power plant at Cernavoda, where two Canadian-designed CANDU
reactors began operating in 1996 and 2007. In 2015, they provided 10.7 TWh or 17.3 percent of
the country’s electricity, compared to 20.6 percent in 2009.
Construction started in the 1980s, with the initial intention of building five units. The first two
units were partly funded by the Canadian Export Development Corporation, the second also partly
by Euratom. Over the past decade, numerous foreign firms have been linked to the completion of
the remaining Cernavoda units, including AECL and SNC-Lavalin (Canada), Ansaldo (Italy),
AtomTechnoProm (Russia), CEZ (Czech Republic), Electrabel (Belgium), ENEL (Italy), GDF Suez—
now Engie—(France), Iberdrola (Spain), KHNP (South Korea), RWE (Germany), and Arcelor Mittal
(Luxembourg). 885 In December 2013, Arcelor Mittal and ENEL sold back their shares in the project
to the Romanian state.
The latest attempt involves China General Nuclear Power Group (CGN), which signed a letter of
intent in November 2013 with the Societatea Nationala Nuclearelectrica (SNN) to complete the
projects in 2019 and 2020. In March 2014, it was announced that an extension would be granted
to the letter of intent, which was set to expire on 25 May 2014. 886 In October 2014, SNN and CGN
signed a binding agreement that made the latter the “selected investor”. This was followed in
881 Rothschild& Cie, “Economic analysis for the Paks II nuclear power project, A rational investment case
for Hungarian State resources”, Prepared for the Office of the Hungarian Prime Minister, September 2015.
882 Candole Partners, “NPP Paks II: Economic feasibility, impact on competition and subsidy costs”,
Prepared for Greenpeace, May 2016.
883 PXE, “Price information from the Power Exchange Central Europe”, see http://www.pxe.cz/, accessed
8 June 2016.
884 S&P, “Hungary 'BB+/B' Ratings Affirmed; Outlook Stable”, 18 March 2016.
885 WNA, “Nuclear Power in Romania”, Updated December 2013.
886 Telgraf, “Construction of NPP units 3 and 4, the petty cash”, 22 March 2014.
Mycle Schneider, Antony Froggatt et al. 204 World Nuclear Industry Status Report 2016