Planned Paks II nuclear power plant will go bankrupt without state aid - A business economics analysis

In the first twenty years of operation, the project company will need yearly 330 million EUR capital injections from public money to keep the project going, and pay-off is feasible only if wholesale power prices increase high above European expectations - that is the key finding of Energiaklub’s new study.


The key question of our analysis was whether the Paks-2 nuclear power plant company will be capable of independent operation in the economic sense, or its survival will depend on further additional aid by the owner, the central budget, even after its commissioning.

We examined from a corporate perspective in what way the already disclosed financing terms and conditions will affect the everyday operation of the power plant company. In other words, we were looking for an answer to the question whether the expected financial commitment of the owner (in our case, due to State ownership, of the taxpayers) will end once the EUR 2.5 billion own contribution (approximately HUF 765 billion at today’s rates) specified by international contract is paid out to realize the investment in the period from 2015 to 2025.

According to the findings, unless the wholesale power prices show permanent real price growth, the project will not pay off; its net present value is expected at EUR -5.0 to  - 6.3 billion (depending on the utilization rate).

Provided that the wholesale power prices will develop according to the forecast of the European Commission (in our model, they increase in real value by 25% until 2026), the ROI will still be negative at any of the capacity utilization rates (EUR -2.7 and -4.5 billion), and the owner will have to keep providing significant (EUR 6-10.5 billion) additional funding to keep the facility operational.

In this case, repeated capital injections will be needed year on year until the mid-2040s to keep the project going. In the first twenty years of operation, the owner (the Hungarian taxpayers) will have to help out the nuclear power station by approx. EUR 330 million per annum on average.

This topic is made particularly timely by the recent decision of the European Commission to authorize State aid to the British Hinkley Point C nuclear power plant. The Hungarian government, however, still insists that no State aid will be needed for Paks-2. According to their position, “no State capital support is needed to ensure the conditions of payoff.”