Rosatom would have to face competition from the French nuclear specialist Areva and the Japanese-American joint venture Westinghouse. Source: AFP / East News

Under an agreement signed between Russia and Hungary, the Rosatom State Nuclear Energy Corporation will build two new power units at the Paks nuclear power plant, edging out France’s and the U.S.’ nuclear specialists hoping to bid on the lucrative deal.

The agreement was signed by Rosatom CEO Sergey Kiriyenko and Hungarian Minister of National Development Zsuzsanna Nemeth.

Paks is Hungary's only nuclear plant currently in operation. Located 100 kilometers away from Budapest, the facility was built to Soviet blueprints. Its four reactors were put into service in 1982 through 1987. Paks accounts for 42 percent of all electricity generated in Hungary.

The agreement calls for the construction of two new power units at Hungary's only nuclear power plant, along with associated fuel supplies and maintenance services. The respective contracts should be signed within six months. Rosatom says the construction timeline remains undefined, as does the generating power of the future reactors. However, according to Janos Lazar, the Minister of State for the Hungarian Prime Minister's Office, the EU has approved the project to build two 1.2-gigawatt units at Paks. The units, which are expected to be launched before 2023, will be fully owned by Hungary.

The agreement is expected to more than double the Paks plant's power generating capacity, from the current 2 gigawatts to 4.4 gigawatts.

The Russian-Hungarian deal came as a surprise to many: Budapest had promised repeatedly to put the Paks upgrade project up for a tender, in which Rosatom would have to face competition from the French nuclear specialist Areva and the Japanese-American joint venture Westinghouse. Hungary, however, decided to award the contract to Russia, apparently to make the most of the existing infrastructure and personnel expertise at Paks, and to avoid extra costs, said a source with knowledge of the deal.

Russia will provide a 30-year loan towards 80 percent of the project's overall cost of 10 billion to 12 billion euros, Lazar reported. Rosatom's Kiriyenko confirmed that the two countries' finance ministries had agreed the terms of the loan. "The total value has been provisionally put at 10 billion euros, but the actual figure is expected to be lower than that."

Under the agreement, 40 percent of the project work will be done in Hungary, Russian President Vladimir Putin has said. A source close to the project says Hungary can easily secure 30 percent of the work share by merely building the foundation for the two new reactors. The Paks contract may also generate extra work for the Hungarian nuclear equipment manufacturer Ganz EEM, which is a subsidiary of the Russian power engineering company Atomenergomash.

Based on materials from Kommersnt and Interfax