EU regulators to probe Hungarian funding for nuclear reactors

BRUSSELS/BUDAPEST (Reuters) - European Union regulators will investigate whether Hungary's plan to finance the construction of two new nuclear reactors breaches the bloc's state aid rules, four days after it took the country to court over the tender for the project. Hungary wants to expand the plant near the town of Paks and last year picked Russian state-owned nuclear company Rosatom to build the reactors, partly funded by a favourably priced 10-billion-euro (7 billion pound) Russian loan. The European Commission said it was concerned the Hungarian investment may not be compatible with market pricing. It opened an in-depth investigation on Monday to look into the business case for the construction, operation and decommissioning of the two reactors. "Given the size and importance of the Paks project, the Commission has to carefully assess whether Hungary's investment is indeed on market terms or whether it involves state aid. This requires a complex analysis," European Competition Commissioner Margrethe Vestager said. Prime Minister Viktor Orban's government said it was convinced the deal would stand up to EU scrutiny, in a statement released to state news agency MTI. "The Hungarian government is firmly of the view that the Paks II project does not involve state aid," it said. "Any rational investor would implement the investment because the expected returns of the project are higher than the cost of capital invested." The small opposition LMP party has called on the government to halt preparations for the project until European regulators complete their enquiries, according to comments by one of the green-liberal party's lawmakers, Bernadett Szel, quoted by MTI. Last week, the EU executive sued Hungary over its contract with Rosatom, saying this may violate the bloc's procurement rules ensuring all interested parties get a fair chance to take part in tenders. Orban however told state radio last Friday that the project would go ahead despite the Commission's legal action. "It is Hungary's basic interest to operate, sustain and potentially expand the nuclear power plant, or else the price of electricity will skyrocket. Paks equals cheap electricity, so the Hungarian government will execute the investment," he said. (Reporting by Foo Yun Chee and Barbara Lewis; Additional reporting by Marton Dunai and Gergely Szakacs in Budapest; Editing by Mark Potter and Laurence Frost)