February 26, 2010 9:00 AM

Press Release

MVM Zrt Board of Directors accepts the concept for preparation of capacity expansion

As a result of the work carried out before, a draft concept was prepared by February 2010 with the intent to provide basis for the technical preparations for the capacity expansion of Paks Nuclear Power Plant. This draft concept was approved by the Board of Directors of MVM Zrt (Hungarian Power Companies closed JSC) on 26 February this year. The aim of this concept is to provide a framework for the preparations for the construction of the new power plant units, for the analyses required for the optimum integration of the new units into the existing system, for obtaining all required licenses, and for the work to be carried out to allow the elaboration of invitation to tender. 

As is well known, the Hungarian Parliament granted, with a 95.4% majority, its basic approval to the start of the work to be carried out as preparation for the construction of new unit(s) on the site of Paks Nuclear Power Plant closed JSC.

The background for the decision were that, upon the call of the owner, a project was launched by MVM ZRt on 7 July 2007 with the aim to make a review of actions to be taken to promote the governmental preparatory work pursuant to § 7 (2) of the Act on Atomic Energy.
The scope of actions include the preparation of a feasibility study, the preparation of a preliminary environmental impact report and an assessment of possibilities for the disposal of spent nuclear fuels and radioactive wastes. An assessment of the technical, financial, commercial, legal and social conditions was also included in the expert reports produced to help the decision making. Some 300 engineer-years were required, during a two-year period, for the generation of these expert reports. The actual preparatory work and, as part thereof, the required licensing procedures can commence as soon as the decision has been made.

The technical backgrounds for the proposal was given by a statement that the expansion of Paks Nuclear Power Plant is necessary for guaranteeing the security of the electric energy supply of the country in the long term. This is supported by the arguments below:

• The majority of the old power plants have become obsolete by now they are environment-polluting, and uneconomical. A significant number of them will need to be replaced during the next decade.
• The domestic demand for electric power is expected to increase in the future.
• The possibilities for import may become limited.
• The improvement of energy efficiency and the more intensive use of renewable energy sources are feasible, but this will not be enough to replace the conventional power plants or reduce, in merit, carbon dioxide emission.
• The Nuclear power plant, being the most economical base load power plant, produces electric power at a reasonable price, and provides a secure supply of electric energy. Nuclear fuel can be purchased from diverse sources for a calculable price and can be safely stored for long. The new units can be integrated into the existing system
• Competitive electric power supply can be provided in the long term with nuclear power plants only.
• It is demonstrated by the results of public opinion polls that the overwhelming majority of the public is supportive of the construction of the new units.
• Among the conventional power plants, nuclear power plants produce environment-saving energy without emitting green house gases. The commitment of Hungary to reduce CO2 emission can be fulfilled only with the use of nuclear energy even with improved energy efficiency and more intensive utilization of renewable energy sources.

Basic principles of the capacity expansion in the light of the analyses undertaken:

• Among the potential sites, the site of Paks Nuclear Power Plant provides the cheapest solution for the construction of the new units with an expected service life of 60 years. No national aid will be required for the construction of these units.
• The development objectives formulated in the business strategy of MVM for guaranteeing the security of domestic supply can be well scheduled both in time and with regard to financing. MVM Group has prepared for financing the investment projects basically with the use of own funds, by mobilization of the available resources. 

After the parliament’s decision, professional work started, which is expected to provide answers to several questions, such as financing and investment construction, technical parameters, competitiveness, integration into the existing system, environmental impacts, unit type and the potential vendor. These are all required to ensure that a correct decision is made, because this decision will have a several-decade long effect on the energy supply of the country and, at the same time, on the environmental conditions. A professional decision, with such a long term influence on the future, can only be made with due consideration of the set of conditions expected for the long term, rather than those existing at present. 

For the above objectives, MVM ZRt and Paks Nuclear Power Plant closed JSC have launched a project on 8 July 2009, which is called Lévai Project. The scope of responsibilities of the project include all items of work until issuing the invitation to tenders and the evaluation work, which is expected to occur in late 2012.

As a result of the work carried out within the framework of this project, a draft concept was prepared by February 2010 with the intent to provide background for the technical preparation of the capacity of Paks Nuclear Power Plant, and this concept was accepted on 26 February by the BOD of MVM ZRt.

The aim of this concept is to provide a framework for the preparations for the construction of the new power plant units, for obtaining all required licenses, and to provide a summary of the construction phases. Thus, the concept does not include any decision, but rather systemizes the work to be carried out during the next period, and the basic principles to be followed during the completion of this work. 
The most important strategic issues affecting the preparation and implementation, which are studied in the concept, are as follows:

• the anticipated ownership structure for the new units and the establishment of an appropriate project company,
• specification of an appropriate unit size and type, which can be economically integrated into the regional electric power system, and complies with the technical and safety requirements of the EU,
• preparation and completion of the licensing process and obtaining social acceptance,
• the circle of potential suppliers for the implementation, the requirements specified for them, and the selection principles,
• financial feasibility of the project and the practical way of financing,
• preparation of the region and the national economy for the implementation of the project.

Based on the preliminary assessments, the following provisions are set forth in the concept:
• The project shall be implemented in a manner to ensure that the facility remain in majority state property (MVM) even after financing. The financing shall be prepared in a way to comply with this requirement. 
• It is practicable to establish the project company with the soon involvement of the future minority stakeholders, by integrating the capacities of the MVM Group and the nuclear know-how Paks Nuclear Power Plant, while maintaining operational safety and the high level of operation of the existing items of equipment.
• It is demonstrated by the preliminary assessments that a power plant unit of the class 1000-1600 MW can be integrated into the Hungarian electric power system, the required contributory developments of the grid are feasible and, at the same time, further detailed reviews will also be required. In line with the regulatory licensing process, these will need to be completed as soon as possible - within 2 years. Hungarian experience and competence, and the European regulatory approvals for the equipment type shall be considered in the selection of the type of unit to ensure the best efficiency of the licensing, implementation and future operation.
• The regulations that provide background for the licensing, the responsibilities and the co-operation of the authorities involved shall be harmonised, as soon as possible, within the already operating framework. The siting, site licensing and the environmental licensing processes, which are independent of the selected type of unit and are preconditions for the construction, shall be started immediately to provide the conditions for obtaining public acceptance, for compliance with the requirements specified in the legal regulations, and for meeting the completion dates and to increase the value of the site.
• The work above shall be carried out in a way as to ensure that the invitation to tender can be issued within 2 years. The delivery dates shall be specified in due consideration of the optimum date of commissioning. Compensation and the maximum involvement of local suppliers and contractors shall be enforced in the process of selection of suppliers. This may help the Hungarian industry prepare and develop and may strengthen political and social support.
• The financing should be provided, first of all, by the owners of the project company in the framework of a corporate financing scheme, but the provision of maximum supplementary sources, by guaranteeing export loans and by buying drawing right, shall be pursued during the preparation for financing.
• For maintaining the financing capacities of MVM ZRt, the returns resulting from the present operations shall be reinvested to the highest degree.
• The provision of professional and human resource backgrounds and, in particular, the improvement of professional training and university education for special qualifications are a precondition for the successful implementation of the project. The start of a special program would need to be considered to promote the achievement of this objective.
• To ensure the transparency of the project, the financial, legal, and other advisors and consultants shall be selected with the use of a transparent procedure.
• The operation of the existing units of Paks Nuclear Power Plant, and the preparations and the implementation of the service life extension work shall be continued at its present high level.

The capacity expansion in figures
Reactor type:                    Pressurised water reactor (PWR)
Unit size:                         1000-1600 MW depending on the manufacturer
Potential reactor types:      AES-2006 (Russian)
                                       AP-1000 (American)
                                       EPR (French-German)
                                       ATMEA (French-German-Japanese)
Specific construction cost:   2000-3000 Euro/kW
Commissioning:                After 2020 (Unit I)
                                       After 2025 (Unit II)
Planned service life:           60 years

Budapest, 26 February 2010


        Ágoston Tringer                                    István Mittler
    Communications Director                   Communications Director
Hungarian Power Companies                  Paks Nuclear Power Plant