Hungary's Paks nuclear power plant is already covering about 40 per cent of the country's electricity needs

EU queries Hungary's nuclear power expansion plans

Hungary’s plans to expand its nuclear power plant near the town of Paks have come into question by EU regulators who believe it may breach rules around state aid.

Last year, the country announced that it had appointed Russia’s nuclear power company Rosatom to expand its only nuclear power plant and double its capacity.

The project is set to be funded by a favourably priced €10bn (£7bn) Russian loan, but the European Commission (EC) said it was concerned the Hungarian investment may not be compatible with market pricing.

The EC has opened an in-depth investigation 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.

In a statement released to state news agency MTI, Hungarian Prime Minister Viktor Orban's government said it was convinced the deal would stand up to EU scrutiny.

"The Hungarian government is firmly of the view that the Paks II project does not involve state aid," the statement read. "Any rational investor would implement the investment because the expected returns of the project are higher than the cost of capital invested."

The EU executive recently sued Hungary over its contract with Rosatom, saying that the tender process was not fair and did not conform to the bloc's procurement rules that ensure all interested parties get a fair chance to take part.

The small opposition LMP party has called on the government to halt preparations for the project until European regulators complete their enquiries.

Orban said it was in Hungary's 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.

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