November 19, 2015 / 3:08 PM / 4 years ago

UPDATE 3-EU starts legal action over Hungary nuclear project

* Hungary chose Rosatom to expand Paks nuclear plant

* Hungary says will press on with project (Adds Rosatom statement in paragraph 9)

By Barbara Lewis and Gergely Szakacs

BRUSSELS/BUDAPEST, Nov 19 (Reuters) - European Union regulators started legal action against Hungary on Thursday over a contract it awarded to Russia’s Rosatom to expand the Paks nuclear power plant, but Hungary said it would press ahead with its plans.

The EU’s executive Commission has been holding talks to try to resolve differences after Hungary chose Rosatom last year to build two new nuclear reactors, partly financed by a favourably priced Russian loan worth 10 billion euros ($10.7 billion).

“The Commission raised concerns about the compatibility with the EU public procurement rules,” Commission spokeswoman Lucia Caudet told reporters following the announcement of formal infringement proceedings.

She said Hungary had two months to respond, but did not confirm a Hungarian press report that the Commission had asked Hungary to suspend preparations for the Paks project.

The Hungarian government has said it respected all relevant laws when it awarded the contract for the construction of two new reactors and the refurbishment of two other reactors.

Prime Minister Viktor Orban’s chief of staff, Janos Lazar, told a news conference that Hungary would draft a detailed response to the Commission, but would press on with the project anyway.

“Regarding the expansion and maintenance of capacity of Paks, everything will proceed according to the government’s intentions,” Lazar said.

Lazar said Hungary had first notified the Commission about Hungary’s plans to enter a bilateral nuclear deal with Russia in November 2013. He said the then Commission president, Jose Manuel Barroso, did not raise any concerns “of principle” about the matter.

Russia’s state-owned nuclear firm Rosatom said in an emailed statement that it agreed fully with Lazar’s assessment and would fulfil all its obligations outlined in the contracts between Russia and Hungary.

COMMERCIAL DEBATE

Hungary has been in continuous contact with the Commission about the plans ever since, Lazar said, adding that EU regulators have already approved the fuel supply and technical parameters of the project before lodging the new challenge.

“This debate has not raised its head by accident today,” Lazar said. “This is not a political debate but a commercial debate about whether Hungary has the right to enter into a 12 billion euro commercial or business deal with a non-EU state.”

He said the debate would revolve around how EU-based companies can access the expansion deal, which will see two new 1,200-megawatt blocks at the Paks plant starting commercial operation in 2025 and 2026.

Lazar said no supplier other than Russia’s Rosatom would have met the government’s demand of keeping the plant in Hungarian state ownership “permanently”. He said no investors were interested in the deal under that arrangement, but did not name any companies.

Lengthy infringement procedures can lead to action in the European Union’s highest courts in Luxembourg which have the power to hand out fines.

Hungary is ready to defend its position in court if needed, Lazar said.

Hungary’s right-wing government has clashed with EU policy-makers on issues including migrants and press freedom as well as energy.

Apart from the alleged breach of public procurement rules, the Commission also has concerns the Paks plant would be overly dependent on Russia. ($1 = 0.9341 euros) (Additional reporting by Julia Fioretti in Brussels and Marton Dunai in Budapest; editing by Adrian Croft)

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