The Commission will in particular assess whether a private investor would have financed the project on similar terms or whether Hungary's investment constitutes state aid. If the project is found to involve state aid, the Commission will investigate whether as planned it would lead to distortions of competition in particular on the Hungarian energy market.
Margrethe Vestager, Commissioner in charge of competition policy, stated: "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. I think it is important that stakeholders can also submit their views."
Under the EU Treaty Member States are free to determine their energy mix. The Commission's role is to ensure that when public funds are used to support companies, this is done in line with EU state aid rules, which aim to preserve competition in the Single Market.
In May 2015, the Hungarian authorities notified plans to invest in the construction of two nuclear reactors at the Paks site. At this stage, the Commission has concerns that this investment may not be on market terms, as Hungary argues. The Commission will therefore assess in-depth the business case for the construction, operation and decommissioning of the two reactors on the basis of the agreed transaction terms and in view of the EU's energy market projections.
If its assessment shows that state aid is involved, the Commission would in particular have to make sure that the project does not lead to distortions of competition on the Hungarian energy market or other undue distortions in the Single Market. To be found compatible with EU rules, an aid measure also needs to be proportionate to the objectives pursued and address a genuine market failure, meaning that the project could not be realised by market forces alone, without state support. Finally, the investment by Hungary must be adequately remunerated.
The opening of an in-depth inquiry gives interested third parties an opportunity to comment on the measure. It does not prejudge the outcome of the investigation.
Public interventions in favour of companies can be considered free of state aid within the meaning of EU rules when they are made on terms that a private operator would have accepted under market conditions (the market economy investor principle). If this principle is not respected, the public interventions involve State aid within the meaning of Article 107 of the Treaty on the Functioning of the European Union, because they confer an economic advantage on the beneficiary that its competitors do not have. The Commission then proceeds to assess whether such aid can be found compatible with the common EU rules that allow certain categories of aid.
Separately, the Commission last week decided to launch an infringement procedure against Hungary as regards the Paks II nuclear power plant project, because it has concerns regarding the compatibility of the project with EU public procurement rules. The Hungarian authorities have two months to respond to the arguments put forward by the Commission.
The non-confidential version of the decision will be made available under the case number SA.38454 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.