A cooperation agreement was concluded between Hungary and Russia on the peaceful use of nuclear power yesterday, within the framework of which Russia will be involved in maintaining the current capacity of the Paks Nuclear Power Plant by providing a loan for the construction of two new blocks to replace the plant's outdated ones.

Regarding the agreement, Minister for National Economy Mihály Varga said the Russian side will provide a loan of 10 billion euros for the construction, and once the investment is completed, Hungary will pay the loan off over 21 years. Such a financial construction does not normally exist in the market, the Minister said, as repayment usually takes 10 to 15 years. Russia is covering 80 percent of the building costs, whereas Hungary is financing the rest.

Minister Varga emphasised that Hungarian companies will benefit from 40 percent of the whole financial framework –around 3-4 billion euros– and at least one billion euros will flow into the central budget in the form of tax and other contributions. The two new blocks would guarantee safe and cheap electricity, he stressed.

Regarding the financial agreement, negotiations have yet to be finalised, the Minister said, adding that the Government is striving to achieve the most beneficial deal possible.

According to current forecasts, several tenths of a percent could be added to the Hungarian GDP as a result of the project, in addition to which employment will also grow and it will be possible to offer a more competitive price for electricity.

Minister for Foreign Affairs János Martonyi held talks in London with his British counterpart William Hague, during which the use of nuclear energy was among the topics of discussion. The parties agreed that both countries have a need for nuclear energy and a sustainable and reliable energy supply. They also share the goal of improving competitiveness.

As far as analyst opinions are concerned, Takarékbank's Gergely Suppán welcomed the deal and expects the construction, worth an estimated HUF 4,000-5,000 billion, to significantly boost investment and consequently Hungary's GDP growth. He said the loan provided by Russia would ensure a stable financial background for the project. He also suggested that if the loan is offered for a 30-year term with an interest rate below market rates as reported, it will ensure a good return on the investment.

He also regards it as positive that by maintaining the capacity of the power plant, the country’s energy dependence will decrease, making less gas imports necessary, an advantage that cannot be ignored in view of the current high price of natural gas.

(Prime Minister’s Office)