EC examines Czech state aid for new Dukovany plant

Friday, 1 July 2022

The Czech government says the new plant, which is scheduled to start operating in 2036, should increase the security of electricity supply for the Czech Republic and for neighbouring countries, helping the decarbonisation of the energy sector and diversifying the Czech energy mix.

In March, the Czech government notified the EC of its plan to support the construction and operation of the new plant at Dukovany. It plans to support the project through three measures: firstly, a low-interest repayable state loan expected to cover 100% of the construction costs (approximately EUR7.5 billion (USD7.8 billion)); secondly, a power purchase agreement for the lifetime of the project; and thirdly, a mechanism to protect utility ČEZ Group and the State in case certain unforeseen events occur (e.g. if Czech law changes and makes the realisation of the project impossible). The contribution of ČEZ to the project will be about EUR180 million.

"At this stage, based on its preliminary assessment, the Commission has found the project necessary and considers that the aid facilitates the development of an economic activity," the EC said. "Nevertheless, there are doubts on whether the measure is fully in line with EU state aid rules."

Under EU state aid rules, the EC analyses the compatibility of the measure under Article 107(3)(c) of the Treaty on the Functioning of the European Union, which enables Member States to support the development of certain economic activities under certain conditions. The support should remain necessary and proportionate and not adversely affect trading conditions to an extent contrary to the common interest.

The Commission said it will investigate the "appropriateness and proportionality of the three components of the measure". It noted, "Given there are three different aid channels that together can limit the risk for the beneficiary, it is important to ensure that overall no more aid than what is necessary is ultimately granted. In particular, whether the duration of the power purchase agreement is justified taking into account the other two measures."

It also said it would examine the impact of the measures on competition in the market and whether this is kept to the minimum. In particular, the Commission said it has doubts on whether there could have been other companies interested in acting as project promoter instead of ČEZ. It also questioned the market impact of the decision to set up a specific state-owned company for the resale of the nuclear electricity, "in particular considering that it is unclear if this future entity will aim at maximising its profit".

ČEZ launched a tender for the new plant in March after the Czech Republic's Ministry of Industry and Trade officially gave its approval on completion of the safety assessment of the three approved bidders - EDF, Westinghouse and Korea Hydro & Nuclear Power.

The bidders have until November to submit their initial bids, with ČEZ expecting to have evaluated the bids and submitted its report for state approval in time for finalisation of contracts in 2024.

In July 2020 the Czech government signed a framework agreement on the construction of the new unit with national power company ČEZ and project company Elektrárna Dukovany II. That agreement aimed for ČEZ to hold a tender for the reactor supplier, negotiate a contract and receive all the required licences by 2024, so that the unit can be put into operation in 2036.