Paks II and Hanhikivi-1: financing concerns András Perger Greenpeace Risks and Responsibilities in EU Nuclear Projects June , Brussels

Study on Paks II ●Commissioned by Greenpeace ●Prepared by Candole Partners ●Economic feasibility assessment, based on project finance discounted cash- flow model ●Impact on market concentration: assessment follows guidelines of EU and US competition authorities ●Forecasts are based on World Energy Outlook (2015) by International Energy Agency ●Analysis used the same very optimistic assumptions as governemnt’s analysis does, except wholesale prices and load factor

Electricity price forecasts

Model inputs

Results ●The project NPV is negative across all analysed scenarios ●The project would break even only if Hungarian government provided subsidy to the project equal at least to EUR 85/MWh ●Paks II will not generate profit, and is not economically viable under any scenarios analysed ●On top of the State investment, the project would require subsidies to cover losses: annual amount is EUR ~216 M in base case (EUR 46 M to EUR 580 M in the high and low scenarios) ●The amount of subsidy is significantly higher than that needed to support alternative generation sources

Results ●Paks II would also have significant negative impact on market concentration ●Positions of state-controlled companies in power generation sector would increase significantly compared to non-nuclear scenarios ●Paks II will likely have a crowding-out effect on the alternatives to nuclear power generation with lower costs than Paks II

Further concerns ●Costs ●WACC ●Load factor ●Construction time ●Currency risks ●Turnkey? ●VEB: near bankrupt ●Financing from other sources? - Paks II still won’t be economically viable

Greenpeace’s activities so far First submission to DG COMP, DG GROWTH and DG ENER in April 2014, concerning: 1.Violation of State aid rules 2.Violation of public procurement rules 3.Violation of tendering obligation for incentives to the construction of new generation capacity (Article 8 of Directive 72/2009/EC) Second submission in November 2015 DG COMP and DG GROWTH have opened State aid investigation and infringement procedure DG ENER has failed to take position on the issue: can Member States re- monopolise markets?

Fennovoima - Hanhikivi-1 ●Fennovoima Ltd: 66% Finnish companies, 34% Rosatom ●Nord Pool prices are low ●Price of electricity of Hanhikivi is expected to be higher than market price ●Rosatom promise: first 12 years the maximum price of electricity produced is 50€/MWh ●Mankala principle: companies are both allowed and obligated to buy the electricity on cost price principle - owners will suffer economically if the NPP ever comes online

Lack of funding ●Hanhikivi-1 price estimate: EUR billion ●Owners pay 1.7 billion ●Rest to be covered by loans organized by Rosatom ●Russian National Welfare Fund promised EUR 2.4 billion loan ●2.4 – 2.9 billion missing ●Welfare fund could be empty by 2019 ●VEB supposed to fund Paks II needs bailout ●With the current economic situation of Russia it is hard to find funding for a project that does not seem to be economically viable

Thank you for your attention! András Perger

Load factor Dukovany Bohunice Mochovce Paks Temelín Kozloduy