EU examines Polish state aid for nuclear power plant

Thursday, 19 December 2024

In November 2022, the then Polish government selected Westinghouse AP1000 reactor technology for construction at the Lubiatowo-Kopalino site in the Choczewo municipality in Pomerania in northern Poland. An agreement setting a plan for the delivery of the plant was signed in May last year by Westinghouse, Bechtel and Polskie Elektrownie Jądrowe (PEJ) - a special-purpose vehicle 100% owned by Poland's State Treasury. The Ministry of Climate and Environment in July issued a decision-in-principle for PEJ to construct the plant. The aim is for Poland's first AP1000 reactor to enter commercial operation in 2033.

The total investment costs of the project are estimated to be about PLN192 billion (USD47 billion).

In September, the Polish government announced its intention to support this investment through: an equity injection of about EUR14 billion (USD14.6 billion) covering 30% of the project's costs; state guarantees covering 100% of debt taken by PEJ to finance the investment project; and a two-way contract for difference (CfD) providing revenue stability over the entire lifetime of the power plant of 60 years.

Under EU state aid rules, the European Commission 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 European Commission said: "At this stage, based on its preliminary assessment, the commission has found that the aid package is necessary and has an incentive effect, as the beneficiary would not carry out the project without the public support. Nevertheless, the commission has doubts at this stage on whether the measure is fully in line with EU State aid rules. For this reason, it has decided to open an in-depth investigation." 

The commission said it would firstly check the "appropriateness and proportionality" of the aid package, noting "it is important to ensure that overall no more aid than what is strictly necessary is ultimately granted". In particular, it will examine whether the 60-year duration of the CfD is justified taking into account the other two measures, and whether there could have been other companies interested in leading the project which might have resulted in a smaller aid amount.

Secondly, the commission will investigate the impact of the aid package on competition in the electricity market and whether this is kept to a minimum. It will investigate whether the design of the two-way CfD sufficiently incentivises the power plant to operate and participate efficiently in the electricity markets, within its technical capacity.

"The public support that Poland plans to grant for its first nuclear power plant needs to be assessed by the commission to make sure that it is in line with state aid rules, which aim to preserve competition within the internal market," said Teresa Ribera, Executive Vice-President for Clean, Just and Competitive Transition. "According to the competition rules, we will also evaluate the impact on the EU's internal energy market. As usual, all interested parties can submit their observations."

PEJ announced last week that French export credit agency Bpifrance Assurance Export and public development bank Sfil have submitted letters of intent regarding financing of the Pomeranian plant for the equivalent of more than PLN15 billion. That announcement came just days after PEJ received a letter of intent from Export Development Canada, for up to CAD2.02 billion (USD1.45 billion) to potentially support the project. Last month, the US International Development Finance Corporation - the USA's development bank - signed a letter of interest with PEJ to provide more than USD980 million in financing for Poland's first nuclear power plant. A similar declaration, for the equivalent of about PLN70 billion, was made earlier by the US Export-Import Bank.