Dec 20, 2024

The EU is reviewing Poland's financial support for its nuclear power plant.

The European Commission has initiated an inquiry to determine if the proposed public funding for Poland's inaugural nuclear power plant aligns with EU regulations regarding state aid.

In November 2022, the Polish government, at that time, opted for Westinghouse AP1000 reactor technology to be constructed at the Lubiatowo-Kopalino site in the Choczewo municipality in northern Poland. In May of the previous year, an agreement outlining the delivery plan for the plant was signed by Westinghouse, Bechtel, and Polskie Elektrownie Jądrowe (PEJ), a special-purpose entity entirely owned by Poland's State Treasury. In July, the Ministry of Climate and Environment granted a decision-in-principle for PEJ to build the plant, with the objective of having Poland's first AP1000 reactor operational commercially by 2033.

The overall estimated investment for the project is approximately PLN192 billion (USD47 billion).

In September, the Polish government declared its plan to support this investment via: an equity infusion of around EUR14 billion (USD14.6 billion) representing 30% of the project’s costs; state guarantees covering 100% of the debt incurred by PEJ for financing the investment; and a two-way contract for difference (CfD) ensuring revenue stability throughout the plant's 60-year lifespan.

Following EU state aid regulations, the European Commission assesses the compatibility of the support under Article 107(3)(c) of the Treaty on the Functioning of the European Union, which permits Member States to assist the growth of specific economic activities under defined conditions. This support must be necessary and proportionate and should not negatively influence trading conditions to a degree that conflicts with the common interest.

The European Commission stated, "At this stage, based on its initial assessment, the commission has concluded that the aid package is necessary and effectively incentivizes, as the beneficiary would not proceed with the project without public support. Nonetheless, the commission has concerns at this stage regarding whether the measure fully complies with EU State aid regulations. Therefore, it has chosen to launch a comprehensive investigation."

The commission indicated that it would first evaluate the "appropriateness and proportionality" of the aid package, emphasizing that "it is crucial to ensure that no more aid than strictly necessary is granted." It will particularly scrutinize if the 60-year duration of the CfD is warranted considering the other two measures, and whether other firms may have been interested in leading the project that could have resulted in a lower aid package.

Secondly, the commission will analyze the impact of the aid package on competition within the electricity market and whether this impact is minimized. It will look into whether the design of the two-way CfD sufficiently motivates the power plant to function and engage effectively in the electricity markets, within its technical capacity.

"The public support that Poland intends to provide for its first nuclear power plant needs to be evaluated by the commission to ensure compliance with state aid rules, which aim to maintain competition within the internal market," stated Teresa Ribera, Executive Vice-President for Clean, Just and Competitive Transition. "In accordance with the competition regulations, we will also assess the influence on the EU’s internal energy market. As is customary, all interested parties may submit their views."

PEJ announced last week that the French export credit agency Bpifrance Assurance Export and the public development bank Sfil have expressed their intent to finance the Pomeranian plant with amounts exceeding PLN15 billion. This announcement followed shortly after PEJ received a letter of intent from Export Development Canada, offering up to CAD2.02 billion (USD1.45 billion) to potentially support the project. Last month, the U.S. International Development Finance Corporation signed a letter of interest with PEJ to provide over USD980 million in financing for Poland's first nuclear power plant. Earlier, a similar declaration of support, amounting to about PLN70 billion, was made by the U.S. Export-Import Bank.