By Gergely Szakacs and Marek Strzelecki
BUDAPEST/WARSAW, Oct 21 (Reuters) - Hungary is considering replacing Russia's Rosatom as the main contractor in the expansion of its Paks nuclear power plant and has started sounding out alternative suppliers as part of a review of the project, two people said.
The project, awarded by Viktor Orban to Rosatom without a tender in 2014, is politically sensitive and extremely costly. Adding to the uncertainties, in August a drought led to a near shutdown of the plant's
existing reactors.
The expansion of Paks is Rosatom's most prominent nuclear project in the European Union, after Finland cancelled the contract with the Russian firm in May 2022. The parties have since been locked in legal disputes.
Under Orban, Hungary opposed any sanctions on Russian nuclear energy.
DECISION EXPECTED BY EARLY NEXT YEAR
The cabinet of Prime Minister Peter Magyar, who won a landslide election victory in April, is expected to make a final decision about the Paks expansion later this year or early next year.
The project, originally estimated to cost €12.5 billion, had cost Hungary more than €2 billion ($2.24 billion) by the time the first concrete was poured in February.
A Hungarian government spokeswoman did not immediately respond to a Reuters request for comment on Wednesday.
Rosatom said it continued to implement the project in line with the schedule agreed with the customer. In parallel, production of the main equipment for the future power units is underway, it said.
"We have received no formal notification from the customer of any intention to terminate the contract, nor do we see any legally justified grounds for such a decision," a company spokesperson said in an emailed response to Reuters questions.
A person familiar with the review of the expansion project said all scenarios were on the table, when asked whether it could lead to Hungary changing its main contractor.
The person also said the review would identify the legal, technical, financial and timing consequences of changing supplier, and whether the project was financially viable.
AMENDMENTS, DELAYS AND COMPLICATIONS
The original contract with Rosatom has been amended five times, with a sixth amendment prepared but not signed.
In another setback, a 2025 ruling from the European Court of Justice, the EU's highest court, annulled the European Commission's approval of state aid for the project.
A second source, close to the administration, said the government was "leaning towards a conclusion that the Paks expansion is necessary" but that Rosatom should not be involved.
Nuclear generation can provide a huge supply of baseload power with almost no carbon emissions, but plants typically need large volumes of cool water, making them vulnerable to the droughts and heatwaves that climate change is making more frequent.
Despite nuclear's cost and complexity, Magyar's pro-EU government is strongly in favour of nuclear energy, which it needs to meet rising demand and to balance intermittent renewable sources.
"Nuclear energy and the nuclear supply chain offer the greatest potential, including at the European level, to secure and strengthen our own capacities," Zsuzsa Beres, deputy state secretary in charge of nuclear energy and international relations at the Economy and Energy Ministry, said.
"We will continue to rely heavily on nuclear energy in the future," she told a conference last week.
As a stopgap pending the Paks expansion, Budapest is exploring seeking approval for a 20-year extension of licences to operate four existing Russian-built reactors at Paks. The licences expire between 2032 and 2037.
ROSATOM HAS AVOIDED EU SANCTIONS SO FAR
Since Russia's invasion of Ukraine in February 2022, EU member states have cut Russian oil and gas imports.
Rosatom, however, has avoided EU sanctions and in 2025, Russia supplied about 23% of the EU's enrichment deliveries and 16% of its natural uranium, according to data from the World Nuclear Association.
Should the government's review lead to a decision against Rosatom, Hungary could have to absorb the €1.1 billion paid so far to Rosatom and any penalties for breach of contract.
The sources did not name any possible new supplier, though one said a European supplier would simplify the foreign-policy context and sanctions environment. The project management challenges would stay the same.
($1 = 0.8919 euros)
(Reporting by Gergely Szakacs and Marek Strzelecki with additional reporting from Moscow; Editing by Barbara Lewis)
