Czech Nuclear Power Plant, KHNP Government Subsidy EU Regulation Violation Contract Legal Issues

 

Czech Nuclear Power Plant, KHNP Government Subsidy EU Regulation Violation Contract Legal Issues

 

The legal issue of whether the ‘foreign subsidy’ proposed by Korea Hydro & Nuclear Power (KHNP) in the bid for the Czech Nuclear Power Plant was ‘legal in the contract’ regarding the violation of EU regulations that were later applied has emerged.

Czech nuclear power company CEZ took the position that the EU’s ‘foreign subsidy ban (including support from Korean government banks to Korean companies)’ was not applied at the time of the bid and therefore not applied at the contract stage, while the EU Commission took a completely different position, stating that “the contract terms are applied at the time of the contract,” and this was ultimately decided by a Czech court.

World Nuclear News (WNN) reported on the 14th that the Czech government and the European Commission are clashing over the application of EU regulations that were not applied at the time of the bid for Korea Hydro & Nuclear Power (KHNP) ‘at the time of the contract.’

 

The European Commission has blocked the signing of a €16 billion contract between Korea Hydro & Nuclear Power (KHNP) and Czech Nuclear Energy Corporation (CEZ) to build two reactors at the Dukovany nuclear power plant, a letter published by EurakActive on the 12th, after French European Commissioner for Industrial Strategy Stéphane Séjourné sent a letter to Czech Minister of Industry and Trade Lukaš Vlček, requesting that the two companies “take immediate action to stop signing the contract for the new reactors in Dukovany and Temelin”. 

The letter from the European Commission stated that it had “initiated a preliminary review to assess whether the potential foreign financial contributions received by the Party (KHNP) amount to foreign subsidies and, if so, whether such foreign subsidies distort the domestic market in relation to the project” and that “there remain ‘significant indications’ that this may be the case” and that “without preempting a final decision, the Commission is currently in the process of preparing a decision to initiate an in-depth investigation”.

 

The letter stated that the clause in question would “contradict the Czech Republic’s obligations” under Article 4 (3) (EU Member States “should refrain from taking any action that could jeopardise the achievement of the objectives of the European Union”) if the contract was concluded before the final decision was taken.

 

WNN reported on the 14th that <before the court injunction was issued last week, Czech nuclear power plant operator CEZ said its Elektrarna Dukovany II project company had conducted the tender “in a completely transparent manner at all stages and under completely fair conditions”>, and <the statement said Industry Minister Vlček said there would be “all necessary cooperation” with the commission, and <the expert opinion of the Ministry of Industry and Trade is that the EPC contract with the company KHNP is not subject to the regulation on foreign subsidies due to the nature of the contract itself and the fact that the tender process began before the entry into force of this regulation>.

WNN continued with a statement from the Czech Ministry of Industry and Trade that <as confirmed today by a spokesperson for the European Commission, the courtesy letter sent by French Commissioner Séjourne to Minister Vlček is not legally binding.>

The minister assessed the binding force of the courtesy letter and confirmed the French commissioner's claims with the relevant companies and authorities, and replied to the letter within four business days from the date of receipt of the letter. <Hanwha said, "We responded to the European Commission's inquiry on February 27, but have not received any response since then."> 

The report said that the Czech government owned a 70% stake in CEZ at the end of April, and the Czech government announced that it had purchased an 80% stake in the Elektrárna Dukovany II project, a new nuclear power plant and a bidder, and that the state-owned company CEZ would hold the remaining 20% ​​stake, so it seems that the legal application of the 'Korean government and Export-Import Bank subsidies to Hanwha' has become a subject of the EU's 'foreign subsidy ban'.

 

The Czech government's 80% stake is worth CZK 3.6 billion (USD 163 million). The Czech Republic currently receives about a third of its electricity from four VVER-440 units in Dukovany, which came into operation between 1985 and 1987, and two VVER-1000 units in Temelin, which came into operation in 2000 and 2002.

Prime Minister of the Czech Republic Petr Fiala announced in July 2024 that he would ‘sign the contract by the end of March 2025’ when selecting Korea Hydro & Nuclear Power (KHNP) as the ‘preferred bidder’, but it was postponed to May, and on May 1, the district court ordered ‘suspension of the contract’ in an injunction, and immediately after, with the guarantee of Minister of Industry Ahn Deok-geun, KHNP signed a contract with a Czech subcontractor, and the main lawsuit is in progress.

<Czech government’s additional burden on Korea for 80% of nuclear power plant share, France ‘objects’ to EU, media manipulation, May 1, 2025>

<Korean Czech court refuses to suspend contract, 9 future contracts, 3 memorandums of understanding with Czech companies, May 8, 2025>