Consequence of the new investor model? Dukovany Unit 5 must be notified again

Approval for state aid for Unit 5 of the Dukovany nuclear power plant expansion must be obtained again. This follows from the content of Amendment No. 6 to the first implementation agreement between the state and EDU II, the company that will build the unit, as well as from a statement by the Ministry of Industry and Trade to oEnergetice.cz. The reason why the notification must be carried out again is the new investor model for the construction of the Dukovany units. 

The new investor model for the Dukovany nuclear power plant expansion was announced by the government and ČEZ at the end of April this year. The government decided to acquire an 80% stake in Elektrárna Dukovany II, the project company responsible for building the new Dukovany units.

However, as it has emerged, the change in the investor model has significant implications for the state aid notification to the European Commission. The changes are so substantial that state aid must be notified not only for Dukovany Unit 6, but also again for Unit 5. The state has already notified aid for Unit 5, but will nevertheless have to repeat the lengthy process.

“As part of the notification process, the European Commission assesses the state aid provided to the project. This aid and the effects of providing it must now be assessed under the conditions of constructing two units and in light of the new investor model, under which the 80% stake in Elektrárna Dukovany II, a. s. is no longer owned by ČEZ, a. s., but directly by the state,” said David Hluštík from the communications department of the Ministry of Industry and Trade (MPO).

As a reminder, notification proceedings for the standalone Unit 5 were officially initiated at the European Commission on 15 March 2022. The final decision, in which the European Commission approved the notified state aid for Dukovany Unit 5, was issued on 30 April 2024. Exactly one year later, the sixth amendment to the first implementation agreement on the conditions for constructing the new Dukovany units was signed, reflecting the change in the investor model for the project. Among other things, this amendment stipulates that the state will arrange a new notification for Dukovany Unit 5.  

One year after the original decision was issued, the notification process is therefore back at the beginning. A new application for approval of state aid has not yet been submitted, even though submitting it is a necessary condition for the European Commission's review of the aid.

According to the ministry, it was not possible to submit the application until the investor model had been finalised. The Ministry of Industry and Trade expects to complete the application within the next few months. A final decision on state aid is expected in the first half of next year. 

“We have been in contact with the European Commission since the beginning of the year and have been discussing the planned new notification proceedings with it. As negotiations on the final form of the investor model and the contractual terms between the state, ČEZ, a. s. and Elektrárna Dukovany II, a. s. were still under way, it was not possible to submit a formal application to initiate notification proceedings. Following the government's decision on 30 April and the signing of the related agreements, it is now possible to finalise the formal application and launch the process. This process may take several months,” David Hluštík told oEnergetice.cz. 

Although the state aid decision for Dukovany Unit 5 took 25 months, the new proceedings could be faster, according to the Ministry of Industry and Trade. This is because the fundamental elements of the state aid will be the same as in the already concluded proceedings concerning Unit 5 alone.

“We will draw extensively on the notification approval already issued. Crucially, during the notification process for Unit 5, the European Commission already assessed the effects of the three core support instruments defined by the Low-Carbon Act: project financing through a state loan, an offtake contract guaranteeing the investor stable revenues and a certain return on equity, and stability of the project's external conditions. These core instruments do not change under the modified investor model. In the previous proceedings, the European Commission assessed their justification and market impacts, and examined a number of other issues that will not change in the two-unit solution,”  David Hluštík added.

During the period since the original notification application was submitted, a reform of the internal electricity market was also adopted. It was adopted in response to the energy crisis and the broader need to prepare the European electricity market for the transition to climate neutrality, which the European Union requires to be achieved by 2050. 

As part of the reform, detailed rules were adopted for direct support for new generation sources, including nuclear sources. The entire notification process could also be faster thanks to this reform, provided that the notification application complies with the rules set out in the Internal Electricity Market Regulation. Conversely, issues related to ČEZ's minority involvement and the doubling of capacity may prolong the state aid notification.