The government comissioned a study from Tungsram about where a nuclear fuel plant could be built in Hungary

The European Parliament resolution of 7 April 2022 on the sanctions against Russia calls for an immediate full embargo on Russian imports of nuclear fuel and urges the Member States to terminate collaboration with Russian companies on new nuclear projects (such as the planned Paks II NPP). In this context, the contract of the Prime Minister’s Office, which was recently obtained by Átlátszó, to carry out a study on the conditions for the establishment of a nuclear fuel fabrication plant, is particularly interesting.

We requested the study as data of public interest, which was prepared by Tungsram Operations Ltd. in 2021 for a net price of HUF 14 750 000, but unfortunately did not receive it: at the end of the 15-day legal deadline, the Prime Minister’s Office informed us that the deadline would be extended to 45 days, because fulfilling the data request would jeopardise the Prime Minister’s Office’s public duties in relation to the current state of emergency.

The contract obtained by Átlátszó was signed by Jörg Bauer, Managing Director of Tungsram Operations Ltd. and Márk Ádám Janó, State Secretary for Public Administration, and the technical countersignatory was Pál Kovács, State Secretary responsible for the maintenance of performance of the Paks Nuclear Power Plant. The study on the assessment of a suitable site for a nuclear fuel rod production plant was, according to the explanatory memorandum, indispensable for the Secretary of State to be able to carry out his statutory duties.

These include creating the necessary conditions for the implementation of the two new units of the Paks Nuclear Power Plant (i.e. the Paks II project) and providing technical support to the minister without portfolio responsible for the design, construction and installation of the two new nuclear power plant units of Paks (i.e. János Süli). Both the State Secretary and the Minister without Portfolio belong to the Prime Minister’s Office, which is why the Prime Minister’s Office concluded the contract in question.

This is not the only contract signed by the Prime Minister’s Office for Paks II that has been recently reported by Átlátszó: János Süli, the minister without portfolio in charge of the Paks expansion, prepared a contract worth €8.425 million in 2018 with the international consultancy Rothschild&Co for “strategic advice on energy policy and special infrastructure projects”.

Hungary offered Rothschild & Co 8.4 million EUR for consultancy during EU approval of a Russian nuclear power plant

According to an official document obtained by Átlátszó, János Süli, the Hungarian minister responsible for the Paks NPP expansion, prepared a contract worth €8.425 million in 2018 with the international consultancy firm Rothschild & Co for “strategic advice on energy policy and special infrastructure projects”.

The Tungsram contract obtained by Átlátszó reveals that of the three offers received by the Prime Minister’s Office, Tungsram Operations Ltd. submitted the lowest one, just below the public procurement threshold, and therefore won the tender procedure. There is no information in the document as to who the other two bidders were or whether there was a criterion in the procedure that the winner had to have expertise in the subject matter. We could not find any publicly available references from Tungsram on nuclear fuel fabrication.

According to the contract, Tungsram had 30 days after signature to prepare the study, including a detailed analysis of the infrastructure requirements of four possible sites, other aspects of the plant’s location, the advantages and disadvantages of the sites and the arguments in favour of the most preferred site, in a minimum of 50 pages. The somewhat tight deadline expired at the end of June 2021, which means that in theory the study has been finalized, still we have not yet been received it.

Extract from the contract between the Prime Minister’s Office and Tungsram Operations Kft.

No reference for Tungsram in the nuclear industry

Tungsram was formerly owned by GE from 1989, but in 2018 GE sold Tungsram, along with its other lighting businesses in Europe, the Middle East and Africa, to Jörg Bauer. For the sake of accuracy, Jörg Bauer is an indirect owner of the company, as Tungsram Operations Ltd. is directly owned by Tungsram Group Zrt., which is owned by Confluentia Holding Ltd., and Confluentia’s sole owner is Jörg Bauer. Bauer has been a senior executive at GE for many years: in 2003 he was CFO and from 2009 he was President of GE Hungary. No public information is available on the price he paid for these businesses in 2018.

Following the old tradition, Tungsram Operations Ltd. is still primarily engaged in the production of lighting equipment, and besides also provides technological solutions and services. The majority of the company’s turnover (HUF 72-73 billion in 2019 and 2020) is generated by the export of products. No references to nuclear energy or fuel were found among the company’s activities and projects.

In 2019, the government entered into a strategic partnership with Tungsram Operations Ltd. and as media news suggest, the company has maintained good relations with the government since then. For example, during a high-level visit to Abu Dhabi in 2020, Minister of Foreign Affairs Péter Szijjártó highlighted as a key agreement that “Tungsram will establish a subsidiary in Abu Dhabi and build a factory worth $4 million, with financial support from the Hungarian government”.

Also in 2020, the company received HUF 282 million as state support from the Ministry of Foreign Affairs and Trade to set up a glass processing plant at the Zalaegerszeg factory. And in 2021, a vertical indoor farm was established to carry out research and plant cultivation experiments with a HUF 250 state grant.

However, 2022 has not been a year of corporate success so far: first the media reported about the withdrawal of employee benefits and the formation of a strike committee, then recently about the announcement of partial plant closures and forced furloughs, and the request for government assistance to deal with the losses caused by the COVID epidemic and now the war in Ukraine.

According to the group’s publicly available accounts, Tungsram Operations Ltd. has indeed been operating with a negative result since its spin-off in 2018, however, there was no epidemic or war in 2018 or 2019, and besides the group’s other companies and divisions have not had negative results at least not all of them and not all the time (e.g. Tungsram Operations Ltd.’s parent company, Tungsram Group, closed 2020 with a profit of nearly HUF 500 million).

We have contacted Tungsram Operations Ltd. but unfortunately, they have not responded to our questions about the study on nuclear fuel facility in Hungary.

Nuclear fuel fabrication is an extremely costly business

Nuclear fuel rods are needed for the operation of nuclear power plants. The Paks NPP uses fuel made in Russia, which, according to the company’s annual reports, now cost about HUF 23 billion a year (2020: HUF 22,760 million, 2019: HUF 23,601 million, 2014: HUF 20,498 million, 2010: HUF 12,934 million).

The contract for the planned Paks II project, which is being in a significant delay, also requires Hungary to use Russian fuel rods. This was precisely one of the EU’s objections to the Paks II project, since the original Russian-Hungarian agreement would have guaranteed Russia full exclusivity in the supply of nuclear fuel for 20 years. In the course of the negotiations, the EU achieved a reduction in Russian exclusivity to 10 years, but unfortunately, we only know this from the reports of former MEP Benedek Jávor, who has had an opportunity to have access to the contracts related to the Paks II project, which had been classified by the government previously.

One of the key elements of the European Energy Security Strategy adopted in 2014 was that the EU should seek to diversify its sources of energy supply to avoid dangerous levels of dependence on a single supplier. The strategy also focused on the issue of nuclear energy, as the uranium needed to produce nuclear fuel is entirely sourced from outside the EU. With only a few EU countries (France, Germany, Spain, Sweden, Romania) producing fuel, the EU is about 40% dependent on imports, at least according to the EU Energy Security Strategy.

The background of this figure is almost impossible to find out, because of a strange methodological recommendation according to which international energy statistics on exports and imports do not include nuclear fuels. In addition to the EU countries mentioned above, Argentina, Brazil, Canada, China, India, Japan, Kazakhstan, Korea, Russia, Pakistan, UK, USA produce nuclear fuel. It can be seen that none of these countries are of the size and importance of Hungary.

In the case of fuel rods, changing the source of supply is not easy for several reasons: first, they have to be produced to match the exact type of nuclear power plant and not all manufacturers can produce any type. Secondly, in most cases they are procured under long-term contracts and, thirdly, prices can vary significantly from one manufacturer to another. A month ago, former government commissioner of the Paks Nuclear Power Plant Attila Aszódi told the G7 that switching manufacturers might actually be considered for Paks because of the situation created by the Russian-Ukrainian war, however, he claimed that no such talks are taking place at the moment. No reference was made in the article to the establishment of a plant in Hungary.

The big question is whether the conditions for the establishment and the economic operation of such a plant exist in Hungary. On the one hand, it is a very complex, very costly task requiring special expertise and covering many related areas. On the other hand, considering economy of scale, it is important how many other locations outside Paks could a Hungarian plant possibly supply? Thirdly, there are also many questions surrounding the Paks nuclear power plant: the existing Paks units have reached the end of their lifetime and can only operate, with an extension, until 2034, while the planned Paks II units are many years behind schedule and may never be completed.

According to press reports, the Russian-Ukrainian situation could also lead to Rosatom withdrawing from the Paks II project, and although the news has not been confirmed by the Hungarian government, the contract appears to give the Hungarian side the option of not proceeding with the project at some point. (That an astonishing amount of public money has already been wasted on the project is another matter.) In Finland, it was announced on 23 March that the Hanhkivi nuclear power plant project, also to be built by Rosatom, was to be stopped. The European Parliament resolution of 7 April also called on the Member States to stop Russian nuclear projects.

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Hopefully, as soon as the Prime Minister’s Office’s duties in the state of emergency allow a break of an hour or two, they will find us the Tungsram study on the conditions for setting up a fuel cell plant.

Written and translated by Orsolya Fülöp, the Hungarian version of this story is available here. Cover photo: A staff member holds samples used to simulate the fuel rods of the Paks nuclear power plant at the Centre for Energy Research of the Hungarian Academy of Sciences on 16 January 2013 (source: János Marjai/MTI)

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