The Czech government wants fresh nuclear capacity, South Korea’s KHNP holds a signed deal, and the European Commission is now probing whether the financial architecture behind the project breaks EU rules — leaving EDF watching closely for a possible second chance.
The Dukovany mega-project under scrutiny
The Dukovany nuclear site in the south of the Czech Republic already hosts four ageing Soviet-era reactors. They helped build the country’s energy independence, but they date back to the 1980s and are edging towards the limits of their extended lifetime.
To avoid a future power gap and reduce reliance on fossil fuels, Prague has embarked on a flagship plan: two new large reactors at Dukovany, supported almost entirely by public money and long-term price guarantees.
At stake is a contract worth at least €16.4 billion for the builder, and between €23 and €30 billion in state-backed financing.
In 2024, the Czech government selected Korea Hydro & Nuclear Power (KHNP) as preferred supplier, beating bids from France’s EDF and others. One year later, the contract was signed, with first reactor commissioning targeted for 2036 and the second for 2037.
That timeline looks ambitious in a sector known for delays and overruns, from Flamanville in France to Olkiluoto in Finland. The Czech cabinet argues that strong state involvement and a clear framework will keep the schedule on track.
How Prague plans to pay for two reactors
The European Commission is not questioning whether the Czech Republic can choose nuclear power. EU rules let each member state decide its energy mix. The real question lies in how far public support can go without distorting competition.
A 100% state-backed financing model
The Dukovany expansion rests on a highly protective set-up for the project company, EDU II. The Czech state owns 80% of EDU II, with the remaining 20% held by national utility ČEZ.
- Public loan at preferential rates for up to 100% of construction costs
- Estimated total state loan exposure: €23–30 billion over more than ten years
- Contract for Difference (CfD) on the electricity price for 40 years
- Political risk protections against radical changes in tax or energy policy
KHNP’s industrial offer is reported at around €8.2 billion per reactor for construction. The much higher €23–30 billion range under EU examination reflects the full financial package: interest, risk buffers, fees and long-term state exposure, not just concrete and steel.
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The state stands as lender, guarantor and risk absorber — turning the project into a test case for what EU state aid rules allow.
Why the Commission stepped in
Brussels had previously cleared a Czech scheme for a single reactor at Dukovany under similar principles. This time, scaling up to two units and locking in a 40‑year CfD triggered a deeper investigation under EU state aid law.
Commission officials want to know whether:
| Key question | EU concern |
|---|---|
| Level of state support | Does it give the operator an unfair advantage in the electricity market? |
| Risk sharing | Does the state shoulder too much construction and price risk? |
| CfD design | Does the scheme still reward efficiency and cost control? |
| Market impact | Could cheap, subsidised nuclear crowd out rivals and cross-border trade? |
Regulators also want more clarity on how the CfD will work in practice. If the strike price is too generous, or if the conditions guarantee revenue almost regardless of performance, competitors can argue that it amounts to a permanent subsidy.
EDF waits for a possible opening
When Prague chose KHNP, EDF did not quietly walk away. The French utility challenged the decision before Czech authorities, claiming that its rival’s promises on costs and deadlines could only hold with hidden subsidies from Seoul.
The Czech courts dismissed EDF’s challenge, and the government moved ahead. Formally, KHNP has the deal. Yet the story did not end there.
The European Commission is now pursuing a parallel investigation under the EU’s regulation on foreign subsidies. This process focuses on whether non-EU support to KHNP may have skewed the bidding process for an EU contract.
If EU watchdogs conclude that KHNP benefited from unfair foreign backing, the entire procurement outcome could be called into question, reopening space for EDF.
KHNP strongly denies any wrongdoing and insists that its offer relied on its own balance sheet, experience and technology, not on prohibited government backing from South Korea.
What EDF really stands to gain
The phrase “contract of the century” has been widely used in French energy circles to describe the Dukovany build. The €16.4 billion figure often quoted refers to the potential value of EDF’s own offer for the two units, excluding broader financing elements.
If the Commission finds the state aid scheme incompatible with EU rules, the Czech government may need to redesign parts of the support model. In extreme cases, it could be forced to modify or even re‑run parts of the tender.
Any such decision would be political dynamite. Prague wants certainty for investors and a clear roadmap for replacing ageing reactors. Reopening the race would add years of delay but could also give EDF a fresh shot at the project.
A long legal and political chess game
The Commission stresses that its in‑depth probe does not prejudge the outcome. These procedures often take several years. The previous, smaller Dukovany aid scheme needed roughly two years for approval, and the current twin‑reactor package may run on a similar or longer schedule, with 2027 often mentioned in Brussels as a realistic horizon.
In the meantime, Czech officials say the project will continue with private and transitional financing. That claim seeks to reassure domestic industry and EU partners that the schedule remains intact, even as legal questions pile up.
EU law sets three benchmarks for such support: necessity, proportionality and non‑distortion. If Brussels judges the package compliant, KHNP keeps its prized deal and EDF walks away empty‑handed. If not, the French company gains leverage and could argue for a revised tender, compensation or a new negotiation.
What this means for nuclear power in Europe
The Dukovany fight captures a wider tension inside the EU. Several countries — including France, Czech Republic, Hungary and Poland — see nuclear as a core tool for decarbonisation and stable baseload power. Others remain sceptical or hostile.
At the same time, nuclear new‑builds remain risky, long and capital‑intensive. Without some kind of state backing, many projects simply do not happen. That reality clashes with EU rules designed to avoid subsidy races between member states.
The result is a fragile compromise: nuclear is allowed, but every large project faces a dense layer of scrutiny, from state aid to competition law to cross‑border energy market rules.
Key concepts behind the controversy
Two technical notions drive much of the debate:
- Contract for Difference (CfD): A long‑term contract where the state guarantees a fixed price per megawatt hour. If the market price is below this threshold, the state pays the difference to the producer; if it is above, the producer pays back the surplus.
- State aid control: A core EU mechanism that checks whether public money gives companies an unfair edge. If aid is deemed illegal, it can be blocked or clawed back.
For nuclear operators, a CfD brings predictability and lowers financing costs. Banks lend more readily when they see guaranteed revenue. For taxpayers and competitors, it raises questions: how high is the guarantee, who bears cost overruns and could cheaper alternatives be crowded out?
Possible scenarios from here
Several paths now appear possible.
- The Commission approves the aid with minor tweaks; KHNP proceeds, and EDF shifts focus to other projects, such as potential EPR2 programmes in Europe or in the Middle East.
- Brussels demands deep changes to the Czech scheme; the financing model becomes less generous, putting pressure on KHNP’s business case and possibly forcing fresh negotiations.
- Foreign subsidy findings hit KHNP; Prague faces a stark choice between defending its partner and redesigning the tender to avoid conflict with EU rules, opening a narrow lane for EDF.
For Czech households and businesses, the final design of the CfD and loan package will also steer future power prices. A very generous guarantee may lock in higher tariffs or bigger budget commitments for decades. A tougher deal could cut nuclear costs but might deter investors or slow construction.
This mix of engineering risk, regulatory scrutiny and geopolitical rivalry makes Dukovany far more than a local build. It has turned into a benchmark case for how Europe finances big nuclear projects — and for how far a company like EDF can rely on Brussels to challenge a rival’s victory, even after the ink is dry on a multi‑billion euro contract.
