The Belgian State and Engie Reach an Agreement for the Prolongation of Two Nuclear Plants

On June 28, 2023, the Belgian government and the French company Engie reached an interim agreement on the prolongation for 10 years of two of the country’s nuclear plants (Tihange 3 and Doel 4).

With this plan, Belgium definitively breaks with its ambition to stop using nuclear energy by 2025, in response to the war in Ukraine and the energy crisis.  The agreement organizes the allocation of risks between Engie and the Belgian State. It deals with two main aspects: the prolongation of the nuclear plants and the respective obligations of both parties concerning nuclear waste.

Prolongation.  The nuclear plants will be incorporated into a legal entity owned 50/50 by the State and Engie.  Both parties have committed to exercise their best efforts to have the plants operational again as of November 2026.  This deadline will be moved to November 2025 if the relevant regulatory requirements are modified in the meantime.  The achievement of this deadline is essential to avoid a black-out during the winter of 2025-2026. The cost price of electricity is also set under a two-way contract for difference, a mechanism that has been widely used in Europe to foster the development of renewables. [1] Under the contract for difference, any surplus generated when the effective market price is above the agreed cost price will be to the benefit of the Belgian State.  However, if the effective market price is below the agreed cost price, the State will have to pay the difference to Engie.  The agreement provides for specific mechanisms to ensure that both parties have a shared interest in the technical and economic efficiency of the plants.

Nuclear Waste.  Engie will pay a lump sum of 15 billion euros to settle definitively its nuclear waste management obligations for all of its seven nuclear facilities in Belgium.  Payment will be made to a sovereign fund specially created to finance the waste’s burying process after 2050 and until 2135, in two instalments.  The first 80% will be due as early as in 2024.  The remaining 20% will have to be paid when the reactors restart in 2026.  This amount was determined with the help of ONDRAF,[2] the national organization dealing with nuclear waste.  It encompasses a risk premium of 43 percent and comes above the costs of dismantling that are already carried by Engie.  Engie’s full commitment, based on current nuclear reserves, should amount to about 23 billion euros.   The remaining risks related to nuclear waste will be borne by the Belgian State.  A similar system has been adopted in Germany even though the risk premium agreed by the nuclear company there was significantly lower. [3] The Commission decided not to raise any objections against this system and deemed it compatible with Article 107(3)(c) TFEU.[4] 

State aid. A final agreement will likely have to be notified to the Commission and examined under the state aid rules.  The Commission should pay close attention to the allocation of risk between the Belgian State and Engie under the contract for difference and nuclear waste management settlement. It had previously reviewed and approved a contract for difference to support the development of the Hinkley Point C reactor in the United Kingdom.[5]It will also not be the first time that the Commission reviews State aid provided in the nuclear sector in Belgium. [6]

A final agreement is expected for the end of July.  It will be signed in the fourth quarter of 2023, then ratified by Parliament.

[1]European Commission, « Q&A Eu’s internal electricity market design revision », March 14 2023, available here https://ec.europa.eu/commission/presscorner/detail/en/qanda_23_1593. 

[2] « L’Organisme national des déchets radioactifs et des matières fossiles enrichies ».

[3]Les Echos, « Nucléaire – Engie et la Belgique trouvent in extremis un accord », June 29 2023, available here, https://www.lesechos.fr/industrie-services/energie-environnement/nucleaire-engie-et-la-belgique-trouvent-in-extremis-un-accord-1957241.

[4] Commission Decision 2017/4249 of June 16 2017 on the aid measure SA.45296 (2017/N), see press release.

[5] Commission Decision (EU) 2015/658 of 8 October 2014 on the aid measure SA.34947 (2013/C), upheld by the Court of Justice in Austria v. Commission (Case C-594/18 P), see press release.

[6] Commission Decision 2017/4668 of July 14 2017 on the aid measure SA.46602 (2017/N), see press release.  For state aid granted by the Belgian State related to the electricity market and for the transition out of nuclear energy, see Commission Decision 2018/589 of February 2, 2018 on the aid measure SA.48648 (2017/NN), see press release and Commission Decision 2021/6431 of August 27 2021 on the aid measure SA.54915 (2020/C), see press release.