Hungary struck an agreement with Russia in 2014 involving a 10 billion euro ($11 billion) loan deal to build two reactors at the Paks plant south of Budapest.

The first new reactor was originally scheduled to come online in 2023, but permit issues, the Covid-19 pandemic and Western sanctions against Russia over its invasion of Ukraine led to delays.

Last year, the United States granted a waiver to the sanctions that allowed the project to be financed.

The ribbon-cutting ceremony Thursday was held even though the EU's top court last year annulled the European Commission's decision to approve state aid for the expansion project, ruling in favour of neighbouring Austria.

Hungary's government argues that the "Paks 2" expansion project is the only way to meet growing domestic demand for electricity in an climate-friendly, inexpensive, and safe manner.

Paks 2 "guarantees Hungary's long-term energy security" Foreign Minister Peter Szijjarto said at the ceremony, also attended by Rafael Grossi, head of the International Atomic Energy Agency (IAEA).

Alexey Likhachev, head of Russia's state-owned nuclear energy group Rosatom, hailed the project launch as a "historic day" and a celebration of Russian-Hungarian ties.

The new reactors are due to be connected to the grid in the early 2030s, just as the original four reactors -- built with Soviet-era technology in the 1980s -- are slated to be gradually retired.

The new 1,200 megawatt reactors are comparable to the plant's current 2,000 megawatt output.

The project also involves Western contractors, including the French-German Framatome-Siemens consortium.

Still, critics say the project could increase Hungary's dependence on Moscow, which already provides fossil fuels for its energy needs.

Greenpeace meanwhile has warned about the risks of nuclear waste disposal and thermal pollution affecting Danube river ecosystem.

Detractors have also expressed fears over the final cost.

In 2024, Hungarian lawmakers adopted a bill that permits increasing the original budget of 12.5 billion euro budget in case of further delays.

Construction is also starting ahead of elections in April when Prime Minister Viktor Orban, the EU's longest-serving current leader, is facing an unprecedented challenge.

Opposition leader Peter Magyar, whose party is leading in polls ahead of Orban's governing coalition, has vowed to renegotiate the loan deal with Russia if he wins the April 12 vote.

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Siemens