The European Commission (EC) has approved Hungary's investment in the construction of two new nuclear reactors, each with 1200MW capacity, in the country with support from Russian firm Rosatom.

European regulators said that they have approved the Hungary's financial support for the €12.5bn Paks II nuclear power plant under the state aid rules on the basis of commitments made by the country to limit distortions of competition.

Commissioner in charge of competition Margrethe Vestager said: "Hungary has decided to invest in the construction of the Paks II nuclear power plant, its right under the EU Treaties.

“During our investigation the Hungarian Government has made substantial commitments, which has allowed the Commission to approve the investment under EU state aid rules."

The investment support for the construction of Paks II expansion project is a part of the country’s effort to replace phased out generation capacity and address the need for new capacity.

In 2014, Hungary signed an agreement with Russia for the development of two nuclear reactors.

Paks is Hungary's first and only nuclear power plant, which is located 5km from the central town of Paks. It currently has four Russia-built VVER-440 reactors with a combined capacity of about 2,000MW.

The four units, which are scheduled to be decommissioned in mid-2030s, currently account for approximately 50% of electricity production in the country.

The new 5 and 6 reactor units are scheduled to be commissioned in 2025 and 2026.