EnBW Hungary said looking to join German utility exodus from CEE

By bne IntelliNews December 20, 2012

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In what could prove a tricky divestment given Budapest's recent tax and tariff moves, German energy utility Energie Baden-Wuerttemberg is seeking to unload its minority stakes in three Hungarian power firms, according to local press reports on December 19. Meanwhile, RWE - its partner in the companies - announced progress in selling its Czech assets.

According to Nepszabadsag, EnBW is selling the Hungarian stakes to raise funds for investment in renewable energy, however the daily did not site its sources. Germany's third biggest energy company currently holds more than 20% in lignite power plant Matrai Eromu, and electricity distributors Elmu Nyrt and Emasz Nyrt, reports Dow Jones.

EnBW recently spoke with potential buyers about its holding in Matrai Eromu, but the parties couldn't agree on the price, the newspaper claims, without naming the suitor. The Hungarian unit of EnBW declined to comment on the report.

Despite planning to unload other CEE assets as part of a divestment drive, compatriot RWE has not indicated it is looking to sell the controlling stake it holds in the three companies. However, Germany's second largest energy company announced the same day that it has sold three regional gas firms in the Czech Republic, in a deal that consolidates the structure of its remaining holdings in the country. RWE said earlier this year that it plans to sell its majority stake in gas pipeline operator Net4Gas.

Germany's largest energy company, E.ON, recently agreed to sell its Hungarian gas storage and distribution business to the government, following the passage of legislation through parliament requiring the nationalisation of such assets. However, the energy giant is in the midst of its own €15bn divestment programme, aimed at lowering debt and allowing it to concentrate on larger emerging markets, and although reports suggest it was forced into giving up its assets at a cut price, is unlikely to be too unhappy.

Recent demands from Hungarian Prime Minister Viktor Orban that energy distribution to retail customers should be a "non-profit" business, will only have confirmed that instinct. Earlier this month, Budapest ruled to drop gas and electricity tariffs by 10% from January, with utilities to absorb the drop in prices. The action comes on the back of ongoing tax hikes on Hungarian utilities, that - while not as ruinous as those on the banking sector - have impacted profitability since Fidesz came to power in 2010.

Analysts at Erste predict that the country's biggest gas producer, MOL, could be hit to the tune of HUF25bn (€87m) per year by the tariff cut. An additional tax on underground utility networks affecting energy, water and telecom suppliers announced in November and set to come into force in January, is likely to cost landline operator Magyar Telekom up to HUF11bn per year, the analysts estimate.

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