Hungarian government promises rough day for utilities

By bne IntelliNews February 24, 2014

bne -

Hungarian utilities are facing a rough day on February 26, Janos Lazar, Prime Minister Viktor Orban's chief of staff, said over the weekend. That's when the government will next discuss how public utilities can be turned into non-profit businesses and how consumers can be further assisted, he added.

Parliament bills on the plan remain obscure and the utilities are still trying to deceive and manipulate consumers, Lazar told a public forum in southern Hungary on February 23, according to Portfolio.hu.

"Electricity and gas service providers will have a difficult day on Wednesday," he said, adding that on that day the cabinet will address public utilities again and see how the country's 4m households could receive further meaningful assistance from the government. "It seems we cannot lower utility tariffs enough so that energy companies would not be profitable," Lazar said. He believes a 25-30% reduction in energy prices for households could bring about palpable results for the population.

The campaign targeting Hungary's energy providers has stepped up as elections approach in April, with the populist agenda clear given the sharp drop in household energy prices over the past 12 months. Thus far, Budapest has overseen 20% of cuts in regulated prices for gas and electricity.

That has also suppressed inflation, which opens the way for the central bank to continue its 19-month easing cycle. At the same time, the government continues to apply pressure on the utilities in an apparent bid to drop valuations in the sector in order to allow state purchases. The government has already taken over the country's main gas importer from E.ON, as well as major gas storage assets from MOL.

Officials have stepped up the rhetoric again recently. Several senior government figures spent last week blasting utilities for a rush to repatriate funds ahead of the next round of regulatory price cuts, the first of which is set for just ahead of the election in the first week of April.

The government has said it intends to regulate prices to capture all excess profit in the utility sector, leaving aside routine funds for re-investment. With the ruling Fidesz set to win, the worry for the companies is that the pressure will accelerate after the vote next month, and a handful are reported to have moved shareholder meetings and dividend payouts forward to beat the date.

Government spokesman Andras Giro-Szasz complained to MTI last week that such plans by utility providers Elmu and Emasz are an attempt to divert funds. The government is determined to ensure that "these attempts to divert funds should not be able to prevent or hinder the government's utility fee cut scheme in any way," he said.

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