Hungary prepares "non-profit" state utility for February launch

By bne IntelliNews January 23, 2015

bne IntelliNews -


Hungary's government plans to have a "non-profit" state utility set up by the end of February, local media reported on January 23, citing a government decree.

The First National Utility Company (ENKSZ) - to be owned by state development bank MFB - will provide electricity, gas and district heating services. The company will offer the services under market conditions, but aims to make its operations non-profit, the government decree as saying.

The government expects the state-owned utility to beat current market players on both price and service, said Janos Lazar, the powerful head of the prime minister's office, in September. ENKSZ will compete with the local units of GDF Suez and E.ON.

The plan to establish a new state utility company was launched late last year. The government says it wants to boost competition in the sector and further lower energy prices for companies. ENKSZ will be established with share capital of HUF1bn (€3.2mn) and capital reserves of HUF14bn, the resolution, published in the Official Hungarian Gazette, says.

Officials from the development ministry and prime minister's office will have until the middle of the year to have gas distributor Fogaz roll out nationwide services. The pair are also charged with investigating ways and means for the state to enter the power market as a universal service provider.

Prime Minister Viktor Orban has spent the past few years pledging to cut energy prices in a bid to make the economy more competitive. In two rounds of cuts in 2013, the government reduced regulated prices by a combined 20%. Gas prices have since dropped a further 6.5%, power prices by 5.7% and district heating prices by 3.3%.

A bonus from those energy price cuts was that they slashed inflation, thereby opening the way for interest rate cuts from the central bank ahead of the general election in April. Utilities were even obligated to note on bills how much customers were saving. However, Budapest is now awaiting the end of the effects as it battles deflation.

Orban’s ruling Fidesz party has long sought to make the utility sector “non-profit” and the government has said it intends to regulate prices to capture all income, leaving aside routine funds for re-investment. In February 2014, the government said that it would seek to impose a limit on the dividend payouts by power companies Elmu and Emasz, majority-owned units of German utility RWE. 

National champion

Meanwhile, the government has been busy buying up a host of energy infrastructure assets as it pushes international companies out of the gas business, including the main importer from Russia, which it bought from E.ON in late 2013. Those assets have been fed into state-owned MVM to build up a Hungarian "national champion". Fogaz joined the roster in October. 

While the government maintains that the purchases are part of a drive to reduce Hungary's dependence on Russian energy, some suggest it is rather that it wants to put itself in the middle of the lucrative trade. Reports now claim Budapest is ready to discuss selling some of the gas assets it has bought to Gazprom. However, the government has flatly denied that ahead of a controversial visit by President Valdimir Putin to Budapest in February.

MVM now says it's aiming to expand its portfolio in the Central and Eastern European region. The first step in that is a joint bid with Hungarian oil and gas group MOL for Slovakia's dominant power producer Slovanske Elektrarne.

Related Articles

UK demands for EU reform provoke fury in Visegrad

bne IntelliNews - The Visegrad states raised a chorus of objection on November 10 as the UK prime minister demanded his country's welfare system be allowed to discriminate between EU citizens. The ... more

Erste claims Hungary is breaking peace deal with banks

bne IntelliNews - Hungary will breach its February agreement with Erste Group if it makes the planned reduction in the bank tax conditional on increased lending, the Austrian lender's CEO ... more

Austria's Erste rides CEE recovery to swing to profit in Jan-Sep

bne IntelliNews - Erste Group Bank saw the continuing economic recovery across Central and Eastern Europe push its January-September financial results back into net profit of €764.2mn, the ... more

Register here to continue reading this article and 2 more for free or 12 months full access inc. Magazine and Weekly Newspaper for just $119/year.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

IntelliNews Pro subscribers click here

Thank you. Please complete your registration by confirming your email address. A confirmation email has been sent to the email address you provided.

Thank you for purchasing a bne IntelliNews subscription. We look forward to serving you as one of our paid subscribers. An email confirmation will be sent to the email address you have provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

If you have any questions please contact us at

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

IntelliNews Pro subscribers click here

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

Thank you. Please complete your registration by confirming your email address. The confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.