Energy Market Actors
Starting in 1991, Hungary restructured, liberalised and privatised its energy sector. Today, the country’s energy industry is in majority privately owned.
Electricity market
Structure of power sector
Transmission
MVM (Hungarian Electricity Board), the former public monopoly, preserved the property of the transmission network as well as that of the single nuclear plant of the country. MVM is responsible for the imports and exports of electricity and plays the role of single buyer in the Hungarian electricity system. MVM has been restructured in a public company with commercial activities. In 2001, face to the rise of the selling prices to the distributors (+14%), the distributors asked the regulator for the authorization of importing electricity directly. The increase in capacities is controlled by MVM, which proceeds by calls for tender with 2 categories of power plants (200 MW and <200 MW).
The sector is composed of 12 companies of production and 6 regional companies of distribution: Dedasz, Demasz, Elmu, Edasz, Emasz and Titasz. The majority are held completely or partly by foreign companies. [Enerdata]
Production
The production is dominated by MVM (33% of the installed capacity), followed by Tractebel (25%), AES (15%) and RWE (10%) (2000). The American Xcek (NRG Energy groue) which purchased in 2001 Csepel (two thermal power plants of 390 MW and 190 MW) PowerGen; sold in September 2002 its Hungarian participations to the Swiss electrician Atel. AES has the majority of the company of Tiszai production. Powerfin-Tractebel has 49% of the capital of Dunamenti the largest company of production with a total capacity of 2220 MW. RWE and EnBw own the power plant of Matrai. EDF bought in December 2000 the shares of Fortum (45.39%) and Tomen Corporation (34%) in the cogeneration plant Eromu (BERt) in Budapest. BERt has a capacity of 262 MW and 2618 thermal MWt: it covers 2/3 of the heating needs of Budapest. EDF recently invested 30 billion forints (123 million euros) in the new power plant Ujpest (cogeneration) and has just signed an agreement to invest 30 billion forints (123 million euros) in the project Kispest of BERt (cogeneration plant). Only three companies of production are still public (Pecsi, Vertesi, Bakonyi), because privatisation failed. Their total capacity accounts for 1100 MW. [Enerdata]
Distribution
The distribution is dominated by 3 foreign companies:
- RWE (44% of the market in 2000)
- E.On (34%)
- EDF (22%).
[Enerdata]
Power system control
Since February 2002 the still state owned Independent System Operator MAVIR Rt. (the former National Power Control Centre) has been separated from MVM Rt. Its new owner is Ministry of Economy. [Enerdata]
Status of restructuring, privatisation and deregulation
New electricity Act
The new EU-conform Electricity Act was passed by the Parliament in December 2001. It is to prepare introduction of market opening in the electricity industry. The first step was taken on January 1st, 2003 when eligible customers with yearly consumption of 6,5 GWh or more have the right to choose their own electricity suppliers and have been granted network access. About 33% of electricity consumption of the country is concerned. The new regulation simplifies the licensing activity and makes it possible to implement power-plant projects on market base. An important change is that the new Act has partly eliminated the regulated price of electricity sold between producers and traders, between traders and eligible consumers. Regulated prices remain in the fields of transmission, distribution, system operation and in the field of public utilities. [Eurelectric]
Status of deregulation
After 1 January 2004, regulated prices will remain in force only for public-utility consumers. Electricity produced from renewable energy sources and with the utilisation of waste materials can get a so-called "green certificate". Export and import activity is partly liberalised: the eligible customers will have import rights up to 50% of their needs. Export/import activities will be allowed for electricity traders, public utility wholesalers, the independent system operator (to such an extent that is essential to do its tasks) and eligible consumers for their own consumption, but eligible consumers are obliged to purchase at least half of their consumption from domestic production until EU accession. The new Act created new concepts like eligible consumers, did away with the monopoly rights for export/import activity, took measures for separating different activities in accounting in such a way that companies should create different balance sheets, profit and loss statements as if the different activities were made by different companies. To ensure the minimum negative environmental impacts is the other main fundamental principle in the new Electricity Act. The electricity market opening will be gradual in Hungary and it is not determined when it becomes fully open.
Implementation of the Electricity Directive
- Access to the network Hungary intends to introduce regulated TPA - Regulator Parallel activities in the area of public supply, on the one hand and those of the competitive market, on the other, are to be licensed by the Hungarian Energy Office (HEO, staff 83). Licence-holders may then establish a power plant, transmission or distribution network based within the market.
- Competition in generation is supposed.
- Unbundling
Investors holding HEO licences have to separate in their accountancy activities within and outside the power industry. - Unbundling of TSO
An Independent System Operator MAVIR Rt. has been created. - Tariff setting
HEO’s role is to regulate prices by establishing an official tariff. However, this does not preclude eligible customers, traders and power plants from freely agreeing prices of electricity for the purposes of their transactions with each other. [Eurelectric]
Oil and gas market
Oil
Magyar Oil Company (MOL), is the national oil company whose activities go from exploration-production to refining and distribution. It results from the regrouping of the oil activities of the national former oil and gas company, OKGT (Orszages Koolaj es Gazi pari Troszi). MOL was privatised at 75%, the progressive privatisation of the remaining 25% is planned until 2003, when the deregulation of the gas market will be implemented. The capital of MOL is currently distributed between OMV (9%), international institutional investors (38%), national institutional investors (19%) and the Slovak companies Slovintegra and Slovbena.
MOL and INA, the Croatian oil company, started in August 1999 discussions in view of a merger but they did not succeed. This merger would have given access to MOL to the Adriatic, with the large refinery of INA (235 000 bl/day); the network of service stations of MOL, currently of 420, would have more than doubled with the 500 stations of INA. In 2000, MOL acquired 36% of Slovnaft, the refining company of Slovakia. In parallel, OMV acquired 9% of MOL in October 2000. [Enerdata]
Gas
MOL is the company in charge of the production, transport and foreign trade of natural gas; it plays the role of single buyer and supplies the companies of distribution, as well as the large industrialists. MOL restructured in 2000 its gas activity in 3 divisions (storage, transport and sale). Following the low gas pricing policy of the government, the sale department of MOL supports heavy losses (1 million USS/day). MOL wished that the State take in charge the department sale. The company had started negotiations in this direction with the preceding government, but the new government was opposed to this possibility.
Panrusgas, joined venture between MOL and Gasprom (50-50) is in charge of the gas imports coming from Russia.
The distribution of gas is ensured by 6 companies privatised since 1995. GDF holds a majority stake in two of these companies (Degaz and Egaz), E.On (ex Bayenwerk (Germany) and EVN (Austria) are associated in the control of Kogaz; Italgaz has Tigaz; Ruhrgas and EWE control Ddgaz and Fogaz.
MOL was present in the capital of four distribution companies from which it gradually withdrew since the beginning of 2003. [US DoE Erda]
Coal and lignit market
The reform of the coal sector remains very dependent on that of electricity, since most of the coal is used in the production of electricity. The government decided to privatise the most profitable mines (80% of the mines) by selling them with the electricity power stations which they supply. The least profitable mines were transferred to three regional public companies (Coal Reserve Utilisation Companies), the purpose of which is to organise their progressive closure The foreign trade is with the hands of Lignimpex, public company whose monopoly was abolished. [US DoE Erda]
