Hungary’s state electricity company buys out loss-making power plant from oligarch

Hungary’s state electricity company buys out loss-making power plant from oligarch
Hungary's state electricity company MVM takes 100% stake in the largest coal-fuelled power plant in the country
By bne IntelliNews January 5, 2020

Budapest Stock Exchange (BSE)-listed Opus Global, owned by Hungarian oligarch Lorinc Meszaros, signed a contract on the sale of its 72.66% stake in Matrai Eromu to state-owned electricity company MVM on December 23. The transaction could be closed in Q1 pending regulatory approval from Hungary and the EU.

MVM, holding a 26% stake before the deal, will take full ownership of Hungary’s second-biggest power plant and the largest coal-fired one with 500MW capacity.

The company employs more than 2,000 people directly and employs more than 5,000 including its suppliers.

MVM will take control of lignite mining rights, which will strengthen the country’s energy independence, the company said.

Opus partnered with Czech utility company EPH to acquire the 72.66% stakes in Matrai Eromu from Germany's RWE and EnBW in the spring of 2018.

A few days later Opus agreed to buy out its Czech partner's stake in the power plant.

The sale comes as no surprise to industry insiders as the preferential agreement with former owner RWE on carbon prices will expire in 2021. 

The company has saved billions of forints as a result of securing EUA (European Emission Allowances) prices as low as €5-6 per tonne, well below the €26 per tonne market price. Some analysts project prices to accelerate to above €40, which would make the operation of lignite power plants running beyond 2021 in Europe deeply unprofitable. 

Matrai Eromu booked HUF817mn (€2.5mn) loss in 2018 down from HUF9bn in 2017, but without low carbon prices, losses would have been far greater. Despite the losses, shareholders approved to pay dividends from the reserves in the spring.

The company’s future is also in danger as a result of tighter rules on carbon-powered plants in the EU, hence the sale by Meszaros to the state came at the right time.

Speaking to business daily Vilaggazdasag on the day the agreement was signed, CEO Miklos Gal said Opus decided to amend its strategy and rechannel capital accordingly in the light of new openings in energy trade and distribution during the year. 

After the sale of Matrai Eromu, Opus is planning to invest heavily in the energy sector targeting trading companies and renewables. Matrai Eromu has expanded its business to renewables.

In 2018 it inaugurated a 22.6MW capacity solar park from a HUF5.4bn investment. State-owned MVM has also invested heavily in solar energy with the aim of becoming the largest producer in the country.

In November, the BSE-listed firm acquired regional electricity distributor Titasz from E.On. Gal said Opus is planning to exploit synergies from the sale with plans to expand in the region, he said, naming Romania, Bulgaria, Serbia, Croatia, and possibly Slovakia as potential targets.

Opus is optimising its stakes outside its four strategic divisions and is planning to reduce ownership in other BSE-listed companies below 10%. Opus' business interests includes property company Appeninn and insurer CIG Pannonia.

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