Hungary moves ahead on E.ON purchase

Feb. 4, 2013 at 12:06 AM
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BUDAPEST, Hungary, Feb. 4 (UPI) -- Budapest is moving ahead with its nationalization of German energy company E.ON's gas business in Hungary, Prime Minister Viktor Orban announced.

Orban, speaking Thursday to public Kossuth Radio's morning show "180 Minutes," said the Hungarian Electricity Works, MVM, had reached an agreement with E.ON to buy its four gas storage facilities as well as Hungary's contract for gas deliveries from Russia.

Orban's move continues an effort by his center-right government to consolidate control over Hungary's energy and utilities sector at a time when the European Union is going in the opposite direction, calling for markets to be opened to private competition.

Orban says the effort will result in more energy security and lower prices for Hungarian consumers, allowing the government to negotiate directly with Russian gas suppliers without the "corruption and overpricing" of multinational energy middlemen.

Opponents, however, denounced the move as a populist ploy for votes ahead of the 2014 elections and have labeled the purchase as an unwise use of borrowed funds that is unlikely to produce in any real consumer prices decreases.

"Thanks to the agreement, the government will have the opportunity to further reduce utility prices and the Cabinet is aiming to bring them down to at least the European average," Orban said in the broadcast.

Hungary announced in November it had signed a letter of intent to buy E.ON's gas facilities, and Orban indicated Thursday the deal was all but signed and sealed, with only technical details to be worked out.

He didn't announce a purchase price but said it was less than the $1.2 billion authorized by the Hungarian National Asset Management Co. The left-leaning daily newspaper Nepszabadsag, citing unnamed government sources, reported the purchase price was $1.1 billion.

U.S. energy analysts Stratfor said government's move, along with the 2011 purchase of a 21 percent stake in the national oil and gas company MOL, are part of a politically popular pushback against the 1990s privatization drive of the former Socialist government, reported.

Polls indicate Hungarian voters are in favor of the moves in the run-up to the 2014 elections, which is expected to be closely contested between the governing Fidesz Party and the Socialists allied with other opposition groups.

The E.ON move is also likely to be a sore point with the European Union, which is seeking energy market liberalization even as Brussels and the International Monetary Fund are negotiating with Orban over extending a much-needed line of credit to Budapest, Stratfor said.

The green-liberal Politics Can Be Different party, LMP, blasted the E.ON move Saturday, the Hungarian news agency MTI reported.

"It seems that Viktor Orban wants to nationalize everything," but the purchase, in fact, is very risky and irresponsible, LMP National Assembly member Gabor Ivady said.

He asserted a costly buyout of E.ON's assets wasn't necessary and that existing energy sector regulations were sufficient to ensure fair prices.

The LMP, he said, is demanding the government make public the data it used to reach the reported $1.1 billion price.

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