Hungary to buy back E.ON gas unit from Germany "imminently" - PM Orbán

More tax cuts

During a cc. 90-minute talk Orbán told an audience at the “Transit - Festival at the border" in the northwestern town of Kőszeg on Saturday that the only possible direction of the country’s economic policy is the one being followed now. “Reviewing the direction is unnecessary, I vote for persevering" he said, adding that he sticks to the economic philosophy that personal income tax and corporate income tax need to be lowed as much as possible and that the job protection action plan and the public work scheme also need to be seen through.

He said Hungary must continue its “economic freedom fight" started in 2010. He reiterated that European countries with a debt-to-GDP ratio of over 90% are in the “hopeless zone", i.e. in the clutch of creditors. There is a “direct danger zone" in the 70-90% range; the debt ratio between 50% and 70% of GDP is tolerable, while under 50% you find a “safe zone". The cabinet will lead Hungary to the latter zone, he added.

Two-thirds majority is solid

With regard to the disputes Budapest has with Brussels, Orbán said measures thought to be causing large conflicts - e.g. the overhaul of the pension system and the bank tax - had been brought forward because the Fidesz-KDNP alliance has a two-thirds legislative majority, and “these two-thirds stand stock-still and even if there’s some problem, fifty percent is [...] guaranteed."

This is why they knew that the disputes with the EU will be won and that some cases will be lost, but the cabinet was prepared for that.

The government was also able to use the clout secured by its two-thirds majority to undertake conflicts related to the repurchase of important companies. “[...] we have bought back MOL shares from the Russians, a part of the water works [...] from the French and we will buy back within minutes E.ON from the Germans."

It was reported a year ago that Hungary’s state-owned electricity wholesaler, the Hungarian Electricity Works (MVM), could gain control over the local gas business of German energy giant E.ON “in a short period of time".

According to local press reports, discussions about the acquisition of E.ON’s Hungarian gas unit were in an advanced stage. Under the deal MVM was reportedly in a position to gain ownership of E.ON Földgáz Trade, the biggest natural gas trader in the country, holding long-term gas supply contracts, and E.ON Földgáz Storage, which owns most of Hungary’s natural gas storage facilities.

MVM, owner of Hungary’s only nuclear plant in Paks, has offered EUR 800 million (HUF 223 bn at current rates) for E.ON AG’s Hungarian gas unit, according to a previous report, citing unnamed sources. The offer was not accepted at that time as Germany’s biggest utility demanded EUR 1.2 billion (HUF 335 bn) for the unit, which includes gas wholesale, import contracts and underground storage.

In view of these numbers and the 2012 and 2013 budget, it is unclear how the state would be able to pay for E.ON’s gas business. We need to note at this point that E.ON took over MOL’s gas business in 2006, which deal covered also the long-term gas supply contract with Russia and the country’s natural gas storage facilities.

• Tags:
• energy,
• e.on,
• economy,
• orbán,
• gas,
• mol