Budapest Business Journal 2918

HUNGARY’S PRACTICAL BUSINESS BI-WEEKLY SINCE 1992 | WWW.BBJ.HU

HUF 1,850 | €5 | $6 | £4

BUSINESS JOURNAL BUDAPEST

VOL. 29. NUMBER 18

OCTOBER 8 – OCTOBER 21, 2021

SPECIAL REPORT Energy

SPECIAL REPORT

Share of Solar Power in Hungary’s Energy mix Continues to Grow

The share of renewables in the energy mix is constantly growing, bringing about the need to develop the network and better storage capacities. Solar energy has seen the most significant increase in Hungary and will have a crucial role in achieving climate goals. 20

FOCUS

‘Solid Fundament’ Underlies ‘Diverse’ Relationship Germany’s Ambassador to Hungary Johannes Haindl discusses the bilateral relationship and the cultural ties that underline the economic partnership between the two countries. 15

‘Thank you, Hungary!’

N ES BUSI

SOCIALITE

Harvest 2021: All’s Well That Ends Well, Just About

Grapes have been harvested up and down the land. All in all, Hungary’s winemakers are relatively happy, given the quality of the crop after what was a tough beginning to the vintage. That said, they will certainly not be cashing in on a bumper vintage, for the most part. 31

NEWS

Moody’s Upgrades Hungarian Economy With Moody’s upgrading the Hungarian economy, all three international marketleading rating agencies now register the country with the same sovereign debt rating and outlook for the first time in several years. 3

S

The seventh person to win the BBJ Expat CEO of the Year title, Erik Slooten, thanked Hungary for being such a great place to do business, HIPA for being a supportive partner, and his team of 5,000 colleagues for constantly rising to the challenge.  8

BUSINESS

NIIP: Important but Seldom Used Metric

The Net International Investment Position (“NIIP”) is an ever-so-important, but ever-so-seldom used indicator of a country’s financial health, as Les Nemethy explores in his latest Corporate Finance Column. 14

2|1

News

www.bbj.hu

Budapest Business Journal | October 8 – October 21, 2021

BBJ

THE EDITOR SAYS

EDITOR-IN-CHIEF: Robin Marshall EDITORIAL CONTRIBUTORS: Balázs Barabás, Zsófia Czifra,

Kester Eddy, Bence Gaál, David Holzer, Levente HörömpöliTóth, Christian Keszthelyi, Gary J. Morrell, Nicholas Pongratz, Gergely Sebestyén, Robert Smyth, Zsófia Végh.

LISTS: BBJ Research (research@bbj.hu) NEWS AND PRESS RELEASES:

Should be submitted in English to news@bbj.hu LAYOUT: Zsolt Pataki PUBLISHER: Business Publishing Services Kft. CEO: Tamás Botka ADVERTISING: AMS Services Kft. CEO: Balázs Román SALES: sales@bbj.hu

CIRCULATION AND SUBSCRIPTIONS: circulation@bbj.hu

Address: Madách Trade Center 1075 Budapest, Madách Imre út 13-14, Building B, 7th floor. Telephone +36 (1) 398-0344, Fax +36 (1) 398-0345, www.bbj.hu

What We Stand For: The Budapest Business Journal aspires to be the most trusted newspaper in Hungary. We believe that managers should work on behalf of their shareholders. We believe that among the most important contributions a government can make to society is improving the business and investment climate so that its citizens may realize their full potential.

The Budapest Business Journal, HU ISSN 1216-7304, is published bi-weekly on Friday, registration No. 0109069462. It is distributed by HungaroPress.

Reproduction or use without permission of editorial or graphic content in any manner is prohibited. ©2017 BUSINESS MEDIA SERVICES LLC with all rights reserved.

BBJ-PARTNERS

VISIT US ONLINE: WWW.BBJ.HU

CONGRATULATIONS, ENJOYMENT, AND RESTRICTIONS (MAYBE) There can be only one place to start this issue’s editorial, and that is with warm congratulations to Erik Slooten, CEO of Deutsche Telekom IT Solutions Hungary, on being named the winner of the (much delayed) 2021 BBJ Expat CEO of the Year Award on September 24.

We should equally say “well done” to our two runners-up, Prabal Datta of Tata Consultancy Services and Daniel Korioth of Bosch. It was an extremely strong lineup this year. Melanie Seymour of Blackrock, last year’s winner and this time round a member of the awards jury, said in announcing the winner that, having been on both sides of the fence, she could confirm choosing first the shortlist and then the winner “really is a process” and no easy task.

At the risk of seeming immodest, I think it is fair to say the enjoyment and excitement on the evening were palpable. I suggested to Róbert Ésik, CEO of our official event partner HIPA, that some of that was down to the simple joy people had at being back in a room with a large group of peers, partners, and friends. He was kind enough to respond that, as we had put on the event and made that coming together possible, we should allow ourselves at least a modicum of praise.

Part of that sheer pleasure in human interaction comes from the novelty factor. We were deprived of it for so long, we have learned to appreciate it anew. And lurking in the background, adding a certain imperative to make hay while the sun shines, is the question no one wants to ask: Might it be taken away from us again?

I had an interesting conversation on that very point with the head of communications at what we might call (although I don’t like the term) one of the “Western” embassies. This person has a theory that some form of restrictions might well return, but not before the end of the international “One With Nature” World of Hunting and Nature Exhibition, which began the day after our gala and runs until October 14.

My contact says this theory is based, in part, on the fact that when it was shared, as a joke, with someone involved with the Operative Corps coordinating the COVID response, the suggestion was met with a wideeyed stare and a demand to know “Where did you hear that?” Perhaps they were playing along, who can say; I merely pass it along and note that you read it here first!

It is worth pointing out that the prime minister has said restrictions, if needed at all, would not return “until the last minute possible.” You can read more about that in our regular Coronavirus Roundup inside. There is also extensive coverage of the gala (well, as I said several times on the night, we are a media company), a Special Report on the Energy Sector and, just a few days after German Unity Day (marking the reunification of the GDR and the FRG, of East and West) on October 3, we have a Country Focus on German investment in Hungary and the bilateral relationship. Enjoy our latest issue.

Robin Marshall Editor-in-chief

ADVERTISEMENT

and

present

28-29 OCTOBER

SAN FRANCISCO

WARSAW

DAPHNE CHEUNG

IAN × 21 SYLWIA MACKENZIE CHADA

The Walt Disney Company, Senior Data Analyst, Engagement & Retention Analytics

FCB/SIX, Chief Creative Officer & Performance Art

LONDON

MANCHESTER

TikTok, General Manager of Global Business Solutions CEE

PHILADELPHIA

JENNIFER CLINEHENS

LAUREN KELLY

MICHAEL SOLOMON

PAVEL STANCHEV

Havas CX Helia, Customer Experience Strategy Director

BehaviourStudio and BehaviourAcademy, Design Psychologist

Professor of Marketing & Expert on Consumer Behavior: Why do they buy?

TV2 Group, CEO

TIBOR RÉKASI

SZABOLCS MÁRTON

FÖRDŐS ZÉ

CSABA KAJDI

Telekom Hungary, CEO

Republic Group, Creative Director

Host of Street Kitchen, Presenter

Owner Of Visage Model Agency, Influencer

AND MORE THAN 100 SPEAKERS!

TICKETS AND MORE INFO: WWW.BRANDFESTIVAL.HU HIGHLIGHTED SPONSOR

TORONTO

SPONSORS

PARTNERS

MAGYAR LAPKIADÓK EGYESÜLETE

BF_2021_SAJTOMEGJELENESEK_BBJ_252x158.indd 3

2021. 10. 06. 9:02:10

1

www.bbj.hu

Budapest Business Journal | October 8 – October 21, 2021

News///macroscope

Moody’s Upgrades Hungarian Economy, Warns of Long-term Risks

With Moody’s upgrading the Hungarian economy, all three international market-leading rating agencies now register the country with the same sovereign debt rating and outlook for the first time in several years.

ZSÓFIA CZIFRA

International rating agency Moody’s raised Hungary’s sovereign debt rating to “Baa2” from “Baa3” at its scheduled review on September 24. Moody’s also changed the outlook for the Hungarian sovereign rating from “positive” to “stable,” the former having been effective since September last year.

In the rationale for its decision, the rating agency cited as one of the main factors for the upgrade the strong growth rebound throughout the first half of this year, which also contributed to the stronger resilience of the Hungarian economy.

Effective fiscal and monetary policies also supported this, Moody’s noted.

Numbers to Watch in the Coming Weeks The Central Statistical Office (KSH) will publish the September inflation data today (October 8).

On October 13, the second, more detailed reading of the August industrial production figures will be released. The next day, construction industry data for August will be out.

Industrial Production in Hungary, 2001-2021 (January-August) Producer volume index

Source:

Moody’s expects Hungary’s potential GDP growth to be around an annual 3-4% over the next five years. The agency points out that due to the coronavirus epidemic, Hungary’s gross domestic product contracted by 5% last year, which is less than the European Union as a whole, where the average setback to the economic performance was 5.9% in 2020.

According to Moody’s forecast, the medium-term outlook of the Hungarian economy until 2025 is underpinned by high investment rates, which reflects Hungary’s attractiveness to foreign investors and the Hungarian government’s growth-friendly economic policy, including low corporate taxes and ongoing reductions in employers’ social security contributions.

The investment rate in the Hungarian economy was 27.6% of GDP last year, which is higher than the EU average of 22%, the rating agency points out in its analysis. Moody’s emphasized that none of the major investment projects - including capacity expansion projects in the automotive industry and greenfield projects - were canceled in Hungary last year.

Near Future

As for the near future, Moody’s calculates with a net positive inflow of foreign direct investment into the Hungarian economy corresponding to 0.3% of GDP during 2021-2025.

According to the credit rating agency, the extra room for maneuver resulting

from stronger-than-expected economic growth this year will be largely used by the government; however, it believes that the budget deficit could be 6.5% of GDP instead of the officially targeted 7.5%.

Thanks to strong economic growth, the debt ratio may also start to decline in the coming years, shrinking by almost four percentage points to 76.7% by 2023.

Moody’s also points out that one of the long-standing risks related to the Hungarian debt rating is the relationship between the government and the EU, which has now culminated in the temporary suspension of the recovery fund’s resources and the possible suspension of subsidies for the 2021-27 cycle.

According to the agency, there will be an agreement sooner and later, and the temporary slip will have a minimum impact on the country’s growth and the budget.

Other long-term risks to Hungary, as Moody’s points out, include an aging population, possible difficulties in valuing supply chains, the need to improve innovation and productivity, and ensuring further catching-up.

Further Upgrades?

According to the credit rating agency, if fiscal discipline returns faster than planned, it could lead to a further upgrade in the future. In addition, the implementation of structural reforms and the National Bank of Hungary’s competitiveness reform proposals could positively affect the current rating.

On the other hand, a slower-thanexpected reduction in the budget deficit or a slowdown in the debt ratio would justify a negative move, the rating agency warns.

Additional risks include a further deterioration of relations with the EU, a permanent suspension of aid, and the implementation of possible economic policy measures that would undermine growth, Moody’s said.

“It is surely a surprise that Moody’s upgraded Hungary,” said Gábor Regős, head of the macroeconomic department at research institute Századvég in a statement reacting to the upgrade. According to him, although a positive outlook had been in place for a year, given the pandemic situation, it could be expected that upgrading would only occur later, if at all.

With Moody’s latest move, all three international market-leading rating agencies register Hungary with the same sovereign debt rating and outlook for the first time in several years. Moody’s new “Baa2” rating for Hungary corresponds to “BBB” in the methodology of the other two major credit rating agencies, Fitch Ratings and Standard & Poor’s.

Upgraded Forecasts Hungarian analysts and international institutions have continued upgrading their forecasts for the Hungarian economy. The latest to do so is Takarékbank, where head analyst Gergely Suppan said that the growth of the Hungarian economy could be as much as 8% this year, based on betterthan-expected data in the third quarter.

This year, the driving force for growth is investment, and employment is already above pre-epidemic levels. Takarékbank now maintains its growth forecast for next year at 7%, with the possibility of further increases in the minimum wage and the skilled minimum wage. In the second half of this year, labor shortages may re-emerge, which could accelerate wage growth.

Due to the constraints in the first quarter and partly in the second quarter of this year, the base for growth in the first quarter of 2022 will still be low in some sectors. Therefore, robust growth can be expected in the coming quarters, supported by the recovery of the labor market and strong wage dynamics.

4|1

News

www.bbj.hu

Budapest Business Journal | October 8 – October 21, 2021

Orbán: No Restrictions Until ‘Last Minute Possible’ Coronavirus ///roundup been vaccinated in Hungary, even though those vaccinated against the coronavirus are much less likely to get sick and those that do have much milder symptoms.

Deliveries of the COVID vaccine developed by Pfizer and BioNTech continue to be delivered to Hungary, with a shipment of 170,000 doses on September 23, 420,000 on September 28, and 150,000 on October 5. Pfizer Gyógyszerkereskedelmi said the latest batch raises total deliveries of the Comirnaty vaccine to Hungary to close to 9.5 million doses.

At the general assembly of the World A woman is vaccinated with a third, booster dose of the German-American Intellectual Property Organization NICHOLAS PONGRATZ Pfizer-BioNTech coronavirus vaccine, Comirnaty, at the Ferenc Markhot (WIPO) in Geneva on October 4, Minister Hospital in Eger on October 5, 2021. Pfizer Gyógyszerkereskedelmi of Foreign Affairs and Trade Péter With a vote of 112 for, 25 against, and no says total deliveries of the Comirnaty vaccine to Hungary are now to Szijjártó acknowledged a push by some for abstentions, MPs decided to extend the close to 9.5 million doses. Photo by Péter Komka / MTI. a patent waiver on COVID vaccines, but effect of the legal provisions until January said the Hungarian government believes 1, 2022. The regulations had been set to such a move “could discourage the Herd Immunity? expire 15 days after the start of the fall “until the last minute possible” in continued work of researchers in future.”

According to virologist Miklós Rusvai, session of Parliament, on October 5. The an interview on Kossuth Rádió on Meanwhile, Semmelweis University the Hungarian population will be law also says that the government could September 24. He added that nothing became the first institution in the end the state of emergency early, before should be introduced that made anybody protected against the coronavirus EU to examine a patient as part of an within a year and a half, either through its cancelation deadline. feel they were being treated unfairly. international clinical trial program for vaccination or re-infection. The The decision comes as coronavirus “It wouldn’t be right, when two-thirds testing oral medicine against COVID-19, pathogen will still be present, but concentrations in wastewater continue of the country is inoculated, six million according to state news agency MTI. everyone will have partial immunity to rise, the National Center for Public people, to restrict them because a Rector Béla Merkely said the medical from then on, and the coronavirus will Health (NNK) said on October 4, minority in the country doesn’t want to school would offer COVID patients that not cause a problem, he said. according to its latest data. The public get inoculated,” he said. qualify and come to the university’s Globally, Rusvai predicted that health authority added that the samples “If there are any kind of restrictions, I facilities a chance to participate in the overcoming the epidemic could take two show an upward trend nationwide. will propose a return to using immunity trial. The program is being carried out to three years. However, the virologist Despite this, Prime Minister Viktor certificates which differentiate between in 400 research centers, including six also told the M1 TV news channel on Orbán said he would argue against those who took the responsibility of in Hungary, to verify if oral antiviral September 26 that as many as 400,000 introducing restrictions during any getting inoculated and those who didn’t medicine can help reduce the duration or people over the age of 60 had still not potential fourth wave of the pandemic take that responsibility,” Orbán said. severity of COVID-19.

The Hungarian Parliament voted on September 27 to extend the effect of government decrees issued by the government under the state of emergency declared because of the coronavirus crisis, according to state news agency MTI.

HelloParks Starts Construction of Fót Megapark HelloParks has celebrated placing the first column of its initial 45,000 sqm warehouse in Fót, close to Budapest. The development, worth almost EUR 50 million, is the opening phase of a project due to be handed over in the first quarter of 2022.

GARY J. MORRELL

The development is being constructed on a 76-hectare plot with the capacity for a total of 330,000 sqm of warehouse and industrial space. HelloParks says it is targeting logistics service providers, light industry manufacturers, and assembly companies, as well as tenants with special requirements.

At the same time, the first tenants have started to move into HelloParks’ Maglód megapark, also located in the Budapest area.

“The composition of tenants is already outlined: negotiations are at an advanced stage, mainly with e-commerce, parcel logistics, and courier businesses, as well

HelloParks as logistics companies serving a single manufacturing company,” comments the Futureal Group, HelloParks’ parent company. The firm recently announced another large-scale development close to Budapest at a 100-hectare site in Páty.

“All three are highly competitive, efficient, and sustainable megapark developments that have been launched in just over a year by HelloParks, driven by the company’s aim to become a key player of the industry,” the company says.

Initial steps will be taken in Hungary before it later steps out into the whole

CEE market, with the aim of contributing to the improvement of Hungary’s position in the international logistics market.

Growing Trend

The Futureal HelloParks project reflects the growing trend for developers in Hungary and the region who have not traditionally been industrial developers to move into the sector due to anticipated long-term high demand and low supply.

“To improve Hungary’s competitiveness, the construction industry must also change. Logistics companies typically like to move into facilities within a year, which

currently cannot be properly implemented in such a short time unless the area has already been set,” comments Rudolf Nemes, CEO of HelloParks.

“This trend is again something that HelloParks developments can respond to; keeping the deadline, we recently handed over a 46,000 sqm warehouse building as the first phase of the Maglód industrial and logistics megapark, where the first tenant has already moved in just five months after construction started,” he explained.

“We are experiencing strong interest from prospective tenants; we are in advanced negotiations for all our free space in Maglód, and our next tenant will move in soon. [...] We have already started planning and permitting the next phases so that we can serve existing and future needs as quickly as possible,” Nemes says.

“We think there is a lot of space for other players who really intend to improve the industry. There is a need for a change in the mindset with regards to sustainability that enhances the wellbeing of the people working in the warehouse, of course with zero impact on nature and to the benefit for the local communities,” the CEO says.

“Round Budapest, we will have at least the three locations we have at the moment, and there will be possibly four or five. Outside of Budapest, there will be further locations in the countryside, and we will enter other countries in the region,” he promises.

1

www.bbj.hu

Budapest Business Journal | October 8 – October 21, 2021

News | 5

Opposition Primary: Dobrev Wins Round 1, but Karácsony, Márki-Zay may run as duo in 2nd Round MEP Klára Dobrev, along with her party, the Democratic Coalition (DK), emerged as the winners in the first round of the opposition coalition pre-elections, which took place at the end of September.

However, an agreement by Gergely Karácsony (second in the vote) and Péter Márki-Zay (third) may mean one or the other is likely to end up as the opposition prime ministerial candidate next spring.

KESTER EDDY

Dobrev’s determined efforts to campaign across the country this summer before the opposition coalition primaries brought their rewards as the DK MEP was the most popular choice of voters in an astonishing 85 of the country’s 106 individual constituencies, garnering 214,319 votes, or almost 35% of the total.

Karácsony, Mayor of Budapest, representing the two green parties, Dialogue and LMP, plus the Hungarian Socialist Party (MSZP), cornered second place with just over 168,000 votes, a 27% slice of the total. Márki-Zay, Mayor of Hódmezővásárhely, proved most pundits wrong, garnering more than 123,000 votes (20%) to take third place.

Márki-Zay’s result is all the more impressive given that he lacks an official party, with only his Everybody’s Hungary Movement (MMM) in direct support.

However, his strong performance in the candidate debates, his well-known religious faith, and his reputation for clean and all-embracing governance of his hometown resonated with many traditional conservatives across the country.

The three most popular candidates move on to the second round of the primaries to determine the winning united opposition prime ministerial candidate for next spring’s general election. Voting will take place between October 10-16.

Péter Jakab, representing the hardright Jobbik party, with 14%, and

politicians, essentially handing control of government to the eventual prime minister and his closest aides, should they win the general election in 2022.

First Round Results Klára Dobrev Democratic Coalition (DK)

214,319 (34.76%)

Gergely Karácsony MSZP, Dialogue, LMP

168,396 (27.31%)

Péter Márki-Zay MMM

123,453 (20.02%)

Péter Jakab Jobbik

86,909 (14.1%)

András Fekete-Győr Momentum

20,944 (3.4%)

Sharp Reaction

Source: Political Capital

Momentum’s András Fekete-Győr, came fourth and fifth respectively and dropped out of the second round.

In her victory speech, Dobrev (dressed as usual in strong, bright colors) declared that “the [political] change has begun.”

On paper, the results should mean she is in pole position to become the opposition’s elected nominee to do battle with Prime Minister Viktor Orbán before the country next spring.

Rarely Straightforward

However, Hungarian politics is rarely straightforward, as the current situation proves only too well. First, the Democratic Coalition’s supporters and voters are highly motivated, meaning it is questionable how many more votes can be cajoled out of the electorate in support in round two.

Second, as the governing party Fidesz never ceases to remind the public, Dobrev is the wife of former MSZP Prime Minister Ferenc Gyurcsány, a self-confessed “liar to the nation” who was, as the government would have it, responsible for all Hungary’s economic ills in the first decade after the millennium.

Speaking about her campaign strategy, Róbert László, election specialist with Budapest think tank Political Capital says: “Klára Dobrev is the professional, she’s the one who can govern, she’s the expert who knows how a state goes, who knows bureaucracy from the inside and who has the experience in the European Parliament.”

In addition, she has positioned herself as someone who doesn’t just want an election victory, but who also knows how to govern and handle the country should she win, he argues. “Yes, she can be a really good expert, but, unfortunately, she’s the wife of Mr. Gyurcsány,

and she will be rejected by voters who are fed up with the pre-2010 world.”

This exact concern had prompted many analysts to forecast that Karácsony would emerge as the ultimate winner of the primaries, based on the premise that he would be the best compromise candidate of the expected three leading politicians from the first round. But that trio included Jobbik’s Jakab (who would be rejected by the vast majority of Budapest voters), not the democratic conservative Márki-Zay. Within minutes of the first-round result, Márki-Zay and Karácsony began talking of an electoral alliance specifically designed to prevent a Dobrev victory in the second primary, with Márki-Zay even speaking about “pre2010 corruption,” effectively taking up the Fidesz campaign line.

As this publication went to press, the two politicians were stating that they would run “as a joint duo” on the voting slips, although their decision on who would become the prime ministerial candidate remains open.

In addition, both are advocating a “government of technocrats” rather than

Unsurprisingly, these moves prompted a sharp reaction from the Democratic Coalition.

“If any PM candidate now declares that he wants an expert government, he is attacking a most basic parliamentary democratic statute. [...] This is unacceptable [...] because [...] he will not be restoring parliamentary democracy, but rather continuing the Orbán system,” Csaba Molnár, DK campaign manager, declared on Facebook.

Márki-Zay, apparently aware of how a rift in the opposition alliance now could damage the greater cause, has since sought to calm the waters, speaking of Dobrev as the likely foreign minister in a future Karácsony/Márki-Zay government.

György Magyar, a lawyer and chairman of the primary election committee, condemned any idea of a “duo” between Karácsony and Márki-Zay, telling the website hvg it was “against the rules” and a “mockery of the electorate.”

Dobrev and her closest supporter, meanwhile, have maintained a dignified, statesmanlike approach.

“The Democratic Coalition will, of course, not back out of the opposition alliance. For us, there this has never been an option. We believe that such a coalition is the key to the opposition’s 2022 victory. The ‘return to the pre2010 world’ is part of Fidesz’s narrative,” Ágnes Vadai, DK vice president, told the Budapest Business Journal in an emailed answer to questions.

“At the same time, let us also be clear that whoever condemns the ‘pre-2010 world,’ also questions the values of the then existing Republic of Hungary,” Vadai cautioned.

“Ultimately, what we are interested in is the opinion of the people, and in the first round of the primary elections, they decided, by a large proportion, that they wanted to see Klára Dobrev as the opposition’s joint prime ministerial candidate.”

The three politicians will face off in a much-awaited televised debate on RTL Klub on October 13.

DK Ahead in Constituency Candidates The Democratic Coalition also proved strongest in the selection of joint candidates for Hungary’s 106 individual constituencies, the most crucial element in Hungary’s 199-seat parliament. (The remaining 93 MPs are elected via party-list votes.)

DK secured 32 candidates, followed closely by Jobbik with

29, and the Socialists with 18.

Momentum’s would-be MPs fared better than their leader in the prime ministerial race, the liberal, pro-Europe newcomers garnering 15 candidates, while Dialogue (seven) and LMP (five) means the two small green parties will also be present at next year’s general election.

6|1

News

WHO’S NEWS

www.bbj.hu

Budapest Business Journal | October 8 – October 21, 2021

Do you know someone on the move? /// Send information to news@bbj.hu

ConvergenCE Names Leasing Manager Judit Kolozsi recently joined real estate developer and investor ConvergenCE’s leasing department as a leasing manager.

After graduating from the Faculty of Law of the University of Miskolc, Kolozsi utilized her legal knowledge at an international law firm, at British Telecom, Judit Kolozsi and in public administration.

She also worked at the Hungarian venture capital fund of the Japanese SBI group and later at AIG Investments, where she was responsible for office leasing and operational duties. Combining her previous experience and legal expertise, she performed operational and legal tasks at a startup under CEU’s incubator program.

Dóra Papp-Vas, director of leasing at ConvergenCE, commented, “We are delighted to welcome another highly qualified member to our team. Judit enriches ConvergenCE with valuable knowledge and diverse experience. The success of our current office buildings and our ambitious plans for the near future justified the expansion of our leasing team. Judit is a great addition to our company, both personally and professionally.”

Csaba Zeley, managing director of ConvergenCE, added, “More and more clients are counting on our leasing business line offered among our integrated services.

In addition to our own buildings, other developers and investors are also cooperating with us in this area. Therefore, Judit’s arrival fits perfectly into the organic organizational development process that is essential to perform our growing tasks and to serve our clients and investors at the highest level.”

New CEO to Lead Heineken Hungária Nikos Zois succeeded Geert Swaanenburg in the position of CEO at Heineken Hungária on October 1. Having held the position since 2018, Swaanenburg will continue his career as managing director of Heineken Germany.

“In Hungary, I have found a new home, made many great friends, and had wonderful experiences; thus, I had mixed feelings when accepting this new and honorable assignment. Heineken sees Germany as a highly important market with significant opportunities for our excellent global portfolio, and one with many exciting challenges ahead of it,” said Schwaanenburg.

“On the other hand, I feel sorry to leave Heineken’s Hungarian team. The company is currently in great shape. We have managed to reach a market-leading position in the last few years, and not only our brand portfolio is stable, but the satisfaction of our colleagues and external partners is also increasing steadily,” he added.

“With Nikos, the company will get a strong and supportive leader who has been a member of the Heineken family for a long time. He is an extremely Nikos Zois experienced colleague, committed to good causes. I wish him the greatest success,” Schwaanenburg added.

Zois has been a member of the Heineken team for 30 years. He has worked as the general manager of the subsidiary in Serbia since 2019 and led operations in Bulgaria for two years prior to that. He has been a top team member since 2010, when he was appointed sales director of Heineken Greece.

He had held various managerial positions in sales before that.

The new CEO will oversee the execution of the company’s “Evergreen” ESG strategy and aims to increase further the market share of Heineken in the premium category in Hungary.

“It is an honor for me to have been appointed CEO of Heineken Hungária,” noted Zois. “I feel enthusiastic about my new assignment in a country with a long history and very dynamic beer market. I am committed to maintaining the strategy of growth my predecessors have laid down and to pursuing continuous improvements. I want the Hungarian operation to be a role model in the country as well as for the whole company group in terms of consumer choices, the

efficiency of work processes, and employee development and satisfaction,” he said.

“In line with these goals, our vision of success includes strengthening the company’s role in generating value for the Hungarian economy, the environment, and society as a whole, so that Heineken Hungária can further enhance its position as a top employer in Hungary,” Zois added.

and a master’s degree from the University of Debrecen. Besides his native Hungarian, he is fluent in English and German.

New Managing Director at Helm of Wolt Hungary

Wolt Hungary has made a management change: from mid-September, László Sabjányi became the company’s managing GTC Hungary Appoints director, while his predecessor, Ákos Tajta, continues as managing director for the Ede Gulyás Deputy Central European region and the Baltic States.

Country Head Sabjány has Globe Trade Center (GTC) has announced it more than 15 has promoted Ede Gulyás to the position of years of senior deputy country head, effective from August management 1. Gulyás is now responsible for all GTC’s experience. He operations in Hungary. holds a PhD in He has been active in the real estate sector Economics from for 20 years, serving 10 years as the head of the Corvinus multiple real-estate investment companies University of László Sabjányi Budapest and an with class “A” office and retail buildings.

Prior to joining GTC in 2021, Gulyás MBA from the led CA Immo Hungary Kft. as managing Wharton School at director, where he oversaw the company’s the University of Pennsylvania. successful merger with Europolis.

After 14 years in London in senior positions Previously, he oversaw a more than EUR in technology and consulting firms, he moved 500 million commercial real estate portfolio to Budapest in 2010 as director of strategy of more than 10 class “A” office buildings, and retail at Vodafone. In 2012, he joined as well as retail and industrial properties Boston Consulting Group, leading business with approximately 200 tenants. transformation projects in the telecom and “Ede Gulyás’ promotion is a recognition technology sectors across Europe and Asia. In of his outstanding management skills and 2015, he was appointed global sales director in-depth sector knowledge: with a thorough for the Amsterdam-based VEON Group, one insight into our properties and the portfolio of the world’s largest telecom operators, where development strategy, Ede will strengthen he was responsible for markets in 12 countries, our operations in Hungary and help us grow including their digital transformation. as a group,” said Yovav Carmi, CEO and “I am honored to work for one of the world’s president of the GTC management board. most successful digital firms. I’m stepping into Commenting on big shoes, as my predecessor has built one of his appointment, Hungary’s largest food delivery companies over Gulyás noted, “My the past three years; almost everyone knows expertise in real the blue Wolt logo, so it’s a big challenge to estate management continue this success story,” he said. will help adjust and “At the same time, Ákos will remain with implement GTC the company as regional manager, and we Hungary’s local will work closely together, so the transition strategy, including will be seamless,” he added.

Ede Gulyás managing standing Talking about his successor, Tajta noted, investments “We have had a very intense three years, from with a focus on an initial team of 8-10 people to over 200 in occupancy and rental income improvement Hungary - not including courier partners. as well as acquiring and developing futureI am delighted that we have found a new proof sustainable properties.”

Hungarian managing director in Laci, as the Gulyás holds an MBA in business and professional background and experience he managerial economics from Budapest’s brings with him will lay the foundations for University of Technology and Economics further success in the years to come.”

ADVERTISEMENT

Ask for the Budapest Business Journal’s daily English-language premium newsletters

NOW Ask for a ten-day trial!

and get the latest news about Hungary, the region and the energy industry direct to your email intray early each work morning

Contact: circulation@bbj.hu

· Tel.: +36/1/398-0344

www.bbj.hu

Budapest Business Journal | October 8 – October 21, 2021

PARTNER CONTENT

Photo by fauxels / Pexels.com

Outsourced Knowledge Sharing: A Competitive Advantage for BSCs A new online knowledge-sharing program, specific to the business services sector (BSS), is being launched this quarter.

Targeting new joiners at entry-level positions, it could be an effective alternative to in-house onboarding programs.

does not happen at the same pace for everyone. Onboarding processes can be optimized to facilitate more effective learning, turning diversity in the workplace into an obvious advantage early on.

Several successful onboarding strategies exist. Before remote working gained popularity, entry-level employees were welcomed with a series of in-person events at the office, some of which were educational, and others team building.

A downside to this is that experienced colleagues have to forgo other duties while teaching the new joiners, but their knowledge exchange is often heavily focused on their field of expertise. This can

make it difficult for some new employees to tell specific details apart from the necessary information about the whole sector, which increases communication difficulties during collaborations with higher-level colleagues.

Online Focus

Today, when the focus has dramatically shifted to online solutions in the workplace, foreshadowed by the already outstanding digital compliance of the sector, onboarding is the next process on the list.

Knowledge sharing, a vital element of the process, can be executed much more effectively using online platforms

Online Retailer eMAG Expects Strong Growth to Continue in 2021 Online retailer eMAG has opened its largest store to date in the recently inaugurated Etele Plaza shopping mall in Budapest. The company says it aims to offer customers the opportunity to test products on-site but also to make available more products than in any other eMAG store from a warehouse in the vicinity.

BALÁZS BARABÁS

Apart from the Hungarian preference for a hands-on shopping experience, statistics indicate that online buyers prefer to collect their

News | 7

because they allow more information to be shared with a broader audience.

This demand is being met with a new initiative created by KnowledgePyramid. The program’s name, KeyStone, alludes to the stability that an overview of the BSS can offer.

This is precisely what the platform does: modules address the various core topics in the field, each led by a professional with decades of experience.

Knowledge sharing, a vital element of the process, can be executed much more effectively using online platforms because they allow more information to be shared with a broader audience.

BBJ STAFF

Hungary’s role in the Central and Eastern European market remains significant, being home to more than 200 service centers with 75,000 employees as of the end of 2020. That equates to 1.3% of the country’s total employment and still increasing. The sector has grown by 10% every year, based on the average of the last five years’ data.

Service centers are well known as multicultural work environments, with new joiners coming from very diverse backgrounds. With career changers as well as fresh graduates increasingly choosing BSCs, experience levels also vary greatly.

Hence, learning about one’s position, and becoming part of the community,

1

purchased products from stores rather than waiting for couriers at home.

In order to meet this demand, eMAG says it is making shipments twice a day to the new store.

The most popular products

The program is being launched initially in collaboration with the University of Pécs, with the Metropolitan University of Budapest planned as the next partner. Among the module leaders are Emese Pataki, Ismail Ahmed, Balázs Egri, Krisztina Molnár, Ferenc Sitkei, Timea Varga, and Miklós Manasziev.

The courses are held online: students, graduates, and even entire teams or divisions of companies can apply.

The benefits of outsourced knowledge sharing are not new to leaders of business services centers: investing in an external program instead of in-house solutions allows for better resource management, while work based on the same knowledge and values creates more employee satisfaction.

KeyStone’s founder, Monika Slomska, has highlighted that the platform is “not just getting the new workforce ready for the future;” the program’s goal is to “help them be the future.”

Substantial Growth

“On the contrary, last year, due to the pandemic, the Hungarian electro-IT market already saw substantial growth of 30%, and for this year, eMAG expects even more significant expansion, of 35%. As for eMAG, the company expects a

20% growth

eMAG CCO Catalin Dit ordered online with in-shop delivery are smartphones, smartwatches, earphones, and notebooks, eMAG says.

Chief commercial officer Catalin Dit told the Budapest Business Journal that all this does not mean that the online market is shrinking.

for 2021,” Dit explained.

The online retailer has business units in Romania, Hungary, and Bulgaria. Dit also shared details regarding shopping habits in those countries.

“Hungarians seem more calculated; they buy mostly products that make their lives easier, for example, dishwashers, and in general, their priority is ‘value for money.’ On the other hand, Romanians target the latest models of premium brands, using the products in most cases to show off. While the purchasing power is still higher in Hungary, Romania is catching up,” Dit told the BBJ.

2

www.bbj.hu

Budapest Business Journal | October 8 – October 21, 2021

Business

Erik Slooten Triumphs at BBJ Expat CEO Gala “Most obviously, there are the healthcare workers, especially those in the front line. The doctors and nurses who worked shift after long shift in hospitals and clinics and nursing homes, the GPs who had to find new ways of holding surgeries, and ambulance drivers and paramedics whose sirens could be heard all over an otherwise silent city,” he noted.

Erik Slooten, of Deutsche Telekom IT Solutions Hungary, took home the BBJ Expat CEO of the Year award at the seventh annual Expat CEO Gala, held at the Corinthia Hotel Budapest on September 24. The HIPA Partnership award went to Nevijo Mance of Jaguar Land Rover Hungary.

BENCE GAÁL

The gala was held in the exclusive Grand Ballroom of the hotel. The event was originally planned to take place in January this year but was postponed due to strict pandemicrelated restrictions in place until the summer.

The BBJ Expat CEO award is given to the foreign CEO working and living in Hungary, who is considered to have done the most to contribute to the development of the Hungarian economy and its international recognition with their

Expat CEO Roll Call Slooten is the first Dutch national to win the BBJ Expat CEO of the Year award. The 2020 winner was BlackRock’s Melanie Seymour, the only Brit to date to be recognized as the Expat CEO of the Year. TairaJulia Lammi, CEO of ABB Hungary Kft., won the award in 2019, becoming the first Finnish winner

Melanie Seymour (left) and Erik Slooten. professionalism and dedicated work.

The award has been granted every year since 2015.

“The BBJ is Hungary’s only Englishlanguage economic bi-weekly and has always played an important role in providing information for expat CEOs working and living in Hungary. That is why we decided to found an award to recognize their efforts annually,” explains Balázs Román, the CEO of the Budapest Business Journal.

The exclusive gala dinner featured many of Hungary’s most important

expat company leaders and their spouses and partners, distinguished guests such as Hungarian Investment Promotion Agency (HIPA) head Róbert Ésik, as well as several ambassadors and diplomats.

Each year, BBJ’s official event partner, HIPA, presents its Partnership Award in recognition of the work of foreign-owned multinational firms for the use of local suppliers in their value chain and of the ambassadorial role their CEOs play in representing Hungary to their home boards.

and the first woman, while in 2018, the title went to Marc de Bastos Eckstein, CEO of Thyssenkrupp Components Technology Hungary Kft. In 2017, it was Jörg Bauer, then of GE Hungary, in 2016 it was Jost Ernst Lammers, of Budapest Airport Zrt. (all three German nationals), and the inaugural award was presented to Spain’s Javier González Pareja, of Bosch Magyarország.

Before the main awards, BBJ editor-in-chief Robin Marshall emphasized the importance of organizations that had helped the country fight the COVID pandemic during the last two years.

“These have been unique times which demanded a unique response.

So, we wanted to break away from our normal routine at this point to acknowledge the huge debt of gratitude we owe to others,” he said.

Debt of Gratitude

“These have been unique times which demanded a unique response. So, we wanted to […] acknowledge the huge debt of gratitude we owe to others. Most obviously, there are the healthcare workers, especially those in the front line. The doctors and nurses who worked shift after long shift in hospitals and clinics and nursing homes, the GPs who had to find new ways of holding surgeries, and ambulance drivers and paramedics whose sirens could be heard all over an otherwise silent city.”

“But there have also been what we call ‘purpose-led businesses’ that went the extra mile to help us work from home and school from home, who kept essential services running, who helped us to survive,” he added.

Standing as proxies for all who had played their part, the paper’s editorin-chief handed over Certificates of Appreciation to the representatives of two organizations: National Ambulance Service CEO Dr. Gábor Csató, and Vodafone Hungary CEO Amanda Nelson.

The National Ambulance Service has been fighting in the frontlines of the pandemic since its outbreak. Vodafone supported the NAS through generous cash donations, and its foundation, together with the ambulance service, developed the LifeSaver App so ordinary people could get emergency medical assistance at the time when it is most urgently needed.

Continued on page 10 ▶▶▶

Shaping the future.

A new era of progressive luxury has begun. An experience device that redefines the future of premium mobility.

Introducing the Audi skysphere concept.* Future is an attitude.

*The vehicle shown here is a concept car that is not available as a production model.

Professional driver on closed course.

10 | 2

Business

www.bbj.hu

Budapest Business Journal | October 8 – October 21, 2021

HIPA CEO Róbert Ésik.

Continued from page 8 ▶▶▶

Nevijo Mance of Jaguar Land Rover Hungary.

significantly to the economic relaunch He acknowledged that the changes in of the country by working together workplace routine brought about by the with 1,400 companies in the past pandemic brought their own challenges.

HIPA Award 18 months,” he said.

“I represent a generation that believes Taking the stage after the presentation “I’m also proud that we were able to that magic happens when people come of the certificates, HIPA CEO Ésik close the largest greenfield FDI project together. I do face engineers in their early noted that the past 18 months have of the country earlier this year, which 30s, late 30s who are very comfortable been “extraordinarily challenging. is an investment of EUR 1.9 bln. So I working from home,” he said.

From the economic perspective, there think these results in these challenging are signs of recovery, and I personally times speak for themselves. It would believe that we have a chance to not have been possible without you,” “I represent a generation achieve a 7% GDP growth by the end he told the audience. that believes that magic of the year,” Ésik said.

This year’s HIPA Partnership award He outlined three significant was presented to Nevijo Mance, happens when people successes HIPA managed to achieve in director of engineering at Jaguar Land come together. I do the COVID period. “Against all odds, Rover Hungary. Ésik presented him we have managed to close a successful with the prize after playing a short face engineers in their year, a successful 18 months. We have video about the winner. early 30s, late 30s who been able to close deals in the value of Mance greeted the audience in EUR 4.1 bln in 2020,” he said.

Hungarian before switching to are very comfortable He explained the agency’s reaction English. He noted that while the working from home.” to the COVID situation. “We have past 18 months were challenging, been able to react fast, we came he had come to realize, “It’s not a up with COVID-specific subsidy lost period; in terms of achievements Expat CEO Selection programs already in April 2020, and collaborations in Hungary, we The winner of the Expat CEO of the Year and we have been able to contribute did a lot,” he said. award was selected by a professional jury of five just 30 minutes before the gala started. The panel consisted of BBJ CEO Balázs Román, American Chamber of Commerce in Hungary CEO Írisz LippaiNagy, HIPA CEO Róbert Ésik, GermanHungarian Chamber of Commerce and Industry president András Sávos, and last year's Expat CEO of the Year winner Melanie Seymour.

Jury members are charged with nominating expat CEOs for the award based on criteria such as innovative skills, successes on domestic and international markets, being prominent and committed representatives of their mother country in Hungary, and their impact on Hungary’s economic life. To qualify for the award, the CEO must have lived in Hungary for at least two years at the time of nomination, and the company’s financial results must be positive.

Taking the stage to present the shortlisted candidates this year, Marshall reflected on an interesting phenomenon among past winners.

“Before I read them out, let me just quickly explain something. It is not unusual for winners of this award to be promoted and to move countries Erik Slooten, winner of the Expat CEO Award, and to bigger jobs,” he noted. “However, Nevijo Mance, winner of the HIPA Partnership Award. when our shortlist was published

back in January, the bosses of one of our trio, Daniel Korioth from Bosch, were so impressed they promoted him and moved him to Turkey virtually right away. Daniel had intended to be here anyway, but the time pressures of what is a very big role have defeated that ambition,” Marshall explained.

The shortlisted company heads this year were: Prabal Datta (managing director for Central and Eastern Europe of Tata Consultancy Services), Erik Slooten (CEO of Deutsche Telekom IT Solutions Hungary), and Daniel Korioth (general manager of Robert Bosch Kft. until August 2021, when he left his position in Hungary to become president of Bosch Turkey and its representative for the Middle East).

After the screening of short introductory videos about the candidates, last year’s winner Melanie Seymour took the stage to explain the process. Before revealing the name of this year’s Expat CEO of the Year, she shared an anecdote about her return to the Hungarian capital.

“Coming back, it’s been so interesting how small Hungary and Budapest are.

The most amazing thing that happened was that I got into a taxi on Wednesday and the taxi driver went, ‘Melanie, you are back!’,” she told the audience, prompting instant laughter.

HIPA Partnership Winners Over the years, the HIPA Partnership award has been presented to: Dale A. Martin, president-CEO of Siemens Zrt. (2020); Kannan Prabhakar, projects chief of Apollo Tyres Hungary Kft. (2019); Frank Müller, head of the Regional Office of VW Group Eastern Europe (2018); Ekkehard Günter Philipp, CFO of Mercedes-Benz Manufacturing Hungary Kft. (2017); Naoyuki Takeuchi, CEO of Magyar Suzuki Zrt. (2016); and Kersten Bachmann, CEO of TAKATA Safety Systems Hungary Kft. (2015).

2

www.bbj.hu

Budapest Business Journal | October 8 – October 21, 2021

National Ambulance Service CEO Dr. Gábor Csató (left) with editor-in-chief Robin Marshall.

Stunned Slooten

The seventh Expat CEO of the Year award went to a stunned Erik Slooten, who made his way to the stage amidst a wave of applause and had no prepared speech.

“Thank you very much to Hungary for making it possible for us to keep growing, to keep bringing talent, although it’s tough out there, the battle for talent, but that’s great for Hungary,” he said. He encouraged expats to explore the country, noting that the region is beautiful and that cities such as Pécs, Szeged, and Debrecen, where his company is investing, are well worth visiting.

“I hope to continue to do this, and even if I probably won’t be the CEO of Deutsche Telekom IT

“Thank you very much to Hungary for making it possible for us to keep growing, to keep bringing talent, although it’s tough out there, the battle for talent, but that’s great for Hungary.”

Solutions Hungary forever, I will always be tremendously grateful for the support I received from HIPA as well. They are a fantastic partner,” he said.

Business | 11

Vodafone Hungary CEO Amanda Nelson.

“I also want to dedicate this to my team, the 5,000 people that work for Deutsche Telekom IT Solutions Hungary, and I promise it will grow,” he added, noting that it provides 24/7 support to customers.

After the conclusion of the main event, Marshall returned to the stage to thank the sponsors and partners for their support and the CEOs, diplomats, and other decision-makers for attending. He said goodbye quoting the late, great Irish comedian Dave Allan’s words: “Thank you, good night, and may your God go with you.”

The networking after the gala went on into the late hours of the evening, with guests enjoying the hospitality of Corinthia’s Valletta lobby, where a large selection of desserts awaited

them. There was a champagne and cocktail bar sponsored by Penny, while a “music sommelier” provided background tunes for the conversations.

Sponsors The main sponsors of the evening this year were Audi, MAN Truck and Bus, Penny Market, and PwC. Arval, BNP Paribas, Heineken, and Thyssenkrupp also supported the gala. Prime Time Communications was responsible for the organization, and Special Effects International provided the technical background.

Nominees, winners, and jury members at the 2021 Expat CEO Awards.

12 | 2

Business

Epat CEO Gala 2021

www.bbj.hu

Budapest Business Journal | October 8 – October 21, 2021

Photos by Marianna Sárközy.

www.bbj.hu

Budapest Business Journal | October 8 – October 21, 2021

2

Business | 13

14 | 2

Business

www.bbj.hu

Budapest Business Journal | October 8 – October 21, 2021

NIIP: Important but Seldom Used Metric

The Corporate Finance Column

NIIP of Selected Countries

The Net International Investment Position (“NIIP”) is an ever-soimportant, but ever-so-seldom used indicator of a country’s financial health, as Les Nemethy explores in his latest Corporate Finance Column.

NIIP is the difference between a country’s external financial assets (including assets held abroad by its residents and corporate affiliates) and its liabilities (including government and private debt and corporate shares by foreign nationals).

You might say NIIP expresses the net financial worth of a country. A positive balance indicates the country is a creditor nation; a negative balance indicates it is a debtor nation. It is often expressed as a percentage of a country’s GDP. The chart sets out the NIIP of countries readers may find interesting. So what does a scan of these numbers tell us?

There are several NIIP superstars, countries that have NIIP’s in excess of 100%. These include Hong Kong, Singapore, Norway, Netherlands, etc.

These countries are not only affluent; high NIIP also provides resilience to weather crises.

Then there are the NIIP stragglers, like Montenegro, Greece, and, surprisingly, Ireland, that have NIIP’s of less than -100%. (Ireland is a special case, driven by the decisions of multinationals to domicile intellectual property there.)

In times of crisis, especially if foreigners were to liquidate their positions in those countries’ assets, those countries could fare quite negatively.

Countries

Date

GDP (USD mln)

Date

Austria Bulgaria China Croatia Czech Republic Germany Greece Hong Kong Hungary Ireland Japan Montenegro Netherlands Norway Poland Romania Russia Serbia Singapore Slovakia Slovenia Switzerland United Kingdom United States

2021 2021 2021 2021 2021 2021 2021 2021 2021 2021 2021 2021 2021 2021 2021 2021 2021 2021 2021 2021 2021 2021 2021 2021

481,796 77,782 16,642,318 65,217 276,109 4,319,286 209,857 368,633 176,543 476,663 5,378,136 5,651 1,012,598 444,519 642,121 289,130 1,710,734 60,435 374,934 117,664 59,132 824,734 3,124,650 22,675,271

2021Q1 2021Q1 2021Q1 2020 2021Q1 2021Q1 2021Q1 2021Q1 2021Q1 2020Q3 2021Q1 2018 2021Q1 2021Q1 2021Q1 2021Q1 2021Q1 2021Q1 2021Q1 2021Q1 2021Q1 2021Q1 2021Q1 2021Q1

CEE Placings

It is interesting to note that Central European countries are typically found at the mid- to lower-end of the table, with Austria slightly positive (13.4%), the Czech Republic and Slovenia slightly negative (-9.6% and -12.5%, respectively), then Hungary, Poland and Croatia (in the -40 to -50% range), with Bulgaria and Romania further behind.

While Japan has a respectable NIIP as a percentage of GDP (62.8%), the substantial size of its economy gives it the single largest NIIP in absolute terms (USD 3.376 trillion).

It is also interesting to note the position of the major powers: China, Russia, and the United States. Both Russia and China have positive NIIP’s, while the USA has a whopping -64.9% NIIP. This may be considered surprising, given the vast debt and equity holding of

NIIP (USD mln) +58,662 -17,228 +2,140,041 -31,558 -24,507 +3,055,922 -352,272 +2,163,155 -74,450 -705,962 +3,375,849 -9,044 +959,049 +1,175,781 -254,623 -121,438 +458,533 -49,970 +1,035,082 -67,785 -4,876 +808,373 -802,202 -14,320,275

U.S. institutions (including multinationals) abroad, but the level of U.S. debt held by foreigners, and holdings in U.S. shares by foreigners, is even more significant.

While substantially negative U.S. NIIP is not likely to be a cause for concern in the short-term, thanks to a positive spread between what American investors earn abroad compared to what foreign investors earn in the States, the country could be put into a very tough spot if interest rates were to experience a major rise suddenly.

Also, the trend in U.S. NIIP has been negative over time. If the trend continues, there may come a point where foreign investors lose confidence. If you look at the chart, the absolute number of U.S. NIIP is so overwhelming (some USD 14 tln) that a loss of confidence would have global ramifications.

NIIP could be an interesting tool or metric for the future. For example, when

Date

NIIP (% of GDP)

2021Q1 2021Q1 2021 2021Q1 2021Q1 2021Q1 2021Q1 2021 2021Q1 2021Q1 2021 2018 2021Q1 2021 2021Q1 2021Q1 2021 2019 2021 2021Q1 2021Q1 2021 2021 2021Q1

13.4 −24.0 12.9 −50.0 −9.6 78.4 −182.7 586.8 −47.8 −168.7 62.8 −178.8 102.3 264.5 −43.0 −48.0 26.8 −88.5 276.1 −63.0 −12.5 98.0 −25.7 −64.9

making an acquisition or investment, it could be helpful to know the NIIP of the country you are investing in, from a risk management perspective. A measure of government performance is debt as a percentage of GDP; perhaps NIIP would be at least as useful a metric.

Les Nemethy is CEO of EuroPhoenix Financial Advisers Ltd. (www.europhoenix.com), a Central European corporate finance firm. He is a former World Banker, author of Business Exit Planning (www. businessexitplanningbook.com), and a previous president of the American Chamber of Commerce in Hungary.

ADVERTISEMENT

Top Expat CEOs in Hungary 2021 As well as an economic background to Hungary’s economy, Top Expat CEOs presents some of the leading market players in the country.

As such, it is an essential aide to getting to know the personalities behind the business.

Please forward your subscription request to: circulation@bbj.hu, or order your copy in the webshop at www.budapestbusinessjournal.com

• Provides an essential overview of Hungary’s economy.

• Get an insight into the CEO mindset regarding business in the country and globally.

• Get to know the personalities behind the business.

• Read personal accounts from the country’s leading non-Hungarian CEOs, including their experiences of doing business in Hungary and what they enjoy about life here.

3

www.bbj.hu

Budapest Business Journal | October 8 – October 21, 2021

Country Focus Germany

D I P L O M AT I C A L LY S P E A K I N G : G E R M A N A M B A S S A D O R J O H A N N E S H A I N D L

‘Solid Fundament’ Underlies ‘Diverse’ Relationship engineering, and chemistry.

But besides production and futureoriented R&D activities, German companies can also contribute to sustainable economic growth and the realization of ambitious climate goals. For instance, one of our big car manufacturers in Hungary has already achieved a neutral carbon balance.

This is crucial if we want to reach climate neutrality in the EU by 2050 and the 55% reduction goal by 2030.

Germany’s Ambassador to Hungary Johannes Haindl discusses the bilateral relationship and the cultural ties that underline the economic partnership between the two countries.

ROBIN MARSHALL

BBJ: Germany has long been a significant partner of Hungary. How much German FDI has been invested into Hungary since the change of regime in 1989?

Johannes Haindl: The latest available figures show that in 2019 Germany made direct investments in Hungary amounting to EUR 2.1 billion. The total amount of German FDI has risen to around EUR 19 bln, and this does not even include the local investments German companies undertake each year by expanding or modernizing their Hungarian factories. German FDI makes up 20 % of the total foreign direct investment in Hungary and illustrates the significance of the GermanHungarian economic relations. More than a third of this sum was invested in the automotive sector.

BBJ: What are today’s figures for bilateral trade between the two countries? How do you see this developing?

JH: In 2020, despite the coronavirus crisis, Hungary’s trade volume with Germany reached the value of EUR 52.1 bln. Hungary’s exports to Germany amounted to EUR 27.5 bln, its imports from Germany to EUR 24.6 bln.

Germany is Hungary’s most important trading partner and, from the German perspective, Hungary occupies 13th place among our global partners, ahead of Russia, Turkey, or Japan. German interest in the Hungarian market stays at a high level. But investors need

Germany’s Ambassador to Hungary Johannes Haindl reliability and the guarantee that the basic conditions for investment, such as legal certainty, will remain.

BBJ: What are the principal Hungarian goods Germany imports? Has this changed at all over the years?

JH: The most important Hungarian export goods over the last years have been motor vehicles, automotive components, and electrical and electronic equipment. Recently, the Hungarian government has been attaching more and more importance to research and development. Therefore, Hungary is increasingly looking for cooperation in this area, also with German companies. And I am delighted that many German companies have already brought state-of-theart innovation and R&D activities to Hungary, for example, in the development of autonomous driving and other fields of artificial intelligence.

BBJ: There are several worldrenowned German automotive brands in Hungary, with BMW waiting in the wings once its factory is complete. Are there more to follow, do you think?

JH: You are right, three of Germany’s premium car brands, Audi, Mercedes, and soon BMW, have already settled in Hungary or are preparing to do so. However, all of the German carmakers are currently heavily focused on transforming the industry towards sustainable mobility solutions.

This will undoubtedly affect their Hungarian units and their suppliers in many areas but will also create new business opportunities. I am convinced that the companies will successfully master these challenges.

And provided that the basic parameters don’t change, I am also convinced that Hungary will stay an attractive location for the German automotive industry.

BBJ: Beyond automotive, what are the most important sectors of the Hungarian economy in which German firms play a significant role? What are the fastest-growing sectors attracting German FDI? JH: German companies are very active in the electronic/optical industry, electrical equipment manufacturing, mechanical

BBJ: In recent years, Germany and Hungary have often been at odds within the EU, especially on matters like immigration.

Do you expect a reset in relations?

Indeed, is there a need for one following September’s Federal elections and the appointment of a new Chancellor?

JH: Indeed, some topics are being discussed in Brussels on which our two countries have different views. You have already mentioned the problem of dealing with the issue of refugees and migration or the complex debate about the rule of law, which we consider a cornerstone of the European Union.

However, overcoming differences and challenges is and has always been part of the European decisionmaking process. In the end, our common goal should be a strong, competitive, and resilient European Union based on our shared values and the rule of law. Germany will therefore continue to constructively contribute towards achieving this goal, now and in the future.

BBJ: What are the areas of greatest strength and most friction within the bilateral relationship?

JH: Our bilateral relationship is based on a solid fundament. Our strong economic ties have been mentioned. Cooperation in the fields of defense, research, and innovation add to this diverse picture of our relationship. In addition to that, Hungary and Germany are also closely bound culturally. Hungary hosts almost 200,000 people of the German minority. They enjoy special protection under Hungarian law and are an essential link between our countries. In fact, it is the diversity and complexity of our cooperation that makes our relationship unique and robust. More than that, it helps both sides to level up potential frictions in our everyday political discussions.

16 | 3

Focus

www.bbj.hu

Budapest Business Journal | October 8 – October 21, 2021

German Businesses Ready to Continue With Innovation-focused Investments in Hungary With a global trend to shorten supply chains due to the pandemic, Hungary could become an ever more important investment target for Germany. Rising Hungarian wages need not negatively impact German investor appetite, either, provided productivity also increases, says Barbara Zollmann, managing director and board member of the German-Hungarian Chamber of Industry and Commerce. She expects legislation to continue focussing on training and education, she tells the Budapest Business Journal.

LEVENTE HÖRÖMPÖLI-TÓTH

BBJ: What was the short-term impact of the pandemic on German-Hungarian economic relations, and to what extent have things got back to normal?

Barbara Zollmann: Both countries are highly export-oriented; therefore, they were hit hard by the breakdown of international supply chains. By now, most of these have been restored, bilateral trade has grown by more than 20% in the first half of the year, while private and corporate demand has recovered. Still, for some goods, for example, semiconductors or construction materials, there are imbalances left between global demand and supply, which hinder an even faster return to pre-pandemic production levels.

BBJ: What about the long-term effects of the crisis? Global supply chains were disrupted due to COVID; many companies started to look for new partners in their closer vicinity. Could Hungary become an even more critical business partner for Germany in the wake of the pandemic?

BZ: Our own surveys show that more and more German companies are considering reducing supply chain risks by diversifying their supplier base

Barbara Zollmann, managing director and board member of the German-Hungarian Chamber of Industry and Commerce. Photo by Csaba Pelsőczy / DUIHK in the wake of the pandemic. In most cases, this means expanding the range of suppliers rather than pulling out entirely from a specific region. However, Central and Eastern Europe could be an attractive target region for near-shoring, as it offers an advanced technological and economic landscape at reasonable costs and distances. Hungary could undoubtedly be one of the economies to benefit from such diversification efforts.

BBJ: Wages have been rising in Hungary by two figures per year, and the minimum wage will hit a new high soon as well. Could this make the country less attractive to German investors?

BZ: German investors directly provide about 220,000 jobs to Hungarians, typically offering above-average remuneration.

In general, we see substantial wage rises across the CEE region. Therefore, the rise in wages and minimum wages in Hungary is positive for retaining talent in the market. For all investors, wage pressure should not be a disadvantage as long as it goes hand in hand with productivity increases. The Hungarian labor market provides a favorable balance of qualification levels, costs, as well as work culture and shall remain attractive for German investors for many years.

BBJ: The Hungarian government has moved from a “Made in Hungary” to an “Invented in Hungary” principle, meaning that policies favor investments that drive innovation and create high value-added jobs. Has this approach made a difference already? Do German companies regard the country as more than an assembly plant but rather a strategic hub for innovation?

BZ: Absolutely. Many German companies have already brought state-of-the-art innovation and R&D activities to Hungary. Thousands of Hungarian engineers are employed in the R&D centers of German investors, particularly in the automotive sector. In many cases the innovations generated in Hungary are not only used in the local manufacturing units, but the global value chains of the respective corporate groups. The Hungarian government actively stimulates higher value-added activities with incentives, and we see rising interest by companies to expand such activities in Hungary.

BBJ: Mercedes announced that from 2030 on it would produce only e-cars.

How will the e-mobility paradigm shift affect the operation of German automotive companies in Hungary?

Will there be enough skilled labor, or is downsizing in sight as a result?

BZ: All of the German car makers are heavily focused on the transformation of the industry towards sustainable mobility solutions. This will certainly affect their Hungarian units as well, from the product portfolio to needed skills, production site layout, and supplier networks. This means major challenges for the education system but also for the readiness of local suppliers to adapt to the changing value and production chains. At the end of the day, this could raise the competitiveness of the entire Hungarian economy without a net loss in jobs.

BBJ: According to a recent analysis

by The Economist, Germany might be facing an economic downturn due to a growing labor shortage in general, with

the active population to fall by four million in 10 years. More specifically, this will affect automotive, where the e-shift demands skilled labor. Other phenomena such as de-globalization and trade hurdles make the outlook even less rosy. Do you agree with such doomsday prophecies? Could this impact GermanHungarian economic relations?

BZ: Germany and Hungary are both reliant on international markets, and they face very similar risks such as the demographic challenge or increasing protectionism and regionalization in international trade. However, innovation and technological progress can help to offset the decline in the labor force. As for the global trade system, a strong and united European Union is the best answer to protect the interests of every European economy in the tough global competition.

BBJ: Do you have any items you would like to see on the legislative agenda of the Hungarian government?

BZ: The German-Hungarian Chamber has a 25-year record in monitoring and analyzing the business sentiment and the expectations of the German and foreign business community in Hungary. Our periodical surveys show that companies put a strong focus on education and training as well as supplier networks, which should remain a focus of legislation in the medium term.

Moreover, we support any efforts by the Hungarian government that address major global trends and challenges such as digitalization, sustainability or demographics because they play an increasing role in shaping the business environment and the future competitiveness of the economy.

www.bbj.hu

Budapest Business Journal | October 8 – October 21, 2021

PRESENTED CONTENT

Old Ally Remains key Economic Player For historical reasons, including geography and the role played in bringing down the Iron Curtain and the reunification of East and West Germany, the Federal Republic has long been one of Hungary’s most significant trade partners.

It still is, and not just for misty-eyed nostalgia, the Hungarian Investment Promotion Agency (HIPA) CEO insists.

Focus | 17

Hungary include electronics, machinery, telecommunications, and retail.

“For us, from an FDI point of view, the business services sector is also relevant,” Ésik notes. Recent examples include TK Elevator and Bosch, which has decided to set up a EUR 16.8 mln regional HR services center in Vecsés, on the outskirts of Budapest, near the international airport.

Future-proofing

ROBIN MARSHALL

“Germany remains the largest foreign investor in Hungary today, and German companies remain the largest investors: in terms of FDI stock, their share is approximately 23%, based on 2019 data published by the central bank of Hungary,” Róbert Ésik, CEO of HIPA, tells the Budapest Business Journal in an exclusive interview.

“Indeed, they have a relatively big margin over the second- and thirdplaced countries. So, I think we can say that in the foreseeable future, most probably Germany will remain the largest foreign direct investor in the country.”

The interconnection of the two economies is there to see the data. Of the top 10 Hungarian companies by revenue, five firms have a German background: Audi, Mercedes Benz, Magyar Telekom (Deutsche Telekom is the majority owner), Lidl, and Bosch.

“In terms of trade, Germany is our number one partner: in 2020, the share of trade volume was approximately 26% for Hungary. This year could see a record trade volume in excess of EUR 60 billion with Germany,” Ésik explains.

“So, in terms of the stock data, of FDI and trade, Germany clearly remains the number one.”

HIPA managed an overall investment volume of EUR 4.1 bln last year, split among 97 large projects. Of those, 20 came from Germany. That made Germany number one for large projects, number two in terms of investment volume, and number three for new jobs.

(As an aside, Ésik points out that 2020 results show a balanced FDI portfolio: Most projects came from Germany, the highest investment volume from China, and most new jobs from the United States.)

3

Driving Force

The main driver of German investments into Hungary has been the automotive sector if you will pardon the pun. But that has long since moved on from a simple workbench operation, bringing jobs here for cheaper manufacturing labor. Ésik identifies two significant trends in the industry. The first is e-mobility, where he lists four examples. Firstly, in December of last year, Mercedes Benz announced it would invest more than EUR 100 mln to bring the serial production of its fully electric EQB compact to the country. That is now about to launch and will be the first serial production of an electric vehicle in Hungary.

On the other hand, Audi Hungaria produced some 90,000 electric motors last year in Győr (120 km west of Budapest).

Bringing things right up to date, in late September, Schaeffler inaugurated its new EUR 70 mln greenfield development on a 30-hectare site in Szombathely (222 km west of the capital). The factory is the Schaeffler Group’s first pure e-mobility plant worldwide and is also a center of excellence for producing components and systems for electrified drives.

The fourth example is the longawaited BMW factory in Debrecen (232 km to the east of Budapest), due to open in 2025, and in which the manufacturer will produce the latest so-called thirdgeneration of electric vehicles.

Between 2014 and H1 2021, HIPA handled 143 German investments worth just shy of EUR 7 bln, creating a bit more than 29,000 jobs. (For a sector breakdown, see infographic.) Evidence of Hungary’s conscious move away from a cheap-labor manufacturing hub towards an economy capable of providing futureproof jobs can also be found in that data.

“Within those 143 projects, we have 10 which are exclusively related to research and development, which I would consider quite a high share. Those 10 projects created at least 600 new R&D positions.

We do see this area as one of future growth,” Ésik says.

Right now, HIPA is working on 15 large deals with potential German investors.

If all came to fruition, they could create more than 4,300 jobs and represent an investment value of EUR 1 bln. They represent all the sectors we have already spoken about, but Ésik will not be drawn on whether there are any as yet not present marquee brands among them.

“We keep an eye out for opportunities; whenever companies announce they are expanding, we get in touch with them.

But any German investor that could fit into our vision of moving up the value chain and increasing productivity would Róbert Ésik be welcome,” the HIPA CEO says.

Not least among the reasons for such a welcome in the level of local engagement.

“German companies have also played “The second trend I would highlight an important role in protecting the is the increased significance of national economy during the pandemic sustainability and carbon neutrality,” and in relaunching it nowadays,” Ésik Ésik explains. This is more of a pushacknowledges. pull effect, in that companies are In 2020 alone, 90 German-owned expected to build carbon-neutral companies took up COVID-specific production into new developments, but subsidy schemes, carrying out they are also “investing in renewable investments worth a combined EUR energy solutions actively.”

405 mln, committing to keep more than Underscoring that point, Ésik 50,000 jobs, a receiving a total of EUR says, “The most prominent example 136 mln in subsidies. is the solar park on top of one Audi’s “German companies have also been buildings, which is Europe’s largest helping us get back to economic rooftop solar park, which has a surface growth, and we have good hopes of of 160,000 sqm in Győr.” closing the year with strong growth in Beyond automotive, other popular terms of GDP,” he adds. sectors for German investment in

Large German FDI Projects by Sector Grand Total: 6.939

bln Automotive

Electronics

5.596 bln

156.6 mln

Machinery

219.5 mln

219.5 mln

Business Services Centers Source: HIPA

18 | 3

Focus

www.bbj.hu

Budapest Business Journal | October 8 – October 21, 2021

Hungarian Chief Engineer Driving Automotive Innovation Forward in Munich While German automotive companies bring plenty of jobs and considerable investment into Hungary, some highly trained Hungarian professionals contribute significantly to the latest innovations in the homeland of these companies. The Budapest Business Journal talks with Attila Kőhalmi, working at EDAG Engineering as the chief engineer responsible for BMW’s camera-based driver assistance systems, about his career in the automotive industry in Munich.

BENCE GAÁL

BBJ: How did your journey in Munich begin? How did you get into the automotive industry?

Attila Kőhalmi: My journey had already Attila Kőhalmi. Photo courtesy of Dániel Kőhalmi begun as a child. My father was working for Malév Hungarian Airlines, which granted me access to the cockpit.

Instead of sitting with my family on At the university, I had to complete an on the test track with cars I wouldn’t board, I was with the pilots in the internship for an entire semester. I began have dreamt about before, like the cockpit. I used to talk a lot with them; to apply to different companies and jobs M850i or the new Toyota Supra, daily. the cockpit was my second home. These and received an e-mail via the aeroclub Today, on behalf of BMW, I am taking experiences led me to decide to work that BMW was looking for an intern. care of the camera-based driving with airplanes. Years later, as a teenager, I applied to that and got it. I couldn’t assistance system, which enables I still held firmly to this dream, so believe that I would work for BMW. On lane-keeping, traffic sign recognition, I enrolled in an aeroclub where my first day, I visited the Munich plant, traffic light recognition, and so on.

I learned how to fly a sailplane. where the 3 and 4 series were built.

At the end of high school, one has I was allowed to get into brand new BBJ: What kind of special education to think about future studies. I went to cars, assembled only some minutes ago. and licenses did you need to drive prea German-Hungarian bilingual high During my internship, I received production cars? school, and I had continued to follow another mail from the same person AK: You wouldn’t believe how many my dreams, so I started to search who told me about the internship additional driving licenses you have to for universities offering studies in vacancy, that there was a possibility complete. For the vehicles I am currently this direction. When I didn’t find my to test the driving assistance systems driving, two theoretical and three preferred area in Hungary, I continued on BMW’s test track in Aschheim. practical driving licenses are required. my investigations abroad. After thorough A special BMW prototype driving First of all, you must always know research, I stumbled upon a promising license was required, which I lacked at that you are driving a car that attracts university in Munich, where I could start the time. Nevertheless, I reached out attention. It might be camouflaged, or my studies in aerospace engineering. to the person conducting the test and there may be external measurement My brother lived in Munich at that time, asked her whether I could observe from equipment installed. You must always so it was a perfect coincidence. During the rear seat of the test vehicle. follow the rules, as you represent the my studies, I was still flying within a I was allowed to, and the car was company and the car of the future.

German aeroclub nearby, in the Alps. a BMW M760Li with a V12 engine.

This is what the first theoretical I was able to make new friends and It was the beginning of my student driving license is about. For the second establish amazing contacts. job after the internship, where I was theoretical driving license, you learn

about restricted driving clearance, how to handle and react to critical situations because the software is being developed, and you are the one who is validating it.

One learns during the three practical driving licenses about safe vehicle control under every condition and speed. I have to admit I had a lot of fun while obtaining the licenses. The second practical driving license takes place on the Salzburgring, where one has to drive on the ideal line, make double lane changes at 100 km/h and, of course, be able to drift (practicing oversteering), at least half a donut, but the more, the better.

“You wouldn’t believe how many additional driving licenses you have to complete. For the vehicles I am currently driving, two theoretical and three practical driving licenses are required.”

BBJ: How does your average workday look?

AK: My job is divided into two parts: Problem management and chief engineering. I receive all of the software failure tickets and have to make a pre-analysis, for example, why the traffic sign was not recognized. This is critical because our goal is to make the customers happy, in which they receive a close to perfect working system without bugs. Those issues should be fixed with the following software delivery, so that we won’t have any problems within the serial productions of the cars. The chief engineering part is more about hardware changes and evaluation. I have to attend many meetings with the supplier and clarify how we proceed and further steps.

BBJ: What is your favorite part of your job?

AK: To see the evolution between two successive software stages. Fortunately, BMW has a program called “testing outside working hours” where some partner development engineers can drive the test vehicles for testing purposes also over the weekend. This is a win-win situation because the newest software will be tested under everyday conditions and one is happy to drive one’s dream car. As a product owner, it fascinates me to see the multitude of vehicles on the roads driving around with my component built-in.

BBJ: Currently, what kind of technologies are you testing?

AK: Mainly the functions of the camera-based driver assistance system, lane departure warning, lane-keeping assist, lane change assist, traffic sign recognition, traffic light recognition, adaptive cruise control, urban cruise control, and many others. I am also supporting parking functions, for example, parking maneuvering assistance.

4

www.bbj.hu

Budapest Business Journal | October 8 – October 21, 2021

Photo by L.O.N Dslr Camera / Shutterstock.com

Special Report Energy

How is Hungary’s energy sector developing in the battle to hit sustainability targets? What role can Artificial Intelligence and smart technologies play, and how do foreign affairs impact matters?

Share of Solar Power in Hungary’s Energy mix Continues to Grow, Backed by State Subsidies 20 Building Organic Growth on Stable Operations

21

How AI is Optimizing the Hungarian Energy Sector

22

Alteo Exploits Increasing Volatility in Electricity Market from Growth in Renewable Generation 23 Hungarian Gas Delivery and Pricing Take on Geopolitical Implications for Ukraine

24

20 | 4

Special Report

www.bbj.hu

Budapest Business Journal | October 8 – October 21, 2021

Share of Solar Power in Hungary’s Energy mix Continues to Grow, Backed by State Subsidies The share of renewables in the energy mix is constantly growing worldwide and locally, bringing about the need to develop the network and better storage capacities.

Solar energy has seen the most significant increase in Hungary and will have a crucial role in achieving climate goals here.

ZSÓFIA VÉGH

The energy news of the past few months may not have revolved around renewables with gas prices and capacities taking center stage, but their march forward is unstoppable. In Hungary, too, non-fossil fuels have been increasing steadily, regardless of economic activity.

That is especially so in solar energy production and use, where the country has seen a steep rise. Beyond climate goals themselves, this is due to a change in the support for solar that the state had provided until 2017.

With the switch from a fixed feed-in tariff system (KÁT) to a more competition-oriented, market-based pricing (METÁR), investors rushed to tap into the benefits of KÁT while it was still available, creating a boom in planned solar capacities that have been coming to realization during the past couple of years.

The new system, METÁR, has sparked a more modest interest but has added hundreds of megawatts (MW) of capacity every year.

“To achieve the target figures of renewable energy production, electrification, the construction of the Paks II nuclear power plant, the increase in solar capacities and the hydrogen produced using electricity can play a key role.” So said János Péter Horváth, president of the Hungarian Energy and Utilities Regulatory Authority (MEKH), at the annual traveling meeting of the Hungarian Electrotechnical Association at the end of September.

Household solar power generation has received generous government subsidies and seen significant growth as a result. Wind generation has not been able to attract similar state backing. Photo by Anton_Medvedev / Shutterstock.com The target set for the European Union as a whole is to reach a 32% share of renewable energy by 2030 in a way that no member state falls below the 2020 (voluntary) commitment.

In Hungary’s case, this is 21% of its energy production, which the country had met already last year.

Last year, around 72,000 households had a small solar power plant with a total capacity of 719 MW, roughly a third of the capacity of the Paks power plant. In 2021, the figure might exceed 80,000. The government aims to have at least 200,000 such installations by 2030.

By 2021, the total installed solar capacity exceeded 2,000 MW; solar’s share in the combined total power plant production has increased significantly in recent years. This June, renewables accounted for 784-gigawatt hours (GWh) of the total electricity supply.

By way of comparison, Paks gave 1,423 GWh, net imports accounted for 855 GWh, coal production was 236 GWh, natural gas 655 GWh, and oil was 4 GWh. This increases the need for regulatory reserves and, in the medium

term, requires establishing energy storage facilities and electricity network upgrades to prevent congestion of transmission elements.

With the share of renewables growing, the prices in the balancing markets have increased significantly as well. “This indicates that the next big task will be to integrate renewable units with difficultto-control capacity into the system,” Pál Ságvári, vice president of MEKH, said at a conference.

It is essential to reconcile the expansion of renewable capacities with the pace of development of network regulation to ensure the security of supply. The aim is to encourage players to provide and keep to more accurate scheduling and increase the flexibility and resilience of the domestic electricity system, the agency notes.

MEKH expects further growth in this field: Between 2022 and 2024, the capacity may jump by 1,000 MW per year. The rapid expansion of weatherdependent renewables has brought about several challenges the system is not ready for, however. Among these are problems with scheduling, the need for network development, and, in the case of small household-sized power plants, the coordination of production and consumption.

Despite the coronavirus pandemic, the spread of household-sized solar power plants has not slowed down.

In one year, the installed capacity of household-sized solar power plants increased 1.5 times. Last year, around 72,000 households had a small solar power plant with a total capacity of 719 MW, roughly a third of the capacity

of the Paks power plant. In 2021, the figure might exceed 80,000.

The interest in these has significantly grown with the introduction of state subsidies; distributors talk about three times higher demand. With the state support, the return on investment has improved as well. The government aims to have at least 200,000 such installations by 2030.

Why no Wind?

The utilization of wind farms in Hungary is excellent: The average value of the capacity factor between 2011-2018 was 23.3% here, compared to 22.1% in the EU, and only 19.2% in Germany, according to the economic news portal portfolio.hu. It remains unclear why the government seems to have taken against wind power generation, but current regulations effectively mean no new wind farms can be built today, even though the current 325 MW capacity could be multiplied by new turbines, according to the Hungarian Climate Change Scientific Panel (HUPCC). The current energy strategy, based solely on solar energy development, creates a unilateral production structure with higher equalization costs as a result, like paired solar and wind energy production.

www.bbj.hu

Budapest Business Journal | October 8 – October 21, 2021

4

Special Report | 21

Building Organic Growth on Stable Operations BBJ: How do you ensure a secure supply amid dwindling capacities?

KCz: Both in Hungary and the European Union, capacity excesses are gradually disappearing while decentralized renewables are posing a challenge for the entire energy system. Both the infrastructure and network flows are changing due to the volumes of renewables fed into the system. There are a number of solutions to handle this matter; what I see is that a combination of tools will be required.

MVM Partner CEO Kornél Czinege talks to the Budapest Business Journal about how the company is trying to reduce risks and secure its position in the rapidly changing energy market.

“Both in Hungary and the European Union, capacity excesses are gradually disappearing while decentralized renewables are posing a challenge for the entire energy system.

Both the infrastructure and network flows are changing due to the volumes of renewables fed into the system.”

ZSÓFIA VÉGH

BBJ: What role does MVM Partner have on the local and regional markets?

Kornél Czinege: As the dedicated electricity wholesale trading company of MVM Group, MVM Partner is responsible for connecting the supply and demand side of the group while constantly optimizing such portfolios according to the market environment.

In practice, MVM Partner brings the electricity of group-owned and other contracted power plants to the market and also sources the group-owned retail companies and other business partners, not to mention the universal service providers in Hungary. The trading company is also an active player in the Hungarian balancing market. Besides electricity trading, we deal with commodities; for example, we offer CO2-emission trading and other services to our clients.

Trading companies with a large market presence have gained market value due to European market integration, the spread of renewable energy, and climate change.

International trade has become a key factor in exploiting the favorable business opportunities arising from periodic price differences between countries and in managing price risks. Considering how wide the gap between prices and available capacities can be in different regions, it makes sense to gain a strong foothold in a variety of markets.

This summer, MVM Partner expanded its operation to the Belgian, Dutch, and Greek electricity markets. As a result, we are currently present in 20 countries and on 11 stock markets in the region, including spot, forward, and, where relevant, intraday trading. As we establish a stronger presence in foreign markets, our trading activities become more effective.

Kornél Czinege Our traded volume per year now exceeds 100 TWh [tera watt]. In 2020, 40% of this was related to foreign markets. To put it into perspective, Hungary’s annual electricity demand is approximately 40 TWh. MVM Group’s primary goal has been and continues to be to strengthen its presence not only in the Hungarian but also in the regional markets, and MVM Partner has its role in fulfilling this goal. Wholesale trading may serve as an entry point to retail electricity markets by providing the group with the necessary “intel” on the local markets in the event of an acquisition. Retail is the next step, an exciting one, of our expansion; by acquiring Innogy’s Czech business, we are organically growing in this field as well by sourcing with electricity the retail assets. Obviously, our responsibilities also grow when the group acquires generating capacities.

BBJ: How does the company address current changes in the market, including capacity shortages and high prices?

KCz: Right now, the market is very volatile, and we need to respond rapidly.

Risk management has always been an

integral part of our job; today, partner risk ranks higher, so our position as a stable player has become an asset in this turbulent market. We have an experienced team; thus, we have the expertise and necessary assets to get through such turbulent times. As a state-owned company, we have never focused on risky short-term gains; our overall aim is to provide stability and calculability to our customers and partners, which becomes a market advantage these days.

On one side, there are innovative developments towards better management of renewables and the demand-side, and to improve power storage capabilities. MVM Group has its own initiatives in these fields, which are supported by MVM Partner experts.

Meanwhile, the diversity and flexibility of the power generation portfolio are appreciating. This changing environment serves as a driver for MVM Group to build new flexible gas capacities because even with the continuous changing of the power generation portfolio, retaining the availability of wellmanageable power plants remains one of our goals. We believe that, besides innovative assets, we will still need conventional elements of power generation.

The Growth of MVM Partner The first wave of regional expansion of MVM Partner Zrt. took place between 2011 and 2015. The company first entered the markets of Germany and the neighboring countries of Central and Eastern Europe (Austria, Croatia, Romania, Serbia, Slovakia, and Slovenia). By 2015, the company had reached the Bulgarian, Czech, French, Northern Macedonian, and Polish markets

as well. The company’s second wave of market expansion began in 2018, after which MVM Partner also appeared on the Italian, Montenegrin, Spanish, and Swiss markets followed this year by expansion to the Belgian, Dutch, and Greek markets. In line with this geographical expansion, the company’s earnings from international trading are also steadily increasing.

22 | 4

Special Report

www.bbj.hu

Budapest Business Journal | October 8 – October 21, 2021

How AI is Optimizing the Hungarian Energy Sector a joint effort. At least one million smart meters should be installed in Hungary, which will make it even more worth creating such communities.

With ever more renewables at play in Hungary’s energy mix, predicting how much energy would be available from natural sources in the national grid at any given time is becoming crucial.

Artificial Intelligence can help here and beyond.

“It’s key to collect data about the operational features of these [green] buses. We need data-driven planning that helps us decide how, where, and with what capacity charging stations should be established.

Big Data can give hints in this regard.”

Another area where AI is being used in terms of energy is transportation. The ongoing green bus initiative aims to replace older public transport vehicles in dwellings with a population of

LEVENTE HÖRÖMPÖLI-TÓTH

The optimizing power of AI comes in handy in many industries, and energy is no exception. For starters, the widespread use of solar systems intensifies the need for algorithm-based planning. Due to the unpredictable nature of sunshine, it’s very difficult to tell how much solar energy will be produced in a specific period.

On the other hand, the number of mini plants has skyrocketed thanks to subsidies available to private individuals and businesses. At the time of writing, there are

80,000 points

of solar energy production in the country, which by now account for the total capacity of the Paks nuclear power plant.

Problems arise with the need to provide electricity in a balanced fashion nationwide, and that’s when AI kicks in.

“Such solutions can help us have cleaner and constantly available energy sources. Renewables are great, but because of the above-mentioned reasons, sophisticated algorithms are needed to make predictions for advanced planning,” says Péter Kaderják, general ministerial counselor and head of Zero Carbon Center.

Predictions can be made only after intensive metering; therefore, smart meters need to be installed in high enough numbers to allow detailed analysis. The abundance of data produced will give users and system operators alike a better idea of how this decentralized network of renewables can contribute to Hungary’s energy provision, eventually in an hourly rhythm, Kaderják explains.

Smart Strategy

Hungary’s AI Strategy deals with the issue as well. The objective is to have 70% of renewable production driven

more than

Péter Kaderják, head of the Zero Carbon Center by smart technologies by 2030.

This tech could, for example, advise consumers how to time their consumption and more efficiently use their devices.

Since the market price of electricity changes every 15 minutes, it would be impossible for humans to adjust without computers. Smart tech holds

the promise of cutting energy bills by dozens of percentage points thanks to smart pricing methods.

Not just single households, but entire communities could benefit from AI. Those living in the same street or dwelling can team up and form so-called energy communities that can optimize renewable use in

25,000

step by step. This and the growing number of e-cars trigger the need to optimize charging infrastructure.

“We don’t have that much experience with this new technology; therefore, it’s key to collect data about the operational features of these buses. We need data-driven planning that helps us decide how, where, and with what capacity charging stations should be established. Big Data can give hints in this regard,” adds Kaderják.

Addressing Grid Load Optimization With Targeted Projects Projects are underway to address energy optimization issues by employing artificial intelligence.

The Hungarian AI Coalition, the stakeholder forum of the local AI ecosystem bringing together 1,000-plus experts from industry, academia, and research, is working in project teams on various aspects of the AI Strategy’s implementation.

Energy is high on their agenda.

One of the initiatives aims to set up systems that use cameras to monitor cloud movements and predict how much sunlight will hit solar panels in any given area.

Renewables represent a very fluctuating energy source, and satellite images are just not good enough to tell in advance how much energy will be produced by the sun. This “cloud spotting” method, if you will, would allow the prediction of sunlightgenerated energy by the second.

Another project concerns drawing up user patterns by

location; consumers in the Budapest metropolitan area have different energy-using habits from those in the countryside.

Suburbs tend to witness, for instance, a peak later during the day than, say, a small town in the south of Hungary or a village in the east. Such patterns can help identify demand graphs in the retail segment more precisely, so grids could be geared to optimize distribution.

Home Charging With the rising number of e-cars around, home charging is posing new challenges for electricity networks too. Therefore, timing plays a crucial role in ensuring a balanced grid load.

Many users forget, for example, that there is no need to fully charge their vehicles every time if they only use them in town for a few miles a day.

It would also make a huge difference if not every user plugged in their batteries after

getting home from work. Charging could be perfectly planned with AI so that it takes place in the middle of the night at different intervals, which reduces peak capacity demand significantly.

Creative options to further improve the situation include offering personalized rates for those that report in advance when they will be away for more extended periods. This would enable service providers to plan ahead better, as they would not needlessly have to keep capacities available on standby.

Smart metering will surely be taken to the next level as well. Every device creates a unique current consumption pattern, which means that it can be determined precisely what is plugged in at a location at any given time. Special rates could be set up, and energy efficiency advice given on a mass scale by installing smart meters. That, in turn, would lead to immense total savings.

4

www.bbj.hu

Budapest Business Journal | October 8 – October 21, 2021

Special Report | 23

Alteo Exploits Increasing Volatility in Electricity Market from Growth in Renewable Generation In the Alteo 2020 company report, under a section entitled “What we at Alteo like most about Alteo,” the first entry is “Diversity of Tasks,” followed by “professional challenges and opportunities.”

The Power Plant Portfolio of the Alteo Group in Hungary Kazincbarcika Ózd

Eger

Jánossomorja Ács Sopron

Győr

Bőny

Gibárt Felsődobsza

Tiszaújváros Budapest

Monor

Törökszentmiklós

Debrecen

Nagykőrös

Pápakovácsi

Balatonberény

Domaszék

KESTER EDDY

This is perhaps just as well since the company runs 21 of its own plants and operates five others, ranging from 0.5 megawatts (MW) to 179 MW. These use technologies from combined cycle gas turbines generating heat and power to gas engines, solar farms, hydroelectric, wind turbines, and even tiny (0.5 MW) landfill gas plants.

The Budapest Business Journal sat down with Domonkos Kovács, deputy chief executive, M&A Capital Markets, to discover more about the company.

BBJ: Looking at your portfolio of assets and operations, one is immediately struck by the broad spectrum of activities spread across a wide range of power and other utilities.

This involves a huge variety of primary energy sources, gas, wind, solar, etcetera, plus energy trading. How do you manage all these operations? It looks like an engineers’ playground and an accountants’ nightmare! But you made a profit last year, so you must be doing something right.

Domonkos Kovács: I prefer to group our activities into three major areas.

These are the major distinction lines, in my view, and the technology is not that important. Obviously, it’s important, but from a management point of view, it’s not as challenging as one might think.

Number one, and I would call this the backbone business line, is energy production and energy production management, a heavily IT-driven regulatory control center that manages the operations of all of our power plants that provide power to the open market.

Within power management, there is a sub-segment, and that is the subsidized power production. There it is fairly easy because these weather-dependent power plants are technically not that difficult.

Production-wise, they are quite complex, but we use them only for electricity production, requiring operation and maintenance type services.

Part of these services are produced by the actual producer of the wind farm, solar panel, or hydro-turbine. What is

Renewable-based Natural gas-powered (heat and electricity) Control Center, Energy Storage Unit and Industrial Services

Source: Alteo company report

more challenging, maybe, is that we had to work out that these units could be controlled and managed far from the actual place of production, and that needs some IT background.

Domonkos Kovács BBJ: But that’s doable?

DK: That’s absolutely doable. The nonsubsidized part, to me, is the more exciting because that works on the open market, and there they do lots of things, but their key focus area is the so-called balancing power market and the capacity market.

And why is that? We have gas-fired power plants with which we can assist the Hungarian transmission system operator in balancing [supply and demand] on the electricity network. As there are a growing number of users, who cannot [accurately] predict their production, especially with renewables, the balancing need for the whole power system is increasing. And there we’ve found a good, fairly high-margin market.

But it also needs very strong, computerized control management and a constant optimization process. The guys need to figure out if it’s now better to produce electricity for the baseload

or, let’s say, turn it off or provide capacity Mavir, the Hungarian system transmission operator.

It’s a fairly complex thing, but apart from that, the underlying power plants, from a technological point of view – and probably our engineers will kill me for saying this – are not that complex. For example, in the case of renewables, their operation and maintenance requirements are not that complex.

There are two other complementary business segments. One is energy services. Here, we have the operations and maintenance services. They work in-house (i.e., for our power-plants), but they also sell their skills to third parties, to clients [with power-plants] like MOLPetrokemia, BorsodChem, and Heineken.

In addition, they can also do powerplant development at an EPC [Engineering, Procurement, and Construction] level, that’s the main contractor. We manage the entire process, so if we get the mandate, we can set up whole power plants; we’ve done some natural gas plants, and we can do solar plants.

BBJ: And wind?

DK: Unfortunately, here in Hungary, from a regulatory point of view, wind is not really supported. From an economic point of view, wind is not worth it. Many obstacles in different legal regulations make it extremely expensive and difficult to erect wind power plants.

Let’s say that’s a policy issue; we’re happy with solar as well.

And the third business segment is retail trading in electricity and natural gas. This is a very useful, separate business unit because it can see and understand what our potential clients want from service providers because it is right there on the market. It knows the price and service quality expectations.

This is a good tool to gather market information from clients.

BBJ: You can see if a company needs so much power, you can offer to build a unit?

DK: Absolutely. Also, naturally, this unit can help us in buying and selling more electricity. They can rely on our production, but they also buy electricity.

So that can help our purchasing.

BBJ: And in balancing your demand?

DK: Exactly. In particular, for example, we are fairly big gas consumers with our gas-fired power plants and need to buy natural gas, but if it’s completed with the purchases of our trading arm, then the overall purchase size can increase, so that gives us an economic scale advantage.

In itself, energy trading is profitable.

Margin-wise, it’s the lowest margin; it’s somewhere between 3-5%, it depends.

BBJ: But it’s not just for the margin profit?

DK: Yeah, it has other advantages, I would say. You can increase your volume purchases with it, you can gather market information, so that’s also very good. This year has been extremely profitable for us in energy production and production management because on the balancing power market, prices have just skyrocketed.

Probably this was in line with overall energy price increases, but also, this was part of our strategy. It’s a bit later than one would have wanted, but the renewable revolution has started, even in Hungary. There are a growing number of solar power plants, which will all increase volatility, and we make money on the volatility with our balancing capabilities.

Alteo Fact Box Total Revenues 2020: HUF 32.9 billion.

Profit after tax 2020: HUF 590 million.

Share price: Alteo closed on October 4 at HUF 1,415 per share, up from HUF 772 one year ago, a gain of 86.5% over 12 months.

Market Capitalisation: HUF 27.4 billion.

Number of shares: 19,386,274 Main shareholder: 63.88% Wallis Asset Management Zrt. and its subsidiaries Free Float: 36.7% Number of employees end 2020: 278 Source: bse.hu and 2020 company report.

24 | 4

Special Report

www.bbj.hu

Budapest Business Journal | October 8 – October 21, 2021

Hungarian Gas Delivery and Pricing Take on Geopolitical Implications for Ukraine Two years ago, the situation on the European and Hungarian gas market looked complicated, with some problems barely settled and new ones arising.

Market logic dictated that, ultimately, all the disputes should be resolved since the goals were simple: producers wanted to sell, buyers wanted to buy. But market logic collapsed, and the arguments took a dramatic turn.

One of the main areas of friction between America and the EU has long been gas imports from Russia. In November 2018, U.S. Secretary of Energy Rick Perry met Szijjártó in Budapest. At the press conference after the meeting, Perry emphasized that Washington opposed “both the Nord Stream 2 and the multi-line TurkStream natural gas pipelines, both of which would extend and deepen Russia’s energy dominance in the region.”

Both TurkStream and Nord Stream pipelines aimed at bypassing the transit BALÁZS BARABÁS of Russian gas via Ukraine. North Stream 2, designed to transport gas In a series of events that unfolded rapidly, from Russia to Germany via Denmark, on October 1, Ukraine called on the was seen as especially problematic by United States and Germany to impose the Trump administration. So much sanctions on Russian gas company so that it even gained the support of Gazprom. Shortly before that, Hungary the U.S. House and Senate to impose and Gazprom had reached a long-term sanctions on companies involved in the deal for gas shipments. construction of the two pipelines.

Hungary’s Minister of Foreign Affairs European politicians reacted angrily, and Trade Péter Szijjártó trumpeted that, Germany’s Foreign Minister Heiko Maas under the agreement, Hungary would stating, “European energy policy is be able to import gas at lower prices. decided in Europe, not in the U.S. We But the deal also affects Ukraine, as reject external interference.”

Gazprom will start shipping via Serbia Joint Statement and Austria, bypassing the Ukrainian Since then, relations between the United pipeline it previously used. Kyiv now States and the EU have softened with the accuses Gazprom of using energy as a advent of the Joe Biden administration. weapon, given that the new deal with Hungary deprives Ukraine of substantial In July this year, German Chancellor Angela Merkel made her last visit to transit revenues.

Meanwhile, Gazprom’s prices are rising, Washington before leaving office. Shortly afterward, the two countries released a adding to the inflation that is already burdening Europe. With the heating season joint statement, basically a compromise over the North Stream II pipeline. closing in, residential gas consumption will The document expressed the need for start growing, while households will face significantly higher gas and electricity bills. both the United States and the EU to The gravity of the situation is indicated by remain alert to “Russian efforts to use energy as a weapon.” the sudden convening, on October 4, of the Further, “should Russia attempt to Eurozone finance ministers to discuss the deepening crisis facing not only Eurozone use energy as a weapon or commit further aggressive acts against Ukraine, countries but the whole continent.

Germany will take action at the national The “America First” policy advocated level and press for effective measures at first by U.S. President Woodrow the European level, including sanctions, Wilson was revived by Donald Trump to limit Russian export capabilities to after he took office in 2017, taking Europe in the energy sector, including unilateral actions in foreign policy, often gas, and/or in other economically disregarding the interests of traditional relevant sectors. This commitment is allies, including the European Union.

Minister of Foreign Affairs and Trade Péter Szijjártó (at right) talks with Jelena Viktorovna Burmisstrova, vice president of Gazprom, before the signing another long-term gas purchase agreement at the Ministry of Foreign Affairs and Trade on September 27, 2021. Photo by Zsolt Szigetváry / MTI designed to ensure that Russia will not misuse any pipeline, including Nord Stream 2, to achieve aggressive political ends by using energy as a weapon.”

The wording of the statement may seem harsh, given that only months before, Russia and Ukraine had signed a transit deal to keep gas flowing to Western Europe. The contract would expire in 2024, but Gazprom had already signaled that it would gradually reduce the amount of gas flowing through the transit line by half between 2021 and 2024.

By shutting off the gas flow to Hungary from Russia, Ukraine is now forced to buy directly from Gazprom, which represents a significant vulnerability for Kyiv, given that its country has been in conflict with Russia since the latter’s 2014 annexation of Crimea.

Until recently, Hungary was receiving its gas from Gazprom via Ukraine.

On September 27, Alexey Miller, the president of Gazprom, arrived in Hungary. During his visit, an agreement was signed with MVM CEEnergy Zrt., based on which Gazprom will deliver to Hungary 4.5 billion cubic meters of gas.

Of that, 3.5 billion will arrive via Serbia and one billion via Austria, meaning the Ukrainian transit route has been excluded.

Apparently, Hungary had not notified Ukraine about the deal, which, Szijjártó said, secured gas prices for residential consumers at the current level.

Ukraine reacted immediately, quickly followed by an escalation of diplomatic tensions, with the ambassadors of both countries summoned to the respective Ministries of Foreign Affairs.

Critical Situation

But what seemed to Ukraine like an unfriendly gesture from Hungary quickly turned into a critical situation: as of October 1, Gazprom shut off the gas flow to Hungary via Ukraine. This measure not only affected Ukraine’s revenues from transit agreements. Kyiv has been buying gas from Hungary, but in effect, the gas from Russia did not physically leave the territory of Ukraine.

By shutting off the gas flow to Hungary from Russia, Ukraine is now forced to buy directly from Gazprom, which represents a significant vulnerability for Kyiv, given that its country has been in conflict with Russia since the latter’s 2014 annexation of Crimea.

Ukraine is now invoking the idea of Russia “using energy as a weapon,” therefore soliciting that the United States and Germany take action, as laid down in the joint statement. As for the Hungarian-Russian gas agreement, Szijjártó said it is Hungary’s sovereign right to decide whom it makes deals with, so Ukrainian protests are unfounded.

It seems, though, that Europe is facing much bigger problems than Ukraine’s transit revenues dropping.

Gas prices are soaring, and while many fingers are pointing at Gazprom, the reasons are multiple, experts say.

On the one hand, industries across Europe, picking up after the pandemic lockdown, are demanding higher gas supplies. Demand is high not only in Europe but also in the Asian market, and notably in China.

The natural gas market is very hectic, and its tendencies are not linear, but instead follow the laws of complex networks and adaptive systems, says Máté Tóth, head of energy at Rátky and Partner Attorneys Law Firm (Hungary).

Tóth summarizes factors impacting the energy market right now as including rising electricity prices and CO2 quota prices in Europe, inflation, and state aiding mechanisms (which intervene in different industries at different times), among others.

4

www.bbj.hu

Budapest Business Journal | October 8 – October 21, 2021

Hungarian-Serbian gas Interconnector Starts Operation

Hungary’s Minister of Foreign Affairs Péter Szijjártó and Serbian Minister of Internal Affairs Aleksandar Vulin opened an interconnector between their two countries’ gas networks on September 30, according to Hungarian state news agency MTI. Szijjártó said the first commercial deliveries of gas to Hungary through the line would start early October 1, the first day of the new gas year. He said that Hungary’s latest long-term gas delivery contract with Russia would also come into effect on that day. Hungary will receive 3.5 billion cubic meters (bcm) of the 4.5 bcm of gas it gets from Russia annually under the contract through the Hungarian-Serbian interconnector.

The total annual delivery capacity of the interconnector is 8.5 bcm.

Szijjártó noted that the first capacity auction for gas delivered through the interconnector had already taken place, with 32% of the capacity booked.

1st Solar Energy Community Established in Hungary

The local council of the town of Keszthely (187 km southwest of Budapest, located on the western shore of Lake Balaton), and MVM Optimum, a unit of state-owned energy group MVM, have set up Hungary’s first solar energy community with the participation of local homeowners and businesses. A contract on building a more than HUF 400 million solar park and battery storage facility was signed on September 28, according to state news agency MTI. Mayor Balint Nagy said households and companies who couldn’t independently install solar panels joined the pilot project.

MVM Optimum smart city and energy community director Krisztián Huber said the company is contributing HUF 168 million to the project, while the Ministry for Innovation and Technology is providing HUF 235 mln in support. The solar energy community comprises 20 retail consumers, five small businesses, and some local council institutions.

Hungary’s Terran inaugurates solar tile plant in Pécs

Hungarian-owned Terran Tetőcserép Gyártó inaugurated a HUF 725 million solar tile plant in Pécs (238 km south of Budapest), on September 21, state news agency MTI reports.

The company won a HUF 326 mln government grant for the investment.

Terran managing director Attila Gódi said the factory, which will turn out

its Generon-brand solar tiles, is the company’s sixth, in addition to three others in Hungary and two abroad.

Terran plans to produce “at least 200,000 solar tiles a year” in the future, he added.

EIB Approves EUR 2.2 bln for Climate Action in Europe

The European Investment Bank’s board of directors have approved EUR 2.2 billion of new financing for clean energy, energy-efficient housing, and climate action, EIB said in a statement on its website. The financing will help grow wind and solar power in Spain and Portugal and back grid upgrades in Poland, and the funds will also support energy efficiency improvements in Hungary and Finland. The bank further greenlit targeted financing schemes to speed up investment in small-scale renewable energy and climate action projects in Austria, Poland, Latin America, and Africa. The EIB board said it had also endorsed a proposal to create a development branch to bolster its impact outside the European Union.

Hungary Still Receives Some gas Shipments from Ukraine

Some gas is still flowing into Hungary via the pipeline from Ukraine, Hungary’s FGSZ Földgázszállító Zrt. confirmed in reply to questions from international news wire Reuters. “If a (trading) company gets hold of gas via Ukraine, it can continue to use the pipeline that comes from Ukraine, and current shipments data show that there is a similar amount of gas coming from Ukraine today as via the new pipeline from Serbia,” FGSZ said. As a transmission system operator (TSO), it said it could not disclose the identity of the trading firm involved. FGSZ said dozens of trading firms have been shipping gas to Hungary besides Gazprom on various routes, including the Ukrainian pipeline. In a Facebook post, Sergiy Makogon, head of Ukraine’s gas transit operator, said Gazprom had not resumed gas transit through Ukraine to Hungary. “There is currently a small flow of gas from Ukraine to Hungary, but this is not transit; it is the re-export of gas by European traders which they kept in Ukrainian underground storage.”

Gazprom’s decision to send gas via Serbia and Austria instead of Ukraine deprives Kyiv of transit revenue and also means it can no longer import reverse flow gas via Hungary, which it has been doing since 2015 as a way of not buying gas directly from Russia.

Reuters notes that the argument over Hungary’s new gas deal with Gazprom has spilled into a bilateral dispute between Kyiv and Budapest.

INSIDE VIEW

Too Much too Soon? Vast Changes to Allocation of Grid Connection Capacities László Kenyeres

Ádám Lukonits

Partner

Associate

WOLF THEISS BUDAPEST

WOLF THEISS BUDAPEST

This spring, new, competitive capacity allocation principles were introduced in the Hungarian Electricity Act, followed by more detailed provisions in September adopted by the Hungarian transmission system operator, MAVIR. The new rules bring a conceptual change and fundamentally affect power plant developments already underway.

Due to an amendment of the Hungarian Electricity Act, new capacity allocation principles were applicable as of April 1, 2021, for power generation facilities.

Under the amendment, on the one hand, authorized network operators (i.e., MAVIR and the distribution service operators or DSOs) are obliged to make detailed information about free capacities public, broken down by highvoltage and high/medium-voltage transformer stations and the technical and foreseeable economic conditions of connection, every six months. This is to facilitate the power producers’ access to the public grid, awarded through competitive tenders.

On the other hand, grid connection applicants must pay financial guarantees for taking part in the capacity allocation, which is in response to the increasing difficulties of integrating solar power plants into the Hungarian electricity system.

The detailed rules are expected to be published in the Implementation Decree of the Hungarian Electricity Act and the technical codes of MAVIR and the DSOs. These rules must ensure equal treatment and transparency of conditions for access and the predictability of investments for generation from renewables while maintaining competitive neutrality, as per the Hungarian Electricity Act. MAVIR decided to adopt its own rules in two phases: a “transitional” period runs until the end of this year (Phase I), with the final setup expected to enter into force next year (Phase II). The transitional rules were published on September 2, bringing important changes to the ongoing grid connection procedures. Similar regulations are anticipated to be adopted by the DSOs in the coming months.

The transitional MAVIR rules affect those grid connection applicants that were in a grid connection procedure as

of July 1, 2021, which means the grid connection agreement had not been concluded by that date, and (i) a grid connection plan or a feasibility study had been submitted to MAVIR by August 3, 2021; or (ii) MAVIR issued its offer for the technical and financial terms of grid connection (the so-called “MGT”) by July 31, 2021, provided that the project took part with such MGT in the last METÁR tender launched in April this year.

Any other grid connection applicant not fulfilling either of the above conditions will have to start its grid connection application over again and go through a competitive tender, the first round of which is expected to be held later this year.

The affected applicants have to submit a binding capacity booking declaration to MAVIR by October 8, pay MAVIR a financial guarantee of HUF 900,000/MVA by the same day, and pay another cash deposit of HUF 3,600,000/MVA by January 31, 2022.

The cash deposits will be credited to the grid connection fee payable under the grid connection agreement.

Failure to comply with any of the above will lead to the termination of the grid connection procedure, and failure to comply with the second payment will also result in the loss of the first one on the ground of liquidated damages. Slightly different rules are applicable for those planning to take part in a METÁR tender later this year. Most importantly, they can make their capacity booking declaration conditional upon winning the tender.

These provisions have a significant impact on developments. Plenty of money has already been invested in many projects, and the above restrictions will mean that, in the short term, business models will have to be significantly modified.

Many questions are open, leading to visible market exposure. For example, it is unclear whether the financial guarantees are recoverable in the event of a failure for reasons beyond the developer’s control.

The new system and the need for high upfront funding may discourage investors. Therefore, ongoing financial and legal support is perhaps more necessary than ever, especially as the DSO rules and final implementation provisions are unknown.

www.wolftheiss.com

NOTE: ALL ARTICLES MARKED INSIDE VIEW ARE PAID PROMOTIONAL CONTENT FOR WHICH THE BUDAPEST BUSINESS JOURNAL DOES NOT TAKE RESPONSIBILITY

News///in brief Energy

Special Report | 25

26 | 4

Special Report

www.bbj.hu

Budapest Business Journal | October 8 – October 21, 2021

Electricity Traders Ranked by total net revenue in 2020 TypEs oF EnERgy TRadEd

gas

oil

Coal

Emission CERTiFiCaTE

mvm nExT EnERgiakEREskEdElmi ZRT. www.mvmnext.hu

721,073

✓

–

–

–

–

2019

MVM Energetika Zrt. (100) –

gábor Hiezl

1081 Budapest, II. János Pál pápa tér 20.

(1) 474-9999 ugyfelszolgalat@mvm.hu

2

mvm paRTnER EnERgiakEREskEdElmi ZRT. www.mvmp.hu

652,558

✓

✓

–

–

✓

2002

MVM Zrt. (100) –

kornél Czinege

1031 Budapest, Szentendrei út 207–209.

(1) 304-2000 info@mvmp.hu

3

audax REnEWablEs kFT. https://audaxrenewables.hu/

242,995

✓

–

–

–

–

2013

– Audax Renovables S.A. (100)

Tibor istván Fejes

1134 Budapest, Váci út 17.

(20) 459-9600 versenypiac@audaxrenewables.hu

4

ElmŰ-ÉmÁsZ EnERgiasZolgÁlTaTó ZRT. www.elmu.hu

192,507

✓

–

–

–

–

2015

Budapesti Elektromos Művek Zrt. (100) –

balázs lehoczki

1132 Budapest, Váci út 72–74.

(1) 238-1223 elmu@elmu.hu

5

bC-EnERgiakEREskEdő kFT. www.bcenergia.hu

51,004

✓

✓

–

–

–

2004

BorsodChem Zrt. (100) –

sándor varga

3700 Kazincbarcika, Bolyai tér 1.

(48) 511-816 energiaker@borsodchem.eu

6

isd poWER kFT. www.isdpower.hu

39,777

✓

✓

–

–

–

1996

ISD Dunaferr Zrt. (100) –

norbert siládi

2400 Dunaújváros, Vasmű tér 1–3.

(25) 584-442 isdpower1@isdpower.hu

7

Jas budapEsT ZRT. www.jas.hu

18,427

✓

✓

–

–

–

2002

Ferenc Arató (50), Mónika Edit Arató-Soós (25), Thália Theoharidis (25) –

Ferenc arató

1141 Budapest, Mogyoródi út 168.

(1) 460-9300 jastitkar@jas.hu

8

budapEsTi EnERgiakEREskEdő kFT. www.energiakereskedo.hu

1,494

✓

–

–

–

✓

2003

Péter Takács (100) –

péter Takács

1061 Budapest, Liszt Ferenc tér 5.

(1) 240-7504 ptakacs@energiakereskedo.hu

9

alpiq EnERgy sE magyaRoRsZÁgi FiókTElEpE www.alpiq.hu

1,404

✓

✓

✓

✓

✓

2001

– Individuals (100)

georgios peponis

1085 Budapest, Kálvin tér 12.

(1) 886-3400 admin.hun@alpiq.com

Rank

ElECTRiCiTy

ToTal nET REvEnuE in 2020 (HuF mln)

1

Company WEbsiTE

yEaR EsTablisHEd

oWnERsHip (%) HungaRian non-HungaRian

Top loCal ExECuTivE

addREss pHonE Email

4

www.bbj.hu

Budapest Business Journal | October 8 – October 21, 2021

Special Report | 27

Fuel Retail Companies Rank

Ranked by total net revenue in 2020

Company WEbsiTE

ToTal nET REvEnuE in 2020 (HuF mln)

no. oF Full-TimE EmployEEs on July 1, 2021

yEaR EsTablisHEd

oWnERsHip (%) HungaRian non-HungaRian

Top loCal ExECuTivE

addREss pHonE Email

2,018,192 (2019)

5,372

1991

Hungarian State (25.20), other (24.50) Foreign investors (34.80), other (15.50)

Zsolt Hernádi

1117 Budapest, Október huszonharmadika utca 18.

(1) 886 5000 ugyfelszolgalat@mol.hu

590,954

10,940

1989

– Tesco Holdings B.V. (100)

Zsolt pálinkás

2040 Budaörs, Kinizsi út 1–3.

(20) 827-0000 tescoglobalzrt@hu.tesco-europe.com

Tibor balogh

1117 Budapest, Október huszonharmadika utca 6–10.

(1) 381-9700 info.hungary@omv.com

1

mol magyaR olaJ- És gÁZipaRi nyRT. www.mol.hu

2

TEsCo-global ÁRuHÁZak ZRT. www.tesco.hu

3

omv HungÁRia ÁsvÁnyolaJ kFT. www.omv.hu

413,111

59

1990

– OMV Downstream GmbH (100)

4

auCHan magyaRoRsZÁg kEREskEdElmi És sZolgÁlTaTó kFT. www.auchan.hu

356,534

6,738

2004

– AUCHAN Retail International S.A.WNDValhungary International SCAWND

gergely polgár, dominique andré ducoux

2040 Budaörs, Sport utca 2–4.

(23) 886-200 info@auchan.hu

5

sHEll HungaRy kEREskEdElmi ZRT. www.shell.hu

265,455

87

1989

– Shell Petroleum N.V. (100)

andrea solti istenesné

1113 Budapest, Bocskai út 134–146.

(1) 436-3200 info-hu@shell.com

6

mabanaFT HungaRy kEREskEdElmi kFT. www.mabanaft.hu

60,408

10

2001

– MABANAFT GmbH & Co. KG (100)

lajos alács

1016 Budapest, Mészáros utca 58/B (1) 450-2960 mabanaft@mabanaft.hu

7

lukoil lubRiCanTs EuRopE gmbH magyaRoRsZÁgi FiókTElEpE www.lukoil.hu

33,658 (2019)

2

2003

– Oleg Tolochko (100)

Tomas Ribanszky

1138 Budapest, Népfürdő utca 22.

(1) 465-7600 Oleg.Tolochko@lukoil.com

8

mo-To '95 kFT. –

15,378

51

1995

Individuals (100) –

attila Hoffer, gyula Zsolt Hoffer

9028 GyőrŐrhely út7.

(96) 437-029 mo-to95@freemail.hu

9

mpH poWER ZRT. www.mobilpetrol.hu

11,460

4

2009

Individuals (100) –

anna papp lázárné

1095 Budapest, Ipar utca 2/A (20) 400-6373 info@mobilpetrol.hu

10

RÜk REpÜlőTÉRi ÜZEmanyag kisZolgÁló kFT. –

9,914

39

2005

Budapest Airport Zrt. (100) –

Tamás dékány

1185 Budapest, Liszt Ferenc Nemzetközi Repülőtér (1) 296-5107 companysecretary@bud.hu

11

J und J kFT. www.maxiline.hu

8,459

89

1996

Individuals (100) –

János pajkos

4030 Debrecen, Galamb utca 2–4.

(52) 470-519 jundj@t-online.hu

12

gRovi kFT. www.grovi.hu

7,336

39

1994

(100) –

Tibor vizler, andrea vámosi vizlerné

4300 Nyírbátor, Szentvér utca 41.

(42) 510-288 postmaster@grovi.t-online.hu

13

Full-sopRon kEREskEdElmi És sZolgÁlTaTó kFT. www.full-sopron.hu

5,754

49

2004

Individuals (100) –

Csaba bognár, péter Csapó, Csaba vasi

9330 Kapuvár, Ipartelepi út 8.

(96) 595-250 fullsopron@t-online.hu

14

EnviRoCHEm kFT. www.envirochem.hu

4,337

6

1995

Gábor Egri (65), Adrienne Bakos (35) –

gábor Egri

1225 Budapest, Nagytétényi út 221–225.

(1) 391-0570 mail@envirochem-ltd.com

28 | 4

Special Report

www.bbj.hu

Budapest Business Journal | October 8 – October 21, 2021

universal Electricity providers Rank

Ranked by total net revenue in 2020

Company WEbsiTE

ToTal nET REvEnuE in 2020 (HuF mln)

yEaR EsTablisHEd

no. oF Full-TimE EmployEEs on July 1, 2021

oWnERsHip (%) HungaRian non-HungaRian

Top loCal ExECuTivE

addREss pHonE Email

1

mvm nExT EnERgiakEREskEdElmi ZRT. www.mvmnext.hu

721,073

2019

321

MVM Energetika Zrt. (100) –

gábor Hiezl

1081 Budapest, II. János Pál pápa tér 20.

(1) 474-9999 ugyfelszolgalat@mvm.hu

2

audax REnEWablEs kFT. https://audaxrenewables.hu/

242,995

2013

186

– Audax Renovables S.A. (100)

Tibor istván Fejes

1134 Budapest, Váci út 17.

(20) 459-9600 versenypiac@audaxrenewables.hu

3

ElmŰ-ÉmÁsZ EnERgiakEREskEdő kFT. www.elmu-emasz.hu

220,068

2002

184

ELMŰ Nyrt., ÉMÁSZ Zrt. (100) –

balázs lehoczki

1132 Budapest, Váci út 72–74.

(1) 238-1150 kapcsolat@elmu-emasz.hu

4

ElmŰ-ÉmÁsZ EnERgiasZolgÁlTaTó ZRT. www.elmu.hu

192,507

2015

A

Budapesti Elektromos Művek Zrt. (100) –

balázs lehoczki

1132 Budapest, Váci út 72–74.

(1) 238-1223 elmu@elmu.hu

universal gas providers Rank

Ranked by total net revenue in 2020

Company WEbsiTE

ToTal nET REvEnuE in 2020 (HuF mln)

yEaR EsTablisHEd

no. oF Full-TimE EmployEEs on July 1, 2021

oWnERsHip (%) HungaRian non-HungaRian

Top loCal ExECuTivE

addREss pHonE Email

1

mvm nExT EnERgiakEREskEdElmi ZRT. www.mvmnext.hu

721,073

2019

321

MVM Energetika Zrt. (100) –

gábor Hiezl

1081 Budapest, II. János Pál pápa tér 20.

(1) 474-9999 ugyfelszolgalat@mvm.hu

2

isd poWER kFT. www.isdpower.hu

39,777

1996

283

ISD Dunaferr Zrt (100) –

norbert siládi

2400 Dunaújváros, Vasmű tér 1–3.

(25) 584-442 isdpower1@isdpower.hu

3

opus TigÁZ ZRT. www.tigaz.hu

35,272

1987

978

MS Energy Holding Zrt. (100) –

balázs Torda

4200 Hajdúszoboszló, Rákóczi utca 184.

(52) 558-100 titkarsag@tigaz.hu

4

alpiq CsEpEl kFT. www.csepel.alpiq.hu

24,288

2001

1

– Alpiq AG (100)

gábor briglovics, Csaba varga, balázs bene

1085 Budapest, Kálvin tér12.

(1) 429-1030 info.csepel@alpiq.com

5

oERg óZdi EnERgiasZolgÁlTaTó És kEREskEdElmi kFT. www.oerg.hu

145

1993

19

Ózd Industrial Park Kft. (A), Fémiksz Kft. (A) –

imre kovács, péter miksztaj

3600 Ózd, Gyár út1.

(48) 574-399 oerg@oerg.hu

4

www.bbj.hu

Budapest Business Journal | October 8 – October 21, 2021

Special Report | 29

gas Traders Rank

Ranked by total net revenue in 2020

Company WEbsiTE

ToTal nET REvEnuE in 2020 (HuF mln)

yEaR EsTablisHEd

no. oF Full-TimE EmployEEs on July 1, 2021

oWnERsHip (%) HungaRian non-HungaRian

Top loCal ExECuTivE

addREss pHonE Email

1

mvm nExT EnERgiakEREskEdElmi ZRT. www.mvmnext.hu

721,073

2019

321

MVM Energetika Zrt. (100) –

gábor Hiezl

1081 Budapest, II. János Pál pápa tér 20.

(1) 474-9999 ugyfelszolgalat@mvm.hu

2

mvm CEEnERgy ZRT. https://ceenergy.hu

535,030

2000

112

MVM Energetika Zrt. (100) –

lászló Zoltán Fritsch

1138 Budapest, Váci út 144–150.

(1) 354-7000 info@ceenergy.hu

3

audax REnEWablEs kFT. https://audaxrenewables.hu/

242,995

2013

186

– Audax Renovables S.A. (100)

Tibor istván Fejes

1134 Budapest, Váci út 17.

(20) 459-9600 versenypiac@audaxrenewables.hu

4

mET magyaRoRsZÁg EnERgiakEREskEdő ZRT. https://hugas.met.com

96,261

2007

53

– MET Holding AG (100)

gergely szabó

1068 Budapest, Benczúr utca 13/B (1) 464-1111 info.methu@met.com

5

opus TigÁZ ZRT. www.tigaz.hu

35,272

1987

978

MS Energy Holding Zrt. (100) –

balázs Torda

4200 Hajdúszoboszló, Rákóczi utca 184.

(52) 558-100 titkarsag@tigaz.hu

6

pRímaEnERgia ZRT. www.primaenergia.hu

22,526

1991

286

"HO-ME 2000" Vagyonkezelő Kft. (100) –

Zoltán szirmai

1117 Budapest, Alíz utca 3.

(1) 209-9900 vevoszolgalat@primaenergia.hu

7

Flaga HungaRia kFT. www.flaga.hu

14,987

1990

155

– Zentraleuropa LPG Holding GmbH (100)

kinga bodó, Réka várkonyi kantiné, noémi adrienn szabó, Éva melinda Telek

2040 Budaörs, Puskás Tivadar utca 14.

(23) 507-600 flaga@flaga.hu

A = would not disclose,

NR = not ranked, NA = not appliacable

This list was compiled from responses to questionnaires received by October 6, 2021, and publicly available data. To the best of the Budapest Business Journal’s knowledge, the information is accurate as of press time.

The list is based on companies’ voluntary data submissions. While every effort is made to ensure accuracy and thoroughness, omissions and typographical errors may occur. Additions or corrections to the list should be sent on letterhead to the research department, Budapest Business Journal, 1075 Budapest, Madách Imre út 13–14, or faxed to (1) 398-0345. The research department can be contacted at research@bbj.hu

5

www.bbj.hu

Budapest Business Journal | September 24 – October 7, 2021

Socialite Patti Smith Returns to Hungary

When I introduced a Hungarian friend to the work of Patti Smith, she was an instant convert to the music, writing and persona of the American punk rocker, poet, author, and activist. She also said, “If she’d been Hungarian, the communists would have put her in a mental institution.”

DAVID HOLZER

Smith plays at Müpa Budapest’s Béla Bartók National Concert Hall on October 13. I will be in the audience with my friend. I can only hope she experiences the same rush of joy and liberation as I’ve felt whenever I’ve seen Smith perform.

Born in December 1946, Smith burst onto the international rock and roll scene with her 1975 debut album “Horses.” I was 14 at the time and had never heard anything like it. The cover, with a photo of Smith taken by her ex-boyfriend, the photographer Robert Mapplethorpe, was equally game-changing.

Smith became an instant icon and role model for women, all the way from my school friends to the first wave of women in punk bands. Her influence continues to resonate down the years.

The ultra-provocative Courtney Love, of the band Hole, said that when she was given “Horses” as an incarcerated teenager she “realized that you could do something that was completely subversive that didn’t involve violence [or] felonies. I stopped making trouble.”

Before “Horses,” Smith had been a rock and roll journalist and poet who had made a name for herself on the tough, competitive New York poetry scene.

She began making music when guitarist and writer Lenny Kaye started backing her in her poetry readings. From there, the duo formed a full-on rock band.

as high as it is today, and she was a revelation. Together with her band, wearing black, all skinny with manes of grey hair, she leant into the music and gave it a vigorous kicking.

Since then, I’ve seen her four times in very different circumstances. In Mallorca, Spain, she performed outdoors at what was once a castle. Followed by a spotlight, she stomped along the parapet shaking her fist and singing her anthem “People Have The Power.” I’ve also seen her play to a tiny crowd in Tangier, Morocco, with only Lenny Kaye to accompany her. Both times she was a mesmerizing lightning rod for the spirit of rock and roll.

Today, Smith manages to temper the ferocity of her performance with an endearing goofiness. This was never more apparent than when she fluffed the words of Bob Dylan’s “A Hard Rain’s a-Gonna Fall” while collecting the Nobel Prize in Literature on his behalf at the ceremony in Stockholm in 2016.

“By devoting her life in all its forms, Patti Smith has demonstrated how much rock and roll there is in poetry and how much poetry there is in rock and roll. She has transformed the way an entire generation looks, thinks, and dreams.”

Now, it’s somehow fitting that she is the one of the first, if not the first, rock and rollers to play Budapest postpandemic. Hungarian fans of her work have waited a long time; she was last Patti Smith playing the Lowlands Paradise Festival here in 2003, when she electrified the in Biddinghuizen, The Netherland, in August 2018. audience at the Sziget Festival.

Photo by Ben Houdijk / Shutterstock.com Smith will be 75 at the end of this year. Judging by recent clips of her performing that have surfaced on Their first recording was 1974’s recommenced her musical career YouTube and the “Live at Electric Lady” single “Hey Joe,” backed with “Piss with the album “Gone Again” in 1996. album released earlier this year, she has Factory.” The A-side is impressive Since then, Smith has recorded five lost none of her power. but the flip, which tells the story of more albums of original material. The When she was awarded the Swedish how Smith plans to leave the factory most recent is “Banga” (2012). Her Polar Music Prize, inaugurated by of the title – in reality a baby buggy albums always have a couple of great Stig Anderson, manager of ABBA, factory – and make it in New York tracks on them but, in recent years, she the organizers said, “By devoting her is astonishing. has become more interesting as a writer, life in all its forms, Patti Smith has In the 1970s, Smith recorded two performer, and activist. demonstrated how much rock and more albums. The first of these, “Easter,” “Just Kids,” a memoir of Smith’s time roll there is in poetry and how much included “Because the Night,” co-wrote in 1970s Manhattan and her love affair poetry there is in rock and roll. with fellow New Jersey rocker Bruce with Mapplethorpe is not just one of the She has transformed the way an Springsteen, which reached 13 in the best rock and roll memoirs ever, it is an entire generation looks, thinks, Billboard magazine Hot 100 singles idiosyncratically written masterpiece. Of and dreams.” chart. It remains Smith’s biggest hit. her subsequent books, “M Train” and “Year If you love rock and roll and freedom Before the release of her third album of the Monkey” are well worth reading. of expression, you shouldn’t miss Patti “Wave,” in 1979, Smith met Fred Smith’s work has always had a political Smith in Budapest on October 13.

“Sonic” Smith, former guitarist in the dimension and she has not hesitated legendary MC5, married him and had to stand up and be counted. She has two children. He co-wrote “People supported AIDS benefits, the Green Patti Smith is at Müpa as part Have the Power,” one of Smith’s bestParty, and Tibet, and protested against of the Liszt Fest International loved songs and an anthem of sorts. the American right-wing, Iraq, and Cultural Festival. You Smith spent most of the 1980s Israel. But, for me, Smith is a true can purchase tickets at married in Detroit. After her husband’s rock and roller, pure and simple. www.lisztunnep.hu. sudden, unexpected passing in I first saw her perform 20 years ago, 1994, she returned to New York and when her profile was nowhere near

5

www.bbj.hu

Budapest Business Journal | September 24 – October 7, 2021

Socialite | 31

Harvest 2021: All’s Well That Ends Well, Just About Grapes have been harvested – and still are in some cases – up and down the land.

All in all, Hungary’s winemakers are a relatively happy bunch, given the quality of the crop after what was a tough beginning to the vintage. That said, they will certainly not be cashing in on a bumper vintage, for the most part.

ROBERT SMYTH

From Szekszárd, Zoltán Heimann Sr. of the Heimann Családi Birtok told the Budapest Business Journal that the quality of the grapes harvested has been good so far, but the quantity is lower than in typical years thanks to the cool weather during flowering in the spring, and then the dry summer.

Both factors led to smaller bunches and individual grapes forming than usual.

This does mean that the grapes are concentrated, however, albeit with the downside that this can lead to problems during fermentation: the winemaking team has to be constantly vigilant to intervene if and when necessary.

Not only have the grapes been more concentrated, but the window for harvesting has been more condensed, with the different grapes ripening at or around the same time.

Horst Hummel, a German lawyerturned-vintner, who makes biodynamic wines in the warm southwestern region of Villány, spoke of a remarkably small harvesting window, with all grapes ripening within a short period of each other.

All his grapes were harvested by the time I ran into him at a Natural Wine tasting event in Budapest last week.

Wineries are used to having something of a more even spread of ripening of the various grape varieties, enabling them to manage (the often limited) processing capacity of the winery more efficiently.

Hang Time

Another challenge related to this set of affairs is to ensure that the grapes are not left hanging too long unharvested since the alcohol level can rapidly soar.

“We want to avoid high alcohol levels, which gets difficult when everything is ripening at the same time,” said Heimann.

With heavy rains forecast, the Heimann family and their team were

hoping to have brought all the grapes in by the time this paper was published.

Regarding the grapes grown, Heimann explained that the family was putting ever-more focus on indigenous grapes, citing the influence of his son Zoltán Jr., who has traveled extensively, working with and studying wine in the process.

“The Kadarka and Kékfrankos look really gorgeous and have fabulous acidity, thanks to cooler nights at the end of August and in September that mitigated the warm days,” said Heimann Sr. The always witty winemaker also quipped that there’s a broader problem to contend with than the vagaries of the weather. “We need more customers and more people to drink our wines,” he said.

In nearby Tolna, Zalán Mucsi of the Grál Borpince said his grapes were set to be highly concentrated, but a significant amount of rainfall in the run-up to the harvest diluted them somewhat. This would typically be a slightly negative outcome, but it could work out for the best as the grapes were already ultra-concentrated.

“It will rather lead to slightly lighter, fresher wines with very nice drinkability,” said Mucsi. A lighter style of wine, in which more than one glass can be enjoyed at a time before the onset of palate fatigue, is indeed what many crave as tastes move away from bombastic blockbusters to the airy and more ethereal.

At a tasting in Budapest on September 15, Zsolt Palkó, the winemaker at Villa Sandahl from the Badacsony region, told the BBJ that the grapes harvested had been healthy and good-looking.

He added that the growing season had started later than usual by some two to three weeks, while the warm September accelerated sugar accumulation, leading to a surprisingly early harvest, given the late beginning.

Conventional wisdom has it that the longer the growing season and the greater the ‘hang time,’ the better, as the grapes can accumulate deeper and more

complex flavors. It, therefore, remains to be seen how the current vintage will turn out, Palkó acknowledged.

Complex Riesling

One thing that seems to be sure is that Sandahl’s Rieslings have staying power and bags of complexity. The winery’s owner, Krister Sandahl, is a Swede. By profession a computer engineer, he has spent his career developing programs for electronics products, although he always had a keen interest in tasting the wines of the world before coming to Hungary to set up his own winery.

“I’m now developing wines,” he joked.

“We’ve succeeded to minimize the failures when it comes to winemaking,” was his modest assessment of what have turned out to be some of Hungary’s finest Rieslings.

The wines also have longevity. A case in point is Magic Rain Riesling from the 2011 vintage, which is remarkably clean and pure with a pleasant touch of petrol to complement its layers of citrus fruit and floral notes, without any signs of oxidation.

It does indeed have that “flowers after rain” lightness of touch about it. It costs

HUF 6,800 from idrinks.hu. Rieslings like this show how Hungary has become quite a serious player with this fabulous German grape, making rich, oily, and layered wines that are also lively and zesty.

When I called Ádám Varkoly from the family-owned Árpád Hegy Pince in Szerencs, in the Tokaj wine region, just ahead of going to press on Tuesday, he was just back from harvesting Furmint that will be made into dry wine.

“It’s been a difficult year, with the coolest spring for 100 years, but then a dry and hot summer brought nice grapes, although the last week of August was very cold, leaving high acidity,” Varkolyi explained.

His just harvested Furmint grapes have a high acidity level of 7.5 g/l, but that will not present a problem. “This is Tokaj; we like high acidity,” he said, adding that the wines will, fortunately, have the body to match the acidity.

Regarding sweet wines, Varkoly explained that the conditions, with sunny, windy days, are ideal for excellent botrytis, the famed “noble rot” that shrivels the grapes and concentrates the color, sugar, acidity, and flavors, enabling Tokaj Aszú wines to be made.

A HOLNAP TECHNOLÓGIÁJÁVAL A JÖVŐÉRT.