Budapest Business Journal 2418 by Business Publishing Services Kft.

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rt 3Special Repo

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Energy

to grow Renewable energy has room

but faces challenges

and renewable energy usage, are considered the total that is via solar collectors.” Biomass and geothermal of Hungarian RES, most of photovoltaic projects the beating heart of can produce The number as of now, since Hungarian agriculture rapidly increasing but, public material and the is individuals rather than most plenty of biomass gradient exceeds private or establishments own so-called geothermal encapsulated in institutions panels and collectors. the global average, that is natural treasures: photovoltaic a new tariff system one of the country’s there is Thanks to solar geared to encourage all those spas. In particular, in this in increasing the specifically use, further growth significant potential in the supply energy makes it is expected, which also role of geothermal energy already a common sectorattractive to potential investors. of heat. Indeed, it is sectors, such as more Journal asked heating method in some The Budapest Business a number of the on comment to horticulture. room MEKH largest power it simply and MVM Group, the Hungary has also significantenergy. issues raised in this article, but which will look solar a Hungarian-language producer in Hungary, CLAUDIA PATRICOLO for development in solar pointed us to hydropower, wind and regulations. to HIPA: “The use of sectors for at developing Moreover, thanks to According 1% of pdf of the relevant Hungary is around energy. The fastest growing in Hungary solar Project, energy in European Demonstration are to alternative energy sources biomass and the are represented by – as outlined innovative green power stations AWAY BY REGULATIONS in the south-eastern WIND FARMS BLOWN geothermal. The target Kaszó. Strategy 2030 be implemented of Pusztamagyaród and in the National Energy and energy villages growth – is to create a sustainable Hungary has significant as solar ZSÓFIA VÉGH foreign in many fields such efficient economy, decreasing parks in One recent potential installation of wind power wind power, and geothermal energy dependency. changes have made the agreement energy, use of Two recent legislation for Energy Policy Research But while increasing example is a cooperation says the Regional Center more worldwide EPBiH (Electric sources. Hungary all but impossible, a ministerial decree setting power has became a signed between the looked at the effects of Herzegovina) wind for growth (REKK). The think tank and a government regulation Utility of Bosnia and trend, Hungarian capacitybureaucratic turbines’ technical aspects, by stringent rules on wind seems hampered for installing a wind farm. despite the fact regulation. That is commercially available that tightened the conditions ADVERTISEMENT specifications of 208 last Global Wind the to technical and the according standards that, REKK compared the newly set report, in the by Siemens and GE, with to Energy Council (GWEC) grew turbines, including models (the think tank was unable the first four conditions last 20 years wind installations found that only nine met and global wind by more than 20% The to double assess noise emission). location requirement. power capacity is projected difficult it is to meet the It The apparent REKK also looked at how installed in built-up areas. in the next five years. power parks cannot be attitude towards of areas regulation says that wind unfavorable Hungarian away from the borders power seems has to be at least 12 km Kisalföld where there greater use of wind the fact that also says that a wind farm REKK picked a part of 12-km radius a particularly odd, given is deemed to are intended to be built-up. draw that not could area power for a farm and 43% of the country’s would be sufficient wind utilization of a town. be suitable for economic a Hungarian circle without covering to It might be to favor certain wind power. According is not clear, says REKK. Agency report: The aim of the legislation installation impossible. Investment Promotion or to make wind farm power turbine wind manufacturers, of leading wind turbine market entry of “There is 330 MW sale. it greatly restricts the Hungary. In areas with Danube view, is for Whatever the reason, capacity installed in level, the annual noted. that are 75 m above sea makers, the think tank 40 sqrm 150 kEUR above 5.5 m/s. At average wind speed is are (Sweden) opportunities the 46706492249 Phone: + higher altitudes, Requirements: height: 100 m even more promising.” e-mail: m_ferenc@hotmail.com 1. Tower’s maximum up to 2 MW 2. Turbine’s capacity: than 50 meters on systems be closer to the ground requirement) this ADVERTISEMENT 3. The blades cannot met turbines of 30% more than 50 kW (only generating generating 50 meters on systems jogi, gazdasági, között blades cannot exceed többek 4. The length of the since óta fordítunk market 2003 is50vállalunk! kW the translation On more than safety zones, 40db outside területen. OFFI ügyintézést cannot exceed 60db in 2003 kereskedelmi 5. The noise emission próba safety zones ria.hu. Ingyenes

has always played an Although natural gas energy market, important role in Hungary’s (RES) are today renewable energy sources importance, albeit with assuming ever greater Some options, such plenty of room for growth. own problems, while their as biomass, come with face regulatory challenges. others, like wind power,

ENERGY

Top floor city apartment,

service! apt@apthunga translation ól!the requirements: megTheszaktudásunkr list of turbines that meet munkát vállalunk, győződjön GE 1 .85-82.5

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NEWS

Hungary on verge of being lifted from junk With two out of the three main credit rating agencies having Hungary firmly in positive territory, it is de facto back at investment grade, with the last agency expected to follow suit in November. 3

SOCIALITE

Szekszárd shines at Harvest Days Festival The annual autumnal festival in Szekszárd – Hungarian epicenter of the Kadarka grape – confirms that some truly excellent wines, and especially reds, are being produced in the region. 22

BUSINESS

Investors returning to Hungary Lars Höglund, MOL Group retail senior vice president talks about what is next for MOL Group following its acquisition of all 173 Agip branded filling stations in Hungary, and the balance between the downstream and upstream sides of the business. 12 SPECIAL REPORT

BBJ_2418_news.indd 1

BUSINESS

Total investment transaction volume for the first half year reached around EUR 910 million, which has already exceeded the full year volume for 2015. Retail assets represented the major share of investments. 8

SOCIALITE

Gas consumption up as interconnectors spread

Businesses, gov’t share common goal

Welcome to the world of the sauna séance

Hungary could further diversify its existing sources and become less reliant on Russian gas if planned infrastructure and market developments in the region finish. 14

Summit hosted by AmCham and HIPA the latest meeting between the corporate world and the administration aiming to improve the country’s competitiveness. 5

You almost certainly already know about Hungary’s long love affair with spa culture, but did you ever consider it might go as far as staging a séance in a sauna? 20

2016. 09. 28. 20:37

www.bbj.hu

Budapest Business Journal | September 30 – October 13, 2016

SPECIAL REPORT:

SUBSCRIPTIONS

3Special Report

BBJ

Energy

Renewable energy has room

to grow but faces challenges

and renewable energy usage, are considered the total that is via solar collectors.” Biomass and geothermal of Hungarian RES, most of photovoltaic projects the beating heart of can produce The number as of now, since Hungarian agriculture rapidly increasing but, public material and the is individuals rather than most plenty of biomass gradient exceeds private or establishments own so-called geothermal encapsulated in institutions panels and collectors. the global average, that is natural treasures: photovoltaic a new tariff system one of the country’s there is Thanks to solar geared to encourage all those spas. In particular, in this in increasing the specifically use, further growth significant potential in the supply energy makes it is expected, which also role of geothermal energy already a common sectorattractive to potential investors. of heat. Indeed, it is sectors, such as more Journal asked heating method in some The Budapest Business of the comment on a number largest power horticulture. has also significant room MEKH to it simply and MVM Group, the raised in this article, but Hungary which will look solar energy. issues us to a Hungarian-language producer in Hungary, CLAUDIA PATRICOLO for development in solar pointed hydropower, wind and regulations. to HIPA: “The use of sectors for at developing Moreover, thanks to According 1% of pdf of the relevant Hungary is around energy. The fastest growing Project, energy in in Hungary solar European Demonstration are to alternative energy sources biomass and the stations are represented by – as outlined innovative green power AWAY BY REGULATIONS in the south-eastern WIND FARMS BLOWN geothermal. The target Kaszó. Strategy 2030 be implemented of Pusztamagyaród and in the National Energy and energy villages growth – is to create a sustainable Hungary has significant as solar ZSÓFIA VÉGH foreign in many fields such efficient economy, decreasing parks in One recent potential installation of wind power wind power, and geothermal energy dependency. changes have made the agreement energy, use of Two recent legislation for Energy Policy Research But while increasing example is a cooperation says the Regional Center more worldwide EPBiH (Electric sources. Hungary all but impossible, a ministerial decree setting power has became a signed between the looked at the effects of Herzegovina) wind for growth (REKK). The think tank and a government regulation Utility of Bosnia and trend, Hungarian capacitybureaucratic turbines’ technical aspects, by stringent rules on wind seems hampered for installing a wind farm. despite the fact available regulation. That is that tightened the conditions ADVERTISEMENT of 208 commercially last Global Wind technical specifications and that, according to the REKK compared the the newly set standards report, in the by Siemens and GE, with to Energy Council (GWEC) turbines, including models (the think tank was unable installations grew the first four conditions last 20 years wind found that only nine met and global wind by more than 20% The to double assess noise emission). location requirement. power capacity is projected difficult it is to meet the It The apparent REKK also looked at how installed in built-up areas. in the next five years. power parks cannot be attitude towards of areas regulation says that wind away from the borders unfavorable Hungarian power seems has to be at least 12 km there greater use of wind the fact that also says that a wind farm a part of Kisalföld where built-up. REKK picked radius particularly odd, given is deemed to that are intended to be could not draw a 12-km area power for a farm and 43% of the country’s would be sufficient wind utilization of a town. be suitable for economic a Hungarian circle without covering to It might be to favor certain wind power. According is not clear, says REKK. Agency report: The aim of the legislation installation impossible. Investment Promotion or to make wind farm turbine of wind power wind turbine manufacturers, market entry of leading “There is 330 MW sale. it greatly restricts the Hungary. In areas with Danube view, is for Whatever the reason, capacity installed in level, the annual noted. that are 75 m above sea makers, the think tank 40 sqrm 150 kEUR above 5.5 m/s. At average wind speed is (Sweden) opportunities are Phone: + 46706492249 higher altitudes, the Requirements: height: 100 m even more promising.” e-mail: m_ferenc@hotmail.com 1. Tower’s maximum up to 2 MW 2. Turbine’s capacity: than 50 meters on systems be closer to the ground requirement) ADVERTISEMENT 3. The blades cannot 30% of turbines met this more than 50 kW (only generating generating 50 meters on systems jogi, gazdasági, között blades cannot exceed többek 4. The length of the since óta fordítunk market 2003 is50vállalunk! kW the translation On more than safety zones, 40db outside területen. OFFI ügyintézést cannot exceed 60db in 2003 kereskedelmi 5. The noise emission próba safety zones Ingyenes

ENERGY

Top floor city apartment,

translation service!

apt@apthungaria.hu. the requirements: megTheszaktudásunkról! list of turbines that meet munkát vállalunk, győződjön GE 1 .85-82.5

our free sample TryAjánlatkérés:

BUSINESS JOURNAL We specialize in

and Law Energetics, Economy Ask for our offer: +36 30/ 561 8454 apt@apthungaria.hu,

VOL. 24. NUMBER 18

Accuracy

Precision

Trustworthiness

77 Goldwind/Vensys Vensys 82 Goldwind/Vensys Vensys 87 Goldwind/Vensys Vensys Enercon E-48 Enercon E-82 Gamesa G80 Gamesa G97 Q Envision 1 .5-93

BUDAPEST

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BUSINESS

SPECIAL REPORT

SOCIALITE

Gas consumption up as interconnectors spread

Businesses, gov’t share common goal

Welcome to the world of the sauna séance

Hungary could further diversify its existing sources and become less reliant on Russian gas if planned infrastructure and market developments in the region finish. 14

Summit hosted by AmCham and HIPA the latest meeting between the corporate world and the administration aiming to improve the country’s competitiveness. 5

You almost certainly already know about Hungary’s long love affair with spa culture, but did you ever consider it might go as far as staging a séance in a sauna? 20

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Hungarian renewables being blown off course This issue features a special report into Hungary’s energy markets, and the data for renewables is particularly interesting. First, the good news; Hungary has plenty of room to grow its share of renewable power in its energy mix, and is blessed with geothermal resources, above average wind levels and good numbers when it comes to hours of sunshine. Indeed, taking solar alone, Hungary’s self-generating capability has been doubling year-by-year, according to data from MEKH, the Hungarian Energy and Public Utility Regulatory Authority. But that is almost exclusively as a result of the installation of private rooftop photovoltaic systems. If it is to continue doubling, more serious players are going to have to come to market. One area of undoubted growth has been biomass, but that is not without problems, either. According to one expert our reporters spoke to in researching Hungary’s energy markets, so-called clean energy makes up just 10% of the energy mix, and some 80% of that is gained from biomass, which, in turn, generates carbon emissions. Biomass fuels are less economical than fossil fuels, do not create the same amount of energy or burn as efficiently as fossil fuels. Compared to gas, it is more bulky to transport, and although it is one of the oldest of renewables (wood has been burnt for fuel since man first learned how to make fire), the technology for exploiting it is among the least developed, and partly as a consequence more expensive. Then there is the moral

dilemma: if you are burning a food stuff for energy, would mankind not be better off if it were exported to somewhere lacking food? Which leads us to wind power, described in an expert opinion piece inside this issue as “a prominent negative example” because of a “controversial ministerial decree introducing new, overly strict technical barriers to wind farm installations, which seems to be counterproductive considering that, according to the Hungarian National Renewable Action Plan, wind shall play a significant role in Hungary’s renewable energy mix, with a total wind capacity of 750MW by 2020.” The criteria for acceptable wind turbines has been narrowed to the extent that the Regional Center for Energy Policy Research (REKK) says less than ten from 200 commonly available wind turbines are now acceptable in Hungary, and restrictions on where you can place a wind farm make it virtually impossible to build one on parts of the Kisalföld, even though the suitability from a wind point of view is high. REKK says it isn’t even sure what the intention behind the legislation is, but it greatly restricts the market entry of leading turbine makers, the think tank noted. Hungary, in common with pretty much every other EU member state, has a battle on its hands to stick to its 2020 targets for CO2 reductions and achieving a wider energy mix. Right now it seems as if its own regulations are doing nothing to help it meet its own goals.

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Then and now Almost since man invented photography, a staple subject setting has been people and their bikes. With a man standing proudly beside his machine on a bridge over the river Zagyva in Szolnok in 1935, the photo above also appears to show an early exponent of parkour on the structure of the bridge. Today, people tend to be a little less static with their cycles, as seen by these BMX bikers, at left, in a Budapest skatepark at Boráros tér.

2016. 09. 28. 20:37

1 News BBJ

NEWS

U.S. Ambassador denies stepping down report  4

NEWS

Terror attack in Hungary possible, warns minister 4

macroscope

Hungary on verge of being lifted from junk status In what was certainly a surprise move, Standard & Poor’s upgraded Hungary’s credit rating in its latest review. The country is now, after five years, all but out of the junk status, and analysts expect Moody’s, the third major credit rating agency, to take a similar step in November. ZSÓFIA CZIFRA

Standard & Poor’s has lifted its rating for Hungary from junk status to investment grade. The rating agency raised its long- and short-term foreign and local currency sovereign credit ratings on the country to ‘BBB-/A-3ʼ from ‘BB+/Bʼ on September 16. The upgrade came as a surprise to all, not least because Standard & Poor’s is regarded as a more conservative institute, one that pays the most attention to “soft factors” such as the predictability of economic policy or the general business environment. While in their spring assessment, S&P sharply criticized economic transparency in Hungary and raised questions about ongoing practices at the National Bank of Hungary, it has seemingly overcome those objections now and admitted the stronger economic performance of the country. S&P expects GDP growth will average 2.5% annually over 2016-2019, up from its forecast of 2% on average in its March review. In 2016, the rating agency projects that the general government fiscal deficit will narrow further to 1.8% of GDP from 2% in 2015, and it also projects that net general government debt will subside to 68% of GDP in 2019 from 72% in 2015. It highlighted the marked improvement in Hungaryʼs external financial profile following the 2008-2009 global financial crisis. The upgrade also reflects the “immunization of the sovereign debt profile from foreign-currency volatility,” the agency said in a statement. With the current upgrade, S&P’s outlook for Hungary is stable. The rating agency noted that “The stable outlook balances our assessment of Hungaryʼs ongoing cyclical recovery and steady headline

BBJ_2418_news.indd 3

What’s next?

Standard & Poor’s overcame earlier reservations to upgrade Hungary’s credit rating. fiscal performance over the forecast horizon against its still-high general government debt and unpredictable policy environment.” As for the future, S&P said it could raise the ratings again “if government debt declines faster than we project in tandem with a further reduction in sovereign debt-servicing costs, or if the transmission of monetary policy improves.” The agency also mentions a few factors that could bring ratings under pressure, such as if Hungaryʼs public finances weakened materially, if external vulnerabilities build up again contrary to S&P’s current expectations, or if the agency saw the transparency of key institutions weakening further.

A well-deserved move While S&P’s move was unexpected by analysts, politicians weren’t taken by surprise, format least according to the ministerial statements. Following the upgrade by Fitch Ratings in May 2016, S&P’s decision to restore Hungary’s status to the investment grade category was the direct consequence of the country’s economic performance, Minister for National Economy Mihály Varga said in a reaction to the upgrade. The achievements of the Hungarian economy and market valuations would have warranted this move some years ago, the minister said. “Policy makers will likely feel vindicated in regaining the investment grade crown from S&P and pleased with the boost to local rates and bond markets,” Bloomberg cited Phoenix Kalen, a London-based strategist at Societe Generale SA, as saying. The analyst noted, however, that Hungarian policy makers would likely not be enthused about the strengthening forint, which they have been fighting against. The forint strengthened as much as 0.7% against the euro to 307.71 right after the upgrade. Commerzbank analyst Tatha Ghose said the broader development was not a surprise for them, as they had been expecting at least two agencies to

upgrade Hungary before the end of the year. However, he noted that while the GDP-growth now projected by S&P is “not too unrealistic” over the medium-term, Commerzbank forecast significantly slower growth of 1.5%-2% this year. “Now, with two agencies at investment grade, Hungary is de facto investment grade, and a number of real money asset managers would likely increase their portfolio exposure based on risk criteria alone. That said, Hungarian assets may have already rallied too far in anticipation (obviously, the action of ‘fast money’), and there is likely to be only a modest follow-through over the coming month,” Ghose said. Following the upgrade, Britain’s leading economic paper, the Financial Times published an article in which it stated that the Hungarian government’s unorthodox economic policy seems to be working. The article emphasizes that Hungary’s economy is doing very nicely. It notes that Orbán’s rightwing agenda has done wonders for Hungarian asset prices, and concludes that “investors’ view of populist policies is that they sometimes work.”

After S&P’s decision, Hungary remains in junk territory only at Moody’s, but a rating review is scheduled there for November 4. Expectations are high about a positive move, so there is a good chance that Hungary would be back in IG at all three of the major rating agencies for the first time in five years. “Based on credit fundamentals, Hungary appears the main candidate for future upgrades, even accounting for S&P’s rating action of last Friday. Moody’s is now very likely to follow Fitch and S&P’s decisions and upgrade Hungary to IG by year end,” Régis Chatellier, analyst with London-based Sociate Generale said. Also, after a two-year hiatus, the Hungarian state might reenter the international money markets, issuing an FX-denominated government bond again, according to analysts. The last time Hungary appeared on the international capital market was in March 2014, when it issued U.S. dollar denominated government bonds worth USD 3 billion.

NUMBERS TO WATCH IN THE COMING WEEKS

The Central Statistical Office (KSH) will publish the second quarter balance of the general government sector on October 3. Important indicators of the Hungarian economy will come out on October 5, when retail trade turnover for August will be released (a first estimate), and industrial output, also for August, will be out only two days later. KSH will publish the consumer price index for September on October 11.

2016. 09. 28. 20:37

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Budapest Business Journal | September 30 – October 13, 2016

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Magyar Suzuki welcomes new managing director

Yoshinobu Abe has been named managing director of Magyar Suzuki, replacing Naoyuki Takeuchi, who has been promoted within the parent Japanese company. Abe has been working for Suzuki Group since 1978, holding several positions at the Japanese headquarters and in international areas. He graduated from Sophia University in Tokyo as a Bachelor of International Economics, and started his career in the global automobile marketing division of Suzuki Motor Corporation. The first 12 years of his career were spent dealing with the Central and South American markets, and then the North American market, as well as projects in India and Pakistan. In 1990, Abe was put in charge of controlling the New Zealand and Australian business operations from SMCʼs Hamamatsu headquarters; in 1992, he eventually took over as MD at Suzuki New Zealand. In 1997, Abe returned to the global automobile marketing division, in charge of the North American market, and then became sales and marketing director of American Suzuki. Two years later he became MD of Suzuki Canada. Four years later, in 2004, he became general manager heading a project at Suzuki India, and in 2010 he became MD of Suzuki Great Britain. Abe is currently President of Suzuki Europe, and will remain in the position, performing those duties in parallel with his new MD’s position at Magyar Suzuki.

Andrékó Kinstellar has new partner

Péter Vörös has joined the Andrékó Kinstellar law firm as a partner and leader of the fourmember competition and litigation practices in the Budapest office, according to a press release issued on September 13. The firm expects the arrival of the competition, litigation and environmental law expert to strengthen its position on the market. Vörös, who has built up a sterling reputation on the market according to Andrékó Kinstellar, was recognized as a Band 1 practitioner by Chambers Europe in 2015 and as a “leading individual” in competition law by Legal 500 in the same year. From 2007, he was a partner at the Budapest office of Baker & McKenzie, where he was co-head of the competition practice. “Kinstellar has built up a recognized competition law practice in the region, which I’m happy to be a part of and to develop further,” Vörös said. He advises and represents clients in cartel, dominant position and consumer protection cases before Hungarian and European authorities

BBJ_2418_biz.indd 6

and courts, while he has obtained merger control clearance for major transactions before the Hungarian competition authority, was involved in several complex merger control filings with the European Commission, and has coordinated numerous multi-jurisdictional merger control approvals, the press release notes. He also advises clients in state aid matters and assists them in their competition law compliance efforts. Vörös also focuses on environmental matters, where he has accumulated a wealth of experience. Managing partner Csilla Andrékó said that the firm has implemented a strategic restructuring over the past 18 months, which has seen the arrival of several experienced senior lawyers and two new partners.

CTP Hungary picks country manager

Peter Würsching MRICS has been appointed country manager for Hungary at international investment and development firm CTP, according to a press release issued on September 19. Würsching will be responsible for the development of the company’s growing operations in Hungary, a market CTP sees as holding excellent growth potential. Würsching joins developer CTP from MASPED First Hungarian General Forwarding, where he was responsible for the planning and execution of the group’s development strategy. Prior to that he was head of asset management at Raiffeisen Bank Hungary’s distressed asset vehicle. Würsching is a member of the Royal Institution of Chartered Surveyors, studied in Hungary and the Netherlands, and spent a six-month scholarship at the European Commission in Belgium. “It is an honor to be entrusted by CTP with the development of their operation in Hungary.... CTP is a company with good prospects, is a market leader in the region, but relatively new on the Hungarian market,” said Würsching. “It is a good time for CTP to expand into this key location within the CEE region and for Hungarian entrepreneurs to enjoy the unrivaled services provided by CTP.”

Dentons names Budapest-based pro bono director

Law firm Dentons has appointed Atanas Politov as Europe director of pro bono, to be based in the company’s Budapest office, joining the Europe pro bono committee formed in 2015 to coordinate Dentons’ pro bono legal services across the continent, according to a press release issued on September 27. Over the last three

years, Dentons Europe has engaged in numerous pro bono projects, working closely together with leading NGOs, the press statement notes. Politov is joining Dentons from PILnet, where as director of programs he developed large-scale legal aid reform projects in Bosnia-Herzegovina and Serbia, coordinated PILnet’s contributions to legal aid reform and oversaw the development of its pro bono clearing houses in Hungary, Russia, China and globally. He also led the PILnet team that organized the annual European Pro Bono Forum – bringing together law firms and NGOs to collaborate on addressing critical issues of social justice, the press statement says. Politov participated in legal training in his native Bulgaria and worked as a staff attorney for Bulgarian Lawyers for Human Rights. He also holds an LL.M. from Columbia Law School and is a former Fulbright scholar. “In line with our global commitment to making a meaningful contribution to the communities in which we work and live, we are delighted to welcome Atanas on board,” said Tomasz Dabrowski, CEO of Dentons Europe. “As one of the most recognized specialists in pro bono programs in Europe, he will help us make our pro bono and social responsibility efforts even more impactful,” he added.

Promotion for Magyar Telekom technology chief

Walter Goldenits, who has been the chief technology innovation officer (CTIO) of Magyar Telekom since January 1, 2013, is leaving the Hungarian subsidiary as of December 31, 2016, and moving on to parent Deutsche Telekom, according to a press release issued on September 23. No replacement for Goldenits has yet been announced. “The promotion of Goldenits is an acknowledgment for the technical field of Magyar Telekom and for the conscious professional work that has determined our everyday work and has made it possible to offer quality services to our clients,” MTel CEO Christopher Mattheisen said.

Apollo Tyres Hungary appoints head of unit Apollo Tyres Hungary, the local subsidiary of India-based manufacturer Apollo, which is currently constructing a plant in Gyöngyöshalász (80 km northwest of Budapest) through an investment of EUR 475 million, has appointed Csaba Mákos as head of unit, according to a press release issued on September 27. Mákos will be responsible for ensuring the launch of production in Hungary and managing manufacturing processes after launch. He has decades of experience in the automotive industry, most recently as plant manager for a greenfield project in Poland

at Opel (having worked for GM for 20 years in areas such as management and business operations), heading a team of 1,800 people. “Csaba Mákos’ rich experience in the automotive industry, in greenfield investment in particular and in a multicultural environment, will be of immense value to Apollo,” said Kannan Prabhakar, managing director of Apollo Tyres Hungary. “I look forward to playing a significant role in establishing Apollo Tyres as one of the premier manufacturing facilities in Europe,” said newly appointed Mákos. “And beyond that, to ensure the availability of superior Apollo products in Europe.”

HIPA welcomes new business development VP

István Papp has been appointed vice president of business development at the Hungarian Investment Promotion Agency, with a brief to develop supplier relationships and serve financial investors, according to a HIPA press release issued on September 28. Papp, a former managing director of Microsoft Hungary, is described by HIPA as an expert with a proven track record of success in the international business environment. In his new position, Papp’s main task will be to provide support to developing relationships with Hungarian small- and medium-sized enterprises in order to facilitate their highest possible involvement in investors’ supply chains. In addition to this, priority tasks will include mapping, professional evaluation and promotion among potential investors of – typically novel – investment projects and ideas that are based on a unique idea, the implementation of which requires an external source of financing and/or involvement of financial partners, says the press release. Papp has more than 21 years of experience in the ICT and telecom sectors, and has held senior positions at a number of large international companies. In his previous job, he was in charge of Microsoft’s regional business activities in the Asia and Pacific region. Prior to that, he spent four years as managing director of Microsoft Hungary. He also held senior positions at several international companies, including being deputy CEO of Magyar Telekom, and managing director of Cisco’s Southeast Europe region. “By strengthening the field of business development, on the one hand, more attention can be devoted to supporting Hungarian SMEs in order to facilitate their inclusion in the scope of suppliers working for foreign investors,” said HIPA President Róbert Ésik. “As a company manager, I have always put great emphasis on increasing the competitiveness of our economy and on improving Hungary’s international reputation,” Papp said, adding that he was honored by the opportunity.

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2 Business

COMPANY NEWS Alcoa inaugurates polishing production line in Székesfehérvár

U.S.-based aluminum company Alcoa inaugurated a polishing production line at its wheel plant in Székesfehérvár on September 20, according to Hungarian news agency MTI. The new equipment is part of a HUF 4.9 billion investment the company is implementing to better meet European demand for its products. The project is due to be completed early next year. Tim Myers, Group President of Alcoa Transportation and Construction Solutions said the company has invested USD 70 million in its Hungarian unit and European operations over the past ten years, and has plans for further investments. Alcoa-Kőfém Székesfehérvári Könnyűfémmű posted revenues of HUF 185.7 bln in 2014. It employs almost 2,200 people and exports 98% of its output.

Decathlon eyes more openings in Hungary

Sports equipment retailer Decathlon is planning to open several more stores in

Hungary in the coming months, managing director Gábor Posfai was reported as saying by Hungarian news agency MTI, in the wake of the opening of a new store in Tatabánya. Decathlon plans to open a new store in Sopron near the Austrian border in November, as well as another in the heart of Budapest, in the Corvin Plaza shopping mall – the second Decathlon in the capital. The company is spending almost HUF 1 billion on new stores this year, according to MTI. Turnover was up 26% year-on-year in January-August and it targets full-year net revenue of HUF 44 bln, compared to sales last year of HUF 34 bln, MTI reported.

Ericsson lays cornerstone for new facility in Budapest

Ericsson Hungary laid the cornerstone of its new country headquarters, Ericsson House, which is due to be completed by the end of 2017, on September 20. Once completed, Ericsson’s two current Hungarian headquarters, for R&D and for sales, will move into the one building in the capital’s Infopark. It will be close to the

most important Hungarian universities for R&D activities, a press statement from the company says says. Wing Zrt. is realizing the building on the banks of the Danube, and it has been pre-certified as LEED Gold, according to the press statement. Ericsson Hungary has a workforce of approximately 2,000 in Hungary.

Erste Hungary, Kaposvár University agree on cooperation

The Hungarian subsidiary of Erste Bank and the Faculty of Agricultural and Environmental Sciences at the University of Kaposvár signed a cooperation agreement on September 22 under which the two institutions will engage in research and education activities, Hungarian news agency MTI reported. The agreement stipulates that Erste Bank Hungary will be able to request industry analysis and review of research papers from the university, while students of the university will be offered training opportunities by the bank. The two parties also agreed to launch joint professional training programs.

Sberbank Hungary performs above plan in Jan-Aug The Hungarian subsidiary of Russia’s Sberbank performed better than expected in “several aspects” in the first eight months of the year, according to the H1 results Sberbank announced on September 23, as reported by Hungarian news agency MTI. After-tax income of the Hungarian

subsidiary came to HUF 3.5 billion during the period. Credit stock exceeded the plan by HUF 3.7 bln, while the stock of deposits came to HUF 9.1 bln over the plan in the January-August period, the bank announced. The capital adequacy ratio reached 25.4% and the loan-deposit ratio was 98%, MTI reported. Sberbank Europe Group acknowledged the Hungarian unit’s performance was in line with the group’s goals, such as focusing on the quality of the lending portfolio while cutting costs and raising client numbers, the news agency reported. Last year, the bank had consolidated losses of HUF 10.9 bln on total assets of HUF 379.9 bln, MTI reported based on the bank’s audited annual report. Consolidated loans to clients totaled HUF 196.7 bln and clients’ deposits stood at HUF 227.1 bln, MTI added.

Wallis Motor opens new salon in Budapest

One of the biggest BMW salons in the Central European region has been opened in Budapest by Wallis Motor, the company announced at a press conference on September 21. BMW described the opening of the salon as an important milestone in the company’s life in Hungary. The more than 5,000 square-meter building has been realized through an approximately HUF 3 billion investment. The building includes a 2,500 sqm service garage for BMW cars, a 300 sqm motorcycle showroom that the company claims to be unique in Hungary, as well as a separate building selling and displaying Minis, called the Mini Cube.

PROMOTION

Wine and dine

Wine aficionados like to twist the old adage about the health benefits of apples: “A glass of cabernet a day keeps the doctor away.” Well, guess what? If you strictly keep to the recommended daily dose – one glass per day – you might even enjoy those health benefits. Indeed, good wine is loaded with antioxidants that pluck up their Dutch courage and fearlessly fight free radicals – loose cannons in your body that like to wreak havoc and cause early ageing, cancer and cardiovascular diseases. Not to mention that wine in moderation is an effective stress reliever! Hear and follow our doctor’s orders. Dr. Ádám Lelbach Ph.D., internal medicine specialist and gastroenterologist at Dr. Rose Private Hospital, gives his two cents’ worth about how to get the most out of ruby cabernet or golden sauvignon.

and wellbeing are your main concern. Wine is medicine, after all,” advises Dr. Lelbach.

LONGEVITY Jeanne Louise Calmenta lived in France for a record breaking 122 years. When asked to share her secret of longevity, she liked to say that not so much a HEALTHY RED Medical research usually focuses on restful lifestyle but the right diet is the red wine for a very good reason: full- key. Of all the good things, olive oil, a bodied reds have a high concentration glass of port and some chocolate were of all the good stuff that helps digestion. at the top of her list. That’s why it feels divine to sip pinot or merlot with a hearty meal. French GENTLE ON THE STOMACH wines have been extensively researched Drinking in moderation and along with and analyzed, but recent studies have your meal is a safe bet, according proved that Hungarian wine is on to Dr. Lelbach. Wine is a perfect a par with the best of Bordeaux or accompaniment for savory canapés Languedoc when it comes to health and finger food, not just for the taste but benefits. All the studies agree on one also for protecting your digestive system fact though: that the goodness of wine and delaying the absorption of alcohol. peaks at 100 ml a day. Any more than Italians like to dunk bread in extra virgin that is a glass too many, and you can olive oil; this does the same thing. The hardly expect to decrease the chance doctor warns against going to a wine of cardiovascular disease if you exceed tasting on an empty stomach, even if the recommended daily dose. “You’d you are used to drinking wine regularly. better stick to doctor’s orders if health Light whites and rosé are gentler on your

stomach, but heavy reds could irritate it and cause discomfort. For the same reason you should avoid spicy and pickled food at a wine tasting event.

Good to Know The diabetic are better off drinking dry wine with low sugar content. If you suffer from reflux, you should avoid drinking wine a few hours before bedtime. Factor in your health condition and medication when reaching for the glass. Alcohol consumption of any kind is to be avoided in the case of certain gastrointestinal diseases, renal or pancreatic malfunction, neurological conditions. If you take regular medication, check the small print or ask your doctor whether – and how much – you are allowed to drink.

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

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Budapest Business Journal | September 30 – October 13, 2016

2016. 09. 28. 20:39

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2 Business

Budapest Business Journal | September 30 – October 13, 2016

Investors finally returning to Hungary

Major international investors are again actively considering Hungary as an investment target.

“Depending on one or two deals, investment volume for the year could reach EUR 1.4-1.5 bln. German institutional investors are back... The investment upgrade has been important for Hungary, as there is a push for Hungarian products. The same investors that would consider Poland and Czech Republic are now considering Hungary.”

GERY J. MORRELL

JLL figures show that total investment transaction volume for the first half year of 2016 reached around EUR 910 million, a figure that has already exceeded the full volume for 2015. In the latest public deal, Austria’s CA Immo has purchased the 70,000 sqm Millennium Towers from TriGranit and Heitman for EUR 175 mln. “What we see at the moment is an extremely positive dynamic in the Budapest real estate market, which is one of the core markets for the CA Immo Group,” commented Frank Nickel, CEO of the company. In another deal, a German institutional investor is reported to have completed the acquisition of an office center in central Pest. “Depending on one or two deals, investment volume for the year could reach EUR 1.4-1.5 billion. German institutional investors are back as they see Hungary as an investment target. The investment upgrade has

been important for Hungary, as there is a push for Hungarian products. The same investors that would consider Poland and Czech Republic are now considering Hungary,” said Ferenc Furulyás, managing director of JLL Hungary. CBRE put the provisional first half year investment figures for Hungary at EUR 734 mln, with a total of EUR 1.2 bln forecast for the year.

Retail assets the major share According to JLL, retail assets represented the major share of investment volume in the first half year at 39%, followed by office with 34%, logistics with 26% and hotels at 1%. The balance of EUR 80 mln is composed of the sale of plots and vacant buildings. At the recent CEE Property Forum in Vienna, organized by Portfolio and RICS, 58% of the participants expected the

investment market in CEE to improve. “Brexit has had no impact on our CEE investment strategy, although we made the decision to purchase in Budapest earlier this year,” said CA Immo’s Nickel at the event. Hungary is regarded as providing a significant yield premium on the established Central European countries. JLL put prime office yields at 7% and expected to fall to 6.5% by the year’s end. This compares to for example 5-5.5% for the Warsaw office market, where there are some fears of possible oversupply.

Legal eagles to descend on Budapest

Budapest is to host to a gathering of more than 1,000 legal professionals from around the world at the 60th annual Congress of the Union Internationale des Avocats from October 28-November 1. DR. ANDRÁS SZECSKAY AND DR. JUDIT BUDAI, SZECSKAY ATTORNEYS AT LAW

This year’s UIA congress will see 35 working sessions, ranging from banking to telecommunications law. In addition, there will also be two plenary sessions. The first, “Compliance: Challenges and opportunities for the legal profession”, will introduce participants to the fundamentals, challenges and benefits of a thorough compliance program. It will look at the necessary building blocks, their implementation into a company’s operations, the review and reporting mechanisms and internal investigations if an issue occurs. The topic will highlight to both corporate leaders and the legal profession the importance of building transparency and integrity in private and public organizations, combating different corrupt practices and, more broadly, the

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Dr. András Szecskay.

Dr. Judit Budai.

issue of using unfair advantages. Speakers from the OECD, large corporations and legal and forensic experts will discuss a variety of international issues.

of users for commercial profiling purposes (the private aspect), all in the context of a society where the processing of citizen and consumer data is increasingly prevalent. The Paris-headquartered UIA is the oldest and second largest global association of lawyers, having been established in 1927, and brings together around two million advocates through its individual members and collective members (bars, federations, and associations) from more than 110 countries. The UIA is open to all lawyers, both general practitioners and specialists, as

Privacy and protection The second plenary session, “Privacy and Data Protection in a digital world: Towards an international regulatory approach for mass surveillance and profiling”, will deal with government surveillance of citizens for criminal purposes (the public aspect), and the corporate use of the personal data

well as legal professionals, judges, law students and teachers. It is a multilingual and multicultural organization. Given its membership, the UIA can initiate high level legal debates within its technical commissions and working groups and adopts resolutions on current problems faced by the legal profession throughout the world. It also plays a key role in defending the interests of justice and the rule of law by raising its voice against political actions and decisions intended to hinder the independence of the legal profession. To promote professional excellence, each year the UIA offers a series of accredited seminars, training sessions and other events. These international events enable participants to meet colleagues and establish business contacts. Annual congress meetings typically attract between 1,000 and 1,200 lawyers. For this year, part of the mission for the UIA – and more especially for the Hungarian organizing committee – will be to show the cultural and culinary treasures of Hungary to visiting delegates. The opening ceremony on October 28 will be held at the Music Academy. The second evening will feature an informal dinner at the Castle Garden Bazar, while the closing ceremony will be at the classicist building of the Pesti Vigadó. All these places are situated in the heart of Budapest, close to the congress venues at the Marriott and Intercontinental Hotels.

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10 2Business

Budapest Business Journal | September 30 – October 13, 2016

CEU BUSINESS SCHOOL

A political life extension BP strengthens SSC muscle in Hungary for nuclear power Michael LaBelle Associate professor CEU BUSINESS SCHOOL

The Iron Gates Dam, the largest on the Danube, sits between Romania and Serbia. Each side has its own generator hall with an identical black and white tiled mural hanging above the whirling turbines. The white tiles are slightly raised on one side, representing the waves of the Danube, complimented by an interplay of semi-circles representing the interdependency of Romania and (former) Yugoslavia. Completed in 1972, the dam’s output is equivalent to Hungary’s Paks Nuclear Power Plant. Both facilities are products of the Soviet and Socialist industrial policy of cooperation and coordination on energy infrastructure. The mural is important as a point of reference. This piece of art sits within a concrete structure that holds back the force of nature. It expresses social and political cooperation between two countries and the joint engineering expertise of both. Energy infrastructure is not simply highly engineered machinery, but reflects political forces working together for economic and social ends. In light of this dual purpose, costs associated with power production may be secondary to political and social goals. Nuclear power in Europe appears to be gaining a new lease on life due to this necessity of politics over economics. The trend in the European Union, since the 1990s, was to establish a competitive market in electricity and gas, where types of generation would compete to promote lower prices for consumers. Interestingly, as the anti-EU rhetoric builds, so does the rejection of the idea of a single market in electricity and gas. The governments of Hungary and the United Kingdom have now taken strong decisions to build more nuclear power, aligning more with political justifications rather than economic ones. The cost of new nuclear in both the U.K. and Hungary is between 75% and 100% more than current or projected power prices. Meanwhile, trends in energy technologies leads to a dropping of prices. As both countries push to be politically and socially separated from the European project that brought Europe together after the Second World War, they seek external partnerships to reinforce their economic base. In the U.K., the expansion of the Hinkley Point Nuclear Power Plant, was placed on hold with the entrance of Prime Minister Theresa May into Downing Street. However, this pause lasted less than two months, as the realities of sidelining Chinese financing

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In 2014, Hungary signed an agreement with Russia to build two new reactors, more than doubling its current size. This agreement places an old trading relationship back in play. Nuclear power and the gas and electricity network in Eastern Europe was an explicit outcome of cooperation between the Soviet Union and COMECON countries in the former Eastern bloc. of the French designed plant became apparent. With the U.K. soon to be negotiating an exit from the EU, both trading partners will be important as U.K. industry is pushed towards a new trade reality. The Hungarian government’s choice to extend Paks, even before the current reactors end their lifecycles, is also based on politics rather than economics. In 2014, Hungary signed an agreement with Russia to build two new reactors, more than doubling its current size. This agreement places an old trading relationship back in play. Nuclear power and the gas and electricity network in Eastern Europe was an explicit outcome of cooperation between the Soviet Union and COMECON countries in the former Eastern bloc. This relationship dates back to 1958, when the Soviets made it an explicit strategy to shift countries away from self-sufficiency in energy production to an integrated approach. Just as the Hungarian government disparages the economic and social policies of the EU, it too must ensure good relations with countries outside of the member bloc. Functionally, nuclear power tethers generations of engineers and citizen taxpayers to Russia’s energy industry. Consequently, geopolitics trumps lower priced energy technologies. The black and white mural sitting below the waterline between Romania and Serbia represents not just their interdependence, but the deliberate choice that once the facility is built, it cements decades of cooperation between the two countries. Nuclear power provides inter-generational cooperation and mutual dependency between states and societies; this needs to be recognized as the part of the cost of the technology. The choice of nuclear power in the 21st century is not based on lower cost. This column is part of a continuing series of opinion pieces from experts at the CEU Business School in Budapest. The opinions stated here do not necessarily reflect those of the Budapest Business Journal.

Szeged Mayor László Botka, Fidesz MP László B. Nagy, foreign minister Péter Szijjártó and BP’s Richard Hookway celebrate after the announcement made in the Ministry of Foreign Affairs and Trade. (MTI/Noémi Bruzák)

And also, innovation and technological Good university developments are essential.” education and wellThe SSC market is an important job generator for Hungary. As Péter Szijjártó, qualified staff who speak Hungary’s Minister of Foreign Affairs and many foreign languages Trade, noted during the announcement of BP’s investment, SSCs are the second most have prompted BP to important field in the Hungarian economy, following the automotive industry. And the open a second SSC in skills and qualifications the domestic labor market has to offer seem to be the magnet the country, this time for such investments. in the southern city of Terrific universities Szeged. CHRISTIAN KESZTHELYI

Marking its 25th year present in Hungary, and seven years after opening its first shared service center in Budapest, British multinational oil and gas company BP is opening an SSC in Szeged. Among many favorable factors, highly qualified Hungarians speaking many languages and the strong university education in the country were key in BP’s decision to expand in the country, Richard M. Hookway, COO Global Business Services & IT at BP, tells the Budapest Business Journal. Once the HUF 8 billion investment (with a HUF 1.9 bln grant from the Hungarian government), is completed in Szeged, the British company is expecting to offer 500 new positions. Those will be in addition to the 1,200 existing jobs in BP’s Budapest SSC. “All businesses are under increasing pressure. If I take my own business, the price of oil has come down, which means we need to be as efficient as we possibly can be,” Hookway says. “How we think about shared service centers is that first you have the economy upscale. Secondly, if you have the right people with the right skills they have the ability to transform the processes, to make them much more effective for continuous improvement. The third area that we are getting into more and more is generating insight, because the center is getting lots of data which tells you more about the business than perhaps you ever thought; more about customers, more about suppliers. You are getting insights you were not able to get earlier.

“If you think about the skills that Hungary has to offer, universities are introducing people with great analytical skills and training, and actually technology is a big help as well. And terrific universities are located in the country, whether in Budapest or in Szeged. These are the main reasons we have chosen Hungary as a place for our shared service center,” Hookway explains. With the unemployment rate dropping and an increasing number of professionals leaving the country to work abroad, labor shortages seem to be hitting almost every field in the local economy. Despite that, Hookway is positive about finding a qualified workforce, and also about keeping them. “Recruiting is one thing, but keeping the people is another. You need to get both of those right. For us, that is why we spend a lot of time both on the quality of work and also on personal satisfaction. If you get personal satisfaction you are on the one hand attracted to that, on the other hand you are more likely to stay,” he says. “The other thing is what we call our employee value proposition, which is not only what work you do, but also how it gets done. You know the emphasis is on teamwork; we offer flexible working arrangements, which is particularly important for the Y generation and Millennials. We have a great work environment, we aim to have fun: work hard play hard is our mantra. We recognize the responsibility for communities and spend a lot of time and effort on career development, personal learning and training, not just skills that are subject to the job. It is a total package.”.

2016. 09. 28. 20:39

Congratulations

to the British Chamber of Commerce in Hungary th on its 25 anniversary. Foundat ion Members

bcch.com

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2016. 09. 28. 20:39

3Special Report BBJ

Energy

Renewable energy has room to grow but faces challenges Although natural gas has always played an important role in Hungary’s energy market, renewable energy sources (RES) are today assuming ever greater importance, albeit with plenty of room for growth. Some options, such as biomass, come with their own problems, while others, like wind power, face regulatory challenges. CLAUDIA PATRICOLO

The fastest growing sectors for alternative energy sources in Hungary are represented by biomass and geothermal. The target – as outlined in the National Energy Strategy 2030 – is to create a sustainable and energy efficient economy, decreasing foreign energy dependency. One recent example is a cooperation agreement signed between the EPBiH (Electric Utility of Bosnia and Herzegovina) ADVERTISEMENT

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and MVM Group, the largest power producer in Hungary, which will look at developing hydropower, wind and solar energy. Moreover, thanks to the European Demonstration Project, innovative green power stations are to be implemented in the south-eastern villages of Pusztamagyaród and Kaszó. Hungary has significant growth potential in many fields such as solar energy, wind power, and geothermal sources. But while increasing use of wind power has became a worldwide trend, Hungarian capacity for growth seems hampered by bureaucratic regulation. That is despite the fact that, according to the last Global Wind Energy Council (GWEC) report, in the last 20 years wind installations grew by more than 20% and global wind power capacity is projected to double in the next five years. The apparent unfavorable Hungarian attitude towards greater use of wind power seems particularly odd, given the fact that 43% of the country’s area is deemed to be suitable for economic utilization of wind power. According to a Hungarian Investment Promotion Agency report: “There is 330 MW of wind power capacity installed in Hungary. In areas that are 75 m above sea level, the annual average wind speed is above 5.5 m/s. At higher altitudes, the opportunities are even more promising.”

Biomass and geothermal are considered the beating heart of Hungarian RES, since Hungarian agriculture can produce plenty of biomass material and the so-called geothermal gradient exceeds the global average, encapsulated in one of the country’s natural treasures: all those spas. In particular, there is significant potential in increasing the role of geothermal energy in the supply of heat. Indeed, it is already a common heating method in some sectors, such as horticulture. Hungary has also significant room for development in solar energy. According to HIPA: “The use of solar energy in Hungary is around 1% of

the total renewable energy usage, and most of that is via solar collectors.” The number of photovoltaic projects is rapidly increasing but, as of now, private individuals rather than public institutions or establishments own most photovoltaic panels and collectors. Thanks to a new tariff system that is specifically geared to encourage solar energy use, further growth in this sector is expected, which also makes it more attractive to potential investors. The Budapest Business Journal asked MEKH to comment on a number of the issues raised in this article, but it simply pointed us to a Hungarian-language pdf of the relevant regulations.

WIND FARMS BLOWN AWAY BY REGULATIONS ZSÓFIA VÉGH

Two recent legislation changes have made the installation of wind power parks in Hungary all but impossible, says the Regional Center for Energy Policy Research (REKK). The think tank looked at the effects of a ministerial decree setting more stringent rules on wind turbines’ technical aspects, and a government regulation that tightened the conditions for installing a wind farm. REKK compared the technical specifications of 208 commercially available turbines, including models by Siemens and GE, with the newly set standards and found that only nine met the first four conditions (the think tank was unable to assess noise emission). REKK also looked at how difficult it is to meet the location requirement. The regulation says that wind power parks cannot be installed in built-up areas. It also says that a wind farm has to be at least 12 km away from the borders of areas that are intended to be built-up. REKK picked a part of Kisalföld where there would be sufficient wind power for a farm and could not draw a 12-km radius circle without covering a town. The aim of the legislation is not clear, says REKK. It might be to favor certain wind turbine manufacturers, or to make wind farm installation impossible. Whatever the reason, it greatly restricts the market entry of leading turbine makers, the think tank noted.

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Budapest Business Journal | September 30 – October 13, 2016

MOL gobbles up Agip

MOL, Hungary’s energy giant, became a little bit bigger on August 1 when the group completed the acquisition of the entire share capital of ENI Hungaria, a company managing 173 Agip branded filling stations in Hungary. The move puts MOL, which already had Hungary’s largest network of service stations, even further ahead of the pack in this country. The expansion in the “downstream” end of the oil business – that charged with selling the finished products – comes at a time when “upstream” activities, like drilling for reserves, are feeling profit pressure due to the low price of oil. According to Lars Höglund, MOL Group retail senior vice president, the lower oil prices are a challenge, but the price of crude is not as important as the markup on refining. In this interview with the Budapest Business Journal, Höglund talks about the importance of the new acquisition and the direction MOL Group is taking.

BBJ STAFF

“We are improving our nonfuel business and convenience retailing. We have created our new retail concept and initiated the Fresh Corner concept in order to satisfy more customers. Parallel with starting the rebranding processes of the newly acquired network, we are aiming to further expand the Fresh Corner as well, thus putting even more emphasis on the non-fuel business.”

MOL now operates roughly 500 filling stations in Hungary. What percentage of the national total is that? A: The aim of MOL is to strengthen its market positions in every country where we are present. As the result of the takeover of the Hungarian Agip stations, the retail network of MOL grows to more than 500 stations in Hungary. This means, that, currently in Hungary, anyone can reach a MOL station within half an hour. Through this acquisition we also strengthen our position in Budapest.

With the exit of the Agip stations, MOL’s dominance of the local filling station business dramatically increased. What are the advantages for MOL and the market if the firm builds its concentration of filling stations here? A: MOL is the leading fuel retailer in Hungary, however the competition is very strong. We are constantly searching for opportunities to improve the quality of our services, in which availability plays an important part. Our strategic aim is to expand our retail network in the radius of our refineries, thus the newly acquired network perfectly complements our existing one and enables us to serve our customers even better every day.

Does MOL see opportunities to expand its profits from food retail, or any other non-fuel business, thanks to the network of filling stations? A: MOL is primarily a fuel retailer, but taking into consideration the current trends and changing consumer needs, in line with our retail strategy, we are improving our non-fuel business and convenience retailing. We have created our new retail concept and initiated the Fresh Corner concept in order to satisfy more customers. Parallel with starting the rebranding processes of the newly acquired network, we are aiming to further expand the Fresh Corner as well, thus putting even more emphasis on the non-fuel business.

How much of the filling station market does MOL control in the region? Are there any other countries where

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Q Lars Höglund, MOL Group retail senior vice president. MOL’s dominance among filling stations is as high as it is in Hungary? A: Together with the current acquisition, in the last two years we have acquired around 450 stations in five countries. Thus the network of MOL has reached close to 2,000 stations in ten countries, and we are now serving more than one million customers on a daily basis. Through these inorganic expansions, MOL was able to further strengthen its market leader position in Hungary, Slovakia and Croatia, and it has become the second largest retail network in Czech Republic, and the third largest in Romania, while reinforcing its position as the third largest provider on the Slovenian market.

What proportion of MOL’s business is downstream and how is that broken down? How much profit do you see from filling stations? Refineries? Other downstream activities?

A: Based on 2015 results, MOL’s downstream business accounts for about 67% of the company’s total EBITDA, covering the production, supply trading and optimization, logistics, sales and retail activities. Retail accounts for approximately 17% of total downstream EBITDA, which is a substantial increase in the contribution compared to last year. This result is driven by a combination of higher sales of fuel and non-fuel. We are virtually growing market share across all our countries.

How do you see downstream businesses expanding in Hungary and throughout Europe? Are you undertaking any unusual initiatives worth discussing? A: Overall in downstream the focus is mainly on the petrochemicals and retail business. In retail we are constantly seeking possibilities to improve our service quality, therefore we are considering every option.

What about upstream? Where is MOL extracting or exploring for oil, shale, etc.? Are there plans to expand in upstream? Do you think MOL’s revenues from upstream will be substantial if oil prices reach moderate levels? A: The aim of the management of MOL is to carry on with its strategy, which secures that the upstream business remains profitable even with such low oil prices.

How do lower oil prices impact your downstream business? Do lower oil prices encourage you to invest more into downstream? A: In the case of downstream, lower crude oil prices mean lower cost of feedstock and energy for the refineries, but refining margins are the real drivers of our profitability. Whatever the external environment will be, downstream strategic directions will remain unchanged and we will concentrate on further increasing our competitiveness and efficiency. Our aim is to increase our refining and petchem asset availability, energy and maintenance efficiency and to improve our yield structure. On the other hand, we are aiming to further develop our wholesale activities in the region, while increasing our sales volumes and market share; in retail we are continuing with the step change. Further investment possibilities are continuously under evaluation, based on our strategic directions.

2016. 09. 28. 20:24

www.bbj.hu

Budapest Business Journal | September 30 – October 13, 2016

Gas consumption up as interconnectors spread

Hungary is well stocked with gas supplies, yet it could further diversify its existing sources and become less reliant on Russian gas if planned infrastructural and market developments in the region finish. The diversification of supplies, however, is not coupled with higher number of market players: as of this October there is one universal service provider only.

Despite milder conditions, Hungarian gas consumption in the first half of 2015 increased from a year earlier. Experts asked by the BBJ put this down to the increased activity of gas-fired power stations in Hungary. Falling gas prices has again made the use of these plants affordable.

BBJ STAFF

With Tigáz’s 1.2 million universal clients taken over by Főgáz by October 1, the renationalization of the household gas market has come to end and the stateowned company is the sole provider of the 3.2 million customers eligible for universal gas service. Following on from Magyar Telekom, E.ON and GDF Suez, Tigáz – the local subsidiary of Italian energy giant Eni – also surrendered its universal service provider license to supply gas to households. The process started in 2015 after the Hungarian government mandated a series of utilities price cuts for households and established the First National Utilities Company (ENKSZ), with the aim of providing utilities at predictable and lower prices. (Customers of universal service receive gas at a set price using a formula defined and controlled by the state.) However, due to a drop in natural gas prices in Europe that ENKSZ has not followed, the controlled prices household customers pay have since become less competitive.

Price Since eligibility to universal gas service is based on meter reading, companies not exceeding 20m3/h have the opportunity to choose ENKSZ and take advantage of state-controlled prices. They also have the option to enter the free market, which, considering the above could result in a better deal. Ever milder winters and more energy-efficient buildings have softened demand for gas as a heating fuel. Better interconnections between regions, thanks to a booming liquefied natural gas (LNG) market, has increased supply. As a result, natural gas prices worldwide have tumbled. Due to crashing oil prices, gas contracts pegged to crude oil may even have a temporary edge over spot market prices, as it would take several months for the effects of oil price rebound in the

BBJ_2418_spec_report.indd 14

first half to trickle down into contracted European gas prices.

Consumption Despite milder conditions, Hungarian gas consumption in the first half of 2016 increased by 300 million m3 to 5.4 billion m3 from a year earlier, according to the calculations of the Regional Center for Energy Policy Research (REKK). Experts asked by the BBJ put this down to the increased activity of gas-fired power stations in Hungary. Falling gas prices has again made the use of these plants affordable after a period during which many lay idle or were used less as electricity often turned out to be cheaper to import. Last year, however, the share of electricity imported decreased to 31.28% from 31.44% a year earlier, according to the data of Hungarian transmission system operator Mavir. Households also consumed more: average piped gas consumption per consumer was 950 m3/household in 2015, up from 834 m3 a year earlier, and breaking a downward trend in previous years, according to the data of the Central Statistical Office (KSH).

If it hadn’t been for a mild winter, consumption could have even been higher, experts say. Customers eligible to universal service used roughly 3.5 billion m3, while the amount of gas sold on the free market totaled 4.5 billion m3.

Supply When it comes to sources, the country is well supplied. With the exception of Slovenia, it is now connected with all its neighboring countries; although not all of them carry gas into the country. The two main sources of gas imports are the Austria-Hungary and the UkraineHungary pipelines. Gas imports through these two in the first six months came to 3.8 billion m3, of which approximately 1.8 billion m3 came from Ukraine (Beregszász) and 1.9 billion m3 from Austria (Mosonmagyaróvár), according to the data of Natural Gas Transmission Company (FGSZ). Due to missing infrastructure or inadequate capacities, flow of gas is only one-way (outbound) between Hungary and Romania, Serbia and Croatia. There has been no notable commercial activity via the Hungarian-Slovakian interconnector built in 2014 either.

The situation is about to improve, though. The missing technical developments that would allow twoway flow in the interconnectors between Hungary and Croatia, as well as Hungary and Romania, could be completed before the end of the decade with funding from the European Union. The building or extension of maritime sources, such as a floating LNG-terminal in Croatia or off-shore sources at the Black Sea in Romania, could also be finished before 2020, according to agreements recently signed by the above countries at the Central and South-Eastern European Gas Connectivity (CESEC) meeting, which took place in Budapest in earlySeptember. Here, the energy ministers of the countries involved in the development of the “Vertical Corridor”, a pipeline running from Greece through Bulgaria, Romania and Hungary, and the so-called BRUA-pipeline, a network connecting Bulgaria, Romania, Hungary and Austria, agreed on completing missing infrastructure. They also pledged to clear major obstacles in the way of the region- and Europe-wide wholesale trade. These go beyond infrastructural shortcomings, and include protectionist policies, high entry-exit and transmission tariffs, the market power of the incumbent operator which hampers access to retail customers and a low number of competitors on either wholesale or retail level, just to name a few. Should all these issues be solved in the next four-five years, Hungary could better diversify its natural gas sources, which also means the country would become less dependent on Russian gas.

Gas transmission data - gas volumes at 15 °C, 101325 Pa reference pressure Million m3/month

Jan 2016

Feb 2016

Mar 2016

Apr 2016

May 2016

June 2016

TOTAL

Transits to domestic exit point

1,514.9

1,059.1

988.6

581.8

472.5

368.9

4,985.8

Import total

564.1

587.4

582.2

607.4

766.2

719.3

3,826.6

Beregszász

246.8

246.7

259.3

278.2

433.2

418.1

1,882.3

Mosonmagyaróvár

317.3

340.7

322.9

329.2

333

301.2

1,944.3

Export total

42.5

25.4

26.6

58.5

43.4

6.4

202.8

Source: Natural Gas Transmission Company (FGSZ Zrt.). The difference in data is due to domestic production and extraction.

2016. 09. 28. 20:25

www.bbj.hu

Budapest Business Journal | September 30 – October 13, 2016

Although district heating in Hungary has tended to be associated with skyrocketing energy bills and inflexibility, research and Western practice show that it can not only offer a competitive alternative for businesses, but also do the environment a favor. LEVENTE HÖRÖMPÖLI-TÓTH

Although September 15 brought a day of Indian summer to Budapest this year, the date also marked the official kickoff of the heating season, at least for those with a district heating contract. However, heat will start flowing to target units only subject to terms laid down in individual agreements, says Péter Herpai, director of communications at Főtáv Zrt., which serves some 245,000 customers in the capital. “Service provision is launched automatically if the median temperature hits a certain degree, or according to the specific request of consumers. Both cases are regulated in the relevant contracts for operation,” he explains. Whilst district heating may have a rather negative reputation in Hungary, the same cannot be said of certain other countries. In Denmark, for example, 63% of households are hooked up to such networks. The Danes are particularly known for capturing and redistributing heat that would otherwise be wasted, something others could learn from. Reusing energy waste from industry and channeling it into public networks play a key role in the first Healing and Cooling Strategy of the European Union as well. Since building and industrial heating and cooling account for 50% of the EUʼs energy consumption, the strategy has huge potential to produce substantial energy savings.

Large-scale reduction of emissions But what about Budapest? “We can detect growing interest on the part of consumers with large energy needs such as industrial premises, office buildings or large-sized public institutions and investors of residential parks,” Herpai says. “In fact, one of our calculations concluded that district heating is not only competitive for new developments, but up to a surface of 90 sqm it is even more cost-efficient than individual gas heating.” Herpai points to Főtávʼs modeling, according to which pollution could be cut by 47 tons (including 27 tons of nitrogen-dioxide, three tons of

BBJ_2418_spec_report.indd 15

sulfate-dioxide and 13 tons of dust) for every 10,000 households and entities switching to district heating. “In Copenhagen, 98% of all buildings are connected to the district heating network, whereas in downtown Vienna related pipeline developments resulted in a radical cut of air pollution,” Herpai says. Among other effects, the chances for a smog alert would go down significantly. Another important factor in this regard is that heat is produced under controlled circumstances outside town, with sophisticated filter systems in place. Veolia Energia Magyarország Zrt. is another big player in the district heating arena, providing district heating for 12,000 apartments in 11 towns, and thermal energy to a further 109,000 residential and institutional customers nationwide. The corporate group also provides energy for 31 industrial centers and 85 public buildings. Its key strategy aims at further improving the ecofriendliness of its service by increasing the ratio of biomass in its energy source mix. In fact, in Pécs heat is provided solely from biomass.

District heating can pay off Veoliaʼs experience is also that the trend of moving away from district heating has stopped, and not only from private residents. The hospital in Esztergom recently became a customer, and businesses are increasingly attracted, too. Vibracoustic CV Air Springs Magyarország Kft. has signed a customer agreement with Tiszántúli Hőtermelő Kft., a Veolia subsidiary. “It is important that whether or not to get connected to district heating is determined by the potential savings. Another factor may be if an entity’s heat center becomes outdated to such an extent that a large-scale investment for modernization would be needed. In such cases, the decision may be facilitated by the district heating provider’s pledge to guarantee savings and take over the burden of works related to connecting. But this is a realistic scenario at places where dense district heating exists and new users may join at relatively small expense,” Veolia said in a statement sent to the Budapest Business Journal.

EXPERT OPINION

Something New Under The Sun actually be completed. Therefore, an adequate follow-up mechanism and the application of appropriate sanctions may be well justified. According to the most Associate recent draft decree of the Ministry of National Development, the completion of WEIL, the renewable capacities will be secured GOTSHAL & by a completion guarantee; if the delay MANGES exceeds one year, the project will lose its eligibility for the premium and the In the 2015 renewable energy progress bidder will be excluded from tendering report, the EU Commission noted for another three years. METÁR may be a state-of-the-art that it was at the time (based on data from 2013), not certain that Hungary tool to achieve Hungary’s renewable could meet its 2020 renewable energy goals. This, however, inevitably depends targets. In order to follow the steepening on the implementation of the system, trajectory of the EU’s 2020 renewable including the prospective ministerial targets, Hungary – along with most decrees as well as the regulations and other EU member states – will have to practice of the MEKH in interpreting embrace all possible tools to facilitate and applying the legal framework. A the increase of renewables production prominent negative example is the on a national (and finally on an EU) level. latest controversial ministerial decree So, welcome METÁR! It is not an introducing new, overly strict technical exaggeration to say that the energy barriers to wind farm installations, market has been waiting for the which seems to be counterproductive changes in the renewable energy considering that, according to the support schemes in Hungary with great Hungarian National Renewable Action anticipation since the first concept of Plan, wind shall play a significant role in METÁR (in Hungarian: Megújuló és Hungary’s renewable energy mix, with a alternatív Energiaforrásokból előállí- total wind capacity of 750MW by 2020. tott hő- és villamosenergia-átvételi Another interlinked decisive factor will be TÁmogatási Rendszer) was aired in 2011. whether METÁR will be able to establish The reform of the mandatory off-take the regulatory certainty necessary to lure (in Hungarian: “kötelező átvétel”, in short private investment in the renewables “KÁT”) regime in 2014 and early this sector in Hungary. Although self-generation receives less year already signaled a move towards a more intense market involvement in of the limelight, it would be worthwhile Hungary’s renewables scheme. METÁR, to rethink the role of household sized when it enters into force following the micro power plants. Besides the obvious approval of the EU Commission, will benefit of generation at the site of break away entirely from the feed-in consumption, self-generation may prove tariff as a general rule and will follow to be a valuable and compatible tool to the feed-in premium concept, in line centralized generation facilities to reach with the recommendation of the EU renewable and security of supply targets. A 2016 summary of the MEKH states Commission’s guidelines on state aid for energy 2014-2020. Under this concept, that self-generation capacities double the renewable energy generators directly every year in Hungary, almost exclusively sell their production on the market and as a result of the installation of rooftop the aid is granted as a premium above photovoltaic systems. Self-generation the reference market price defined by can only thrive and grow in the long run if the TSO, MAVIR, based on HUPX day- the producing consumers or “prosumers” take a more active market role according ahead prices. The EU Commission’s guidelines to the latest position paper of the also call for competitive allocation Council of European Energy Regulators mechanisms. METÁR’s other material (CEER). This, however, also entails that move towards market integration of the market take prosumers into account renewables is that renewable energy at network planning, and that the producers with at least 1 MW capacity adequate regulatory background creates and all wind power plants will have to a level playing field for self-generation, compete in tenders conducted by the including the burdens such as costHungarian Energy and Public Utility reflective network tariffs as well as the Regulatory Authority (MEKH), where benefits, such as renewables subsidies. METÁR is indeed a large step forward, the generators requesting the smallest premiums win. However, it must be noted and may well contribute to Hungary that only a well-designed and properly achieving its renewables objectives. implemented tendering system can One should, however, not forget that on result in creating the most cost-efficient the one hand, the devil lies in the details, conditions for delivering renewables. and on the other hand we should take The limitations of the tenders (such as all opportunities that could supplement minimum and maximum volumes for the general renewables support scheme, each renewable generation technology, such as, for example, self-generation. territorial restrictions and maximum bidding prices) to be defined in a ministerial decree, will play an important role in ensuring that the tendering system does not miss its target. One of the major considerations of tendering renewable capacities www.weil.com is whether the winning projects will

Dániel Arányi

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

District heating offers savings and less polution

2016. 09. 28. 20:25

www.bbj.hu

Budapest Business Journal | September 30 – October 13, 2016

Profits keep players going in the free market arena of electricity provision

Outdated power plants A matter of faith might cause problems in Attila Holoda, an energy expert and former state secretary, agrees that plants fueled by the mid-term in terms natural gas are of strategic significance, since they can adjust to cyclic demands and of electricity supply, provide energy evenly. “It was no accident that MET Power AG acquired the heat plant experts warn. As for Dunamenti Hőerőmű from GDF Suez back electricity provision, in 2014,” he says. “It’s also about risktaking. The prime minister is known for market players in the being suspicious about renewable sources, he believes in nuclear energy and natural free segment should gas, which provide more supply security.” probably prepare for Given that, there is a possibility that Hungary will remain a potential growing competition. powerhouse of solar and geothermal LEVENTE HÖRÖMPÖLI-TÓTH

When it comes to the Hungarian electricity market, pundits are all but overwhelmed by the number of hot topics, from the enlargement of the Paks nuclear power plant to the growing role of the government as a player. But as Dr. László Molnár, general secretary of the Scientific Association of Energy Management says, even though the country seems to be flooded by overcapacity, which will only be further increased once Paks has been expanded and is online, the truth is that capacities should not be taken for granted beyond the next five to six years. “Most of the power plants are outdated and should be shut down soon,” Molnár tells the Budapest Business Journal. “The Mátra plant, for example, which provides 20% of the total domestic electricity production, shouldn’t operate longer than six or seven more years. So we should be witnessing capacity shrinking,” Imports, which in 2015 accounted for 33% of energy supplies, cannot be hiked infinitely, either. Therefore, Hungary must provide for future capacities, and more specifically the kind producing energy without fluctuations. “Plants are needed where supplies can be controlled. Natural gas is definitely an option here, but it is no wonder that the U.K. has started to build a nuclear plant, since its electricity system nearly collapsed not so long ago due to the lack of permanent capacity. Renewables unfortunately cannot ensure such permanence,” Molnár adds.

energy only: clean energy makes up just 10% of the energy mix, and some 80% of that is gained from biomass, which, in turn, generates carbon emissions. According to Molnár, the Hungarian attitude toward renewables is the opposite of that embraced in Germany, where up to EUR 30 billion is invested annually in the segment. “We are talking about massive amounts of money in the form of subsidies meant to support investments, operation and grid building. Around here, by contrast, there’s a regulatory cap on wind power installations.” Lajos Kerekes, senior research fellow at REKK, the Regional Centre for Energy Policy Research, says: “The increase of imports seemed to hit their peak in 2015, and lately domestic production has been on a growth track, albeit a modest one. The future of domestic electricity production will depend primarily on how long natural gas prices remain as low as they currently are, and how regional and domestic electricity prices evolve. However, no major changes are expected regarding these factors in the upcoming few years.”

Lucky coincidence In fact, the overall sharp drop of wholesale electricity prices played a key role in another politically sensitive matter; the cutting of public utility rates pushed through by the government. “It was a lucky coincidence that global prices fell dramatically, since energy costs went down anyway, so it was no big deal to announce continuous cuts,” Molnár notes.

As highlighted by Kerekes, though, tensions did accumulate, in spite of such favorable world market trends. “Network operating companiesʼ investment activity dropped by 40% between 2008 and 2013, and in 2013 it didnʼt even reach the level of depreciation.” Losses have been mitigated mainly by cross financing, whereby nonresidential users in the free market segment were charged higher fees than residential ones in the so-called universal service segment, where decree-based prices tie the hands of providers. The government has also imposed several other costs, such as special sectoral taxes and other burdensome administrative items. As far as electricity retail activities are concerned, three multinational firms rule the day: E.ON, RWE and EDF. According to the data detailed in the 2015 parliamentary report of MEKH, the Hungarian Energy and Public Utility Regulatory Authority, the total market share of those companies on the domestic retail market accounted for around 70%. On the other hand, there were some 30 independent trading companies in 2015 that were not connected in any way to supply network firms. Their share made up nearly 23%, while MVM carved out 10%. Actually, the incumbents’ loss of influence to independent players has been constant since 2003, the date of market liberalization. As stated in the report, E.ON , RWE and EDF still dominate because the bulk of consumers buy electricity under the universal service scheme. However, in the free market segment, their share is a mere 40%. Since in the free market segment nice profits continue to be up for grabs, experts interviewed by the BBJ agree that it is highly unlikely that players would consider an exit or look to sell their networks. Holoda believes, in turn, that the government might want to expand its activities into new territories such as smart metering and related services, primarily via MVM. The BBJ asked E.ON, the player with the largest share on the Hungarian electricity market, to talk about current market conditions and rumors concerning an approach by the government to buy it out, but it declined to comment.

Market share of electricity providers by number of places of use (December 2015) Number of users Provider

Universal service

Free market

Total

Total Market Share

E.ON Energiaszolgáltató Kft., E.ON Energiakereskedelmi Kft.

2,374,491

28,527

2,403,018

43.24%

ELMŰ ÉMÁSZ Energiaszolgáltató Zrt., ELMŰ Nyrt., ÉMÁSZ Nyrt., Magyar Áramszolgáltató Kft.

2,094,897

106,161

2,201,058

39.6%

EDF DÉMÁSZ Zrt.

731,710

21,746

753,456

13.56%

Magyar Telekom Távközlési Nyrt.

106,564

1.92%

MVM Partner Energiakereskedelmi Zrt. Other Total

0 0 5,201,098

68,885 24,611 356,494

68,885 24,611 5,557,592

1.24% 0.44% 100%

Source: MEKH parliamentary report 2015.

BBJ_2418_spec_report.indd 16

THE GROWING SHADOW OF A GOVERNMENT BEHEMOTH The Orbán government’s intention to buy its way into the energy market is far from new. The establishment of ENKSZ last year hinted, yet again, that energy provision could soon be taken care of by one single stateowned entity. To further intensify that impression, a declaration of intent to purchase ELMÜ from German owner RWE was signed by ENKSZ in May 2015, and the newly founded behemoth has allegedly been in talks with EDF about buying out EDF Démász. However, both deals have stalled, so the wish expressed by Cabinet Chief János Lázár back in October 2015 that gas and electricity should be available solely from ENKSZ by January 2017 will not be granted, for now. Lajos Kerekes, of think tank REKK, adds that as long as prices remain fixed by decree in the universal service segment, it makes no difference whether providers are owned privately or by the government; therefore, competition as such is not concerned by ENKSZʼs entry. “Boosting state influence might come true if universal segment services are integrated under ENKSZ, but on the electricity market we are very far from that for now,” he says. Supposing that the integration in question does happen, ENKSZ will have to deal with all those crippling costs that have caused losses for existent market players, and which cannot be maintained in the long run; the outcome would be either bankruptcy or a subsidy injection, but EU law forbids the latter. However, according to Dr. László Molnár, of the Scientific Association of Energy Management, the state will always find subtle ways to channel subsidies to its own entities, and Brussels is getting tired of fighting this practice anyway. “If ENKSZ does become a key market figure and generates losses, it will try to stop loss-making operation. Very probably the government wonʼt react by increasing consumer prices.” ENKSZ may assume a different role on the free market, though. “ “If it enters there, which is still a big ‘ifʼ, it would significantly push down the market share of the current incumbents, E.ON, RWE and EDF, so its entry would result in elevated competition,” Kerekes points out. “However, it is also in the air that, after all, it will not be ENKSZ, but MVM, a government-owned player already present in the free market segment, which would pose as the new buyer, and that, by contrast, would rather harm competition. ”

2016. 09. 28. 20:25

www.bbj.hu

Budapest Business Journal | September 30 – October 13, 2016

MVM looking to grow on all fronts

Beyond strengthening the group’s international role, the new company will have a highlighted role regarding MVM’s planned Saudi Arabian cooperation, where the group intends to use and “sell” its expert know-how gathered in the past decades, for example in nuclear projects or network development. Assuming the country’s energy demands will rise in the future, the group wishes to be part of the development of the network that will be needed to carry the increased volumes of energy. There is significant market potential in this segment: based on MVM’s market research, a network of the size of Hungary needs to be established every year to serve Saudi Arabia’s growth objectives. To be able to participate in power line tenders there, MVM OVIT, the power line unit of MVM, signed an agreement with steel company Arabian International Company (AIC) last year on the establishment of a joint venture. Though

BBJ_2418_spec_report.indd 17

The new Hungarian renewable energy support scheme ‒ what to expect? depending on the performance and the type of generation power plants. Producers with a performance under 0.5 MW and with demonstration Attorney at Law projects are exempt from the METÁR premium system, they remain under the SCHOENHERR scope of KÁT. The newly established HETÉNYI terminology “demonstration projects” ATTORNEYS AT LAW stands for such project using innovative technology which is not fully fledged where the investment and operational In its National Renewable Energy experiences and references helping to Action Plan, Hungary undertook to calculate the aid are lacking. The most fundamental innovation fulfil EU Commission requirements by ensuring it has a 14.65 % ratio compared to KÁT is that that bigger of renewables within its gross final energy producers, with over 1 MW energy consumption by 2020, over capacity may only be entitled to state the obligatory 13 % prescribed for aid, the so-called premium support, Hungary as national overall target in if they participate and win a tender, the RED (Renewable Energy Directive). announced and coordinated by To provide a general picture of the HEPURA. The yearly quantities to be latest developments, according to the supported will be announced regularly latest available statistical analysis of and it is likely that the quantities will be the Hungarian Energy and Public Utility distributed by technologies (eg wind, Regulatory Authority (“HEPURA”), the photovoltaic). This new system is in ratio of the renewables out of the gross compliance with the internal market, but final energy consumption was 9.6 % it is worth noting that if the targets are to in 2014. Finally, on 13 June, 2016, be achieved by 2020, there is not much after several long years of discussions time to announce and close tender and delays, the Hungarian Parliament procedures. Furthermore, it would be accepted the new renewable support more than desirable if the upcoming scheme („METÁR”, „MEgújuló enforcement laws would ensure that TÁmogatási Rendszer” – “Renewable the winners of the tenders actually build Support Scheme”) regarding electric and operate the power plants. Producers with between 0.5 – 1 energy, which may help to achieve the above ambitious aims. The MW performance are not obliged to new support scheme will only be participate in tender procedures, they effective if the European Commission are entitled to receive the so-called accepts its text, which is expected by administrative premium over the market price. 1 January, 2017. Apart from the above green premium Notwithstanding the above implementation deadline, the currently system, METÁR also introduces applicable KÁT (Kötelező ÁTvételi the so-called “brown premium” to rendszer – Obligatory Off-take) system promote the generation of electricity did not urge the legislator to change from biomass or biogas sources. In the rules and provisions of the energy this special procedure carried out by laws. The KÁT system worked well HEPURA the producer should request and ensured a balance in the electricity the brown premium after the procedure, system, but times are changing, and the and if HEPURA accepts the request, frequent overproduction of renewable eligibility is granted for 5 years. To summarise the above information energy and the rapid technological progress required the introduction of and market conditions, it should be a more flexible legal framework. The noted that an investor would calculate introduction of the new legislation also 10-15 years of return in advance in means that the KÁT system is gradually the sector and the KÁT system was changed to METÁR, with a transitional always criticised for not ensuring period, until the termination of the last planning. The METÁR system ensures effective agreement which includes KÁT, that renewable energy will be placed in the market, so an investment will result but not later than year 2045. The key feature of the new support in a better return. In light of the above, scheme, is that the producers of it is obvious that the declared goals renewable energy receive the aid of the new support scheme are costas a paid premium over the market effectiveness, and the development of reference price (e.g. the average price new generation capacities apart from of the regulated market). The customers ensuring competitiveness. of this kind of energy will be those consumers of electricity who are not entitled to universal services (mainly business enterprises). The new system ensures that the producers will not be interested in the sale of the electricity at negative electricity market prices. The producers of electric energy are www.schoenherr.eu classified into three different categories

Péter Csiba, CEO of MVM Group. it is not planning to open an outlet there, the company is also eyeing Turkey as a potential target. Ongoing gas and nuclear projects, as well as the massive rise in energy demand, could make the country attractive for MVM, which says it could use its system integrator and portfolio management expertise.

Fostering innovation Another element to the group’s strategy is to expand into new territories, including renewable projects. “From planning to implementation to operation, we are interested in all phases of renewable energy investments in Hungary,” said Csiba. MVM already owns a solar power plant and a wind farm, but wants “to lead the renewables ramp-up in Hungary”. In the mid-term, the company aims to compile a portfolio in the neighboring countries that allows for the sales of significantly larger volume of energy, gas or electricity, than today. In addition to the above, MVM has hopes of fostering more energy-related innovation and registering patents. The Smart Future Lab launched this spring reviews and nurtures ideas (that may come both from within the company or outside) and helps release them to market. The lab, too, is linked to foreign expansion: MVM plans to sell market-ready ideas abroad, and says it also wishes to learn from foreign best practices. MVM has not revealed how much it aims spend on each goal; it has only said that it will able to finance the

strategy from its own resources (cash flow) and revenues generated from planned growth. The aim is to double MVM’s EBITDA to HUF 200 billion by 2020, while keeping the net debt/ EBITDA ratio below 3%. “A stated aim of our strategy is to cover all aspects of the energy market value chain. We have our professional and stable financial background to fulfill

this aim, and other elements of our strategy,” said Csiba.

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BBJ STAFF

Saudi cooperation

EXPERT OPINION

Péter Gullai

A growing international foothold, a more enhanced role in the Hungarian renewable market, the registration of energy-related patents and innovations are the main objectives of Hungarian energy company MVM Group’s growth strategy for the next five years. Entering new geographic regions is one major pillar MVM is planning to lean on to strengthen its strategic position. The company’s aim is to substantially increase its international presence and up the currently negligible share (1%) of revenues coming from non-Hungarian operations to 10% by 2020. Should MVM successfully finish ongoing due diligence programs linked to potential acquisitions, that figure could be improved even by the end of this year, MVM said. To deliver on that international growth, the group opened three new offices in Moscow, Brussels and Bratislava this summer. The choice of locations is linked to the strategic importance attached to each city (such as legislation, EU-environment or timing – the Presidency of the Council of the European Union is currently held by Slovakia). “We are also in the process of establishing a foreign branch: MVM International AG,” said CEO Péter Csiba. “Being one of the most important (energy) commerce hubs, we chose Switzerland.”

2016. 09. 28. 20:25

www.bbj.hu

Budapest Business Journal | September 30 – October 13, 2016

Gas traders Rank

Ranked by total net revenue Company Website

total net Revenue in 2015 (HuF mln)

yeaR establisHed

oWneRsHip (%) HungaRian non-HungaRian

top loCal exeCutive CFo maRketing diReCtoR

addRess pHone Fax email

2000

MVM Magyar Villamos Művek Zrt (100) –

lászló Fazekas – –

1138 Budapest, Váci út 144–150. (1) 354-7000 (1) 354-7040 info@mfgk.hu

norbert pál, balázs lehoczki – –

1051 Budapest, Széchenyi István tér 7–8. (1) 472-2300 (1) 354-3890 sajtoszoba@eon-hungaria.com

Magyar Földgázkereskedő zrt.

e.ON eNergy PrOvider kFt.

200,296

2007

E.ON Hungária Energetikai Zrt. (100) –

met magyaRoRszág eNergiakereskedő zrt.

188,601

2007

– MET Holding AG (100)

gergely szabó – –

1068 Budapest, Benczúr utca 13/B (1) 464-1111 (1) 464-1112 gaz@met.com

Főgáz zrt.

1993

Magyar Fejlesztési Bank Zrt. (100) –

gábor lászló králik – –

1081 Budapest, II. János Pál pápa tér 20. (1) 477-1111 (1) 477-1195 kommunikacio@fogaz.hu

tigáz tiszáNtúli gázszOlgáltató zrt.

169,987

1993

– ENI S.p.A (100)

Fabrizio dassogno Gianfrancesco Zani Mauro Rinaudo

4200 Hajdúszoboszló, Rákóczi utca 184. (52) 558-100 (52) 361-149 ugyfelszolgalat@tigaz.hu

enksz Észak-dÉl Regionális FöldgázszOlgáltató zrt.

109,655

2006

Fővárosi Gázművek Zrt. (100) –

andrás biczók – –

1081 Budapest, II. János Pál pápa tér 20. (62) 569-600 (62) 473-943 –

PríMaeNergia zrt.

18,234

1991

PG Investment Befektetési Kft. (100) –

zoltán szirmai Went Clifford Sydney Árpád Molnár

1117 Budapest, Budafoki út 56. (1) 209-9900 (1) 209-9999 vevoszolgalat@primaenergia.hu

Flaga HuNgaria kFt.

13,232

1990

– Zentraleuropa LPG Holding GmbH (100)

bálint Ézsiás Attila Rábaközi Judit Demeter Mikéné

2040 Budaörs, Puskás Tivadar utca 14. (23) 507-500 (23) 507-507 –

iFC eNergy kFt.

7,314

2006

Invest Finance Consulting Zrt. (100) –

viktor szabó – –

1054 Budapest, Szabadság tér 14. (1) 358-6870 (1) 269-5274 ifcenergy@ifcgroup.eu

www.magyarfoldgazkereskedo.hu

www.eon-hungaria.com

www.met.com

www.fogaz.hu

www.tigaz.hu

www.enksz-eszakdelgaz.hu

www.primaenergia.hu

www.total.hu

www.optenergy.hu

ENERGY

NEWS IN BRIEF First gas pipeline crosses Danube, connecting Bulgaria and Romania

The three companies involved in the Giurgiu-Ruse pipeline project managed to have the main pipeline undercross the Danube, Transgaz announced on September 25. This means that the gas transport systems of Romania and Bulgaria are now interconnected, local media reported. Romanian Transgaz, local firm Inspet Ploiesti, and the Austrian constructor Habau have worked on the project. The news has important relevance for Hungary as the GiurgiuRuse pipeline is part of a larger project called BRUA which aims to connect the gas transport systems of Bulgaria, Romania, Hungary and Austria. The project will allow the transport of gas from the Black Sea to Austria. Meanwhile, Romanian state-owned gas transporter Transgaz Medias says it has accessed a €179 million grant from the European Commission to build the BRUA pipeline, local media reported.

BBJ_2418_spec_report.indd 18

608,162

179,863

Alteo moves to enter Budapest bourse Hungarian energy firm Alteo has launched an initial public offering (IPO) of its shares, with the transaction due by October 17 at the latest, Alteo Group CEO Attila Chikán announced on September 26 according to reports. At a maximum price per Alteo share of HUF 4,900 and at a face value of HUF 100, the company is planning to sell a total of 300,000 shares in a public offering to private investors, while institutional investors can participate in a private listing, Hungarian news agency MTI reported. Alteo foresees raising HUF 3 billion through the listings, according to Domonkos Kovács, lead manager of the group’s M&A transactions and capital market activities. Alteo has identified HUF 38 bln of investment opportunities between 2017 and 2019 and plans to implement 30% of this from this program, Kovács was reported as saying by MTI.

Hungary expects EU clearance for Paks reactors in weeks A senior Hungarian government official said on September 16 that the country expects European Union clearance to build two Russian nuclear reactors at its Paks

nuclear site in the coming weeks. Last year, EU regulators started legal action against Hungary over a contract it awarded to Russia’s Rosatom to expand the Paks nuclear power plant in the so-called Paks 2 project. Attila Aszódi, government commissioner for the country’s only nuclear power plant, told news wire Reuters that Hungary expected separate decisions on the procurement and state-aid aspects of the deal. “Naturally, we assume a positive decision,” he said, adding that Maros Sefcovic, the vice president of the European Commission in charge of Energy Union, had already indicated negotiations were close to a successful completion. Hungary plans to build two Russian VVER 1200 reactors for a total budget of USD 13.9 billion, 80% of which will be financed by Russia. Hungary aims to start building the reactors in 2018 and to complete the first one in 2025, and the second in 2026. Paks currently has four smaller VVER 440 reactors with a combined capacity of about 2,000 megawatts that account for 36% of Hungary’s power consumption. These will be retired between 2023 and 2037, Aszódi said. That means that for a number of years Hungary will have six nuclear reactors in operation, but the government commissioner insi9sted there would be no overcapacity as the country already imports about one-third of its power from abroad. He said the ultimate aim was to keep the contribution of nuclear

in Hungary’s power mix at around 40%. Last November the Commission announced that it would look into whether a private investor could have financed the project on similar terms. On May 31 Greenpeace released a report it had commissioned that said Paks 2 is “economically uncompetitive” and unviable without a state subsidy.

Excise tax of petrol and gasoline to rise in Hungary The excise tax of petrol in Hungary will rise by HUF 5 per liter (some $0.018) and that of gasoline by HUF 10 per liter from October 1, in line with legislation passed by Parliament in June linking excise tax on vehicle fuel to global energy prices. According to the June legislation, if the average global price of Brent oil in a designated period is below $50 per barrel then the excise tax of fuel rises. Based on data gathered the National Tax and Customs Authority (NAV), the average price of Brent between July 1 and September 15 was at $45.551 per barrel, leading to a raise in the excise tax. From October 1 the excise tax of unleaded petrol will be HUF 125 per liter ($0.4536), that of unleaded gasoline HUF 120.35 per liter, that of leaded petrol HUF 124.20 per liter and that of leaded gasoline HUF 129.20 per liter.

2016. 09. 28. 20:25

www.bbj.hu

Budapest Business Journal | September 30 – October 13, 2016

Electricity traders Ranked by total net revenue

gas

oil

Coal

emission CeRtiFiCates

mvm paRtneR eneRgy tRading ZRt.

476,977

✓

–

✓

2002

MVM Zrt. (100) –

györgy major – –

1031 Budapest, Szentendrei út 207–209. (40) 300-200 (1) 202-0134 info@mvmp.hu

e.on eneRgy pRovideR kFt.

200,296

✓

–

✓

2007

E.ON Hungária Energetikai Zrt. (100) –

norbert pál, balázs lehoczki – –

1051 Budapest, Széchenyi István tér 7–8. (1) 472-2300 (1) 354-3890 sajtoszoba@eon-hungaria.com

budapesti elektRomos Művek Nyrt.

193,760

✓

–

1991

Magyar Villamos Művek Zrt. (15.63), other (1.87) RWE Beteiligungs GmbH (55.25), EnBW Trust e.v. (27.25)

maria-theresia elisabeth thiell – –

1132 Budapest, Váci út 72–74. (1) 238-1000 (1) 238-2822 elmu@elmu.hu

magyaR ÁRamsZolgÁltató kFt.

2002

Budapesti Elektromos Művek Nyrt. (50), Észak-magyarországi Áramszolgáltató Nyrt. (50) –

Zoltán nagy – –

1132 Budapest, Váci út 72–74. (1) 238-1000 (1) 238-2803 masz@masz.co.hu

enksZ ÉsZak-dÉl RegionÁlis FöldgÁZsZolgÁltató ZRt.

2006

Fővárosi Gázművek Zrt. (100) –

andrás biczók – –

1081 Budapest, II. János Pál pápa tér 20. (62) 569-600 (62) 473-943 –

edF dÉmÁsZ ZRt.

1991

– EDF International S.A. (100)

eric mansuy Gábor Lehoczki –

6720 Szeged, Klauzál tér 9. (62) 565-565 (62) 568-000 gazdasag@edf.hu

ÉsZak-magyaRoRsZÁgi ÁRamsZolgÁltató nyRt.

69,335

✓

–

✓

1991

MVM Zrt. (12.05)other (6.86) RWE Beteiligungs GmbH (54.26), EnBW Trust e.v. (26.83)

maria-theresia elisabeth thiell – –

3525 Miskolc, Dózsa György utca 13. (46) 535-000 (46) 535-110 emasz@emasz.hu

bC-eneRgy sales kFt.

53,798

✓

–

2004

BorsodChem Zrt. (100) –

sándor varga – –

3700 Kazincbarcika, Bolyaitér 1. (48) 511-816 (48) 511-891 energiaker@borsodchem.eu

isd poWeR kFt.

41,198

✓

–

1996

ISD DUNAFERR Zrt. (100) –

evgeny tankhilevich – –

2400 Dunaújváros, Vasmű tér 1–3. (25) 581-186 (25) 412-658 isdpower1@isdpower.hu

Jas budapest ZRt.

27,726

✓

–

2002

Ferenc Arató (50), Edit Aratóné Molnár (25), Thália Theoharidis (25) –

Ferenc arató – –

1141 Budapest, Mogyoródi út 168. (1) 460-9300 (1) 460-9301 jas@jas.hu

budapesti eNergiakereskedő kft.

2003

– B.E.K. GROUP s.r.o. (100)

péter takács – –

1061 Budapest, Liszt Ferenc tér 5. (1) 240-7504 (1) 242-3628 energiakereskedo@ energiakereskedo.hu

alpiq eneRgy se magyaRoRsZÁgi Fióktelepe

2009

– ALPIQ ENERGY SE (100)

peter dworak – –

1085 Budapest, Kálvin tér 12. (1) 886-3400 (1) 886-3401 info.hun@alpiq.com

Rank

eleCtRiCity

types oF eneRgy tRaded

Company Website

www.mvmpartner.hu

www.eon-hungaria.com

www.elmu.hu

www.masz.co.hu

www.enksz-eszakdelgaz.hu

www.edfdemasz.hu

www.emasz.hu

www.bcenergia.com

www.isdpower.hu

www.jas.hu

www.energiakereskedo.hu

www.alpiq.hu

BBJ_2418_spec_report.indd 19

total net Revenue in 2015 (HuF mln)

148,353

109,655

98,267

1,428

✓

–

✓

–

✓

–

✓

–

✓

–

✓

yeaR establisHed

oWneRsHip (%) HungaRian non-HungaRian

top loCal exeCutive CFo maRketing diReCtoR

addRess pHone Fax email

2016. 09. 28. 20:25

4 Socialite BBJ

The weird and wonderful world of the sauna séance

You almost certainly already know about Hungaryʼs long love affair with spa culture, but did you ever consider it might go as far as staging a séance in a sauna?

Once or twice, for about 30 heavenly seconds, the sauna mistress opened the door and flapped in air from outside. It felt like an ice-cream kiss.

DAVID HOLZER

The first sauna séance I ever went to was at the Lukács Thermal Baths on the Buda side of Budapest. I’d never been to a sauna séance and had no idea what to expect. When I asked my companion if the word “séance” had the same meaning in Hungarian as in English – to communicate with spirits – she told me

it did. Which made me more even more nervous. How hot was this going to get? A smiling young woman dressed in the kind of Greek tunic worn in gladiator movies, and with a white flag on a stick

over her shoulder, ushered us into the sauna. She was what’s known as the sauna master or, in this case, mistress. One couple removed their sauna sheets. Their bodies were nut-brown, hairless

and beautifully toned. An old man with an enormous pink belly also disrobed. Before you go to a sauna séance, it’s a good idea to check whether it’s ‘without textile’ or not. ‘Without textile’ means you can’t use a swimsuit but can wear one of the white sauna sheets or go naked. Every sauna that holds séances will give you a sheet. The sauna mistress carried in a portable music player, a set of purple and violet lights and a tray of little pots of oily salt topped with a tomato. We each took a pot. One guy started

BBJ_2418_socialite.indd 20

2016. 09. 28. 20:26

4 Socialite

www.bbj.hu

Budapest Business Journal | September 30 – October 13, 2016

to eat his tomato. When all burst out laughing, including him, it was a muchneeded release of tension. I was glad it wasn’t me. Shutting the door, the sauna mistress started the music – electronic with lots of whooshy, tinkling noises. The lights pulsed in the gloom. Next, the sauna mistress filled the dipper from the wooden bucket, added a few drops of something and scattered water over the hot stones. She flapped her towel and the air filled with a nostril-opening, eyewatering peppermint fragrance. I rubbed my tomato onto my skin, followed by the oily salt. I was already sweating so much the oil dissolved instantly. For the next 15 minutes, the sauna mistress danced in front of us, moving the hot air around with her white flag. The sight was both graceful and surreal. Every time she poured more drops of a different aroma into the dipper and flung water on the stones, she twirled her flag in circles and figure of eight patterns. Once or twice, for about 30 heavenly seconds, the sauna mistress opened the door and flapped in air from outside. It felt like an ice-cream kiss. When the last of the water had been emptied onto the stones, the sauna mistress began to wave her flag as if she was at a Grand Prix finish line. I had never felt air so hot in my life. Convinced I was about to enter another dimension, I was ready to make a break for the door. But I didn’t have to. Still smiling through her perspiration, the sauna mistress opened the door and we staggered out. I felt truly glad to be alive and ready to do it all over again.

None of them were naked. In fact, several, including the sauna master, wore pointy felt hats that made them look like giant, perspiring elves. The hats, apparently, were a sauna fashion statement unique to Gyopárosfürdő.[...] I couldn’t see myself wearing the pointy hat. It was already shockingly hot in the sauna and adding an additional level of insulation just to become part of the gang seemed insane to me. Maybe that was the point.

century they created their own baths, some of which still exist today. The problem with saunas is that sitting in them for any length of time is boring. So it makes sense to look at sauna séances as a performance that’s simultaneously distraction, challenge and ritual. And Hungarians love ritual as much as they adore being extremely hot. Sauna séances all follow the same pattern: moody music, lights and stuff to smear on your skin to make you feel good. There are, however, ingenious variations. At Bükfürdő Health and Adventure Center’s Sauna World in West Transdanubia you can meditate in the sauna, experience an ‘icy chill’ – apparently, this is splendidly refreshing – and even sweat to the aroma of freshly baked bread with alcohol-free beer to drink afterwards. Part of the fun of sauna séances is trying to decide from the name what the experience is going to be like. At the Hagymatikum Thermal Bath in Makó, the séances have names like ‘Heavenly manna’ or ‘On the peaks of Tibet’. But sauna séances are also serious affairs. People train to be sauna masters or mistresses and compete at events like the Hungarian National Sauna

Distraction, challenge, ritual Thermal baths and spas are part of Hungarian life. There are so many in Budapest that it’s sometimes known as the ‘city of spas’. But every decentsized Hungarian town has one, for two reasons. Hungary is located on the Carpathian Basin where the earth’s crust is particularly thin so it’s easier for heated water to rise to the surface. Also, the ancient Romans were convinced Hungarian thermal waters were especially healing and developed a sophisticated bathing culture. When the Turks occupied the country in the 16th

Master contest held every February at Hagymatikum. After my first sauna séance, I couldn’t get enough of them. Fortunately, Saturday night at the thermal baths at Gyopárosfürdő, about an hour’s drive from Szeged where I live, is sauna séance night.

A sauna revolution My first sauna séance at Gyopárosfürdő followed the same basic ritual as you’ll find anywhere and was every bit as good. The sauna master, a young lad who kept taking sneaky peeks at his biceps, put on a great performance. A couple of times he nearly took my eye out with his towel. It was the people who were the biggest difference. For a start, none of them were naked. In fact, several, including the sauna master, wore pointy felt hats that made them look like giant, perspiring elves. The hats, apparently, were a sauna fashion statement unique to Gyopárosfürdő. One of the regulars, a large, older, hairy guy with a big grin on his face had bought the first hat back from the Ukraine. Now wearing one was a badge of honor.

I couldn’t see myself wearing the pointy hat. It was already shockingly hot in the sauna and adding an additional level of insulation just to become part of the gang seemed insane to me. Maybe that was the point. Talking to my companion afterwards, I found out that they do hold ‘without textile’ sauna séances at Gyopárosfürdő. They were introduced two or three years ago and the older people from the village have come to love them. Sauna séances have quietly caused a change in their attitudes to health, their lives and their bodies. A night of séances is a lot more entertaining and life affirming than sitting in front of the TV, admittedly in a slightly strange way. The regulars in their pointy hats have become a community. With just two sessions under my belt, I’m far from being an expert on sauna séances. I would, however, say they’re definitely the perfect way to take your sauna experience to the next level. Personally, I’m already planning a sauna séance tour of Hungary. I’m practicing my flag-waving moves ready for next year’s Hungarian National Sauna Master contest and maybe the Sauna Séance Oscar Competition in Balmazújváros and concocting insanely exotic combinations of fragrances and unguents. There’s a whole world out there to explore and conquer.

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Electronic tills the mandatory electronic The reach of which cash registers directly till system, in businesses are for all kinds of tax authority, has been connected to the since it began in 2014. expanding steadily every sale is instantly The system means authority, and it makes tax reported to the on VAT. it harder to cheat originally introduced, When it was that most cash-heavy the law required in Hungary install businesses operating in the fall of 2014. run up tills by the deadline to do so could Fines for failure After a long and rocky to HUF 500,000. upwards of 190,000 end of start to the program, installed by the e-tills had been operation throughout in 2014, and were last year. Hungarian the November, In plans to expand tills to government announced use of electronic the mandatory taxis, laundries ANIKO FENYVESI include auto mechanics,offices. had and currency exchange end of 2014, NAV with their taxes on earnings Already by the of cases As companies file most should find that encountered thousands companies in the made last year, fined several huge differences shortfalls and following a series there are not the new regulations, for failing to complyNAV also noted a by amount owed under experts interviewed of targeted audits. in VAT revenue of according to tax tabs on trucks. Journal. of the subsequent increase authorities keep the Budapest Business billion by the end regulations help enforcement measures come nearly HUF 200 according more EKAER Still, stricter in the years to tills’ operation, some firms pay most to have higher burdenslose their tax losses first year of the may mean that that the measure previous tax before. And they will to reports. It appears of tax losses in Minister Mihály this because than they did explains Antretter. probably already great deal to benefit from what Economy from previous years,” that are able reduce amount periods would be able “shadow economy” companies have was changed calls Hungary’s increase in the Conversely, companies experienced an involved in reporting measure, but the legislation Antretter of of the new gross Varga success. Erzsébet to take advantage lower income tax is a resounding of administration the right amount on last year,” explains will have Hungary. difficult tax consultants Accacesystems, Hungary tax credits year, Antretter adds. The income and paying with the more tax electronic monitoring burdens this tax credit idea, time. Complying Like many other to carry forward downside is that the grosswith before- Increased burden is a good pay administrative allows businesses to businesses declarations of elsewhere as those who missed VAT several losses by postponing expectation that only applies exceeding that of previous While experts say that the experts say, punctually for the majority on the tax profit far will not have to still represent accurately and benefits. those losses, further profitable in coming years. “Such companies on the portion payments can enjoy some this could be hardwould be more from years in a row income tax of unpaid taxes, proposed interviewed are about they The firm could deduct a loss the The experts through filing pay corporate times higher than reduced years. invoicing generalizations on its current profit that is five pressed to make should expect to pay several years ago year, to reduce their of the Antretter explains, introduction of online corporate measure in previous years,” in fast growing linked directly to NAV. This to follow whether companies for a very profitable that companies to income. the authority more or less. to five adding are the most likely would allow business. For example taxable as it does with limitations – down will sectors, such as IT, “It depends on the benefit from tax loss in real time, just “Now there are growth. – so companies to for invoicing see such exponential had a tax years from 2015 if someone used tills. be advantageous yet companies that “Changes may for example freight electronic on the measure have not of carry forward, Details in other forms specific sectors, confirmed, but tax companies operating in VAT been electronic monitoring by the forwarders or by a decrease closer place. sectors affected ADVERTISEMENT Lunczer of VGD authorities are already in might rates,” notes Katalin 1, the tax authority Kft. “Companies As of January software Ferencz & Partner new tax base and taxnew invoicing introduced a the government benefit from the income tax items, requirement that will help more credits reducing corporate a business’ activityadd-on donations and tax and scrutinize software including easier cultural purposes local closely. 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tax The corporate bite for last year’s be not earnings should dramatically different from the year before for most companies, but the administrativeto burden will continue to local grow, according experts.

28, 2016 – JAN

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 14

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Regulations change, tax bills might not

Tax experts explain the changes in the laws that will impact businesses. For the most part, analysts say, companies have to comply with more regulations, but that doesn’t mean the tax burden is higher. 18

Andrew Vajna, the Hollywood producer who became Hungary’s film commissioner, was criticized for how he supports local movie makers. But an Oscar nomination is an argument in his favor. 6

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Szekszárd shines at Harvest Days Festival

The annual fall festival in Szekszárd confirms that some truly excellent wines, and especially reds, are coming out from the region.

In fact, a feature of this year’s harvest days was that lots of lesser-known winemakers are breaking through into the bigtime in terms of quality – the sign of a region on the move.

ROB SMYTH

The “Szekszárd Harvest Days” (Szekszárdi szüreti napok) festival is always a joy to attend with the winemakers themselves out in force in the town’s pretty central square, but this year a stronger sense of place than ever could be felt coming through in the predominantly red wines. Indeed, Szekszárd is continuing to confidently define itself by finding its own path, allowing local grapes to lead the way and has moved successfully out of the shadow that had long been cast over it by the region of Villány that lies a little further south. Szekszárd is the Hungarian epicenter of the Kadarka grape (known in Bulgaria as Gamza), which came to Hungary from the Balkans, supposedly brought by Serbs fleeing Ottoman invaders. However, for so long its wine has all too

often either been watery and insipid on the one hand, or overdone and covered in an oaky, overripe and tannic cloak and trying to be something it’s not, on the other.

Another Hungarian play premieres in Rózsavölgyi Salon!

Magda Szabó: Deer

“Deer” is a novel of cruel honesty; it is translated in to more than 30 languages the story of jealousy, envy, passionate - has been adapted for the stage for the love and true friendship. Eszter Encsy, first time. the protagonist of the novel, recounts Premiere: her life at the grave of her lover, and the October 15, 2016 unique story of a woman unfolds from the Further performances: 19, 20 October • 6, 28 November fragments of her memories. Magda Szabó’s hugely successful novel was first published in 1959 and became an instant hit with the public. It is one of the outstanding artistic achievements of Hungarian literature in the 20th century with its disturbing and engaging story, remarkable language and amazingly deliberate, brilliant structure. Magda Szabó’s novel - although it has been

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Rózsavölgyi Salon Arts & Café 1052 Budapest, Szervita tér 5. • Tel.: +36 1 486 33 38 • Ticket Information: +36 30 463 88 22 • szalon@rozsavolgyi.hu • www.szalon.rozsavolgyi.hu • facebook. com/rozsavolgyiszalon

On tasting the 2015 Kadarka offering from Tüske Pince, it was apparent that a nice balance had been struck between light playfulness and depth of flavor and that this was actually Kadarka. On communicating the victory of finesse, purity and balance in the said wine to its maker, Csaba Halmai – a retiring type who eschews the limelight and appears happier driving his tractor around his vineyards – remarked: “Yes, but that bigger style is easier to sell.” This may still be true but thankfully many of the Kadarka offerings tasted at the festival from the 2015 vintage were not only light in color and airy on the palate, but also flavorsome with vibrant acidity, feather light tannins and the grape’s trademark rose hip, raspberry and spicy notes coming to the fore. One of the best from 2015 comes from Pranter Pince, which nails this tricky grape’s qualities to a tee with a delightful lightness of touch and ethereal quality. It deservedly won a gold medal at Szekszárd’s 2016 wine competition. Winemaker Ferenc Prantner showed he’s also got it when it comes to Kékfrankos, Hungary’s most widely planted red wine grape. His 2015 had very appealing floral aromas of violets and sour cherry, with a hint of coconut on the soft palate. It wasn’t aged in American oak which the coconut may seem to suggest but 500-liter Hungarian barrels. Some dismiss Kékfrankos for being thin and tart – this one is anything but. Prantner is a name hardly known beyond Szekszárd, but his wines are great value, like those from Tüske’s Halmai, and certainly worthy of a wider audience. In fact, a feature of this year’s harvest days was that lots of lesserknown winemakers are breaking through into the big-time in terms of quality – the sign of a region on the move. Ferenc Prantner’s stepson Tibor Juhász from Pastor Pince is also a man on the move. Pastor’s red wines used to have a distinct whiff of “barnyardy brett” – a winemaking fault due to lack of cleanliness that renders a wine seriously rustic – and he himself knew it. The important thing is that he did something

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about it, as a look into his spotlessly clean, mould-free ageing cellar at his garage winery attests. Indeed, Pastor’s wines preach elegance over power, a concept which is thankfully catching on among the region’s winemaking firmament. Pastor’s Bikavér oozed juicy red fruit on the nose and palate and tipped the alcohol scales at 13%, which is relatively low for this sunkissed southern region. Vida’s 2013 was another that was had modest alcohol and restrained tannins, but impressed in a more subtle and structured way.

Three-pronged approach Szekszárd is wisely focusing on a threepronged approach of single varietal Kadarka (including exploring different clones) and Kékfrankos, and Bikavér, which come in their own Burgundy style bottles which further serves to emphasize elegance. The way the word Szekszárd is embossed under the neck of the bottle – à la Châteauneuf-du-Pape – is a nice reference to the spice of the Rhône, which is also a feature of Szekszárd reds. Bikavér is typically based on a Kékfrankos backbone fleshed out with international varieties, especially the Bordeaux grapes, which enables them to play an important role without hogging the limelight. The finishing touch is the spice and aromatics added by a few percent of Kadarka. Interestingly, Bikavér is not often referred to by its English form of Bull’s Blood any more, probably due to

Festival goers enjoying some of the offerings at the Szekszárd Harvest Days. (Photo: Szekszárdi Vasárnap) that form of the name’s association with the cheap and cheerful as opposed to classy and concentrated. Szekszárd and Eger lock horns over which region first coined the term Bikavér but while the northern Hungarian region of Eger battles with different levels of quality, Szekszárd tends to produce a higher end wine. In Eger, where the Kadarka grape was grubbed up during communism in favor

of higher yielding varieties, winemakers are increasingly planting Kadarka to add it to their Bikavér blends. A few percent is all that’s needed or else its pronounced aromas can start to take over, something not desired in a wine in which the aim is for no grape to dominate. While Villány may have attempted to claim the Cabernet Franc grape under its Villányi Franc brand, there are also some

very good ones coming out of Szekszárd, such as those from Posta, Pastor and Takler. The next step for Szekszárd is for thorough analysis to be carried out on the region’s soils, explained Péter Vida jnr. While it is widely assumed that Szekszárd is only about loess, there is believed to be a lot of terra rossa, such as that found in Australia’s prestigious Coonawarra region, lurking below the loess, as well as pockets of limestone. Indeed, you can see red soil breaking through the lighter colored loess surface in many places. Meanwhile, wine is promised to be the major star at Bodrogkeresztúr’s upcoming “Mindszent Havi Mulatság” festival, explained Sarolta Bárdos, winemaker at Tokaj Nobilis. One wine to look out for at the event, which takes places on October 7-8 in the 1,300 people strong settlement that lies eight kilometers from Tokaj town, is Három grácia 2015 – a dry offering that’s a cooperation between Bárdos and two other female leading lights of the Tokaj region – Judit Bott and Stéphanie Berecz. Bárdos and Bott both contributed Furmint, while Berecz’s portion comprises Furmint and Hárslevelű. The wine is remarkably well balanced with a pure quince and Williams pear character and the oak perfectly integrated and adding texture but not blocking out the fruit. In other news, despite rumors to the contrary, the organizers of the “Budapest Wine Festival” say that the bibulous bonanza will remain in the sumptuous setting of the Buda Castle next year. The 2016 edition held in September had around 40,000 visitors.

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2016. 09. 28. 20:26

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2016. 09. 28. 20:26 05/09/16 16:00