Two new companies, Hungarian Gas Trade Ltd. and Hungarian Gas Storage Ltd. join MVM Group
On September 30, 2013, MVM Hungarian Electricity Ltd. has paid in full the contractual purchase price for E.ON’s Hungarian natural gas business interests. The transaction is valued at approximately HUF 260 billion, and includes all shares in the natural gas trading and storage companies, worth approximately HUF 110 billion, the two companies’ assumed liabilities, and assets, including the underground gas storage facilities as well as the natural gas store there. MVM also transferred HUF 20 billion to offset the cash and tax assets held by the two companies.
The companies will continue operations under new names, Hungarian Natural Gas Trade Ltd. and Hungarian Natural Gas Storage Ltd., and under full national ownership, securing natural gas supplies for Hungary, providing a solid foundation for economic growth and contributing to keeping energy prices at an affordable level. Gábor Králik will serve as chairman of the board for Hungarian Natural Gas Trade Ltd., while László Fritsch will lead Hungarian Natural Gas Storage Ltd. as CEO. International advisors like Credit Suisse, KPMG, Baker and McKenzie and Morgan Stanley have supported MVM in implementing the transaction through their asset valuations and advisory services.
The E.ON group acquired 100% stakes in MOL Natural Gas Storage Ltd. and MOL Natural Gas Supply Ltd. in 2006 for HUF 270 billion at the current exchange rate. In addition to several other investments, E.ON also invested HUF 32 billion in expanding the Zsana Underground Natural Gas Storage Facility’s capacity.
As part of due diligence, the two companies’ assets were appraised multiple times since the parties started negotiations. Based on asset valuation and market conditions the value of companies may exceed HUF 400 billion.
The purchase agreement closing now is for 100% of the shares in E.ON Natural Gas Storage Ltd. and E.ON Natural Gas Trade Ltd., so all of the two companies’ assets, including the natural gas stored in the underground facilities, were transferred to the integrated national energy group’s ownership. In addition to purchasing all shares, MVM Ltd. also redeemed the companies’ outstanding owner’s loans to the E.ON group, and it also assumed ownership of very significant cash reserves as well. MVM Ltd. financed the transaction from both its own funds and external sources.
“In line with the Government’s energy policy and the National Energy Strategy, today we have taken an important step towards cementing Hungary’s energy security, as well as strengthening the long-term growth potential of the Hungarian economy. The group has started on a growth path in 2010, and with the two new companies joining us, MVM Group has become the largest, Central European wide significant nationally-owned corporation in Hungary. The group’s consolidated turnover may exceed HUF 1,300 billion next year,” said Csaba Baji, Chairman and Chief Executive of MVM Hungarian Electricity Ltd. “MVM is a successful, vertically integrated, nationally-owned energy group. It needs talented and experienced professionals for its continued development, so following the close of the transaction, we have taken over the two natural gas companies’ employees as well, and are counting on their continued work.”
As part of its medium-term strategy, MVM has decided to build on its existing assets and expertise by entering market segments that provide a good strategic fit to its core business. Over the last two years, the MVM Group has prepared well for taking a key role in the natural gas market, and is now present in all key areas of the business, from infrastructure to trading.
“We will have to integrate companies with revenues comparable to that of the MVM Group, while also securing the continuity of operations. Hungarian Natural Gas Trade Ltd. supplies natural gas to almost all Hungarian natural gas service providers, and thus indirectly all residential customers. Hungarian Natural Gas Storage Ltd.’s four underground storage facilities provide energy security to businesses and residents. With this transaction, MVM majority owner, the State will have a more significant say in the medium and long-term development of Hungarian gas prices.” said Péter Horváth, Chief Executive of MVM Hungarian Electricity Ltd.
“The transaction was carried out in a transparent way, in line with market conditions, and its value has been set at fair market value. So we can safely say that MVM negotiated a good deal,” added Attila Ságodi, Partner and Energy Industry Consultant at KPMG.
Hungarian Natural Gas Trade Ltd. secures Hungary’s natural gas supply through multiple long-term natural gas purchase agreements, chief among them the one in place with the Russian supplier. Following the transaction’s closing, a Hungarian company will once again operate the largest Zsana, as well as the Hajdúszoboszló, Pusztaederics and Kardoskút underground natural gas storage facilities. In addition to taking over the two companies, MVM has an option to purchase E.ON Ruhrgas International GmbH’s stake in natural gas importer Panrusgáz Ltd.