Hungary May Pay $1.6 Billion for EON Unit, Bill Shows

Hungary may pay as much as $1.6 billion for German utility EON SE’s local natural-gas unit as the state seeks to boost its influence in the energy industry.

The government is extending a guarantee to MVM, the state-owned electricity wholesaler, for as much as 875 million euros ($1.17 billion) to buy the unit and an additional 90 billion forint ($414 million) for its inventory, according to a draft bill submitted to Parliament today.

The plan is part of Prime Minister Viktor Orban’s drive to push down energy prices before facing re-election next year. The purchase would follow similar government deals including its acquisition of OAO Surgutneftegas’s stake in refiner Mol Nyrt. and an accord by the city of Budapest to buy back a 25 percent stake in the municipal water works from Suez Environnement.

Josef Nelles and Sabine Meixner, spokesmen for EON, were unavailable for comment when called outside normal business hours. Messages left on their mobile phones weren’t immediately answered.

Orban intends to cut gas and electricity tariffs 30 percent by mid-2014, the Origo news website reported Jan. 31, citing Janos Lazar, the premier’s chief of staff. The government cut household energy prices by 10 percent on Jan. 1.

The state purchases are part of a strategy to make utilities nonprofit, Deputy Premier Tibor Navracsics told MTI state news service in August. The government may boost the capital of MVM, which may also take on loans or sell bonds to pay for the EON unit, Nepszabadsag reported Jan. 21.

EON bought its Hungarian business in 2004 for 2.1 billion euros from Mol. The government will be a guarantor for MVM until Sept. 30, according to the bill.

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