Boston, MA -- (SBWIRE) -- 03/17/2014 -- Despite the government's commitment to upgrading the Paks nuclear power plant, Hungary will remain a net energy importer over the course of our forecast period, with consumption increases outstripping any additional capacity. The main shift will be in the sources of said power, with nuclear generation set to gather steam and a number of natural gas supply opportunities set to boost thermal generation.
The government, under Prime Minister Viktor Orban, is expected to finalise the tender process for refurbishing and upgrading the country's only nuclear power plant, Paks, during the course of 2014. While the move is politically popular in Hungary (a poll by TNS Hoffman finding that 76% of Hungarian adults polled were pro-nuclear), it will not increase capacity enough to make the country a net energy exporter during the course of our forecast period.
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Despite government plans to boost capacity at the Paks plant, we see the risk of energy firms withdrawing from the Hungarian market remaining high over the course of 2014. The government has refused to rule out further energy price cuts, following the state-mandated 10.0% cut to household utility prices in January 2013, and the 11.1% reduction implemented in November of the same year. This will squeeze energy firms' profit margins even tighter; they had already been under pressure as a result of the government's substantial taxes on 'big business', especially those with foreign owners. We are likely to see a scaling back of this sort of rhetoric following the general election in spring 2014, which our Europe Country Risk team expects to result in a comfortable re-election for Orban and his governing Fidesz party.
While nuclear power is set to go through a period of renovation in Hungary, natural gas will remain the second largest contributor to power consumption over the course of our forecast period. The government's commitment to Russia's South Stream pipeline, as well as the news in November 2013 that Hungary would seek to import gas from Slovakia and Germany by reversing the flow of Russian gas, highlights the important role that natural gas will continue to hold in Hungary's energy mix.
Key trends and developments in the Hungarian electricity market:
- Hungarian total power generation is set to expand at an average 0.9% per annum across the period 2014-2022. We also forecast consumption to tick up across the forecast period, at an average rate of 1.3% per annum over the same period. This is a sign of the developed nature of Hungary's power sector, but also raises the probability that the country will continue to be a net importer of energy.
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