BBJ 2518

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

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BUSINESS JOURNAL BUDAPEST

VOL. 25. NUMBER 18

OCTOBER 6 – OCTOBER 19, 2017

SPECIAL REPORT

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Photos: AMCHAM/Lazar Todoroff

When Business Meets Government E SS BUSIN

SOCIALITE

On the Scent of Something Special in Budapest David Holzer spends a heady hour in a niche upmarket parfumerie in Budapest, but is first reminded how we can too often take the sense of smell for granted.21

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SPECIAL REPORT

Plans to Become Regional Energy Hub Gather Pace Recent moves in the Hungarian gas market may promote the country’s aim of becoming a regional hub.

The field of electromobility has also taken a step ahead, with legislation bringing some clarity to market players. 13

While much has been done to improve Hungary’s competitiveness, more still is needed in education reform, efficiency improvements and attracting more investments of higher added value. 8 NEWS

Two Weeks Packed With Good News The Hungarian business environment received positive news from ranking institutions, the country’s CDS premium fell to a historic low, and Hungary also climbed several places up the global competitiveness list. 3

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Budapest Business Journal | October 6 – October 19, 2017

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THE EDITOR SAYS

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BRAIN DRAINS AND BRINGING BACK THE WORKERS

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The problem with the brain drain is that no one really knows how extensive it is, or even how to properly measure it.

You would think that this would be a relatively straight forward thing to process. One country counts the people that leave, the host countries count the people who arrive, but apparently it doesn’t work like that.

Free movement of labor, data privacy laws, whether someone is on an extended holiday, a short-term secondment or plain flat emigrating, all these factors and more are mixed into the blend.

We can agree that Hungary, with ever more people in work, is experiencing a labor shortage. We can also agree that some of that is down to young people leaving the country to work elsewhere.

Their reasons for doing so matter, however. Some might simply want more money, or a more challenging career. Others might have a wanderlust that cannot be confined within the relatively narrow confines of Hungary’s borders. Yet more must surely have left because they don’t like the politics, or life here is too conservative (please note the small “c”; that is not another political side swipe).

Of those groups, it is the first that are the most obvious target to bring back and, even then, it is easier to say than to achieve.

If money is the reason for people leaving, then improving the pay differential between Hungary and Western Europe might draw them back.

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There are two immediate problems with this: one, it is expensive and you cannot match wages overnight; two, doing so undermines some of the cost advantages that attract some of the FDI (and jobs) here in the first place. So, if increasing wages is a longer-term answer (and it needs to be longer term, if only to keep a lid on inflation), then perhaps offering more interesting careers is a better bet.

Minister of Foreign Affairs and Trade Péter Szijjártó made exactly this point at the third “Business Meets Government” summit last week, referencing BlackRock and its shared service center. “The more big brands we can convince to set up shop here, the more young Hungarians will return,” he told delegates.

Possibly, maybe even probably – and it is certainly worth a try – but, as another of our stories this week points out, that is, in effect, working off a hunch. Because just as no one knows exactly how many Hungarian emigres there are out there (Colliers estimates it is 400,000, of whom perhaps 90,000 might return), no one really knows what they are looking for or what might bring them back, for many of the same reasons.

There is one final complication to add to all of this: Brexit. When news of the U.K.’s ultimate EU opt out first broke, Hungarian government officials openly spoke of the possibility that this would bring more people home quicker. That certainly doesn’t seem to have been the case up to now.

Presumably most are simply biding their time, waiting to see what the conditions of Britain’s divorce might be, and only then will they make a decision about their own future. But I have spoken to some British sources who say their information suggests a lot of those Hungarians who do leave the UK after Brexit becomes final will simply move to another EU state.

Perhaps we should just try to crowd source the answers: where in Hungary were you born, why did you leave, and what would tempt you back?

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Two Weeks Packed With Good News

Although the past weeks’ macroeconomics calendar wasn’t exactly crowded, the Hungarian business environment received positive news from ranking institutions, the country’s CDS premium fell to a historic low, and Hungary also climbed several places up the global competitiveness list.

Change in gross domestic product (GDP) in Hungary, 2003-2017, 1st quarter

Quarterly change in GDP (2004-2017, 1st quarter)

Once again, Hungary’s budget surplus showed a massive growth in the first half of the year, latest data published by the Central Statistical Office (KSH) reveals.

Hungary posted a budget surplus of HUF 270.5 billion (EUR 868.7 million) in the first half of 2017, equivalent to 1.5% of GDP. The H1 surplus was up HUF 183.9 bln or one percentage point of GDP compared to the same period in 2016.

The government has said in the light of this that it will continue to pursue a stable budget, keeping the deficit low. This can be achieved by further reducing the public debt, economy ministry state secretary Péter Benő Bánai said, commenting on the data.

He noted that the statistical authorities of the various European Union member states provide Eurostat with data on their budget deficits and public debts twice a year. Eurostat and KSH have, after some to-ing and fro-ing, eventually reached a professional consensus and the KSH has made some methodological modifications to its calculations, he said.

These changes, however, have not affected the positive developments concerning the budget deficit or the reduction in public debt. The public debt at the end of 2016, based on National Bank of Hungary data, came to 73.9% of GDP.

October 2, stating that budget revenue and expenditures were in line with the pro-rata targets in the first half, and it also said that the deficit target of 2.4% of the GDP for 2017 can be achieved.

This positive mood was further justified by the fact that the five-year credit default swap (CDS) premium for Hungary, for the very first time in history, fell below the 100-point benchmark to 98 points, which shows that market investors appreciate the achievements of the Hungarian economy and are upbeat concerning the country’s outlook, the government insists.

In May 2010, this indicator was at 195 basis points, and had skyrocketed up to 730 points by the beginning of 2012.

“Thanks to potent crisis management and a pro-growth economic policy, the CDS premium was back to around 200 points by the middle of 2014 and to 98 points today, falling below the 100-point mark,” the Ministry for National Economy said in a statement posted on the government’s website, kormany.hu.

“Economic growth has not generated debt; on the contrary: the government debtto-GDP ratio has been firmly below the 3% threshold in recent years, and the indicator has improved more markedly than others in the EU – thanks to a prudent fiscal policy, sensible debt management and economic expansion,” the ministry added.

More good news for the Hungarian economy was that credit insurer Coface had upgraded Hungary at the end of September.

The institution reasoned its decision with the economic growth the country had demonstrated lately and the improvement of the business environment. According to the fresh “A3” rating, Coface considers the risks of the Hungarian business sector to be acceptable, and slightly down from the previous “A4” rating.

Deficit Achievable

Consumer Confidence

Hungary’s Fiscal Council delivered its opinion on the state of this year’s budget on

It is not only investor confidence that has improved; the latest retail trade

ZSÓFIA CZIFRA

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figures also show that households are tending to purchase an increasing amount of durable consumer goods, which is a sign of growing consumer confidence.

According to preliminary retail sales data released by KSH, in August the volume of sales grew by 4.6% year-onyear, and thus the upward sales trend, in place for 50 months, has continued.

Retailers are expecting further increases: in the second quarter of 2017, the volume of investment in the sector was up by 14% year-on-year.

As if all that is not enough good news for a fortnight, Hungary’s competitiveness has also improved, as the World Economic Forum’s latest Global Competitiveness Index reveals that the country climbed nine places on the list. Hungary now takes 60th place, returning to levels it held previously (63rd in 2015, 60th in 2014). Improvements in technological readiness, financial markets and the business and innovation environment

lifted Hungary in the ranking. Among the most problematic factors for doing business were the inadequately educated workforce, corruption and tax rates.

The index investigates the competitiveness of 137 countries, based on 114 sub-indices. Minister for National Economy Mihály Varga said that the scale of improvement was spectacular compared to the progress achieved during the past decade, and this was the largest year-on-year leap forward on the ranking, which he called one of the most prestigious world-wide. (Last year, when it lost places, the government had not been so complementary.)

Achievements have confirmed that the choices made by the National Competitiveness Council, which was established last spring, concerning economic fields and reform proposals capable of substantially boosting the country’s competitiveness in the shortterm and longer, had been right, the minister stressed.

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Budapest Business Journal | October 6 – October 19, 2017

Operational Leasing: Robust Growth, With More to Come More companies and individuals are happy to join an operational leasing market that is still dominated by diesel cars; an e-breakthrough is still some way off, but is moving nearer.

LEVENTE HÖRÖMPÖLI-TÓTH

Car ownership is so 20th century; that much is becoming clear not only to members of Generations Y and Z, but many other folks and companies as well. In particular, the latter have been celebrating a moment of revelation in growing numbers lately.

What made these entities bornagain lease faithful was legislation that now allows them to reclaim VAT upon vehicle leases. At the end of the day operational leasing (OPL) offers a much more cost-efficient solution than ownership, not least because OPL companies can pocket bigger discounts based on their bulk purchases, which then slashes costs of insurance, reparation and maintenance.

“Currently, operational leasing is a financially very nice scheme that definitely supports growth,” says Tímea Pesti, CEO of Leaseplan Zrt., the third biggest market player in the country. “The number of vehicles that have been bought and are maintained under private ownership schemes are still very high with Hungarian businesses, and that constitutes serious market potential.”

Tapping into that potential is among the top priorities of market players, where educating clients and enhancing brand recognition are both of crucial importance.

Consistent Growth Not that there is reason for gloom.

The market has been seeing consistent growth rates of 5-10% annually, which puts the total number of leased cars at 55,000 today in Hungary.

As commercial director of ALD Automotive Magyarország Kft., Zoltán Borbély says, H1 data hints that interest in new cars has soared, and more importantly, private individuals have also reemerged on a market whose presence has been validated by car manufacturers as well.

“Standards of the past few years have been dominated by corporate car supply needs, but those standards have changed,” Borbély notes. “One key thing to bear in mind, though, is that the average age of cars is on the rise.”

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Tímea Pesti, CEO of Leaseplan Zrt.

Hasan Kurt, general manager at Budget Car Rental.

He further believes that there is plenty of room for maneuver to trigger more growth, both in OPL and fleet management. However, approaches differ as to how to use that potential.

Some service providers partly focus on SMEs, whereas others reach out to private customers too.

ALD is expanding its customer relations and targets the SME segment via that alternative sales channel. But a key pillar for growth is keeping services at a very high level. Customers have become much more informed, they are open to new solutions and trends, and they will compare quotes from OPL service providers before making a decision.

Price sensitivity is still an issue, and in the case of clients with experience at fleet management, ultimately it is not only monthly fees that matter.

“We are certain that, at some point, every fleet management company will come up with an offer tailor-made for

Zoltán Borbély, commercial director of ALD Automotive Magyarország Kft.

private customer needs in the field of OPL and fleet management,” Borbély adds.

Further Consolidation?

ALD became market leader as a result of last year’s acquisition of MKBEuroleasing, and now manages nearly 15,000 leased cars. Pundits expect further consolidation of a market where the top five already have combined market share of 79%. New entrants from abroad may also turn up soon from amongst other leading global firms.

“The ALD-MKB Euroleasing acquisition affects the market positively because it provides market stability and proves that there is more opportunity for growth,” Hasan Kurt, general manager at Budget Car Rental says.

As a result of the deal, more than 900 customers are now served by ALD. However, the company says it is clear

that being number one doesn’t mean you can just sit back and relax. “The market leading position is no magic magnet in B2B that attracts clients by itself,” Borbély says. “Keeping customers requires high quality of service and competitive prices.”

What trends is the market driven by? In the past 15 years, corporate fleets have gradually shifted towards diesel. Petrol-engine models faced the additional obstacle that, in many cases, company regulations would expressly ban their operation. The pendulum is beginning to swing back to petrol, but the ultimate paradigm shift could be set to arrive in the form of the e-revolution.

Leaseplan Zrt.’s fleet currently contains just 1% of e-cars or plugin hybrid models. “Diesel cars are still preferred in our experience, our orders bear witness to this trend,” Pesti says.

“We would like to be a champion of electromobility and make a strategic agreement with the Hungarian government to push for radical change.”

ALD, present in 43 countries, has a 12,000-strong pool of electric or plugin hybrid vehicles across Europe, and while the first steps in the e-direction may be observed on the local market as well, the current conditions of the infrastructure rather keep this process at a slower pace.

“Around 90% of our fleet is made up of diesel vehicles, which poses substantial risk for the future, especially at end-of-the-leasingterm sales. Signs of that are already apparent on Western European markets,” Borbély notes. “Openness towards fleets of electric and hybrid models clearly does exist, and government engagement can help their proliferation, but the real breakthrough is yet to come.”

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Budapest Business Journal | October 6 – October 19, 2017

The Time to Prepare for the new Data Protection Regulation is Now Employers in Hungary have until May 25, 2018 to comply with the rules of the General Data Protection Regulation.

While that may seem some way off, experts warn that, due to the various types and large volume of data, this is a highly complex task.

LEVENTE HÖRÖMPÖLI-TÓTH

Even though there seems to be plenty of time left until the Regulation (EU) 2016/679, better known as the General Data Protection Regulation (GDPR), comes into full force, companies had better start preparing to take appropriate

Companies will also need to identify exactly which personal data should be managed by employers, for how long it should be stored, and who will have access to it.

“Once the decisions are made that are necessary for future data management, the relevant internal regulations must be set up that describe clearly the applicable data management rules to employees,” says László Szűcs, legal specialist at Réti, Antall & Társai PwC. “Workers must also be informed about their rights concerning data deletion and the management of incorrect data.”

to positions meant for rehabilitation purposes.

“Standardizing of regulations is possible up to a point, yet they need to be based on individual types of data management procedures applied by employers,” says András Csenterics, a legal specialist in data protection and data security at Réti, Antall & Társai PwC. “In this regard, we can barely talk about two identically operating employers.”

After the regulations have been drawn up, employers must make sure that workers become acquainted with the new rules on data management. The most effective way to do so is training where data management rules summarized in the regulations must be shared.

In addition, a data protection officer needs to be appointed to assure that data protection rules are being observed, and companies with more than

Totally new Rights László Szűcs of Réti, Antall & Társai PwC.

measures for timely compliance.

As PwC experts pointed out at a press conference on the issue, the process promises to be very time-consuming, with phase one being the assessment of existing data assets.

Employers need to identify what kind of personal data they store and use. The legal basis and purpose of such activities must also be determined, with the former being of particular sensitivity. In the future, the lack of a proper legal basis for storing and using personal data will trigger the legal consequence of the deletion of that data.

As the expert highlights, in the case of certain types of data management, totally new rights are enshrined in the GDPR for those concerned compared to the current regulation. Since the employment relationship is quite complex from a legal standpoint, employers must manage a large number of various types of personal data.

It is impossible to draw up separate data protection regulations for all kinds of personal data or data management practices, so a coherent framework regulation is recommended that applies to the totality of employee personal data.

The framework regulation can then be supplemented by annexes on laptop use, GPS records or health records in relation

250

employees

also have the obligation to set up a register documenting all data management records.

Finally, the data security compliance of certain IT systems will also be subject to review, and other complex tasks will have to be dealt with as well, such as deletion of illegally managed data or preparing the conditions for data mobility.

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2017.04.10. 14:09:37

2017. 10. 04. 19:48

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Waste Management Under Reconstruction

There is a long way to go for Hungary to reach EU targets for recycling, and it remains to be seen whether the emergence of a single government player can help that effort.

LEVENTE HÖRÖMPÖLI-TÓTH

Things have been far from calm in the past few years in the waste management industry in Hungary.

According to market players, the entire sector map has been redrawn through multiple amendments of the waste management act; a centralized government entity, NHKV Zrt. (National Coordination of Waste Management and Asset Management Plc.), was established last year and tasked to bring order and transparency.

However, the 2016 statistics of FKF Zrt. (the Metropolitan Public Area Maintenance Company), which is in charge of keeping Budapest clean, paints a rather gloomy picture as of now. Plastic recycling containers in the capital have a

60%

foreign matter

rate, and mixed waste contain some 37% of recyclable material.

Simultaneously, the number of dumping spots for recyclable waste has dramatically dropped from around 900-1,000 to less than 200 in the past few years, according to one expert the Budapest Business Journal spoke to.

Despite that, NHKV points to the positive impact of its own coordination activity. In a statement sent to the BBJ in response to our questions, it says collection of recyclable waste is becoming increasingly accessible thanks to a mobile home collection scheme, and the number of dwellings is negligible where separate waste collection hasnʼt been made available.

Further developments and raising awareness also serve the optimizing of recycling. Under the current development period, the infrastructure needed for separate collection and waste utilization is to be expanded.

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Centralized Waste Management So, what is going on in this sector worth around HUF 100 billion? Through the change in the regulatory environment, the waste management sector has been centralized. Among the outcomes is that the new state-owned coordinator is now also sole owner of recyclable waste collected by public service providers, so it is at the discretion of NHKV to determine to whom it is willing to sell the recyclable material.

According to our expert, who spoke only on condition of anonymity, a scheme is in the works that will mean only those companies that fulfill a set of criteria can buy the material. As a result, some 80 public service providers have already been denied certification, many of which had been active market players for a long time before.

NHKV argues that it is bound by law to proceed with issuing these co-called “compliance opinions”, and, as a law applying entity, it cannot deviate from binding rules. The entire concept of compliance opinions was based on the idea of serving residents better, that is to provide an elevated quality of service.

More players might be leaving the market soon by virtue of another amendment, effective from January 2018, according to which public service providers will be allowed to engage only non-profit entities as subcontractors.

Currently, several for-profit companies are part of the waste management life cycle as only they have the proper infrastructure to get certain jobs done. NHKV is planning to start building out those capacities at public service providers, which market players

The number of dumping spots for recyclable waste has dramatically dropped from around 900-1,000 to less than 200 in the past few years, according to one expert the Budapest Business Journal spoke to. see as an unnecessary duplication. The BBJ asked NHKV to comment directly on this issue, but it declined to do so.

There are also signs that the government is willing to shift the emphasis from recycling towards incineration. This is considered to be both an outdated and a costly approach according to experts the BBJ spoke with. The idea also appears to be in conflict with the EU’s circular economy strategy, in which incineration plays a marginal role only.

More Incinerators Due Still, plans have been unveiled to erect around a dozen waste incinerators at a cost of HUF 40 billion-80 bln apiece.

Such a heavy investment would require EU funds, but it is highly questionable whether any could be secured for the purpose in question because of the above-mentioned reasons. Our expert suggests there is strong behind-thescenes lobbying activity to install more incineration capacities in Hungary, with the technology losing ground across the European Union.

A waste dumping fee has been levied on waste selection residues, which puts an extra financial burden on public service providers squeezed by underfunding anyway. By contrast, incineration residues enjoy an exemption from the fee.

The earlier widespread introduction of a product fee levied for packaging doesn’t seem to have fulfilled its initial purpose, either. It was originally meant to finance waste management activities, and thus boost the green economy.

However, the BBJ understands that only a fraction of the related revenues is actually channeled back into the sector: last year just HUF 12.75 bln out of the total of HUF 72.4 bln landed in waste management, with the rest having gone into the state budget.

Perhaps not surprisingly, the recycling rate of packaging waste dropped by 7% between 2011 and 2014.

Hope for improvement may come from EU funds. In the current programming period, well over HUF 100 billion will be available for waste management and collection development, recycling investments and rehabilitation of old landfill sites.

It is worth noting that, under the EU’s Waste Framework Directive, Hungary will need to reach a

50% target

for recycling the four main types of municipal waste (paper, glass, metals and plastics) to be prepared for reuse or recycled by 2020, whereas by 2030 a common EU target of 65% of all municipal waste is foreseen for recycling.

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Budapest Business Journal | October 6 – October 19, 2017

WHO’S NEWS

Business

|7

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

Head of Eaton’s BSC in Budapest Announced Csaba Szende has been named as site leader/managing director of Eaton’s Europe, Middle East and Africa (EMEA) Business Service Center (BSC) in Budapest, effective from September 15.

Eaton’s BSC is the newest addition to the company’s EMEA regional capability and opened in 2015. It now has more than 400 employees, helping manage operations across the region through customer care, sales support, and commercial management, as well as supply chain management, HR, IT, finance and marketing.

Szende will be responsible for setting the strategy and leading the direction of the BSC organization, providing overall leadership and responsibility for site operations, customer and business partner relationship management, as well as the health and safety of the site and employees.

In addition, he will enable Eaton’s Business and Corporate teams to respond to changing market needs and business expectations through improving the productivity, efficiency and effectiveness of business services.

Prior to joining Eaton, Szende held several leading local and international managerial positions within shared services environments in Budapest.

Granit Polus Names Head of International Investments

With extensive management and director-level experience in property and asset management, Simona Ioana Ion has been promoted to head of international investments at

Granit Polus Group.

As head of international investments, Ion will track and report on general marketplace trends, competitive developments, emerging companies, new opportunities and threats to the businesses of real estate developer and manager Granit Polus.

Besides this, she will oversee cost control, optimizing financial resource efficiency through implementation of controls, controlling annual budgets and approving capital expenditures to meet financial objectives. She will also retain her position as director of the

Atrium Mall in Arad, Romania.

Ion joined the group in 2012 as head of commercialization, being responsible for introducing best practice and crossborder opportunities working with the local teams at that time in Hungary, Croatia, Poland, Russia, and Slovakia, and later also Bulgaria, Armenia and Georgia.

Horizon Development Welcomes Head of Leasing and Sales

Andrea Szente-Tóth joined the sales division of Horizon Development as head of leasing and sales on September 20. Her role involves the strategic and operative management of the complete development portfolio – leasing of commercial facilities Szervita Square Building and Promenade Gardens, and residential sales of Buda Gardens – as well as heading the leasing and sales team.

Szente-Tóth previously worked in top management positions both on the development and agency sides of the property industry, including spells with

Bradmore Consulting, Wallis Real Estate, Orco Business Park, and Futureal.

“She fits perfectly into the company culture of Horizon Development with her well-established, overarching knowledge of the field, her customer-centric approach and dynamic personality,” said managing partner Attila Kovács.

Audi Hungária Names new Managing Director As of October 1, Achim Heinfling is the new managing director of Audi Hungária.

He takes over the position from Peter Kössler, who will continue as a member of the board of Audi AG in charge with production and logistics.

Heingling is relocating to Győr from Audi HQ in Ingolstadt. A machine engineering graduate, he has been with Audi for nearly 30 years and previously worked in Győr between 2007-2014 as CEO in charge of engine production.

He then returned to Inglostadt as head of engines/aggregators production design.

Most recently, he was responsible for preparing the way for the mass production of electric engines in Győr.

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Budapest Business Journal | October 6 – October 19, 2017

Progress Made, but More Needed as ‘Business Meets Government’ The American Chamber of Commerce in Hungary and the Hungarian Investment Promotion Agency organized their third “Business Meets Government Summit” on September 28, with the aim yet again of finding concrete ways to improve education, taxation, the regulatory environment and innovation.

LEVENTE HÖRÖMPÖLI-TÓTH

The primary objective of the conference has always been to develop a coherent national strategy to make Hungary a more competitive place to invest in. In order to achieve that, an annual cycle of ongoing consultation takes place between AmCham and various government bodies, with the “Business Meets Government Summit” of key importance.

AmCham president Farkas Bársony stressed that considerable progress has been made since regular, structured dialogue started with the government; cutting the corporate income tax to 9%, for example, was a game changer.

Other achievements include improving dual education, providing R&D incentives and putting an increased focus on language training. Such measures must have contributed to the fact that Hungary has advanced nine places in the World Economic Forum’s latest annual global competitiveness ranking, released a few days before the summit.

“There is still a lot to do concerning, among others, education reform, efficiency improvements and the need to

have more investments of higher added value,” Bársony said. “We need to carry the momentum and identify the main priorities for the upcoming year.”

Thriving Relations Minister of Foreign Affairs and Trade Péter Szijjártó said he he had met with 31 companies on his most recent visit to New York City, many of which shared plans to invest more in Hungary. “The U.S. is a natural and strategic ally of ours, and the American and the Hungarian government both focus on pragmatism,” Szijjártó said. It is the core responsibility of every state to ensure security for people and investments, he noted. “And I can assure you that the safety of American investments is fully guaranteed here.”

The United States has become the No. 1 export destination for Hungary outside the EU, the minister said. “Total trade grew to USD 5.5 billion; the number of American companies operating here has surpassed the 1,700 mark, and they now employ more than 100,000.”

New direct flights connecting Budapest to American cities are set to further

strengthen relations. Polish airline LOT will launch four flights per week to New York and will fly twice a week to Chicago from May 2018, while American Airlines will start operating flights between Budapest and Philadelphia.

Central European cooperation should also be deepened in the future, for which Hungary’s current V4 presidency provides a great opportunity. “We will do our best to keep this unity so that our voice can be heard much more loudly at the EU level,” Szijjártó said, albeit he noted that Franco-German cooperation will continue to determine the development of the Union.

Economic activity is underlined by record high employment figures and 700,000 jobs created since 2010, the minister said. But further growth may be hampered by the chronic labor shortage, which should be addressed using various tools. Ukrainian workers are now enjoying an accelerated work permit procedure, unemployed people have access to a growing amount of training, and companies are also financially rewarded for carrying out in-house training.

Even more desirable would be to attract those young skilled Hungarians back that left the country in the recent past.

Szijjártó mentioned the example of the establishment of the new BlackRock SSC in Budapest that generated high interest among emigrants. “This could be the best repatriation program, indeed: the more big brands we can convince to set up shop here, the more young Hungarians will return.”

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Catering taken to the next level Zsidai Gastronomy Group is primarily known for its top-notch restaurants on the Budapest gastronomy landscape, rather than for its catering services.

However, this perception is about to change dramatically. In fact, for a rapidly increasing number of happy customers, it already has.

What started as a series of ad-hoc catering requests has gradually turned into a permanent stream of orders. Excellence associated with the Zsidai heritage attracted demand for on-the-spot event catering services, which convinced the management to tap into this new opportunity.

By the summer of 2016, the need to set up a dedicated catering unit was undeniable and so Zsidai Catering was brought to life.

“Efficiency in this segment requires us to have our own central kitchen that serves our

BBJ_2518_bus.indd 8

restaurants with basic products like highend pastry and bakery items or sauces, but also our catering business,” catering sales manager Gábor Somogyvári explains.

He was hired about a year ago upon his return from England, where he had gathered seven years of hands-on experience in various positions from chef to hospitality consultant. Now he is making great use of his deep insight of the latest trends in the industry, with special regard to the up-market catering and restaurant scene.

“Our goal is to introduce an approach embraced by leading U.K. firms that is totally

customer-, product- and service-focused,” adds Somogyvári.

Part of the deal is educating guests. “We are in constant dialogue with them, trying to pick their brains so that we can provide the very best service possible in order to go far beyond their expectations,” he adds. This includes working together with some of the best event organizers, decoration experts and florists just as much as getting back to clients with a quote within the shortest possible time.

“No requests are turned down because they wouldn’t match our profile,”

Somogyvári says. “We cater to your needs so we’ll make things happen, whatever it takes.”

Immense behind-the-scenes expertise helps deliver on such promises. Cateringrelated culinary tasks are coordinated by executive chef Vernon Strachan, who was previously the cluster executive chef of three Hilton hotels in London − simultaneously. He is also assisted by several top in-house chefs, not to mention a highly motivated staff.

The idea is to take catering to the next level, and Zsidai Catering seems to be on the right track to do so; the number of orders has tripled since last November. “We are on the verge of exponential growth, we are investing heavily into state-of-the-art equipment to meet the demand, so we are looking forward to very exciting times,” Somogyvári notes.

He is aware that there is fierce competition out there, but this new kid on the block is set to impress clients with its whole new approach.

“Catering is not only about food and drinks. It’s about bringing people together and making sure that they have a fantastic time,” the expert says. “The ‘wow factor’ is what really matters and this stands for every single aspect of an event. When an event goes well and guests feel great, that’s when conversations happen and that’s when they swap business cards. We are looking forward to open-minded customers who are willing to embrace new ideas and concepts and entrust us to make them come true.”

Zsidai Gastronomy Group +36 (1) 800 9211 hello@zsidai.com www.zsidai.com

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Budapest Business Journal | October 6 – October 19, 2017

Business

|9

Does the Brexit Boomerang Promise a Returning Workforce?

A major study predicts dramatic reversal in emigration from Hungary and the CEE, but has anyone asked the emigres themselves?

EDDY KESTER

Hungary can expect in excess of 90,000 expatriates returning “home” within the next three years as a result of changing socio-economic fundamentals across Europe, and in particular the impact of Brexit, according to Colliers, the international real estate services provider.

The prediction – if fulfilled – will come as music to the ears of employers in Hungary, who have been reporting recruitment difficulties across sectors ranging from construction and hospitality to health and IT since the economic upswing began around 2014.

“I believe the number of Hungarians out of the 440,000 estimated to be abroad in Western Europe who will return, on a net basis would be around 90,000, or around 20% [of the current total] by the end of 2020,” Mark Robinson, Colliers central European research specialist, told the Budapest Business Journal when asked for concrete numbers.

“I stress on a net basis because it is inevitable that some Hungarians will still choose to emigrate to Western Europe, but a far greater number will return by then,” he added.

These details add to a recent study on the central European diaspora co-authored by Robinson, who argues that emigration from Central and Eastern Europe has not only peaked, but is set to reverse.

Boost to Economies The study, dubbed “The Labor Force Boomerang”, highlights that the returnees will significantly boost the region’s economies. “Every skilled worker returning [home] adds to productivity and growth (good for industrial/office demand), tax take, demand for consumer products (good for retail/logistics sectors, as demand from mid-high spend consumers is boosted) and their experiences of living as citizens in Western Europe should aid the progress of CEE societies,” the report states.

Colliers estimates that “at least” seven million, mostly young people have emigrated to Western Europe from the “CEE 6” (i.e. Bulgaria, Czech Republic, Hungary, Poland, Romania and Slovakia) since the first wave of

BBJ_2518_bus.indd 9

accession to the European Union in 2004. It puts the Hungarians in the mix at 440,000, near the lower end of the figures usually quoted, but notes this still accounts for

4.4%

of the countryʼs population

and constitutes a massive 10.5% of the current total workforce.

The report estimates Magyar expatriates in the United Kingdom at some 90,000 (20% of the total diaspora) but notes that this may be conservative.

While property consultants are sometimes less than neutral observers (wont to emphasize the positives in any scenario likely to boost real estate

Total CEE Emigration to Western Europe since 2004

CEE 6 7 million

Hungary 440,000 Source: Colliers

activity), the report sets out a seemingly powerful case.

The “Labor Boomerang” primarily hinges on what the authors term “pull factors” – a combination of improving conditions in the CEE homelands – not least current and expected wage increases, along with lower taxes, better governance and legal frameworks created across the region in recent years. They also cite expected future appreciations of free-float domestic currencies outside

the euro, and government efforts to induce repatriation.

The “push factors” seem less convincing, being largely based upon the relatively diminishing attractiveness of Western Europe – but with special mention to the uncertainties of Brexit, and the associated depreciation of sterling.

(The report acknowledges that, so far, Brexit has had little discernable effect on repatriation, although inward migration to the United Kingdom has slowed significantly since the 2016 Brexit vote.)

Reverse Migration Overall, the study implies Hungary – particularly with its acute labor shortage, low, flat income tax regime and strong national characteristics – looks set to benefit from reverse migration more than most.

“Wage growth [will be] in the 13% range in 2017 nationally, with me estimating this will be in the 7%-10% per annum growth range in 2018-2020. This will mean wages will be

38-50% higher

than at the end of 2016 in forint terms,” Robinson told the BBJ in a detailed clarification.

Colliers is certainly not alone in recognizing the potential of the diasporas in Western Europe. Hungarian economists such as András Vértes (GKI Research) and László Urbán (a one-time Fidesz financial guru) have both pointed to the enormous human resources available in the Magyar expatriate community.

In politics, LMP, the small Hungarian green party lays great stress on not only the current, but the future implications of emigration. “One of my biggest concerns is that more and more women [of childbearing age] are going abroad to work.

Naturally, these women will have

“I believe the number of Hungarians out of the 440,000 estimated to be abroad in Western Europe who will return, on a net basis would be around 90,000, or around 20% [of the current total] by the end of 2020.” children there, and they will probably never come back,” says Bernadett Szél, LMP co-president.

The Hungarian government has also acknowledged the issue, launching a repatriation project in the previous parliamentary cycle – although reports indicate very limited take-up.

And therein, perhaps, lies the greatest weakness in Colliers’ predictions – at least regarding Hungary. At no point does the study cite the views of the “expatriate on the street”, be they in London, Brussels or Berlin.

LMP has quizzed the diaspora to find out individual motivations, discovering a widespread reluctance to return in the current social and political environment.

“Based on their answers, we can definitely say that the Hungarians abroad are upset with the system [here]; they are upset with the education, healthcare, tax and wagesalary systems,” Szél told the BBJ. While truly objective surveys are lacking, anecdotal evidence seems to support the LMP findings. Asked if Hungary’s low tax regime made it attractive to return home, one 31-year old female professional working in London – requesting anonymity – told the BBJ bluntly: “No. I will only consider returning if there is a change in politics.”

2017. 10. 04. 19:44

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Business

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Budapest Business Journal | October 6 – October 19, 2017

INSIDE VIEW

INNOVATION

sponsored by

Insight

Three Finalists Win Accelerated Growth Prospects

Budapest PR Firm Launches new

Social, Environmental Concept: Impact Branding Budapest-based communications and branding consultancy Capital Communications is debuting what it says is a new concept for the region: impact branding, applying the ideas behind impact investing to branding, corporate identity, corporate communications, public affairs, and many other disciplines.

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

BBJ STAFF

Digital solutions in finance, education and image creation carried the day in the Telenor Accelerate selection procedure.

After a highly competitive application procedure, the three best candidates have been selected for Telenor Accelerate, a corporate startup acceleration program that gives the final three the chance to take advantage of five months of intensive mentorship.

What became Hungary’s first corporate startup acceleration program when it was launched last year generated huge interest yet again among the brainy and brave, with 110 applications filed.

At stake was five months of rigorous, yet rewarding mentoring under the leadership of top-notch business advisors, seed investment of HUF 5 million-10 mln apiece, and total support worth HUF 150 mln from Telenor.

The pre-selection allowed just nine teams to advance to Pitch Day, where they had to impress a panel of experts. In the end, the best three won the chance to benefit from the program. They offer digital solutions in the fields of finance, education and image creation.

Top Trio Family Finances has come up with an app and virtual wallet that is specifically designed to teach children how to manage their pocket money wisely. It will be under the expert guidance of Péter Oszkó (Oxo Group) and Balázs Vinnai (Misys Digital Channels).

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BeeTheBest focuses on education.

Its online pedagogic motivation scheme relies on gamification to break the curriculum down to levels. Successful completion of each level is rewarded by scores and virtual badges. BeeTheBest has been assigned to György Simó (Day One Capital), who is making his debut as a mentor for the program, and Zoltán Varga from Central Invest.

Last, but not least, Vimage also managed to convince the jury on Pitch Day that it is worth further investment. Its app allows users to make cinemagraphs, that is photos featuring animated movements, by using their smart phone. Veronika Pistyur (Bridge Budapest) and Balázs Várkonyi (Extreme Digital) are set to take the team by the hand and supervise its progress.

As Alexandra Reich, CEO of Telenor Magyarország noted, the high number of applicants filled her with pride, not least because interest remained as intensive as last year. “I am curious to see how these supertalented teams will fare after the acceleration program,” she said at the ceremony where the winners were announced.

“Young Hungarian startups have substantial innovative power and we can learn from them too. Digital solutions developed by them may help Hungary make it to the top ranks of digital development in the fast lane.”

The upcoming boot camp is designed to invest the selected startups with knowledge and skills that should enable them to attract more investors in their critical early phase of development.

More importantly, Telenor will provide access to its global customer base and partner network, new sources of funding and experienced senior executives. The package also includes Telenor’s unlimited mobile data plan, Hello Data, Samsung Galaxy S8 devices and Microsoft’s cloud computing service, BizSpark.

“We are not suggesting we have invented something totally new here, but it is certainly something of a novelty in the region,” Gábor Hegyi, founder and managing director of Capital Communications and former co-chair of the World Communications Forum told the Budapest Business Journal. He does believe they have coined a new global industry term in impact branding, however.

“What we are talking about is not replacing CSR – that still has a vital role to play – but taking it to the next level, by encouraging companies to think about it strategically, not least by appealing to impact investors looking to place their money with companies that make a difference.”

Capital Communications was founded in 1996 in Budapest with the backing of Dewe Rogerson (now Citigate Dewe Rogerson), and became a fully independent regional agency in 2011.

With a 20-year track record operating across the CEE/SEE region, including work for NGOs and MNCs addressing environmental and social issues, the PR firm says it has identified the importance of social, environmental, ethical and ecological impacts for brands, organizations, and corporations – and the need to combine diverse practices and services into a single concept.

ʼCritical Importanceʼ

“Impact branding combines established and new communications and branding approaches under an important new concept that reflects the critical importance of these target issues in today’s world,” says Hegyi.

“Customers, stakeholders, investors, institutions and the public all expect brands and organizations to prioritize social and environmental impact, as shown by global rankings and benchmarks from Fortune’s “Change the World” list to the United Nation’s Sustainable Development Goals. Impact branding provides the structure and tools to combine all these key priorities into a single service offering,” he explains.

Paul Mackintosh, senior consultant at Capital Communications adds: “Impact branding demonstrates the power of a concept to define and demarcate a whole new area of practice, addressing urgent contemporary concerns. The pioneers of impact investing have already done the groundwork in developing these

Gábor Hegyi.

Paul Mackintosh. concepts and priorities in finance.

Capital Communications has built on its own pioneering heritage to apply their work to the wider areas of branding, communications, identity and social practice, in the holistic discipline of impact branding.”

Hegyi says the firm is already talking to several major companies about putting together strategic impact branding campaigns, although it is too soon to name names just yet.

According to Investopedia.com (which claims to be the world’s leading source of financial content on the web), impact investing aims to generate specific beneficial social or environmental effects in addition to financial gain. It is similar to socially responsible investing, “but while the definition of socially responsible investing encompasses avoidance of harm, impact investing actively seeks to make a positive impact by investing, for example, in nonprofits that benefit the community or in clean technology enterprises”.

2017. 10. 04. 19:44

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REAL ESTATE NEWS

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Business | 11

Lack of Industrial Space Impacting Growth Development of the industrial market is being hampered by a lack of quality industrial space; large requirements of 20,000 sqm plus dominate demand and there is a lack of 5,000 sqm plus spaces.

GARY J. MORRELL

Although there has been a growth in construction activity most speculative space is pre-let before the end of construction. The majority of transactions are renewals, partially due to the shortage of available quality industrial space, and vacancy has hit a record low of 5.5% according to Colliers International.

Further, there is a very low supply of speculative development as the top five developers (Prologis, BILK, CTP, Logicor, and Wing), which between them own 68% of the available space, have tended to opt for the safer built-to-suit (BTS) option.

However, construction activity has shown a significant increase in 2017, with five new projects of 50,000 sqm handed over in the first half of the year. By the end of the year, another 50,000 sqm plus

is expected, according to Colliers. Total industrial stock stood at 1.95 million sqm as of the end of H1 2017.

“Even though vacancy is at a historically low 5.5% level, it is mainly the result of the lack of new supply coming to the market rather than strong net absorption,” explains Tamás Beck, head of industrial at Colliers Hungary.

“The total new demand is typically 150,000-200,000 sqm per annum, while the net absorption is only approximately several 10,000 sqm,” Beck tells the Paul Mackintosh.

Several projects are expected to commence in 2017-2018. Wing has announced the construction of two speculative 14,000 sqm and 11,000 sqm phases of a double warehouse at the East Gate Business Park.

Handover of the first phase is scheduled for this year.

space at Budapest Dock Szabadkikötő by the end of the year.

Outside of the capital, the regional industrial developer and logistics park operator CTP has undertaken development of the 17,000 sqm extension for Rudolf Logistics at CTPark Tatabánya (60 km west of Budapest). Construction is also ongoing on a 13,000 sqm factory for Dana at CTPark Győr.

The largest Hungary industrial developer, Prologis, is focused on developing its remaining sites at Batta, Harbor Park, Hegyeshalom and Fót on a BTS basis. At the same time the company is “investigating speculative development while maintaining the high occupation rate”.

Headline rents in the Budapest East Gate Business Park. metropolitan area are put at EUR 3.6-3.9 per sqm per month for big box logistics The multi-sector developer is and EUR 4.5-5.5 for city logistics expanding its activity in the industrial projects. Net effective rents tend to be sector in recognition of the development 5-10% lower than headline rents. The possibilities there. As reported in the last southern M0 region and areas around the issue of the BBJ, Wing has purchased the M1, M3 and M5 motorways remain the renamed Login Business Park, which has most popular locations.

8,000 sqm of development land.

The typical size of speculative buildings is 10-25,000 sqm, although the low supply of speculative projects under Need for Space construction mean most are pre-leased The Hungarian state-owned developer and therefore tend not to appear on the NIPÜF Zrt. (National Industry Park market as leasable area.

Management & Development Company) “For 20,000 sqm plus requirements, is developing 23,000 sqm of BTS space at currently only pre-lease is possible with Inpark, close to Páty (about 25 km west of a long-term commitment. As of now, Budapest). This reflects recognition by the only a few projects have building permits, state of the need for modern logistics and light industrial space: “Inpark was founded hence to fulfil such a need it would take a minimum of 10-12 months from the by the Hungarians state but operates as start of negotiations with the chosen a classic property developer on a market developer to deliver that space, even if basis,” the NIPÜF website declares. the site is well prepared for development,” Elsewhere, the Hungarian investor comments Beck.

Westbay is due to deliver 15,000 sqm of

South African Fund Purchases Aréna Plaza

The prolific South African-based CEE regional investor and developer, NEPI Rockcastle has acquired the Aréna Plaza, the second largest retail center in Budapest, from Symmetry Arena Ingatlankezelő Kft. for EUR 275 million (HUF 85 billion).

GARY J. MORRELL

The 66,000 sqm Aréna Plaza, located close to the Keleti (Eastern) Railway Station, opened in 2007 and is regarded as one of the most successful retail centers in Budapest, with more than ten million annual visitors according to CBRE. “The purchase of Aréna Plaza is important not only because it represents a complex, landmark deal for the market, but also because another new international source of equity has entered the Hungarian real estate market,” says Tim O’Sullivan, head of capital markets at CBRE Hungary, who advised the vendors on the deal.

“We expect another strong year as the investment market continues

BBJ_2518_bus.indd 11

to gather momentum on the back of strong investor appetite from both local and international equity sources. It is anticipated that close to EUR 1.7 bln may enter the commercial property investment market by yearend,” O’Sullivan adds.

Highest Rents

In addition to Aréna Plaza the leading Budapest shopping centers are generally considered to be the 68,000 sqm Árkád center, the 47,000 sqm Allee, the 45,000 sqm WestEnd City Center, the 44,000 sqm Mammut, and the 30,000 sqm MOM center. All have waiting lists for tenants and are therefore able to command the highest rents.

With the improving market, the larger retail sectors are attracting the

interest of international investors and a number of deals are said to be ongoing.

That said, liquidity is restricted, due to limited recent development and the fact that center owners tend to hold on to their acquisitions and developments.

Hungary is attracting a wider pool of institutional investors but, just as importantly, Hungarian funds are continuing to be active, providing more security for the market. Investment volumes are expected to approach the EUR 2 bln threshold for 2017. Prime

shopping center yields are put 6%, compared to prime office yields at 6.5% and logistics at 7.75%.

“Retail in Hungary has made a significant leap in activity this year with more stock being made available to investors. Demand for retail has always been there, but vendors were not necessarily willing to sell. This year has seen a change in this attitude as retail yields have compressed and the number of willing buyers increased,” O’Sullivan concludes.

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Budapest Business Journal | October 6 – October 19, 2017

Special Report Energy

Renewables get new Support Scheme, but is Gov’t Committed? 14 Paks 2 : Close to ʼPoint of no Return15 The Cost of Overhead Reductions 16

Hungary has ambitions of becoming an energy hub, and ambitious plans for nuclear energy. How are they shaping policy?

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2017. 10. 04. 19:44

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Budapest Business Journal | October 6 – October 19, 2017

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Special Report | 13

Hungary’s Plans to Become Regional Energy Hub Gather Pace

Recent moves in the Hungarian gas market may promote the country’s aim of becoming a regional hub. The field of electromobility has also taken a step ahead, with legislation bringing some clarity to market players.

SONJA BENCZE

While summer may not be the busiest period in business, the Hungarian gas market has seen much more activity lately.

Among this was one unexpected move by the Hungarian transmission system operator FGSZ Földgázszállító Zrt., which announced in July that it was no longer in a position to hold an open season on the RomanianHungarian-Austrian section of the pipeline (BRUA).

The project, which is backed by the European Union, was going to link Bulgaria to the central European Baumgarten hub in Austria. The source of natural gas in the pipeline could either come from the Black Sea, or from the Caspian region. The idea behind it was to improve security of supply by the end of the decade by connecting the Black Sea gas reserves into the European gas infrastructure.

However, FGSZ and Transgaz, the Technical Operator of the Natural Gas Transmission System of Romania, said the only “economically viable” part of the BRUA pipeline would be the existing Romania-Hungary interconnector, and decided to hold a binding open season procedure to allocate the capacities of the ROHU transmission corridor – excluding their Austria partner. The authorities say capacities could be expanded

from

4.4cubicbillion meters

(bcm) to 5.26 bmc/year.

The move is in line with Hungary’s long-term aim of becoming a regional gas hub. Not only is the country well positioned geographically, it has abundant storage capacities, much of which lays idle.

Security of Supply Although current legislation demands gas traders store a certain amount of their annual capacities in these storages, more would be needed to make storage facilities profitable. To achieve this, more

BBJ_2518_special_report.indd 13

Summer legislation on the pricing of electric charging has been welcomed, although a large increase in the network of stations (the one pictured is in Downtown Budapest) is still some way off.

Although household electricity and gas prices are regulated in Hungary, unexpected outages at a number of power plants, including the Paks nuclear plant, taking place at a time during periods of high demand in December and January, caused price spikes on the Hungarian power exchange, HUPX. gas should be stored on a market basis, and traders should be offered deals that would make them store capacities beyond the mandatory rate.

Not only would this improve the quality of storage capacities, which deteriorate quickly if unused, it would also improve security of supplies.

The exceptionally cold weather this past winter drew countries’ attention to strategic storage.

As a result of the increased demand for a prolonged time, and/or failures in their power generation systems, some countries, indeed regions, experienced capacity shortages. They were forced to replace the shortfall with energy of more expensive resources which, in deregulated markets, made prices skyrocket. Although

household electricity and gas prices are regulated in Hungary, unexpected outages at a number of power plants, including the Paks nuclear plant, taking place at a time during periods of high demand in December and January, caused price spikes on the Hungarian power exchange, HUPX. To avoid such events and ensure uninterrupted supply, the European Union recently approved a regulation that aims at preventing gas supply crises.

According to the legislation, member states are required to prepare for and manage gas shortages through regional cooperation. Beyond that, the new rules put solidarity first when it comes to dealing with disruptions to gas supply.

For regulators, periods of peak demand require a lot of coordination and can sometimes cause issues. From an economic viewpoint, however, such periods may promote investment in new peak-load capacities or the maintenance of these kinds of power plants that would otherwise be closed in an extended low price environment, according to a policy brief by REKK. Similar demand shocks can be satisfied not only by maintaining or expanding the current power plant portfolio, but also by expanding crossborder capacities, the study adds.

Hungary’s intention of becoming a regional gas hub may further strengthen as a result of a switch to euro-based trading at the gas bourse. CEEGEX natural gas bourse shifted to euro -based trading on October 2 in response to feedback from stakeholders, who had long been looking to the platform to change from forint-based trading.

Electric Charging

Another long-awaited piece of legislation in the energy sector was published this summer, this time on the pricing of electric charging. Operators and owners of electric chargers/filling infrastructure can decide whether they want to apply time-based or kilowatt-hour-based charging.

Which method will become widespread, no one can say. A time-based method may be unfavorable for owners whose cars have a lower-capacity battery, as charging these takes more time. Though the market has welcomed the arrival of the legislation, as it brings some clarity to field, a significant increase in the number of filling stations will only come when the number of electric cars in Hungary also rises.

“To achieve that investment into electric filling infrastructure in the future, more steps are needed,” Balázs Felsmann, president of the Hungarian Energy Traders’ Association told the Budapest Business Journal.

Today, legislation differentiates between operators and service providers.

Permits are given to those who own filling infrastructure/charging points and service providers are not necessarily operators, so this cross-over between fields is not resolved, he explained. Since no one knows in which direction the field will move, there is much uncertainty, Felsmann added.

Building infrastructure therefore is regarded more as an investment into the future, a must for players who aim to be active in the field of electromobility later.

2017. 10. 04. 19:44

Special Report

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Budapest Business Journal | October 6 – October 19, 2017

Renewables get new Support Scheme, but is Gov’t Committed?

With the new Hungarian renewable electricity support scheme fully introduced this summer, renewable energy producers at last have legislation to rely on. Yet this doesn’t mean that new projects will suddenly spring up; experts don’t know when the ministry will publish tenders – if it will at all.

SONJA BENCZE

After years of waiting, the new renewable electricity support scheme (METÁR) was

finally introduced in

2017.

The European Commission approved the scheme this July, after the legislation was partially introduced in January.

Under the new rules, based on the plant’s capacity, different support systems are used: a feed-in tariff (which remains unchanged), a ‘green premium’ without tender, and a ‘green premium’ granted through tendering procedures. A so-called ‘brown premium’ has also been introduced – this refers to solid biomass and biogas plants.

Support with a feed-in tariff is limited to small installations (below 500 kilowatt) and demonstration projects. Installations with a capacity of more than 500 kilowatt will receive a premium on top of the market

Thanks to a statistical methodology review by the European Commission, Hungary has already met its renewable energy target for 2020. While such news must be welcomed by environmentalists, experts agree that the major motivation to introduce more renewable energy in the system has now gone.

BBJ_2518_special_report.indd 14

price of electricity. For installations with a capacity above one megawatt and for wind installations, the premium will be determined and beneficiaries selected in a competitive bidding process. The scheme will be financed through the renewables support levy currently in place. As of this year, Hungary is partially opening up the renewables support scheme to foreign producers.

Following the Commission’s decision this summer, the National Development Ministry published a new legislative proposal for public consultation. It proposed several major changes compared to the original version: among them, a substantial budget cut.

Limited Subsidy The current 62/2016-os NFM decree limits the amount of subsidy for feed-in tariff energy generators (those below 500 kwh) at HUF 20 billion for the period of 2017-2021.

This sum was reduced to HUF one million/ year – a total of HUF five million for the entire period – but only HUF one million could be used annually – says the Regional Center for Energy Policy in a comment.

The proposal is to introduce a cut of similar scale for premium subsidies that can be allocated without a tendering procedure. Instead of the originally set HUF 45 billion for the whole period,

HUF could 12.5 bln be

used between 2017-2021.

Yet it is not only the budget cut that may signal that the government is not as motivated to increase the proportion

of renewables significantly. Thanks to a statistical methodology review by the European Commission, Hungary has already met its renewable energy target for 2020.

While such news must be welcomed by environmentalists, experts agree that the major motivation to introduce more renewable energy in the system has now gone. It is also unclear when government tenders might be published, if at all.

Photovoltaics are the only sector that has seen significant growth in the past few years.

This is, in part, due to the fact that it started from a low basis. The arrival of the new renewable scheme, or rather the phase-out of the previous one, also gave a push to the sector. The old feed-in tariff provided very favorable conditions for those enterprises/ companies that invested in the PVs. Approximately 2,200 photovoltaic projects received a green light from roughly 2,500 applications that were submitted to the Hungarian Energy & Utilities Regulatory Agency (MEKH) by the end of last year; a new, revised support scheme for renewable energy resources replaced the existing feed-in tariff (FIT) system as of January 1.

Skeptical Experts As a result, an equivalent of approximately 2.2 GW of solar capacities could be added to the grid, if all those projects are carried out. Industry experts have been skeptical about the outcome though: most believe no more than 30-50% of the 2.2 GW will eventually added.

The source of such skepticism is twofold: experience with previous programs

and the lack of any real sanctions should a project not be completed. The only penalty is the loss of rights of building capacities. Also, the law allows for the sale of permits on a secondary market, which is already taking place.

On a more positive note, this summer two legal modifications came out, both of which could improve the completion rate. “One extends the deadline of site selection of the project until the end of this year, which means they don’t have to hastily pick a site,” said Ádám Szolnoki, head of MANAP (the Hungarian Photovoltaic Industry Association).

The other extends the completion period by adding one year to the 1+1 year set in law. In turn, however, 10% of the buy-back period of 22-23 years will decrease to 20 years.

“Both measures are helpful, however, they won’t make the completion rate increase substantially,” Szolnoki said.

“If the previous estimate for the average completion rate stood at 40%, these measures can increase it to 50%,” he added.

To ensure sustainable growth of renewables/and PV, the association would suggest that TAO would be extended to renewables as well. The current legislation covers the energy of buildings and energy efficiency. “By extending it to renewables, a part of the projects financed by EU-funds could be replaced,” Szolnoki said.

The expert would also welcome a credit line from The Hungarian Development Bank (MFB), knowns as zero-credit, as a tool to finance household renewable investments.

2017. 10. 04. 19:44

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Budapest Business Journal | October 6 – October 19, 2017

Paks 2 : Close to ʼPoint of no Returnʼ

Special Report | 15

INSIDE VIEW

Possibilities for gas Diversification in Europe Neither the international examination on the financing, nor permanent criticism from coal, with nuclear holding the single largest share of nearly 30%. In the United Kingdom Hungary’s anti-nuclear greens have halted Dr. Márton and Germany, the share of gas-fired power Gervai generation increased. April 21, 2017 was, the planned expansion of Hungary’s nuclear Attorney-at-law in fact, the first working day since the industrial revolution without coal being part plant, the so-called Paks 2 project.

SCHOENHERR ÁGNES VINKOVITS

Construction work will start in a few months. Yet, energy experts who think it too expensive or just plain unnecessary say that it is still not too late to cancel.

Green liberal parliamentary opposition party LMP was collecting signatures in the summer to try and force Hungary’s government to have a referendum about Paks 2, as the project looks set to define the country’s future in environmental and financial aspects too. The party’s attempt has just been rejected by the Curia.

In addition to the renewable vs. nuclear argument, the financial background of the project has been one of the most disputed elements of Paks 2.

The European Commission examined the investment to see if any marketdistorting state aid would be involved.

That infringement case was closed late 2016 and gave an effective green light for the investment, though Hungary was asked to make some further commitments.

To avoid overcompensation of the operator of Paks 2, for example, any potential profits earned by Paks 2 will either be used to pay Hungary back for its investment or to cover normal costs for the operation of Paks 2. Profits cannot be used to reinvest in the construction or acquisition of additional generation capacity. Also, to ensure market liquidity, Paks 2 will sell

at least

30%

of its total electricity output on the open power exchange. The rest of Paks 2’s total electricity output will be sold by Paks 2 at auctions.

Historical Responsibility

Hungarian public opinion, however, seems more concerned with the fact that 80% of the EUR 12 billion investment will come through a loan from the Russian state. In the first seven years, Hungary has to pay a 4.5% interest rate, which in the second seven-year period rises to 4.8%, and then to 4.9%.

The contract seems to have caused tensions even in the normally extremely disciplined Fidesz-led government.

Soon after János Süli took his chair as a minister without portfolio responsible for the Paks nuclear power plant expansion in May, in his first and so far only, press conference, he came up with the idea of searching for alternative financing sources for the project, suggesting the Russian offer was probably not the best one available.

However, Minister for National Economy Mihály Varga publicly responded the next day that the

BBJ_2518_special_report.indd 15

government “has been thinking” and “examined other possibilities”, but is committed to the existing loan contract as it seems to be the most predictable on the long run.

Countries nowadays, however, are prepared to issue state bonds with 70 or even 100 years’ interest dates. Austria, for example, recently issued bonds in the amount of EUR 3.5 billion with 2.11% yield for 100 years, meaning that “Hungary could definitely find much better sources for the same 20-30 years period than the Russian offer of 4-5% interest rates,” stresses Imre Mártha, an energy expert and former head of stateowned energy holding MVM. “Everyone working on Paks 2 today has a historical responsibility,” Mártha continues. “If, out of servility or unprofessionalism, someone misses the chance for a comprehensive social, technological and financial monitoring before the ‘point of no return’ and, as a result, the project fails or will be unreasonably expensive, shame will stay around those people for decades.”

Cancelling such giant investments at a late stage is not unprecedented, but it usually has its costs. For example, construction works of the Virgil C. Summer Nuclear Generating Station in South Carolina in the United States was halted in late July this year, meaning that the

USDalready 9 billion spent

will basically be lost.

Still, it might have been the rational decision to make: the project was dropped because the total cost of the investment kept rising and finally was estimated to go 75% beyond the original budget.

Russia’s Rosatom, the main constructor of Paks 2, won a tender in 2005 for a nuclear plant in Belene, Bulgaria but the local political changes finally washed away that investment and the construction was shut down.

Rosatom went to court over the cancellation and won EUR 600 million, meaning that Bulgaria lost a total of USD 1.8 bln through the miscarried project.

The European Commission’s reports on European electricity and gas markets for the first quarter of 2017 reveal interesting developments regarding the swings and divergences in electricity prices, the importance of natural gas in the EU’s power mix, and the possibilities to diversify gas imports and production.

VOLATILE EUROPEAN MARKETS In Q1, cold temperatures and the increasing use of relatively expensive fossil fuels, stemming from low nuclear availability and weak renewable generation, caused a surge in wholesale electricity prices in the EU, which rose 51% compared to the same quarter in 2016. The existing gap between prices in Europe and the United States widened; both wholesale and industrial retail prices in the States were about half as much as in the EU on average.

As prices spiked in January, differences between the highest and the lowest wholesale prices across the EU member states grew to nearly two-fold, with the ratio in the case of retail prices exceeding three-fold. While in industrial retail prices, a trend of convergence between the highest and the lowest prices may be observed over time, household retail prices show a trend of divergence across the EU. One of the reasons is the growing tax component in the final household retail prices.

As another example of the inefficiencies of the European electricity market, temporary export restrictions and bans were introduced by some EU member states in the volatile market period of the January cold temperatures. Aimed at securing domestic supply, export bans undermined market confidence, and also caused losses for power generators, traders and consumers.

GAS REMAINS IMPORTANT In the power generation mix of the EU member states, competition between renewables and coal may be observed: coal is replaceable if renewable sources are abundant. Natural gas, however, is holding on to its share among the power sources in the EU at around 20%, roughly on par with

of Britain’s power mix.

In Q1 2017, EU gas imports grew 12% compared to Q1 2016. Russia continued to be the EU’s biggest import supplier of gas, as well as of coal, covering 41% and 34% of extra-EU imports, respectively.

While Ukraine pulled through the second consecutive winter without Russian gas, relying on imports from the EU, this country remained the main transit route of Russian gas coming to the EU, followed by the Nord Stream pipeline and transits through Belarus.

The European Commission has been concerned that Gazprom, the dominant gas supplier in a number of Central and Eastern European countries, is breaking antitrust rules. In the Commission’s view, the commitments offered by Gazprom, including the removal of restrictions on cross-border reselling, and the use of pricing based competitive benchmarks, will help integrate CEE markets, facilitating cross-border gas flows at competitive prices. The Commission will assess the comments of interested parties before deciding on whether or not to accept the commitments and make them binding on the Russian company.

LOOKING TO DIVERSIFY Cyprus, Greece, Italy and Israel plan to build the East Med pipeline by 2025 to carry gas from Israel and Cyprus to Europe. The pipeline would diversify EU gas imports, and it would also facilitate production in the Aphrodite field of Cyprus. This country has the seventh largest gas resources and the largest deepwater resources among EU member states. About 40% of all EU gas resources are in offshore fields, while one-third are classified as shale gas. Some 87% of EU shale gas resources are found in Poland and the United Kingdom.

The EU is increasingly looking at liquefied natural gas (LNG) to diversify its gas imports, with Australian and U.S. production capacities and exports expected to grow in 2017. In Q1 2017, LNG made up 12% of total extra-EU gas imports. Qatar remained the main LNG supplier of the EU, with a market share of 37%. The United States had a 6% share of EU LNG imports, a tenfold increase from 2016.

In January 2017, France’s fourth LNG terminal started commercial operations, and Malta also became an LNG importer.

Malta’s LNG facility will be the main source of power for the country, replacing an oilfired plant, reducing costs and emissions.

Supported by the EU, Croatia’s Krk terminal, once completed in 2019, is expected to diversify Russian-dominated supply in the region, improving energy security and price competitiveness.

www.schoenherr.eu

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Special Report

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Budapest Business Journal | October 6 – October 19, 2017

The Cost of Overhead Reductions

The centrally lowered overhead charges have undoubtedly gained some popularity for the governing parties since the initiative was kicked off four years ago. Some argue, however, that free market prices, however, might have had been more beneficial to Hungarian consumers. ÁGNES VINKOVITS

“The Fight Against Overheads” is how the government calls its initiative to keep gradually lowering households’ running costs. Before the first cut, the average Hungarian household spent one-third of its total income on overheads, statistics show. The government’s aim with the price regulation was to give those families a relief, the central reasoning went.

The price of household gas, district heating and electricity was lowered by 10% in January 2013 in the first place, and half a year later that was followed by a 10% reduction in water, sewerage and waste disposal fees. In November 2013, which was only half a year before the then upcoming parliamentary

elections, a further 11.1% cut in gas, district heating and electricity came, meaning that the major items of overhead costs had become

20% cheaper

in just one year. The drop in utility prices also contributed to a lower inflation rate, an overreaching effect that gave further relief to consumers.

To make it sure that the source of the financial ease is not forgotten, suppliers are obliged to display the amount of money consumers could save thanks to the regulated prices on the invoices.

Voters reacted as expected. After reaching a record low in 2012, the governing parties’ popularity started

to increase in 2013 and Fidesz-KDNP was able to renew its parliamentary majority at the 2014 elections, which is considered to be at least partly a result of the overhead reduction.

‘Political Innovation’ Political analyst and contributor at Hungarian Academy of Science Center for Social Sciences (MTA TK) Balázs Böcskey calls the overhead reduction a “political innovation” and claims that it has an obvious correlation with the election results.

Without ever saying that the overhead cuts were a bad idea in itself, opposition parties criticized the step, stressing that it lacks social aspects. As the socialist MSZP often said, it gives proportionately more relief to those big consumers who “heat their swimming pools”, than to the really poor.

In the meantime, the European Commission in 2015 launched an infringement procedure against Hungary because of the price regulation. That lengthy procedure is on-going. Meanwhile, the Hungarian government put the issue (together with three other questions about immigration and taxation policies) into national consultation questionnaire entitled “Stop Brussels”. This March, a letter

According to a strategic analysis of the Association of County Right Cities (MJVSz) dated June, leaked to investigative news site Átlátszó.hu, HUF 3 trillion needs to be spent on the water and sewage system alone. was sent to every household saying that “Brussels wants to force us to abolish the reduction in public utility charges” and asking whether Hungary should protect its achievements, or “shall we accept Brussels’ plan and give big corporations the right to set utility prices?” There is no official data about how many citizens filled the questionnaire.

However, the European Commission (EC) quickly released its response, stressing that it shares the Hungarian government’s aim to have affordable energy for households. The best way to achieve this, EC says, is to establish a competitive energy market where suppliers try to stay attractive with lower prices and better services.

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Budapest Business Journal | October 6 – October 19, 2017

Letting free market competition do its price-lowering job might not seem such a silly idea when you look at the actual figures. The price of oil and natural gas has since 2014 been dropping at a faster pace on the global markets.

According to the latest data from Eurostat, Hungary’s gas prices fell by 3% in 2016, which is the eighth worst for the continent. In the same period, Great Britain could bag a 25% price drop, while countries around Hungary from Croatia to Bulgaria also reduced overheads by between 20-30%.

Special Report | 17

Saving on Innovation

According to the latest data from Eurostat, Hungary’s gas prices fell by 3% in 2016, which is the eighth worst for the continent. In the same period, Great Britain could bag a 25% price drop, while countries around Hungary also reduced overheads by between 20-30%.

Suppliers have had to be careful with their budgets. As raw material prices keep changing, regulated prices can either mean a higher profit or loss, depending on the sector. As suppliers themselves admitted, the 2013 introduction of overhead reduction combined with the launch of a utility tax gave them a headache and meant they often had to save costs on innovation and system maintenance.

Yet, given climate change, water prices are definitely not dropping.

As such, the water and sewage sector suffer from the obligatory lowered charges. According to a strategic analysis of the Association of County Right Cities (MJVSz) dated June, leaked to investigative news site Átlátszó.hu, HUF 3 trillion needs to be spent on the water and sewage system alone. The money, which

further waves of overhead cuts, the Ministry of National Development declined to reveal its plans. Yet according to pro-government weekly Figyelő, draft legislation aimed at achieving just that could soon be on Parliament’s agenda.

This time, it seems, social aspects would also appear in the regulation as big families, pensioners and those living in difficult social circumstances would have their electricity and gas bills reduced, while the cost of district heating, water and waste management would be left untouched.

The political opposition is also getting ready for the elections in 2018.

Despite their previous concerns, MSzP has already introduced its draft about reducing households’ gas costs by 32%, and the price of electricity and district heating by 10%.

According to one survey, 26% of water goes completely to waste via leaks before it even reaches households.

exceeds

8%

of Hungary’s GDP, should be immediately spent on system rehabilitation, MJVSz urges, adding that the problems lie “in the lack of technological reconstruction and maintenance.” As a result, 26% of water goes completely to waste via leaks before it even reaches households,

MJVSz says. Nonetheless, while the overhead reduction is clearly said to be one of the reasons for such difficulties, the document also suggests that the public utility tax should be revised as it is calculated on the length of the pipes and so puts the suppliers of sparsely inhabited countryside areas at a disadvantage.

To the Budapest Business Journal’s inquiry as to whether there would be

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Special Report

www.bbj.hu

Budapest Business Journal | October 6 – October 19, 2017

Electricity traders Ranked by total net revenue in 2016

oil

Coal

yeaR establisHed

gas

emission CeRtiFiCates

oWneRsHip (%) HungaRian non-HungaRian

1

mvm paRtneR eneRgiakeReskedelmi ZRt.

466,353

✓

✓

–

–

✓

2002

MVM Zrt. (100) –

györgy major – –

1031 Budapest, Szentendrei út 207–209.

(1) 304-2000 (1) 202-1246 info@mvmp.hu

2

e.on eneRgiasZolgáltató kFt.

143,286

✓

✓

✓

–

✓

2007

E.ON Hungária Energetikai Zrt. (100) –

balázs lehoczki – –

1134 Budapest, Váci út 17.

(1) 472-2300 (1) 354-3890 sajtoszoba@eon-hungaria.com

3

dÉmásZ ZRt.

1987

ENKSZ Első Nemzeti Közműszolgáltató Zrt. (100) –

györgy kóbor Sándor Sipos –

6720 Szeged, Klauzál tér 9.

(62) 565-565 (62) 568-000 web@edf.hu, ceo@edf.hu

4

budapesti elektRomos Művek Nyrt.

91,350

✓

–

–

–

Ÿ

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

5

BC-eNergiakereskedő kft.

44,152

✓

✓

–

–

–

2004

BorsodChem Zrt. (100) –

sándor varga – –

3700 Kazincbarcika, Bolyai tér 1.

(48) 511-816 (48) 511-891 energiaker@borsodchem.eu

6

isd poWeR kFt.

1996

ISD DUNAFERR Zrt. (100) –

evgeny tankhilevich – –

2400 Dunaújváros, Vasmű tér 1–3.

(25) 581-186 (25) 412-658 isdpower1@isdpower.hu

7

ÉsZak-magyaRoRsZági áRamsZolgáltató nyRt.

32,522

✓

–

–

–

–

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

8

Jas budapest ZRt.

28,348

✓

✓

–

–

–

2002

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

Ferenc arató – –

1141 Budapest, Mogyoródi út 168.

(1) 460-9300 (1) 460-9301 jastitkar@jas.hu

9

budapesti eNergiakereskedő kft.

1,395

✓

–

–

–

✓

2003

– B.E.K. GROUP s.r.o. (100)

péter takács – –

1061 Budapest, Liszt Ferenc tér 5.

(1) 240-7504 (1) 242-3628 ptakacs@energiakereskedo.hu

2009

– ALPIQ ENERGY SE (100)

peter dworak – –

1085 Budapest, Kálvin tér 12.

(1) 886-3400 (1) 886-3401 admin.hun@alpiq.com

Rank

eleCtRiCity

types oF eneRgy tRaded

NR

Company Website

www.mvmp.hu

www.eon-energiaszolgaltato.com

www.edfdemasz.hu

www.elmu.hu

www.bcenergia.com

www.isdpower.hu

www.emasz.hu

www.jas.hu

www.energiakereskedo.hu

alpiq eneRgy se magyaRoRsZági Fióktelepe www.alpiq.ch

BBJ_2518_special_report.indd 18

total net Revenue in 2016 (HuF mln)

95,459

35,123

Ÿ

✓

✓

✓

–

✓

✓

–

–

✓

–

–

✓

–

–

✓

top loCal exeCutive CFo maRketing diReCtoR

addRess pHone Fax email

2017. 10. 04. 19:44

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Budapest Business Journal | October 6 – October 19, 2017

Special Report | 19

Universal electricity providers Rank

Ranked by total net revenue in 2016

Company Website

1

ELMŰ-ÉMÁSZ EnErgiakErESkEdő kft.

2

E.On EnErgiaSZOLgÁLtató kft.

3

dÉMÁSZ Zrt.

4

budapesti elektRomos MŰvEk nyrt.

5

ÉSZak-MagyarOrSZÁgi ÁraMSZOLgÁLtató nyrt.

www.elmu-emasz.hu

www.eon-energiaszolgaltato.com

www.edfdemasz.hu

www.elmu.hu

www.emasz.hu

total net Revenue in 2016 (HuF mln)

146,842

143,286

95,459

91,350

32,522

yeaR establisHed

2002

2007

1987

1991

1991

no. oF Full-time employees in 2017

oWneRsHip (%) HungaRian non-HungaRian

top loCal exeCutive CFo maRketing diReCtoR

addRess pHone Fax email

259

ÉMÁSZ Nyrt., Elmű Nyrt. (100) –

Zoltán nagy, Csilla Jenei fejesné, László koncz – –

1132 Budapest, Váci út 72–74.

(1) 238-1150 (1) 238-2905 kapcsolat@elmu-emasz.hu

Ÿ

E.ON Hungária Energetikai Zrt. (100) –

Balázs Lehoczki – –

1134 Budapest, Váci út 17.

(1) 472-2300 (1) 354-3890 sajtoszoba@eon-hungaria.com

516

ENKSZ Első Nemzeti Közműszolgáltató Zrt. (100) –

györgy kóbor Sándor Sipos –

6720 Szeged, Klauzál tér 9.

(62) 565-565 (62) 568-000 web@edf.hu, ceo@edf.hu

331

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

72

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

Universal gas providers

Rank

Ranked by total net revenue in 2016

Company Website

total net Revenue in 2016 (HuF mln)

yeaR establisHed

no. oF Full-time employees in 2017

oWneRsHip (%) HungaRian non-HungaRian

top loCal exeCutive CFo maRketing diReCtoR

addRess pHone Fax email

1,359

NKM Nemzeti Közművek Zrt. (100) –

gábor lászló králik – –

1081 Budapest, II. János Pál pápa tér 20.

(1) 477-1111 (1) 477-1195 kommunikacio@fogaz.hu

Ÿ

E.ON Hungária Energetikai Zrt. (100) –

balázs lehoczki – –

1134 Budapest, Váci út 17.

(1) 472-2300 (1) 354-3890 sajtoszoba@eon-hungaria.com

Fabrizio dassogno – –

4200 Hajdúszoboszló, Rákóczi utca 184.

(52) 558-100 (52) 361-119 titkarsag@tigaz.hu

1

Főgáz zrt.

310,397

1993

2

E.ON ENErgiaszOlgáltató KFt.

143,286

2007

3

tigáz tiszáNtúli gázszOlgáltató zrt.

105,806

1987

4

– ENI S.p.A. (100)

4

isd poWeR kFt.

35,123

1996

509

ISD DUNAFERR Zrt. (100) –

evgeny tankhilevich – –

2400 Dunaújváros, Vasmű tér 1–3.

(25) 581-186 (25) 412-658 isdpower1@isdpower.hu

5

alpiq Csepel kFt.

25,780

2001

16

– Alpiq AG (100)

gábor briglovics, Csaba varga, balázs bene – –

1085 Budapest, Kálvin tér 12.

(1) 429-1030 (1) 268-1536 info.csepel@alpiq.com

6

OErg ózdi ENErgiaszOlgáltató és keReskedelmi kFt.

28

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

imre kovács, péter miksztaj – –

3600 Ózd, Gyár út 1.

(48) 574-399 (48) 471-345 oerg@oerg.hu

www.fogaz.hu

www.eon-energiaszolgaltato.com

www.tigaz.hu

www.isdpower.hu

www.csepel.alpiq.hu

www.oerg.hu

BBJ_2518_special_report.indd 19

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1993

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Gas traders

Rank

Ranked by total net revenue in 2016

Company Website

total net Revenue in 2016 (HuF mln)

yeaR establisHed

oWneRsHip (%) HungaRian non-HungaRian

top loCal exeCutive CFo maRketing diReCtoR

addRess pHone Fax email

1

Magyar Földgázkereskedő zrt.

390,244

2000

MVM Magyar Villamos Művek Zrt. (100) –

lászló Fazekas – –

1138 Budapest, Váci út 144–150.

(1) 354-7000 (1) 354-7043 info@mfgk.hu

2

Főgáz zrt.

310,397

1993

NKM Nemzeti Közművek Zrt. (100) –

gábor lászló králik – –

1081 Budapest, II. János Pál pápa tér 20.

(1) 477-1111 (1) 477-1195 kommunikacio@fogaz.hu

3

met magyaRoRszág energiakereskedő zrt.

2007

– MET Holding AG (100)

gergely szabó – –

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

4

e.On energiaszOlgáltató kFt.

143,286

2007

E.ON Hungária Energetikai Zrt. (100) –

balázs lehoczki – –

1134 Budapest, Váci út 17.

(1) 472-2300 (1) 354-3890 sajtoszoba@eon-hungaria.com

5

tigáz tiszántúli gázszOlgáltató zrt.

105,806

1987

– ENI S.p.A. (100)

Fabrizio dassogno – –

4200 Hajdúszoboszló, Rákóczi utca 184.

(52) 558-100 (52) 361-119 titkarsag@tigaz.hu

6

PríMaenergia zrt.

17,727

1991

PG Investment Befektetési Kft. (100) –

zoltán szirmai – Árpád Molnár

1117 Budapest, Budafoki út 56.

(1) 209-9900 (1) 209-9999 vevoszolgalat@primaenergia.hu

7

Flaga Hungaria kFt.

13,232 (2015)

1990

– Zentraleuropa LPG Holding GmbH (100)

bálint Ézsiás – –

2040 Budaörs, Puskás Tivadar utca 14.

(23) 507-500 (23) 507-507 balint.ezsias@flaga.hu

www.magyarfoldgazkereskedo.hu

www.fogaz.hu

www.met.com

www.eon-energiaszolgaltato.com

www.tigaz.hu

www.primaenergia.hu

www.flaga.hu

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192,860

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Budapest Business Journal | October 6 – October 19, 2017

On the Scent of Something Special in Budapest David Holzer spends a heady hour in a niche upmarket parfumerie in Budapest, but is first reminded how we can too often take the sense of smell for granted.

DAVID HOLZER

An hour or so before I walked into Madison, the niche perfume specialist shop on Andrássy út, I was talking with a friend of mine. She happened to mention that she had lost her sense of smell for two years. It wasn’t much fun, she said. She lost weight because she couldn’t appreciate how food smelled. A whole aspect of her sensual life disappeared.

I mention this because, like you perhaps, I have always taken perfume to be an indulgence. But there’s rather more to it than that.

In recent years, the cost of designer perfume has fallen considerably. This has led some fashion houses to push price and exclusivity ever higher. Consumers have responded with delight and haute parfumerie has become the fastest growing part of the enormously valuable fragrance industry.

So, what’s the difference between a niche perfume and your mass-market fragrance – apart from the cost, of course? The answer comes down to the way in which ingredients are used, whether raw or synthetic. Niche perfumes use ingredients to make their perfume compositions more interesting or avant-garde, never simply to save money.

The Father of Niche Fragrance Despite having a mother and grandfather in the perfume industry, Frédéric Malle initially resisted following in their nosesteps. But in 2000 he accepted his olfactory destiny and opened his first shop.

Reacting to the rise of marketingled fragrances that were suffocating the perfume industry, Malle became what he calls a “perfume publisher”. He placed the emphasis on the highly skilled perfumers who created the fragrances, not celebrities who simply lent their name.

Calling his company Editions de Parfums, Malle put the name of the perfumer on the label, as if they were the author of a book. Naturally, you can find the stars of the Editions range at Madison.

When I wandered into Madison, it felt at first like stepping back in time. Original wooden shelving dating back to when the store was first built as a pharmacy in the

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late 1800s is immaculately preserved.

Máté Dávid, head of communications for Madison Budapest told me that people who remember the old days still come into the store to indulge in nostalgia.

But, after spending some time in the store, I realized that Madison wasn’t just slavishly recreating an ambience of traditional luxury. Something different was going on.

Madison was founded by Madeleine Florescu, a Romanian who worked in the beauty industry in New York for almost 20 years. After communism ended in Romania, Florescu returned home. Needing to find something to do, “I picked the easy option: perfumes,” she said, “Not any kind of perfumes, however, but the most special, hard to find, fragrance houses with personality, authenticity and a great story to tell.”

Florescu opened Madison in Budapest in 2011, picking Andrássy út because of its huge walking traffic. The store’s customers are split equally between tourists and Hungarian VIPs. As Dávid explained, “Foreigners know the brands from abroad. For Hungarian VIPs, price is very important. They want to buy quality and excellence in a knowledgeable, welcoming environment.”

I asked Dávid if he could introduce me to the best-selling fragrances at Madison.

“Rose of No Man’s Land” was developed as a collaboration between supermodel Freja Beha Erichsen and Byredo. A portion of the sale of each bottle goes to Médecins Sans Frontières or Doctors Without Borders.

Apparently, the perfume is centered around “the delicate petals of a Turkish rose, both strikingly lush and softly sweet”.

hundreds of trials to balance such an expressive formula”.

Ropion also created “The Night” for Malle. This ode to the Middle East is described as “the most precious perfume on the market, born from that sacred moment when the heat of the day subsides and constellations appear in the sky”.

Oud is one of the most expensive perfume ingredients in the world and is the main element in “The Night”. When the wood of the tropical Agar tree is infected with a certain kind of mold it produces the precious resin called oud. That explains the EUR 700 price tag, then.

“The Night” is, unsurprisingly, designed to appeal to a Middle Eastern audience.

“Arab men are our most fascinating customers,” Dávid said. “They’re more adventurous. To a European nose, “The Night” smells almost frighteningly intense.”

It certainly does. Like “Black Afgano Nasomotto” for men and women. This

smells exactly as you think it would. A bit too much.

After a fascinating hour spent with Dávid at Madison, I strolled out onto Andrássy út.

My head was reeling from the gorgeous but somewhat unnerving array of fragrances I’d inhaled. Dávid had explained that, according to the latest scientific studies, scent molecules vibrate in a certain way that resonates with particular neural connections. No wonder my mind was somewhat pleasantly scrambled.

After all, as Patrick Süskind writes in “Perfume”: “Odors have a power of persuasion stronger than that of words, appearances, emotions, or will. The persuasive power of an odor cannot be fended off, it enters into us like breath into our lungs, it fills us up, imbues us totally.

There is no remedy for it.”

I thought of my friend who’d lost her sense of smell, and gave thanks for my nose.

Sumptuous and Symphonic “Portrait of a Lady”, created by Dominique Ropion for Malle, is “a baroque, sumptuous and symphonic perfume that required

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Budapest Business Journal | October 6 – October 19, 2017

A Somló Tale: the Taming of Juhfark

Somló may be Hungary’s tiniest wine region, but it is very much a case of small is beautiful with its combination of indigenous white grapes grown in volcanic basalt soils on perfectly situated hillside vineyards.

ROB SMYTH

While Somló, located in Hungary’s northwest, has Furmint and Hárslevelű in common with Tokaj, it also grows Olaszrizling, which on its day can certainly match the usually more illustrious aforementioned pair for quality in this terrific terroir. Then there’s Juhfark, a grape that is pretty much exclusive to Somló.

While there are many who wish Juhfark (literally translated as “Sheep’s Tail”) would stay there – and indeed when it’s bad it can be rustic beyond belief and aggressively acidic – Juhfark is capable of making outstanding and highly distinctive wines. Incidentally, Queen Victoria was a great fan due to the grape’s supposed quality of aiding female imbibers in the pursuit of conceiving male offspring.

A few years ago, the idea of a special day dedicated to the grape would have sent an acidic shudder down many a wine lover’s spine – and sure enough the first wine of the day did just that – but overall the quality was high at the Somlói Juhfark Ünnep, held at the Tornai winery on Somló Hill on September 23.

At its best and when it is able to ripen fully on the best sites to bring sufficient

Bence Barcza (with beard) talking with tasters at the Somlói Juhfark Ünnep.

fruit to counterbalance the grape’s searing acidity, Juhfark has impressive body, structure (built on that erect acidic backbone) and substance, revealing distinctive notes of rhubarb, banana and pineapple, and a stony character.

Up With the Best Béla Fekete, for many the doyen of Somló, retired from winemaking after selling his winery and vineyards to Ákos Dölle, György Emmert and Gábor Riesz in 2014. Keeping the name of Fekete Pince, the trio still welcome the advice of Béla bácsi (“Uncle” Béla) and hope to be able to call on him for a long time to come. At the tender age of 91, Béla bácsi was recently spotted in the vineyards helping out with the harvest. Fekete Pince’s 2012 was made by Fekete himself and is right up there with the best wines he’s made.

Another local winemaking legend, Imre Györgykovács – the maker of some of my favorite Hungarian white wine, period – has never had Juhfark on his whopping one hectare vineyard.

Nevertheless, he was present at the Juhfark tasting and mentioned that he likes the grape and was considering buying in some to make Juhfark from.

Now, that I would love to see, especially as he is gradually handing his own vines

over to the safe hands of the Kreinbacher winery as he steps back from the growing side.

Somló thankfully has a number of exciting prospects following in the massive footsteps of Fekete and Györgykovács, and the younger generation was out in force at the Somlói Juhfark Ünnep.

Péter Tóth of Kőfejtő Pince, who has just a single hectare that faces west, made his 2016 Juhfark from grapes picked at the beginning of October, spontaneously fermenting them in small Zemplén barrels of 220-250 liters, ranging in age from 2-10 years. The use of oak is excellent and helps bring concentration without blocking out the fruity and floral character of the wine.

Bence Barcza’s wines are becoming more distinguished and he’s showing a willingness to experiment (see the review of his J4 2015 below).

On my radar for some time now, Tomi Kis of Somló Vándor harvested the Juhfark grapes for his 2016 on three different harvest dates and from three different plots – facing west, south and east. This barrel-fermented wine has bags of potential but is still young and sharp, and needs time to integrate.

Kolonics is a cellar that has really cleaned up its act to produce wines that pack plenty of quality and concentration

into the bottle and the 2015 is a great example.

István “Stefan” Spiegelberg’s 2012 is currently in great form with mature notes beginning to enter the otherwise fresh, floral and fruity fray.

Of the bigger producers, Kreinbacher’s 2015 Selection is juicy and deliciously ripe, with grapefruit, pineapple and lemon notes, as well as being balanced and supremely smooth for Juhfark, but without losing too much of the grape’s individual character. The 2009 offering was a little on the oaky side but it was good to see the winery has learnt a lesson in oak use and employed more restraint in the 2015.

Tornai, which hosted the tasting, impressed with its intense yet elegant 2015 offering from the Grófi vineyard.

Tornai will be happy that talented Mór winemaker Ákos Kamacsay Jr. is joining the winery on a full-time basis, after having consulted there for a couple of years.

Fekete Pince Juhfark 2012 From the Aranyhegy vineyard.

Spontaneously fermented from the indigenous yeast inherent in the cellar and on the grapes, which in this case has led to a seriously complex range of flavors developing, yet with nothing off, which can occur in wild fermentations.

Aged for a year in barrels and then for another year in stainless steel. Fullbodied, mouth-filling, rich and nutty with notes of honey and apricot, as well as a creamy, slightly buttery finish. Very long, balanced and memorable.

HUF 3,750 from Bortársaság.

Barcza Pince J4 2015 This spent four days on the skins before pressing, instead of the usual maximum of a few hours, and what a great idea it was from winemaker Bence Barcza to give Juhfark some skin contact. Indeed, the touch of tannin brought by the maceration helps to take the edge off of the acidity and deliver a wine that is substantial, creamy, layered and very long. It also has fabulous fruit, which could have something to do with part of this wine having been made in the tank, with the other part made in barrel.

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UNIKUM SEASON TICKET Kristóf Baráti and his friends Kristóf Baráti – violin

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Reinterpreting ABBA, Rediscovering Peer Gynt

Two very different performances by the Budafoki Dohnányi Zenekar (BDZ – Dohnányi Orchestra of Budafok) will seek to show audiences the extra complexity and layering orchestras can bring, even to popular music, by presenting new collaborations with other artistic forms.

ROBIN MARSHALL

“We have become famous for always combining different styles,” Gábor Hollerung, the executive music director of BDZ, says of the Budafok orchestra. It was founded in 1970 and is named for the

Hungarian composer, pianist and conductor Ernő Dohnányi, who died in 1960.

“For me it is very important to make music more understandable by combining it with other art forms, especially dance, which like music is unspoken, and also with images.”

That idea of making music more understandable is perhaps best illustrated by the concert BDZ is to perform at the Papp László Sportaréna on October 8: “ABBA Symphony”. Hollerung says the idea is to show a different audience “they should not be afraid of longer music, but will hopefully understand what additional value an orchestra can bring”.

If that sounds faintly evangelical, Hollerung insists it is not about education but “our strong believe that this is a way to give young people and fans of pop music something of a feel for what a real classical concert is about, to help people get interested in classical music”.

“ABBA Symphony” was first presented at the Zemplén Festival (of which Hollerung is also artistic director) in Tokaj this August.

Composer Ott Rezső has taken more than 30 of the band’s greatest hits and reworked them into four movements, each roughly 10-12 minutes long, called “Beginnings”, “Love and Breaking”, “Scherzo” and “ABBA Forever”.

“We have not changed ABBA’s songs, people will still recognize them, but we have picked out themes and made some musical

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jokes,” the conductor insists. The music has been paired with dancers, vocal soloists from Singer Street, a 150-member chorus and giant LED projections. It proved so popular at Zemplén that a 2,500-seat venue sold 2,800 tickets.

Incidental Music to the Fore The second performance, at Budapest’s Palace of Arts (MŰPA) on November 5, is called “Peer Gynt: Incidental Music” and seems like more natural territory for BDZ. While Edvard Grieg’s “In the Hall of the Mountain King” is extremely popular, it is not well known that the composer wrote more than an hour of incidental music for Henrik Ibsen’s drama. “This music represents the complete musical

Gábor Hollerung Hollerung was born in Budapest on August 18, 1954, and studied at the Liszt Ferenc Music Academy, where he specialized as chorus master (19721977) and conductor (19751980). In addition to his work with the BDZ and the Zemplén Festival, he is also master conductor of Budapest Academic Choral Society, and founder and art director of Budapest International Choir Competition. story from Grieg, and it is very exciting because most people only know the concert pieces, not the stage music.”

This performance pulls together much of that music to tell the same story in a different way, with narration by Péter Huszti (described as “one of the leading Hungarian actors” by Hollerung) and also featuring the Budapest Academic Choral Society and the Coincidance Dance Ensemble.

“The stage music makes the whole story easier to understand, and that is what we want to show. We have done a shorter version of this previously, but in this form, this is a premier.”

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BLUE DANUBE CONCERT SALON ORCHESTRA Géza Egyházi – singer 9th November, 7 p.m.

THE SOUNDS OF SEVEN YEARS Flautett Flute Quartet 10th November, 7 p.m.

CAPELLA SAVARIA 18th November, 7 p.m.

GUITAR MUSIC IN ÓBUDA András Csáki 29th November, 7 p.m.

DANCE-VOICE-FANTASY Enikő Túrós, Eszter Túrós – piano 30th November, 7 p.m.

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