Hungary may sign deal for E.ON's gas units soon - source

BUDAPEST Thu Nov 29, 2012 3:45am EST

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BUDAPEST Nov 29 (Reuters) - Hungary's state-owned energy firm MVM may sign a deal with E.ON to buy the German utility's local gas trading and storage units before the end of this year, a source familiar with the situation told Reuters.

"There are intensive talks under way," the source said on Thursday on condition of anonymity, adding there "might be some kind of an agreement signed before the holiday season."

MVM and E.ON declined to comment. The Hungarian government was not immediately available for comment.

Hungarian newspaper Vilaggazdasag said, without naming its sources, MVM was likely to pay closer to 800 million euros for the units than 1.2 billion euros, a figure earlier quoted in local media as the price sought by E.ON.

Hungarian Prime Minister Viktor Orban said in late August his right-of-centre government would "buy back E.ON from the Germans momentarily", but there have been no further announcements since then.

Nationalising E.ON's local units could give the government control of gas imports and long-term energy prices, analysts said.

E.ON's gas wholesale unit, E.ON Foldgaz Trade Zrt, is Hungary's biggest gas trader, supplying gas distributors and, thus, the household sector in the country of 10 million.

Its storage unit, E.ON Foldgaz Storage Zrt, operates four gas storages with a total capacity of 4.2 billion cubic metres.

Hungary, whose position at the heart of central Europe gives it an important role as a gas-shipping route, gets over 80 percent of its annual gas consumption of 11-12 billion cubic metres through imports, mostly from Russia.

The price of natural gas has always been an important political issue in Hungary which has a long-term gas deal with Russian group Gazprom expiring in 2015.

If MVM bought E.ON's gas operations, the government could be in a position to negotiate a new contract.

Hungarian oil and gas firm MOL sold its gas business to E.ON in 2005. (Reporting by Krisztina Than; Editing by Andrew Callus and Mark Potter)

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