September 20, 2013 / 9:38 AM / in 4 years

Hungary in talks to nationalise 6-7 utility firms

BUDAPEST (Reuters) - Hungary is in talks to nationalise six or seven utility companies as part of a drive to lower energy prices and revive a struggling economy, Prime Minister Viktor Orban said on Friday.

The move is the latest attempt by Orban, whose ruling Fidesz party faces elections next year, to increase the power of the state, against the trend in much of the rest of Europe.

In particular, he has sparked fury among banks by forcing them to share losses on foreign currency mortgages that many Hungarians suffered due to a weaker forint, and has made several previous moves aimed at cutting energy costs for consumers.

“I cannot reveal it yet, but we are in continuous talks about buying back or getting into state hands at least 6-7 very serious companies involved in this field (utilities) that were previously privatised,” Orban told public radio in an interview.

His spokesman declined to comment further.

Major players in the Hungarian utility sector include Germany’s E.ON (EONGn.DE) and RWE, France’s EDF (EDF.PA) and GDF Suez GSZ.PA, and Italy’s Eni (ENI.MI). They either declined or were not immediately available to comment.

Orban said if his government was re-elected, the public utility system in Hungary could become “community-owned” within the next one or two years.

Orban is battling to lift Hungary out of a protracted period of economic weakness, and his interventionist policies have not always been well received by investors. The main Budapest stock index .BUX has fallen around 26 percent since he came to power in 2010, broadly in line with stocks in the nearby Czech Republic, but underperforming those in Poland and Romania.

In the energy sector, the government cut utility prices for households by 10 percent in January and has flagged further reductions in heating prices for November.

In March, state-owned MVM also signed a deal to buy the local gas units of E.ON for about 870 million euros in a move seen as giving the government a firmer grip on crucial talks over gas imports from Russia.

    Orban has said he wants to transform the household public utility sector into a non-profit operation, a point he reiterated on Friday.

    He said the relevant legislation could be submitted to parliament in the Spring, although it was unclear if it could be approved before the elections in April or May.

    If re-elected, his government would also tackle energy costs for industrial and agricultural customers, not just households, to make the indebted economy more competitive, he said.

    Orban said Hungarians pay too much for energy compared with what they earn, and pointed to the United States where he said energy prices were around a third lower than in Europe.

    “After the elections the next Hungarian government will have to answer the question as to how we can reduce our energy price levels to those in the U.S. if we are to compete with them in the world,” Orban said.

    He did not specify when or how such reductions could be achieved.

    Utility firms partly compensated for the 10 percent price cut for households early this year with a rise in prices for companies, an energy industry think tank has said.

    Reporting by Gergely Szakacs; Editing by Mark Potter

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