Interview with László Fazekas, CFO of MVM Group, Hungary

Interview with László Fazekas, CFO of MVM Group, Hungary


BF: As Hungary’s largest electricity and gas utility company, MVM boasts more than €7 billion in revenue and accounts for €2 billion in added value to the Hungarian economy. To start, can you perhaps explain to our readers what is MVM’s role in Hungary’s energy system and its policy objectives? How does the group ensure stability, efficiency, and competitiveness within the country’s energy market?

László Fazekas: MVM is Hungary’s largest vertically integrated energy and utility group which is fully owned by the Hungarian state. MVM Group is an asset heavy utility. Now let’s have a look at our assets.

Primarily we have the largest power generation portfolio in Hungary with more than 3.9 gigawatt installed capacities, which in 2021 contributed more than 20 terawatt hours of electricity, which is 60% of the domestic power generation. The backbone of our power generation portfolio is the Paks nuclear power plant which is the sole nuclear power plant of Hungary with a capacity of two gigawatt. As is the case with many of our European peers, we operate a coal fired power plant of 0.9 GW capacities (Mátra Power Plant). Because it is an important asset of our conventional fleet, we have recently started a major transformation program to phase out and to decarbonize these capacities and eventually to become carbon neutral by 2050. In the implementation of such vision we attest great importance to our fast-growing renewable fleet, which currently provides for an installed capacity of more than 0.3 GW currently in Hungary and to a small extent in Romania. For the sake of system flexibility we also run some gas fired units with capacity of 0.7 GW. This is very important for providing the flexibility necessary for the electricity system.

Beyond our power generation portfolio, the other major part of our assets is the extensive energy infrastructure, which including a massive power grid infrastructure, gas pipeline infrastructure and storage facilities. Our network infrastructure consists of the transmission system of Hungary, which is a natural monopoly. We also have several natural gas storage facilities with more than 4.4 billion cubic meter capacity. This is approximately 65% of the total storage capacity of Hungary that owns the 6th largest storage capacity in the EU. We also have several power and gas distribution companies corresponding to 20% of the total distributed power and 33% of the total distributed gas of Hungary.

At last but not least, let me review our asset light activities. We have the largest power and gas wholesalers in our group within Hungary. We are also the market leader in the so-called open market retail segment, and all the Hungarian households are supplied with power and gas by MVM Group. Our downstream operations have witnessed the largest acquisitions lately including the acquisition of the no. 1 gas retailer in the Czech Republic, innogy Česká Republika, which was also our most significant international acquisition to date.  Other than Hungary and Czech Republic our downstream activity is present in many countries in the CEE region including Austria, Slovakia, Romania and Croatia. That’s about our core business.

Regarding some new business initiatives, we also deal with alternative mobility like, e-mobility or CNG, in both Hungary and the Czech Republic. We are also for so-called small scale behind- the- meter solutions for our customers, energy efficiency solutions, and various other solutions for our business and residential customers.



Business Focus:  MVM Group recently signed a €250 million corporate financing agreement with ICBC Austria to secure energy supplies and bolster its financial stability. Within the context of Europe’s intense energy crisis and the skyrocketing inflation affecting both gas and electricity prices, how has MVM navigated 2022, and what were some of the main challenges, the most pressing issues but the opportunities this year summoned?

László Fazekas: This year was very special for all energy companies across Europe, thus for MVM as well. The main focus was on the security of supply and the mitigation of negative impacts of the high and extremely volatile energy prices. In this summer, the Hungarian government implemented a seven-step action plan to manage the energy crisis. MVM which is really the backbone of the Hungarian energy sector was involved in most of the elements of this action plan. The main focus was on preparing for the winter supply in natural gas. So MVM filled the natural gas storage facilities here in Hungary. We increased the domestic power generation which meant that our qualifier power plant, Mátra had to intensify its production for a temporary period, and we also started to be more active in the natural gas upstream segment. This is a new business line in our portfolio, but it is a natural development to complement our natural gas wholesale activity and because of its diversification potential we regard this as a strategic investment. We see some promising opportunities in this area in the CEE region.

About the challenges that we have ahead of us, we plan to implement large infrastructure projects on the site of the Mátra coal fired power plant. We plan to implement a new gas fired unit there with 500-megawatt capacity and so-called biomass or RDF (Refuse Derived Fuel) power plant as well and some photovoltaic production capacities as well. Regarding gas fire power plants, these are crucial for the stability of the Hungarian energy system and also for providing the necessary flexibility for the electricity system. So, we also plan to implement some additional units near the Tisza River, two blocks with 500 megawatt installed capacities each. Besides that, one of the key focus points is to strengthen our power grid. This is necessary because of the integration of the renewable capacities, both in terms of the transmission and the distribution system. This is, I think, the key strategic goal for the next five to eight years. We also plan to continue with our renewable portfolio. We would like to reach a portfolio of at least 800 megawatts by 2025-2026. In the long term, we would like to reach 25% market share in the renewable segment.


Business Focus:  In 2021, Hungary’s electricity output was marked at 35,805 GWh, of which the Paks nuclear power plant generated 44.7%. The country is now targeting increased energy independence on the back of MVM’s new Paks NPP extension project. What will the new plant bring to Hungary? How important is it for the future energy system, what’s at stake for Hungary, and what is Russia’s role in the project?

László Fazekas: MVM Group operates the sole nuclear power plant which is in the town called Paks. This has four blocks, and the lifetime of these blocks expire between 2032 and 2037. It is very clearly said in the energy strategy of Hungary that we would like to preserve the nuclear power generation in our energy mix. The preparation for a lifetime extension of the already existing blocks started in 2022. This is about the already existing blocks, and we are talking about lifetime extension of 10 to 20 years.  The other project which is called Paks II is about to build two additional units basically on the same site or neighboring site. Albeit this project is also fully owned and sponsored by the state, but due to EU competition law it is entirely developed independently from MVM Group, and therefore I am not in the position to address any questions as to the details or the stakeholders thereof. However, from our point of view the rationale behind the Paks II Project is very simple. Due to the ambitious national decarbonization targets, massive industrialization and the extensive electrification we expect a continuous increase of power demand in the coming decades. This would increase the need for a great volume of base load carbon free electricity, which cannot be supplied with intermittent sources exclusively, if we want to secure energy independency. In this term I believe that both the lifetime extension of Paks I and the new blocks of Paks II are vital for the energy sovereign of Hungary.


Business Focus:  In addition to your strong market position spanning the country’s electricity and gas markets, MVM plays an indispensable role in Hungary’s renewable energy development and has ambitions to become a market leader in green energy production too. Could you give us some insight into the initiatives and new technologies you are targeting to lower your carbon emissions, and the renewable energy projects underway?

László Fazekas: Our decarbonization strategy has 4 pillars. On the one hand, direct emission reduction with phasing out the coal, clean energy generation and fostering energy efficiency. On the other hand, we’ll also transition from coal to gas with these CCGT projects. We are also looking for gas alternatives like hydrogen, bio methane or biogas and we are also taking voluntary carbon reduction measures and participating in other sustainability programs as well.

In recent times, the clean energy transition process was accelerated, and we do believe that the clean energy transition can support the energy independence of Hungary. Renewables have been the fastest growing generation segment of MVM. By now we have more than 300 megawatts of renewable assets installed, and we would like to achieve 800 megawatts by 2025. We are also preparing the biomass and geothermal projects besides the photovoltaic, and we are going to revisit the possibilities of installing further wind capacities. But with regard to decarbonization and sustainability, I must emphasize that the key element of our strategy is the phase out of the coal-based power generation in the Mátra Power Plant. With all these sustainability focus activities, we are also relying on accessing dedicated financing facilities such as green bonds to finance our organization aspirations.


Business Focus:  In recent years, the group has been diversifying into supplementary areas such as ICT infrastructure and financial and security services to address its customers’ increasingly complex needs and provide a full range of services. How is MVM accelerating the use of new technologies and digital tools, like AI and IoT technologies, to accelerate its transformation & tap into new niche opportunities?

László Fazekas: By now MVM has more than 11 million customers mainly in Hungary but also in other countries mostly in the Czech Republic. We do believe that this customer base represents a huge value and not only for the core business, for energy supply but also for additional services. In the recent years we extended our services portfolio with home services insurances assistance solutions and MVM tried to and tries to become a complex solution provider for the households and businesses with all the all the needs connected to energy supply. Besides that, the extensive digital transformation is one of the key pillars of MVM Group strategy.  We focus on asset digitalization to foster renewables scheduling and development of smart solutions. We promote the digital channels to our customers to switch to electronic invoices payment solutions and customer services.


Business Focus:  MVM Group has made significant extensions in the past year, including the acquisition of German-owned E.ON’s electricity distributor and a potential agreement with QatarEnergy. Considering the Group is currently Central Europe’s tenth largest company, with a presence spanning 23 countries, could you tell us more about the group’s plans for expanding its portfolio, its regional reach and infrastructure, and how the recent acquisitions play into these goals?

László Fazekas: MVM Group is currently present in 23 countries. Of course, the activities are mainly concentrated in Europe, but we also have a manufacturing company in China. Traditionally, MVM has been a strong energy wholesaler and wholesale is a business unit that has always been a kind of forerunner in any of the foreign markets. The international markets are an important means for the over the counter in exchange trading and origination deals. I would like to also mention the important role that our energy exchange operator company called HUPX plays in the region. This company, HUPX is the most liquid power exchange in the central eastern European region and provides reference prices also for the Balkan countries. In the strategy of MVM Group, there is a target that by 2025, 25% of the EBITDA should come from foreign or international activities. It is also to be mentioned that HUPX has just launched the trading of Guarantees of Origin recently, being the first exchange in the EU to trade guarantees of origin internationally. We have some primary target markets like Czech Republic, Romania, Serbia and Croatia. A very important milestone in 2020 was the acquisition of Innogy Česká Republika which is the largest gas and growing power retailer in the Czech Republic. This acquisition brought us 1.1 million new gas customers and 0.4 million new power customers. Last year we continued with our international acquisitions.  We appeared on the Serbian market with acquisition of two EPC companies. Regarding the wholesale, our gas supply portfolio is continuously increasing, and we are working on the diversification of our import sources. We have a long-term capacity booking on the regasification terminal on Krk Island, Croatia and some long-term LNG supply sources. We are also looking for additional alternatives of our original or core supply sources.


Business Focus:  As CFO of the company how would you summarize MVM’s vision as a regional energy player and towards implementing a unified electricity market in the region?

László Fazekas: Our mid term strategy outlines our vision to become a top regional utility company with strong focus on clean energy and end-to-end customer solutions. That makes us to focus on decarbonization, renewables and flexibility development, power infrastructure development and international acquisitions. These are the key elements of the next years for MVM. We see some great CapEx programs for the upcoming years because of the infrastructure developments, the production, and the generation project. We plan to invest a significant share of the so-called recovery and resilience funds of the EU, the RRF to increase our renewable portfolio, extend our flexibility capacities, and develop the transmission and distribution grid. Besides that, we are continuously looking for good investment opportunities in the regional markets.  Now after this year and the energy crisis, I think all the countries are focusing rather on strengthening the security of supply of the home markets and we do the same.


Business Focus:  What would be your final message to the readers of USA Today?

László Fazekas: MVM Group is rated BBB-at Standard and Poor’s and BBB at Fitch Ratings. So, we have investment grade credit ratings, and we debuted to the Debt Capital markets in 2021. We do believe that that our asset heavy and well diversified activity portfolio ensures stable operations in Hungary and in the region. We were able to rapidly increase our revenues in the recent years through acquisitions and we could operate profitably during the covid crisis and also during the energy crisis. We also believe that the MVM Group’s sustainability efforts are fully in line with the decarbonization goals of the EU and Hungary. I would like to also mention that the government as our shareholder is fully committed to provide all the necessary support to MVM and for all our very promising developments which we see ahead of us. We are monitoring the capital markets and looking for investors for an ESG link or structured finance financing opportunities as well.