Hungary Power Report Q1 2008

The new Hungary Power Report from BMI forecasts that the country will account for 1.84% of Central and Eastern European (CEE) regional power generation by 2011, and to remain a net importer of electricity from neighbouring states. BMI's CEE power generation estimate for 2006 is 2,006 terawatt hours (twh), representing an increase of 4.00% over the previous year. We are forecasting an increase in regional generation to 2,451twh by 2011, representing a rise of 22.14%.

CEE thermal power generation in 2006 is estimated by BMI at 1,247twh, accounting for 62.23% of the total electricity supplied in the region. Our forecast for 2011 is 1,527twh, implying 22.54% growth which raises the market share of thermal generation to 62.32% - in spite of environmental concerns that should be promoting renewables, hydro-electricity and nuclear generation. Hungary's thermal generation in 2006 is estimated at 22.1twh, or 1.78% of the regional total. By 2011, the country is expected to account for an unchanged 1.78% of thermal generation.

For Hungary, gas is the dominant fuel, accounting for 45.8% of Primary Energy Demand (PED), followed by oil at 30.2%, nuclear energy at 12.4% and coal with an 11.6% share of PED. Regional energy demand is forecast to reach 1,724mn toe by 2011, representing 19.8% growth over the period. Hungary's 2006 market share of 1.72% is set to fall to 1.68% by 2011. Hungary's 14.0twh of nuclear demand last year is forecast to reach 17.5twh by 2011, with its share of the CEE nuclear market rising from 4.07% to 4.26% over the period.

Hungary's overall business environment can be considered neutral in a regional context, with moderate long-term economic risk, very low long-term political risk, and an advanced state of deregulation. It is let down only by modest forecast growth in power consumption and generating capacity, as well as a relatively high level of energy import dependence. In the BMI Business Environment Ranking matrix, Hungary this quarter receives a lower composite score of 31, which ranks the country equal fourth out of nine states included in the CEE region, alongside the Czech Republic.

BMI is forecasting Hungarian real GDP growth averaging 3.9% per annum between 2006 and 2011, although 2007's forecast is 3.4%. Population is expected to contract from 10.1mn to 10.0mn over the period, but GDP per capita and electricity consumption per capita are forecast to increase significantly.

The country's power consumption is expected to increase from an estimated 47.2twh in 2006 to 55.5twh by the end of the forecast period, requiring imports falling from 10.7twh in 2006 to no more than 10.5twh in 2011, assuming 3.9% annual growth in generating capacity.