Hungary Power Report Q2 2008

The new Hungary Power Report from BMI forecasts that the country will account for 1.85% of Central and Eastern European (CEE) regional power generation by 2012, and to remain a net importer of electricity from neighbouring states. BMI's CEE power generation estimate for 2007 is 2,083 terawatt hours (TWh), representing an increase of 3.84% over the previous year. We are forecasting a rise in regional generation to 2,538TWh by 2012, representing an increase of 26.49%.

CEE thermal power generation in 2007 is estimated by BMI at 1,293TWh, accounting for 62.1% of the total electricity supplied in the region. Our forecast for 2012 is 1,577TWh, implying 22.6% growth that leaves unchanged the market share of thermal generation to 62.1% - in spite of environmental concerns that should be promoting renewables, hydro-electricity and nuclear generation. Hungary's thermal generation in 2007 is estimated at 23.7TWh, or 1.84% of the regional total. By 2012, the country is expected to account for 1.82% 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. CEE regional energy demand is forecast to reach 1,723mn tonnes of oil equivalent (toe) by 2012, representing 24.5% growth over the period. Hungary's estimated 2007 market share of 1.79% is set to fall to 1.76% by 2012.

Hungary's estimated 14.2TWh of nuclear demand in 2007 is forecast to reach 18.0TWh by 2012, with its share of the CEE nuclear market rising from 3.92% to 4.21% over the period.

Hungary is ranked eighth, above only the Czech Republic in BMI's newly revised Power Business Environment rating, thanks to its limited market size, modest growth prospects, high level of energy import dependence, and limited progress towards the use of renewables. Country risk factors offset some of the industry weakness, but the country seems destined to jockey for position with last-placed Czech Republic at the foot of the table for the foreseeable future.

BMI is forecasting Hungarian real GDP growth averaging 3.67% per annum between 2006 and 2012, although the 2008 forecast is 2.9%. Population is expected to contract from 10.0mn to 9.9mn 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 47.9TWh in 2007 to 56.8TWh by the end of the forecast period, requiring imports rising from an estimated 9.6TWh in 2007 to no more than 9.8TWh in 2012, assuming 4.0% annual growth in generating capacity.