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Building Organic Growth on Stable Operations

Energy Trade

Kornél Czinege

MVM Partner CEO Kornél Czinege talks to the Budapest Business Journal about how the company is trying to reduce risks and secure its position in the rapidly changing energy market.

BBJ: What role does MVM Partner have on the local and regional markets?

Kornél Czinege: As the dedicated electricity wholesale trading company of MVM Group, MVM Partner is responsible for connecting the supply and demand side of the group while constantly optimizing such portfolios according to the market environment. In practice, MVM Partner brings the electricity of group-owned and other contracted power plants to the market and also sources the group-owned retail companies and other business partners, not to mention the universal service providers in Hungary. The trading company is also an active player in the Hungarian balancing market. Besides electricity trading, we deal with commodities; for example, we offer CO2-emission trading and other services to our clients.

Trading companies with a large market presence have gained market value due to European market integration, the spread of renewable energy, and climate change. International trade has become a key factor in exploiting the favorable business opportunities arising from periodic price differences between countries and in managing price risks. Considering how wide the gap between prices and available capacities can be in different regions, it makes sense to gain a strong foothold in a variety of markets.

This summer, MVM Partner expanded its operation to the Belgian, Dutch, and Greek electricity markets. As a result, we are currently present in 20 countries and on 11 stock markets in the region, including spot, forward, and, where relevant, intraday trading. As we establish a stronger presence in foreign markets, our trading activities become more effective.

Our traded volume per year now exceeds 100 TWh [tera watt]. In 2020, 40% of this was related to foreign markets. To put it into perspective, Hungary’s annual electricity demand is approximately 40 TWh.

MVM Group’s primary goal has been and continues to be to strengthen its presence not only in the Hungarian but also in the regional markets, and MVM Partner has its role in fulfilling this goal. Wholesale trading may serve as an entry point to retail electricity markets by providing the group with the necessary “intel” on the local markets in the event of an acquisition. Retail is the next step, an exciting one, of our expansion; by acquiring Innogy’s Czech business, we are organically growing in this field as well by sourcing with electricity the retail assets. Obviously, our responsibilities also grow when the group acquires generating capacities.

BBJ: How does the company address current changes in the market, including capacity shortages and high prices?

KCz: Right now, the market is very volatile, and we need to respond rapidly. Risk management has always been an integral part of our job; today, partner risk ranks higher,  so our position as a stable player has become an asset in this turbulent market. We have an experienced team; thus, we have the expertise and necessary assets to get through such turbulent times. As a state-owned company, we have never focused on risky short-term gains; our overall aim is to provide stability and calculability to our customers and partners, which becomes a market advantage these days.

BBJ: How do you ensure a secure supply amid dwindling capacities?

KCz: Both in Hungary and the European Union, capacity excesses are gradually disappearing while decentralized renewables are posing a challenge for the entire energy system. Both the infrastructure and network flows are changing due to the volumes of renewables fed into the system. There are a number of solutions to handle this matter; what I see is that a combination of tools will be required.

On one side, there are innovative developments towards better management of renewables and the demand-side, and to improve power storage capabilities. MVM Group has its own initiatives in these fields, which are supported by MVM Partner experts.

Meanwhile, the diversity and flexibility of the power generation portfolio are appreciating. This changing environment serves as a driver for MVM Group to build new flexible gas capacities because even with the continuous changing of the power generation portfolio, retaining the availability of well-manageable power plants remains one of our goals. We believe that, besides innovative assets, we will still need conventional elements of power generation.

The Growth of MVM Partner

The first wave of regional expansion of MVM Partner Zrt. took place between 2011 and 2015. The company first entered the markets of Germany and the neighboring countries of Central and Eastern Europe (Austria, Croatia, Romania, Serbia, Slovakia, and Slovenia). By 2015, the company had reached the Bulgarian, Czech, French, Northern Macedonian, and Polish markets as well. The company’s second wave of market expansion began in 2018, after which MVM Partner also appeared on the Italian, Montenegrin, Spanish, and Swiss markets followed this year by expansion to the Belgian, Dutch, and Greek markets. In line with this geographical expansion, the company’s earnings from international trading are also steadily increasing.

This article was first published in the Budapest Business Journal print issue of October 8, 2021.

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