MVM: Growing the Group, Building the Brand

Green Energy

György Kóbor, the chairman and CEO of the MVM Group, talks exclusively to the Budapest Business Journal about building growth despite COVID, increasing renewable inputs, developing inter-group communication, future acquisitions and a major rebranding effort.

György Kóbor

BBJ: What sort of year did the Group close in 2019?

György Kóbor: Both from a professional and a financial viewpoint, 2019 was successful for the MVM Group. We have generated more than HUF 1.8 trillion in revenues, which is a record. The group ended the year with a profit after tax of HUF 60 billion, significantly exceeding the previous year’s HUF 22 bln. Being a state-owned company, we are proud to have contributed to the budget with taxes and other fees of nearly HUF 270 bln. The increase in turnover and in results is, to a large extent, due to the fact that in 2019 the figures of energy trading and distribution companies belonging to the Nemzeti Közművek were included in the balance sheet of the MVM Group. Other companies of the group performed very well; for example, the Paks Power Plant closed a record year in electricity generation.

BBJ: Which areas have seen progress?

GyK: Important developments of last year are related to the group’s internal transformation. We managed to consolidate our technical services business, which had previously accumulated significant losses, and thus were able to show a positive result in this area as well. We continued the reorganization of the MVM Group, initiated by the integration of the retail and distribution businesses into the group. That process will not stop this year either, and I am confident that by the beginning of 2021 we will see a more modern and flexible group than at the beginning of 2018. Another important internal development has been the preparation of a new medium-term strategy, the most important goals of which are carbon-neutral energy production, the development of network infrastructure, international expansion and reaching a level of being able to be listed a company: that is, we want to catch up with the leading Hungarian blue chip companies.

Important photovoltaic elements have been added to the group’s renewable business: by the end of 2019, we had a total of 140 MW of solar energy capacity at more than 100 sites, in addition to the 23 MW of wind energy and 8.5 MW of hydropower in Romania that had already been added to the portfolio. With these, 97.7% of our gross energy production came from carbon-neutral energy [sources] last year. Currently, our entire renewable capacity is close to 200 MW (of which 165 MW is solar capacity).

BBJ: What areas would you say need improvement?

GyK: The profitability of the group is still below the level I consider desirable and what is confirmed by international benchmarks, but we have some reserves in the system.

BBJ: How has the coronavirus impacted the group’s activities and plans?

GyK: When the pandemic started, the management’s primary task was to maintain continuity of supply while protecting the health of employees. The MVM Group operates critical infrastructure, so we introduced a number of special work organization procedures at our power plants, electricity transmission network operator MAVIR Zrt., and at distribution and natural gas storage companies. In a matter of a few days, we reorganized our customer service activities so that our partners could handle their deals with us as smoothly as possible. We have not modified our business plans adopted at the beginning of the year, nor have we withdrawn the goals set for this year. I am proud of my staff for carrying out their work with exemplary composure and discipline, even in the midst of the shock-like changes caused by the pandemic.

BBJ: What sort of year are you expecting – in light of the above?

GyK: The pandemic has had a number of effects that have negatively impacted the group’s profitability, such as a significant decline in electricity consumption during the first wave. However, based on the financial data for the first eight months, these effects were offset. Therefore, we are confident that, at the end of the year, we will be able to report that we have been able to achieve at least the planned results, even if the uncertainty caused by the second wave poses a risk for us as well.

BBJ: What has the group done to further sustainability and digitalization?

GyK: Let me highlight three sustainability programs. On one hand, we would expand our portfolio both in Hungary and abroad as part of our renewable program. On the other hand, the carbon transition in connection with the Mátra Power Plant is a high priority. Third, we will be investing significant resources in building our energy efficiency business to provide turnkey solutions to our corporate and residential customers. We have been testing the latter since last year, implementing about 40 energy efficiency projects, 35 of them in ESCO [energy services company] constructions, worth more than HUF 400 million. In the future, we would like to scale this up to a level similar to our other business lines. In addition, we wish to continue to play an active role in “greening” transportation.

Digital Transformation

In this area, we would further strengthen our leading Mobiliti brand in the e-mobility market, which has more than 600 filling stations and 20,000 registered customers covering the entire country.

Like other companies, the pandemic has significantly accelerated the digital transformation at the MVM Group. As a result, our employees have an ever-expanding digital toolbox for remote working. When it comes to device exchanges, we also prefer mobile devices. The introduction of digital signatures has also begun.

With the help of our digital platforms, used by an ever growing circle, our customers can also manage their utilities more efficiently and securely. Our e-invoice campaign was extremely successful; by now, 1.4 million customers are taking advantage of this opportunity. New solutions are constantly appearing on our web interfaces, allowing our customers to report their meter readings with a photo, pay their bills or initiate contract changes from home.

BBJ: What plans do you have for the upcoming period?

GyK: A vital task for us in the coming period is to launch and scale up international expansion. With the imminent acquisition of Innogy Česká Republiká, we have reached a crucial milestone here this year. Our goal is to be able to build 25% of group-level EBITDA from foreign activities by 2025. To this end, we are planning significant acquisitions in the countries of the region in the near future.

The acquisition of Mátra Power Plant at the beginning of the year was a very important development in the domestic market. We have given Hungary’s last operating lignite power plant a new vision that will ensure a decarbonized transition. This will remain a top priority for us in the near future.

Our renewable program does not stop, we want to expand further our production portfolio; our goal is to reach 1000 MW of solar capacity in the medium term. We consider the system-level integration of renewables to be equally important: we plan to integrate energy storage and flexible power generation units in the portfolio.

Last but not least, we want to focus on transforming and preparing the group to appear on the capital markets in order to raise the funding needed to carry out our tasks.

To achieve our strategic goals, I would like to highlight two very important things. One is the corporate culture that we need to improve continually. After all, this group with more than 80 member companies covers a wide range of jobs over 15,000 employees, from gas fitter to nuclear physicist, to customer service to controller. Organizing effective internal communication between these groups is essential for our progress so that everyone can identify with our vision, understand where we are going, and so we can effectively contribute to achieving marketability.

Another strategic point is our image. In line with the group’s strategy and business objectives, transformations have taken place in almost all business areas: we envision the future of the group with a new, unified image. This also means that the entire group of companies will adopt the MVM name and brand (with a few special exceptions), on the other hand, we will also renew the MVM brand. The MVM brand has reached an important milestone, by becoming a customer brand from 2021 by introducing MVM in the retail market to replace the NKM brand, with a new logo that can be used flexibly on all platforms, is close to people and is also appropriate on foreign markets. The introduction of this new image will start early next year.

The MVM Group delivered what was at the time Hungary’s largest capacity solar power plant at Felsőzsolca in November 2018. The installed capacity of the Felsőzsolca Solar Power Plant, built with an investment of nearly HUF 9 billion and utilising purely renewable energy is 20 megawatts (MW). The companyʼs goal is to reach 1000 MW of solar capacity in the medium term.
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