Can Hungary’s high energy prices halt industrial project?

Analysis

Hungary’s electricity prices are already among the highest in the European Union - and are set to rise by nearly 50% in 2008.

Soaring electricity prices and uncertainty about energy regulation could put a halt to a €220 million ($311 million) industrial project that stands to generate more than €1.1 billion of investment and create 4,000 jobs in a depressed region of Hungary, according to one of the country’s leading chemicals companies.

BorsodChem heads a list of six big electricity users that have appealed to the government to intervene on the grounds that Hungary’s electricity prices are already among the highest in the EU - and are set to rise by nearly 50% in 2008.

The news comes amid concerns about rising electricity prices - and possible shortages - across south-eastern Europe, caused by strong economic growth, a lack of investment and the partial closure of Bulgaria’s Kozloduy nuclear plant, the area’s largest power exporter. Hungarian electricity users complain that their situation is worse than elsewhere because privatization has left the power supply in the hands of just three dominant companies - MVM, the state-owned generator and grid owner, and two German groups, E.ON and RWE.

Limited cross-border electricity connections to possible exporters are exacerbating the squeeze. In their letter to the economy ministry, big electricity users said: “As a result of market disturbances, our companies are uncertain today from what source and for what price they will be able to purchase electricity next year.” (Read more: msnbc)

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