With recent investments and transactions, Swiss-based MET Group is gradually converting from a non-asset trading company into an internationally recognized integrated energy firm in the region.
The group has just closed a deal with a new financial investor and sold 50% of one of its local assets, TIGÁZ to Status Energy Group. Not long ago, it also signed an agreement with NIS, a Serbian energy company, to build a 102-megawatt wind power plant in Serbia. It makes sense working with partners all over the region, as Balázs Gábor Lehőcz, CEO of MET Asset Management and TIGÁZ, highlights in this interview.
BBJ: Why are assets so important for an energy trading company like MET Group?
Balázs Gábor Lehőcz: Prior to the acquisition of the Dunamenti Power Plant in 2014, MET Group was a non-asset based company relying heavily on the gas trade. In order to diversify our activities and also to stabilize our position, we decided to turn to assets just like the biggest energy companies around the world. However, adding assets to our portfolio alone does not guarantee success. Luckily, we could combine our experience in energy with a private equity mindset which aims to operate an asset to achieve maximum efficiency. That is, not settling with what worked in the past, rather constantly looking for ways to improve operations. With that, we added a second pillar to wholesale trade. Assets in general tend to be quite reliable and their profitability is plannable. The third pillar of our operation has become retail sales; not only in Hungary, but in several European countries where the group is present.
In summary, by adding two more pillars to the existing one, we aim to have a more predictable, stable and plannable operation. Mostly through assets, which I am responsible for, but also with EU sales as retail is also a less volatile business. These two serve as a counter for the more risky wholesale trading.
BBJ: Is there a specific part of the region that MET’s Asset Division is focusing on now?
BGL: MET Group is aiming to build a diversified portfolio both in terms of geography and industry in the upcoming years. Renewables are a clear trend: the construction of our first solar park in Százhalombatta was finished last year and we will soon start to build another one in Hungary. We recently signed an agreement with NIS, a Serbian energy company, and we will hopefully soon start building a 102-megawatt wind power plant together in Serbia.
It is also our aim to involve well-capitalized partners from Hungary and neighboring countries in further acquisitions. It makes sense working with partners from the region. As for the other divisions of the group, we also see potential for gas trade in southern Europe. Currently we are in talks with companies in Italy and Spain about potential acquisitions.
BBJ: What are your experiences with TIGÁZ and how do you improve efficiency?
BGL: We bought TIGÁZ from ENI last summer, a bit more than a year ago. The first year’s experiences are very good, and we are happy to state that we have faced no surprises or impossible challenges. What we focus on is how to further raise the efficiency level of the company’s operation. We identified 165 steps to go through to achieve the level of profitability and costs that will result in the EBIDTA and profit we wish to achieve. We have also converted a very fragmented company structure into a more concentrated one. We launched a mobile workshop service to assist the work of mechanics, and we are building an IT system that will improve the efficiency of our fleet. Aggregating procurements to get more favorable offers, restructuring management, eliminating duplication and asking regulators to switch from paper-based to digital communication with our customers are further methods we use.
Overall, it is the combination of many small steps that improves efficiency. We calculate that these measures will become integrated in our operation by 2020. We hope that, as a result of the above, our profitability will increase by at least 20-40%. But beyond keeping our eye on the savings everyday, we also pay attention to reward our high-performing employees. We have a great team and we are proud of the company culture we have managed to build over the past one year.
BBJ: What was the consideration behind selling 50% of TIGÁZ to Status Energy Group?
BGL: As I said, it makes sense working with partners in the region. This is our philosophy in every country where we operate. When you are in partnership, you share the risks as well, which further increases the stability of the operation. MET has dedicated a lot of energy to TIGÁZ recently, but besides that we are focusing on many other strategic paths too, like investing into more renewable projects for example. Though Hungary is only one of the many countries we focus on, I would say South Europe is at least as important a target area as our Central European region, if not even more so.
BBJ: MET Group has organized its strategy into three divisions: trading and wholesale, EU sales, and assets. Which of the pillars will provide more profitability?
BGL: Just like on the money markets, margins in energy trading are shrinking. However, the value of assets is increasing. Gas consumption may fluctuate, but people will always buy gas and this infrastructure will serve as a strong fundamental to that. Companies owning assets provide a product the profitability of which can be calculated quite well in the long run. What favors us compared to long-standing utilities is that our operation is not rigid, we are not weighed down by stranded assets. Our flexible approach allows us to streamline operations more efficiently.
BBJ: What further plans does MET Group have?
BGL: We expect that our three main divisions will operate efficiently in the next 3-5 years, as a result of which MET Group can truly become an integrated energy company. Our overall long-term goal is to take the company public.