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MVM to transform its coal-fired power plant in line with Hungary’s climate goals

Hungary’s state-owned energy group MVM Zrt completed the transaction to acquire Mátra Power Plant, a major provider of electricity and the second-biggest power plant in Hungary. The Hungarian government declared the transformation of the lignite-fired power plant a priority development project that should comply with the country’s long-term climate goals of reducing carbon emissions.

“The total cost of the transaction involving the acquisition of the Mátra Power Plant and Status Power Kft amounted to 17.44 billion forints [49 million euros],” reads the company announcement. “Besides, the new owner will open a credit line of 11.4 billion forints [32 million euros] to cover outstanding bank and non-bank debt of the power plant and to ensure safe operation until the end of 2020.”

Commenting upon the completed acquisition Gergely Gulyás, Hungarian head of the Prime Minister’s Office, emphasized that the Mátra Power Plant has a key role in the Hungarian electricity supply, accounting for 16 per cent of the country’s electricity production. The minister added that the operation of the power plant is also crucial for the preservation of jobs and the economic stability of the region.

The previous owner, Opus Global Nyrt announced last year that it would begin negotiations on the sale of the power plant and shortly after signed a letter of intent with the national energy company, MVM. Earlier this year, Hungarian prime minister Viktor Orbán claimed that the decision of Opus Global to sell the facility was the result of increased climate fines of the European carbon quota system and the huge transformation costs of converting the power plant from coal to cleaner technologies.

The strategic importance of the Matra Power Plant derives from the central role it plays in local energy security, being the only major source of power for the Eastern part of the country’s electricity grid. With an installed capacity of 966 megawatts (MW), more than 80 per cent of the electricity generated at the power plant relies on coal extracted from the two company-owned strip mines – Visonta and Bükkábrány – where Hungary’s largest lignite deposit is located. With the purchase of the power plant these reserves of lignite also comes under state control.

László Palkovics, Hungarian minister for innovation and technology stated that the next step is to reduce the operating costs by decommissioning coal technology and restructuring the production of the Visonta mine. In its recently published Climate and Environmental Protection Action Plan the Hungarian government set the objective of gradually phasing-out the Mátra Power Plant’s lignite-burning units with no coal-fired electricity generation after 2025. The plan also revealed that in addition to developments based on natural gas, there will be a role for new technologies such as solar power, electricity storage and an increase in the plant’s waste-to-energy capacity. The new owner clarified its intentions to transform the now obsolete and inefficient energy production system into a modern, carbon-efficient system that also supports the goals set out in the National Energy Strategy.

As the decommissioning of coal technology is in line with EU climate objectives, Hungary is counting on EU support and subsidies from the EU’s Modernization Fund to cover part of the restructuring costs, but nothing is certain until the Member States approve the next multiannual financial framework.

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