Fast and Accurate Number Crunching
Manager Magazine, October 2014
Balázs Gábor Lehőcz, CEO of MET Power AG, had missed out on some exciting developments when he joined MET only a year ago. And he is very sorry about that. Yet, he is not short of new challenges.
“MET has a slightly different business model of growth than traditional European energy companies, and I think there is still a long road ahead of us. Our model is different from the vision of other market players. They have evolved organically from within a traditional, large-scale multi-utility corporate structure, encompassing virtually every element of the energy value chain (production, transmission, distribution). We have turned all that upside down: MET is a traditional energy merchant with a trading floor in Switzerland, which operates efficiently and competitively also by West-European standards. “The technical expertise of our team out there, made up of more than 50 employees recruited from 18 different countries, and the extensive market presence and visibility of the company itself have enabled us to start investing, for example, in Hungary”, explains the CEO of this start-up MET Group subsidiary, majority owned by MOL.
CAPACITY HAS VALUE
Hence, MET follows the Anglo-Saxon trade and corporate growth model rather than the above-mentioned European business model, which had its successes in the past, similarly to other international powerhouses like Glencore, Trafigura or Mercuria, all of which have been pioneers of the commodity trade market. These corporations started trading only a small range of products and they did that spectacularly well, and then expanded their range. Today Glencore, for example, has as much acumen at trading in agricultural products as it has in oil or precious metals. As they expand their operation in the commodity market, these companies also look to build stability in the background, so they invest in projects close to their core business. MET did the same when it set up in the gas market and later branched into oil and oil products, LNG and LPG, and then a year ago plugged into the power market. And it typically started dealing in new products in countries and regions where it had already gained a foothold in other segments (most of all in natural gas). In addition to trading in commodities, MET went on to lay down the foundations of its stable future with the acquisition of Dunamenti Erőmű. And it assigned a different role to Dunamenti Power Plant instead of a multi power plant owner seeking to maximise its power generation output: the Dunamenti facility has become a new instrument for optimising portfolio.
At the same time, MET has naturally no objections in principle to its Százhalombatta acquisition ramping up production, if it also means more revenue. Unfortunately, at present this is proving very difficult. Although the previous owner upgraded block G3 and improved efficiency, these measures were not enough to turn the power plant around. “Today the Hungarian market is not geared primarily to this type of production. In today’s market environment, energy is no longer a prime value commodity - it is capacity”, stresses Balázs Gábor Lehőcz. “This is, by the way, partly a question of power industry growth, so much so that according to our sources, in several European countries, for example, in Belgium and Germany, the concept of sustaining a strategic capacity market in order to secure and maintain steady energy supply has now been adopted or at least being considered by Parliament’ - he added.
In Q3 the power plant’s G3 block was already turning profit. To illustrate MET’s different operating philosophy, as soon as we found a way to meet customer needs more cost-effectively using an alternative source, the unit formerly in operation was immediately shut down. “We look at Dunamenti’s production capacity as a real option that we can mobilise at any time. We know the European power and gas market very well, so we can spot even the smallest opportunities. And we are always open to act on them: we do not shy away from rolling our sleeves up”, explained the CEO.
MET is likely to make further acquisitions of that kind in future, but for the time being the current one is enough to deal with for a company still in the early stages of growth. As part of the Group’s philosophy, MET’s merchants can rely extensively on the power plant’s management, engineers and other experts in matters of technology and other technical areas.
For the MET Group, expanding into the European power market is in itself a serious challenge. According to Balázs Gábor Lehőcz, MET Group experts have in-depth knowledge of the region’s market, and have a deep understanding of both its fundamentals and other market influences. Expansion is vital from the point of view of market entry, but it started with lower risk and less capital intensive wholesale operations and trading. The ultimate goal is to reach end users, just as we have successfully done so in the gas markets of several countries. In light of the development model of the commodity trade companies, previously referred to as an example, it is rewarding to enter as many product markets as possible because fundamentally single product traders tend to find it hard to stay afloat in the long run. Balázs Gábor Lehőcz underlined how proud the CEO and the Management of the Group are of having the MET Group, in a recent market analysis prepared by an influential unnamed Anglo-Saxon investment bank, named as one of the top three gas trading companies in Western Europe based on its West European gas trade hub activity.
According to MET Power’s CEO, in addition to a novel business development approach and more than average flexibility, there is yet another key ingredient of success shared by all highly skilled members of the Group: ‘They can crunch numbers very fast and accurately.’ Over the nearly 16 years he spent in the industry Gábor Lehőcz Balázs had plenty of opportunity to gauge the level of precision and attention to detail of the large number of people he has worked with. Precision and very solid maths were perhaps less indispensable skills before the mid-2000s, when energy investments still yielded outstanding profits internationally. This meant that industry players were not used to having to calculate everything with the precision of a pharmacist scale, and now many are obviously finding it difficult to adjust. Still, according to Balázs Gábor Lehőcz, creativity, innovation and precision are key components of success today, based on which profitable operations can be achieved even on the current energy market, which is in transition and shrinking at the same time. The CEO cites Danske Commodities as an example, whose business model is based solely on having in-depth knowledge of the spot deals and the overnight market. The company has developed so-called trading robots - used by money and capital markets for some time - by adapting and optimising them for the power market so that the bulk of their trade transactions are executed by these robots based on pre-programmed mathematical algorithms.
“Perhaps the bottom line is that today one must work in a whole different way and with whole different methods than ten years ago. Those who cannot adjust quickly and efficiently will face major obstacles.’
(B. Lilla Horváth)
Lehőcz Balázs: Graduated from the Budapest College of Economic Studies and then from Corvinus University of Budapest, fluent speaker of English and German. Started his career at Citibank, then became Head of Sales Controlling and later Head of Sales of Elmű-Émász-Mász Group, Chief Executive Officer of MVM Partner in 2006-2008, subsequently MVM Deputy CEO - Chief Financial Officer and later Chief Commercial Officer. Between 2012 and 2013 Chief Commercial Officer of GdF Suez Hungary, later Chief Operation Officer of JAS Budapest. Married, father of two.