What kind of impact lower demand caused by the coronavirus pandemic has had on MET Group’s gas and electricity sales?
The worldwide economic slowdown that followed the pandemic has obviously shown its impact on energy use too. Europe’s gas and power consumption has fallen precipitously in the previous months. This has mainly impacted countries which moved to shut down whole industries besides a full lockdown, such as Italy and Spain. In Hungary, the drop has not been as drastic so far, but energy market players here are under considerable pressure as well. Lower sales volumes mean traders need to liquidate any remaining stock, leading to heavy losses across the industry amid energy prices that are plunging to unprecedented lows. When these market players have weathered the initial shock, they will be faced with the spillover effect of the crisis, which will manifest itself primarily in companies becoming insolvent. For the next period, we believe this is the highest risk faced by traders that hold sizeable amounts of outstanding receivables.
Has MET been forced to cancel any previously reserved power plant capacity or amend gas purchase contracts?
We did not need to cancel any power plant capacity bookings to supply our customers. Traders at the Group are optimising positions deriving from demand and supply disparities continuously, several times a day if needed – current market liquidity is sufficient to manage this exposure. Optimisation on a daily basis has been an established practice at MET Group, our Dunamenti Power Plant is operated under such continuous optimisation. Dunamenti Power Plant and the other, small-scale power generators in MET’s portfolio are, almost without exception, contributing to grid-level system-balancing too.
How did Dunamenti Power Plant’s April output compare to last year’s levels?
The coronavirus pandemic has no direct impact on output in a given month, rather it reflects whether the clean spark spread indicator has been in positive or negative territory. The power plant in April was operating as previously planned, which means it was generating electricity and contributed to system balancing. So far, the epidemic has not impacted generation levels, but we did introduce a range of measures to protect the health of our colleagues, to minimise the spread of the disease, and to create a safe working environment by mandating the use of protective equipment and increased disinfection. However, the proper handling of the situation and its comparative predictability, at least from an energy production aspect, does not mean that trends seen before the coronavirus outbreak cannot change, even as soon as in the short or medium-term. This might bring about either a more rapid transition towards renewables-based power generation, or, due to the financial and economic strain, slow down the transition in a transforming global economic model. At MET Group our perception is that while the direct health and economic impacts of the coronavirus epidemic are reasonably easy to see, or can be modelled, there is a high level of uncertainty worldwide concerning its long-term effects, which could have an impact on energy markets in the Central and Eastern European region.
Will MET be able to launch its solar power plant in Kaba on schedule?
Yes, there have been no delays to the planned schedule. Germany’s IBC Solar, the project’s general contractor, and all Hungarian subcontractors have continued to work throughout the epidemic, cooperating as the pros they are. The project is going on according to plans.
How will MET’s new operational environment affect the Group’s expected annual results?
MET Group has also encountered the impact of the coronavirus pandemic and is currently focusing on three key areas: protecting the health of staff, its liquidity, and analysing and adapting to the long-term effects. The Group comprises three robust business divisions (European Sales, Trading and Wholesale, Asset Management), and the previously defined strategy has proven to be resilient in the current situation. Obviously, results from certain divisions in a given period of time can be different, but by standing on these three legs, the company has a secure footing.
Which key points had to be changed in this year’s business plan due to the new situation?
The Group-level business plan did not need to be modified because of the pandemic. Of course, considering the emergency, we carried out the appropriate checks wherever it was necessary. The company seeks to avoid any potential risks and is prepared to take timely and appropriate actions in response, if faced with some unexpected negative impact.
Will any planned projects or acquisitions be cancelled?
Previously planned acquisitions have not suffered any setbacks so far, but MET is continuously keeping an eye open for changes in the market, and will make the appropriate decisions at the appropriate time if an acquisition is deemed to be too risky. The key task of the Group, however, is not just the monitoring of risks, but also to detect any opportunities arising from this situation. The fact that we are maintaining our strategic direction and are market optimists has also been confirmed by our move in April, during the pandemic, to book significant capacities for the delivery of 1.3 billion cubic metres of natural gas, at the LNG terminal currently under construction in Croatia. This project is a milestone in the development of the region’s energy market, as it will, besides creating new business opportunities, have a key role in boosting security of supply and diversification of sources across the region.
Does MET see any favourable changes arising out of the new situation, such as the elimination of some of its competitors from the market?
Every crisis has its winners and losers, MET Group is currently working to be among the winners. The assessment of the economic impacts is an ongoing process though, so it would take some excessive optimism to say that we are in any kind of winning position. Companies that came through the 2008 economic crisis were the ones that managed to properly tackle the changes and adapt to new circumstances. Over the previous years, MET has repeatedly demonstrated its excellent adaptability.
When does MET believe the market will return to pre-crisis levels?
The world will return to business-as-usual only when a vaccine for the coronavirus, or a cure for the disease it causes, is found. Until then, we will be living in an emergency, one that we can manage to some extent, and the general population will also learn to live with the pandemic. The world will never be fully the same as before. As was the case after each crisis, a shake-up should be expected, and that will have an impact on the energy sector as well. Just think about the change in oil prices, the extreme volatility – but the long-term effects on oil companies, or on different sectors, and also on consumers’ habits, is hard to predict.