Overview on Hungarian Energy Business

1. Attila Debreczeni, Senior Consultant Finpro CSE & ME, 5 November, 2010 Hungarian Energy Market

2. Contents Pages Key Energy Market Data 3 Energy Policy 4-5 Strategy & Key Priorities Upcoming Regulatory Changes & Planned Actions Power Generation 6-9 RES (forestry, agri) potential & usage Electricity Generation 10-12 Feeding tariffs Distribution Heat Generation 13-16 District Heating Housing – as “Panel program” Appendixes: Major players in energy market 17-25

3. Key Energy Market Data © Finpro 3 Source: BMI energy report 2010; Short,-Middle,-Long-term capacity balance on supply side in Hungarian electricity system (Mavir,2009)

6. Growing share of RES within power & heat generation;

7. RE heat generation in the Hungarian district heating systems;

8. Changes in feeding tariffs: CHP less support and subsidies shifted toward RES;

9. Implementation modes & selected technology of the new 1 or 2 blocks at Paks Nuclear PP;

11. © Finpro 7 Power Generation (>50 MW, 2009)2/2 Mátrai Power Plant www.mert.hu Location: Visonta Type: CHP Installed capacity: 841 MW Efficiency: 31.8% Expected to stop operation: 2026- 2030 AES Borsodi Energetikai PP www.aes.hu/intro.html Location: Kazincbarcika Type: CHP Installed capacity: 288 MW Efficiency: 34.2% Expected to stop operation: 2013- 2016 Dunamenti Power Plant www.electrabel.hu Location: Százhalombatta Type: CHP Installed capacity: 1,673 MW Efficiency: 39.6% Expected to stop operation: 2011- 2023 Alpiq Csepeli Erőmű www.csepel.alpiq.hu Location: Csepel (Budapest) Type: CHP Installed capacity: 386 MW Efficiency: 50.6% Expected to stop operation: 2025- 2026 Tisza II. Power Plant www.aes.hu/intro.html Location: Tiszaújváros Type: Electricity only Installed capacity: 860 MW Efficiency: 36% Expected to stop operation: 2016- 2018 Vértesi Power Plants www.vert.hu Location: Oroszlány Type: CHP Installed capacity: 224 MW Efficiency: 27.7% Expected to stop operation: 2013- 2014 MVM GTER Lőrinci www.gter.hu Location: Lőrinci Type: Electricity only Installed capacity: 407 MW Efficiency: 30% Expected to stop operation: 2026- 2027 Bakonyi Power Plants http://www.mvm.hu/engine.aspx?page=bvmt_fooldal Location: Ajka Type: CHP Installed capacity: 88 MW Efficiency: 45.8% Expected to stop operation: 2014- 2016 Debrecen KCE Power Plant Location: Debrecen Type: CHP Installed capacity: 93 MW Efficiency: 69.7% Expected to stop operation: 2026- 2028 Budapesti Power Plants www.budapestieromu.hu Location: Budapest Type: CHP Installed capacity: 399 MW Efficiency: 69.1% Expected to stop operation: 2026- 2027 Paksi Nuclear Power Plant www.atomeromu.hu Location: Paks Type: Electricity only Installed capacity: 1,940 MW Efficiency: 31.4% Expected to stop operation: 2032- 2037 Pannon Power Plant www.pannonpower.hu Location: Pécs Type: CHP Installed capacity: 122 MW Efficiency: 68.9% Expected to stop operation: 2014- 2016 ISD Power www.isdpower.hu Location: Dunaújváros Type: CHP Installed capacity: 58 MW Efficiency: 67.6% Expected to stop operation: 2017- 2019

12. © Finpro 8 RES potential: Fire woods & residues 1/2 Annual Cutting: 6 - 7 mill. m3 Import: 1 – 1.1 mill. m3 Export: 0.25 – 0.3 mill. m3 Annually available wood: 6.75 – 7.8 mill m3 Stolen woods : 0.2 – 0.3 mill. m3 Residue : 1 - 1.4 mill. m3 Fire-wood: 2.5 – 2.8 mill. m3 Industrial wood: 2.7 – 3.1 mill m3 Households collections: 0.3 -0.4 mill. m3 Power Plants: 1 – 1.3 mill. m3 Smaller players: 1.2 - 1.5 mill. m3 Households: 1 -1.5 mill. m3 Major players (3): 1.8 – 2 mill. m3 Forestry potential in Hungary 1.09 mill m3 0.73 mill m3 0.48 mill m3 0.73 mill m3 1.22 mill m3 0.73 mill m3 1.28 mill m3 Source: Ministry of Rural Development, 2009 & Finpro research

13. © Finpro 9 RES potential: Agri-fuel 2/2 Agro-biomass potential in Hungary 5.2 mill. Tons I. 1.5 mill. tons 2 mill. Tons 0.8 mill. tons 2.5 mill. tons 4.5 mill. Tons III. 4.9 mill. Tons II. Annual total: 21,4 Source: EnergyCenter, Energy Club, 2008 9

14. Electricity Generation © Finpro 10 Source: BMI energy report 2010

15. © Finpro 11 Feeding tariff system Current Incentives

17. Electricity service providers/distributors:

18. Six distribution area were created, including Budapest the capital and its suburb area (ELMÜ);

19. German & French energy companies are the owners;

20. In 2008 total domestic electricity use was 43,928 GWh, exceeding volume in 2007

22. © Finpro 14 District Heating 1/2

23. © Finpro 15 District heating market 2/2 Budapest DH www.fotav.hu No. of heated units: 240.958 Avg. total cost of end-users: EUR 637 DunaújvárosDH www.dvcsh.hu No. of heated units: 19,181 Avg. total cost of end-users: EUR 708 Miskolc DH www.miho.hu No. of heated units: 31,487 Avg. total cost of end-users: EUR 623 Győr DH www.gyorho.hu No. of heated units: 23,841 Avg. total cost of end-users: EUR 544 Nyíregyháza DH www.nyirtavho.hu No. of heated units: 15,649 + 413 Avg. total cost of end-users: EUR 603 TatabányaDH www.tata.hu No. of heated units: 22,636 Avg. total cost of end-users: EUR 704 Székesfehérvár DH www.szepho.hu No. of heated units: 20,550 Avg. total cost of end-users: EUR 598 Debrecen DH www.dhrt.hu No. of heated units: 30,895 Avg. total cost of end-users: EUR 618 Szeged DH No. of heated units: 27,249 Avg. total cost of end-users: EUR 708 PécsDH www.petav.hu No. of heated units: 31,160 Avg. total cost of end-users: EUR 545

24. 16 Housing - as“Panel program” A significant part of the Hungarian housing stock is in need of rehabilitation because of both material and social challenges. The degree, focus and quality of the necessary rehabilitation differ from region to region. A constant expansion of the panel program has taken place in the last few years and its beneficiaries are not only the housing estates, but every tenant community occupying a building constructed with pre-fabricated technologies. Around 750,000 panel housing units and until 2008, the 25% of this stock have been renovated to some degree, generating on average investments per unit as 700th HUF (~2,600 EUR). However, until 2010 the number of renovated buildings grew up to 1/3 of the total stock. The degree of renovation is very basic and comprises mainly Building isolation; Changing the joinery (windows, doors, etc.); Measuring (adjusting) units for the regulation of the temperature, however, the whole system (old Russian style panel blocks) has not been changed. Sources: Expert`s interviews, European Commission, Housing Needs in Hungary (Varoskutatas Kft) © Finpro

25. © Finpro 17 Appendix 1/9

26. © Finpro 18 Appendix 2/9

27. © Finpro 19 Appendix3/9

28. © Finpro 20 Appendix 4/9

29. © Finpro 21 Appendix 5/9

30. © Finpro 22 Appendix 6/9

31. © Finpro 23 Appendix 7/9

32. © Finpro 24 Appendix 8/9

33. © Finpro 25 Appendix 9/9