Thursday, February 14, 2008

Bulgaria's proposed 'regional' energy behemoth

Bulgaria has proposed (and will probably) be merging five of its energy companies into one. Part of this plan is is to make it a regional force that can expand beyond Bulgaria. We can now add this government owned company to the list of state owned companies trying to emulate CEZ. Hungary's MVM, is also trying to position and justify its dominate market position in Hungary by rolling out this regional strategy. Let's not buy into it.

This regional strategy may have worked for CEZ but, for a variety of factors, doesn't mean that it will work for others as well. One thing to consider, just as in the case of German energy giants RWE and E.ON, it is the protection from within their home markets that give them the stability and subsidies to expand outward. Therefore, we can expect that both the Hungarian and the Bulgarian energy markets will remain in-transparent and closed under the justification that their 'national champions' are going to be regional champions. As is usually the case with 'national champions' if you have no competitors and you make up the rules as you go along then it is easy to call yourself a national champ.