Decontrol in Eastern Europe

Former Communist nations in Eastern Europe continue to make progress toward privatized energy industries and free markets.

Former Communist nations in Eastern Europe continue to make progress toward privatized energy industries and free markets.

In Hungary, the government has sold all but its remaining 25% interest in the oil and gas conglomerate MOL Rt.

Government privatization agency officials said the 25% share may be sold in 2000, if issues arising from MOL's merger talks with Croatian oil company INA can be resolved.

MOL, Hungary's largest company by sales, has been restructuring and expanding in a drive to become Eastern Europe's dominant energy company.

Hungary wants to raise natural gas prices to free-market levels but has decided it cannot do that without increasing inflation to an unacceptable extent. Of course, the progress of gas decontrol will have a heavy bearing on MOL's profits.

The government said last month that it will allow a 12% natural gas price increase this summer, but any more would push inflation over the government's goal of 6-7%.

Czech decontrol

In the Czech republic, price decontrol also has been difficult.

The Czech Central Bank has been lobbying the government to decontrol energy prices, and late last fall a council of government, business, and labor leaders agreed to complete the deregulation of household energy prices by the end of 2002.

Under the plan, electricity prices would rise 15% and natural gas prices 10.9% for homeowners in 2000.

Industry and Trade Minister Miroslav Gregr said the government had to compromise from its original proposal to increase natural gas prices by 15%.

In 2001, electricity prices are due to rise 14% and gas 7%, while in 2002 electricity would jump 13% and gas 5.7%.

Gregr said the energy price rises may add up to 0.8% to the country's inflation rate in 2000.

Refineries sold

In Bulgaria and Poland, the emphasis has been on asset sales.

The Bulgarian government privatization agency has approved the $101 million sale of its 58% interest in the refiner Neftochim to Russia's Lukoil. The sale was completed Dec. 1.

The government increased its efforts in 1999 to sell state-owned companies to reform the economy and raise money to pay debt.

Poland raised $580 million in late November when it sold a 30% share in Polski Koncern Naftowy SA, the nation's leading refiner and distributor.

About half the 126 million shares sold on the Warsaw Stock Exchange went to foreign investors and half to domestic buyers. PKN is now the second largest company traded on the exchange.

PKN has 75% of crude processing capacity in Poland and 40% of gasoline sales through its chain of 2,000 stations.

The company wanted to increase its standing on the exchange to facilitate its plans to raise funds to upgrade equipment and expand operations before the government fully opens the market to foreign competition.

The government has been phasing out imported oil tariffs and plans to eliminate them, effective Jan. 1, 2001.

PKN also wants cash to build another 300 service stations by 2002. New car sales have nearly doubled demand for gasoline in the past 6 years.

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