* State-owned MVM to buy E.ON's gas units by end-Jan
* No price given for gas trade and storage units
* Deal seen giving govt control over Russian gas contract
* Gas prices a touchy political issue, elections due in 2014
(Adds more detail, prime minister, analyst comments)
By Krisztina Than
BUDAPEST, Nov 30 Hungary has agreed to buy the
local gas units of Germany's E.ON AG and hopes to use
its ownership to gain greater control over politically-sensitive
Hungary gets over 80 percent of its annual gas needs of
between 11 and 12 billion cubic metres through imports, mostly
from Russia, former Communist overlord of the European Union
Under the agreement, which the two sides hope to finalise by
the end of January, Hungary's state-owned energy firm MVM, which
the government wants to beef up into a key regional energy
player, would buy E.ON's local gas trade and storage units.
"Hungary aims to create stable energy supply in a
sustainable way and is therefore interested in expanding its
activity via (the) state-held MVM group," the government said.
A "declaration of intent" on the deal was signed by Prime
Minister Viktor Orban and E.ON Chief Executive Johannes Teyssen.
Terms of the proposed deal, which would give the government
control over vital gas imports and negotiations with key Russian
supplier Gazprom, were not disclosed.
Local media reports have said MVM was likely to pay closer
to 800 million euros for the units than the 1.2 billion figure
earlier quoted in the media as the price sought by E.ON.
Orban, whose centre-right government has boosted state
ownership in several industries since it took power in 2010,
first signalled in August that his government would seek to buy
E.ON's local gas units.
Orban, whose support has suffered from domestic austerity
and high unemployment, has also said he wanted to transform
household energy distribution into a non-profit activity.
NO PRICE RISES
"I can only reiterate, not only will there be no gas price
rises or utility price rises, but rather, I will try my utmost
so that we can curb utility costs in the coming year," Orban
told public radio on Friday.
"Those making profits in the utility sector will have to
make do with lower profits," said Orban, who faces an election
in 2014. "Their taxes will rise, while the people will have more
Earlier this month his government said it would raise tax on
energy utilities to 50 percent next year, one of the highest
such rates in the world, though utilities would be able to
reduce that via investments.
E.ON's gas wholesale unit E.ON Foldgaz Trade Zrt is
Hungary's biggest gas trader. Its storage unit E.ON Foldgaz
Storage Zrt operates four gas storage facilities, with a total
capacity of 4.2 billion cubic metres, according to its website.
The price of natural gas has long been a hot political issue
in Hungary, whose import deal with Gazprom expires in 2015.
Backed by the state, MVM could have better bargaining chips
to offer in a future gas deal with Russia. The company is also
building a gas interconnector to Hungary's northern neighbour
Slovakia, to be completed by 2014.
"The government expects it could have better positions in
negotiating with the Russians (than E.ON)," said Concorde
analyst Attila Vago. "This transaction is also a step towards
putting the state in a position where it can influence market
prices and sales conditions in a sustained way."
Erste Bank analyst Jozsef Miro said any losses that may
occur due a difference between import and domestic consumer
prices will now be incurred by MVM, which, however, could
mitigate that impact from its profitable operations.
($1 = 215.36 Hungarian forints)
(Additional reporting by Sandor Peto; Writing by Gergely
Szakacs; Editing by Mark Potter and David Holmes)