Croatian press agency Hina reports that the planned 1.5 billion cubic metre annual capacity high-pressure natural gas pipeline between Hungary and Croatia will be 296km long and would cost EUR 135m. The Hungarian section of the pipeline will be longer, and building the 215km section would cost EUR 100m. The press also reports that the Croatian government has already set up a workgroup to manage potential tasks related to building the LNG storage facility on Krk island.
It now seems to us that the project agreed by the Croatian and Hungarian governments last week will get off to a quick start. However, in the absence an official announcement from MOL we are still unclear regarding the potential contribution of the company. What is certain is that opening up a new direction in Hungary’s gas supply could be beneficial for MOL through higher transmission revenues, although at the moment we are unable to give an estimate on this due to the lack of information on the total length of new deliveries and the planned schedule of the pipeline construction. We maintain our hold rating on the stock with our target price of HUF 22,650.