MOL has won a tender to construct a 1.2 bcm emergency natural gas storage facility, beating German E.ON, the tender's management firm announced yesterday. MOL beat E.ON by a "wide margin," both in its financial offer and strategic concept, Zoltan Sipos, a spokesman for the state-run hydrocarbon storage association MSzKSz told Reuters. The storage facility will cost around HUF 150bn (US$753m), excluding the cost of the gas to be stored. MOL will take a 62 percent stake in the project company, leaving the state with the remaining stake, whereas E.ON sought a 100 percent stake.
Our view: We are generally neutral to slightly positive on the project. Return on the deal is relatively low at 6.1%, which is behind our estimate of ROACE of 11.0% for LT and MOL's own long-term ROACE objective of 15%. However the project is expected to provide these returns at low risk and also gives MOL an opportunity to spend its cash planned for expansions. Yesterday MOL shares closed up 1.1% at HUF 22,040 per share reflecting the slightly positive stance of the market to the deal.