Bige won’t let this slide; he’s suing the Hungarian state – the markets seem dead sure about this. The reason behind this is the recently imposed special tax on carbon dioxide quotas, as well as the retroactive effect of the government decree. In essence, Nitrogénművek Plc. (translating to Nitrogen Works), Hungary’s largest consumer of industrial gas, has been hit with a special tax higher than any of its kind on imposed a Hungarian company. Due to the additional cost, Bige’s company incurs a disadvantage of around 20,000 HUF per ton compared to all its European competitors.
László Bige, the (HUF) billionaire often referred to as the ‘fertiliser king’, has not explicitly mentioned suing the state, but he has left no doubt that he’s diving back into the newly revived fertiliser war. He has stated that “they won’t go to the slaughterhouse with raised hands” and emphasized that they will explore every available legal avenue in both Europe and Hungary.
This time two, sharply conflicting documents directed the attention to Bige Holding. Bige’s statement emerged at 6 AM in the morning on November 14th, declaring that after 93 years, they intend to permanently shut down Hungary’s only fertiliser plant, Nitrogénművek Plc., owned by the Bige family. However, a few hours later, he told TV channel RTL that they won’t close the factory after all. On the contrary, they will fight for the firm until the bitter end. In his view, the puzzle’s solution is simple and not at all new:
All this is about is to take our money via government decree, so that certain circles could get their hands on Nitrogénművek, which they have had in their sights for a long time.For years, storms have been brewing around the Bige empire: we’ve seen temporary shutdowns, a large-scale authority raid, a 11 billion HUF fine imposed by the competition authority for cartel conduct, not to mention the lawsuits accusing László Bige of bribery, with the prosecution seeking imprisonment for one of Hungary’s wealthiest individuals. Bige, with an estimated fortune of 233 billion forints, secured the 8th position on the list of the 100 richest Hungarian entrepreneurs, just after real estate guru Dániel Jellinek, who often conducts business with Viktor Orbán’s son-in-law István Tiborcz. 2022 also proved to be a great year for the fertiliser business: Nitrogénművek increased its revenue by 25%, reaching 182 billion forints, and reported a profit of 30 billion forints after taxes.
We have mentioned earlier that several oligarchs have their sights on Bige’s fertiliser factory:
- OTP-leader (OTP is Hungary’s largest bank) Sándor Csányi, who initially supported Bige’s advancement but later became his bitter rival,
- former Czech Prime Minister Andrej Babis, who has recently acquired Hungarian agricultural giant Bábolna IKR
- Felcsút (Orbán’s hometown) billionaire Lőrinc Mészáros, who has also entered the market of agricultural integrators supplying farmers with raw materials.
Recently, the name of István Tiborcz – who is notoriously expanding in all directions – has also appeared in rumours circulating in agricultural circles, but there is no concrete information on the matter.
The match is also being played on the stock exchange floor
However, the majority is more focused on keenly monitoring the market prices of Nitrogénművek’s bonds. These are part of a $200 million bond package issued for the development of the fertiliser plant, the repayment of which has already been rescheduled at one point. When evaluating the firm, analysts repeatedly highlight that this money was borrowed from the market at a relatively high interest rate of around 7% – repayment poses a significant burden for the company.
Market analysts consider the debt securities traded on the stock exchange to be a central issue regarding the fate of Bige’s companies.
One source mentioned that negotiations have begun with bondholders for the acquisition of their papers at a certain price level to acquire Hungary’s only fertiliser manufacturer through the acquisition of its debt. In any case, the price drop following the announcement of the factory’s permanent shutdown seems to present a good opportunity for a potential acquisition. Just after Bige had announced closing the plant, Nitrogénművek’s euro bonds on the Frankfurt Stock Exchange plummeted to 55% of their nominal value – a historic low, representing a 37 per cent drop in just one day. The next day saw its price level rise by 44 per cent, but such fluctuations were unprecedented in the past year, as bonds had been trading within a range of 69 to 90 per cent.
Until now, the mentioned 69 per cent was believed to be the safety threshold below which they would not allow prices to drop, as reaching this level would trigger the automatic buying of the bonds. However, the alleged limit was breached with the prices speeding downhill, seemingly without brakes. Speculation immediately arose about whether it was Bige’s associates or opposing interest groups that were pulling the strings. While our source found the acquisition through bonds more likely, they noted that “Bige isn’t one to refrain from chess gambits”.
The background of the bond market movements remains hidden from the public, unlike a letter from Bige sent to the ministers of both agriculture and energy. In the letter sent over two months ago, the billionaire discusses how government measures are causing an increase in costs that makes Nitrogénművek’s fertiliser unsellable.
According to his calculations, the taxation of carbon dioxide quotas represents a burden of 12-14 billion forints. An additional 6 billion forints in expenses result from the increased gas storage fee,
we reported earlier of the special gas storage that increased the country’s energy bill by 2 billion euros last year, the role of Minister of Foreign Affairs and Trade Péter Szíjjártó, as well as the consequences of Russian purchases. Along with several other smaller items, the combined effects of these would increase the costs of fertiliser production by 20,000 HUF per ton for the country’s largest industrial gas consumer. No such extra fees burden his competitors – Bige added, requesting a refinement of the regulation from the two ministers, so far to no avail.
How much does 20,000 forints count?
Currently, the price per ton of fertiliser from Nitrogénművek’s Pétfürdő plant sits at 133,000 forints, but in larger quantities, it is sold for 130,500 forints. Ukrainian fertiliser comes somewhat cheaper at 122,000 forints, but, according to a wholesaler from southern Hungary, the quality is not exactly the same. He believes, however, that a price increase of 20,000 forints would seriously make buyers reconsider whether to opt for the more expensive domestic product. György Raskó, former agricultural state secretary turned billionaire entrepreneur, stated that his businesses choose the domestic product irrespective of the price difference, as they work with precision machinery featuring cutting-edge technology that only works with a consistent base material suitable for uniform application. He emphasized the importance of uniform particle size for timely and efficient work, explaining that it’s “not feasible for the tractor operator to jump off the vehicle every now and then to clean a clogged device”. However, there are also traders who argue that Babis’ fertiliser achieves the same quality, and their pricing is set to follow that of Bige’s product. The question remains: what would happen if Nitrogénművek was forced to raise prices?
If Bige’s companies were to drop out of the supply, imports would take over, and farmers – due to the market being dominated by a handful of large wholesalers – predict an almost certain price increase.
This would hit Hungarian producers in an already devastated state as far as finances go. Traders reported that although fertiliser prices, which skyrocketed last year (reaching a peak of 400,000 forints/ton), have readjusted along with gas prices, demand has declined sharply. They observed a 40% decrease in turnover for nitrogen fertilisers and even larger declines for phosphorus and potassium based products compared to the so-called “last peace year” of 2021.
The data compiled by the Institute of Agricultural Economics (AKI) show similar trends nationwide: in the first six months of 2021, fertiliser distributors sold a total of 1,105,000 tons directly to agricultural producers, but in the same period this year, only 561,000 tons were sold.
The outlook for the future is not bright, either, as according to György Raskó, the financial condition of the agricultural sector is incredibly poor.
He estimates that around 6-7 million tons of unsold grain products are stored in warehouses (for comparison, that is a year’s worth of Hungary’s total corn yield), the “buyers for which remain invisible,” he says. Even from last year’s stock, about 1.5 million tons are still weighing down the market. There is no revenue, interest rates are high, and farmers refrain from taking up debt – Raskó explains the lack of demand for fertiliser.
As for the present, the production of fertilisers at Nitrogénművek is on hold due to planned maintenance. As for when the factory will restart, Bige has tied the timing to the completion of a new investment, stating that the project will definitely be done by June. This new technology involves manufacturing fertiliser from ammonia – an imported product – and thereby avoiding the additional tax on gas consumption. While such technology is already used in other countries and is an existing and viable solution, it remains uncertain whether a new investment could bring an end to the fertiliser war.