21.11.22

ETRM in Elektroprivreda Srbije

Company
Elektroprivreda Srbije
Project beginning
2014
Implemented system
ETRM - IPESOFT SELT
Business Area
Energy

Elektroprivreda Srbije (EPS) is a key energy player in the Balkans, which has played a significant role in building energy infrastructure in the region. In order to ensure the supply of electricity at the most economically and socially sustainable prices and at the same time support the country in the form of revenues to the state budget, the company is constantly looking for new ways to optimize processes, minimize hidden production costs and maximize economic revenues. A major economic opportunity for energy producers is the trade-in electricity and other energy commodities, associated with the liberalisation of the energy market in Serbia.

Energy market liberalisation has opened the door for trading on both the Serbian and European stock exchanges. How did they use the opportunity in EPS?

The Serbian electricity market began with liberalisation between the years 2012 and 2015. It first affected large customers, later medium-sized and finally households. The liberalisation of the energy market has separated the distribution of electricity from its sale, created space for competition and allowed customers to choose their own electricity supplier.

The customer thus has a contract for connection with the distribution company and a contract for the supply of electricity with the seller.

On the part of the energy producer and supplier, one company is divided into several entities with their own internal processes, due to their function in the free market. A number of new business relationships are emerging, which must be monitored and managed procedurally, documentarily, as well as administratively. It is a complicated and long-term process requiring time, expertise, detailed planning, quality management and information support.

Liberalisation has enabled EPS to take a better look at internal processes, optimize them and make full use of the opportunities of the newly created free market. At the same time, the process brought a number of administrative and systemic challenges related to market sharing, which EPS had to deal with.

Energy market liberalisation is a global trend that has already taken place in several countries. EPS, therefore, had the opportunity to gain expertise and know-how from foreign partners who have already undergone the liberalisation process. The aim was to address these challenges better, shorten the process and make it more efficient.

Electricity trading on domestic and European stock exchanges

One of the opportunities was trading in electricity on the commodity exchange. However, trading on stock exchanges is associated with the free market, but it also brings considerable risks. A new entity that has not traded on the stock exchange in the past can accumulate critical losses very quickly. Especially for important players like EPS who work with a lot of electricity.

To maximize revenue and profit from trading, it is essential that qualified personnel make the right business decisions based on quality and up-to-date information. To obtain the mentioned information, their processing and clear visualization, EPS decided to implement the ETRM (Energy Trading Risk and Management) system.

The required system was to comprehensively provide front office, middle office and back office business activities of EPS. The front office deals primarily with the trading itself, the middle office evaluates the risk and the back office mainly deals with contracts and invoicing. [1]

The main required functionalities of the system include:

  • Trading with energy commodities;
  • Records of contracts;
  • Entering counterparties;
  • Customer records;
  • Support of trading processes on energy commodity exchanges.
Source: eps.rs

The aim was to facilitate, monitor and provide support for the efficient trading of energy commodities on domestic and foreign stock exchanges, trading with the use of brokers, but also trading with distribution companies on national terms. An important criterion for the ETRM system was to facilitate access to the European energy commodities market while facilitating the purchase of European transmission system capacities in accordance with the terms of the ENTSO - E (European Network of Transmission System Operators for Electricity).

IPESOFT SELT solution

Most of the available ETRM systems are adapted to the conditions of a market that is already fully and long-term liberalised. They do not take into account the specific needs associated with the transition to the free market and specialize only in the business itself, without the possibility of linking to other business processes. While these systems may be suitable for traders in Western Europe, they are significantly less able to meet the specific needs of traders in Central, South-Eastern or Eastern Europe.

EPS and IPESOFT started cooperating on the implementation of the ETRM system in 2014 based on the results of the tender. Important criteria for the selection of the supplier were the experience and know-how gained by IPESOFT during the liberalisation of the Slovak market. They were directly involved in the process and played an important role.

Market liberalisation in Serbia was in many ways similar to the liberalisation process in Slovakia. Experience with the implementation of software solutions (including ETRM systems) in the conditions of a liberating market has enabled EPS to make better use of the new opportunities associated with market opening and trading on stock exchanges.

Another important selection criterion was the specific features of the ETRM system called IPESOFT SELT. It met the company's requirements mainly due to the economic advantage, flexibility and modularity of the solution, speed of implementation and the ability to adapt the system to customer requirements.

IPESOFT SELT Screenshot

Experts from both companies analyzed the needs of EPS and designed a unique system, which on the one hand could be implemented relatively quickly, but at the same time was fully adapted to the unique situation of EPS. Simultaneously, in addition to trading itself, it was also able to offer additional services.

What does IPESOFT SELT do?

The system provides an overview of the status of individual exchanges and allows traders to easily buy and sell without having to directly use the web interface of a particular exchange, enter codes, contract details and the like.

After the EPS traders make a trading decision, the system will ensure communication with the stock exchange and a successful trade based on automatic communications. At the same time, it automatically secures follow-up processes. In the case of international trade, for example, it concerns the purchase of transmission system capacity in order to supply an agreed amount of electricity.

The ETRM system was put into full operation according to the agreed schedule in 2015. The implementation schedule was designed so that EPS simultaneously with the implementation adapts or creates its business procedures and processes necessary for efficient trading and also builds its sales department. The ETRM system has also been integrated into EPS accounting processes so as to provide the required inputs for internal accounting, such as external outputs in the form of invoices according to local rules in the Serbian language.

After the successful implementation of the ETRM system IPESOFT SELT, the system for the preparation of the IPESOFT EMS operation was also implemented in 2018. Together with other EPS information systems, they contribute to optimizing production and maximizing economic results.

Results

The potential of trading electricity and other energy commodities on stock exchanges was directly reflected in the positive economic results of the producer. In the first quarter of 2021 alone, EPS traded 1.4 TWh of electricity on stock exchanges. The sale brought EPS revenue in the amount of € 74 million. The mentioned volume represents approximately three times last year's traded electricity for a similar period. [1]

"The solution allows EPS to be well prepared for the liberalisation and standardization of processes in the Serbian energy market and at the same time to easily and quickly access several foreign markets."

David Žarkovič, EPS

The success can be attributed to the positive conditions for the production of electricity in hydropower plants and the correct managerial and business decisions of EPS employees.

Source: epr.rs

The surplus made it possible to satisfy domestic demand and at the same time monetize free electricity on foreign stock exchanges. Based on the right decisions of traders, established on accurate and up-to-date information provided by the IPESOFT SELT system, it was possible to trade electricity under the best market conditions and thus maximize profits while minimizing risk.

Positive economic results allow EPS to contribute to the state budget and at the same time invest wisely in innovation in the form of environmental projects.

About EPS

Elektroprivreda Srbije (EPS) is a key producer and supplier of electricity in Serbia. It is the largest company in the country[2] and employs more than 20,000 people. [3] The thermal and hydropower plants operated by EPS are among the largest and most modern in South-Eastern Europe and together produced more than 34 TWh of electricity in 2020. [4]

EPS' economic results have a direct impact on the country's economy and, thanks to effective management, make a significant contribution to Serbia's state budget.

“Last year, EPS paid more than 80 billion dinars (approx. € 700million) to the state budget. In this way, in one of the most difficult years, we contributed to the stability of the country, when the Covid-19 pandemic stopped the entire planet and changed the way of life for all of us ... “[4]

Milorad Grčić, Acting director of EPS

The goal of EPS is to constantly improve the quality of services and to bring electricity to all customers in a socially responsible way at the most acceptable market prices. [2]

About IPESOFT

IPESOFT is a leading supplier of comprehensive real-time software solutions. It focuses on the energy industry, transport and industry. Based on almost 30 years of history, it brings together qualified experts from the fields of IT, energy industry and industry itself.

The IPESOFT SELT ETRM system is a unique solution based on its own software platform. It offers a wide range of options for quickly and efficiently adapting the software to unique customer conditions. Thanks to its flexibility, SELT is suitable not only for critical producers or distributors of energy commodities but also for independent traders in energy commodities.

Sources

[1] https://serbia-energy.eu/serbia-ipesoft-slovakia-sells-power-trading-software-to-power-utility-eps/      

[2] http://www.eps.rs/eng/Pages/Main-information.aspx

[3] http://www.eps.rs/eng/Pages/zaposleni.aspx

[4] https://serbia-energy.eu/serbian-eps-earned-74-million-euros-from-electricity-exports/

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