GEN-I: Slow reg­u­la­tion weighs on SEE gas mar­kets

Top 100 See - - Top 100 Per Capita - By Djordje Daskalovic

What medium-term risks and chal­lenges do you see for the elec­tric­ity trad­ing mar­kets in South­east Europe (SEE)?

The Euro­pean whole­sale elec­tric­ity market has changed pro­foundly in re­cent years, with the in­creas­ing gen­er­a­tion of elec­tric­ity from re­new­ables, with its volatile pro­duc­tion pat­tern, multi-year low elec­tric­ity prices on ex­changes, and fre­quently neg­a­tive short-term elec­tric­ity prices as a con­se­quence. Reg­u­la­tory changes re­gard­ing sub­si­dies for re­new­ables, enor­mous growth in the lat­ter in re­cent years and the step­wise in­tro­duc­tion of ca­pac­ity re­mu­nera- tion mech­a­nism schemes are dis­turb­ing market prin­ci­ples, price sig­nals are be­ing dis­torted and based less and less on ac­tual elec­tric­ity market fun­da­men­tals.

Mar­kets in SEE are not iso­lated from the ef­fects of these changes and are de­vel­op­ing in a sim­i­lar man­ner. There are still ma­jor chal­lenges in the de­vel­op­ment of com­mon rules and mech­a­nisms, which are af­fect­ing and lim­it­ing market liq­uid­ity in some SEE coun­tries.

What is your view of the state of de­vel­op­ment of the gas mar­kets in SEE?

SEE is no stranger to changes, al­though they seem to be much slower than in Western Europe, lag­ging well be­hind de­vel­op­ments on elec­tric­ity mar­kets. The main rea­sons for this slow progress is the dom­i­nant po­si­tion of lo­cal in­cum­bent gas sup­pli­ers try­ing to pro­tect their ex­ist­ing market shares, to­gether with slug­gish reg­u­la­tory changes and with, to a no­tice­able ex­tent, a still-high per­cent­age of long-term and oil in­dexed con­tracts. Based on its many years of ex­pe­ri­ence and ex­per­tise in elec­tric­ity sup­ply, GEN-I recog­nised the po­ten­tial of sup­ply­ing gas to end cus­tomers at quite an early stage, and en­tered the Slove­nian market as the first in­de­pen­dent market sup­plier in late 2012, achiev­ing a 19% market share of the Slove­nian house­hold nat­u­ral gas market al­ready in the first year. Since then, we have been ex­pand­ing our gas trad­ing and sup­ply ac­tiv­i­ties.

What are the im­pli­ca­tions from the re­gion's eco­nomic out­look for the growth pat­tern of the con­sump­tion of gas and elec­tric­ity in SEE?

The SEE re­gion's in­dus­try has suf­fered sig­nif­i­cantly from the eco­nomic cri­sis, re­sult­ing in a sub­stan­tial de­crease in in­dus­trial con­sump­tion and an in­creased pro­por­tion of house­hold con­sump­tion in the na­tional con­sump­tion mix. In the con­text of a slow eco­nomic re­cov­ery and the EU En­ergy Ef­fi­ciency Direc­tive from 2012, we do not see sig­nif­i­cant medium-term growth. With oper­a­tions on 18 elec­tric­ity mar­kets and five nat­u­ral gas mar­kets, GEN-I con­tin­ues to reaf­firm its po­si­tion as one of the most ad­vanced market play­ers in Cen­tral Europe and SEE, and has proven it­self as a flex­i­ble and cus­tomer-ori­ented part­ner. GEN-I of­fers port­fo­lio man­age­ment and var­i­ous trad­ing ser­vices to its part­ners and busi­ness cus­tomers, help­ing them to seize op­por­tu­ni­ties, cre­ate added value, and man­age their en­ergy costs and the price risks that arise from the market at any point of the day.

How is the planned launch of a power ex­change in Ser­bia and Croa­tia ex­pected to af­fect gas and elec­tric­ity trad­ing in the re­gion?

Power and gas ex­changes are a ne­ces­sity for trans­par­ent pric­ing and a com­pet­i­tive market. The planned launch is there­fore a wel­come step. This shows that lo­cal en­ergy reg­u­la­tors and gov­ern­ments are headed in right di­rec­tion. How­ever, the launch of an ex­change is only one of the nec­es­sary steps for a liq­uid and ef­fi­cient market. The frag­mented mar­kets are too small and the market con­cen­tra­tion of typ­i­cally pre­ferred in­cum­bent sup­pli­ers re­mains much too high.

How is GEN-I po­si­tioned to take ad­van­tage of growth op­por­tu­ni­ties on the gas and elec­tric­ity trad­ing mar­kets in SEE?

GEN-I Group strives to main­tain the right balance be­tween global trad­ing and lo­cal sup­ply ac­tiv­i­ties, com­ple­ment­ing these with a fresh, flex­i­ble and in­no­va­tive ap­proach that rep­re­sents the ba­sis for a re­li­able part­ner­ship on whole­sale and re­tail en­ergy mar­kets. Our pres­ence on nu­mer­ous whole­sale en­ergy mar­kets en­ables us to gen­er­ate syn­er­gies that are the re­sult of our ex­ten­sive market ex­per­tise, highly qual­i­fied trad­ing per­son­nel, ef­fi­cient or­ga­ni­za­tion and busi­ness pro­cesses main­tained at the high­est stan­dards. We also sup­ply elec­tric­ity and nat­u­ral gas to small busi­ness and pri­vate house­holds in Slove­nia and Croa­tia, where we al­ready have more than 120,000 con­sumers.

Igor Ko­privnikar, member of the man­age­ment board

Gen-I Group’s core ac­tiv­i­ties in­clude in­ter­na­tional elec­tric­ity trad­ing, as well as the sale of elec­tric­ity and gas to end­cus­tomers. The Krsko-based group has sub­sidiaries in Aus­tria, Italy, Ger­many, Hun­gary, Ro­ma­nia, Bul­garia, Ser­bia, Bos­nia and...

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