The Serbian Electricity Exchange Ensures the Highest European Standards

After almost a decade since its foundation and becoming operational in February 2016, the Serbian Electricity Exchange (SEEPEX) has firmly positioned itself not only as an important support provider in green transition and further liberalization of the electricity market in Serbia but also as a significant integrative factor in stock exchange business in a broader regional, interregional and one could even say pan-European context.

After the establishment of the first regional electricity exchange in the regions of Southeastern and Central Eastern Europe, the Alpine-Adriatic-Danube Electricity Exchange (ADEX), established in December 2022 through the corporate merger of SEEPEX and the Slovenian electricity exchange BSP, it was officially announced that in 2024, the Hungarian stock exchange HUPX will be added to that unique business infrastructure. After this year’s drastic energy crisis and price consolidation, this news, as well as the current situation and further development directions of the European electricity market, are the reasons we talked to Miloš Mladenović, founder and director of SEEPEX.

SEEPEX and partners from the ADEX Group continue to push the boundaries and ensure the highest European standards in stock exchange business infrastructure. In a way, it has brought to life its initial idea of forming a single regional stock exchange.

“This significant business success at the end of the first decade of SEEPEX’s operations came as the icing on the cake of the company’s successful and profitable business, which in just a few years profiled itself as a relevant national and regional trading place, with a fully rounded spot market framework. Last year, the intraday segment of spot trading was also launched with more than 40 participants from 16 European countries and a volume of almost 5TWh of electricity traded in the day-ahead market. Those business results were accomplished during the so-called ‘isolated’ operations, which is the first such case in the region, where all other stock exchanges (including those from the EU) began to accomplish such business and financial results only after the implementation of market merger projects and the significant increase in liquidity that they consequently brought”, said Mr Mladenović.

He pointed out that all of the above was due to believing in the success and commitment of all parties who participated in the company’s establishment and operations, not only from SEEPEX and Elektromreža Srbije but also from a wider area, including the institutions that came forward to meet the necessary, and on a couple of occasions, systemic interventions on changes and additions to the energy sector, market and financial regulations. First of all, this is the fruit of the set, the far-reaching vision of SEEPEX as a modern European stock exchange that will operate fully in accordance with the best European practice and have a clear regional perspective.

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The multifaceted importance of the common stock exchange

The formation of ADEX, the corporate association of the stock exchanges of Serbia, Slovenia, and Hungary, was a significant step forward in this segment of the region.

“The importance of forming a joint stock exchange for all three parties is truly multifaceted, not only in terms of the electricity market, security of supply and more efficient integration of renewable energy sources, but also on a strategic, and one might say, geopolitical plan, above all in the context of integrative activities towards the European Union“, Mr Mladenović adds.

He reminded us that the so-called BlueSky project was initiated in 2017 by SEEPEX and its founders (EMS and EPEX SPOT) as an instrument for realizing SEEPEX’s initial vision of establishing a regional electricity exchange. Due to an insufficient understanding of political structures from the relevant countries, which are the most important and natural interlocutors regarding that plan, SEEPEX turned to partners from the EU.

“The project implementation was carried out in two phases. The first phase, which involved the corporate integration of the Serbian and Slovenian stock exchanges and the establishment of the ADEX Group, was successfully completed at the end of 2022, while negotiations with Hungarian partners were also completed last year. The transaction document on HUPX joining this unique business infrastructure was signed in December 2023“, explains Mr Mladenović.

The first practical results of the planned synergy within ADEX were achieved after a few months, i.e., by establishing an intraday market in Serbia in late July last year. In April of this year, the process of transforming the business model of the Slovenian Stock Exchange (BSP) was completed in such a way that the clearing function and the platform for day-ahead trading were harmonized with SEEPEX’s business model, i.e. by applying the best European practices used in all EPEX SPOT markets. With the introduction of a unique membership process and a harmonized price list, all Serbian and Slovenian spot market participants will be provided with the so-called one-stop-shop solution, where all the accompanying benefits of such a solution will be at their disposal. These include a unique business and clearing infrastructure, netting and cross-margining of collateral, a uniform procedure and reduced costs of accessing spot markets. The plan is to boost further the synergy with Hungarian partners in the near future.

“In the Serbian market, the establishment of the intraday spot market is included in the legal framework as one of the essential prerequisites for the efficient integration of renewable sources of electricity and the successful implementation of a new incentive scheme based on auctions for concluding long-term financial purchase contracts (the so-called contract for differences), where the contracting party responsible for the state’s implementation of those fifteen-year financial contracts would be the guaranteed supplier (i.e. the Electric Power Industry of Serbia – EPS), while the physical delivery of the produced energy and the balance responsibility would fall on the producers themselves“, explains Mr Mladenović.

Of course, SEEPEX’s role in incentive measures is much broader, primarily in the context of providing a relevant and robust reference price to which the mentioned financial contracts refer, as well as ensuring a sufficiently liquid day-ahead market that will be able to accept the entire amount of produced energy without a significant impact on the price. So, it is safe to say that, with these latest improvements, a complex market puzzle has been completed and can now successfully respond to all the challenges that the green transition imposes on the electricity market and, therefore, support planned activities of state institutions aimed at achieving the proclaimed, very demanding goals contained within Serbia’s Integrated National Energy and Climate Plan (INEKP).

Prepared by Mirjana Vujadinović Tomevski