Annual report - HSE

The scope of trading on the Italian market increased, in comparison with financial year
2011, which is mainly a result of purchasing cross-border transmission capacities, enabling
transfer of electricity from Slovenia, Austria, Switzerland and France to Italy. In 2012,
Italy also increased its RES-based installed capacity, especially from solar energy. It was
expected to influence the electricity price; however, the Standard National Price in summer
was relatively high, and reached an average of 85 EUR/MWh, in August.
The Swiss electricity market remains relatively illiquid, which is shown in large trading gap
for almost all products listed in trade portals. Prices are under strong seasonal influence,
since Switzerland imports electricity during winter and intensively sales it in spring and
summertime.
SE Europe
In 2012, the recession in the area of the SE Europe additionally deteriorated, which had
a significant impact on trading with electricity. Although the average daily supply price
decreased in 2012, the winter and early summer day-ahead market prices reached
record values. This was a result of long periods of draught, causing decreased electricity
production, and of incredibly low temperatures, which reflected in higher consumption.
Extraordinary circumstances influenced also a temporary border restrictions and ban of
electricity exports from the countries with record consumption. In the second half of the
year, especially in the last quarter of 2012, prices changed drastically, due to abundant
precipitations and deteriorated economic conditions. As industrial consumption continued
to decline, certain countries further reduced their electricity purchases in the market. In
this way, Montenegro exported electricity for the first time. On the SE Europe markets,
trading liquidity decreased, since credit ratings of trading companies continued to drop.
Due to insufficient financial liquidity of companies in the region, operating risks increased
additionally, which led to stricter monitoring of credit ratings of all business partners,
increased trading in organised electricity markets and lower number of bilateral deals.
In 2012, HSE participated – directly or through its subsidiaries – in most auctions for crossborder
capacities in SE Europe. Due to liquidity and operating electricity exchange, Hungary
is the HSE’s most relevant market in SE Europe in terms of transactions in connection with
hedging against price changes and portfolio balancing at hourly basis. In 2012, HSE traded
in Hungary on the behalf of the controlling company.
In 2012, Romania adopted an act for mandatory trading on OPCOM. For HSE, this has
been an insurmountable obstacle; namely, due to VAT repayment issues for foreign
organisations we cannot trade directly on the electricity exchange and have been forced
to trade through intermediaries instead. For this reason, at the end of 2012 we decided to
establish a branch in Romania, through which will could trade at OPCOM exchange.
Due to financial problems of Greece, HSE limited trading on the Greek market and
consequently its exposure to the market already in 2011. HSE carefully monitored financial
situation of its business partners also on other markets. Nevertheless, most of activities
were carried out uninterruptedly. In mid-2012, Bulgaria additionally increased electricity
export duties, thus raising the price of Bulgarian energy to the extent to render export
economically unreasonable. This reduced the trading scope of HSE MAK Energy, mainly
engaged in transferring Bulgarian energy to other SE Europe markets At the end of 2012,
we were successful in launching energy supply to Albanian borders. In the last quarter, the
company HSE BH purchased hydro-electricity surpluses in Bosnia and Herzegovina for
transmissions to other electricity markets. Even in 2012, HSE Adria presented a significant
link within the HSE Group, since it connects the domestic market with the markets of SE
Europe.
Annual Report HSE 2012
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