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Elektromreža Srbije: Plans to invest EUR400 million in transmission by 2020 [free access]

January 8, 2015

Serbia’s government-owned transmission system operator (TSO) Elektromreža Srbije (EMS) recently announced plans to invest EUR400 million by 2020 to upgrade the national transmission grid and to develop new electricity interconnections with neighbouring countries. The investments have been necessitated by the need to accommodate the growing power demand in the country, which is likely to expand from almost 34,500 GWh in 2013 to over 49,000 GWh by 2021. New transmission assets will support the over 3,600 MW of generation capacity expansion expected during the 2015–23 period as well as establish more electricity interconnections with neighbouring countries. 

 

Asset base and performance

 

EMS was set up in 2005 after the unbundling of the transmission division of the vertically integrated energy holding company Elektroprivreda Srbije (EPS). The TSO is responsible for ownership, operation and development of the national transmission system as well as for operation of the national electricity market in Serbia.

 

The transmission network of EMS included 9,077 km of transmission line length at the end of 2013 at voltage levels of 100 kV and above. This was 0.2 per cent higher than the 9,060-km network at the end of 2012. Between 2009 and 2013, transmission line length increased at a moderate compound annual growth rate (CAGR) of 1.1 per cent. Almost 61 per cent of the total transmission lines operate at the 110 kV voltage level, another 21 per cent is at 220 kV and 18 per cent is at 440 kV. At the end of 2013, EMS’s transmission network included 66 transformers and 36 substations aggregating 13,555 MVA of capacity.

 

EMS’s network is well connected with the power systems of neighbouring countries. The interconnections include four lines with Romania, of which one is at 400 kV and three are at 110 kV; four with Bosnia and Herzegovina, of which one is at 220 kV and three are at 110 kV; three with Bulgaria, of which one is at 400 kV and two are at 110 kV; three with Croatia, of which one is at 400 kV and two are at 110 kV; three with Montenegro, of which two are at 220 kV and one is at 110 kV; and two with Hungary, of which one is at 400 kV and one is at 110 kV.

 

The operational and financial performance of EMS has improved significantly over the past few years. The transmission losses declined from 2.68 per cent in 2009 to 2.45 per cent in 2013. During this period, the company’s revenues increased at a CAGR of 13.8 per cent, against a 12.5 per cent increase in its operating costs and expense. As such, gross profit increased four times from RSD364 million in 2009 to RSD1,540 million in 2013. In 2013, EMS reported a net profit of RSD1,626 million, up 9.6 per cent from the previous year.

 

The improvement in the company’s financial position has been partly due to the government’s decision to raise transmission tariffs. The government approved a 29 per cent increase in electricity transmission tariffs for large industrial consumers from March 2013 onwards and a subsequent rise of 9.2 per cent for retail customers.

 

Investments and projects

 

EMS has been steadily increasing its investments from less than EUR25 million in 2009 to over EUR45 million in 2013. About three-fourths of the total investments made in 2013 was on substation construction, while another 19 per cent was invested in transmission lines, 5 per cent on automation equipment and less than 1 per cent on building reconstruction. The company intends to invest nearly EUR400 million over the next six years to upgrade its ageing power network and to strengthen its transmission links with European Union countries. 

 

The company is currently implementing several 400 kV projects, aggregating almost 523 km of line length. Key domestic transmission line projects include the 105-km-long Bajina Basta−Obrenovac thermal power plant line and the 140-km-long Kraljevo 3−Bajina Basta transmission line, expected to be commissioned in 2018 and 2020 respectively. All other major power lines coming up in the country are part of interconnection projects.

 

At present, EMS is engaged in developing three new transmission interconnections. One is a new link with Macedonia, being built in collaboration with its Macedonian counterpart, Makedonski Elektroprenosni Sistem Operator (MEPSO). The project entails the construction of the 210-km-long, 400 kV alternating current (AC) Nis (Serbia)−Leskovac (Serbia)−Vranje (Serbia)−Skopje (Macedonia) interconnector. The 40-km stretch from Nis to Leskovac was completed in 2009. Another 100-km stretch on the Serbian side has been built and the 70-km stretch on the Macedonian side is nearing completion.

 

Also under development is an interconnection between the Pančevo 2 substation in Serbia and the Reşiţa substation in Romania. The project involves the construction of a 131-km-long, double-circuit 400 kV overhead line between the existing substations, of which 63 km will be on the Romanian side and 68 km on the Serbian side. The interconnection is expected to be operational by 2015.

 

EMS is also developing another interconnection with Montenegro, the 156-km-long, 400 kV Bajina Basta (Serbia)−Pljevlja (Montenegro)–Visegrad (Bosnia and Herzegovina) transmission line aimed at strengthening the regional northwest–southeast corridor. The project includes 105 km of transmission lines on the Serbian side. This project is expected to be built after 2016.

 

Meanwhile, another interconnection is also being considered with Montenegro to connect the 2,660 MW Nikola Tesla coal-fired power plant in Obrenovac to the Montenegro border. This new link would also help connect Serbia to Italy. Serbia is also considering the construction of a new interconnection from its Pančevo refinery and petrochemical complex to Romania. Additional interconnections could be built in the future with Macedonia and Bosnia-Herzegovina.

 

Market development

 

The transmission investments made by EMS are critical to the government’s plan to fully liberalise the national electricity market in January 2015, as part of it negotiations to enter the European Union. EMS is in charge of developing the South East European Power Exchange (SEEPEX), which will establish a day-ahead market in the Serbian control area. It is expected that SEEPEX will be linked with power exchanges in neighbouring countries. EMS expects that companies from Montenegro, Macedonia and the Republic of Srpska will participate in the exchange.

 

The government approved the establishment of SEEPEX in March 2014. It is expected to become fully operational during 2015 and reach full capacity in 2018. EMS will hold 75 per cent ownership in SEEPEX, while the rest will be owned by European Power Exchange (Epex Spot).

 

EMS is also in the process of defining a clear relationship with Kosovo Electricity Transmission System and Market Operator (KOSTT), the TSO of Kosovo formed in July 2006 to manage the transmission system in the autonomous province of Kosovo. Disputes continued over ownership of transmission and distribution assets, as the power systems of Serbia and Kosovo remain highly integrated.

 

In February 2014, EMS and KOSTT signed the first-ever agreement to help govern bilateral relations. The agreement, which entered into force on September 15, 2014, defines the rules and forms of mutual cooperation between KOSTT and EMS, with the aim to ensure safe operation of the transmission network connection between the two countries. It also determines the border demarcation between the two electrical systems. The agreement enables KOSTT to participate in the inter-transmission system operator compensation mechanism and makes it responsible for allocation of cross-border capacities on its interconnection power lines with neighbours.

 

Outlook

 

The Serbian power sector has suffered from years of underinvestment partly due to the poor financial health of EPS. The government has been announcing a large number of projects in both the transmission as well as generation segments, but implementation has been slow. Meanwhile, the roles and responsibilities of EMS are set to increase in the coming decade as more and more interconnections are developed with EU members and as the SEEPEX becomes operational.

 

Figure 1: Growth in EMS’ transmission line length 

gte_jan_1_522

Note: Data excludes transmission lines located in Kosovo and Metohija

Source: Elektromreža Srbije

 

Figure 2: Growth in EMS’ transformer capacity

 gte_jan_2_569

Note: Data excludes transmission lines located in Kosovo and Metohija

Source: Elektromreža Srbije

 

Table 1: EMS’ key financial indicators (RSD million)

 

2009

2010

2011

2012

2013

Net operating revenue

12,167

14,120

15,600

16,853

20,423

Operating costs and expenses

11,803

13,409

13,062

15,431

18,883

Gross profit

364

711

2,538

1,422

1,540

Net profit

NA

NA

NA

1,483

1,626

Source: Elektromreža Srbije