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Energy

Ministry of Mining and Energy published on 21st January, long awaited draft of the Amendments to the Renewable Energy Sources Act (RESA) with purpose to push forward further investments in RES sector by creating better legal framework for development of new projects.Initial adoption of the RESA was welcomed by the investors with high enthusiasm, skyrocketing the number of requests for securing connection to the transmission grid to 17,000 MW of new capacities (in comparison total installed capacity of Republic of Serbia at the moment is 8,000 MW) which led in the end to the suspension of all new procedures by EMS.The main argument for this was that number of requests has led to the endangerment of the stability of transmission system of Republic of Serbia, as well position of guarantee producer EPS due to several very controversial solutions of the RESA including obligation of the EPS to bear the balance responsibility in full for all renewable energy producers, and right to priority access to transmission/distribution system for each renewable energy producers.This initiated the discussion between key stakeholders Ministry of Mining and Energy, EMS and EPS which led to the draft of the proposed amendments.The public debate will be opened until 9th February, and all interested parties can provide their suggestions to the Ministry of Mining and Energy on the e-mail <a href="mailto:oie@mre.gov.rs">oie@mre.gov.rs</a>. Most important changes to the RESA include:<ol start="1"><li>EPS (guaranteed supplier) will bear balance responsibility only for the RES power plants with incentives</li></ol>The biggest change introduced by the Amendments to RESA is that EPS will bear balancing responsibility only for the power plants which receives incentives in form of market premium and feed in tariffs. Other producers will have to regulated their balance responsibility in accordance with the Energy Act and operating rules of electricity market.Market Premium users will pay for balancing services to EPS a percentage of the offered price per produced MWh.<ol start="2"><li>Organization of Auctions</li></ol>Ministry of Energy will be now in charge with determining the maximum price for the auctions and feed in tariffs per MWh instead of Energy Agency of the Republic of Serbia. The idea is to centralize the auctions process in one authority instead of two for the sake of efficiency.<ol start="3"><li>Priority Access to Transmission/Distribution/Closed Distribution System compiling a ranking list and filling the quota</li></ol>Priority access to the transmission, distribution and closed distribution system is now limited only for small power plants up to 400 kW for the beginning, and from 1st January 2026 up to 200 kW. This was implemented to harmonize RESA with EU standards for priority access.<ol start="4"><li>Request for additional capacities</li></ol>Most controversial provision of the proposed amendments act is right of the EMS to request from the developers to secure additional capacities on the territory of Republic of Serbia capable to provide system services of regulation of frequencies and power exchange, as precondition for connection of power plant to the transmission system. EMS can request additional capacities in the event if it estimates that connection of the new RES power plant could endanger functioning of electro-energy system of Republic of Serbia, and includes conventional sources, and batteries.<ol start="5"><li>Limitation of prosumers to 10MW of capacity</li></ol>Considering the number of transmission connection requests, the Ministry of Energy and Mining has decided to propose limiting prosumers to the distribution grid exclusively, hence stipulating that maximum installed power of prosumer is 10MW.This text is for informational purposes only and should not be considered legal advice. Should you require any additional information, feel free to contact us.Contact:Nemanja Providžalo, Senior Associate <a href="mailto:milan.samardzic@sog.rs">nemanja.providzalo@sog.rs</a>

Ministry of Mining and Energy published on 21st January, long awaited draft of the Amendments to the Renewable Energy Sources Act (RESA) with purpose to push forward further investments in RES sector by creating better legal framework for development of new projects.
Initial adoption of the RESA was welcomed by the investors with high enthusiasm, skyrocketing the number of requests for securing connection to the transmission grid to 17,000 MW of new capacities (in comparison total installed capacity of Republic of Serbia at the moment is 8,000 MW) which led in the end to the suspension of all new procedures by EMS.

A New Hope for Renewables

The European Union has set ambitious targets for the development of renewable energy sources, aiming to reach 32% of total energy consumption by 2030. Furthermore, energy from from renewable sources can reduce the EU’s demand for fossil fuels and thanks to their low operational costs, more renewables in the EU’s energy system can lower energy prices. To achieve this goal, a significant increase in the deployment of renewable energy projects is necessary. However, the permit-granting process for these projects can be lengthy and complex, often involving multiple agencies and levels of government.To address this issue, the European Council has adopted a regulation establishing a temporary framework to accelerate the permit-granting process for renewable energy projects. The regulation applies to all EU member states and covers a wide range of renewable energy technologies, including solar, wind, geothermal, and hydropower.Maximum deadlinesUnder the temporary framework established by the Council Regulation, member states are required to ensure that the permit granting process for renewable energy projects is completed within certain time limits. These maximum time limits are as follows:<ul><li>a deadline of one monthfor the installation of heat pumps below 50MW and three months in case of ground source heat pumps;</li><li>a deadline of three months permit-granting process for the installation of solar energy equipment and co-located energy storage assets,</li><li>a deadline of six monthsfor the permit-granting process for repowering projects including all relevant environmental assessments. Where repowering results in an increase of up to 15 % in the capacity of the power plant, grid connections will be permitted within three months.</li></ul>Presumption of overriding public interestThe planning, construction and operation of plants and installations for the production of energy from renewable sources, and their connection to the grid, the related grid itself and storage assets is presumed to be in the overriding public interest and serving public health and safety when balancing legal interests in the individual case.Projects which are recognised as being of overriding public interest are given priority when balancing legal interests in the individual case during the planning and permit-granting process, the construction and operation of plants and installations for the production of energy from renewable sources and the related grid infrastructure development are given priority when balancing legal interests in the individual case.The regulation is valid for a period of 18 months from its entry into force.Overall, the regulation represent  a positive step towards meeting the EU’s renewable energy targets and supporting the transition to a low-carbon economy. It will help to remove barriers to the development of renewable energy projects, encourage the growth of this important sector and hopfully soone have an impact on the market energy prices.

The European Union has set ambitious targets for the development of renewable energy sources, aiming to reach 32% of total energy consumption by 2030. Furthermore, energy from renewable sources can reduce the EU’s demand for fossil fuels and thanks to their low operational costs, more renewables in the EU’s energy system can lower energy prices. To achieve this goal, a significant increase in the deployment of renewable energy projects is necessary.

Council Regulation (EU) 2022/2577 – introducing a new temporary emergency regulation to accelerate the permit-granting process and the deployment of renewable energy projects

Practices

At the end of 2021, the total number of active banks in the Serbian market was 23. The consolidation trend continued and financial results on the sector level in 2021 indicate the same trend for the next years.Total assets on a sector level on 31 December 2021 were EUR 42.9bn. The concentration is increasing. The top 10 banks have assets of EUR 36.4bn, which is 84.8% of the total assets. The top 5 banks have assets of EUR 24.4bn, which is 56.9% of the total assets in the Serbian banking sector.

The number of systematically important banks, meaning banks that participate with at least 5% of the total assets is 9.A very similar situation is on the deposit side, hence top 10 banks participate with 85.5% of the total deposit level on a sector level.In terms of size measured by the number of employees, over 2000 employees on 31 December 2021, have: Intesa (3059), OTP (2916), Komercijalna (2350), and Postanska (2557). This data is mostly in close correlation with the number of branches. Over 100 branches have the following banks: Intesa (178), Komercijalna (206), and Postanska (236).Only the top 9 banks by assets on 31 December 2021 realized net interest income above EUR 50.

Regarding profits on 31 December 2021, the results for the top 10 are the following.

The situation here is the most extreme because only one of the banks below the top 10 by assets made a profit above EUR 10m. The total profit for the top 10 banks made EUR 417.9m, which is 91.2% of the total sector in 2021.The profitability of the whole sector analyzed through the ROAE ratio is as follows.

As we can see 12 banks has this ratio above 5%, and 5 banks have 10% or more.When it comes to CIR (cost/income) ratio, the status among the top 10 is very different.

The years 2021 and 2022 are still significantly marked by M&amp;A activities. Some of the processes have come to an end, and some are still ongoing. After acquiring Vojvodjanska bank, Hungarian OTP subsequently acquired the Serbian branch of the Societe Generale Bank. On 1st July 2021, the state-owned Banka Poštanska štedionica concluded the acquisition of MTS Banka. In April 2022 the merger of the Komercijalna bank and the Slovenian NLB bank took place. One more french banking group abandoned the Serbian market. Raiffeisen acquired in April 2022 the Serbian branch of Credit Agricole banking group. Eurobank and Direktna bank merged into one bank in December 2021. Russian Sberbank sold its branch to the Serbian AIK bank in March 2022.Currently, at least 3 banks in Serbia are up for sale. The exit of the 2 global banking groups already happened. A huge part of the market is now in the hands of the regional banking groups NLB and OTP, while Austria and Italy still traditionally keep their significant influence on the market. There are 2 Serbian banks among the top 10. The state still has the opportunity to support and develop Postanska bank, while AIK bank confidently keeps its momentum and position.This text is for informational purposes only and should not be considered legal advice. Should you require any additional information, feel free to contact us.Contact:Miloš Velimirović , Managing Partner <a href="mailto:milos.velimirovic@sog.rs">milos.velimirovic@sog.rs</a>

At the end of 2021, the total number of active banks in the Serbian market was 23. The consolidation trend continued and financial results on the sector level in 2021 indicate the same trend for the next years. Total assets on a sector level on 31 December 2021 were EUR 42.9bn. The concentration is increasing. The top 10 banks have assets of EUR 36.4bn, which is 84.8% of the total assets. The top 5 banks have assets of EUR 24.4bn, which is 56.9% of the total assets in the Serbian banking sector.

A Brief Analysis of The Serbian Banking Sector 2022: Current Trends and Perspectives

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Jelisaveta is a junior associate at SOG Law Firm. She is a member of the Corporate and M&amp;A department. Her practice focuses on M&amp;A, strategic advice to shareholders in private companies, as well as acquisition structuring and post-M&amp;A integrations. She also advises national clients in the area of corporate housekeeping. Other main areas of her practice include advising clients in energy and infrastructure areas.Jelisaveta is graduated of University of Belgrade, Faculty of Law.Jelisaveta is fluent in Serbian and English.

JelisavetaFolić