Prior to 1990, electricity was treated as an important social tool in eastern bloc countries. In those economies, the energy sector played a key role in the central plan. With the fall of the Berlin Wall and the regions’ transition to a market economy, electricity became a market commodity like any other. The energy sector was fundamentally transformed, losing its ties to the Soviet Union and eventually breaking up into a number of independent entities and state-controlled utilities. 

The overall energy situation at the time could best be described as chaotic. Only a few countries had the capacity to produce surplus energy, while the majority had serious energy deficits. This created an immediate need for the power utilities to start trading in electricity among themselves. 

However, direct trading between the state utilities was not happening on normal economic terms. The infrastructure was wholly inadequate and financial liquidity was poor. As an automatic response to years of difficulties in the normal commercial cycle of cross-border power delivery and payment, regional power companies had institutionalised their mode of operation – either energy was to be sold on pre-payment terms, or it was to be acquired on deferred-payment terms – thereby leaving a yawning and insoluble gap which tended to prevent the wider flow of energy and the smoothing out of regional imbalances. This led to a situation in which much needed electricity was rarely delivered and paid for on time. 

In such circumstances, the public utilities of South-East Europe soon accumulated debts toward their suppliers. The cost of production exceeded income from sales of electricity, which led to shortages of electricity and a series of detrimental effects for the regions’ industry and economy.

EFT was born out of a realisation that a company that could mobilise the necessary capital to absorb the risks of dealing between the different utilities could make substantial returns and create a whole new market. The vision that its founders brought to EFT was that it would be feasible to treat power flows in the region in the same way as flows of funds, and to create the much-needed bank or settlement mechanism through which such flows could occur. 

EFT would build a portfolio of assets comprising an amalgam of pre-paid energy flows of diverse sorts (base-load and mixed high-tariff and low-tariff) and would match this against a balanced portfolio of liabilities towards a mix of different utilities and other power users.Financing itself in the markets it was thus able to inject the necessary liquidity that allowed sellers of power to meet their goals, whilst allowing those who needed energy, but were short of funds, still to import energy. In due course the local industry would be enabled to generate sales and the source of funds to settle energy debts. 

Over time, EFT built a client base of loyal clients comprising all of the regional power utilities, from Ljubljana to Athens, and north to the markets of central Europe, providing the vitally important working capital that the regional market had lacked up to that date. 

The top tier of industry formed the next addition to EFT’s customer base, and the product range expanded to include short-notice reserve energy, amongst other innovations aimed at better serving the ever increasing and complicated requirements of counterparties. 

In line with the regulatory direction pursued in the region, EFT’s network has constantly expanded, with units now in 18 countries.  Whilst meeting these local requirements, the Group has nevertheless acted as a constant ambassador for the greater integration of the south-eastern European market, the dismantling of anti-competitive barriers and the adoption of market standards from north-western Europe. 

Finally, to provide long-term sources of energy to support its trading and sales businesses, EFT is now implementing its vision for the ownership of generation assets, and is developing an energy generation infrastructure. This development will see the EFT Group remain one of the most significant contributors to the development of the electricity markets of central and south-east Europe.