MVM Expands Serbia Energy Infrastructure Role as Južna Bačka Faces Margin Pressure

Hungary’s state-owned MVM Group is expanding its role in Serbia’s energy sector through infrastructure rather than direct electricity generation or retail supply, after taking majority control of established engineering contractor MVM Južna Bačka.

Formerly known as Energotehnika Južna Bačka, the company operates across substations, transmission and distribution infrastructure, power generation, electrical installations, metering and industrial energy systems. Its position gives MVM exposure to Serbia’s growing requirements for grid modernisation, renewable integration and rehabilitation of ageing energy assets. MVM initially acquired 33.4% of Energotehnika Južna Bačka and Elektromontaža Kraljevo from Serbia’s Maneks Group in March 2022. In July 2025, it agreed to increase its holdings to 60%, with the transaction completed on September 30, 2025, after the necessary competition approvals.

Majority Control Follows Three Years of Minority Ownership

The staged acquisition gave MVM approximately three years as a minority investor before it assumed control. During that period, the Hungarian group gained exposure to Serbian procurement practices, project execution, customer relationships, working-capital requirements and the economics of major infrastructure contracts. The acquisition also brought an established engineering business rather than a newly created market presence. Južna Bačka dates back to 1958, was privatised in 2010 and became part of Maneks Group in 2013. Its accumulated licences, engineering references, procurement experience and relationships with Serbian utilities and public institutions formed part of the platform acquired by MVM.

MVM’s simultaneous investment in Elektromontaža Kraljevo expanded the platform across transmission, distribution, generation rehabilitation and industrial infrastructure. The combined businesses provide a local engineering base considerably broader than an electricity-trading operation.

Revenue Growth Has Been Followed by a Sharp Profit Decline

Južna Bačka’s financial results show substantial expansion followed by a marked deterioration in profitability. Total income reached approximately RSD14.10 billion in 2023 before almost doubling to RSD27.01 billion in 2024, an increase of approximately 91.5%. Net profit increased from around RSD958 million to RSD2.42 billion, while EBITDA rose from approximately RSD1.33 billion to RSD3.26 billion. The trajectory changed in 2025. Total income remained at approximately RSD26.41 billion, only 2.2% below the previous year’s level, but net profit dropped to roughly RSD1.12 billion, a decline of around 54%.

EBITDA fell from RSD3.26 billion to RSD1.44 billion, or approximately 56%. The EBITDA margin consequently declined from about 12% in 2024 to 5.5% in 2025, while the net margin contracted from approximately 9% to just over 4%. Total expenses increased to approximately RSD25.06 billion even as income edged lower. The financial data therefore show that the principal deterioration was in profitability rather than revenue. The available accounts do not identify a single cause for the decline. Infrastructure contractors can face procurement exposure, subcontracting costs, equipment-price movements, labour costs and delays between expenditure and customer certification. The 2025 results consequently place greater emphasis on controlling margins alongside maintaining revenue.

Workforce and Working Capital Add to the Financial Test

Južna Bačka increased its workforce from approximately 295 employees in 2024 to 307 in 2025, while business revenue declined from around RSD26.87 billion to RSD25.97 billion. Revenue per employee consequently fell from approximately RSD91 million to RSD85 million. The movement does not by itself indicate a structural problem, particularly because infrastructure contractors can expand staffing ahead of major execution phases, but it highlights the difference between increasing project activity and improving economic returns.

The balance sheet does not indicate a major long-term leverage burden. At the end of 2025, current assets stood at approximately RSD22.74 billion, compared with short-term liabilities of around RSD20.37 billion. Net working capital was therefore approximately RSD2.37 billion, with a current ratio of roughly 1.12. Long-term liabilities were comparatively limited at approximately RSD229 million.

The greater financial consideration is the working-capital structure inherent in engineering contracting. Equipment, labour and subcontractors can require funding before clients make final payments. With more than RSD20 billion in short-term liabilities, changes in customer payments, certification schedules or supplier terms can materially affect cash conversion. MVM’s larger balance sheet and financing capacity could provide additional support for working-capital requirements and larger tenders. The value of that capacity, however, depends on whether the projects being financed generate sufficient returns.

Serbia’s Electricity Market Remains Operationally Concentrated

MVM is expanding into an electricity market that has undergone years of liberalisation but remains strongly influenced by state-owned companies and regulated household supply. Final electricity sales reached approximately 31.2TWh in 2025. Around 53.8% was supplied through the competitive market, while approximately 46.2% remained under regulated supply arrangements. Households continue to purchase electricity overwhelmingly through regulated channels. Although Serbia had approximately 75 licensed electricity suppliers in 2025, only around 11 were commercially active. Elektroprivreda Srbije (EPS) remains the dominant electricity generator and a central supplier, while Elektromreža Srbije (EMS) operates the transmission system and Elektrodistribucija Srbije (EDS) manages the distribution network.

For an engineering company, these institutions are major market participants regardless of the formal degree of electricity-market liberalisation. MVM’s infrastructure strategy therefore does not depend on rapid gains in household electricity supply. Južna Bačka can participate in physical investment in the power system regardless of the pace of retail-market liberalisation.

Wholesale Trading Is Expanding Alongside Renewable Integration

Serbia has developed a functioning wholesale electricity market through the SEEPEX exchange. Day-ahead trading reached approximately 5.84TWh in 2025, with about 48 registered participants and 40 active participants. The activity represents progress in wholesale price formation, although liquidity remains substantially weaker in the intraday market. Intraday trading amounted to only approximately 79GWh during 2025. The difference is increasingly relevant as variable renewable generation expands.

Greater wind and solar penetration increases the need for intraday liquidity, balancing capacity, flexible generation, storage, accurate forecasting and more advanced grid-management systems. That requirement extends beyond renewable generation facilities themselves. It creates demand for grid connections, substations, transformers, protection systems, transmission reinforcement, distribution upgrades, control equipment and smart meters.

Renewable Investment Creates a Large Engineering Pipeline

Serbia’s energy strategy envisages approximately 3.5GW of additional wind and solar capacity by 2030, alongside a renewable share approaching 45% of electricity production.

The country’s second renewable-energy auction awarded support to approximately 645MW of wind and solar projects, representing planned investment of around €782 million. Auction prices were approximately €50.9/MWh for solar and €53.5/MWh for wind, supported through long-term market-premium arrangements. The resulting infrastructure requirements extend beyond generation assets. Renewable projects require grid connections, substations, transformers, protection systems, transmission upgrades, distribution reinforcement, control systems, smart meters and balancing infrastructure.

Wind and solar also create different engineering requirements. Wind projects generally have higher capacity factors and can provide significant winter generation, while large facilities require strong transmission links from resource-rich areas. Solar can be deployed more rapidly and in a more distributed manner but creates different requirements for distribution networks, voltage management and system balancing. MVM Južna Bačka therefore has exposure to the infrastructure spending associated with renewable deployment without assuming the full merchant electricity-price risk of owning the generation assets.

Vlasina Rehabilitation Brings International Financing

One of Južna Bačka’s major projects is the modernisation of the Vlasina hydropower cascade. The rehabilitation programme is valued at approximately €109.7 million and covers facilities with installed capacity of around 129MW. The programme is expected to add approximately 8MW of capacity and extend the assets’ operating life by another 30 to 40 years.

The financing includes approximately €67 million from the European Bank for Reconstruction and Development (EBRD), around €15.4 million in EU grant funding and approximately €27.2 million from EPS.

For Južna Bačka, the project combines large-scale technical rehabilitation, a state-owned utility customer, international institutional financing and equipment-intensive engineering work. The rehabilitation also comes as hydropower becomes more relevant to a power system with increasing wind and solar generation. Dispatchable hydro generation can respond to changes in renewable output more effectively than conventional baseload assets, increasing the importance of existing hydro facilities as variable renewable capacity expands.

Smart-Meter Contracts Add a Digital Infrastructure Component

Južna Bačka has also secured contracts involving approximately 200,000 smart meters. A contract covering around 140,000 meters in the Niš region was valued at approximately €25.8 million. Another contract for approximately 60,000 meters in the Kraljevo and Čačak areas was worth around €11 million. The two contracts represent almost €37 million of work.

The programme extends beyond physical meter installation. Serbia’s electricity-market reforms increasingly involve active consumers, distributed generation, dynamic tariffs, aggregation and energy communities, all of which require detailed consumption information and remote-metering infrastructure. The expansion of rooftop solar, electric vehicles, battery systems and flexible industrial consumption further increases the importance of network visibility. The gap between Serbia’s electricity-market framework and the physical capabilities of parts of its distribution network represents an additional investment requirement for engineering contractors.

Oil Pipeline Work Broadens MVM’s Infrastructure Exposure

MVM Južna Bačka is also expanding beyond conventional electricity infrastructure. A consortium led by the company has secured work related to the Serbian section of the planned Hungary-Serbia oil pipeline, designed to establish a direct crude-oil connection between the two countries. The relevant contract is valued at approximately RSD14.5 billion, or about €123 million, and covers roughly 113 kilometres between Horgoš and Novi Sad. Južna Bačka holds approximately 43% of the consortium’s work.

The project involves different regulatory, environmental and geopolitical considerations from electricity infrastructure, but it also demonstrates the widening scope of the Serbian platform. Južna Bačka is consequently developing into a broader regional energy-infrastructure platform, rather than remaining solely an electrical contractor.

MVM Provides a Larger Financial Platform

The financial scale of MVM Group is substantially greater than that of its Serbian engineering subsidiary. MVM reported approximately HUF3.81 trillion in revenue in 2025, HUF772 billion in EBITDA and around HUF432 billion in capital expenditure. That financial capacity is relevant for infrastructure contracts requiring substantial guarantees, equipment purchases and extended working-capital commitments.

The Serbian businesses could also potentially operate beyond Serbia. Their engineering qualifications, workforce and project references provide MVM with an established execution base, while the companies gain access to a larger regional customer and financing platform. The acquisition therefore creates a two-way relationship: MVM obtains local Serbian engineering capacity, while Južna Bačka and Elektromontaža Kraljevo gain access to the resources of a larger central European energy group.

2026 Becomes the First Full-Year Test Under MVM Control

The timing of the ownership change is critical when assessing Južna Bačka’s financial performance. MVM did not complete the move to 60% ownership until September 30, 2025, meaning most of the company’s 2025 results were generated before the Hungarian group assumed majority control. The sharp decline in EBITDA and net profit therefore represents the earnings profile MVM inherited rather than a full-year measure of its management of the business.

2026 is consequently the first full-year period in which MVM can influence procurement, tender discipline, financing structures, project selection, cost management and regional expansion. Revenue growth alone provides a limited measure of progress because Južna Bačka has already demonstrated its ability to generate more than RSD25 billion in annual revenue.

The more significant financial test is whether MVM can restore EBITDA margins toward the approximately 12% achieved in 2024 while maintaining cash conversion and avoiding excessive growth in working-capital requirements. Serbia is entering a period of investment involving renewable generation, transmission reinforcement, distribution digitalisation, hydropower rehabilitation and cross-border energy infrastructure. Južna Bačka places MVM directly within that investment cycle, while its 2025 margin contraction makes profitability and cash generation central measures of the acquisition’s performance.