Serbia’s state-owned electricity utility Elektroprivreda Srbije (EPS) recorded a €149 million net profit, while investing only €130 million, or 38% of its planned capital expenditure. The company also faced declining electricity and coal production and a 21% increase in electricity procurement and system-access costs.
Net profit fell 20% year on year but exceeded the budgeted result by approximately 25%, supported partly by lower-than-planned operating and financing costs and reduced depreciation associated with delayed investment commissioning. Domestic electricity production declined 5% to 14,825 GWh, while coal output dropped 5% to 14.7 million tonnes. Electricity procurement and system-access expenses climbed to approximately €904 million.
Capital Spending Falls €214 Million Short of Plan
EPS planned approximately €344 million in capital expenditure, but realised only €130 million, leaving a shortfall of around €214 million.
Investment financed from internal resources reached approximately €126 million, against a planned €160 million. Borrowing and grant financing contributed just €3.4 million, compared with approximately €183 million planned—an execution rate of only 2%. The gap raises questions about project readiness, procurement schedules, loan disbursements and construction milestones. Delays in permits, technical documentation and contractual requirements can prevent financing agreements from translating into completed assets.
Lower Depreciation Supports Reported Profit
EPS generated approximately €2.10 billion in revenue, up 2%, while total expenses increased 5% to €1.91 billion. Net profit reached €149 million, compared with a budgeted €119 million. Depreciation amounted to approximately €145 million, around €34 million below plan, partly because investments entered service later than expected. One affected project was the flue-gas desulphurisation installation at TENT B. Lower depreciation reduced accounting expenses, but delayed commissioning can postpone improvements in generating capacity and operational performance.
Coal and Electricity Output Decline
Electricity generation reached 14,825 GWh, approximately 7% below plan and 5% lower year on year. Coal production totalled 14.7 million tonnes, missing the plan by 3% and falling 5% from the previous year. Overburden removal, which supports future coal extraction, was 9% below plan and 6% lower year on year.
Weaker thermal generation and lower domestic coal quality contributed to higher procurement expenditure. EPS spent nearly €90 million on coal imports, below both budget and the previous year’s level, indicating that purchasing electricity was sometimes more economical than importing additional fuel for domestic generation.
Regional Electricity Markets Increase Cost Exposure
EPS’s procurement requirements expose the utility to prices on regional power markets, including SEEPEX in Serbia, HUPX in Hungary and OPCOM in Romania. Strong solar and wind generation can make imported electricity cheaper than output from less efficient thermal units. Conversely, high demand, low renewable generation and transmission congestion can increase procurement costs.
The utility also faces challenges in aligning wholesale purchasing costs with electricity prices charged under regulated or contractual arrangements. Pricing for electricity supplied to distribution and transmission operators to cover network losses remains relevant when replacement power must be purchased at market prices.
€3.6 Billion Investment Programme Requires Financing
EPS’s three-year business plan envisages approximately €3.6 billion in investment, including around €2.5 billion in borrowing. Priorities include renewable generation, the proposed Bistrica pumped-storage hydropower project, solar power with battery storage, thermal-plant upgrades and mining infrastructure.
The limited use of planned external financing highlights the importance of bankable project documentation, permits, procurement progress and construction readiness. The first-half figures do not establish that the entire investment programme is delayed, but they demonstrate a significant gap between planned and realised expenditure.
Workforce Constraints Add Operational Pressure
EPS employed 18,724 people, approximately 1,196 fewer than planned. During the first half, 31 employees left through mutual termination agreements or dismissals, including 21 university graduates, of whom 17 were engineers.
Approximately 40% of employees are older than 50, while fewer than 5% are younger than 30. The workforce profile creates challenges for knowledge transfer, technical supervision, maintenance and the commissioning of complex energy infrastructure. Engineering capacity remains important across EPS’s thermal plants, mines, hydropower facilities and renewable energy projects, particularly as the company seeks to accelerate investment while maintaining reliable electricity production.
