Serbia’s state-owned electricity utility Elektroprivreda Srbije (EPS) recorded approximately €150 million in net profit, but lower electricity generation, rising power procurement costs and delayed investment highlight challenges in maintaining and modernising its energy infrastructure.
The company generated 14,825 GWh of electricity, down 5% year-on-year and 7.4% below plan. Coal production declined from 15.4 million to 14.7 million tonnes. Although net profit fell from approximately €192 million, it exceeded the budget by 26%. Operating revenue increased 7% to €2.07 billion, while operating expenditure rose by a similar rate to €1.81 billion.
Capital Investment Remains Below Plan
EPS invested approximately €130 million against a planned €344 million, achieving just 38% of its capital expenditure target and leaving a shortfall of approximately €215 million. Spending from internal resources reached €126.5 million, while investment financed through loans and grants totalled only €3.4 million, compared with approximately €184 million planned.
Management reported an adjusted investment execution rate of 65% when accounting for the scheduled timing of its major 1 GW renewable energy programme. The overall shortfall therefore does not necessarily represent cancelled projects, but low externally financed expenditure highlights difficulties in translating investment plans into implementation.
EPS is pursuing renewable generation, coal-mining modernisation, hydropower rehabilitation and pumped-storage development. Progress depends not only on financing but also on engineering, permits, procurement, environmental compliance and construction readiness.
Lower Depreciation Supports Earnings
Depreciation expenses were approximately €34 million below budget, partly because some investments entered commercial operation later than planned. While this supported reported profitability, lower depreciation does not represent an equivalent improvement in cash generation.
EPS recorded EBITDA of approximately €409 million, slightly above the previous year but below budget. Its EBITDA margin declined from 21% to 19.8%.
Net debt stood at approximately €1.04 billion, below the planned level. However, financial flexibility will depend on the utility’s ability to generate sufficient cash flow while meeting future investment requirements and maintaining existing assets.
Electricity Procurement Costs Increase
EPS spent approximately €909 million on electricity procurement and network access, an increase of 21% year-on-year. Lower domestic generation contributed to the higher purchasing requirements, alongside weaker coal quality and unfavourable hydrological conditions. Danube inflows were approximately 32% below their long-term average during the second quarter, reducing hydropower output and adding pressure to the electricity balance.
EPS also identified the EU Carbon Border Adjustment Mechanism (CBAM) as a factor affecting regional electricity prices, arguing that reduced export opportunities to the EU had increased electricity availability in Western Balkan markets. The utility must therefore manage domestic generation, imports, hourly wholesale prices and cross-border trading to limit its exposure to procurement costs.
Mining and Power Infrastructure Projects
Investment in new coal-mining equipment reached approximately €70 million, exceeding the planned level by 18%. Other developments include rehabilitation of the Bajina Bašta pumped-storage plant and progress on flue-gas desulphurisation equipment at the Nikola Tesla B thermal power station. These projects form part of a wider investment requirement covering renewable generation, energy storage, environmental systems and ageing thermal assets. EPS must balance expenditure on existing facilities with projects designed to diversify Serbia’s electricity supply and improve system flexibility.
The company employed 18,724 people, with more than 40% aged over 50, underscoring the importance of retaining engineering expertise and preparing for workforce succession. For lenders and contractors, EPS’s investment programme presents opportunities in financing, engineering and construction. Its ability to advance technically complex projects while maintaining sufficient cash flow will remain central to the modernisation of Serbia’s power sector.
