Hungary’s state-owned energy group has taken control of one of Serbia’s established power-engineering contractors at a moment when the country is entering a costly cycle of grid modernisation, renewable integration and regional market reform. The strategic fit is clear. The financial performance is more complicated.
Hungary’s MVM Group has chosen an unconventional route into Serbia’s changing energy market. Instead of beginning with the acquisition of a power plant, electricity supplier or renewable portfolio, the state-owned utility has invested in the engineering infrastructure needed to build and modernise the Serbian power system itself.
Its principal vehicle is MVM Južna Bačka, formerly Energotehnika Južna Bačka, an engineering and construction company with activities spanning substations, transmission and distribution infrastructure, power generation, electrical installations, metering and industrial energy systems.
That positioning gives MVM exposure to something potentially more durable than electricity trading margins: Serbia’s increasingly unavoidable infrastructure investment cycle.
The Serbian power market is formally liberalised and increasingly aligned with European electricity rules, but it remains heavily influenced by state-owned institutions, regulated household supply and concentrated wholesale activity. At the same time, renewable deployment is accelerating, ageing generation assets require rehabilitation and both transmission and distribution networks need substantial investment.
MVM has effectively positioned itself between these two forces.
A carefully staged Serbian entry
MVM did not take control of Južna Bačka immediately.
In March 2022, the Hungarian group agreed to acquire 33.4 per cent of Energotehnika Južna Bačka and the related engineering contractor Elektromontaža Kraljevo from Serbia’s Maneks Group. The initial transaction created a strategic partnership while leaving operational control with the existing Serbian owners.
Three years later, MVM exercised the mechanism that allowed it to increase its ownership. An agreement signed in July 2025 raised its interest to 60 per cent, with the transaction completing on September 30 2025 following the necessary competition approvals.
The sequence is significant. MVM spent roughly three years as a minority shareholder before committing to control. That period provided exposure to Serbian procurement practices, project execution, customer relationships, working-capital requirements and the economics of large infrastructure contracts before significantly more capital was committed.
It was also acquiring something that would have taken years to reproduce organically.
Južna Bačka traces its origins to 1958 and has accumulated decades of experience in Serbia’s electricity infrastructure. The business was privatised in 2010 and subsequently became part of Maneks Group in 2013.
Its value to MVM therefore extends beyond machinery, employees and individual contracts. It brings engineering references, licences, procurement experience, relationships with Serbian utilities and public institutions, and knowledge of a technically demanding market.
The simultaneous investment in Elektromontaža Kraljevo broadens that platform. Together, the two companies give MVM a local engineering base capable of participating across transmission, distribution, generation rehabilitation and major industrial infrastructure.
For a foreign utility entering Serbia, this is a considerably deeper position than simply obtaining an electricity trading licence.
Rapid growth followed by a sharp margin correction
The financial record explains both the attraction and the risk.
Južna Bačka recorded total income of approximately RSD14.10bn in 2023. By 2024, that had almost doubled to RSD27.01bn, an increase of about 91.5 per cent.
Profitability expanded even faster.
Net profit rose from approximately RSD958mn in 2023 to RSD2.42bn in 2024, while EBITDA increased from around RSD1.33bn to RSD3.26bn.
For an engineering contractor operating in a relatively small regional market, those numbers demonstrated substantial scale. They also illustrated the operating leverage available when large infrastructure projects move simultaneously through execution and revenue recognition.
But 2025 produced a much less comfortable picture.
Total income remained substantial at approximately RSD26.41bn, only about 2.2 per cent below the previous year. Net profit, however, fell to roughly RSD1.12bn, a decline of around 54 per cent.
EBITDA dropped from RSD3.26bn to RSD1.44bn, a fall of approximately 56 per cent.
The EBITDA margin consequently moved from roughly 12 per cent in 2024 to about 5.5 per cent in 2025. The net margin contracted from around 9 per cent to just over 4 per cent.
This is arguably the most important financial signal surrounding MVM’s acquisition.
Južna Bačka did not suffer a collapse in revenue. It suffered a collapse in the profitability attached to that revenue.
Total expenses increased to approximately RSD25.06bn even as income declined slightly. That combination points towards the central vulnerability of infrastructure contracting: revenue visibility does not necessarily translate into earnings visibility.
Large electrical and civil-engineering projects can involve significant procurement exposure, subcontracting costs, equipment-price movements, labour pressures and delays between expenditure and certification. Competitive tenders can also leave relatively little protection when input costs move against the contractor.
The available accounts do not provide sufficient detail to attribute the deterioration to one factor. They do, however, make MVM’s immediate task clear. The priority under majority ownership is likely to be margin discipline rather than revenue expansion alone.
Employee numbers provide another indication of the changing economics. The workforce increased from approximately 295 employees in 2024 to 307 in 2025, while business revenue declined from around RSD26.87bn to RSD25.97bn.
Revenue per employee therefore slipped from approximately RSD91mn to RSD85mn.
That movement is not necessarily problematic for a project contractor — employees are frequently recruited ahead of major execution phases — but it reinforces the distinction between expanding the order book and expanding economic returns.
The balance sheet shifts attention towards working capital
Južna Bačka does not appear to face the kind of long-term leverage problem that often accompanies aggressive infrastructure expansion.
At the end of 2025, current assets were approximately RSD22.74bn, compared with short-term liabilities of around RSD20.37bn. That implies net working capital of approximately RSD2.37bn and a current ratio of roughly 1.12.
Long-term liabilities were relatively limited at approximately RSD229mn.
The more important issue is the structure of the business itself.
Engineering contractors frequently finance equipment, labour and subcontractors before receiving final payment from clients. A company can therefore report substantial revenues and accounting profits while simultaneously facing pressure on cash conversion.
With more than RSD20bn of short-term liabilities, relatively small movements in customer payments, certification schedules or supplier terms can have material consequences.
MVM’s balance sheet and financing capacity could become an important competitive advantage here. A Serbian contractor supported by one of central Europe’s largest state-owned utilities should theoretically have greater capacity to absorb project working-capital requirements and compete for larger contracts.
But access to capital only creates value when the projects being financed generate adequate returns.
Serbia is liberalised, but not yet deeply competitive
The environment into which MVM has expanded is unusual.
Serbia has spent years liberalising its electricity sector, but market structure still differs substantially from the deeper and more liquid markets of western and central Europe.
Final electricity sales reached approximately 31.2TWh in 2025. Around 53.8 per cent was supplied through the competitive market, while approximately 46.2 per cent remained within regulated supply.
Households continue overwhelmingly to purchase electricity under regulated conditions.
The commercial market is therefore substantially more liberalised than the residential market.
Formal participation numbers can also give a misleading impression of competition. Serbia had approximately 75 licensed electricity suppliers in 2025, but only around 11 were commercially active.
The result is a market that is open in legal terms but remains concentrated in operational terms.
Elektroprivreda Srbije (EPS) continues to dominate domestic electricity generation and plays a central role in supply. Elektromreža Srbije (EMS) controls transmission infrastructure, while Elektrodistribucija Srbije (EDS) operates the distribution network.
For companies seeking engineering contracts, these institutions matter at least as much as formal electricity-market liberalisation.
This is where MVM’s strategy becomes particularly interesting.
Its Serbian investment is not dependent on rapidly capturing household electricity customers. Južna Bačka can earn revenues from the physical investment required regardless of whether retail liberalisation proceeds quickly or slowly.
SEEPEX is developing, but liquidity remains limited
Serbia has nevertheless established a functioning wholesale market around the SEEPEX electricity exchange.
Day-ahead trading reached approximately 5.84TWh in 2025, with about 48 registered participants and 40 active participants.
That represents meaningful progress towards transparent wholesale price formation.
Intraday liquidity remains considerably weaker. Intraday trading amounted to only around 79GWh during 2025.
This becomes increasingly important as Serbia adds variable renewable generation.
Solar and wind output cannot be managed efficiently through day-ahead trading alone. Greater renewable penetration increases the value of intraday liquidity, balancing capacity, flexible generation, storage, accurate forecasting and more sophisticated grid management.
The infrastructure implications are considerable.
Serbia needs more than renewable plants. It needs the electrical architecture around them.
The renewable build-out creates the real addressable market
Serbia’s energy strategy envisages roughly 3.5GW of additional wind and solar capacity by 2030, alongside a renewable share approaching 45 per cent 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 €782mn.
Successful auction prices were approximately €50.9/MWh for solar and €53.5/MWh for wind, supported through long-term market-premium arrangements.
These projects create a second layer of expenditure beyond the generation assets themselves.
New renewable capacity requires grid connections, substations, transformers, protection systems, transmission upgrades, distribution reinforcement, control equipment, smart meters and increasingly sophisticated balancing infrastructure.
That secondary investment cycle is directly relevant to MVM Južna Bačka.
Wind and solar also impose different requirements on Serbia’s power system.
Wind projects generally achieve higher capacity factors and can provide significant winter generation, but large projects require strong transmission connections from resource-rich regions.
Solar can be deployed more rapidly and on a more distributed basis, but rising daytime generation creates different challenges for distribution networks, voltage management and system balancing.
Both create engineering demand.
For MVM, ownership of an established Serbian contractor provides an opportunity to capture part of that expenditure without assuming all of the merchant electricity-price risk associated with owning renewable generation.
Vlasina demonstrates the scale of the opportunity
One of Južna Bačka’s most important projects is the modernisation of the Vlasina hydropower cascade.
The rehabilitation programme is valued at approximately €109.7mn and covers a system with installed capacity of around 129MW.
Modernisation is expected to increase capacity by approximately 8MW while extending the operating life of the assets by another 30 to 40 years.
The financing structure is equally important.
Approximately €67mn comes from the European Bank for Reconstruction and Development, around €15.4mn from an EU grant, with approximately €27.2mn provided by EPS.
For Južna Bačka, this represents precisely the type of project that could define the next phase of its development: large-scale technical rehabilitation, an established state utility as customer, international institutional financing and equipment-intensive engineering.
Hydropower also has growing system value as Serbia installs more wind and solar.
Dispatchable hydro generation can respond to changes in renewable output far more effectively than conventional baseload assets. Existing hydro plants therefore become strategically more valuable as variable renewable penetration rises.
The Vlasina contract places MVM Južna Bačka directly inside that transition.
Smart meters provide a second growth platform
The company’s exposure to Serbia’s smart-meter programme may prove equally important.
Južna Bačka has secured contracts covering approximately 200,000 smart meters.
A contract for around 140,000 meters in the Niš region was valued at approximately €25.8mn, while another covering around 60,000 meters in the Kraljevo and Čačak areas was worth approximately €11mn.
Combined, these represent almost €37mn of work.
The significance goes beyond meter installation.
Serbia’s electricity-market reforms increasingly envisage active consumers, distributed generation, dynamic tariffs, aggregation and energy communities. None can function efficiently at scale without detailed consumption data and remote metering infrastructure.
Digitalisation therefore becomes inseparable from liberalisation.
Every additional rooftop solar installation, electric vehicle, battery system or flexible industrial consumer increases the importance of network visibility.
The gap between Serbia’s increasingly sophisticated electricity legislation and the physical capabilities of parts of its distribution system creates a substantial investment requirement. Južna Bačka is positioned to monetise part of that gap.
MVM is also moving beyond electricity
The Serbian platform is already expanding outside the conventional electricity sector.
A consortium led by MVM Južna Bačka has secured work connected with the Serbian section of the planned Hungary–Serbia oil pipeline, a project intended to create a direct crude-oil connection between the two countries.
The relevant contract is valued at approximately RSD14.5bn, equivalent to about €123mn, covering roughly 113km between Horgoš and Novi Sad.
Južna Bačka’s share of the work is around 43 per cent.
This should be separated analytically from the electricity investment thesis. Oil infrastructure carries different regulatory, environmental and geopolitical risks.
But commercially it reveals something important about MVM’s intentions.
Južna Bačka is becoming a regional energy-infrastructure platform, rather than remaining simply a Serbian electrical contractor.
A Serbian foothold backed by MVM’s balance sheet
The difference in financial scale between the parent and its Serbian subsidiary is substantial.
MVM Group reported approximately HUF3.81tn of revenue in 2025, EBITDA of around HUF772bn and capital expenditure of approximately HUF432bn.
The group therefore has financial resources far beyond those available to most independent Serbian engineering contractors.
That matters when bidding for projects requiring large guarantees, substantial equipment purchases and prolonged working-capital commitments.
It also opens another possibility.
Južna Bačka and Elektromontaža Kraljevo do not necessarily have to remain businesses focused exclusively on Serbia. Their engineering workforce, qualifications and project references could increasingly be deployed across MVM’s operations in central and south-east Europe.
The acquisition could therefore work in both directions: MVM gains local Serbian execution capability, while the Serbian companies gain access to a much larger regional customer and financing base.
The first full year under MVM control becomes decisive
There is an important timing issue when interpreting the latest financial numbers.
MVM completed the move to 60 per cent ownership only on September 30 2025.
Most of Južna Bačka’s 2025 financial performance therefore predates effective majority control.
The sharp decline in EBITDA and net profit should consequently be treated as the earnings profile MVM inherited rather than as evidence of the success or failure of its management.
That makes 2026 the first meaningful operational test.
MVM now has the authority to influence procurement, tender discipline, financing structures, project selection, cost controls and regional business development.
Revenue growth alone would be an insufficient measure of success. Južna Bačka has already demonstrated that it can generate more than RSD25bn of annual revenue.
The more important question is whether MVM can restore EBITDA margins towards the levels achieved in 2024 while preserving cash conversion and avoiding excessive working-capital expansion.
The strategic case for the acquisition remains substantial. Serbia is moving into a period in which renewable deployment, transmission reinforcement, distribution digitalisation, hydro rehabilitation and cross-border infrastructure must advance simultaneously.
These are capital-intensive processes that cannot be achieved through regulation alone.
MVM has bought into the companies that physically build them.
The financial opportunity therefore extends beyond today’s Serbian electricity market. It lies in the billions of euros of infrastructure investment required to transform that market over the coming decade.
Južna Bačka gives MVM an established seat at that table. Its 2025 margin contraction, however, is a reminder that infrastructure exposure and infrastructure returns are not the same thing. Under majority ownership, MVM now has to demonstrate that strategic access to Serbia’s energy transition can be converted into disciplined earnings and cash generation.
