The narrative of EPS’s financial and operational stabilisation is inseparable from the utility’s evolving capital-expenditure (CAPEX) and financing strategy. After years of emergency borrowing, reactive repair spending and short-tenor loans, EPS is now managing a deliberate, long-horizon investment pipeline totalling several billion euros. These investments are structured not as ad-hoc line items but as a comprehensive transformation programme designed to modernise generation, expand cleaner capacity, improve flexibility, rehabilitate legacy hydro assets and enable the energy transition while maintaining financial discipline.
As of 2025 EPS’s CAPEX envelope is sizeable. The company’s medium-term investment plan — spanning 2024 through 2030 — currently totals approximately €3.7–€4.1 billion. Roughly €1.8–€2.0 billion of that is allocated to major hydro refurbishments, solar and auxiliary renewable capacity. Another €0.9–€1.1 billion is earmarked for lignite-plant modernisation, emissions control systems and environmental compliance investments, reflecting Serbia’s need to balance reliability with regulatory expectations. The remaining investment envelope is dedicated to grid modernisation, digitalisation, critical auxiliary infrastructure and system integration projects.
Hydropower rehabilitation is the largest CAPEX component in absolute terms. EPS’s flagship hydro programme involves rehabilitation of the Djerdap cascade units, upgrades at Bistrica and Potpeć, and efficiency improvements on the Vlasina system. The estimated total cost of these hydro initiatives exceeds €1.6 billion, and they are financed through a blend of long-tenor institutional loans, sovereign-aligned facilities and EPS’s own cash flow contributions. These investments are calibrated to extend asset life by 25–30 years, boost overall capacity by up to 10–15% at individual facilities and materially improve availability factors — a key driver of revenue predictability.
Solar CAPEX — an increasingly strategic element of EPS’s portfolio — is being pursued both at utility scale and through distributed generation. As of 2025, EPS has committed to deploying approximately 300–400 MW of solar capacity by 2030. The initial investment tranche totals nearly €620–€700 million, with financing blended between institutional debt and internal cash. Solar projects are attractive not only for their alignment with climate strategy but also because they provide daytime, low-variable-cost generation that reduces lignite burn, lowers system OPEX and improves overall portfolio flexibility. When combined with hydro and thermal assets, the solar pool helps flatten net load curves and reduces exposure to thermal fuel price volatility.
Crucially, EPS’s financing architecture is no longer dominated by short-term commercial debt. Instead, the utility is accessing long-tenor institutional financing that aligns with project life cycles. The European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD) are core partners in this strategy. EPS has secured multiple long-duration facilities — some with tenors stretching 20–25 years — specifically aligned to large hydro rehabilitation and solar build-out projects. These institutional loans typically carry fixed or semi-fixed interest rates below commercial bank benchmarks and feature grace periods that match expected commissioning profiles. In addition to direct lending, a portion of EPS’s CAPEX programme is supported by European Union grant components under broader energy transition frameworks, effectively subsidising portions of eligible renewable and grid modernisation investments.
The EIB financing framework with EPS currently totals approximately €207 million, aligned with a larger project cost of around €408 million, underpinning multi-facility hydro rehabilitation. Another EBRD facility approximating €67 million, combined with EU grant co-financing of around €15–€18 million, supports optimisation projects on the Vlasina cascade extensive enough to boost capacity and provide ancillary services. These figures illustrate the blended finance principle EPS is increasingly using: external institutional debt underpins large CAPEX items, grant co-financing reduces overall project cost, and EPS’s own cash commitments ensure alignment of interests and execution discipline.
Beyond institutional partners, EPS is also deploying internal funding. In 2024 the company generated roughly €220–€230 million of free operating cash flow after OPEX and working capital adjustments; in 2025 that metric is projected to rise toward €280–€320 million as export volumes and price stability improve. Because EPS’s profitability has stabilised, internal funds contribute meaningfully to CAPEX without pushing leverage metrics into stress zones. For instance, EPS allocated approximately €320–€350 million of its 2025 CAPEX programme from internal resources, with the remainder financed through long-tenor loans and facility credit.
EPS’s debt profile today is deliberately structured to support both stability and growth. Net debt at the end of 2025 is projected at €2.65–€2.75 billion, a level that reflects recent borrowing for CAPEX but remains within comfort bands given EBITDA generation capacity and forecast cash flow. Net debt to EBITDA ratios, previously above 5.0x, are now approaching 3.0x, a level widely viewed as manageable for utilities with stable regulated or contracted cash flows. Interest coverage ratios, supported by return to profitability and reduced extraordinary costs, have likewise improved to levels that comfortably cover interest obligations with sizable coverage multiples.
This evolution has significant implications for Serbia’s fiscal and corporate risk trajectory. First, the reliance on long tenor, institutional financing reduces refinancing risk and interest rate exposure. Short-term commercial debt — costly and unpredictable — has been minimised in favour of structured programmes that align repayment schedules with asset revenue life cycles. Second, sovereign support frameworks, including explicit guarantee structures for certain facilities, have materially lowered EPS’s cost of funds and improved investor confidence. Third, EPS’s internal co-funding capacity signals that the utility is not dependent solely on external capital, but is recycling earnings into strategic transformation.
These financial dynamics influence national policy as well. Serbia’s energy transition obligations, environmental compliance schedules and industrial competitiveness goals are now embedded in EPS’s capital planning. The utility’s CAPEX does not follow a disparate project list; it is a coherent strategic programme integrating legacy asset rehabilitation, clean generation expansion, grid modernisation and system optimisation. Each macro-project — whether a €700 million hydro upgrade or a €300 million solar cluster — is calibrated not only for energy outcomes but also for macroeconomic impact, employment effects, foreign exchange stability and regulatory alignment.
The CAPEX strategy extends beyond generation into grid investments. Distribution and transmission reinforcements aimed at accommodating larger volumes of variable renewables, reducing losses and enhancing system reliability account for an additional €450–€550 million through 2030. Digitalisation initiatives — including advanced metering, real-time grid management and cybersecurity layers — add another €120–€170 million of planned investment. Though relatively small in comparison with generation expenditure, these grid elements are critical enablers of a modern, flexible energy system and structurally support EPS’s broader transformation.
Ultimately, the financing story of EPS is a testimony to how a large national utility can transition from crisis reactivity to strategic execution. The combination of profitability stabilisation, disciplined OPEX management, internal cash funding, long-duration institutional loans, and sovereign policy alignment has repositioned EPS as a credible long-term investment platform. For international lenders, investors and policymakers, this means that EPS is not only generating reliable megawatt-hours; it is also executing a multi-billion-euro transformation programme that is structurally tied to Serbia’s economic development, energy security and decarbonisation pathways.
From an investor perspective, the critical matrices to watch — net debt metrics, CAPEX execution quality, OPEX discipline, tariff regime predictability and project delivery timelines — are all trending positively. EPS’s generation base of 30–35 TWh annually, combined with robust profitability and a €3.7–€4.1 billion investment plan, positions the utility not only as the cornerstone of Serbia’s energy strategy but also as a deeply bankable infrastructure entity in the broader South-East European context. Its financing evolution demonstrates how state-linked utilities can leverage institutional capital, internal cash flows, and coherent CAPEX frameworks to navigate energy transition imperatives without undermining financial stability, tariff predictability or macroeconomic resilience.