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Rating action

Scope Ratings Gmbh (Scope) has today assigned a first-time issuer rating of B/Stable to Kodar Energomontaža d.o.o. Scope has also assigned a preliminary bond rating of (P) B to the company’s planned RSD 5.9bn (EUR 50m) senior unsecured bond.

The rating reflects Kodar’s solid track record in executing projects for large telecom, transmission and distribution operators, as well as its expanding operations. However, the rating remains constrained by Kodar’s small scale, high customer concentration, and the expected increase in leverage resulting from the financing and execution of the Jasikovo and Brebex renewable‑power‑plant projects, which are to be funded through the planned RSD 5.9bn bond issuance. The issuer rating also incorporates concerns over potential cash outflows tied to the owner’s external renewable-power-plant projects and the structuring of certain related‑party transactions not aligned with best interests of creditors.

The full list of rating actions and rated entities is at the end of this rating action release.

Key rating drivers

Business risk profile: B (new). The business risk profile is constrained by Kodar’s relatively small scale, which limits economies of scale and weakens its competitive position in tendering processes, particularly given the presence of a significantly larger domestic competitor that may adopt a more aggressive bidding strategy following its recent change in majority ownership. Kodar’s domestic market share is estimated at around 20%, and the company has benefited from strong market‑volume growth over recent years.

Kodar’s key domestic customers include the state‑owned national transmission system operator Elektromreža Srbije (EMS) and the national distribution operator Elektrodistribucija Srbije (EDS). Both entities plan substantial investments in network upgrades in the coming years, and Kodar is expected to remain involved given its decades‑long track record with these clients. Internationally, Kodar’s operations are focused primarily on the Netherlands, where its business model is reinforced by a circular workforce structure that deploys Serbian engineering staff to help alleviate persistent labour shortages in the Dutch market. The company expects to further capitalise on the upcoming large‑scale grid expansion programme in the Netherlands.

Revenues from foreign customers have steadily increased, with their share rising to nearly 50% today from 31% in 2018, although most international revenues remain concentrated in the Netherlands. This growing geographical diversification helps mitigate exposure to potential downturns in the domestic market.

The company is principally active in one segment of the construction industry: EPC contracting. However, within this segment Kodar generates revenues from five distinct sub-segments: transmission, distribution (both segments mainly focused on the domestic market), fiber optic networks installation (with 95% of revenues generated in the Netherlands), telecommunications infrastructure and solar power plants. These sub-segments have different demand patterns, which helps diversify revenue streams and mitigate exposure to fluctuations in economic cycles. In particular, demand in the sub-segments generating the highest proportion of revenues, the transmission and distribution (T&D) and networks installation, have fundamentally different patterns. While T&D is structurally less cyclical and more policy‑anchored, as it is driven by national grid expansion, electrification trends, renewable‑energy integration, and regulatory mandates, the networks sub-segment tends to be more sensitive to macroeconomic conditions, as demand depends on competition among telecom operators, government broadband‑expansion incentives, and fluctuations in consumer and enterprise connectivity needs. This product‑level diversification partially mitigates revenue and margin volatility.

Customer concentration is high, with the ten largest customers accounting for roughly 90% of total turnover on average over the past two years. This creates elevated cluster risk, as non‑payment, project delays, loss of key contracts, or weaker order intake from any major client could materially affect revenue stability. Scope notes, however, that such concentration is not uncommon for a company of Kodar’s size operating in a relatively small and specialized market. As a partial mitigant to this risk, Kodar has sizeable master agreements with its key customers in the Netherlands and multiple active contracts with its largest domestic customers. These long-term contractual relationships provide some revenue visibility and reduce the impact of concentration-related EBITDA volatility.

Operating profitability has shown considerable volatility in the past, driven largely by project dynamics, type of projects, high project concentration and the varying contribution of individual contracts. This volatility is mitigated by the fact that, while many customer contracts stipulate fixed prices, meaning the contractor bears the risk of increases in material or labour costs beyond initial estimates, they also allow certain price adjustments in response to inflation. Also, on the supply side, Kodar typically secures fixed euro‑denominated unit prices from suppliers, and subcontractor agreements allow for price increases only for additional work.

Scope-adjusted EBITDA margin* averaged 9.1% in the past seven years with highs in 2022 (12.7%) and 2024 (11.2%), the latter of which was supported by works performed on a renewable-power-plant similar to those subject to financing from the planned bond proceeds. Looking ahead, Scope expects EBITDA margin will remain around 10%, with a positive impact in the next two years coming from Jasikovo and Brebex projects. Excluding these projects, Scope estimates the company’s backlog at 1.45x relative to its average revenues over the past three years, indicating a solid pipeline and further growth potential.

Financial risk profile: BB- (new). The company has deleveraged over the past few years, reducing debt/EBITDA to an estimated 1.0x in 2025 from 3.5x in 2020. However, the planned addition of RSD 7bn in new debt in 2026 (RSD 5.9bn from a bond issuance and RSD 1.2bn from revolving credit facilities) will raise leverage to around 3.0x. EBITDA will be temporarily supported by profits from related-party Jasikovo and Brebex projects, for which the new financing is intended.

Although the proposed bond has a bullet maturity, meaning no immediate pressure on cash flows from this source, any delays in project execution or shortfalls in profitability could exert upward pressure on leverage. Toward the latter part of the forecast horizon, Scope expects leverage to rise further as EBITDA normalises following the completion of the two renewable‑power‑plant projects. Similarly, Scope projects funds from operations/debt to fall from a high level in 2025 to around 25%–35% in the subsequent two years, driven by higher debt and partially offset by project‑related inflows.

Scope projects interest cover to decline sharply to around 9x in 2026 from above 30x in 2025 due to increased net interest expenses following the bond issuance. Excluding the extraordinary EBITDA from the two renewable‑power‑plant projects, interest cover is expected to weaken significantly to around 2.5x after project completion.

Until now, the company has relied exclusively on short‑term facilities with interest rates linked to EURIBOR, without the ability to hedge this exposure due to the absence of suitable derivative products in the domestic market. The shift to a fixed‑rate instrument therefore reduces sensitivity to interest‑rate volatility and provides additional stability to interest cover over the bond’s life.

Capital expenditure requirements are expected to remain modest, largely limited to maintenance capex aligned with annual depreciation. Accordingly, free operating cash flow/debt is projected to follow a similar pattern to funds from operations/debt, falling from a high level in 2025 to around 25% in the next two years. Working capital volatility, however, may continue to affect cash‑flow cover, reflecting Kodar’s project‑based business model involving significant advances received and paid, and milestone‑based invoicing, factors that have historically driven substantial fluctuations in working capital.

Liquidity: adequate (new). Kodar’s liquidity is adequate, given that the company operates with a low level of short‑term debt and a normalised break-even level of free operating cash flow (excluding the Jasikovo and Brebex projects). The company currently benefits from sizeable, short‑term revolving credit facilities with multiple banks, which are regularly rolled over at maturity, a standard practice in Serbia’s banking market. Nevertheless, Scope notes that the company will face a material cliff risk in 2031, driven by the large bullet repayment of the bond.

Supplementary rating drivers: -1 notch (new). Scope has applied a one‑notch negative adjustment to the issuer’s standalone credit-assessment of B+ under the supplementary rating drivers, reflecting concerns over potential cash outflows linked to the owner’s external renewable‑power‑plant interests and the structuring of certain related‑party transactions. In Scope’s view, these arrangements could weaken Kodar’s credit standing and are not aligned with the best interests of creditors, given the risk that group‑external projects may divert financial resources away from the core operating entity (ESG factor: credit-negative).

One or more key drivers of the credit rating action are considered an ESG factor.

Outlook and rating sensitivities

The Stable Outlook reflects Scope’s expectation of a successful placement of the planned RSD 5.9bn bond and the timely execution of the company’s broader project pipeline in line with the business plan. The Outlook also incorporates the anticipated weakening of credit metrics stemming from the planned development of the two renewable‑power‑plant projects.

The upside scenario for the ratings and Outlook is:

• Improvement of the business risk profile that leads to a larger and more granular project portfolio and order backlog, which minimises the potential for high volatility in cash generation. A scenario considered remote at present.

The downside scenario for the ratings and Outlook is:

• Material deviation in project execution and weaker-than-anticipated success in securing new contracts, which leads to a weakening of credit metrics beyond Scope's base case.

Debt rating

Kodar plans to tap the bond market with a first-time RSD 5.9bn senior unsecured bond issue in Q1 2026, to which Scope assigns a preliminary bond rating of (P) B.

The recovery analysis based on enterprise value as a going concern indicates “average” recovery, allowing no notching upwards relative to the issuer rating.

Environmental, social and governance (ESG) factors

Scope highlights concerns about potential cash outflows tied to the owner’s external renewable‑power‑plant interests and the structuring of certain related‑party transactions. In Scope’s view, these arrangements could weaken Kodar’s credit profile and are not in creditors’ best interests, as group‑external projects may divert financial resources from the core operating entity (ESG factor: credit‑negative).

All rating actions and rated entities

Kodar Energomontaža d.o.o.

Issuer rating: B/Stable, new

Senior unsecured RSD 5.9bn bond rating: (P) B, new

The rating was prepared with the application of Scope’s Construction and Construction Materials Rating Methodology, 24 January 2025. The application of the Construction and Construction Materials Rating Methodology, 23 January 2026, does not have an impact on the rating.

*All credit metrics refer to Scope-adjusted figures.

Stress testing & cash flow analysis
No stress testing was performed. Scope Ratings performed its standard cash flow forecasting for the company.

Methodology
The methodologies used for these Credit Ratings and/or Outlook, (General Corporate Rating Methodology, 14 February 2025; Construction and Construction Materials Rating Methodology, 23 January 2026), are available on scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): registers.esma.europa.eu/cerep-publication. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on scoperatings.com/governance-and-policies/rating-governance/methodologies.
The Outlook indicates the most likely direction of the Credit Ratings if the Credit Ratings were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
The following substantially material sources of information were used to prepare the Credit Ratings: public domain, the Rated Entity, the Rated Entities’ Related Third Parties and Scope Ratings' internal sources.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and/or Outlook and the principal grounds on which the Credit Ratings and/or Outlook are based. Following that review, the Credit Ratings and/or Outlook were not amended before being issued.

Regulatory disclosures
These Credit Ratings and/or Outlook are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and/or Outlook are UK-endorsed.
Lead analyst: Dániel Szebényi, Director
Person responsible for approval of the Credit Ratings: Philipp Wass, Managing Director
The Credit Ratings/Outlook were first released by Scope Ratings on 12 February 2026.

Potential conflicts
See scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use / exclusion of liability
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