Montenegro’s state power utility Elektroprivreda Crne Gore (EPCG) and Abu Dhabi renewable-energy developer Masdar are targeting 2027 for construction of their first jointly owned solar power plant, subject to completion of engineering, permitting and financing requirements. The partners have selected the 115 MW Štedim and 35 MW Krupac solar projects near Nikšić as the initial developments under their 50:50 joint venture. The wider platform has a potential target of up to 2 GW of renewable-energy capacity.
EPCG board chairman Milutin Đukanović said construction could begin once technical designs and administrative procedures are completed and the final capital structure is agreed. Project finance is among the funding options being considered. The joint venture is expected to combine EPCG’s generation portfolio, local development expertise and relationships with government and grid institutions with Masdar’s experience in equity, debt, engineering and commercial structures for utility-scale renewable projects. A 2027 start does not yet constitute a final investment decision. The partners still have to establish the joint company, sign a shareholders’ agreement, determine governance and funding obligations, complete environmental and technical documentation, secure grid capacity and decide how electricity from the projects will be sold.
Štedim and Krupac form the first 150 MW investment package
EPCG and Masdar signed their joint-investment agreement on 22 April 2026 in Tivat. On 27 July, they signed project-development agreements for Štedim and Krupac and established a framework to assess more than 400 MW of pumped-storage hydropower capacity. Štedim and Krupac together are planned to deliver 150 MW to the grid. Their photovoltaic-module capacity is approximately 190 MWp, comprising around 140 MWp at Štedim and 50 MWp at Krupac.
The higher photovoltaic-module capacity reflects the planned use of more direct-current panel capacity than the alternating-current output delivered through inverters and the grid connection. This configuration can improve utilisation of the connection and production during periods of lower solar irradiation, although some output can be curtailed during periods of strongest generation. The final commercial value will depend on equipment configuration, generation forecasts, connection terms and the ability to sell or store electricity when solar production is high across regional markets.
Neither the final construction budget nor the split between debt and equity has been disclosed. Earlier EPCG estimates put the initial investment requirement for the Štedim, Krupac and Slano solar developments at approximately €150mn. The final cost of the Masdar portfolio will depend on its scope, module prices, substations, transmission works and financing conditions.
Under a conventional project-finance structure, the joint venture would raise debt against projected plant cash flows. Lenders would assess construction contracts, grid-connection rights, permits, generation forecasts and the electricity-sales strategy. EPCG and Masdar would provide equity according to their ownership shares unless another funding arrangement is agreed. The projects could operate as merchant plants, use long-term power-purchase agreements, or combine contracted and market-based electricity sales. Montenegro’s domestic electricity demand is small relative to the partnership’s 2 GW development target, making regional trading and exports an important part of the investment case.
Pumped storage expands the planned renewable portfolio
The proposed assessment of more than 400 MW of pumped-storage hydropower forms a second element of the partnership’s development programme. Large-scale solar can reduce daytime electricity imports and allow EPCG to preserve water in its reservoirs. At the same time, greater photovoltaic production in Montenegro and neighbouring markets can put downward pressure on wholesale prices during sunny periods.
Pumped-storage facilities could use lower-priced or surplus electricity to move water into an upper reservoir and subsequently generate electricity during higher-value periods, particularly evening peaks. They could also provide balancing, reserve and ancillary services.
Masdar has experience in the sector through TERNA ENERGY, the Greek renewable-energy platform it acquired in 2025. TERNA ENERGY is developing the 680 MW Amfilochia pumped-storage project in Greece. Pumped storage requires extensive civil works, water rights, environmental approvals and long construction periods. Its financial returns depend on price spreads between lower- and higher-priced hours, grid-service revenues and the regulatory treatment of storage. The framework covering more than 400 MW is therefore an assessment of future system flexibility rather than a construction commitment.
The Italian interconnector provides an export route
Montenegro’s subsea electricity interconnector with Italy gives the planned renewable portfolio access to a larger and generally more liquid electricity market. The connection also provides a potential trading route between renewable generation in the Western Balkans and demand in southern Europe. Access to the Italian market does not guarantee that Štedim and Krupac will receive Italian electricity prices. Export capacity must be available and commercially acquired, while price differences can narrow as transmission infrastructure and renewable generation expand.
Electricity destined for export may also have to pass through Montenegro’s domestic network before reaching the converter station, increasing demands on transmission capacity.
The planned portfolio could combine domestic consumption, regional electricity sales, optimisation of hydro resources and selective exports to Italy. Solar generation could cover domestic daytime demand, preserve reservoir water for higher-value periods and allow excess electricity to be traded through Montenegro’s cross-border connections. Such a mix could also reduce Montenegro’s exposure to dry hydrological periods. EPCG remains heavily reliant on hydropower, while the Pljevlja coal plant continues to provide an important baseload role. Weak hydrological inflows or prolonged thermal-plant outages can leave Montenegro requiring substantial electricity imports.
Solar cannot replace the system services provided by dispatchable hydro and thermal generation, but it can diversify the generation profile and reduce electricity purchases during expensive summer periods when high temperatures increase demand across Southeast Europe.
EPCG is expanding renewable capacity before the Masdar projects
The Masdar partnership is being developed alongside an existing EPCG investment programme. The Montenegrin government has authorised EPCG to borrow up to €64.22mn for 10 renewable-energy projects with combined capacity of 95.87 MWp and expected annual production of approximately 124.5 GWh. EPCG has invested around €25mn of its own funds in the portfolio.
At Kapino Polje, three initial solar sections have combined capacity of 23.36 MWp and are scheduled to enter operation by the end of 2026. A further 28.88 MWp Kapino Polje B2 project is targeted for completion by 30 June 2027. EPCG is also developing a 12.98 MWp solar project at the Nikšić steelworks, smaller installations at the Vrtac dams, and projects at Slano and Krupac.
The utility expects the first solar assets entering service to generate sufficient cash to cover between 30% and 35% of borrowing associated with the solar segment. The programme is intended to provide EPCG with additional construction, operating and grid-integration experience before the larger Masdar projects are built. It is also creating a domestic supplier and workforce base for future developments, while EPCG is expected to maintain competitive procurement and prevent local-content requirements from increasing construction costs.
EPCG’s 54.6 MW Gvozd wind farm entered trial operation on 9 May 2026 and had generated 26.2 GWh by early August. Commercial operation is expected before the end of the year following completion of the Gvozd–Nikšić transmission line. A planned 21 MW Gvozd 2 extension is being advanced with turbines supplied by Germany’s Nordex and supported by a €25mn European Bank for Reconstruction and Development loan.
EPCG estimates that Gvozd, the first Kapino Polje and steelworks solar sections, and Gvozd 2 could together generate approximately 78 GWh in 2027. This additional generation is expected before the first Masdar solar project reaches commercial operation.
Battery storage provides an additional flexibility option
EPCG is preparing two battery-deployment models for the Nikšić steelworks complex. The initial installations would have combined power of 60 MW and storage capacity of 240 MWh. A four-hour battery of this size could store solar generation during daytime hours and discharge during the evening, while providing frequency services and reducing imbalances. Batteries can generally be permitted and constructed more quickly than pumped-storage facilities, although their operating life is shorter and their economics depend on cycling strategy, degradation and access to balancing markets.
Using the steelworks site could allow EPCG to reuse existing industrial land and grid infrastructure while supporting broader redevelopment of an asset whose traditional steelmaking operations have created financial and operational challenges for the utility. Battery and pumped-storage projects address different requirements. Batteries are suited to rapid response and shorter-duration shifting, while pumped hydro can provide larger-scale and potentially longer-duration storage.
Financing and governance remain outstanding
The EPCG-Masdar partnership has progressed from intergovernmental cooperation to specific projects. Montenegro and the United Arab Emirates initialled their energy agreement on 8 November 2025, while Montenegro’s parliament ratified it on 19 March 2026. The companies signed their joint-investment agreement in April and selected the initial solar projects in July. The next stages include establishing the joint company and signing the shareholders’ agreement. Those arrangements will determine how the equal partners divide control, capital calls, procurement, dividend policy and project selection.
Financing will also determine the timing of construction. Masdar’s participation can provide access to international capital, while lenders will require durable permits, credible EPC arrangements, secure grid access and a revenue structure capable of remaining viable during periods of lower daytime electricity prices. For EPCG, the partnership provides a mechanism to expand renewable generation without carrying all development and construction risk on its own balance sheet. For Masdar, Montenegro provides renewable resources, established hydro assets and an interconnection with Italy, while expanding its Southeast European platform. A 2027 construction start would mark the first construction-stage test of the 50:50 venture and its ability to translate the wider 2 GW renewable-energy target into financed generation, storage and cross-border electricity-trading assets.
