Montenegro’s majority ownership of Crnogorski elektroprenosni sistem (CGES) gives the state control over a key regional electricity corridor, with opportunities to expand renewable investment, electricity exports, industrial development and EU energy integration.
Through its 55.38 per cent stake in CGES, the Government of Montenegro controls the transmission system linking the country with Serbia, Bosnia and Herzegovina, Albania and Italy. The company’s shareholder structure also includes Italy’s Terna with 22.09 per cent and Serbia’s Elektromreža Srbije (EMS) with 15 per cent, reflecting the strategic importance of Montenegro’s electricity network.
The state’s role in CGES extends beyond dividend income and corporate governance. The transmission operator is positioned as a potential platform for renewable-energy development, cross-border electricity trade, system flexibility, industrial investment and deeper integration with European energy markets.
Strategic role of CGES in regional electricity flows
Terna’s interest in CGES is connected to the submarine interconnector between Lastva and Villanova, which provides a link between Montenegro and Italy and supports access to electricity flows from Southeast Europe. EMS relies on Montenegro’s transmission network as a route toward the Adriatic connection and the Italian market.
For Montenegro, the strategic objective is to move beyond the role of a transit corridor for electricity generated in neighbouring countries. While congestion revenues and transmission income provide value, a broader economic model would involve attracting generation capacity, energy storage, balancing services and electricity-intensive industries within the country. CGES is expected to continue operating as an independent transmission system operator under European electricity rules, while national policies can align energy, industrial, spatial and fiscal planning with the company’s infrastructure development.
State ownership remains central to energy strategy
The Government of Montenegro holds a majority position in CGES, while Terna and EMS together control 37.09 per cent of the company. Their combined shareholding provides technical expertise and a long-term interest in the expansion of the system, but does not transfer control of the company. Maintaining majority state ownership is considered central to preserving influence over a strategic infrastructure asset. A reduction below 50 per cent plus one share would generate a one-time fiscal inflow but reduce Montenegro’s ability to direct future development of the transmission system.
Additional capital could instead be mobilised through retained earnings, international financial institutions, EU grants, green bonds, developer contributions and project-level partnerships. A capital increase could also be considered if the government participates sufficiently to maintain control and if new funds are directed into infrastructure development. The distinction between selling existing shares and issuing new CGES capital is significant. A share sale would provide budget revenue, while a primary issuance would strengthen CGES’s balance sheet and increase investment capacity.
Potential investment partnership with Terna and EMS
One development option is a formal investment framework between Montenegro, Terna and EMS covering domestic grid reinforcement, cross-border capacity, digitalisation, cybersecurity, renewable connections and system flexibility. Such an agreement could define profit retention policies, dividend distribution and participation in future capital requirements. Terna could contribute expertise in areas including the Adriatic corridor, high-voltage direct-current systems, digital substations, asset management and operational training.
EMS could support transmission planning, system modelling, cross-border capacity management, protection systems and balancing cooperation. Montenegro’s objective would be to ensure that strategic shareholders contribute to capital formation, technical development and project implementation.
Project-level partnerships as an alternative to ownership changes
Introducing additional strategic shareholders into CGES could strengthen individual transmission corridors, but it could also complicate governance if multiple foreign state-controlled operators became involved in decision-making. A more targeted approach would be creating special-purpose companies for specific infrastructure projects, such as new interconnectors, substations or expansions of the Adriatic connection.
Under this model, CGES would retain control of the national transmission system, while investors could participate directly in assets from which they receive economic benefits. The structure would allow different financing models for different infrastructure categories. Cross-border assets could rely on project financing and congestion-related revenues, while domestic grid infrastructure would depend more on regulated tariff recovery.
International financing could support major grid expansion
Montenegro could also accelerate CGES investment through European and international financial institutions, including the European Investment Bank, European Bank for Reconstruction and Development, Agence Française de Développement and the Western Balkans Investment Framework.
The recently approved €25 million AFD facility for electricity-network modernisation demonstrates access to long-term institutional financing.
A broader transmission investment programme worth €250–400 million could combine:
- €50–100 million in grants and concessional support;
- €140–240 million in long-term loans;
- €50–80 million from CGES retained earnings, state contributions or project partners.
Domestic reliability projects would primarily rely on regulated tariffs and public financing, while cross-border infrastructure could attract EU support and regional cost-sharing mechanisms.
Renewable expansion depends on grid capacity
Montenegro has a renewable-energy project pipeline exceeding domestic electricity demand, but the value of those projects depends on transmission capacity, export routes and reliable connection schedules. The country could integrate renewable planning with CGES investment by coordinating ministries, regulators, municipalities and environmental authorities around priority development zones.
Wind resources in northern Montenegro and solar potential in central and coastal areas require different approaches. Wind projects can provide stronger capacity factors and winter production, while solar projects generally have lower capital costs and faster construction but can create midday congestion. A diversified mix of wind, solar, hydro and storage would provide greater system value than concentrated solar development during identical production periods.
CGES should provide clearer information on available connection capacity, planned reinforcements, expected connection dates and potential congestion. Developers should meet financial guarantees and project milestones to retain reserved network capacity. A delay of 12–18 months in transmission infrastructure could increase financing costs, extend EPC obligations, postpone power-purchase agreement revenues and reduce equity returns by approximately 1.5–4 percentage points. A coordinated renewable programme could support 1.5–2.5 GW of additional wind, solar, hydro and storage capacity during the next investment cycle, with associated private-sector investment estimated at €1.8–3.5 billion.
Storage and balancing services could increase system value
Montenegro’s hydropower capacity, combined with potential battery storage and pumped-storage projects, creates opportunities to provide flexibility services for the regional electricity market. Growing solar generation across Southeast Europe is expected to increase midday electricity surpluses, negative-price periods and evening demand ramps. CGES could identify substations where storage could reduce congestion or delay network reinforcement.
Storage ownership would not necessarily need to remain with the transmission operator. Commercial investors, EPCG or developers could provide flexibility services through transparent market arrangements. CGES would continue identifying system requirements, facilitating connections and procuring services, while commercial entities would assume market risks.
Market integration and industrial opportunities
Deeper integration with European electricity markets could improve capacity allocation, balancing arrangements and price signals. Terna provides access to the Italian electricity market, while EMS connects Montenegro with the wider Central and Southeast European system. Closer cooperation could support market coupling, renewable forecasting, balancing services and congestion management.
Improved electricity infrastructure could also support corporate power-purchase agreements and attract electricity-intensive industries. Potential investment areas include data centres, electricity-intensive processing, cold storage, port-related logistics, green maritime services and selected manufacturing activities. The Port of Bar, central and northern industrial areas, and locations near strong substations could be considered for such investments, taking into account grid capacity, water availability, transport infrastructure, environmental requirements and workforce needs.
CGES could become a platform for green financing
CGES could use its regulated revenue base and infrastructure assets to access additional financing through green bonds or sustainability-linked bonds. Such instruments would require a defined investment pipeline, transparent use-of-proceeds frameworks, external verification and measurable performance indicators. Funding could support grid digitalisation, renewable connections, climate resilience and cross-border infrastructure.
The government would need to avoid excessive reliance on sovereign guarantees and increasingly base investment financing on regulated cash flows, approved tariffs and identifiable assets. A stable tariff framework would be required to provide confidence for lenders and investors while protecting households and businesses from sudden increases. Dividend policy would also need to balance shareholder returns with the need to retain capital for infrastructure expansion.
Corporate governance remains a key condition
The future role of CGES depends on strong governance structures and technical expertise. The company’s management and oversight bodies require experience in energy systems, finance, regulation and cybersecurity. Strategic projects should be monitored through indicators covering costs, schedules, permits, procurement and commissioning. Terna and EMS can provide specialist knowledge, but Montenegro will need to continue developing its own institutional capacity for planning and managing the national transmission system.
Major procurement procedures should follow EU principles, including transparent competition, technical specifications, lifecycle-cost assessments and enforceable performance requirements. Montenegro currently controls a strategically positioned transmission asset, while Terna and EMS have invested in its regional importance. The next stage of development depends on using that ownership structure to attract investment, expand renewable capacity and create greater domestic economic value from the electricity corridor.
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