Montenegro’s electricity transmission operator CGES is preparing for a sharp expansion of its asset base as the country moves from a power system built around a small number of large generating plants toward one shaped by renewable connections, regional transit flows and deeper integration with the European electricity market.
Financial projections published in the CGES management report for 2025 show that the balance-sheet value of assets classified as “new assets” is expected to reach €111.7 million in 2026, rise to €170.5 million in 2027 and reach €214 million by the end of 2028.
The figure does not represent the amount that CGES plans to invest during 2028 alone. It is the projected cumulative balance-sheet value of recently commissioned and developing infrastructure. Between 2026 and 2028, the category would increase by €102.3 million, or approximately 91.6%, giving a more accurate measure of the expected asset expansion over the three-year period.
The total value of CGES fixed assets is projected to rise from €334 million in 2026 to €382.9 million in 2027 and €417.5 million in 2028. Existing assets are expected to decline in carrying value from €222.3 million to €203.5 million, mainly through depreciation, while new infrastructure becomes the dominant source of balance-sheet growth.
By 2028, assets classified as new would represent approximately 51% of the company’s total fixed-asset base, compared with about 33% in 2026. This would be an unusually rapid change in the composition of a regulated transmission company and reflects the scale of modernisation required to support Montenegro’s emerging generation and interconnection portfolio.
CGES operates a relatively compact but strategically positioned network. Its transmission system includes around 1,550 kilometres of lines at the 400 kV, 220 kV and 110 kV levels, together with 29 substations, one 220 kV switchyard and approximately 4,465 MVA of transformation capacity.
The network connects the Pljevlja thermal power plant, the Piva and Perućica hydropower plants, the Krnovo and Možura wind farms and an expanding pipeline of new renewable projects. It also provides the inland infrastructure supporting the 600 MW first pole of the Montenegro–Italy submarine cable, which has transformed Montenegro from a small national transmission system into an increasingly important regional transit platform.
The value of that position is visible in CGES’s recent financial performance. The company reported net profit of €20.99 million in 2025, following €24.83 million in 2024 and a record €35.7 million in 2023. International-market revenues, particularly electricity transit and commercial use of the Italian interconnector, have helped preserve earnings while reducing pressure on domestic transmission tariffs.
Those results are not expected to continue at the same level during the main investment cycle. CGES projects net profit of only €1.4 million in 2026, €1.7 million in 2027 and €1.6 million in 2028. The decline is not driven by an expected collapse in revenue. Total income is forecast to increase gradually from €68.4 million in 2026 to €70.9 million in 2027 and €71.8 million in 2028.
EBITDA is expected to rise from €12.8 million to €14.3 million over the same period. The implied EBITDA margin improves from approximately 18.7% in 2026 to almost 20% in 2028, but depreciation, interest expense and regulatory adjustments absorb most of the operating result before it reaches the bottom line.
Part of the profit normalisation reflects the mechanics of transmission regulation. Montenegro’s Energy and Water Regulatory Agency previously reduced the allowed transmission tariff after CGES recorded exceptionally strong results, cutting 2025 revenue by approximately €9.5 million. A regulated monopoly can earn a return on approved assets, but unusually high income in one period can be offset through lower allowed tariffs or subsequent regulatory adjustments.
The company is therefore entering its largest asset expansion with earnings considerably below the exceptional results of 2023–2025. That does not necessarily weaken the investment case, because new transmission assets can enter the regulated asset base and support future tariff revenue. It does, however, create a timing gap between construction expenditure, commissioning, regulatory recognition and cash recovery.
The associated debt increase is material. CGES expects net debt to rise from €17.8 million in 2026 to €59.1 million in 2027 and €91 million in 2028. Long-term liabilities are projected to grow from €44.2 million to €91.5 million, while the forecast cash balance at the end of 2028 is only €500,000.
On the projected figures, net debt would increase from approximately 1.4 times EBITDA in 2026 to around 6.4 times EBITDA in 2028. That is a substantial leverage increase, even for a regulated transmission-system operator with relatively predictable underlying cash flow.
The ratio should be interpreted with caution because projects under construction may not yet contribute fully to EBITDA, while debt is already drawn and visible on the balance sheet. Interest during construction may also be capitalised. Once commissioned assets enter the regulatory base, allowed revenue and EBITDA should increase. The available forecast nevertheless shows that the construction period will require disciplined liquidity and debt management.
CGES ended 2025 with approximately €40.4 million in outstanding loan obligations. The largest single exposure was the remaining €22.37 million under an EBRD facility associated with the Lastva–Čevo transmission project, while approximately €13.15 million remained outstanding under an NLB loan.
The company’s investment programme is already broadening. In March 2026, CGES secured a new €15 million EBRD loan to rehabilitate the 220 kV transmission corridor linking Bosnia and Herzegovina, Montenegro and Albania. The project covers the regional route running through Trebinje, Perućica, Podgorica and Vau Dejës, improving reliability, reducing technical losses and strengthening cross-border capacity.
The corridor is important because it supports both regional electricity trade and Montenegro’s domestic system security. Its existing 220 kV elements were built for an earlier generation mix and were not designed around several hundred megawatts of additional wind, solar and cross-border transit.
Another core investment is the conversion of the Brezna substation from 110/35 kV to 400/110 kV. The project carries an estimated value of approximately €36 million, including €28 million in EBRD financing and an €6.5 million EU grant.
Brezna is expected to allow the connection of up to 400 MW of wind and solar capacity and reduce transmission losses by approximately 13 GWh annually. At current electricity values, CGES estimates that the avoided losses could produce savings of more than €1 million a year, while cutting carbon emissions by around 6,000 tonnes.
The substation also connects the renewable-rich northern and central parts of Montenegro more directly to the country’s 400 kV backbone. It is part of the wider Trans-Balkan Electricity Corridor, which is intended to strengthen the route from Romania and Serbia through Bosnia and Herzegovina and Montenegro toward Italy.
The wider Lastva–Čevo–Pljevlja development has an estimated total value of approximately €119.7 million. Parts of the system are already in operation, including the 400 kV links from Lastva toward Trebinje and Podgorica and the Čevo–Brezna section, currently operated at a lower voltage in parts of the configuration.
Completion of the full corridor would allow higher and more secure use of the Italian submarine cable, improve voltage conditions and remove internal bottlenecks between the coast, central Montenegro and the north. CGES estimates that the complete system could reduce network losses by more than 52 GWh annually and support cross-border transit in the range of 500–1,000 MW, subject to regional network conditions.
The investment programme is not concentrated only on flagship interconnectors. CGES is installing two new 150 MVA autotransformers at the Podgorica 1 and Mojkovac substations under a contract worth approximately €4.5 million. The equipment will replace ageing transformers and strengthen supply security in two different parts of the system.
The procurement illustrates the long delivery cycle now affecting European transmission investment. Almost three years passed between preparation of the technical specifications, tendering, production, factory inspection, transport and installation. Large power transformers have become one of the main schedule risks for grid operators because manufacturing slots are limited and global demand is rising.
CGES is also completing the reconstruction of the Budva–Lastva and Lastva–Tivat lines, covering approximately 17 kilometres and carrying an estimated investment of about €1 million. Although modest compared with the 400 kV programme, the works are strategically important for the coastal municipalities of Budva, Tivat, Kotor and Herceg Novi, where tourism, real-estate construction and seasonal demand are increasing pressure on the local network.
The generation pipeline provides the commercial rationale for the larger asset cycle. CGES signed a connection agreement in June 2026 for the planned 88 MW Korita wind farm, a private generation investment valued at approximately €132 million and targeted for operation in 2030.
It has also agreed the connection infrastructure for the proposed 70 MW Tupan solar power plant. The recently disclosed 92.4 MW Njegovuđa wind project near Žabljak would add another large injection to the northern 110 kV system, subject to environmental approval and a bankable connection solution.
These projects alone represent more than 250 MW of prospective generation, excluding Gvozd 2, the 118.8 MW Bijela wind farm, distributed solar and other wind and solar developments seeking access to the system. Their combined output could materially exceed local demand during favourable weather conditions, increasing the importance of transmission capacity, storage, hydropower flexibility and exports.
Connection agreements do not guarantee that every project will reach financial close. Developers still need land rights, environmental approvals, construction permits, turbine or module contracts, financing and an acceptable revenue model. From the transmission operator’s perspective, however, grid planning cannot wait until every generation project is fully bankable. Substations and 400 kV lines have longer development and procurement periods than many renewable plants.
This creates the familiar risk of timing mismatch. Underinvestment could leave completed renewable assets waiting for network capacity and expose developers to curtailment or delayed energisation. Excessive investment based on speculative connection applications could leave CGES with underutilised infrastructure whose costs must be recovered through tariffs.
The development plan therefore needs to distinguish between projects with signed connection agreements, secured land and advanced permits and those that remain at an early application stage. It should also identify which network investments are required for domestic security independently of renewable development and which depend on a specific volume of new generation.
The management projection presents new assets as a consolidated category and does not allocate the planned €214 million among individual projects. That limits the ability of investors, lenders, regulators and market participants to reconcile the balance-sheet forecast with the physical development programme.
A bank-grade capital plan would normally show annual CAPEX, committed contracts, remaining cost to completion, financing source, grant component, commissioning date and regulatory treatment for every major project. It would also separate replacement investment from expansion CAPEX and distinguish assets financed directly by CGES from connection infrastructure initially funded by generators and later transferred to the transmission operator.
CGES has already used the latter structure. In January 2026, it signed an agreement to acquire infrastructure constructed for the connection of the Krnovo wind farm, including the Brezna substation and associated 110 kV lines. Part of the double-circuit Krnovo–Brezna line is being transferred without compensation.
Such arrangements can reduce the TSO’s initial financing burden while ensuring that strategically important connection assets ultimately become part of the regulated network. They require precise treatment of ownership, valuation, depreciation, maintenance responsibility and the point at which the asset enters the regulatory base.
The projected debt profile points toward continued reliance on long-tenor financing from institutions such as the EBRD, EIB and commercial banks, combined with EU and Western Balkans Investment Framework grants. Concessional or blended finance is particularly valuable for cross-border projects whose benefits extend beyond Montenegro’s domestic tariff base.
CGES retained a substantial portion of its earlier profits to support the investment cycle. From the €24.83 million earned in 2024, shareholders approved a gross dividend of €5 million, leaving approximately €19.83 million as retained earnings. That approach provides an equity contribution for future projects and reduces dependence on borrowing during the initial construction period.
The planned €500,000 cash balance in 2028 nevertheless leaves little visible liquidity buffer. A company managing simultaneous transformer, substation and overhead-line contracts must be able to absorb delayed regulatory payments, contractor claims, equipment-price changes and mismatches between loan drawdowns and invoices. Committed revolving facilities or undrawn project-loan tranches would be essential even where the year-end accounting forecast shows limited cash.
The investment cycle also raises execution risk. Montenegro’s terrain makes transmission construction expensive and slow. Mountain access, geotechnical conditions, forest corridors, snow, land acquisition and environmental permitting can delay overhead lines and substations. The Brezna area has already generated public comments concerning environmental and community impacts.
Cost escalation is another concern. Transformers, high-voltage switchgear, conductors, protection systems and steel structures have experienced longer delivery periods and higher prices. A project budget prepared several years before procurement may require substantial contingency. Fixed-price EPC contracts can transfer part of the risk, but contractors increasingly include indexation or exclusions for exceptional materials and logistics movements.
The decline in projected profit should therefore be viewed alongside the build-up of assets rather than in isolation. CGES is moving from a period in which international transmission revenue generated exceptional earnings into one in which retained cash and new debt are being converted into grid capacity.
Its financial resilience will depend on regulatory recognition of commissioned assets, continued income from the Italian cable and regional transit, controlled project costs and access to long-tenor financing. The projected increase to €91 million of net debt is supportable only when the new infrastructure enters service on time and generates the expected regulated and cross-border benefits.
Montenegro’s renewable ambitions now depend less on announcing additional wind and solar capacity than on whether CGES can deliver the substations, transformers and corridors required to move that electricity. The projected €214 million of new assets by 2028 places the transmission operator, rather than any single power plant, at the centre of the country’s next energy-investment cycle.
