Montenegro’s state power utility Elektroprivreda Crne Gore and Abu Dhabi renewable-energy developer Masdar could begin constructing their first jointly owned solar power plant during 2027, provided the partners complete the remaining engineering, permitting and financing work.
The timetable represents the first test of whether a politically prominent energy partnership can be converted into bankable generation assets. EPCG and Masdar have identified the 115 MW Štedim and 35 MW Krupac solar projects near Nikšić as the initial developments within a platform ultimately targeting as much as 2 GW of renewable-energy capacity.
Milutin Đukanović, chairman of EPCG’s board, said construction could start after the technical designs and administrative procedures were completed and the final capital structure agreed. The projects would be developed through a company owned 50:50 by EPCG and Masdar, with project finance among the funding models under consideration.
The planned joint venture gives EPCG access to an international developer with extensive experience arranging equity, debt, engineering and long-term commercial structures for utility-scale renewables. Masdar gains a local partner controlling much of Montenegro’s generation portfolio and possessing established relationships with the country’s government, grid institutions and electricity market.
That combination improves the projects’ credibility, but a 2027 construction start is not yet a final investment decision. The partners must still establish the joint company, execute a shareholders’ agreement, settle governance and funding obligations, complete environmental and technical documentation, secure grid capacity and determine how the electricity 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 followed it with project-development agreements covering Štedim and Krupac, as well as a framework for assessing more than 400 MW of pumped-storage hydropower capacity.
The two solar projects have combined planned grid-delivery capacity of 150 MW. Their photovoltaic-module capacity has also been described as approximately 190 MWp, comprising about 140 MWp at Štedim and 50 MWp at Krupac. The difference reflects the common practice of installing more direct-current panel capacity than the alternating-current output delivered through the inverters and grid connection.
This oversizing can improve utilisation of the connection and increase production during lower-irradiance periods, although it also means that some output may be clipped during the strongest solar hours. The final commercial value will depend on equipment configuration, generation forecasts, connection terms and the ability to sell or store electricity when many regional solar plants are producing simultaneously.
Neither the final construction budget nor the allocation of debt and equity has been disclosed. Earlier EPCG estimates placed the initial investment required for solar developments at Štedim, Krupac and Slano at roughly €150mn, but the eventual cost of the Masdar portfolio will depend on the final scope, module prices, substations, transmission works and financing conditions.
A conventional project-finance structure would require the joint venture to raise debt against the expected cash flows of the plants. Lenders would scrutinise construction contracts, grid-connection rights, permitting, output forecasts and the electricity-sales strategy. EPCG and Masdar would then supply equity in accordance with their ownership shares unless they agreed a different funding mechanism.
The principal commercial question is whether the plants will operate as merchant assets, secure long-term power-purchase agreements or combine contracted and market-based sales. Montenegro’s electricity demand is small relative to the 2 GW ambition of the wider partnership, making regional trading and exports central to the investment case.
Pumped storage could protect solar earnings from daytime price erosion
The proposed development of more than 400 MW of pumped-storage hydropower is the most strategically important element accompanying the solar programme.
Utility-scale solar can reduce daytime imports and allow EPCG to conserve water in its reservoirs. It can also depress wholesale prices during sunny hours as Montenegro and neighbouring markets install additional photovoltaic capacity. A solar plant selling entirely into the spot market may therefore produce its greatest volume when electricity is least valuable.
Pumped storage would allow the partners to use low-priced or surplus electricity to move water into an upper reservoir and generate power later, particularly during evening peaks. This could turn part of the solar portfolio from intermittent production into dispatchable energy, while creating additional revenue from balancing, reserve and ancillary services.
Masdar brings relevant experience 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, providing Masdar with technical and commercial knowledge that could be applied to Montenegro’s mountainous terrain and existing hydroelectric system.
The economics will nevertheless be more complex than those of a solar plant. Pumped-storage facilities require extensive civil works, water rights, environmental approvals and long construction periods. Their returns depend on the spread between low- and high-price hours, the value of grid services and the regulatory treatment of storage.
A framework agreement to study more than 400 MW is therefore an option on future system flexibility, not a construction commitment. Even so, integrating storage into the investment plan strengthens the commercial logic of developing solar capacity at a scale exceeding Montenegro’s immediate daytime consumption.
The Italian cable creates an export route but not guaranteed revenue
Montenegro’s subsea interconnector with Italy provides the partnership with access to a larger and generally more liquid electricity market. It also gives the country a potential role as a trading bridge between renewable resources in the western Balkans and southern European demand.
That route does not guarantee that the new solar plants will receive Italian prices. Export capacity must be available and commercially acquired, while price differences can narrow as transmission infrastructure and renewable generation expand. Electricity may also need to move through the Montenegrin network before reaching the converter station, placing additional demands on domestic transmission capacity.
The portfolio’s strongest configuration would combine domestic supply, regional sales, hydro optimisation and selective exports to Italy. EPCG could use solar generation to meet local daytime demand, preserve reservoir water for higher-value hours and trade excess output through Montenegro’s cross-border links.
Such a structure would also reduce Montenegro’s exposure to dry hydrological years. EPCG remains heavily dependent on hydropower, while the Pljevlja coal plant continues to play a central role in baseload supply. Weak inflows or extended thermal-plant outages can quickly turn the country into a substantial electricity importer.
Solar generation cannot replace the system services supplied by dispatchable hydro and thermal plants. It can, however, diversify the production profile and reduce the volume EPCG must purchase during expensive summer periods, when high temperatures increase demand across Southeast Europe.
EPCG is building an earlier pipeline before the Masdar plants arrive
The Masdar partnership sits beside an EPCG investment programme already moving towards commissioning. The Montenegrin government has authorised the utility to borrow as much as €64.22mn for ten renewable-energy projects with combined capacity of 95.87 MWp and expected annual output of approximately 124.5 GWh.
EPCG has invested about €25mn of its own funds in that portfolio. The most advanced assets include solar installations at Kapino Polje, where three initial 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.
Work is also continuing on a 12.98 MWp solar development at the Nikšić steelworks, smaller installations on the Vrtac dams and projects at Slano and Krupac. EPCG expects the solar assets entering service first to generate enough cash to cover between 30 and 35 per cent of the borrowing associated with the solar segment.
These projects should provide EPCG with construction, operating and grid-integration experience before the larger Masdar plants are built. They also create a domestic supplier and workforce base that could participate in future projects, although EPCG will need to ensure that procurement remains competitive and that local-content objectives do not inflate construction costs.
The utility’s 54.6 MW Gvozd wind farm entered trial operation on 9 May 2026 and had produced 26.2 GWh by early August. EPCG expects commercial operation to begin before the end of the year after 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 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 collectively generate about 78 GWh during 2027.
That incremental output will arrive before the first Masdar solar project is likely to reach commercial operation. It gives EPCG a near-term increase in domestic generation while the joint venture completes the longer development cycle required for Štedim and Krupac.
Battery storage adds a faster route to flexibility
EPCG is also preparing two alternative models for battery deployment. Its first planned installations would provide combined power of 60 MW and storage capacity of 240 MWh within the Nikšić steelworks complex.
A four-hour battery of this scale could absorb solar generation during the day and discharge during the evening, provide frequency services and reduce imbalances. Compared with pumped storage, batteries can generally be permitted and constructed more quickly, although their operating life is shorter and their economics depend heavily on cycling strategy, degradation and balancing-market access.
Locating the systems at the steelworks could allow EPCG to reuse industrial land and grid infrastructure. It could also support a wider redevelopment of an asset whose traditional steelmaking activities have imposed financial and operational challenges on the utility.
The battery and pumped-storage programmes should not be treated as competing alternatives. Batteries are better suited to rapid response and short-duration shifting, while pumped hydro can provide larger-scale and potentially longer-duration storage. A system combining both would give EPCG greater control over a generation portfolio increasingly exposed to weather and intraday price volatility.
The investment case now depends on execution
The EPCG–Masdar partnership has moved rapidly from intergovernmental cooperation to named projects. Montenegro and the United Arab Emirates initialled their energy agreement on 8 November 2025, parliament ratified it on 19 March 2026, the companies signed their joint-investment agreement in April and selected the first solar assets in July.
That sequence has reduced strategic uncertainty but has not yet removed development risk. Establishing the joint company and signing the shareholders’ agreement will show how control, capital calls, procurement, dividend policy and project selection are divided between the two equal owners.
The financing plan will be equally important. Masdar’s participation can improve access to international capital, but lenders will still require durable permits, credible EPC arrangements, secure grid access and a revenue structure capable of surviving lower daytime electricity prices.
For EPCG, the partnership offers a way to expand without carrying every euro of development and construction risk on its own balance sheet. For Masdar, Montenegro supplies renewable resources, established hydro assets and a strategic interconnection towards Italy, while extending the company’s growing Southeast European platform.
A 2027 construction start would therefore mark more than the beginning of another Balkan solar plant. It would show that the 50:50 venture can translate a 2 GW development ambition into financed assets—and that Montenegro can combine solar generation, storage and cross-border trading into a commercially coherent energy portfolio.
