Montenegro controls one of Southeast Europe’s most strategically positioned electricity transmission systems, but it has yet to capture the full economic value of that position. Through its 55.38 per cent ownership of Crnogorski elektroprenosni sistem, the state holds the infrastructure connecting its domestic electricity market with Serbia, Bosnia and Herzegovina, Albania and Italy. The presence of Italy’s Terna with 22.09 per cent and Serbia’s Elektromreža Srbije with 15 per cent confirms the value that neighbouring systems attach to Montenegro’s geography.
For Montenegro, the ownership question should not be reduced to dividends, board appointments or the percentage held by the government. The central national interest is to use CGES to convert geographic advantage into electricity exports, renewable investment, industrial development, lower system risk and deeper integration with the European Union.
Italy’s strategic interest is clear. Terna needs the Montenegrin transmission system to support the submarine interconnector between Lastva and Villanova and provide access to electricity from the wider Western Balkans. Serbia’s interest is equally rational. EMS needs Montenegro as its most direct transmission route toward the Adriatic cable and the Italian market.
Montenegro’s interest must be broader. The country should not settle for being the territory through which Serbian, Bosnian or Albanian electricity travels to Italy. Transit income and congestion revenue are valuable, but they represent only a fraction of the economic activity that a regional energy corridor can support. The more important opportunity is to locate generation, storage, balancing services and electricity-intensive investment inside Montenegro.
CGES should therefore be treated as an instrument of national industrial and investment policy, while preserving its regulatory independence as a transmission system operator. Its investment programme must remain technically justified and compliant with European electricity rules, but the government can align energy, spatial, industrial and fiscal policies around the infrastructure that CGES develops.
Montenegro’s majority position gives it the ability to set that direction. The state controls ordinary shareholder decisions, while Terna and EMS together hold 37.09 per cent. Their combined stake gives them substantial influence, technical knowledge and a long-term interest in the company, but not control. This is a favourable arrangement for Montenegro: it retains sovereignty over critical infrastructure while sharing the shareholder base with two national transmission operators that benefit from CGES’s expansion.
The immediate strategic priority should be to protect majority state ownership. Selling down the government’s stake below 50 per cent plus one share would produce a one-off fiscal receipt but weaken Montenegro’s leverage over its most important cross-border energy asset. A conventional privatisation would be particularly difficult to justify as Montenegro approaches EU membership and transmission infrastructure becomes more valuable in a market shaped by renewable expansion, electrification and cross-border balancing.
Preserving control does not mean freezing the ownership structure. Montenegro can mobilise additional capital without losing its majority through a combination of retained earnings, international financial institution lending, European grants, green bonds, developer contributions and project-level partnerships. A limited capital increase could also be considered, provided the government participates sufficiently to maintain control and the proceeds go directly into new infrastructure.
The distinction between selling state shares and issuing new CGES capital is fundamental. A sale of existing shares directs money to the government budget. A primary issuance strengthens CGES’s balance sheet and creates investment capacity. Montenegro’s objective should be to enlarge the asset rather than monetise a small part of it prematurely.
A larger, better-financed CGES could be more valuable to the state even with a marginally lower percentage ownership. Yet the present 55.38 per cent holding leaves only a narrow dilution margin. Any substantial capital increase would require the government to subscribe alongside other investors or use instruments that do not transfer ordinary voting control.
Montenegro’s first development option is to retain the existing shareholders and establish a formal investment compact with Terna and EMS. The three principal owners could agree on a multiyear capital programme covering domestic reinforcement, cross-border capacity, digitalisation, cyber resilience, renewable connections and system flexibility.
Such an agreement should establish how much profit will be retained, when dividends will be distributed and whether strategic shareholders will participate in new capital requirements. Terna and EMS benefit from a stronger Montenegrin grid and should share the financial responsibility for expanding it.
This would represent a shift from passive ownership to measurable strategic participation. Terna’s contribution should extend beyond representation in CGES’s governing bodies. It could include engineering support for the Adriatic corridor, high-voltage direct-current expertise, asset-management systems, digital substations, market integration and operational training. EMS could provide coordinated transmission planning, system modelling, cross-border capacity expertise, protection-system coordination and balancing cooperation.
Montenegro should define the value it expects from both shareholders. Their equity positions should support capital formation, knowledge transfer and project execution rather than serve only as vehicles for dividends and regional influence.
The second option is to introduce another strategic shareholder, but this should be approached conservatively. Additional ownership by a neighbouring transmission operator could strengthen a particular cross-border corridor, yet it could also complicate governance. A CGES shareholder base containing several foreign state-controlled TSOs would risk turning investment decisions into negotiations among national electricity interests.
A new strategic shareholder would make sense only when linked to a clearly defined project. A Croatian participant could support a wider Adriatic transmission strategy. An Albanian or Bosnian operator could strengthen regional coordination. Their ability to contribute meaningful equity, however, may be limited, and share ownership would not automatically create new physical capacity.
Montenegro should avoid selling shares simply to create diplomatic alignment. Equity is permanent, while infrastructure cooperation can be organised through bilateral agreements, joint ventures and project companies without altering ownership of the national transmission operator.
The stronger model may be to admit new partners at project level rather than CGES level. Montenegro and CGES could establish special-purpose companies for a new interconnector, major cross-border substation or expansion of the Adriatic connection. Terna, EMS, another European TSO or an infrastructure fund could invest in the specific asset from which it benefits, while the state retains control of CGES itself.
This structure would protect the national transmission system from unnecessary dilution and make the allocation of costs and returns more transparent. It would also permit different financing structures for different assets. A cross-border cable can support project finance and congestion-based economics, while domestic substations and transmission lines depend more directly on regulated tariff recovery.
The third option is an accelerated programme financed primarily through European and international institutions. The European Investment Bank, European Bank for Reconstruction and Development, Agence Française de Développement and the Western Balkans Investment Framework are better suited than conventional strategic investors to financing infrastructure without demanding operational control.
The recently approved €25 million AFD facility for electricity-network modernisation demonstrates the availability of long-term institutional capital. Montenegro can use its EU accession position, regional interconnection role and renewable potential to assemble a much larger financing envelope.
A credible transmission programme of €250–400 million could combine €50–100 million in grants and concessional support, €140–240 million in long-term loans and €50–80 million from CGES retained earnings, state contributions or project partners. This would support network reinforcement without requiring the state to sell a material part of its shareholding.
The financing structure should reflect the economic function of each asset. Infrastructure serving Montenegro’s domestic reliability should be recovered primarily through regulated tariffs and public financing. Cross-border assets producing wider European benefits should attract EU grants and regional cost sharing. Dedicated connections should include contributions from the developers that require them.
Montenegro’s fourth option is to use CGES as the backbone of a coordinated renewable-development strategy. The country has a project pipeline far larger than its domestic electricity demand, but the economic value of that pipeline depends on connection capacity, export routes and credible commissioning schedules.
The state should move away from considering generation licences, spatial planning and transmission development as separate administrative processes. CGES, the responsible ministries, the regulator, municipalities and environmental authorities should prepare a single sequence of renewable development zones and corresponding grid investments.
Priority zones should be based on resource quality, environmental constraints, construction access, connection costs and the contribution of each project to system operation. Northern wind potential should be treated differently from central and coastal solar potential. Wind can provide higher capacity factors and stronger winter and non-daylight production, while solar brings lower CAPEX and faster construction but creates sharper midday congestion.
A diversified portfolio of wind, solar, hydro and storage is more valuable to Montenegro than an oversized solar pipeline concentrated in the same production hours. Transmission planning should reflect hourly generation profiles rather than nominal megawatts alone.
CGES should publish clearer information on available capacity, planned reinforcements, connection dates and probable congestion. Developers should be required to provide financial guarantees and meet defined milestones to retain reserved capacity. Projects without secured land, permits, financing progress or realistic construction schedules should not be allowed to block the network.
This would improve the bankability of credible projects. Grid uncertainty is one of the largest risks faced by renewable investors and lenders. A 12–18 month delay in a transmission line or substation can increase interest during construction, extend EPC guarantees, delay power-purchase-agreement revenue and reduce equity IRRs by approximately 1.5–4 percentage points.
For Montenegro, delayed grid infrastructure means more than a late engineering project. It postpones private investment, construction employment, municipal revenue, electricity exports and potential tax receipts. Transmission timing should therefore be treated as a national investment indicator.
A coordinated scenario could support 1.5–2.5 GW of additional wind, solar, hydro and storage capacity over the next investment cycle. Depending on the technology mix, terrain and connection scope, the associated private-sector CAPEX could reach €1.8–3.5 billion. Even a smaller realised portfolio would be material for an economy of Montenegro’s size.
The country should capture part of this value through developer-financed connection infrastructure. Large projects can finance dedicated substations, transmission lines and system upgrades under standardised agreements defining construction responsibility, technical acceptance, asset ownership, cost recovery and connection rights.
The assets required for transmission-system operation should ultimately remain under CGES control. Developer financing should not create permanent private control over critical network infrastructure or discriminatory access. It should accelerate construction while preserving the regulated character of the system.
The fifth development option is to turn Montenegro into a regional flexibility and balancing centre. The country’s hydropower portfolio already provides dispatchable capacity, while new batteries and potential pumped-storage projects could increase the value of the transmission corridor.
The rise of solar across Southeast Europe will create deeper midday surpluses, more frequent negative prices and steeper evening ramps. Montenegro is well placed to absorb low-priced electricity, preserve water in hydropower reservoirs, charge batteries and export during higher-value hours. This is more economically attractive than acting only as a passive transit system.
CGES should identify substations where battery storage can reduce congestion or defer network reinforcement. Storage does not necessarily need to be owned by the TSO. Competitive investors, EPCG or project developers can provide flexibility under transparent market and ancillary-service arrangements.
Montenegro must preserve the separation between regulated transmission and competitive generation or storage. CGES can identify system needs, procure services and facilitate connections, while commercial entities bear energy-market risk.
The sixth option is to deepen market integration. A transmission corridor generates limited national value when capacity allocation is inefficient, intraday liquidity is weak or balancing arrangements remain fragmented. Montenegro needs closer integration with European day-ahead, intraday and balancing markets, supported by transparent capacity calculation and reliable publication of system data.
Terna and EMS are valuable partners in this process. Italy connects Montenegro directly to an EU power market, while Serbia provides access to the larger Central and Southeast European system. Montenegro can use these relationships to improve market coupling, balancing cooperation, renewable forecasting and congestion management.
The result would be lower risk for power traders, more credible price signals for generators and better conditions for corporate PPAs. Industrial buyers in Italy and elsewhere in the EU could contract electricity from Montenegrin renewable projects while relying on stronger physical and market infrastructure.
Montenegro can also connect this opportunity with its EU accession and carbon strategy. Renewable electricity exported through the interconnector can gain additional commercial relevance as European industry faces tighter decarbonisation requirements. The country should build systems for metering, guarantees of origin, hourly generation records and auditable electricity attributes.
The value of low-carbon electricity will increasingly depend on evidence as well as physical production. CGES, the market operator, EPCG, regulators and generation companies should develop compatible data systems capable of supporting cross-border verification, PPAs and carbon-related claims.
A seventh option concerns domestic industrial development. Montenegro should use new transmission capacity to attract activities that benefit from reliable low-carbon electricity. These could include data centres, electricity-intensive processing, cold storage, port-related logistics, green maritime services and selected materials or manufacturing projects.
The objective should not be to subsidise energy-intensive industry without limits. It should be to secure creditworthy anchor consumers whose demand supports renewable investment and reduces dependence on volatile exports. Long-term industrial PPAs can improve project bankability while giving Montenegro a larger share of the value chain.
The Port of Bar, central and northern industrial zones and locations near strong substations could be assessed for such demand. Grid capacity, water availability, transport infrastructure, environmental constraints and workforce requirements must be considered together. Announcing industrial zones without confirmed power availability would reproduce the same disconnect that has slowed renewable projects elsewhere in the region.
Montenegro’s eighth option is financial. CGES could become one of the country’s strongest platforms for green and infrastructure financing. A well-structured bond programme could attract regional banks, European funds, insurance companies and institutional investors without transferring voting control.
A green bond or sustainability-linked bond would require a defined asset pipeline, credible use-of-proceeds framework, external verification and transparent performance indicators. Proceeds could finance grid digitalisation, renewable connections, climate resilience and cross-border infrastructure.
The government should avoid providing unlimited sovereign guarantees. CGES’s projects should increasingly be financed on the strength of regulated cash flows, approved tariffs and identifiable assets. Selective guarantees may still be justified for projects with exceptional national or European importance, but they should not substitute for sound regulatory design.
A stable tariff framework is essential. Lenders and investors need confidence that efficient CAPEX will enter the regulated asset base and earn an adequate return. At the same time, households and businesses must be protected from sudden tariff shocks. Long asset lives, concessional financing and grants can spread costs across the generations that benefit from the infrastructure.
Dividend policy should support this financial strategy. The government should establish a transparent rule under which CGES distributes part of normalised earnings while retaining enough capital to fund approved investments. Extraordinary income should not automatically become budget revenue when the network faces a large capital programme.
Corporate governance will determine whether these options are credible. CGES must not become an instrument for political employment, procurement patronage or short-term fiscal extraction. Its board and supervisory structures need technical, financial, regulatory and cyber-security expertise. Strategic projects should be monitored through cost, schedule, permitting, procurement and commissioning indicators.
Terna and EMS should be required to contribute specialist knowledge, but CGES must build its own institutional capability. Montenegro cannot depend indefinitely on foreign shareholders or consultants to plan and manage its national grid.
Procurement should be aligned with EU principles even before membership. Major contracts require transparent competition, robust technical specifications, lifecycle-cost evaluation and enforceable performance guarantees. Low initial prices can produce higher long-term costs when equipment lacks interoperability, spare-parts support or compliance with European grid and cybersecurity standards.
Montenegro’s position inside CGES is already strong. It controls the company while Italy and Serbia have invested their own strategic credibility in its regional role. The next stage does not require a sale of national control. It requires a clearer definition of what that control is intended to achieve.
CGES can remain a profitable transmission utility, or it can become the infrastructure platform supporting several billion euros of generation, storage and industrial investment. The second route demands more disciplined capital allocation, stronger project preparation, deeper European financing and a firmer negotiating position toward strategic shareholders.
Montenegro owns the central asset in the corridor. Terna needs it to connect Italy with the Balkans. EMS needs it to connect Serbia with the Adriatic. The state’s development strategy should ensure that the largest share of the next cycle’s investment, flexibility services, renewable exports and industrial value is created within Montenegro rather than merely transmitted across it.
Elevated by Virtu.Energy
