CGES ownership stakes link Montenegro’s grid to Italy and Serbia

The ownership structure was formed after a regional reorganisation of electricity networks following Montenegro’s separation of its transmission business from Elektroprivreda Crne Gore. Italy’s participation was linked to development of an undersea interconnector between Lastva near Tivat and Villanova near Pescara, described as a strategic connection between Italy and the Western Balkans. EMS joined later, initially acquiring around 10 per cent before increasing its holding to 15 per cent in 2021.

Terna’s stake and the submarine link requirements

Terna’s investment is tied to the economics of the submarine cable connecting Montenegro and Italy, but the cable alone does not create a functioning regional corridor. Electricity must first reach Montenegro through adequate cross-border connections and then be carried across a domestic transmission system capable of handling large transit flows toward the coast. The value of Terna’s stake depends on CGES maintaining and expanding substations, internal 400 kV lines, system-control infrastructure, and connections with Serbia, Bosnia and Herzegovina and Albania.

The Lastva–Pljevlja 400 kV transmission corridor is identified as central to this architecture because it links the coastal landing area of the submarine cable with northern Montenegro and the wider regional network. Its economic purpose extends beyond supplying Montenegrin consumers by enabling Montenegro to act as a collection and transit platform for electricity generated elsewhere in Southeast Europe. Terna’s 22.09 per cent position places it inside governance for that land-side system.

The stake is described as providing visibility over investment plans, network-development priorities, technical performance and operational reliability supporting the interconnector. It is also described as reducing risk that changes in Montenegro’s political cycle could leave the cable commercially isolated from the regional grid on which its utilisation depends.

Italy-facing flows and regulated transmission exposure

Italy’s interest includes import diversification through an Adriatic interconnector that adds another supply direction compared with imports through northern borders and domestic gas-fired generation used for marginal demand. The Western Balkans generation mix accessible via the corridor includes Montenegrin, Bosnian, Serbian and Albanian hydropower, Serbian thermal generation, and wind and solar projects across the region.

The value of that mix changes hour by hour: wet periods can support competitively priced Balkan hydropower deliveries into Italy, while periods of strong wind or solar output can move surpluses toward higher-priced markets. When Southeast Europe faces generation shortfalls, flows can reverse so that electricity enters Montenegro and neighbouring systems from wider European supply directions.

Terna operates as a regulated transmission operator rather than an electricity trader, so it does not receive wholesale price spreads between Montenegrin and Italian markets in the way merchant generators or trading companies might. Its exposure is instead linked to regulated infrastructure value and utilisation, cross-border capacity allocation, congestion-management mechanisms, and how the link fits into the European transmission system.

Network investment needs linked to capacity use

Persistent price differences can make interconnection capacity commercially valuable while also indicating a need for additional network investment. Terna’s strategic objective is described as increasing secure transfer capacity, reinforcing the role of the Adriatic route, and integrating the corridor into the wider European market rather than focusing only on congestion levels.

The minority shareholding is also described as placing Italy inside Montenegro’s energy transition process because developers require credible export routes, liquid markets and confidence that grid expansion can accommodate new output. Terna benefits when additional bankable generation connects in Montenegro and neighbouring systems since it expands electricity available for use of the interconnector.

This interest is described as aligning with CGES accelerating grid connections, strengthening network capacity, and applying transparent curtailment and capacity-allocation rules . Wind and solar are treated differently in how they affect system operation: wind output from elevated northern and coastal areas may coincide with hours when regional solar output is lower, while solar increases midday supply but also raises risks of simultaneous surpluses and negative prices across Southeast Europe.

EMS stake focused on Serbia-to-Adriatic access

Serbia’s stake follows the opposite end of the corridor because EMS controls the largest directly connected transmission system north of Montenegro. EMS has an interest in ensuring Serbia is not only an external user of a Montenegrin–Italian infrastructure arrangement by holding an institutional position in CGES governance for Serbia’s most direct route toward the Adriatic interconnector .

Serbia’s power system is larger than Montenegro’s and combines lignite-fired generation, major hydropower plants, growing wind capacity, plus an expanding pipeline of solar generation and battery storage. Depending on hydrology, coal availability, plant outages, temperature conditions and renewable output levels, Serbia’s market position can shift between exporter and importer roles.

Access to Montenegro expands options in both directions: during surplus periods it can provide another route toward Italy and southern Balkan markets; during domestic shortages it can support imports from Montenegro, Albania or Bosnia and Herzegovina or via submarine links toward Italy and wider European systems.

Renewables integration pressures on cross-border capacity

The optionality becomes more valuable as Serbia adds intermittent renewables because large volumes of wind and solar can create periods when domestic supply exceeds immediate demand during low-load hours. Without adequate cross-border capacity those surpluses can depress Serbian wholesale prices, increase curtailment levels, weaken project economics for new builds , while stronger transmission toward Montenegro provides another export direction for generators and traders.

For wind projects, improved corridor access is described as reducing concentration risk when multiple Serbian wind farms produce simultaneously. For solar it offers an outlet during midday surpluses where value depends on whether Italy remains priced above Southeast Europe during those hours; growth in Italian solar also affects assumptions about consistently higher Italian daytime prices.

The source describes that flexibility tools such as batteries, hydro coordination and intraday trading are becoming as important as gross interconnection capacity for managing these patterns across markets .

Coordinated planning across borders under shared governance

EMS’s interest extends into regional investment planning because new lines built in Montenegro cannot maximise their value if constraints remain on the Serbian side of the border. Likewise an EMS reinforcement cannot deliver additional cross-border capacity without complementary CGES investment. Coordinating development plans, outages schedules, protection systems, operational procedures and capacity calculations is therefore described as essential.

The ownership structure adds alignment beyond ordinary cooperation between neighbouring TSOs because EMS can observe or influence CGES strategic direction through shareholder governance channels while technical cooperation continues under network codes, bilateral agreements and regional institutions . The holding also has a defensive geopolitical purpose by ensuring Serbia has a formal position within CGES ownership architecture around a project that could otherwise have been structured primarily as an Italian–Montenegrin corridor.

No preferential access despite equity influence

Becoming CGES’s third-largest shareholder does not grant Serbia preferential access to cable capacity because cross-border capacity must be allocated under applicable market and regulatory rules . CGES must operate as an independent transmission system operator so EMS cannot reserve transmission rights for Serbian companies or direct dispatch decisions or discriminate against other participants. Terna faces similar restrictions; strategic influence is exercised through investment priorities, governance oversight and long-term coordination rather than privileged commercial access.

This distinction matters because CGES performs a regulated public function requiring neutral grid operation regardless of share ownership . Strategic shareholders benefit from a larger more reliable corridor but cannot convert equity positions into exclusive transmission capacity rights under legal requirements.

Shared objectives on financing resilience against underinvestment

Italy-focused objectives shared with Serbia include maintaining strong technical performance at CGES, having a credible investment programme, securing access to affordable long-term finance, improving cross-border transfer capability through new substations where needed, strengthening system-control infrastructure, and deepening integration into European electricity-market arrangements . Both sides are also described as having an interest in protecting CGES from chronic underinvestment.

The source notes that pressure for larger dividend distributions may arise if profits are used for fiscal revenue by government owners or cash returns by minority investors . Excessive dividends are described as potentially weakening CGES ability to co-finance transmission projects, absorb cost overruns and support new borrowing requirements.

Diverging priorities for limited capital during build-out

For Terna and EMS the value of CGES is described as lying primarily in future network development rather than immediate dividend extraction . A larger regulated asset base improving grid resilience alongside higher transfer volumes is characterised as strategically more valuable than short-term cash extraction. The government must balance this position against domestic tariff sensitivity alongside public demands that a profitable state-controlled company contribute more directly to budget needs.

The interests of minority shareholders are aligned but not identical: Terna prioritises infrastructure supporting Italy-facing flows including utilisation of submarine interconnector capacity while EMS focuses more on northern corridor elements such as capacity across Serbia–Montenegro border areas . Priorities may compete when investment capital is limited because CGES may need to choose between reinforcing domestic supply reliability within Montenegro, connecting new Montenegrin renewable projects, removing constraints toward Serbia or investing facilities increasing flows toward Italy .

Cable connectivity improves security but does not remove competition

The source describes competition during regional scarcity when both Italy/Italian-linked flows and Serbia-linked needs seek access to flexible hydropower from Montenegro plus Albania or Bosnia and Herzegovina during droughts or thermal outages . Under such conditions both systems can become import-dependent at similar times even though physical interconnection improves security . Interconnection does not eliminate competition for available generation resources within Southeast Europe.

Governance obligations tied to domestic investment outcomes

The government position is described as stronger than implied by domestic market size because its 55.38 per cent majority gives control over CGES while Terna at 22.09 per cent plus EMS at 15 per cent embed two larger neighbouring systems into company development planning . The arrangement is also described as able to attract financing technical knowledge and political support for investments that might be difficult to justify based only on domestic demand grounds.

The source also describes governance obligations for Montenegro so that CGES strategy reflects national priorities rather than becoming a compromise between Italian demand for an Adriatic supply route and Serbian demand for access . Domestic security of supply affordable transmission tariffs renewable connections resilience to extreme weather are stated as remaining central even if transit volumes grow over time .

Ownership versus national benefit for congestion income

A heavily utilised corridor can increase congestion income while strengthening CGES balance sheet according to the source description; however full economic advantage depends on whether infrastructure supports domestic investment outcomes . New wind solar storage flexible generation projects are cited as potential drivers turning transmission capacity into local employment tax revenue export income plus more credible project finance structures . Transit without domestic generation growth would leave Montenegro earning regulated network returns while commodity value accrues elsewhere among producers traders in other markets .

Three-state interests around CGES corridor operations

The stakes are described as creating both protection pressure: Terna protects Italy-facing interconnector performance by maintaining influence over network elements behind it; EMS protects Serbia’s route toward Adriatic access within regional planning; Montenegro protects sovereign control through its majority holding . CGES is characterised within these facts as more than a national utility because it acts as corporate centre for a regional electricity corridor where three states have distinct but interconnected interests involving Italy needing productive Balkan interconnector utilisation via Montenegro; Serbia needing efficient access through Montenegro; and Montenegro needing both systems to develop wider European significance despite its smaller domestic grid size .