Montenegro’s electricity transmission operator, CGES, is poised for a substantial expansion of its asset base as the nation transitions from a power system reliant on a few large generating plants to one that integrates renewable energy sources, regional transit flows, and deeper ties with the European electricity market.
According to financial projections in the CGES management report for 2025, the balance-sheet value of assets categorized as “new assets” is anticipated to reach €111.7 million in 2026, increase to €170.5 million in 2027, and ultimately attain €214 million by the end of 2028. This figure reflects the cumulative balance-sheet value of recently commissioned and developing infrastructure rather than a single year’s investment.
Between 2026 and 2028, this category is expected to grow by €102.3 million, representing an approximate 91.6% increase over three years. Meanwhile, CGES’s total fixed assets are projected to rise from €334 million in 2026 to €417.5 million in 2028. Existing assets will decline in carrying value from €222.3 million to €203.5 million, primarily due to depreciation, while new infrastructure will drive overall balance-sheet growth.
By 2028, new assets are expected to comprise around 51% of CGES’s total fixed-asset base, up from about 33% in 2026. This rapid transformation reflects the modernization needed to support Montenegro’s evolving generation and interconnection portfolio.
The CGES network encompasses roughly 1,550 kilometers of transmission lines at voltages of 400 kV, 220 kV, and 110 kV, along with 29 substations, one 220 kV switchyard, and approximately 4,465 MVA of transformation capacity. It connects several key power generation facilities including the Pljevlja thermal power plant and various hydropower and wind farms.
The strategic positioning of CGES has been reflected in its recent financial outcomes. The company reported a net profit of €20.99 million in 2025, following profits of €24.83 million in 2024 and a record €35.7 million in 2023. Revenues from international markets, particularly through electricity transit and commercial use of the Italian interconnector, have helped sustain earnings while alleviating pressure on domestic transmission tariffs.
However, CGES anticipates a decline in net profit during its upcoming investment cycle, projecting only €1.4 million in 2026, €1.7 million in 2027, and €1.6 million in 2028. This forecast is not due to an expected revenue drop; total income is anticipated to gradually rise from €68.4 million in 2026 to approximately €71.8 million in 2028.
The expected EBITDA will increase from €12.8 million to €14.3 million, resulting in an improved EBITDA margin from about 18.7% in 2026 to nearly 20% by 2028. However, depreciation, interest expenses, and regulatory adjustments will heavily impact net earnings.
This projected profit normalization aligns with transmission regulation dynamics; Montenegro’s Energy and Water Regulatory Agency previously reduced allowed transmission tariffs after CGES’s strong financial performance, resulting in around €9.5 million less revenue for 2025.
The company is embarking on its most extensive asset expansion phase with earnings significantly lower than those recorded between 2023 and 2025. While this does not weaken the investment rationale—since new transmission assets can enhance future tariff revenues—it creates a timing gap between construction expenditures and cash recovery.
The anticipated increase in debt is substantial; CGES expects net debt to rise from €17.8 million in 2026 to approximately €91 million by 2028. Long-term liabilities are projected to grow from €44.2 million to €91.5 million, while the forecasted cash balance at the end of 2028 stands at just €500,000.
This increase implies net debt would escalate from about 1.4 times EBITDA in 2026 to roughly 6.4 times EBITDA by 2028. Such leverage growth is significant for a regulated transmission operator with relatively stable cash flows.
The projected figures call for cautious interpretation as projects under construction may not yet contribute fully to EBITDA while debt obligations are already visible on the balance sheet. Once commissioned assets enter the regulatory framework, revenue and EBITDA should improve; however, effective liquidity and debt management will be critical during the construction phase.
Cumulatively, CGES ended 2025 with about €40.4 million in outstanding loan obligations, including a notable exposure of €22.37 million tied to an EBRD facility related to the Lastva–Čevo transmission project.
The company has broadened its investment program; it secured a new loan of €15 million from EBRD in March 2026. This funding aims to rehabilitate the vital transmission corridor linking Bosnia and Herzegovina, Montenegro, and Albania.
This corridor supports both regional electricity trade and enhances domestic system security within Montenegro as it was originally designed for an earlier generation mix that did not account for significant additional renewable capacity.
An essential project involves upgrading the Brezna substation from 110/35 kV to 400/110 kV, estimated at around €36 million, including financing from EBRD and EU grants. This upgrade is expected to facilitate connections for up to 400 MW of wind and solar capacity.
The broader Lastva–Čevo–Pljevlja development has an estimated total value near €119.7 million. Some segments are operational already while others are still under development.
The completion of this corridor would enhance utilization of the Italian submarine cable while improving voltage conditions across Montenegro’s grid.
Additions such as two new autotransformers at Podgorica 1 and Mojkovac substations are being installed under a contract valued at approximately €4.5 million to bolster supply security.
The procurement process highlights challenges faced by European transmission investments due to lengthy delivery cycles exacerbated by high demand for large power transformers.
The company is also reconstructing sections of lines along Budva–Lastva and Lastva–Tivat covering approximately 17 kilometers with an estimated investment of around €1 million.
This investment addresses increasing demand driven by tourism and real estate development pressures on local networks.
A robust generation pipeline supports this asset expansion cycle; CGES signed connection agreements for several upcoming projects including an planned wind farm valued at approximately €132 million set for operation by **2030**.
The anticipated output from these projects could surpass local demand during favorable conditions necessitating enhanced transmission capacity alongside storage solutions.
The management projection aggregates new assets without detailing allocations among individual projects which could hinder clarity for stakeholders regarding balance-sheet forecasts versus physical developments.
A comprehensive capital plan would typically outline annual capital expenditures alongside committed contracts and financing sources for major projects while distinguishing between replacement investments versus expansion capital expenditures.
This structured approach aids CGES’s financial strategy as it looks towards long-term financing avenues through institutions like EBRD while also leveraging retained earnings for equity contributions towards future projects.
The planned cash balance presents limited liquidity options requiring careful management during simultaneous contracts across various project phases amidst potential delays or cost escalations due to external factors affecting procurement timelines.
The execution risk associated with construction remains heightened due to geographical challenges within Montenegro impacting timelines significantly while necessitating thorough environmental assessments during project implementation phases.
