The state-owned power utility in Montenegro, EPCG, has announced a delay in the commissioning of the new A8 generating unit at the Perućica hydropower plant. Originally scheduled for 2027, the startup is now expected to occur in 2028 due to prolonged contractor selection processes associated with this significant hydro modernization project.
This postponement highlights the growing complexities involved in executing strategic energy infrastructure projects throughout Southeast Europe. Factors such as procurement procedures, supply-chain issues, financing conditions, and compliance with technical standards are extending delivery timelines even for established hydroelectric facilities.
EPCG has indicated that the tender process for the fabrication, delivery, installation, and commissioning of the A8 turbine-generator unit is still under evaluation months after bids were opened in September 2025. The utility noted that the review has proven more challenging than anticipated owing to the extensive and intricate technical documentation submitted by bidders, coupled with the oversight requirements mandated by German development bank KfW.
Two bids from European companies are currently under consideration. One proposal comes from a consortium that includes Voith Hydro GmbH & Co KG, Končar, and Elnos, while the other was submitted by Slovenia-based Litostroj Power.
The technical evaluation commission at EPCG is finalizing its assessment report, which will then require approval from KfW before financial offers can be reviewed and a contractor appointed. The utility now anticipates that contract activation will occur around mid-2026, which compresses the construction schedule to approximately 24 months and eliminates any chance of commissioning in 2027.
The A8 expansion project is a critical modernization initiative within Montenegro’s renewable energy generation portfolio. Once completed, it is projected to boost installed capacity at the Perućica hydroelectric complex from 307 MW to roughly 365.5 MW and enhance annual electricity production capacity by up to 50 GWh following system optimization.
In addition to increasing nominal capacity, this project is expected to have broader implications for Montenegro’s electricity market structure and long-term decarbonization efforts.
Hydropower remains essential to Montenegro’s domestic electricity system and provides necessary balancing flexibility for integrating larger solar and wind energy sources. As regional electricity systems transition towards higher renewable intermittency and more volatile intraday market dynamics, projects like the Perućica modernization are becoming increasingly valuable.
The delay comes at a critical juncture for EPCG as it strives to expand solar energy deployment, modernize transmission infrastructure, and pursue broader decarbonization goals while ensuring stable domestic generation capacity amidst changing hydrological patterns and regional market fluctuations.
The Perućica modernization program also reflects a regional trend in Southeast Europe where utilities are focusing on refurbishing and optimizing existing hydro assets instead of solely pursuing new generation projects. Existing hydro infrastructure tends to offer quicker permitting processes, reduced environmental opposition risks, and more predictable grid integration compared to new developments.
However, the delay at Perućica underscores how refurbishment initiatives are increasingly susceptible to broader European industrial challenges.
EPCG has cited ongoing global supply-chain issues, component availability limitations, and cost inflation impacting major electromechanical equipment procurement as contributing factors. These challenges have become prevalent across European hydropower projects since 2022, particularly affecting large rotating equipment and power electronics.
Financing conditions further complicate this project’s strategic significance. In September 2024, EPCG secured a EUR 40 million loan agreement with KfW for Phase III reconstruction and expansion of Perućica, with repayment set over 15 years including a five-year grace period. Overall financing from KfW for various modernization phases at Perućica now totals over EUR 83 million.
This initiative aligns with a broader European framework aimed at decarbonization and infrastructure modernization rather than being merely a replacement of existing turbines.
From a regional perspective, additional flexible hydro capacity is becoming increasingly crucial within the Western Balkans electricity system. The rapid rise of solar generation in Serbia, Montenegro, and Albania—alongside expanding cross-border electricity trading—highlights the growing importance of dispatchable balancing generation amid episodes of negative pricing in neighboring EU-connected markets.
This trend holds particular significance for Montenegro as hydro flexibility not only serves domestic needs but also functions as a regional balancing asset capable of capitalizing on intraday volatility and cross-border price differences.
The delay in commissioning the A8 unit thus has far-reaching implications beyond EPCG’s generation portfolio; it affects Montenegro’s future market flexibility and capacity for renewable integration at a time when Southeast Europe’s electricity market is undergoing structural changes driven by EU decarbonization policies.
While EPCG maintains that this extended evaluation period will yield superior technical solutions and equipment standards ultimately, the revised timeline emphasizes how strategic energy-transition infrastructure in Southeast Europe increasingly relies on complex international financing frameworks and resilient supply chains.
