The ownership structure of Crnogorski elektroprenosni sistem (CGES), Montenegro’s electricity transmission system operator, reveals far more about the country’s strategic regional importance than the relatively modest size of its domestic electricity market. While the State of Montenegro retains control with a 55.38 per cent ownership stake, the company’s two largest minority shareholders are not institutional investors or private utilities, but two neighbouring transmission system operators with long-term strategic interests. Terna, Italy’s national transmission operator, owns 22.09 per cent, while Elektromreža Srbije (EMS), Serbia’s state-owned transmission operator, holds 15 per cent.
Together, Terna and EMS control 37.09 per cent of CGES. Although this does not provide them with voting control or the ability to override Montenegro’s majority position, their investments carry strategic significance that extends well beyond dividends or the market value of CGES shares. Their ownership provides both Italy and Serbia with a permanent institutional presence in the electricity corridor linking the Western Balkans with the Adriatic Sea and, through the Montenegro–Italy submarine cable, one of Europe’s largest electricity markets.
For Italy, CGES represents the land-based infrastructure supporting its electrical bridge into Southeast Europe. For Serbia, it provides the most direct route toward that same interconnection. Montenegro occupies the central position, maintaining ownership control while relying on both strategic partners to transform its geographical location into a valuable long-term energy asset.
The current ownership structure developed following Montenegro’s separation of its transmission network from Elektroprivreda Crne Gore (EPCG). Italy’s participation was closely linked to the development of the submarine electricity interconnector between Lastva near Tivat and Villanova near Pescara, a project designed to establish a strategic connection between Italy and the Western Balkans. Serbia joined the shareholder structure later, initially acquiring approximately 10 per cent before increasing its stake to 15 per cent in 2021.
Neither investment was driven by conventional financial considerations. Terna did not purchase shares because Montenegro’s regulated transmission business offered unusually attractive returns, nor did EMS invest primarily for dividend income. Instead, both companies acquired strategic ownership positions designed to protect national infrastructure interests and strengthen their long-term access to regional electricity markets.
For Terna, the value of its investment begins with the submarine cable itself. The interconnector provides the physical connection between Montenegro and Italy, but the cable alone cannot function as a regional energy corridor. Electricity must first reach Montenegro through sufficient cross-border transmission capacity before being transported across the domestic grid toward the Adriatic coast. Consequently, the success of the Italian investment depends heavily on CGES continuously expanding and modernising substations, 400 kV transmission lines, control systems and interconnections with Serbia, Bosnia and Herzegovina, and Albania.
One of the most important elements of this infrastructure is the Lastva–Pljevlja 400 kV transmission corridor, which connects the coastal landing point of the submarine cable with northern Montenegro and the wider regional transmission network. Its role extends beyond supplying domestic consumers. It enables Montenegro to function as a transit platform capable of collecting electricity from across Southeast Europe and transferring it toward the Italian market.
Terna’s 22.09 per cent ownership therefore provides more than financial exposure. It gives the Italian transmission operator direct visibility over CGES’s investment strategy, network development plans, technical performance and long-term infrastructure priorities. At the same time, the stake reduces the risk that political changes within Montenegro could undermine the efficient utilisation of the submarine interconnector.
Italy’s interest is also closely connected to energy security and supply diversification. Historically, the Italian electricity system has relied heavily on imports from northern Europe while depending on domestic gas-fired generation during periods of high demand. The Adriatic interconnector creates an additional supply route, providing access to a different generation portfolio that includes Montenegrin, Serbian, Bosnian and Albanian hydropower, Serbian thermal generation, and an expanding pipeline of renewable energy projects across the Western Balkans.
The value of this diversified supply changes continuously. During wet years, abundant Balkan hydropower can provide competitively priced electricity to Italy. Periods of strong wind or solar generation may also produce export surpluses capable of flowing toward the generally higher-priced Italian market. Conversely, when Southeast Europe experiences electricity shortages, the direction of power flows can reverse, allowing electricity from Italy and the wider European market to support Montenegro and neighbouring systems.
As a regulated transmission operator, Terna does not profit directly from differences between Italian and Balkan wholesale electricity prices. Instead, its commercial interest is linked to the utilisation and regulated value of its infrastructure, cross-border transmission capacity, congestion management and the long-term integration of the Adriatic corridor into the European electricity network.
The Italian shareholding also places Terna at the centre of Montenegro’s energy transition. Although Montenegro has a relatively small domestic electricity market, it possesses substantial renewable energy potential. New wind, solar and hydropower developments will increasingly depend on export opportunities because domestic consumption alone cannot support large-scale investments. Reliable transmission infrastructure and transparent market rules therefore become essential for attracting project financing.
Terna benefits from this development because every new renewable project connected in Montenegro or neighbouring countries increases the amount of electricity available to utilise the submarine interconnector. This creates a strong incentive for the Italian shareholder to support grid reinforcement, faster renewable connections and transparent capacity allocation procedures.
The transmission system must also adapt to changing renewable generation patterns. Wind projects in Montenegro’s mountainous and coastal regions often produce electricity at different times from solar installations, while increasing solar capacity creates larger midday surpluses that require flexible transmission, storage and balancing solutions. Consequently, Terna has a strategic interest in strengthening the grid through additional hydropower flexibility, battery storage, improved balancing markets and more sophisticated cross-border scheduling mechanisms.
Serbia’s 15 per cent stake represents the northern end of the same strategic corridor. EMS operates the largest neighbouring transmission network connected directly to Montenegro and seeks to ensure that Serbia remains an integral participant in the Adriatic electricity route rather than merely an external user of Montenegrin infrastructure.
Serbia’s electricity system is considerably larger than Montenegro’s and includes significant lignite generation, major hydropower facilities, expanding wind capacity and rapidly growing investments in solar energy and battery storage. Depending on weather conditions, hydrology, thermal plant availability and renewable output, Serbia regularly alternates between being a net electricity exporter and importer.
Access to Montenegro significantly expands Serbia’s strategic flexibility. During periods of surplus generation, Serbian electricity can reach Italy and southern European markets through Montenegro. During domestic shortages, Serbia can import electricity from Montenegro, Albania, Bosnia and Herzegovina or, through the submarine cable, from Italy and the wider European market.
This flexibility becomes increasingly valuable as Serbia expands renewable generation. Wind and solar projects inevitably create periods when domestic electricity production exceeds local demand. Without sufficient cross-border transmission capacity, these surpluses could depress wholesale prices, increase renewable curtailment and reduce investment returns. Stronger transmission links through Montenegro therefore provide Serbian generators with additional export opportunities.
For wind farms, the corridor reduces the risks associated with simultaneous production from multiple projects, while for solar generation it offers valuable export capacity during periods of high daytime production. However, as Italy continues expanding its own solar generation, future market dynamics will increasingly depend on battery storage, hydropower flexibility, intraday trading and regional balancing rather than simply higher Italian daytime prices.
EMS’s investment also supports long-term regional transmission planning. New infrastructure constructed in Montenegro cannot deliver its full value unless complementary upgrades are undertaken within Serbia, just as Serbian network reinforcements depend on corresponding investments by CGES. Coordinated planning of transmission lines, substations, outage schedules, protection systems and cross-border capacity calculations therefore becomes essential.
Ownership strengthens this cooperation beyond normal relationships between neighbouring transmission operators. EMS gains direct insight into CGES’s long-term strategy through shareholder governance while continuing technical cooperation under European network codes, bilateral agreements and regional institutions.
The Serbian investment also carries an important geopolitical dimension. Without a direct ownership position, the Montenegro–Italy interconnector might have evolved primarily as a bilateral Italian-Montenegrin project. By becoming CGES’s third-largest shareholder, EMS secured Serbia’s institutional position within the governance structure surrounding the Adriatic electricity corridor.
However, ownership does not provide either EMS or Terna with preferential access to transmission capacity. Cross-border electricity transmission remains subject to European market rules, transparent capacity auctions and regulatory oversight. CGES is legally required to operate as an independent transmission system operator, ensuring equal treatment of all market participants regardless of share ownership.
Italy and Serbia nevertheless share several strategic objectives. Both support strong technical performance, continuous investment, reliable transmission infrastructure and improved integration of Montenegro into European electricity markets. Both also favour maintaining sufficient investment levels rather than maximising short-term dividend distributions.
This issue occasionally creates tension. As the majority shareholder, Montenegro may seek higher dividend payments to support public finances, while minority investors naturally welcome financial returns. However, excessive dividend distributions could reduce CGES’s ability to finance new transmission projects, strengthen its balance sheet and support future borrowing.
For both Terna and EMS, the greatest value lies in the future expansion of the transmission network, not immediate dividend income. A larger regulated asset base, improved system resilience and higher cross-border transfer capacity ultimately provide greater long-term strategic benefits than short-term cash distributions.
Although their interests frequently align, they are not identical. Terna naturally prioritises investments that strengthen electricity flows toward Italy and maximise utilisation of the submarine cable. EMS places greater emphasis on strengthening the northern section of the corridor and expanding transmission capacity between Serbia and Montenegro. Given limited investment resources, CGES must carefully balance domestic reliability, renewable integration, cross-border reinforcement and Italy-facing infrastructure.
Competition may also emerge during periods of regional electricity shortages. Both Italy and Serbia rely increasingly on flexible hydropower resources located across Montenegro, Albania and Bosnia and Herzegovina. During droughts or unexpected thermal plant outages, both countries may simultaneously seek access to limited regional generation, demonstrating that stronger interconnection enhances security but cannot eliminate competition for available electricity.
Montenegro’s position is therefore considerably stronger than the size of its domestic electricity market would suggest. Its 55.38 per cent majority ownership allows it to retain strategic control while simultaneously benefiting from the technical expertise, financing capacity and political support provided by Italy and Serbia. This combination enables infrastructure investments that would be difficult to justify based solely on Montenegro’s domestic electricity demand.
At the same time, Montenegro must ensure that CGES’s development strategy remains aligned with national priorities rather than becoming a compromise between Italian import interests and Serbian export ambitions. Domestic energy security, affordable transmission tariffs, renewable integration and climate resilience must remain at the centre of the company’s long-term strategy.
The distinction between ownership and national economic benefit is equally important. A heavily utilised transmission corridor may increase congestion revenues and strengthen CGES’s financial performance, but Montenegro captures the greatest value only when transmission infrastructure also supports domestic renewable generation, battery storage and new investment. Without these complementary developments, much of the economic value created by the corridor would continue to accrue primarily to electricity producers and traders operating in neighbouring countries.
Ultimately, the ownership structure creates both opportunity and responsibility. Terna safeguards the Italy-facing interconnector by maintaining influence over the transmission network supporting it. EMS protects Serbia’s access to the Adriatic corridor and secures its role in regional transmission planning. Montenegro, through its majority ownership, preserves national control while leveraging the strategic interests of two larger neighbouring electricity systems.
CGES has therefore evolved into far more than Montenegro’s national transmission operator. It has become the corporate centre of a strategically important regional electricity corridor linking Southeast Europe with the European Union. Italy depends on Montenegro to maximise the value of its Adriatic interconnector. Serbia depends on Montenegro for efficient access to that same route. Montenegro, in turn, depends on both partners to transform a relatively small domestic electricity system into infrastructure of lasting European significance.
