CGES lines up €25 million AFD loan, betting on transmission upgrades to keep Montenegro’s grid flexible

Montenegro’s transmission system operator, Crnogorski elektroprenosni sistem (CGES), is preparing to take on a new €25 million loan from the French Development Agency (AFD), supported by a state guarantee. The financing is intended to reinforce the country’s grid infrastructure as part of an ongoing modernisation cycle—an area that is becoming increasingly central as regional power systems shift toward higher renewable output and more cross-border electricity movement.

AFD funding earmarked for Perućica and Pljevlja 2

The loan will be directed toward critical transmission upgrades, including the reconstruction and expansion of the Perućica substation and the installation of a new autotransformer at Pljevlja 2. Both assets are described as key nodes within Montenegro’s high-voltage network.

By strengthening transformer capacity and improving substation resilience, the project is designed to address structural constraints that have grown more visible as the regional system changes. The upgrades are expected to support voltage stability and increase transmission flexibility—two operational areas where Western Balkans grids have faced mounting pressure.

A familiar financing model: development capital plus sovereign backing

The structure of the AFD facility reflects a recurring approach in Montenegro’s energy sector: international development funding combined with sovereign support. The government’s willingness to provide guarantees highlights how transmission infrastructure is treated as strategically important for system-wide reliability, rather than as a purely commercial asset.

The AFD loan also fits into a broader pattern of cooperation between Montenegro and the French Development Agency through multi-tranche arrangements. Those programmes have supported not only infrastructure investment but also policy reforms, including work related to climate policy, renewable integration and institutional capacity building.

Transmission readiness over pure generation growth

For CGES, the new borrowing continues a long-standing reliance on international lenders—historically including the European Bank for Reconstruction and Development—to finance grid upgrades linked to regional interconnection and system reliability. The current phase of investment is framed less as expanding capacity from a low base and more as adapting the network to higher volatility, bidirectional flows, and integration with EU markets.

The focus on Perućica and Pljevlja is particularly relevant because these nodes sit at intersections involving domestic generation, cross-border exchanges, and future renewable inflows. That positioning makes them critical for maintaining system balance during both high-export periods and low-demand conditions.

Overall, while €25 million is modest relative to total system needs, it aligns with an incremental investment pattern in which cumulative upgrades determine how effectively the network can absorb renewable capacity, stabilise power flows and sustain export competitiveness.