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Italy-Montenegro power link project pared back 50%

Barcelona β€” Italy has pared back its plans for a power interconnector withMontenegro, with delivery of the project planned for the end of 2019 andcapacity half what was originally expected, according to the CEO of gridoperator Terna Luigi Ferrari, speaking to analysts Thursday.

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* Capacity of link reduced to 600 MW for 2019 start

* Reduction follows compromise between two countries

* Terna to boost capex 30% with grid development key

The undersea cable has been laid and the two receiving points completedeither side of the Adriatic, he said, meaning the first link between thecountries should come online near the end of next year. Capacity on the linkhas been reduced to an initial 600 MW, following a compromise with Terna'sMontenegrin counterparts, he said.

The link joining Villanova and Tikat, was previously slated forcompletion in 2018, with the start date pushed back into 2019 at Terna'sstrategy presentation last year, while the overall capacity was previouslyexpected to be 1.2 GW.

Ferraris also said Terna was looking to include the project as part ofthe Italian 'Interconnector' mechanism -- a domestic scheme to incentiviseprivate electricity links with other countries in order to import cheaperenergy into Italy.

The 2009 Law allows for up to 2.5 GW of such projects, of which Italy'sother large link, currently under construction on the French border, is one.

Indeed, Ferraris said Thursday the 1.2 GW link between Piedmont, Italyand Savoy, France, will also come online before the end of 2019.

Terna has made interconnection and grid development key cornerstones ofits new strategy plan for 2018-2022, which was presented to the financialcommunity Thursday. The company said it had earmarked Eur2.8 billion ($2.5billion) in its 2018-2022 strategic plan for grid development, adding 1,250 kmof new lines.

Terna's overall capex will total Eur5.3 billion for the period, anincrease of 30% from the previous five-year plan.

The company said it sees a move to a more complex and integrated system,with distributed generation, prosumers, multi-directional systems, storage andincreased cross border flows, giving the transmission grid a pivotal role.

"The focus is interconnection of Italy with the rest of Europe," Ferrarissaid.

Besides the conclusion of the two cross-border links during the period,the company will also invest in the decongestion of Sicily, rationalizationprojects for major metropolitan areas and work on its SA CO I 3 connectionbetween Sardinia, Corsica and the Italian mainland, which has a target date of2024 for conclusion.

The company said it had also set aside Eur700 million for increased gridsecurity measures and Eur1.9 billion for asset renewal and efficiencymeasures.

Among the main projects for increasing exchange capacity among thedifferent zones of the Italian electricity market, Terna will carry out threeundersea connections at Venice, Capri and Elba among other projects betweenthe different zones.

The rationalization of electricity grids in the metropolitan areas willcover the cities of Milan, Rome, Naples and Palermo in particular and willmainly include the replacing of old infrastructure with new sustainable andtechnological cables, it said.

--Gianluca Baratti, newsdesk@spglobal.com

--Edited by Jonathan Loades-Carter, jonathan.carter@spglobal.com