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Banking Sector

Privatization and Investments

BANKING SECTOR Source: Bulletin of the Central Bank of Montenegro (July, August, September 2012).

Total Bank Assets and Liabilities From end-June to end-August 2012, total bank assets and liabilities totalled € 8,453.2 million, while the average monthly level was 2,817.7 million. Total bank assets and liabilities were recorded as € 2,839.0 million at end-August 2012, thus showing a decline on an annual level (2.9%). At end-June, end-July and end-August 2012, within the structure of total bank assets, loans recorded a decrease, while monetary assets and deposits with depository institutions recorded an increase (Graph 1). Total bank capital amounted to € 834.4 million from June to August 2012, while on an average monthly level it amounted to € 278.0 million. At endAugust, total bank capital amounted to € 267.0 million, thus recording a decline on an annual level (5.9%). Deposits Total deposits amounted to € 5,714.4 million from June to August 2012 and on a monthly level amounted to €1,904.8 million. At end-August, total deposits amounted to € 1,954.4 million. Observing data from August 2012 and comparing it with figures from August 2011, total deposits increased by 3.4%.

age about 50.8%) and deposits with a maturity period of up to 3 months (average about 22.7%). Deposits with maturity periods ranging from 1 to 3 years showed a decrease. Observed on a sector by sector basis, within the deposit structure, deposits made by natural persons remained dominant with a percentage share of about 56.8%.

Household Deposits Total household deposits amounted to € 3,246.4 million, and on a monthly level amounted to € 1,082.1 million. At end-August, total household deposits amounted to 1,108.3 million and recorded an increase of 2.0% on a monthly level and of 8.5% on an annual level. From end-June to end-August 2012, within the maturity structure of household deposits, time deposits were dominant and were recorded as representing 68.7%. However, time deposits recorded a slight decrease in comparison with earlier figures (Graph 1).

Loans Total loans granted by banks amounted to € 5,814.1 million, which, on a monthly basis represented € 1,938.0 million. At end-August, total loans amounted to € 1,905.6 million, and thus recorded a decrease of 5.1% less in comparison with the previous year. The loan-to-deposit ratio1 amounted to 1.10 at end-June 2012, 1.02 at endJuly and 0.98 at end-August 2012. When observing data from August 2012 and comparing it with data recorded in June 2012, it can be seen that the ratio between loans and deposits improved. In the structure of total loans disbursed, corporate and household loans were dominant (91.0%) during the period from June to August 2012; the remainder referred to banks, other financial institutions, public owned organizations, non-profitable organizations and others. Interest Rates From June to August 2012, the weighted average lending effective interest rate (lending interest rates) amounted to around 9.54%. The weighted average deposit effective interest rate (deposit interest rates) amounted to around 2.98% in the same period. ■

Graph 1. The maturity structure of household deposits, in %

Within the deposit maturity structure, time deposits recorded a decrease (around 60.0% of total deposits), while demand deposits recorded an increase (around 40.0% of total deposits). Within the structure of time deposits, the largest segment was made up of deposits with a maturity period ranging from 3 months to 1 year (aver-

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Source: Bulletin of the Central Bank of Montenegro: July, August, September 2012. 1 This ratio represents the relationship between loans and deposits. In this case loans exceed deposits by 10% at end-June, by 2% at end-July and were 2% lower than deposits at end-August 2012.

Privatization and Investments Despite business barriers and the economic crisis, Montenegro still has a high inflow of investments for an economy of its size. It is expected that FDI will reach €450 million by the end of the year, according to an announcement made by the MIPA. Currently, one major privatization procedure is underway – the Simo Milosevic Institute, a health care centre, which is expected to be completed soon. However, a few other major investments are still pending.

Investments EIB Provides €49 Million in Loans and Grants for Montenegro The European Investment Bank (EIB) has signed 4 contracts in favor of the local economy in order to support the country in its path towards the European Union. The EIB will lend Montenegro €25 million to support the country’s small and medium-sized companies (SMEs) and €20 million for urgent flood relief and prevention. The bank will also provide an additional grant worth €600,000 as part of the Western Balkans Investment Framework for the reconstruction of the water supply system in Cetinje and another grant worth €3.5 million to realize plans for a wastewater treatment plant in Pljevlja. Dario Scannapieco, the EIB Vice-President responsible for the Western Balkans said, “Thanks to these operations we are able to continue supporting the country in the sector of small and medium enterprises and also in the reconstruction process after the floods. Moreover, I am really delighted about the two grants in the water sector, because technical assistance plays a crucial role in preparing projects of a high standard.”

US Invenergy Eyes 5-10-MW Solar Park in Montenegro A US clean energy company, Invenergy, has expressed interest in constructing the first solar power facility in Montenegro with a capacity of 5-10-MW. The company’s president, Michael Polsky, at a meeting with the Montenegrin Prime Minister, Igor Luksic, expressed interest in the solar park as well as in evaluating the potential of the Moraca, Kamarnica and Maoca rivers. Polsky said that conditions were favorable for energy investment in Montenegro and that this represented a new development opportunity for Invenergy. Chicagobased Invenergy is currently implementing around 6,600MW in various energy projects and is developing new ones totaling about 15,000 MW. UniCredit Group Ready to Support Investment Projects in Montenegro The UniCredit Group plans to support investment and development projects in Montenegro. With its present tax policy, Montenegro is becoming an attractive and competitive business destination. In a statement issued after the meeting between the Montenegrin Finance Minister, Milorad Katnic, and the Vice-President of the

UniCredit Group, Fabio Fornaroli, the government said that this is a good basis for receiving support from financial institutions. China’s Gezhouba Group Plans to Bid for the Construction of TPP Pljevlja Block II China’s Gezhouba will make an official offer to lead a new power generation project in Montenegro, related to the construction of a second block at the thermal power plant Pljevlja, by the end of September. Gezhouba first visited Montenegro in July to gather information for the preparation of a feasibility study and to prepare a project proposal. The coal fired power plant at Pljevlja has an installed capacity of 210 MW and uses coal from the Pljevlja basin. The potential second unit will use coal from the same reserves, which should be enough to guarantee a supply for both blocks during their lifespan. The Economy Minister, Vladimir Kavaric, pointed out that the government would not issue any guarantees for the project and that any business risk would be borne entirely by the investor, and not by the state. Preliminary estimates state that the second block would cost €330 million, and that construction works would take three years. The new energy source would generate 1.3 billion kWh. Montenegro Attractive to Chinese Investors Representatives from the International Port Group from Shanghai held a meeting with the President of the Municipality of Bar in order to discuss possible cooperation opportunities. The Chinese representatives stressed that the aim of their visit was to become familiar with the economic potential of Montenegro and to explore potential possibilities for cooperation in the areas of economy and tourism. Despite its size, Montenegro is attractive to Chinese investors. The President of the Municipality of Pavićević concluded

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Privatization and Investments that Montenegro is ready to enter into partnerships in areas that investors find interesting. In addition to visiting the Port of Bar, the Shanghai delegation also visited the Container Terminals, the Atlas Capital Centre in Podgorica and Porto Montenegro in Tivat. Construction of the Luxury Complex, ‘Plavi Horizonti,’ in Tivat Postponed Qatari Diar is fully owned by the Qatar Investment Authority and has acquired the rights to the existing hotel complex, Blue Horizon, for €24 million. It agreed to invest €250 million in the five-star hotel complex construction, Blue Horizon, on the Lustica Peninsula, but has now decided to postpone the start of its project. The Blue Horizon site was supposed to occupy an area of 24 hectares, and Qatari Diar planned to build a five-star luxury tourist complex in a Mediterranean architectural style. This luxury resort was planned to greatly enrich the tourist appeal of Montenegro as well as contributing to positioning the country as a high-class tourism destination. However, the management of ‘Qatari Bajo Sekulic Saltworks

Privatization and Investments Diar’ recently instructed its branch office ‘Qatari Diar Hotel Investment Property Montenegro’ (QDHPIM) to stop all project activities due to the fact that there is some privatelyowned land situated in the complex they bought from the company ‘Primorje.’ The private owners were offered a price of €1007m2 for their land but they did not agree. The second reason that this project has been postponed is that some amendments are required in part of the planning documentation due to changes in circumstances in the world markets and because of the type of clients sought by ‘Qatari Diar.’ Therefore, amendments are soon expected to be made to the urban plan, ‘Pržno 2.’ A decision regarding this will be made soon.

Open Tenders New Tender for the Sale of the Bajo Sekulic Saltworks The bankruptcy administration of the Bajo Sekulic Saltworks has launched a new call for the sale of

the company’s property at a reserve price of €230 million, two million less than in the previous tender. Bids are expected by 19 January 2013, at which time they will be publically opened. The property offered for sale includes land, salt pans, industrial facilities, administration buildings, electric power and gas facilities and canals. The new tender has been launched despite the fact that, in July, parliament members adopted a decision to make amendments to the Spatial Plan 2020. The plan suggests restoring the area of the salt works by transforming it into a protected area. It is suggested that it could become a monument of nature and that its existing land use designation should be preserved. This decision prevents the construction of any tourist facilities in this area. Call for the Sale of Queen’s Beach Launched A call for sale and valorization of Kraljicina Plaza (Queen’s Beach) near Canj, at a reserve price of € 50/m2 has been launched. The deadline for the submission of bids is 10 January 2013, on which date they will be opened, at 1500, in the City Hall, Bar. 

Montenegro Leases Land to LPGD for a Golf Resort Project

Kraljicina Plaza (Queen’s Beach) near Canj

Closed Tenders Montenegro Sells Zora Dairy to the Local Company, Simsic Montmilk The Government of Montenegro signed an agreement to sell the insolvent dairy, Zora, to a local company, Simsic Montmilk, based in Danilovgrad. According to the agreement, the government must repay Zora’s outstanding debts to both its workers and creditors. The government said that Simsic Montmilk has offered to pay €250,000 for Zora, and that it will invest the same amount again in the company. The state-owned stake of 99.56% in Zora was sold at a price of €0.43 per share. Montenegro Receives 20 Expressions of Interest in its Tender for Oil/Gas Exploration Interest to participate in this tender was expressed by around 20 international companies, all of which are reputable in this area, and five of which are the top five in the world. Some companies that visited the data room included: Wintershell from Germany, Exxonmobil International Limited from the USA, Statoil from Norway, INA from Croatia, Trajan Oil Gas Energean from the UK and Greece, Hellenic Petroleum, HESS Corporation, Total from France, ENI Spa from Italy, and Novatek from Russia, etc. The tender committee gave

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interested parties information about procedures regarding concessions for exploration and for the production of oil and gas on the Montenegrin coast. The information was sent to the Council for Privatization and Capital Projects for adoption. The tender will cover the territory of former Ulcinj block - 13 blocks in all with a total surface area of 3,000 m2. Montenegro’s Zetagradnja Filed the Only Bid for the Novi Duvanski Kombinat Montenegro’s Zetagradnja has filed the only bid to tender for the partial privatization and/or recapitalization of the Novi Duvanski Kombinat. During the duration of the tender process, four companies showed interest in the company and bought tender documentation. Shareholders of the Novi Duvanski Kombinat comprise the government which has a stake of 68.78%, and the city of Podgorica, which has a stake of 31.22%. The main activities of the company include the purchase, production and marketing of tobacco and tobacco products. The company has a registered capital of €7.4 million, which is divided into 7,389,611 ordinary shares. Interested investors who wish to participate in the tender process are required to have experience in the tobacco industry for at least 3 years and to have annual operating revenues-sales of at least €5 million in the business year preceding public invitation.

A lease agreement for the construction of a golf resort in Tivat was signed on 25 October, 2012, by the Minister of Sustainable Development and Tourism on behalf of the Government of Montenegro, by Chris Librecs on behalf of the company LPGD and by Mr. Andrija Radman on behalf of the company ‘Montepranzo-Bokaprodukt Tivat’. The lease is for a land plot in the Adriatic municipality of Tivat and has been earmarked for the development of a golf resort. The land which totals 786,685m2 is to be leased for a period of 90 years, with a commitment on the part of the tenant to build and operate a golf course and associated facilities. Montenegro’s Privatization Council said, earlier this month, that LPGD has proposed to invest €181.6 million in such a golf course development over a nine-year period. Two Bids to Tender for the Institute Simo Milosevic An extended tender period for the sale of shares in the health centre for physical medicine, rehabilitation and rheumatology, ‘Dr. Simo Milošević AD, Igalo,’ closed on 30 September, 2012. The Tender Commission received two bids: one from the Serbian company, MK Group, owned by businessman Miodrag Kostić, and one from the French company, Vichy. During the process of assessing bids, both bidders were asked to upgrade and revise their offers. The French company, Vichy, offered €300,000 to take over 56.48% of the state shares, along with an investment plan of €33 million and investment of approximately €117 million for new amenities. MK Group offered about €6 million for shares and about €20 million in investment. The health centre in Igalo is the largest and most well-known multi-disciplinary spa resort for health treatment in the Mediterranean. The company also owns the famous ‘Galeb’ villa, built in 1979 for the exclusive needs of the former communist leader and president of the SFRY, Josip Broz Tito. ■

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PRIVATIZATION AND INVESTMENTS 42