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Banking Sector

Privatization and Investments

BANKING SECTOR

Total Bank Assets and Liabilities

From the end of October to the end of December 2012, total assets and liabilities of banks amounted to € 8,470.30 million, while the average monthly level amounted to € 2,823.43 million. Total assets and liabilities of banks amounted to € 2,810.10 million at the end-December 2012, recording a decline at the monthly level (0.4%). At the end of October, November and December 2012, in the structure of banks’ assets, net loans accounted for the main share (61.0%), followed by cash and deposits with depository institutions (about 26.5%) (Graphic 1). From the end of October to the end of December, within the banks’ liabilities, deposits accounted for the main share (about 70.0%) and recorded an increase of share in total banks’ liabilities. In addition, borrowings (average around 14.5%) recorded a fall of share, while total banks’ capital (average around 11.5%) recorded an increase of share in total banks’ liabilities (Graphic 1). Graphic 1: The structure of total banks’ assets and banks’ liabilities, in %

Deposits Total deposits amounted to € 5,929.4 million from the end of October to the end of December 2012 and at the average monthly level amounted to € 1,976.5 million. At the end of December 2012, the total deposits amounted to € 1,981.0 million. Observing data from December 2012 and comparing to December 2011, total deposits increased by 9.0%. From the end of October to the end of December 2012, within the deposit maturity structure, the share of time deposits recorded an increase (amounting to around 61.3% of total deposits), while the share of demand deposits recorded a decrease (amounting to around 38.6% of total deposits). In the structure of time deposits, the largest share recorded deposits with maturity from 3 months to 1 year (average about 55.9%) and they recorded a slight increase of their share. Deposits with maturity up to 3 months recorded a fall of their share (18.6%). Observed by sectors, in the deposit structure, deposits of natural persons were still dominant with a share of about 57.3%.

Household deposits

Source: Bulletin of Central Bank of Montenegro, November 2012, December 2012 and January 2013

The total capital of banks amounted to € 857.3 million from October to December 2012, while at the average monthly level amounted to € 285.7 million. At the end of December, the total capital of banks amounted to € 294.0 million, recording a decline at the annual level (3.7%).

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time deposits were dominant with 67.1%. In addition, observing data from November 2012 and comparing to December 2012, time deposits recorded a decrease of their share (12.2%).

Total household deposits amounted to € 3,396.5 million from the end of October to the end of December 2012, and at the average monthly level amounted to € 1,132.2 million. At the end of December, total household deposits amounted to 1,147.1 million and recorded an increase of 1.1% at the monthly level and by 11.0% at the annual level. From the end of October to the end of December 2012, in the maturity structure of household deposits,

Loans From the end of October to the end of December 2012, total loans granted by banks amounted to € 5,588.1 million, which was at the average monthly level € 1,862.7 million. At the end of December, total loans amounted to € 1,862.6 million, thus 4.8% less than in the previous year. The loan-to-deposit ratio1 amounted to 0.95 at the end of October, 0.94 at the end of November and 0.94 at the end of December 2012. In the structure of total loans disbursed, corporate and household loans were dominant by 92.0% in the period from October to December 2012, whereas the remaining referred to banks, other financial institutions, public owned organizations, nonprofitable organizations and others. Interest rates From October to December 2012, the weighted average lending effective interest rate (lending interest rates) amounted to around 9.48%. The weighted average deposit effective interest rate (deposit interest rates) amounted to around 3.24% in the same period. Graphic 2: Interest rates, period-end, in %

Privatization and Investments Open tenders New Public Call for the Company Novi Duvanski Kombinat AD Podgorica Launched The Government of Montenegro has invited the tender process for recapitalization through the construction of the factory and selling shares in the company Novi Duvanski Kombinat AD Podgorica (New Tobacco Plant). The subject of this tender is the granting of rights to build a factory to a mandatory investment program and determined project documentation of the Company with a recapitalization to the amount of the assessed value of the work 9,415,702€, (excluding VAT), and the sale of 7,669,611 shares of the company New Tobacco Plant JSC Podgorica or 100% of the share capital of the company. The deadiline for submission of Tender Offer expired on 7th May 2013 at 12 am (local time). The Tender Committee reserves the right to amend this deadline, if it is necessary. Sixth Tender for Salt Works Announced The Bankruptcy board of Salt works ‘Bajo Sekulić’ has launched the sixth

tender for the sale of the property at an initial price €209 million, ten million lower than at the previous auction. The interested bidders may deliver their bids by May 9, 2013. The initial price of the Salt works property on the first public tender was €257.8 million, but there were no bids delivered either then or the following four times. Ever since January 2012, when the first public auction was held, the interest was shown only by businessmen from Turkey. Privatization of the Container Terminal and General Cargo JSC: Companies to Deliver their Bids The German HHLA, Turkish Global Ports, Singapore Portek and ICTFI from Indonesia are companies that have passed the pre-selection phase in the process of privatization of the Container Terminal and General Cargo (CTGC) and now are invited to submit their bids. The Government has previously decided to privatize CTGC, or to sell 62% of state shares in this company and grant concessions for the use of the Port Bar area in order to develop the port sector and generate additional economic activities. CTGC is the company that has been separated from the Port of

Bar in 2008 and as of October 1, 2009 it has operated independently. The Government of Montenegro and the European Bank for Reconstruction and Development (EBRD) approved the tender documentation for the process of the sale of state shares of the company. All documentation is published on site: http://www. bar-transaction.com/, while access is granted only to companies that in the previous tender phase gain the right to present their offers to this project. The conditions of the purchase and concession contract have been changed. Namely, a Social program has been implemented with assistance of the EBRD and the number of workers optimized.

Closed/canceled tenders Company ‘Sato’ Purchased Hotel ‘Nikšić’ in Sutomore Hotels ‘Onogošt’ in Nikšiću, ‘Teuta’ in Risan, ‘Nikšić’ in Sutomore and Inn in Šavnik were offered for sale for the ninth time. The total initial price was €13.8 million and the deadline for delivering offers was April 16, 2013. At a public auction held on April 19, hotel ‘Nikšić’ in Sutomore was sold for €300.000 over the initial price to the company ‘Sato’, which offered the highest price (€2.3 million). By a Decision of the Commercial Court Podgorica, the Hotel ‘Nikšić’ was closed in October last year. It comprises of 274 beds and it is located on the sea shore. The monies received from the auction will be used to cover €470.000 debt to workers, while other creditors will be paid out in a percentage from the remaining amount. The Bankruptcy

Source: Bulletin of the Central Bank of Montenegro November 2012, December 2012 and January 2013. 1 This ratio represents the relationship between the amount of loans and deposits. In this case loans were below deposits by 5% at the end of October, and by 6% at the end of November and December 2012.

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Privatization and Investments Board stated that the decision is to be made about the next tender for the remaining properties of the company. Tenders for Institute Simo Milošević and daily Pobjeda Annulled The Montenegrin Privatization Council canceled privatization tenders for ‘Dr Simo Milosevic’ Institute in Igalo and the daily newspaper ‘Pobjeda’. According to Mr. Aleksandar Ticic, secretary of the Council, the submitted bids were not in compliance “with the criteria prescribed by tenders”. Bids for the institute came from France’s Vichy and Miodrag Kostic’s MK Group. Vichy offered an investment of EUR 33 million, announcing that about EUR 117 million would be invested in new facilities. Kostic offered to invest about EUR 20 million and to pay the institute less than it is really worth, said people at the Privatization Council. Negotiations for the purchase of daily newspaper ‘Pobjeda’ had only one bidder, Sarajevo-based ‘Avaz’ and the tender period officially lasted longer than one year. ‘Avaz’ has announced withdrawal from the purchase due to the poor company business results, after which negotiations continued before failing. Montenegro Government to Terminate Privatization Agreements The Council for Privatization and Capital Investments adopted a Decision on terminating privatization agreements in the tourism area. The Council ordered unilateral termination of agreements for hotels ‘Planinka’ and ‘Jezera’ in Žabljak due to failure to fulfill obligations defined in investment agreements. The agreement for hotel ‘Žabljak’ is still in force, since the works on it are in progress and are planned to be completed within a month. In the second form of privatization - sale through share capital the Council proposed termination of the agreements for the Hotel Centre for

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Privatization and Investments Rest, Recreation and Rehabilitation Igalo and hotel ‘As’ in Perazica valley. In the third form of privatization, long-term lease, the Council proposed termination of agreement with Nord Star Company for peninsula Luštica, unless all obligations from the agreement are fulfilled by June 1, 2013. Czechs Closest to the Second Block of Thermo Power Plant Skoda Praha has the best chance to be selected contractor for the second block of the thermo power plant Pljevlja. Their offer is technically more advanced than the one submitted by Montenegrin side, stated the director of Skoda Praha Danielk Jirichka to Czech papers. According to him, the construction of the 220 MW second block would enable a lot of business for Czech supplier companies. Besides Skoda, the bids for the second block were received from Poland Rafako, Slovakian IEG and three Chinese consortiums. The financier of the second block will be Montenegro State Power Company (EPCG), while companies that delivered the bids will be contractors. EPCG is currently negotiating with banks and asks for the most favorable loan. It takes about €300 million for the construction of the second block, which is expected to be completed in three years.

Investment news Bids for the highway: Chinese would make the road to Matesevo for 800 million euros If the Montenegrin Government reaches an agreement on all the other details with Chinese investors, they will be ready to build an 800 million priority section of the motorway Bar-Boljare, from Podgorica to Matesevo. The two sides will have to make an agreement about the details, and the biggest news is that for the first time a specific amount of money was mentioned. Whatever the Government, Chinese investors

and construction companies agree, it is unlikely to expect construction soon and at best only the PodgoricaMateševo section and most likely one way only, to attract traffic immediately and start production of revenue. In addition to Chinese companies CCCC Intenational, which has the support of the Chinese government Exim Bank, the most serious bidder for the construction of highway is US-Turkish consortium Behtel-Enka. The Ministry of Transport and Maritime Affairs expects to receive new bids from the Chinese and all other companies interested in the Bar-Boljare motorway construction in the following 15 days, planning to present its position on that matter to the Government in June, on the basis of which the final decision will be made. The Minister of Transport and Maritime Affairs, Mr. Ivan Brajovic says that the bids of all partners have been improving daily, adding that all options are open until the final decision has been made.

interviews were conducted with Chinese partners. “ They would, according to unofficial information, continue the project and construction of a new hotel Queen’s Beach and a residential complex of villas in Milocer park. The owner of Adriatic Properties is the offshore firm Aidway Investment Ltd from the British Virgin Islands. Now included on the its board of directors are the owner of Restis Group, Victor Restis, the chairman of the board and their representative to Montenegro, Petros Statis, while the CEO is his brother Teofanis Statis. In previous convocations a member of the board was the owner of Aman Resorts, Adrian Zecha. There were some indications that the talks were conducted with Azerbaijan oil company SOCAR, which has leased the land of the former military barracks in Kumbor. Tourist Resort ‘Slovenska plaža’ Soon to Be Under ‘Iberostar’ Brand

Greeks to Hand over Sveti Stefan to Chinese

Once a trademark of Montenegrin tourism, tourist brand - city hotel Sveti Stefan, will probably have a new “boss” soon. The Greek Restis Group, an investor who led the project of reconstruction of the popular “Saint”, is ready to sell its shares and provide a new, financially stronger partner. Although the company Adriatic Properties, which is the official lease-holder of the complex Sveti Stefan, Villa Milocer and Queens Beach, did not want to publicly declare the negotiations with foreign investors, from multiple sources close to the negotiating team it has been confirmed that the “most serious

One of the most famous brands in the Spanish hotel industry “Iberostar” is interested in joint appearances on the world market with the hotel group “Budvanska Riviera”. The prestigious Spanish company has a chain of over 100 hotels in 16 countries around the world, and after Croatia (where it already has two luxury properties) it came to Montenegro with the aim to establish cooperation with HG “Budvanska Riviera”. They are especially interested in the complex “Slovenska plaza”, and the plan is to include in their catalogue the hotel “Palas” from Petrovac. Agreement of cooperation will be signed in June, it was announced to Radio Montenegro from Alfa tours. The arrival of “Iberostar” to Montenegro

and cooperation with one of the best travel companies will contribute to a better positioning of Montenegro on the world tourist map. Iberostar has owned the hotel “Bellevue” in Becici for the last 10 years.

Montenegro Tax Paradise for Yacht Owners

Monte ne gr o Gov e rnm e nt Forbade Off-Shore Companies to Participate in the Tender for Oil and Gas Exploration

The Montenegrin Government forbade off-shore companies to participate in the forthcoming tender for oil and gas exploration. In Information, adopted at the last session, it was clearly stated that companies coming from tax paradises and off-shore destinations, companies registered in jurisdictions where Montenegro’s relevant bodies have no access to both registration or financial statements are not eligible to participate in the tender. Also, non eligible companies are those without a transparent ownership structure, as well as companies with whom the state has had a negative experience. In this way, the Government has abandoned so far the practice of allowing offshore companies to apply as bidders and buyers in privatization processes of the largest Montenegrin companies such as the Aluminum Plant, Iron Plant and tourist resorts. The exact date of the tender has not been officially announced yet. According to the tender conditions, there are 13 blocks selected that once belonged to the block 3 in Ulcinj covering an areas surface of 3191 km2. There were 24 companies that expressed interest in pursuing exploration for ‘the black gold’, among which are aome of the world`s largest companies in this area: Gasprom (Russia), Exxon (USA), Statoil (Norway), etc.

Croatia’s accession to the EU in July this year will bring indirect short-term benefits to Montenegro when it comes to yachting tourism, because Croatia will become a part of a single customs territory of the EU. Citizens who have so far kept their yachts, registered in their own states in Croatia, will have to officially import and register them in Croatia, or re-register them under some other so called ‘flag of convenience’, or perhaps search for a new home for their ‘floating pets’ – firstly in Montenegro, Turkey or even along the African coast of the Mediterranean, these countries do not come under EU legislation. While Croatia was outside the EU, owners could keep their yachts and boats in its marinas in the status of so called ‘temporary admission’, which enabled them to avoid paying high taxes to their states. This will end on July 1, 2013, so the rich are already preparing to move to the next ‘nonEU’ destination. ■

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