Montenegro will cover the obligations of both Montenegrin shipping companies to the Chinese EXIM Bank, stemming from the initial loan taken for the procurement of four overseas vessels. The state-owned Barska plovidba currently owes 7.7 million euros, while Montenegrin plovidba has incurred debts exceeding 34 million euros, as stated by Jovan Šćekić, the State Secretary at the Ministry of Maritime Affairs.

Montenegro operates two shipping companies with two vessels each. The vessels are owned by Bar navigation and Budva, while 21. May and Kotor belong to Montenegrin navigation. The loan from the Chinese EXIM Bank was guaranteed by the state for the purpose of financing these ships. The first payment is due on January 21 of the loan’s first year. According to CEO Boris Mihailović, the income generated from the current operations, particularly due to significant losses incurred by both boats last year, is insufficient to meet this financial obligation, as reported by eKapija.

“We managed to cover regular five-year maintenance costs, but we lost over three million euros in profit, which renders us incapable of meeting the loan payment due on January 21, totaling one million and 640 thousand euros. While we are able to maintain and repair the vessels, we currently cannot cover this installment, nor the upcoming payment in July, and projections indicate that we will face similar issues in January,” Mihailović explained.

The state has assured that it will provide funds on behalf of Montenegrin navigation to meet the loan installment, as confirmed by Jovan Šćekić, the Secretary of State in the Ministry of Maritime Affairs.

“Bar navigation currently owes approximately 7.7 million euros to the state and will not be able to meet its loan payment obligations this January, while Montenegrin navigation is in an even more challenging situation with an accumulated debt of 34 million euros. As for Bar navigation, it has already fulfilled its primary obligations under current operations and has paid over 29 million euros, while Montenegrin navigation’s obligations stand at around 34 million euros, in addition to the impending debts for January,” emphasized Šćekić.

The pressing question remains whether the state should cover the credit obligations for both shipping companies.

“Currently, this is not considered state aid for several reasons. Both companies have documented these debts in their financial records. The state is the guarantor of this loan and is committed to preserving these two companies and our maritime legacy; having serviced these obligations in the past, we now need to devise a solution to address all outstanding debts,” Šćekić noted.

He elaborated that the state must ensure the money is returned.

“While it is feasible to manage interest payments on this debt, the state is burdened by high default interest rates, currently at 12.5 percent annually. If we can negotiate more favorable interest terms, we could potentially ease these financial burdens over the next 3-4 years,” pointed out Boris Mihailović from Bar navigation.

Šćekić indicated that a restructuring plan for the existing debts should be considered in the near future, ensuring that it is sustainable, reflecting the ability of these companies to fulfill their obligations.

A representative from the Ministry of Maritime Affairs suggested that initial decisions may have been misguided, particularly regarding the acceptance of unfavorable credit terms for the purchase of Montenegrin vessels. Additionally, the business plans of both companies were overly reliant on vessel rentals. Revisions to the business policies of the shipping companies will be forthcoming, Šćekić stated.

“We need to pursue independent brokerage arrangements that offer much more favorable conditions than those currently presented in the market,” concluded Krekic.

The director of Bar navigation, Boris Mihailović, highlighted that ticket sales for the Ferry Line Bar-Bari would continue and that negotiations with the Italian company Adria Ferries are underway to renew maritime connections between Bar and Ancona.