Montenegrin govt revises 2013 budget to take over KAP’s electricity debt

By bne IntelliNews June 27, 2013

The Montenegrin government said it revised the 2013 budget bill on Thursday, June 27, to take over the payment of aluminium firm KAP’s outstanding electricity bills and allow new borrowing to cushion the imminent activation of state guarantees issued on KAP loans.

The revision is made exclusively for the need to finally resolve KAP’s long-accumulated financial problems and put an end to the status quo, finance minister Radoje Zugic told a news conference after the cabinet meeting.

Under the revision, the government is taking over KAP’s EUR 61mn debt to power producer EPCG and is introducing the possibility for additional state borrowing in the amount of EUR 102mn - to compensate for the guarantees that will be unavoidably activated once the company enters bankruptcy next month.

Zugic said the rebalance was supported by most of the members of the DPS-led government. However, the cabinet members from the junior coalition partner SDP abstained during the vote – therefore, Zugic added, he is not sure if the rebalance will gain enough support to pass through parliament.  

Zugic gave no further details on the financial parameters of the rebalance but underlined it is made only for the purpose of solving KAP’s troubled state. On the other hand, he added, a second budget revision will follow soon that will contain fiscal measures – savings on the expenditure side and the effects of the recent tax hikes on the revenue side.

Montenegro’s original 2013 budget bill targets halving the budget gap to 2.73% of GDP (EUR 95mn) from 5.86% of GDP (EUR 196mn) in 2012. Fiscal data for January-April, however, show a rapid deterioration in the government finances with the budget gap already reaching EUR 72mn, or 75% of the full-year target due to higher-than-planned spending.

The initial bill also limits this year's state borrowing to EUR 220mn, which limit is now being raised by nearly 50%.

The government has issued state guarantees on KAP’s EUR 40mn loan to Hungarian lender OTP and over EUR 60mn loan to Russia’s VTB. The activation of these guarantees is believed to happen immediately after the court announce bankruptcy at KAP on July 16.

VTB has also extended further EUR 30mn loans to KAP that are not guaranteed by the state. The accumulated debts of the aluminium smelter are estimated at some EUR 360mn, equal to more than 11% of last year’s GDP.

Related Articles

UNCITRAL dismisses all CEAC's claims against Montenegro in KAP case

The United Nations Commission on International Trade Law (UNCITRAL) arbitration tribunal dismissed all claims of CEAC Holding, owned by Russian businessman Oleg Deripaska, against ... more

Montenegro’s government adopts urgent budget revision

Montenegro’s government has adopted an urgent budget revision to redirect funds for social payments due in November and December, a statement on the government’s website said on November 8. ... more

Russian nationalists planned to kill Montenegrin PM Djukanovic, prosector claims

Russian nationalists organised the alleged coup attempt on the eve of Montenegro’s October 16 general election and planned to assassinate Prime Minister Milo Djukanovic, Montenegro’s special ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss