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Privatisation of Montenegro’s Rail freight Operator MONTECARGO

Privatisation of Montenegro’s Rail freight Operator MONTECARGO

MONTECARGO is the majority state owned (87,6358% of the shares) rail freight operator of Montenegro. The company was established in July 2009 as a result of a major railway sector
reform which focussed on the splitting of the former railway company Željeznice Crne Gore (ŽCG) into the following three joint stock companies. Each of these enterprises is fully
independent of one another.
  1. Railway Infrastructure of Montenegro [“Zeljeznicki Infrastruktura Crne Gore AD Podgorica” (ZICG)] 72,35% state-owned,   
  2. Rail freight [“Montecargo”] 87,6358% state-owned, and    
  3. Rail Passenger Transport [“Prevoz”] 87,6358% state-owned.
Rail Freight Operator
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As a result of the restructuring process the former railway company Željeznice Crne Gore (ŽCG) ceased to exist.

The restructuring of the railway sector was carried out in accordance with the Law on Railways which was adopted by the Montenegrin Government in 2004 and is fully implemented since 01 January 2005. In the context of the restructuring and splitting process of ŽCG the Government of Montenegro has taken over lager parts of the accumulated debts enabling MONTECARGO to start its operation as an independent company with:
  • only a limited and well defined amount of inherited debts,
  • an amount of staff tailored to the company’s operation (i.e. no, or little staff redundancy); and
  • a temporary sheltered de-facto monopoly.

Development of the national rail freight sector

The Government of Montenegro wishes to strengthen the national freight transport sector by among other supporting the development of the rail freight sector. One of the main purposes hereof is to develop:
  • a reliable, high quality and competitive rail freight sector, and
  • the Port of Bar through the provision of improved rail freight services between the port and the hinterland markets.

In order to achieve these purposes the Government:
  • provided the necessary legal and institutional framework needed for the introduction of competition, and
  • intents to strengthen the current operator (MONTECARGO) by developing it into a strong, efficient, economic viable and competitive company.

The Government however is fully aware that:
  • neither the Government nor MONTECARGO has the financial means to provide the funds necessary to modernise the company’s operation and assets, i.e. its rolling stock (locomotives and freight wagons) and to qualify its staff to successfully withstand competition;
  • it lacks the resources and capacity to implement strong corporate governance necessary to provide guidance and supervision to MONTECARGO’s executive board and management; and
  • it can not take the risk of having to assume any further debts as a possible result of a state owned MONTECARGO failing to withstand a competitive environment.

Consequently, the Government of Montenegro decided to completely divest its shareholding of MONTECARGO by privatising it to a strategic investor able to achieve above mentioned objectives.

Privatising MONTECARGO to a strategic investor able to achieve these objectives will strengthen MONTECARGO developing it into a strong, efficient, economic viable and competitive operator.

A strategic investor is required to develop the company by investing a considerable amount into the company. The investment will have to be specified in an investment plan (e.g. rolling stock, staff development through capacity development measures, multimodal terminals and logistic centres, etc.) and guaranteed by a performance bond.

A respective announcement, published by the Privatisation Council, invited foreign and local strategic and financial investors to submit their bids for the acquisition of above mentioned 87,6358% of the share capital in AD MONTECARGO until end of March 2010.

The privatisation process of MONTECARGO is still ongoing (October 2010).

Contact person: Mathias Nehm

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