Indecon Consulting

[Montenegro] – Privatisation Advisory / Rail Transportation

Assignment Name

Pre-privatisation and Privatisation of MONTECARGO JSC (Rail Freight Operator)



Total Value

Large (> EUR 800K)




The Government of Montenegro (GoM) wished to strengthen the national freight transport sector by specifically supporting the development of the rail freight sector.

In order to achieve a reliable, high quality and competitive rail freight sector, the state owned rail freight operator (MONTECARGO) requires modernisation through investments into rolling stock (freight wagons and locomotives) and qualification of its staff. Not having the financial means required for the company’s modernisation, nor the resources and capacity necessary to lead the company (corporate governance), GoM decided to privatise MONTECARGO and thus withdraw from this specific sector. For this purpose the Privatisation Council of Montenegro appointed indecon consulting as Transaction Advisor.

The assignment consisted of:

  • An assessment of MONTECARGO’s preparedness for privatisation and advising the Ministry of Transport (MoT) and MONTECARGO on necessary adjustments on company level;
  • Advice to the MoT in designing and introducing corporate governance procedures, in particular internal procedures and their monitoring in MONTECARGO. The procedures focussed on management control on operations and capital expenditure;
  • An assessment of the institutional and legal framework required for the operation of a privately owned rail freight operator and advising the MoT and the Railway Directorate (Regulatory Authority) on necessary adjustments;
  • Advice the MoT on issues related to market entry rules for rail freight operators;
  • Assessment of the conditions envisaged for the public service obligations (PSO);
  • Assessment of the conditions and rules to acquire capacity paths stipulated in the Network Statement and on the procedure for determining access charges;
  • Preparing and implementing the tender process including identifying potentially interested parties, stirring their interest in the investment opportunity and performing the respective contract negotiations.

Negotiation with the investor resulted in: EUR 4,620,000 purchase price and EUR 12,000,000 of contractually guaranteed investment commitment.

Type of Services Provided

Services provided comprised corporate finance, technical & legal advice and corporate governance aspects:

  • Assessing the undergone spin-off process from the former Railway Company of Montenegro into (a) Railway Infrastructure (ZICG) and Railway Transport and subsequently from Railway Transport into (b) Railway Passenger Transport (Prevoz) and (c) Railway Freight Transport (MONTECARGO) and identifying unsettled and non-addressed issues with implications for the performance of the companies, in particular MONTECARGO;
  • Advising MoT on completion of the spin-off process including aspects of valuation and allocation of assets and liabilities as well as spinning-off the rolling stock maintenance workshop (until then part of Prevoz) into a independent JSC directly owned by the state;
  • Advising on the specifications of rail operator – rolling stock maintenance workshop service contracts;
  • Advising on the contract between the Infrastructure Manager and the rail freight operator
  • Performing a due diligence at MONTECARGO and flagging deficits on managerial, corporate finance and contractual level;
  • Assessing the management’s willingness to support privatisation;
  • Analyzing and commenting the Collective Agreement;
  • Assessing the assets, identifying surplus assets (not necessary for the operation) and advising the company and the MoT on the respective asset management;
  • Assessing the multi-national and bilateral (Serbia-Montenegro) railway agreements to be applied also to private owned operators;
  • Reviewing the railway relevant legal framework (Law on Railway, Law on Railway Safety, Law on contracts of railway transport, Law on Inspection Control, Law on ratification of agreement on establishing South-East Europe High Performance Railway Network, Law on transport of dangerous goods, etc) required to ensure the functioning of the sector and necessary for MONTECARGO’s privatisation,
  • Reviewing and commenting the institutional framework (Railway Directorate, Safety Inspectorate, Board for allocation of capacity paths) required to ensure the functioning of the sector and necessary for MONTECARGO’s privatisation,
  • Preparing tender documentation and carrying out the respective tender;
  • Identification and attraction of suitable investors;
  • Developing and negotiating the Sale-and-Purchase-Agreement for selling the package of state owned shares in MONTECARGO;