If the Ministry of Maritime Affairs (MoM) had listened to the former management of Crnogorska plovidba AD Kotor (CP) and supported them in implementing the business plan they prepared last year, the state-owned maritime company would have fully returned to the state all the money paid to the Chinese Exim Bank as a loan for the construction of the ships "Kotor" and "Dvadeset prvi maj" by 2039, the fleet would have doubled, and in the next 15 years the operating profit would have amounted to more than 80 million dollars.
This is shown by data from a document called "Analysis of previous business operations in the period 1. 1. 2020 - 30. 6. 2024 with a projection of development and operations in the period 2025-2039", which was prepared by the former CP management, headed by the chairman of the Board of Directors, who has since been replaced, the captain of a long-distance ship. Jov Lazarevic, prepared and submitted to the Ministry of Maritime Affairs in October last year.
"Vijesti" had access to a 30-page document, with an abundance of numerical data and tables based on information from everyday practice in the global shipping industry, namely reports and forecasts of trends in the global shipping space market prepared by the renowned brokerage house Clarkson from London, namely Baltic Exchange Index analyses.
The Ministry did not listen to the experts
Instead, due to the controversial moves of the Ministry of Maritime Affairs and its representatives in the Shareholders' Assembly of CP, which is 100 percent state-owned, the company has been literally destroyed in the past little more than half a year. The Board of Directors, led by Lazarević, was replaced because the majority opposed the intentions and actions of the Ministry of Maritime Affairs, a new one was formed, and the fleet was lost because "Kotor" and "Dvadeset prvi maj" were sold, under controversial circumstances, in mid-September to the Danish shipping company K/S Navision Group for a total of 13,25 million dollars, which is about a third less than the market value.
All this was done in a situation where in January this year the last installment of the loan to the Chinese Exim Bank, taken out ten years ago for the construction of two ships in Shanghai, was paid, which meant that "Kotor" and "Dvadeset prvi maj" were "cleared" of the pledge and thus became free to be used as a means of securing possible new loans, without any further participation or guarantee from the state as the owner of the company, and to serve as the basis for the procurement of additional ships and the expansion of the CP fleet.
The controversial sale of the CP fleet, which was condemned by the maritime community, has since been investigated by the Special State Prosecutor's Office.
In a document prepared and submitted by the former CP management to the Minister's cabinet at the end of October Filip Radulović It explains in detail how the global market for ship space for bulk carriers such as those owned by CP works, how time chartering ships is negotiated, which was the basis of CP's business and that of another state-owned shipping company in Montenegro - Barska plovidba (BP), and how the amount of freight generated is affected by the technical characteristics of the ships, their fuel consumption, and even their position in the world when their time charter contract expires, as well as the list of countries to which these ships may not be allowed to sail due to the flag they fly, or the type of cargo that the shipowner prohibits the charterer from transporting, all of this viewed through the prism of the daily fluctuating conditions on the global market in which shipping companies operate.
It also pointed out the effects of exchange rate differences on the operations of CP and BP, which maintain their balance sheets in Montenegro in euros, because global shipping transactions are concluded and settled in US dollars, and provided a detailed overview of CP's business results from the beginning of 2020 to mid-2024 based on three aspects of the company's profitability.
The company is mostly in the black, the ministry hired anonymous people to do the analysis
In 2020, when the Chairman of the Board of Directors Jovo Lazerević took over in the third quarter, CP ended the year with a loss of 56.000 euros, according to the income statement, in 2021 it operated positively with a residual profit of 79.694 euros, in 2022 the profit increased to 2.437.821 euros, and in 2023 the positive result was 158.012 euros. According to the income statement, the company ended the first half of 2024 with a deficit of 242.182 euros. At that time, the Minister of Maritime Affairs Filip Radulović told the management that CP was allegedly "in a catastrophic state" and that the state, as the owner, would file for bankruptcy. When the media reported this, Radulović denied it, and in August last year he announced that the Ministry of the Interior had commissioned an economic and financial study of the situation in shipping companies. He said at the time that he "expects the analysis by the Faculty of Economics to be completed in the next four to six weeks", and that "after the analysis, we will consider all the options offered and then inform companies and the public what we will do and what specific steps we will take."
However, this turned out to be untrue because the analysis was not carried out by the Faculty of Economics at all, but rather by a completely unknown company in the maritime and maritime business, “Računovođa” doo from Pogodorica, which is backed by the NGO Institute of Certified Accountants of Montenegro. According to unofficial information, this document was paid for by CP and BP at the insistence of MP in the total amount of 18.000 euros, and from the point of view of the maritime profession is shockingly superficial and completely unprofessional. However, it gave rise to a scenario called “Programmed Shutdown of Crnogorska plovidba AD”, which MP began to implement in April, presenting it to the public as an alleged “attempt to save CP”, which was then brought into insolvency by MP’s untimely decisions and, to say the least, by the strange moves of Prva Banka.
A much better picture than the one sent by the ministry
"When looking at the achieved business results in the period from 1. 1. 2020 - 30. 6. 2024, it can be concluded that in those years the company had the best financial results since its establishment, and of all those results, the best was the one achieved in 2022, when the positive financial result, according to the company's profitability indicators, ranged from 2,4 million euros according to the Income Statement to five million according to the EBITDA method," it is written, among other things, in the Analysis of the former CP management led by Captain Lazarević.
EBITDA stands for “Earnings Before Interest, Taxes, Depreciation, and Amortization,” and is a measure of a company’s operating profitability, showing how much money it generates from its core operations, before taking into account financing decisions (interest), tax liabilities, and accounting items such as depreciation and amortization. This method is used to compare the performance of companies in the same industry and assess their ability to generate cash.
In the analysis of the former CP Management, the Ministry of Maritime Affairs was repeatedly drawn to the attention of the Ministry of Maritime Affairs that the EBITDA method, which calculates the so-called operating profit, or as it is often called "operating cash", is much more relevant for assessing the true performance of CP than is the case with the income statements that it prepares and submits according to Montenegrin regulations, which include these categories, as well as negative exchange rate differences that "ate" at least another two million euros from the company's accounting from 2020 to mid-2024.
In the last four years, they have paid off 11 million euros in liabilities.
"Analyzing the recapitulation of all income and expenses incurred in the period from 1 January 2020 to 30 June 2024, through the three levels of the company's profitability (Income Statement, EBIT and EBITDA), and taking into account that the analyzed period of four and a half years was full of large oscillatory movements in the global maritime and financial market (freight rates ranged from just three to as much as 20.000 dollars per day), which had a greater negative impact on the company's operations than there were any significant positive effects, where the ratio between maximum and minimum freight rates ranged as much as six times and where the euro had a dominant growth in relation to the dollar and ranged up to a maximum of 27%, a general conclusion can be drawn that 'Crnogorska plovidba' AD Kotor, in the observed period, achieved satisfactory, one could even say exceptionally good financial results... For these four and a half years, in addition to regular current liabilities, the company managed to pay over 11 million euros, of which 4,65 million to cover the work and costs of regular docking, overhaul of main and auxiliary engines and installation of ballast water treatment systems in shipyards, and eight million dollars to repay the loan to Exim Bank", says the Analysis of the former management.
Instead of none, we would now have three ships.
Based on these parameters, and the fact that the last installment of the Chinese loan is due in January 2025, the former CP management created a detailed plan for the acquisition of additional ships that would stabilize and strengthen the company's operations. It was proposed to purchase used handy-size bulk carriers with a deadweight of 38.000 tons (slightly larger than CP's current ships), 10-12 years old, built in Japanese shipyards, and which could be purchased on the world market in the fall of last year at an average price of about $16 million per ship.
"The purchase of ships would be carried out through mortgage loans from a domestic or foreign bank, for a period of about 10 years, with an interest rate of about 5%, through repayment in 20 equal six-month annuities. The initial participation in the loan repayment would be in agreement with the bank and in accordance with the accumulated operating profit," the Analysis states, with detailed elaboration of all aspects of the calculation of the purchase and repayment of the first ship that the former management wanted to purchase and put into service by mid-2027, with another such ship to be purchased by mid-2027.
It is also planned that after the ten-year arrangement for these two second-hand ships expires, two additional similar second-hand ships will be purchased, which would replace the ships “Kotor” and “Dvadeset prvi maj” in 2035 and 2037, respectively, which would then be approaching the end of their operational life. In this way, the fleet would be doubled from two to four ships by mid-2027, with a total carrying capacity of 152.000 tons, instead of the current 70.000 tons.
Based on detailed data on the expected movement of freight rates and their gradual average growth, a slight increase in daily operating costs and repayment of commercial loans for procurement, the former management also prepared a detailed projection of the company's expected business results and its ability to repay these loans, but also to return to the state the 37 million euros that it, as a guarantor of the Chinese loan, paid to the Chinese bank instead of CP at a time when the company could not do it itself from its profits.
According to these projections, if this scenario were to be realized, in the period 2025 - the end of 2039, CP would have achieved a total operating profit according to the EBITDA method of $86.418.623, repaid loans from commercial banks taken for the purchase of four second-hand ships in the amount of $47.449.733 and, in accordance with the decision of the Agency for the Prevention of Corruption, returned $38.968.890 of "unauthorized state aid" to the state (the installment of the Chinese loan that the Government paid as a guarantor instead of CP).
Appeals that the Minister of Maritime Affairs did not want to hear
"Considering the entire situation, when Crnogorska plovidba, even under the conditions of credit indebtedness to Exim Bank, functioned normally and after ensuring coverage of all current operating costs, managed to achieve multi-year operating profits, there are no clear positions that now, when the company is getting out of credit indebtedness, when conditions are created for expanding shipping capacities, by purchasing ships, the company should be closed down and its ships should be transferred to someone else. The operational management has so far exceptionally performed and continues to successfully perform all the tasks that are before it in the area of managing and directing the ships and the company, so there is absolutely no need to engage any other management. We believe that it is not clear to anyone that someone is ready to enter into such an adventure and that a serious and extremely promising company, which through fleet renewal can return the Kotor shipping industry to some of its old paths, is now closed down," the analysis submitted to the Ministry of Maritime Affairs states at the end.
The former management drew the attention of Minister Radulović and his associates to the fact that "Bokelje and Boka Kotorska have a good part of their history tied to the sea and maritime affairs, so it is inconceivable that someone could forget that or perhaps someone does not understand how important it is for Kotor and Boka, and, obviously, the initiator of this initiative does not understand that this should not be touched."
"We expect that the unnecessary dust that has been raised around this will soon subside, because we believe that someone started this out of pure ignorance of the situation and the importance that this company has for Kotor, Boka, and Montenegro as a maritime country," they said.
But, apparently, no one wanted to hear them.
Lazarević: Their material was excellent, and then they said nothing was good
Captain Jovo Lazarević told "Vijesti" that he submitted the Analysis and Projection of the Company's Further Development, prepared by the former Board of Directors of CP, to the State Secretary at the Ministry of Maritime Affairs, Jovan Šćekić, who was the representative of state capital at the company's Shareholders' Meetings, at the end of October last year.
"He then said that this material was excellent, and then when he took it to Podgorica and showed it to Minister Radulović and others, he later told me that this was allegedly 'no good', without further explanation. However, I already saw the intention of the Ministry of Maritime Affairs to destroy this company, which is clearly visible from what we, as the Board of Directors, stated in the conclusion of the Analysis," Lazarević pointed out.
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