Page 99 - SE Outlook Regions 2022

The central bank carried out the AQR at all 13 banks operating on the
Montenegrin market, using the financial data of banks as of December
31, 2019. According to the AQR, the average solvency coefficient of
Montenegro’s banking sector is 16.2%, well above the required 10%.

The AQR was carried out between March 2020 and September 2021. It
was complicated by the pandemic and the merger of CKB Bank and
Podgoricka Banka in 2019.

However, despite the stable performance, the central bank has
projected that non-performing loans in Montenegro could increase as a
consequence of the coronacrisis. The share of non-performing loans
(NPLs) in Montenegro stood at 5.5% in May, unchanged from the
previous two months and compared to the end of 2020. The stock of
NPLs reached €183.8mn at end-May, up 1.1% month on month and
13.4% higher year on year.

3.7.3 Industry

Montenegro’s sole aluminium smelter and the country’s largest
industrial enterprise KAP completed its shutdown on December 30,
2021, after its owner Uniprom repeatedly warned that rising electricity
prices mean it is no longer economically viable.

The fate of KAP could seriously shake the country’s economy in case
no solution is found and the smelter closes permanently.

The shutdown came after Uniprom failed to reach an agreement on a
new electricity price with power company EPCG. At the end of 2021,
KAP was paying €45 per MWh plus VAT, while on international markets
the electricity price is now around €250 per MWh. However, KAP’s
contract with EPCG expired at the end of the year and as 2021 neared
its close EPCG requested a price of €183 per MWh as of January 2022
so that it would not suffer financial losses.

Various proposals to keep KAP in operation have been put forward,
including for EPCG to take over the smelter for one year or for the
government to take it over. However, as yet no solution has been found.
According to Deputy Prime Minister Dritan Abazovic, the cabinet may
yet agree to a takeover in order to save the 500 jobs and avoid a
significant unemployment crisis.

3.7.4 Energy & power

Montenegro’s government has drafted a roadmap to achieve its goals
for becoming a carbon neutral country, setting a goal to reduce carbon
emissions by 35% by 2030. The country has already reduced emissions
by 30%, fulfilling its previous goal set back in 2015.

It hopes that the reduction of carbon emissions can even reach 40% by
2030 thanks to new systemic measures in the forestry and agriculture
sectors.

99 SE Outlook 2022 www.intellinews.com