On May 12, Dutch-based MNSS B.V. (MNSS), the majority stakeholder in Montenegro's sole steel plant Željezara Nikšić a.d. (ZN Steel), announced that MNSS and Montenegro's government have reached an agreement on a refinancing plan to guarantee ZN Steel's future and role as a leading Montenegrin exporter, after several months of intensive negotiations and planning.
Accordingly, MNSS has agreed to invest an additional €10.0 million to ZN, on top of the €40 million it has already committed, and the government has agreed to provide a loan guarantee in the amount of €25 million to support ZN's modernization, funding and working capital needs.
Commenting on the progress to date, MNSS spokesperson Mark R Jacobson said, "We truly appreciate the constructive and pragmatic approach of the government. The steel sector globally is facing incredibly challenging times and the situation at ZN is no different; in fact, without the support of the government, the immediate future of ZN cannot be assured."
However, the successful implementation of the agreement continues to be frustrated by the failure and inability of Prva Banka (Prva), one of the country's leading banks, to meet its contractual and legal commitments and obligations; and in particular its failure to make payments to ZN's capital equipment suppliers from funds deposited with it by MNSS specifically for this purpose.
Mr Jacobson added "We cannot allow the breathtaking failures of Prva to continue to endanger the future of ZN and all its stakeholders. It beggars belief that after more than six months of continued requests by MNSS that the payments be made to CAPEX suppliers, Prva cannot come up with even €1 million to meet part of its obligations. This is despite the injection of more than €40 million of new funds into Prva by the government earlier this year. I no longer have reason to believe that Prva has any desire or intention to play a constructive role in the process and while Prva may be willing to gamble with its future and reputation, its approach will no longer be allowed to threaten the future of ZN."
MNSS said in a statement, "In addition to damaging ZN and the Montenegrin economy, both financially and reputationally, Prva's failures have caused significant financial problems for ZN's key equipment supplier, a leading Turkish company which could have a detrimental effect on Turkish Montenegrin relations. The Turkish company is owed millions of Euros for work already carried out which should have been paid for out of significant ash deposits of MNSS held by Prva precisely to fund such CAPEX payments."
MNSS added, "While it remains the desire of MNSS to see the refinancing plan implemented with the support of Prva, the situation demands that Prva's repeated and ongoing failures to adhere to clear contractual and legal commitments now be adressed through the courts and international arbitration agencies. Mr Mark R Jacobson added that ‐ "I am sure that Prva will continue to claim that ZN owes it €20.0 million and therefore cannot make any further payments-this point is not denied. However, the fact of the matter is that MNSS has funds of in excess of the €27.5 million on deposit with Prva - the netted balance is what we have been trying to access to pay CAPEX suppliers for more than 6 months. MNSS has previously shown considerable restraint by delaying the commencement of legal action against Prva but rather than tak advantage of this goodwill, Prva has seen fit to continue to mislead and frustrate the efforts of MNSS, ZN and the Government to implement the refinancing plan and so secure the future of ZN."
ZN is a producer of carbon, low alloy and high alloy steel grades and exports its products to Italy, Germany, Switzerland, Austria, England, Ireland, Netherlands, Slovenia, Poland, Serbia, Croatia, Bosnia and Herzegovina, Macedonia, Albania, Bulgaria, Hungary, Romania, Czech Republic, Turkey, Russia, Egypt, India.