The State Investment Development Fund (IDF) provided the company of Blažo Đukanović, son of Montenegro’s President Milo Đukanović, a million and a half Euro loan for the construction of a small hydropower plant (sHPP) in Kolašin, according to documents obtained by the MANS Public Finance Programme.
It is a loan for the construction of HPP Bistrica in Lipovo, approved by the company “BB Hidro”, in which Đukanović Jr. has half of the ownership, while the other half belongs to Ivan Burzanović from Podgorica. The two are partners in the company “BB Solar” as well, where they also share ownership.
Although “BB Hidro” concluded a concession contract for the construction of the sHPP with the Ministry of Economy in November 2016, it provided funding for the project two years later. The loan agreement for the construction of HPP Bistrica was concluded on December 26 last year with the bank Hipotekarna banka from Podgorica, but the money was actually provided by IDF.
Namely, on December 25, 2018, Hipotekarna banka concluded a special loan agreement with IDF, and then approved and transferred the loan from the funds of IDF to the company of Milo Đukanović’s son.
Thus, it was hidden from the public that the money for the controversial sHPP project in Kolašin was actually approved by IDF, whose loans are significantly more favourable than commercial bank loans, and because of the subsidized interest rates, they represent a state aid. At the head of the IDF is Zoran Vukčević, DPS official, to whom Milo Đukanović is a direct party boss.
According to the loan agreement in possession of the Public Finance Programme of MANS, the company “BB Hidro” is granted a loan at an interest rate of 5% annually and can be used by the end of August this year. The repayment term is ten years, and it is repaid in half-year instalments.
As the companies that own sHPPs realize a subsidy for electricity produced for a period of 12 years, paid by consumers through electricity bills as a special fee, this in fact means that it is them who will finance the investment of the son of Montenegro’s President. The concession for work of the HPP Bistrica has been approved for 30 years.
In order to get a loan, Đukanović Jr. and his business partner mortgaged a large number of their properties in Žabljak and Podgorica, as well as the real estate of both companies which they own, including the land in Kolašin where the HPP Bistrica is being built.
In addition, the loan agreement envisages that within 12 months of its conclusion, a mortgage will also be put on the equipment that should be installed into sHPP, and that the bank will also be granted the receivables from the Power Purchase Agreement, which should be concluded with Montenegrin operator of the electricity market.
Such a scheme of investment implementation clearly indicates that state institutions have enabled Blažo Đukanović a number of benefits and that he uses not one, but two lines of state aid (subsidies and a favourable loan for IDF) for the business from which they will make money.
This profit will be realized at the expense of taxpayers and consumers, especially locals living in the Kolašin area where the HPP Bistrica is being built. Namely, the company “BB Hidro” put 1.5 km pipeline through the part of Bistrica, leaving the inhabitants without water from the river for normal living needs, such as irrigation, feeding of cattle, agriculture, while disturbing the biological fund of the river and the plant and animal world in it.
sHPP projects in the country, which the Government of Montenegro once represented as a development opportunity for the north of Montenegro, quickly showed their negative sides, as the investors by their construction literally “ripped” the river from the locals and thus jeopardized their living needs, while there has been no development of local communities and employment.
All this has instigated the locals to start protests against the construction of new sHPPs and ask the government to suspend them.
Damage to the local community
IDF has a special credit line for “infrastructure projects” that support water supply projects, environmental protection, energy efficiency and renewable energy.
As stated in the last year’s IDF Management Report, which is publicly available, the aim of this credit line is to support projects that should contribute to sustainable development, valorisation of natural resources and encourage the development of businesses.
However, it is unclear in what way a loan for the investment of sHPPs has been granted, when it is already known that it will not only not bring development to the local community, but it also will directly threaten the environment and make the locals, mostly farmers emigrate as Đukanović Jr. Is going to put a part of the river into the pipe to produce more electricity and earn more.
IDF’s website states that projects in this line are financed either directly or through commercial banks, through which it can credit up to 100% of the total investment, and then the interest rate is 5%, of which 3% belongs to the bank. It is also possible to negotiate a lower interest.
All permits already planned
According to the Loan Agreement, by mid-July, “BB Hidro” has to build HPP Bistrica and deliver to the Hipotekarna banka a report on professional supervision, it must submit a decision on the status of a privileged producer and a contract for the purchase of electricity in November, and a month after that the contract on the assignment of claims from a contract for the purchase of energy.
This defining of contractual obligations gives the impression that Đukanović Jr. believes that receiving all necessary permits and concluding all necessary contracts is a done deal.
MANS Public Finance Programme
Ines Mrdović
