PODGORICA (Montenegro), March 18 (SeeNews) – The Russian majority owner of Montenegrin aluminium smelter KAP has said it would increase its 330 million euro ($428 million) claim against the government if it tries to seek the plant's insolvency or nationalise it, Montenegrin daily Vijesti reported on Wednesday.
Last week KAP’s majority owner CEAC, a company controlled by Russian tycoon Oleg Deripaska, rejected a rescue deal proposed by the government in Podgorica and aimed at keeping the troubled company afloat in the first half of the year.
CEAC turned the offer down mainly because of the government’s attempt to render pointless KAP's claim against Montenegro filed with an arbitration court in Frankfurt last year. CEAC is seeking 330 million euro in damages allegedly incurred during the smelter’s privatisation four years ago.
In case the government starts liquidation procedure against KAP or nationalises the smelter, the arbitration will continue and the claim would mostly likely rise as in this case the damages for CEAC would significantly increase, Vijesti quoted KAP CEO Viacheslav Krylov as saying.
CEAC owns 58.73% of KAP, figures from KAP's website showed on Wednsday. The remainder is with different companies and individuals.
CEAC is ready to continue the negotiations on the proposed rescue package which will go on this week but insists that it should not be tied to the arbitartion procedure. The rescue plan came with a number of conditions, including the withdrawal of the arbitration claim.
The government in Podgorica has maintained that KAP’s privatisation had been conducted according to the law and the claim was aimed at winning lower electricity prices for the smelter from Montenegro's state-owned power utility EPCG.
As part of the rescue deal, the government is ready to extend guarantees for a 20 million euro credit and defer for several months KAP’s outstanding payments to the tax administration and the state-owned power utility, a port operator and an oil firm. As part of the deal, KAP will also be required to secure a monthly output of at least 5,000 tonnes, the amount it produced in January, keep the current payroll, pay wages regularly and prepare a new restructuring programme by May 31.
KAP should also pledge the assets of its processing factory and around 66% of the assets of local bauxite mining company Rudnici Boksita, also owned by Deripaska, in order to qualify for state aid.
KAP's losses have swelled on high production costs and low international metal prices resulting from the global crisis. The company posted an operating loss of $38 million in the first 10 months of 2008.
The smelter has an outstanding debt of 9.0 million euro to the state owned power monopoly EPCG, which has sought a court injunction to enforce the payment of the debt, Vijesti said.
The smelter, which exports 50% of its output, and the adjacent Rudnici Boksita, together employ over 4,000 workers. KAP accounts for over 15% of Montenegro's gross domestic product and economists have warned its closure may cost the tiny country’s economy dearly.
($=0.7625 euro)