Montenegro, Russia’s CEAC Agree on Operative/Financial Restructuring Programme for Smelter KAP

As part of the deal, the government will issue by the end of 2009 sovereign guarantees worth 135 million euro ($201 million) for the restructuring of KAP’s existing debt and for its planned modernisation, CEAC, a subsidiary of Russia's En+ Group which manages KAP, said in a statement posted on the smelter's website on Monday.

In return, the government will take control of half of CEAC’s current stake in KAP and the two parties will own equal stakes of 29.365% in the smelter following the transaction.

The agreement, due to take effect at the end of 2009, aims to gradually restore KAP to its full operating capacity of 120,000 tonnes by 2012 and to ensure a profit of some 7.0 million euro in 2011.

CEAC will continue to manage KAP and its adjacent bauxite mining company, Rudnici Boksita, the main supplier of bauxite for KAP, while the Montenegrin government will have a seat on the board of directors with a right veto.

Contracts with KAP’s creditors on restructuring its debt will be signed in the next six to 24 months.

The statement did not specify the debts of the Montenegrin smelter.

The smelter will push on with its 39 million euro five-year modernisation programme while a new concession contract will be prepared for Rudnici Boksita, making supplies for KAP a priority.

En+ Group, the energy division of Oleg Deripaska's Basic Element group, bought 65.4% of KAP in 2005.

CEAC and the Montenegrin government started the negotiations on the bailout plan for KAP in October 2008 after the company's revenues were severely hit by a sharp drop in aluminium prices on the global markets.

($=0.6717 euro)