Deripaska's En+ Group to seek EUR 1bn in damages from Montenegro over aluminium firm KAP

By bne IntelliNews August 14, 2013

Russia's En+ Group will sue Montenegro and seek EUR 1bn in damages because the government in Podgorica allegedly falsified the financial statements of aluminium firm KAP when it sold it back in 2005 to the company of Oleg Deripaska, state broadcaster RTCG reported.

The report is based on a video press conference held by KAP's former CEO Yury Moiseev on Tuesday, Aug 13. Moiseev announced En+, which controlled KAP via its subsidiary CEAC, has engaged several law firms who have already filed a lawsuit with the commercial court in Podgorica, seeking EUR 93mn from Montenegro.

"We will also go to court in Frankfurt because of the forgery of financial statements at the time of KAP's purchase, as well as because of the non-compliance  with the settlement contract [signed between the government and CEAC in 2009]," Moiseev said, adding the overall amount of these claims is EUR 1bn.

He cited as an example of falsification the amount of KAP's real debt for ecological purposes, which according to him total EUR 10mn.

Moiseev added that the Montenegrin government also did not allow En+ Group to implement its plans for KAP - but did not elaborate. 

Under the 2009 agreement between the government and CEAC, the government issued EUR 135mn state guarantees to the aluminium firm and in return took over half of CEAC's holdings in KAP, acquiring a nearly 30% stake in the aluminium firm.

KAP entered insolvency on July 8, 2013 after the finance ministry requested the move over some EUR 25mn of unpaid debt. The court estimated KAP’s debts at EUR 380mn, adding the company’s nominal value is only EUR 183mn.

GOVERNMENT REACTION TO EN+ CLAIMS

The government said in a statement on Aug 13 that the accusations it forged KAP's financial reports eight years ago when it sold it in December 2005 are groundless, adding the privatisation process was transparent and implemented in line with the Montenegrin laws and KAP's privatisation strategy, which had been previously put at public debates.

Furthermore, the sale was carried out with the technical and financial help of the EBRD plus a consortium of well-known international companies, including France's BNP Paribas, UK firms CRU and URS, Greece's IKRP Rokas as well as Ernst & Yang.

The government also said that the problems with CEAC and En+ arose from the nonpayment of three electricity bills, which is one of the terms defined in the cancellation contract. In line with it in November 2011 the government launched a procedure to cancel the privatisation but back then CEAC and EN+ declined to transfer their shares in KAP to the government on this basis.

In addition, the government has met its obligations under the 2009 settlement contract - both regarding the subsidising of KAP's electricity consumption and regarding the issuance of state guarantees on loans taken by the firm.

KAP IN INSOLVENCY

After KAP entered insolvency last month - all existing contracts were annulled and its management was taken by an insolvency receiver, while state-owned firm Montenegro Bonus was appointed to run its operations.

Yet, on Aug 13 - for a second day in a row, angry workers blocked the main entrance of the KAP's factory buildings, preventing the exports of aluminium. The workers demand to receive severance pay since their employment contracts were automatically cancelled with the insolvency. They were reportedly refused the severance pay because they gained the right to go to early retirement thanks to a special amendment made recently in the pension law.

The government representative in the company, Nebojsa Dozic, warned that the halt in the aluminium exports would result in a halt of the company's overall operations.

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