Germany’s HGL Group is ready to invest more than EUR 500mn in Montenegrin aluminium firm KAP, which entered insolvency in the beginning of July, an official of the German company was quoted as saying by news agency Mina Business.

The implementation of this investment, which would go for renovating all KAP units, should eventually lift the overall invested amount to EUR 700mn, Stefan Walter said at the end of July.

Walter added that under the investment plans KAP and mining firm Rudnici Boksita would employ nearly 2,000 workers until 2016, though HGL is ready to at present take over KAP with no more than 580 workers on (the company has them around 1,200 now).

HGL has one condition for embarking on this investment though - the government in Podgorica should secure electricity for KAP at subsidised prices over the next five years until the plant builds or finds an own source of energy.

Walter added this is no final offer yet. “Once we look through the options of finding a long-term electricity source, we will submit the complete offer with the commercial court and the Montenegrin government.”

The proposal of the German investor comes less than a month after KAP entered insolvency namely because of its lasting electricity supply problems and the inability of its previous management, led by Russia’s CEAC, to resolve this key issue.

The interest indicated by HGL is certainly a positive sign, hinting there is still hope that the former industrial giant has chances to recover and become one of the backbones of the Montenegrin economy again.

Still, the complex issue of KAP’s power supply has already become a burden to the country’s economy and even endangered the stability of the government, leaving the coalition partners split over the ways out of the problem. The DPS-led government intended to amend this year’s budget bill and transfer the company’s electricity debt of EUR 61mn to the state – but failed to convince the parliament to support the rebalance and withdrew the proposal on Aug 1.

However, power producer EPCG has said that it will not sign a new supply contract with KAP until it receives these EUR 61mn. For the time being, the question of how to settle KAP’s debt to EPCG remains open – but if the government wants to sign a long-term supply deal with EPCG and especially if it hopes to be in a position to negotiate favourable prices for KAP, it would certainly need to clear the outstanding debts first. Otherwise, it will not be able to meet the only requirement of KAP’s potential savior - Germany’s HGL, and will risk losing a much needed investment.

Moreover, the split between the coalition partners DPS and SDP is precisely over transferring KAP’s electricity bills to the taxpayer. This means DPS might face new difficulties in convincing SDP the state should continue subsidising the aluminium firm’s electricity price in order to lure the foreign investor.