Montenegro gets four bids for assets of bankrupt aluminium firm KAP

By bne IntelliNews January 8, 2014

Podgorica-based commercial court has received four bids for the sale of bankrupt aluminium firm KAP’s assets, and three bids for the assets of its aluminium processing unit Prerada, the head of the court, Dragan Rakocevic said on Jan 8 when the tender deadlines expired.

The bidders and the content of their offers are not known yet since the bids were submitted in closed envelops without any signature, Rakocevic told broadcaster RTCG. He added that these details will be revealed on Friday, Jan 10, when the bankruptcy receiver will open them.

Depending on their content, above all the proposed price, the receiver will decide within eight days whether the sales procedure will proceed, or advise the court to open new tenders, Rakocevic said. According to him, there is a still a chance that more bids might arrive via post in the next days.

So far, metals trading firm Uniprom of local businessman Veselin Pejovic and another local firm called Politropus Alternative have confirmed they filed bids for KAP. Pejovic announced he filed his offer already in the last days of December, while Politropus Alternative revealed this week it is bidding for both KAP and Prerada.

Montenegro launched the tenders for KAP and Prerada on Dec 6. The estimated value of KAP's assets offered for sale is EUR 52.5mn, while of Prerada's EUR 15.26mn - but these figure are not the minimum required price in the tenders, neither are binding for the bidders.

KAP's assets offered for sale are divided into ten groups. Potential buyers could bid to acquire all of them, or just for separate elements of the offer. The key assets on sale include KAP’s main production units – the alumina refinery and its adjacent infrastructure, the red mud pool, the anode manufacturing plant, the smelter facilities, along with other administrative buildings, land plots and movable assets.


Politropus Alternative said in a statement quoted by local media that it has bid for separate smaller elements of the tender for KAP's assets, including its red mud pool.  The company says that with the partnership of the state it intends to finance and carry out an innovative project for the construction and operation of facilities that will produce most up-to-date construction material, manufactured based on industrial material.

This will be ecological manufacturing in line with EU standards and will solve Montenegro's key environment issues. The production process will be self-sustainable, including own production of electricity. The final product will be exported and in line with the government's development policy.

Politropus estimates the investment in the building the capacities at over EUR 50mn, saying they could further rise if the state creates the necessary conditions. In the first stages of the projects, part of Prerada's facilities might be put into function of producing final aluminium products.

The investor said it has already presented to the government the full scope of its business, production process and technology, as well as its future business plans.

According to Montenegrin media, Politropus Alternative is a local firm with foreign capital established in 2010. Its founder and owner is Roman Denkovich (most likely from Ukraine), born 1960, who has experience in the areas of mining, metallurgy, production and company management (he has established a dozen of firms all over the world and owns a number of patents). His companies usually emerge as greenfield projects to later on develop into large, profitable and stable companies with a turnover of hundreds of million euro, according to Politropus' statement.

So far, Tivat-based Politropus Alternative has invested more than EUR 8mn in Montenegro. It was not immediately clear in what kind of business.


Uniprom, on the contrary, intends to keep KAP's main line of business. The owner of the Niksic-based firm, Veselin Pejovic, has been in the aluminium industry for 30 years now and according to him, KAP has a future if its management is restructured and business processes reorganised.

Uniprom firm is already active in the metals trading, aluminium in particular, for 25 years and also has an aluminium casthouse in the northern town of Niksic.

Pejovic is also known by the successful privatisation of the Suplja Stena lead and zinc mine in Pljevlja back in 2007. He subsequently brought the mine out of bankruptcy to sell it last summer to a strategic partner from Poland. Suplja Stena mine now operates successfully, Pejovic says, adding the mine now export some 20,000 tonnes of concentrate and has buyers for its complete output. It employs some 140 workers who regularly receive their wages.

Daily Vijesti revealed on Jan 8 some details of Pejovic's bid for KAP, including the vital issue of how much the investor is ready to pay for electricity and whether he will seek state subsidies. According to the report, Pejovic has announced he is ready to pay for electricity EUR 35 per MWh to EPCG plus EUR 3 to power grid operator CGES.

The report also speaks about an estimate of KAP's management that the current aluminium production would be sustainable at an electricity price of EUR 27.5 per MWh. The government already covers with the taxpayer money the remaining amount to the market price KAP now pays - of EUR 40-42 per MWh.

According to unofficial information, the government would accept to pay subsidies if Pejovic offers to pay a price of EUR 38 per MWh. This way the state would have a bigger profit from the company than the subsidies it pays - if 500-600 workers are kept in KAP and its


KAP was declared bankrupt on Oct 9, which cleared the way for its debt-free sale. Investors from India, Germany, Poland, Turkey and Croatia have already indicated interest in taking over debt-free KAP. Even if the sale is successful, however, most of KAP’s creditors will likely remain empty handed considering the total value of their claims ranges between EUR 360-460mn.

The largest creditors are the Montenegrin government with claims worth EUR 148.1mn, followed by KAP’s former owner Russia’s CEAC with some EUR 50mn, energy firm EPCG with EUR 44.9mn, En+ Group (the owner of CEAC) with EUR 43.4mn and Russia’s VTB Bank with EUR 25.8mn.

Regarding the tender for KAP, the bankruptcy manager will announce the buyer eight days after the Jan 8 bids' opening. The buyer is obliged to sign the sales contract up to 15 days after they are announced a buyer.

If only one bidder participated in the tender, the manager is authorised to select them, or not, for buyer. If more bids are received, the priority will be given to those offering to take over the complete assets put up for sale.

Germany's HGL, Turkey’s Toscelik, India’s Essar Group, as well as Russian and Croatian investors could be among the remaining bidders, considering their previously announced interest in KAP.

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