Montenegrin power grid operator CGES - not aluminium firm KAP, will begin on Thursday, June 13, returning the electricity taken illegally from the European interconnectors earlier this year for the needs of KAP, daily Vijesti reported, quoting anonymous sources from CGES’ management.

The process will be regulated through a multiple compensation that will involve the government, state-owned energy firm Montenegro Bonus and KAP, the report said. Most likely the government will adopt a decision on this at its cabinet meeting on June 13.

Judging by previous experience, it is very likely that this debt clearing will be at least to some extent at the expense of the state budget.

The European Network of Transmission System Operators for Electricity (ENTSO-E) said last week that KAP should return immediately the electricity of over 100,000 MWh, which CGES took without authorisation for KAP’s needs in Feb 22-May 23, or Montenegro might face a cut-off from the European grid.

ENTSO-E gave KAP a June 12 deadline to begin returning the illegally taken power. The whole volume of due electricity is estimated at some EUR 3.5mn. Its return should be wrapped up in October.

KAP’s Russian management, however, declined to pay for the electricity, saying it is not accountable for it because it neither has a contract with CGES, nor the infrastructure needed for stealing power from the European system.

As a result, CGES has decided on Wednesday evening to step in and start returning the power in order to prevent a power cut-off of all the country.

Previously, CGES had threatened to automatically disconnect KAP on June 12 from the grid if it does not meet ENTSO-E’s requirement. According to Vijesti’s report, however, CGES did not cut off KAP as promised but gave it yet another extension – until Monday, June 17. The grid operator has sent an open letter to the government, saying KAP will be disconnected on Monday if it does not sign a power supply contract until then.

The aluminium firm has been left without an official supplier in the start of 2013 after failing to pay its electricity bills to energy producer EPCG and state-owned Montenegro Bonus, which both cancelled their contracts with KAP last year.

CGES, however, continued to supply KAP with power this year, saying the government’s administration for inspection affairs prevented it from disconnecting the firm as this would have had serious implications to the complex aluminium production process and to the environment. Therefore, CGES was forced to take electricity from the regional grid in order to balance its system at home.

According to Vijesti, CGES should return to its European partners the first tranche of electricity, worth EUR 600,000, by 1000 local time on Friday, June 14 – and the money for buying this electricity from EPCG, which is managed by Italy’s A2A, could be provided by state-owned Montenegro Bonus. The latter received a power supplier licence in the autumn of 2012.

The government is expected to adopt all these steps on June 13. It, however, still counts that at the end all the costs for the electricity will be covered by KAP, as CGES has already insisted – though Russia’s CEAC, which has a majority in KAP’s board of directors, declines to do so. CEAC demands CGES stole the electricity with the support of the government, while both the government and CGES insist the power should be paid by the one that consumed it.

Furthermore, the Russian managers have openly called on the government to close down KAP if it believes its operations are against Montenegro’s interest, the report said. The government, however, has remained reluctant to take any action on the issue so far.

DISCONNECTING KAP

The government representative in KAP’s board of directors prevented on June 12 a management decision to shut down KAP. The two members of CEAC in the board voted in favour of the closure, while Nebojsa Dozic and the small shareholders’ representative Bojana Saranovic voted against such move.

For the electricity at the company to be switched off, KAP needs at least 12 days to prepare – this is the time needed for a gradual shutdown of the electrolytic cells of the aluminium smelter.

KAP workers, however, appreciate the unofficial information, which speaks against the shutdown of the factory. The head of their biggest trade union, Rade Krivokapic, believes a new deal will be reached with EPCG with or without the Russians.

In the meantime, some opposition parties like Pozitivna and SNP already warned they will soon launch a no-confidence motion in the government, considering the significance of the issue on KAP’s fate for the whole economy and the inadequate reaction of the state on the matter.

Branko Radulovic – a deputy speaker of the national assembly and MP from the opposition Democratic Front, believes the prosecution office should intervene in the case of KAP since the situation there reminds a ‘Russian roulette’.

Radulovic told the assembly on June 12 the chief state prosecutor should enter the factory and cancel the contract with CEAC. He believes the best solution for KAP is programmed liquidation accompanied by new investments. “A complete shut-down of KAP would be catastrophic for Montenegro,” he said, adding the aluminium industry has a promising future in the region.