Russia’s CEAC urges Montenegrin MPs to endorse restructuring plan for KAP

By bne IntelliNews April 11, 2013

The Montenegrin parliament should endorse the restructuring plan for aluminium smelter KAP offered by its owner – Russia’s CEAC, as it will secure the long-term sustainability of the company and raise its attractiveness before new investors, KAP’s board of directors’ chairman, Alexey Arnautov, said in an open letter. Arnautov has addressed the letter to the MPs as they are due to vote on the fate of one of Montenegro’s most strategic companies later this month.

Earlier this year, CEAC - part of En+ Group of Oleg Deripaska, revealed its plan to transfer its 29.3% stake in KAP to the government in Podgorica, which also already holds 29.3%. CEAC is offering to transfer its stake as in return the plant pays back within five years only part of the loan it owes Russian lender VTB - EUR 40mn, Montenegrin media reported earlier. The governing DPS party is ready to accept CEAC's offer. Yet, the opposition parties as well as junior coalition partner SDP say the proposal is against the interest of the state and the citizens and seek instead an immediate cancellation of the privatisation or an introduction of programmed bankruptcy.

KAP has been unable to service its bank loans and electricity bills and last year the government had to step in and pay its debt of EUR 23.4mn to Deutsche Bank. For a small country like Montenegro, an unforeseen expense like this can easily destabilise the state finances, therefore the government should urgently take actions to turn KAP back into a profitable company and make it one of the main economic growth and export pillars again. Or decides it costs too much to the budget and should be closed down.

In its letter Arnautov says that the offered restructuring plan envisages the transformation of KAP’s existing debt into share capital, signing of a six-year power supply contract under which the company will pay EUR 27.5 per MWh and a gradual debt repayment. If the parliament approves the plan, CEAC will as “a sign of good will” transfer the existing KAP shares to the government together with the possibility to manage the company.

Arnautov said that the main obstacle for adopting the plan seems to be the claims that KAP’s debt towards CEAC, En+ Group and Russian lender VTB are unfair or incorrect. In order to eliminate such doubts, the board of directors is ready to call any of the four big auditors – PwC, KPMG, Ernst&Young or Deloitte, to check the business operations of KAP. According to Arnautov, such an audit would prove that En+ Group has invested over EUR 200mn in the Montenegrin economy (including the price it paid for the purchase and the investments made in KAP and mining firm Rudnici Boksita).

A programmed bankruptcy cannot be accepted in KAP’s case, the letter argued, because of the complexity of the technological process as any deterioration in the electricity supply would result in a production halt and in the activation of another EUR 102mn of state guarantees on KAP loans. Once the production is shut down, its restart will require a lot of time and millions of euro in investments – which will dampen the revival process at the company and make unsuccessful any attempt to attract a new investor.

Related Articles

Overlooked carbon costs spell financial trouble for Western Balkan coal power plants

Ten coal-fired power plant projects across the Western Balkans are facing serious financial problems as they have not taken properly into account carbon costs, according to ... more

US Senate ratifies Montenegro’s Nato accession protocol

The US Senate ratified the protocol for Montenegro’s membership in Nato late on March 28, ending months of tension and speculation over Washington’s ... more

US Senate moves closer to unblocking Montenegro’s Nato membership

US senators voted overwhelmingly to end the debate on Montenegro’s Nato membership at a session on March 27, paving the way for a vote on the issue ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss