Deripaska leans on Montenegrin govt.

Russian billionaire Oleg Deripaska is seeking compensation from Montenegro in a dispute over the aluminum plant, KAP. Podgorica daily Vijesti writes today that KAP's owner, CEAC, a company controlled by Deripaska via his Rusal, wants the government to pay EUR 300mn because it allegedly failed to provide a realistic report on the state of the factory at the time of its sale. Deripaska leans on Montenegrin govt. Montenegrin Economic Development Minister Branimir Gvozdenovic reacted by telling the newspaper that the request for international arbitration was "unfounded". The Russians are seeking the arbitration process to take place in Frankfurt, as specified in the KAP acquisition contract, and are lodging their complaint against the government of Montenegro and state owned funds based on several issues connected to the 2005 takeover of KAP and bauxite mines in the north of the country. The main argument CEAC is putting forward is that the government in Podgorica failed to provide proper auditing and factual state of the balances, concerning the factory and the value of its property. KPMG carried out the auditing of KAP, while Deripaska's company, soon after the takeover, hired Deloitte, which produced a report significantly different from the one given by KPMG. "It is my personal impression that the start of the arbitration process is not motivated by the buyer's conviction that their demand is well-founded. The buyer wishes to formally proceed with all the issues that they believe will strengthen their negotiating position in the overall relations that they have with the government and local partners," Gvozdenovic commented. On the other hand, he continued, "individual reactions of the public", caused by a flawed interpretation of the KAP sale conditions, especially the price paid for the electricity used by the plant, are likely seen as hostile by the KAP owner, "perhaps leading them to wish to demonstrate how baseless such an approach is". Nevertheless, "Montenegro will strive to solve this problem in a reasonable manner, considering the importance KAP has for the country's economy", according to this minister. CEAC acquired majority stakes in KAP, the mines, and bought the mining concession for a total of EUR 58.5mn in December 2005. They also undertook it to service some of the company's debts, including the EUR 90mn owed to creditors, Gvozdenovic reminded. However, Deripaska's Montenegrin operation has been a source of dissatisfaction for some time, primarily due to the unsolved electric power supply issue. KAP has a contract with Montenegro's state-owned power corporation that is due to expire in 2010, and which specifies that in the first three years since 2005, the plant enjoyed subsidized prices for two-thirds of its electricity consumption, while in the remaining two years, this rule applies to one half of the sum. The price of electricity paid by KAP is also depending on aluminum prices in the global markets. At this point, the KAP owner and the state have struck no permanent deal on the issue.

Deripaska leans on Montenegrin govt.

Montenegrin Economic Development Minister Branimir Gvozdenović reacted by telling the newspaper that the request for international arbitration was "unfounded".

The Russians are seeking the arbitration process to take place in Frankfurt, as specified in the KAP acquisition contract, and are lodging their complaint against the government of Montenegro and state owned funds based on several issues connected to the 2005 takeover of KAP and bauxite mines in the north of the country.

The main argument CEAC is putting forward is that the government in Podgorica failed to provide proper auditing and factual state of the balances, concerning the factory and the value of its property.

KPMG carried out the auditing of KAP, while Deripaska's company, soon after the takeover, hired Deloitte, which produced a report significantly different from the one given by KPMG.

"It is my personal impression that the start of the arbitration process is not motivated by the buyer's conviction that their demand is well-founded. The buyer wishes to formally proceed with all the issues that they believe will strengthen their negotiating position in the overall relations that they have with the government and local partners," Gvozdenović commented.

On the other hand, he continued, "individual reactions of the public", caused by a flawed interpretation of the KAP sale conditions, especially the price paid for the electricity used by the plant, are likely seen as hostile by the KAP owner, "perhaps leading them to wish to demonstrate how baseless such an approach is".

Nevertheless, "Montenegro will strive to solve this problem in a reasonable manner, considering the importance KAP has for the country's economy", according to this minister.

CEAC acquired majority stakes in KAP, the mines, and bought the mining concession for a total of EUR 58.5mn in December 2005.

They also undertook it to service some of the company's debts, including the EUR 90mn owed to creditors, Gvozdenović reminded.

However, Deripaska's Montenegrin operation has been a source of dissatisfaction for some time, primarily due to the unsolved electric power supply issue.

KAP has a contract with Montenegro's state-owned power corporation that is due to expire in 2010, and which specifies that in the first three years since 2005, the plant enjoyed subsidized prices for two-thirds of its electricity consumption, while in the remaining two years, this rule applies to one half of the sum.

The price of electricity paid by KAP is also depending on aluminum prices in the global markets. At this point, the KAP owner and the state have struck no permanent deal on the issue.