Montenegro, CEAC Agree to Bailout of KAP Aluminum Smelter

June 3 (Bloomberg) -- Montenegro and the Central European Aluminum Co., a subsidiary of Russia’s Basic Element holding company, reached agreement on a bailout package for Kombinat Aluminijuma Podgorica, the country’s biggest exporter, Finance MinisterIgor Luksic said. The government of Milo Djukanovic will provide guarantees for a total of 45 million euros ($64 million) to cover KAP’s debt to commercial banks and a layoff plan for workers, Luksic said today by phone. The Russian company will hand over half its holding to the government and withdraw claims for 300 million euros in damages over an alleged false evaluation of KAP’s assets before the 2005 takeover of the company. Montenegro will receive a 29 percent stake in KAP and 32 percent of the bauxite mines which are a part of the company, as well as a right to veto decisions by the board of directors. The company’s production accounts for more than 15 percent of Montenegro’s gross domestic product, according to KAP’s Web site. Central European Aluminum has spent more than $40 million on equipment and environmental programs since acquiring the smelter and mine in 2005 for 58 million euros and assuming 90 million euros in debt, according to KAP’s Web site.