Russia's EN+, Montenegro in deal to save smelter

* En+ Group to relinquish half its stake to government * En+, government to own 29.365 pct each of smelter * Government to guarantee up to 135 mln euros debt PODGORICA, Nov 17 (Reuters) - Russia's En+ Group will relinquish majority control of Montenegro's only aluminium plant by transferring half its stake to the government in a deal that will also slash the workforce at the smelter and a nearby mine. En+ Group, owned by Russian tycoon Oleg Deripaska, said on Tuesday the government of Montenegro would issue guarantees on up to 135 million euros ($201.1 million) in debt to cover loan repayments and redundancies at Kombinat Aluminijuma Podgorica. The agreement ends a dispute between the Russian group and the government of Montenegro. Both sides have agreed to withdraw claims against each other in international courts and each will own 29.365 percent of the smelter after the deal is completed. "The agreement will secure the continued work of Montenegro's largest enterprise, preserve hundreds of jobs and ultimately solve the crucial issues of high electricity tariffs and excess staff," En+ Chief Executive Vladislav Solovyov said. He added that the agreement should bring "long-term profitability" to the smelter. Montenegro's economy draws heavily on Kombinat Aluminijuma Podgorica, or KAP. The plant contributes over 15 percent of the country's gross domestic product and accounted for 41 percent of its exports in the first eight months of 2009. KAP has been running at a loss since global metals prices fell last year and has previously said that it plans to halve aluminium output to about 60,000 tonnes in 2009. The government would issue the sovereign guarantees before the end of this year to cover new and existing debt to be issued by KAP, En+ Group said in a statement. Some of this money will be used to repay debt, while another portion will be used to raise the plant's working capital and to finance social programmes related to redundancies. About 2,300 employees of KAP and an associated bauxite mine, Rudnici Boxita Niksic, are set to lose their jobs in the restructuring -- 59 percent of the current workforce of 3,900 people, double the amount at other smelters in the region. En+ said it retained the right to buy the shares back from the government at a later stage. Minority shareholders will retain their 41.3 percent stake in the plant. En+ and the government of Montenegro plan to invest 39 million euros in the smelter over the next five years, while the agreement also sets a new price formula for electricity supplied to KAP by state-owned power company EPCG. The electricity prices will be tied closely to the price of aluminium on the London Metal Exchange until the end of 2012, En+ Group said, reducing the heavy cost burden on the smelter. (Reporting by Petar Komnenic, additional reporting by Robin Paxton in Moscow, writing by Ivana Sekularac, editing by Anthony Barker)