October 15, 2013 / 4:54 PM / 7 years ago

Bosnia's Aluminij starts smelter shutdown, says bankruptcy looms

* EPHZHB blocks Aluminij’s accounts over 19 mln euro debt

* Aluminij says will shut down plant unless government helps

* General Manager says blockade is politically motivated

By Daria Sito-Sucic

SARAJEVO, Oct 15 (Reuters) - The aluminium maker Aluminij Mostar, a crucial pillar of Bosnia’s economy, began shutting down its smelter on Tuesday and said it would be forced into bankruptcy unless the government helped it settle a debt to the state-owned power company.

The company, EPHZHB, succeeded on Monday in freezing Aluminij Mostar’s bank accounts to try to force it to settle a debt of 38 million Bosnian marka (19 million euros), Aluminij General Manager Ivo Bradvica told a news conference on Tuesday.

Like other smelters, Aluminij Mostar has suffered from a 30 percent fall in the price of the metal in the last 2-1/2 years, caused by oversupply, as well as high power prices. But the firm accounts for more than a quarter of Bosnia’s GDP, and the government has already saved it from collapse in June by taking a 44 percent stake and promising further subsidies.

Bradvica, who has repeatedly urged the government to subsidise its power, which accounts for around 60 percent of the production cost of aluminium, said the plant had only enough stocks of the raw material alumina to last 10 days.

“We began the process of shutting down the smelter this morning,” he said. “We have to start a planned closure of the smelter so as not to cause even greater damage with even worse consequences.”

Bradvica said he would meet Nermin Niksic, prime minister of Bosnia’s autonomous Muslim-Croat Federation, which owns 98 percent of EPHZHB, on Friday.

“Unless those who caused this do something very quickly, we are inevitably going into bankruptcy,” he said.

Bradvica also published a letter to the government on the company website that read: “All future relations with our partners are no longer in our hands but in the hands of the government and EPHZHB.”

EPHZHB director Nikola Kresic said the company had been forced to block Aluminij’s accounts “because our operation was endangered by this debt”, according to local media.

Aluminij employs 900 people directly in the Mostar region and thousands more indirectly, and produces around 160,000 tonnes of aluminium a year.

The Muslim-Croat federation and Aluminij’s private shareholders agreed in June that each would take a 44 percent stake in the firm, ending a dispute dating back to the end of Bosnia’s 1992-95 war. The Croatian government has the remaining 12 percent.

Nobody from the federation government was immediately available to comment as the region’s majority Bosnian Muslims, known as Bosniaks, celebrated the Islamic Eid holiday.

Since the end of its war, Bosnia has been made up of two autonomous entities - the Muslim-Croat federation and the Serb Republic - under a weak central government. (Reporting by Daria Sito-Sucic; Editing by Kevin Liffey)

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