April 18, 2014 / 1:46 PM / 4 years ago

Bosnia's Aluminij again risks closure over debt to utility

* Owes $70.8 million for electricity supplies

* Utility EPHZHB sets April 24 deadline for payment plan

* Smelter accounts for more than a quarter of Bosnia’s GDP

By Daria Sito-Sucic

SARAJEVO, April 18 (Reuters) - Bosnian aluminium smelter Aluminij Mostar is facing closure again after a state-owned power company said it would cut electricity supplies over its mounting debt.

Power provider EPHZHB failed in late March to collect some of the nearly 100 million Bosnian marka ($70.8 million) the smelter owes for electricity supplies in the past year by activating a bank guarantee.

“We have not succeeded to cash anything, they have no money,” EPHZHB spokesman Mario Fofic said.

“Unless they come up with a new plan to pay the debt by April 24 we shall be forced to halt the delivery of electricity,” Fofic said by telephone from the southern town of Mostar, where both the smelter and the utility are based.

Aluminij Mostar was not available for immediate comment.

It is the second time in seven months that the smelter is facing closure over its debt to EPHZHB. Last October, it avoided a shutdown after the government mediated a debt-settlement deal.

Under the deal, Aluminij was to pay down a debt of 40 million marka in 10 monthly instalments starting from February and to regularly service its monthly obligations to the utility.

“The biggest problem for us is that they are not servicing their monthly bills,” Fofic said. The debt rose to 99 million marka in April, he said.

“Our operation and liquidity are at stake now because Aluminij accounts for about 50 percent of our total sales.”

The smelter, which generates more than a quarter of Bosnia’s national output, has been in trouble like other smelters across the world because of high electricity prices and a sharp fall in aluminium prices in the last three years caused by oversupply.

Last June, the government of Bosnia’s autonomous Bosniak-Croat federation, where the smelter is located, took over 44 percent of the smelter and promised fresh subsidies in order to stave off a looming closure.

Small shareholders hold another 44 percent stake and the government in neighbouring EU member Croatia the remaining 12 percent.

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

Fofic said the Federation government, which owns 90 percent of the EPHZHB utility, has been notified about its plan to cut power supplies to the smelter and has pledged to try to help the smelter continue operating.

The government was not available for immediate comment.

1$=1.412 Bosnian marka Reporting by Daria Sito-Sucic; Editing by Zoran Radosavljevic and

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