OREANDA-NEWS. On 15 June 2009 was announced, that En+ Group had reached an agreement with the Government of Montenegro to pursue joint efforts in order to achieve a comprehensive operational and financial restructuring concerning of the Podgorica aluminium smelter (Kombinat Aluminijuma Podgorica, KAP) and the Niksic bauxite mine (Rudnici Boksita Niksic, RBN, primary material supplier to KAP). En+ Group CEO Vladislav Soloviev and Vice-Premier and Minister of Economics of Montenegro Igor Luksic signed a Memorandum of Understanding, that sets a plan of actions to reorganize the plant's production and financial systems.

En+ CEO Vladislav Soloviev commented: "Once implemented, our plan will ease the financial burden on En+ Group, settle the mutual claims between the Company and the Montenegrin Government, adjust KAP's relations with its creditors and, ultimately, solve the crucial issues of high electricity tariffs and excess staff with a view to bring long term profitability to the smelter".

"The endorsed measures are to secure continued work of the Montenegro's largest enterprise and to preserve hundreds of jobs, which is obviously the most crucial task in the current economic situation. We are satisfied by the successful completion of our talks, and the Government of Montenegro fully supporting our proposals on KAP's bailout", he added.

Chairman of the KAP's Board of Directors Viacheslav Krylov said, "This Memorandum is but the first step towards KAP's complete turnaround. The situation is extremely complicated for KAP, and its future completely depends on how prompt and accurate and professional we and the Government of Montenegro are in our implementation of the agreements we've arrived at".

Basic provisions of the Memorandum:

the Government of Montenegro shall issue sovereign guarantees of up to ?135m for the existing and new debt to be issued by KAP;

the guarantees will be used to raise funds for repayment of KAP's debts to its lenders, joint financing of the social programme, and raising the plant's working capital;

for its part, En+ Group shall transfer 50% of its shares in KAP and RBN and have the right to repurchase. CEAC (En+ Group's subsidiary managing KAP and RBN) and the Government of Montenegro will have equal stakes of 29.365% in KAP after the transfer; the Government of Montenegro will get one seat on the KAP's Board of Directors;

the Memorandum sets a new price formula for the electric power supplied to KAP by the state-owned power company EPCG - establishing a tight link to the LME aluminium price till 2012; the new formula is to be used to recalculate KAP's already historical electricity costs - since January 1, 2009.

En+ Group and the Government of Montenegro agreed to reconsider the KAP Sale and Purchase Agreement that stipulates investments of over ?40m into the smelter within the next two years.

En+ Group and  the Government of Montenegro agreed to withdraw their mutual claims they had filed with international courts.