“Next year will be a year of great crisis and in order for KAP to survive we will implement crisis management of the company,” Avaliani said in a statement issued by KAP after its November 25 shareholders' meeting.
The question of KAP's survival is largely limited to the high cost of electricity, Avaliani said. He was quoted as saying by Montenegrin daily Vijesti that KAP's cost price of a tonne of aluminium was $2,998, compared to a sale price of $1,700. Due to high production costs KAP’s operating loss was $38 million (30 million euro) for the first ten months of the year, Avaliani said.
“Our plan is to minimise our losses in 2009 and survive the global crisis, which affects not only aluminium producers, but all metal producers as well,” he said in KAP's statement.
The statement added that the shareholders had agreed that KAP will start as of January to define flexible output of primary aluminium and to sell non-core assets in order to generate “much needed cash.” It did not say how much the production will be cut but according to reports in local media it will be decreased to an annual 60,000-100,000 tonnes.
KAP has installed capacities to produce 120,000 tonnes of aluminium, but Avaliani said in the statement that the smelter produced 10,000 tonnes in October after a brakedown in two transformers caused a decrease in production earlier this year.
“During the first ten months of 2008 the energy costs drastically increased, as well as the costs of raw materials while the price of aluminium on the London Metal exchange keeps on going down,” Avaliani said in the statement.
Basic Element, owned by Russian tycoon Oleg Deripaska, bought 65.4% of KAP in 2005, planning to take control of Montenegro's sole coal-fired power plant, TE Pljevlja, shortly after and secure cheap and stable electricity supplies to the aluminium smelter. However, the plan failed a year later, when Montenegro cancelled the sale of TE Pljevlja to the Russian company.
Data from KAP’s website showed on Thursday that CEAC Holdings, a company also owned by Deripaska’s EN+, holds a 58.73% stake in KAP, while the remaining is owned by smaller shareholders.
($=0.7758 euro)
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