Bosnia's sole aluminium smelter shut down over debt

SARAJEVO, July 10 (Reuters) - Bosnia’s sole aluminium smelter and one of the country’s biggest exporters was disconnected from the power grid just after midnight on Wednesday over a huge debt it had incurred because of high electricity and alumina prices.

The closure of the smelter, which employs about 900 workers in the southern town of Mostar, puts at risk some 10,000 jobs, including contractors and those at the aluminium processing firms it supplies.

Aluminij is 44%-owned by the government of Bosnia’s autonomous Bosniak-Croat Federation, with small shareholders holding another 44% and the Croatian government the rest.

The move on Wednesday followed a failed attempt to find a strategic partner for the company, which has a total debt of nearly 380 million Bosnian marka ($218 million).

Of that amount, 280 million marka is owed to the state power utility, EPHZHB, which in June stopped supplying it with power at favourable prices agreed with the government last December.

The smelter has since been forced to buy day-ahead electricity, which is more volatile than long-term power contracts.

Late on Tuesday, several hundred Aluminij workers blocked traffic on the road linking Mostar and the Bosnian capital, Sarajevo, in a protest over the failure of Aluminij’s shareholders to find a solution for the troubled firm.

The protest was disbanded after police removed the demonstrators.

The Federation government has refused to subsidise the electricity for the smelter, saying it should purchase power on the open market. It has been in talks with several companies about the possible takeover of the smelter and its restructuring.

Aluminij’s management said the damage from the power cutoff would be assessed in the course of the day. It said earlier that shutting down electrolysis cells at the smelter could cost several hundred million marka.

Reporting by Maja Zuvela; Editing by Peter Cooney