Bosnia government proposes to help Aluminij Mostar avoid closure

Bosnia's regional government said on Friday it had made proposals to help aluminium smelter Aluminij Mostar settle a debt to state-run power utility EPHZHB and stave off the company's closure.

Aluminij, a mainstay of Bosnia's economy, began to shut down its smelter on Tuesday after Mostar-based EPHZHB froze its bank accounts in a dispute over a 40 million Bosnian marka (20 million euro) debt owed for power deliveries.

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 by high power prices.

The government of Bosnia's autonomous Muslim-Croat federation, where the smelter is located, said it had proposed to EPHZHB to unfreeze Aluminij's accounts and to enable it to continue production.

Federation Energy Minister Eldar Trhulj said the government and Aluminij had come up with two proposals for settling the debt and that EPHZHB had promised to choose one of them at an urgent session of its managing board.

"The final agreement on the issue should be reached by the Oct. 23 government session," Trhulj told state radio.

The smelter accounts for more than a quarter of Bosnia's national output and the government already saved it from collapse in June by taking a 44 percent stake and promising further subsidies.

Small shareholders also hold a 44 percent stake in the firm and the Croatian government the remaining 12 percent.

The company employs 900 people directly in the region of the southern town of Mostar and thousands more indirectly and it produces around 160,000 tonnes of aluminium a year.

The government of the Muslim-Croat Federation owns 98 percent of the utility EPHZHB.

Since the end of its war in the 1990s, Bosnia has been made up of two autonomous entities - the Muslim-Croat Federation and the Serb Republic - under a weak central government.