Bosnia blocks aluminium smelter sell-off

SARAJEVO, Dec 20 (Reuters) - The privatisation of Bosnia's sole aluminium smelter Aluminij Mostar has been blocked by a government minister.

"The process is stopped," Hamdija Kulovic, the head of the Aluminij sell-off commission, told Reuters on Wednesday.

Industry and Energy Minister Vahid Heco of the Muslim-Croat federation government this week annulled the privatisation agency's decision to send bid invitations for a 88 percent stake in Aluminij to firms regarded as possible strategic partners.

The invitations went to leading producers, such as Alcoa(AA.N: Quote, Profile , Research), Alcan Inc.(AL.TO: Quote, Profile , Research) and RUSAL, and also to Aluminij's long-time partners Norway's Norsk Hydro (NHY.OL: Quote, Profile , Research) and Swiss-based metals trader Glencore International AG (GLEN.UL: Quote, Profile , Research).

Heco said the minimum value of the stake slated for the privatisation, put at 150.3 million Bosnian marka ($102.5 million), was too low and that the initial balance sheet included farmland, which was against the law.

He also said bid invitations contravened the law.

"According to the privatisation law, it must be privatised through a public tender," Heco told Reuters. 

He said he expected the privatisation agency to draft a new balance sheet for Aluminij and offer it for sale through a public tender.

Kulovic said the government needed first to agree new terms with Aluminij shareholders, who own half the stake slated for privatisation.

Last year, the government and the management of the smelter based in the southern town of Mostar reached an ownership agreement under which the government and small shareholders would each hold a 44 percent stake.

The remaining 12 percent remains in the hands of the Croatian TLM company, which helped Aluminij restart production after the 1992-95 war.

The parliament of the federation, which makes up Bosnia and the Serb Republic, last summer approved legislation enabling the privatisation of companies with mixed ownership, such as Aluminij, through direct agreement with the government.

The legislation paved the way for the Aluminij privatisation, agreed by the two parties in November. Its management insisted that world leading metal producers and Aluminij's proven partners should be favoured in the sell-off.

"We think that this new problem is not a matter for the agency but for the government," Kulovic said. "We are now waiting for a new government order."