SARAJEVO – A Bosnian regional government will help to keep aluminium smelter Aluminij Mostar running, a Minister said on Friday, after heavy debt brought it to the brink of closure.

Management at Bosnia's sole aluminium smelter had called for the Bosniak-Croat Federation to intervene after the business was hit by rising alumina and electricity prices.

The company sounded the alarm last week when the country's power regulator threatened to cut it off the grid because of unpaid bills.

Aluminij's total debt stood at 344-million Bosnian marka ($202-million) at September 30, of which 188.4-million marka is owed to the EPHBHZ power utility.

"The Federation government will not allow the plant's closure," Prime Minister Fadil Novalic told a news conference on Friday.

Novalic guaranteed that the plant would be kept on a so-called warm regime, keeping it connected to the grid to minimise restart later costs. The warm regime does not provide enough power for the smelter to continue production.

The Federation government owns a 44% stake in Aluminij Mostar, with small shareholders holding 44% while the Croatian government has a 12% stake.

Novalic said he also expects the Croatian government to get involved in resolving Aluminij's problems.

The Federation ministries of industry and finance will consider providing guarantees for bank loans that Aluminij could take to purchase the electricity and raw materials necessary for production, Industry Minister Nermin Dzindic said.

The government will also work on renegotiating the electricity debts once Aluminij has started a financial review and operations audit, Dzindic added, pledging 1.1-million marka towards the auditors and current costs.

Dzindic said the review will show whether Aluminij would be able to resume full production in the coming months.

Aluminij's General Manager Drazen Pandza welcomed the government support but said they were not enough.

"This is a major step towards starting to solve our problems," he said at a separate news conference in Mostar.