State Expects Large Revenue from Sale of Property, Investors Attracted by ACI

Lauren Simmonds

Due to the delay in law, the state is now in the position to bring in two annual property management plans for both 2018 and 2019.

As Poslovni Dnevnik/Marija Brnic writes on the 7th of April, 2018, the new law on the management of state property was not sent to the Parliament for second reading by the government this Thursday either, and Goran Marić is persistently waiting for the law to finally be passed, so that he can begin properly preparing his first property management plan for the Republic of Croatia. Since the adoption of the law lasted longer than expected (it was originally planned to be passed by the summer of last year), it postponed the adoption of a new long-term strategy. Seeing as the existing one expired last year, as did the annual plan, both should be based on this strategy.

This document will make clear what the government specifically plans to privatise this year, and given the fact that we’ve now already stepped into the second quarter, it’s interesting to note that it will soon be followed by a public hearing and adoption of not one, but two of plans for property management – one for 2018, and another for 2019. Those documents should be adopted in the autumn, before the creation of the state budget for the next year, in order to be able to realistically estimate budget revenues. Recently, the competent ministry has released the first more detailed estimates on the process of privatisation and other revenue which it expects to receive from the sale of state property to the public. In a document based on the period from 2019 to 2021, the sum of income on various grounds amounts to a handsome 1.94 billion kuna.

Approximately three hundred million kuna more than the previous year is in question, and the most important of all will of course be the eventual privatisation of what are currently state-owned companies. Revenues that Minister Marić expects from the sale of such shares are three times higher than they were in the past year, which, according to the ministry data, amounted to 316 million kuna through the sale of what were considered to be non-strategic companies from the abundant CERP portfolio. This year, sales should result in a total pull of 932 million kuna, and half of that work already has been done, various bids took place last year and selected customer contracts have been concluded this year. Club Adriatic, Hoteli Makarska and Crikvenica’s Jadran (Adriatic), previously entirely stated owned hotel companies, who therefore all have majority shares owned by the state, are currently pulling in a massive 427 million kuna.

A new attempt is being made to privatise what has appeared to be rather problematic so far, Dubrovnik’s Maestral hotel chain, for which there was huge interest last year, but only one bidding offer was received, and that was eventually discarded. The first round will be closed on Monday, and based on the bids of interest collected, a new starting price will be established. In the previous attempt to privatise it, that price was set at 114 million kuna, a price the sole bidder, the Czech J & T IB Capital Markets, was willing to pay, however, things went sour and it fell through. What exactly the state could put on the market besides this hotel, and several much smaller packages in mostly less attractive companies that are being offered on CERP’s website, is not yet known.

From the competent ministry’s strategic plans, it is only very generally mentioned that the goal is to complete the privatisation process in the coming years and to deal with smaller shares over which the state has no influence on the management, and improve the quality of the management of state-owned enterprises. Some problematic companies from the state portfolio, such as Petrokemija or Uljanik, in which the state has a significant share of ownership, but with their privatisation, the budget itself will not receive any money, are currently in the phase of having their often major financial and operating issues resolved.

Despite rather significant problems in this field, companies such as ACI have caught the eye of numerous investors.

Otherwise, Goran Marić’s mandate in the Croatian Government was marked by the very realisation of the portfolio itself, which had been neglected in the shadow of the privatisation and the renovation of state-owned enterprises throughout the past several years. The move was met by praise from the European Commission, and although the public generally expects the process of privatisation to pick up its pace.


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