ZAGREB, February 8, 2019 – The Minister of Economy, Entrepreneurship and Crafts, Darko Horvat, said on Thursday that good prospects existed for restructuring of Uljanik if the new strategic partner proved to be financially capable, otherwise serious problems would occur because there was no more time for salvaging shipbuilding in Rijeka and Pula.
The management and supervisory boards of the Uljanik shipbuilding group on Thursday selected the Brodograđevna Industrija Split, or Brodosplit, as the strategic partner and an agreement will be concluded to regulate mutual rights and obligations to as soon as possible draw up an acceptable and implementable restructuring programme for the Uljanik company and shipyard.
“If… we get clear indicators that, in addition to the strategic partner’s wish to enter the restructuring phase, it shows that it is financially capable of it, I think that a chance exists,” Horvat told reporters in Government House.
“If during the making of the restructuring programme it is established or we get clear information that the strategic partner doesn’t have that financial ability, I’m afraid that we will have a serious problem because there is no time left to secure a new life for shipbuilding in Rijeka and Pula,” Horvat warned.
He added that the strategic partners (Brodosplit & Fincantieri) claimed in their bid that they had the necessary financial ability for Uljanik’s restructuring and submitted financial data showing that they are solvent companies.
Until such time that the strategic partner proves that it has that ability, “the strategic partnership is a potential with good wishes and very little possibilities.”
Answering a reporter’s question, Horvat said that the bid was submitted jointly by the Brodograđevna Industrija Split, owned by the DIV Group, and the Italian shipbuilder Fincantieri at a ratio of 70% to 30%.
He added that negotiations were underway with a client for a new ship for which the state has issued guarantees in the amount of 126 million euro. He warned that the state will have to pay that guarantee if the ship is not completed or if Uljanik goes bankrupt. That is why the state wants the ship to be built and estimates that that requires about 22 million euro.
“How that burden will be shared with the client is a matter of negotiation and I hope that in the next 10 days or so that will be completed. Whatever we invest in completing the ship will give us a chance to not only halve the 1.7 billion kuna Finance Minister Zdravko Marić is speaking about, but to save 1 billion kuna,” Horvat said.
Asked whether he was satisfied with the choice of the strategic partner, Horvat said that he would refrain from making any subjective assessments and that he considered as relevant the financial reports about the status of Brodosplit and Fincantieri for 2016 and 2017 that were included in the bid. They show good business results, which offers hope that the strategic partners will use their know-how to reduce the huge deficit in the business accounts of the 3. Maj and Uljanik docks, said Horvat.
Asked whether Brodosplit used state money earmarked for restructuring in 2017 as intended, Horvat said that the ministry monitored Croatia’s shipbuilding and that this information was available to the public on an annual basis.
“I’m certain that the management board carefully analysed all those reports over the past few days. Should there be any need for some other bodies to become involved in any analysis before the restructuring programme is adopted, similarly to the start of 2017, when we conducted an inspection of how funds and grants for Uljanik were expended, I think that there is no reason why we shouldn’t be able to check the situation and status of the dock in Split as well,” Horvat said.
He did not wish to specify how much Uljanik’s bailout would cost taxpayers. He added that reports saying that the restructuring of the Rijeka and Pula docks could cost 1.2 billion didn’t come from the ministry. I would like to ask those who presented that data, how they came to that figure and who their source was, he said.
Finance Minister Zdravko Marić did not want to comment on how much the restructuring of the Uljanik group could cost and repeated how much had been paid to date in enforced guarantees. “To date, we’ve paid 2.545 billion kuna in 2018 and payments have continued in 2019. In January an additional 250 million kuna was paid in enforced guarantees. We are approaching the amount of about 2.8 billion kuna, which is in line with our initial estimates at the time when the crisis broke out,” Marić told reporters.
When reminded that he said that this year 1.5 billion kuna would be paid in state guarantees for Uljanik, Marić reiterated that his ministry estimated that a portion of that amount would very likely have to be paid.
He added that construction work on a big ship, which was also the most valuable vessel under construction, was nearing completion and that he hoped a solution for that ship would be found and that guarantees would not have to be paid for it.
Marić did not wish to comment on speculation that the strategic partners estimated that the state would have to contribute to Uljanik’s bailout with about 10 billion kuna. He also didn’t want to comment on previous statements by Minister Horvat that Uljanik’s restructuring would cost about 800 million euro and that the state would have to pay half of that.
He reiterated though that he had always advocated that the integrity of state guarantees had to be secured and that if the state issued a guarantee, it had to settle its obligations and pay guarantees. On the other hand, I have said many times that the question should be asked why so many guarantees have been issued and how, he said.
More news on the Croatian shipbuilding industry can be found in the Business section.