Although it remains to be seen whether the government's session to be held in the northern Adriatic city of Pula on Thursday would offer any solutions to help the troubled shipyards of Uljanik and 3. Maj, the mounting problems spell troubled waters for the once-prosperous heavyweights of Croatian industry.
Except for having secured July and August salaries for the shipyard’s workers, which had ended their eight-day strike, there have been no new concrete developments in the Uljanik saga which shook the city of Pula and the entire Istria region this summer.
Although the needed 51 million kuna (€6.9 million) for August wages for 4,200 workers has been secured, and is due to be paid on Friday, September 14, it remains unclear how the salaries would be paid out after the shipyard’s bank account has been blocked again earlier this month.
Meanwhile, Monday’s comments by Economy Minister Darko Horvat imply that the entrepreneur Danko Koncar has definitely been scrapped as a potential new owner of the Uljanik Group, Vecernji List reported.
Uljanik Group had considered bids from three companies for a strategic partnership earlier this year, and in March they selected Kermas Energija, a Croatian company owned by businessman Danko Koncar, which already owns the much smaller Brodotrogir shipyard in the Dalmatian town of Trogir.
“Both me and the Prime Minister (Andrej Plenkovic) were clear when we said that at this moment we are in contact with parties which are a relevant force in the global shipbuilding industry. These include Germans, the Chinese, Koreans. Yes, we are talking with them, and we will continue talking with them for as long as necessary to find a way to make both shipyards – the Pula-based Uljanik and the Rijeka-based 3. Maj – capable of doing business on market principles,” Horvat told reporters on Monday.
It was hoped that Koncar’s Kermas Energija would help Uljanik complete and implement a restructuring plan in line with a government decision made in January, when it issued a €96 million state guarantee for the troubled company, under the condition that the group increases its equity (by bringing in a strategic partner) and launches a restructuring plan.
Horvat went on to add that he has been saying all along that “it was never impossible” to change the strategic partner (to partner up with Uljanik), and especially so if – according to European Commission’s recent statements last week – “we cannot prove that the partner in question can finance the restructuring plan” in the form that it had been sent to Brussels for approval.
Under the plan, Horvat said last week that Croatia’s government and any future partner would share the restructuring cost 60-40 percent, estimated to cost in total €584 million – meaning taxpayers would spend up to €352 million to save the shipyards.
“The European Commission trusts the government, but has doubts about the quality of the strategic partner,” Horvat said. But whether the government would be able to find a new interested partner to invest in shipbuilding remains unclear.
Some experts say that the problem could be more easily solved if the two shipyards were separated, which would allow them to be sold to new owners separately. According to media speculations, the Italian shipbuilding company Fincantieri had several times in the past expressed interest to acquire 3. Maj based in Rijeka.
Currently the largest shipbuilding company in Europe which builds both commercial and military vessels, Trieste-based Fincantieri posted a €100 million net profit in 2017, against a revenue of over €5 billion. The figures go to show how low the profitability of European shipbuilding is, although the company also has some €9 billion worth of projects ordered, Vecernji List reported.
Economy Minister Horvat did not mention Italians in his comments on Monday, but he did announce that talks would be held with shipyard’s clients based in Norway and Canada, to try to prevent order cancellations for ships that were already being built at Uljanik and 3. Maj.
Just after the strike had ended last week, Norway-based Siem Shipping had cancelled four projects ordered at Uljanik, including one for a car carrier ship that was already 70 percent built, with Finance Minister Zdravko Maric saying that the €70 million state-issued guarantees for these projects would likely be activated and claimed by cancelling clients.
“This whole time I have been saying that this way of signing contracts and financing of shipbuilding in both Pula and Rijeka has come to an end. A different way of doing business will be necessary,” said Horvat, avoiding to answer a direct reporter’s question whether the European Commission would approve the restructuring plan sent to them by the Uljanik Group company management, or is bankruptcy imminent.
But in order to avoid that scenario, some way to pump liquidity into the company would have to be found, because by the end of the year the company will have no income of its own. And without any income and with bank accounts still blocked, it cannot do business. Since it already has a 760 million kuna (€102 million) debt it owes to suppliers, it cannot even buy materials it needs to build ships. So the Uljanik Group is now asking the government to lend them another 90 million kuna (€12.1 million), Vecernji List reported.
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