Prime Minister Andrej Plenkovic said on Thursday that there were three possible scenarios for the Uljanik Group shipbuilding company to go forward - insolvency, a restructuring plan acceptable to the European Commission and the government, or getting a new strategic partner.

“The first scenario is the worst one, and would involve launching insolvency proceedings according to Croatian law. This would not necessarily mean the end of the company, but some sort of restructuring, ” he said at a cabinet session in Pula.

The second scenario, Plenkovic added, involves modifying the existing restructuring plan that had been drawn up by Uljanik management, to make it viable and acceptable to both the European Commission and the Croatian government. The third scenario means getting another strategic partner and finding a new solution.

“The government is interested in the survival of profitable shipbuilding in the cities of Pula and Rijeka… but it is necessary to find a new model which will not generate the problems the Uljanik Group is faced with,” Plenkovic said.

“Shipbuilding is also a political issue, resulting in discussions on who is more and who is less to blame, but the incumbent government is not to blame, as this year it approved a guarantee for a loan which kept the Uljanik Group afloat, and is now investing a lot of effort to help the company weather the current crisis, Plenkovic said.

At the cabinet session, Sinisa Ostojic of the state-owned Jadranbrod shipbuilding corporation which oversees and coordinates the industry, presented a report on Croatia’s shipbuilding sector. It said that Croatia’s docks currently account for some 7,500 jobs and employ around 2,000 sub-contractors, or 60-70 percent less jobs and employees than in their heyday in the early 1990s.

“The docks have lost a large part of their professional workforce over the years, as well as their presence on the global market, and instead of being oriented to big series and relatively simple ships, they have started turning to making vessels with higher added value,” Ostojic said.

“To a large extent, Croatian shipyards share the same fate as the industry globally, as 90 percent of ships made in Croatia are intended for export, and – apart from (liquefied natural gas) LNG tankers and cruise ships – other types of vessels are much less in demand,” he added.

All Croatian shipyards combined have 34 vessels in their order books at the moment, worth $1.3 billion, whose delivery is expected over the next three years, Ostojic said.

As for the long history of generous state aid, Ostojic said that from 1992 to 2017, state subsidies given to shipyards totalled of 31.7 billion kuna (€4.3 billion), which helped build a total of 442 vessels. The cost of building these vessels was 115 billion kuna (€15.5 billion), but their sale generated an income of 83 billion kuna (€11.2 billion). This means that 22 percent of the value of the delivered ships has been secured through state aid.

“In other words, one in four kuna of shipyards’ revenues was paid for by taxpayers,” Ostojic told the cabinet.

Economy Minister Darko Horvat said the current situation in Uljanik was unsustainable, and that a long-term restructuring model for the Uljanik Group should be sought in order to enable business operations in accordance with EU legislation, national laws, and market-based principles.

Horvat said that on March 31, Uljanik Group’s debt amounted to 575 million kuna (€77.5 million). He also said that on July 13, the government had sent to the European Commission using “informal channels” Uljanik’s restructuring plan, which is still being looked into in Brussels.

The European Commission has said that the state’s financial stake in the dock was too high, and expressed doubts that the current strategic partner – Croatian company Kermas owned by businessman Danko Koncar which owns a smaller shipyard Brodotrogir – would be able to finance it.

(€1 = 7.42 kuna)

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