Finance Minister Zdravko Maric told a government session on Wednesday that in the period from 2010 to September 2018 the government had issued 7.5 billion kuna (€1 billion) worth of state guarantees for the Uljanik shipbuilding group, of which 4.29 billion kuna (€578 million) had been activated so far.
In the same session, the government said shipbuilding contracts which involved state-issued collaterals would be investigated and checked, together with prosecutors.
The move raises doubts about the legality of some of the troubled shipbuilding group’s business dealings.
“Based on a series of government decisions, in the period from 2010 to September 2018 government collaterals totalling 7.5 billion kuna (€1 billion) were issued for the purpose of financing the building of new ships, as well as for maintaining liquidity at the shipyards,” Maric said.
“State guarantees totalling of 2 billion kuna (€269 million) were used to build nine new vessels in the period that were then delivered to their clients, and those state guarantees were returned to the Finance Ministry and withdrawn. But activated guarantees currently amount to 4.29 billion kuna (€578 million), leaving some 1.21 billion kuna which were not claimed (€163 million),” said Maric.
The 4.29 billion kuna (€578 million) refers to only to the principal guarantees, Maric said, noting that the amount does not include additional fees charged for contract terminations, unpaid fees for guarantees and loans, as well as interest.
He added that according to data provided by the Uljanik Group and the Jadranbrod shipbuilding company on the completion status of ordered ships showed that construction work on a large number of vessels had not even begun, even though the funds paid for them are claimed to have already been spent on their construction.
VEZANE VIJESTI
The data quoted by Maric also showed that around 1.07 billion kuna (€144 million) in funding, for which state issued bank guarantees totalling 856 million kuna (€115 million), were not spent on the actual construction of those ships.
The Finance Ministry has so far received calls from banks for payments in the amount of 1.1 billion kuna (€148 million), he said, plus interests and various fees, and due to the recently announced cancelling of contracts for four ordered ships, more calls for the repayment of advance payments are expected in the future, totalling 431 million kuna (€58 million), plus interest and fees.
“When everything is added up, by the end of 2018 the Finance Ministry expects the government will have to pay a minimum of 2.35 billion kuna (€317 million), plus interests and bank fees. The amount is likely to increase if more orders get cancelled. Banks have announced potential cancellation of loans that are still not due for payment, but ships for which they were issued were cancelled, so it is likely that the payment of another 237 million kuna (€32 million) would be requested,” Maric told the cabinet.
“By the end of the year at least 2.35 billion kuna (€317 million) would be paid for this purpose from the state budget and the amount could end up being even larger… This year’s budget included reservations for state guarantees in the amount of 265 million kuna (€36 million) including some 118 million kuna (€16 million) which have been spent so far… The amount we are talking about here is ten times higher than what had been originally planned as reserves for these guarantees,” Maric said.
Once payments for activated guarantees are made, the Finance Ministry will submit to the Financial Agency (Fina) orders for the collection of its own claims from the Uljanik Group.
Since it will not be able to settle its claims by seizing the group’s bank accounts, the ministry plans to seize vessels on which it has lien.
Maric added that the series of order cancellations that the government might be forced to pay for could affect the public debt and government budget balance – figures important for the country’s credit rating.
“According to the ESA 2020 statistical methodology, payments made upon activation of state guarantees are treated as capital expenditures, which in this case may have a negative impact on government’s account balance, namely the general government budget deficit or surplus, and consequently on the public debt,” said Maric.
In spite of this, he said he expected the public debt-to-GDP ratio to continue falling until the end of the year, but noted that it is now not entirely clear how Eurostat and the state statistics bureau would treat the capital expenditures incurred.
Speaking on the same topic, Prime Minister Andrej Plenkovic said the government had ordered a review of all contracts for ships for which state issued bank guarantees, in close cooperation with the chief state prosecutor’s office (Dorh).
“We… will analyse in detail the legal effects, and in doing so will try to protect Croatia’s interests in the best possible way,” said Plenkovic.
(€1 = 7.42 kuna)
Follow N1 via mobile apps for Android | iPhone/iPad | Windows| and social media on Twitter | Facebook.