Croatia's government will not sign off on a restructuring plan for the major 3. Maj and Uljanik shipyards, which would cost the government a minimum of 7.5 billion kuna (€1 billion), as it does not seem sustainable in its present form, Prime Minister Andrej Plenkovic said on Thursday in a government meeting.

Because of the massive cost to taxpayers, the government cannot agree to the current plan, Plenkovic said, but added that the government would keep exploring options to the help the Croatian shipbuilding industry.

The two shipyards – the Rijeka-based 3. Maj and the Pula-based Uljanik – have been suffering in agony for months, after they have been hit by massive losses, bank accounts blocked due to unpaid debts to suppliers, order cancellations and strikes.

Several drafts of restructuring plans have been submitted over the past year or so, by the privatised Uljanik Group’s management board, which were intended to be jointly funded by the government and a private company selected as a “strategic partner.”

The first strategic partner, selected in March 2018, was a Croatian private-owned company Kermas Energija which owns another, smaller, shipyard in the port city of Trogir.

After many months of negotiations and re-negotiations, Kermas had backed out of the deal and a new strategic partner was selected in February, this time in the form of another Croatian shipyard, Brodosplit. Details of the plan were never released to the public.

On Thursday, Plenkovic said that the initial version of the restructuring plan as proposed by Brodosplit would have cost taxpayers some 10 billion kuna (€1.3 billion), which was later reduced through talks to 7.5 billion kuna (€1 billion). Nevertheless, Plenkovic said that this sort of spending represented an unacceptable sum for the state budget.

Government “open to new solutions”

“Implementing the restructuring plan on government’s part would require putting a huge burden on all taxpayers. Considering all the circumstances of this issue, this points to a conclusion that sustainability of such a plan is in doubt, and the government cannot support this kind of plan at this moment… However, we remain open to seek new solutions for shipyards,” Plenkovic said.

The shipbuilding industry was traditionally always heavily subsidised. Plenkovic said on Thursday that in the period from 1992 to 2017 a total of 31.7 billion kuna (€4.3 billion) had been spent on various restructuring plans and subsidies, including 4.3 billion (€580 million) for the Uljanik shipyard, and another 9 billion (€1.2 billion) for the 3. Maj dock.

In addition, the government currently may be required to spend another 15.3 billion kuna (€2 billion) for bank guarantees for cancelled orders. Around 3.1 billion kuna (€420 million) has already been paid for that purpose until March 2019.

Plenkovic’s cryptically-worded decision, which may or may not open the way for Uljanik’s bankruptcy, came only two days after corruption police arrested 12 former executives of Uljanik Group, under suspicion of committing fraud worth around 1.2 billion kuna (€167 million) in business dealings between companies within the group, as well as misappropriation of state subsidies spent on shipbuilding.

Workers still on strike as court postpones bankruptcy decision

Meanwhile, the workers of the Uljanik dock went on another strike last week, when they welded shut the doors of two entrance gates at the dock, not allowing anyone in except the workers, and refusing access to subcontractors who are working to finish a polar cruiser currently under construction there.

They are demanding that the management and the government agree on the restructuring plan for the company, or obtain a loan to pay out their wages.

Also on Thursday, a court in Rijeka which was supposed to decide on whether to formally launch bankruptcy proceedings of 3. Maj postponed its decision again, this time for April 17. The court request was originally brought against the company after it’s bank accounts had been blocked for 120 days due to unpaid debts to suppliers.

A similar court date has been set for early May, to decide on whether the Uljanik Group would be sent to bankruptcy.

“The judge said that she does not want to be the one to put the final nail in the coffin of the shipbuilding industry. She wants to have a clean situation, she wants to see if the government would approve rescue aid and the restructuring plan. She said that if the government decides not to approve the restructuring, she can call a phone court meeting and send the company to the bankruptcy instantly,” unionist Dalibor Cupkovic from the 3. Maj shipyard told reporters.

(€1 = 7.41 kuna)

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