March 28 (SeeNews) - Croatia's government cannot endorse the proposed restructuring of struggling shipyards Uljanik [ZSE:ULPL-R-A] and 3 Maj, as it would require a huge financial exposure by the state, prime minister Andrej Plenkovic said on Thursday.
The government remains committed to resolving the issue and is seeking other solutions for the Croatian shipyards, Plenkovic said during a cabinet meeting, according to a government press release.
Plenkovic said that 31.7 billion kuna ($4.8 billion/4.3 billion euro) have been spent on the recovery of the shipyards from 1992 to 2017.
"Out of that amount, 4.3 billion kuna were directed to Uljanik, and 9 billion kuna to 3 Maj, so 13.3 billion kuna in total for what is today Uljanik Group," Plenkovic said.
"The total exposure of the state towards Uljanik Group, according to the issued guarantees, amounted to 4.3 billion kuna on October 15. However, since Uljanik Group failed to manage its debt for which state guarantees were issued, contracts for building ships got cancelled which resulted in the payment of 3.1 billion kuna from the state budget by March 11," Plenkovic said.
He added that the cost of restructuring proposed by Uljanik's strategic partner stands at maximum 10.8 billion kuna and minimum 7.5 billion kuna.
The troubled shipbuilding group chose local peer Brodogradevna industrija Split (Brodosplit) as its strategic partner in February.
On March 5, Croatia's financial agency FINA asked a local court to open bankruptcy proceedings against Uljanik shipyard over an outstanding debt of 28.2 million kuna.
The Uljanik Group comprises two major shipyards -- Uljanik and 3 Maj, along with smaller subsidiaries. The group has been in financial trouble for some time due to the adverse effects of the global financial crisis on the shipbuilding sector in general which has led to a drop in orders for new vessels.
(1 euro = 7.43014 kuna)