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UPDATE 1-Croatia gets two offers for loss-making docks

Published 09/30/2009, 09:59 AM
Updated 09/30/2009, 10:03 AM

* Croatia gets two bids for two of six state-held shipyards

* Government plans second round for other shipyards

* If left unsold, shipyards face bankruptcy (Updates with more detail, quotes, background)

By Igor Ilic

ZAGREB, Sept 30 (Reuters) - Croatia said on Wednesday it had received two bids at an international tender for two of six state-owned shipyards it put on sale as part of the conditions it must meet to secure European Union membership.

The government has received offers from two Croatian companies for a shipyard in Trogir and for the smaller of two shipyards in Split.

"I wish we had succeeded in the first round," deputy Prime Minister in charge of economy Damir Polancec told reporters. "But this proves that it was good to have agreed with the European Commission the privatisation in two stages."

The sale of the once flagship export industry, which employs more than 15,000 people but is now piling up debt, is one of the most politically sensitive of the measures the government has to take to close EU accession talks, because it could entail job losses.

"The problems of the Croatian shipbuilding industry are far bigger than those presented in a report last year ... Losses have piled up, but the process needs to continue and we will move to the second round with slightly changed conditions," he added.

But if the second round fails, unsold shipyards will face bankruptcy, except for a single profitable one.

The 60-day tender, which offers for sale three docks in the northern Adriatic and three in the south, around Croatia's biggest Adriatic city of Split, closed on Wednesday at 1200 GMT.

Only one of six docks -- Uljanik in the northern Adriatic town of Pula -- is profitable, and the government is offering 59.25 percent of the dock to a strategic investor at a price of 300 kuna per share. The government also plans to offer 25 percent of shares at a discount to Uljanik employees.

Four docks are up for sale for a token price of 1 kuna, while the asking price for the smaller of the two shipyards based in Split is some 18 million kuna ($3.62 million).

The government said it would give advantage to those bidders with the best business and investment plans, aimed at modernising and preserving shipbuilding, and not simply to those offering the highest price.

Croatia's shipbuilding has piled up huge losses for years, and is in dire need of investment and overhaul. It has survived only thanks to heavy state subsidies, which are considered a violation of EU rules. (Reporting by Igor Ilic, editing by Will Waterman and Rupert Winchester)

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