The Commission Clears Way for 3. Maj Shipyard Privatisation

The European Commission has authorised under EU state aid rules an amendment to the restructuring plan for 3. Maj, one of the Croatian shipyards in difficulty. The Commission concluded that any distortion of competition that may arise from the modest increase in the total amount of restructuring aid would be offset by the additional compensatory measures proposed by Croatia.

This clears the way for the privatisation of the yard by 1 July 2013, the date of Croatia’s EU accession, as required by the Act of Accession.

Croatia’s EU accession act provides that shipyards in financial difficulty need to be privatised before 1 July 2013. In 2011, the Commission and the Croatian competition authority approved a restructuring plan for 3.Maj, involving HRK 5.3 billion (around €714 million) of restructuring aid. In June 2013, Croatia notified a modest increase in the restructuring costs and a proportional increase in the amount of restructuring aid. To offset the impact on competition, Croatia proposed to withdraw the possibility for 3. Maj to trade production quotas with other yards, a mechanism which was allowed by the accession act.

The Commission found that this will ensure a strict limitation of production and a permanent removal of part of the production facilities, on top of the individual capacity reduction already committed to. The Commission therefore concluded that these additional compensatory measures adequately address the potential distortion of competition triggered by the aid, especially in view of the relatively modest increase of the aid amount. Moreover, the own contribution of 3. Maj’s buyer to the restructuring is real, free of state aid and after the increase still represents 40% of the total restructuring costs. This is in line with the EU Guidelines on state aid for restructuring companies in difficulty.

Croatia committed to appoint an independent trustee to assist with the monitoring of the main conditions and obligations for the privatisation of 3. Maj.

This decision follows similar Commission decisions of February and March 2013, approving the amended restructuring plan and privatisation contract of the Brodosplit and Brodotrogir shipyards (see IP/13/134 and IP/13/252).

Background

Uljanik, the buyer of 3. Maj, is another Croatian shipyard that was recently privatised. This shipyard was not included in the list of shipyards in difficulty and is therefore not subject to the commitments of the Shipbuilding protocol (Annex VIII) to the Act of Accession. Uljanik intends to restructure 3. Maj in line with its own strategy to focus on the core shipbuilding business. This should create important synergies.

Croatia’s Act of accession provides that the restructuring of its shipyards in difficulty should be carried out through their privatisation on the basis of a competitive tendering process by the date of accession, 1 July 2013. No bid for 3. Maj complied with the conditions of the public competition published in the first round. Negotiations were continued with Jadranska ulaganja d.o.o., the only investor who submitted a bid in the second round. Jadranska ulaganja d.o.o. intended to acquire 3. Maj together with two of the other Croatian shipyards in difficulty, namely Brodotrogir and Kraljevica, in order to create synergies in an integrated shipbuilding group. Its restructuring plan for 3. Maj was accepted by the Croatian Competition Authority and the Commission in 2011.

However, Jadranska ulaganja d.o.o. withdrew its bid early in 2012. In December 2012, Uljanik d.d. (JSC) presented to Croatia a letter of intent for the purchase of the shares of 3. Maj. On 11 February 2013, Uljanik submitted to Croatia a binding offer for the shares of 3. Maj. 3. Maj will be taken over by Uljanik but will remain an independent legal entity with its own financial reporting.

The amendment of 3. Maj’s restructuring plan is due to delays in the implementation of the planned restructuring measures resulting from the unsuccessful tenders and from the fact that Uljanik took over the restructuring programme from Jadranska ulaganja d.o.o..

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Press Release, June 20, 2013; Image: shipbuildingtribune