Maritime, Transport and Infrastructure Burdened by Doubts

The government project Clean Start has shown that the maritime, transport and infrastructure sector under state control receives annual state subsidies of 5.7 billion kuna, yet it generates a loss of 1.2 billion kuna and has a debt of 68.8 billion kuna.

In the recommendations of the authors of the Clean Start analysis, key measures that should contribute to the recovery of six analyzed out of a total of 53 companies in the maritime, transport and infrastructure sector include financial restructuring and recapitalization, mergers, consolidations, better project management, and changes in the business model with a focus on changing the revenue structure that should rely less on state subsidies and more on the market.

Subsidies and other state transfers for road transport in 2011 amounted to 3.04 billion kuna. The year before, subsidies amounted to 3.58 billion kuna, and their reduction in 2011 also brought a decrease in total revenue. The sector’s debt at the end of 2011 was 43.8 billion kuna, and the difference between total revenues and expenses was 1.46 billion kuna in favor of expenses.

Commenting on the level of indebtedness in the road sector, the authors of the analysis warn that limited borrowing options, negative operational results, the country’s low credit rating, and negative returns on investments represent a key limitation and risk, indicating that a wrong business model has been chosen in the sector. An additional potential risk is represented by 80 percent of financial obligations covered by state guarantees.

The data were obtained by analyzing the financial reports of HAC, Croatian Roads, ARZ, Autocesta Zagreb – Macelj, and Bina Istre.

In rail transport, the state allocated 1.87 billion kuna in subsidies and other transfers according to Clean Start data in 2011. However, this did not help the railway end the year positively, as the total revenues of the then holding company without dependent companies of 4.18 billion kuna were lower by 118.7 million kuna than total expenses. As much as 48.6 percent of the total revenues of the railway sector comes from subsidies and other state transfers. Financial obligations and debt of the railway sector at the beginning of 2012 amounted to 2.89 billion kuna.

In the air transport sector, Croatia Airlines, airports, and Croatian Air Traffic Control achieved total revenues of 3.18 billion kuna and total expenses of 3.15 billion kuna, with state subsidies and other transfers amounting to 311.5 million kuna. The sector’s debt of 1.04 billion kuna was reduced compared to 2011 by 144.3 million kuna. As in most other sectors, the high coverage of financial obligations by state guarantees represents potential obligations for the state.

The debt of the maritime transport sector of 2.25 billion kuna is not significant, the analysis assesses, but it notes that entities within the system are in the process of investments for which new borrowings will be needed. Like air transport, the state-owned maritime sector is marked by a relatively low share of subsidies and other state transfers in total revenues of 20.9 percent.

Financial indicators of the inland waterway transport sector show a low level of activity in that sector, with total revenues amounting to 79.5 million kuna and expenses of 76.9 million kuna, along with a debt of 12.9 million kuna. The sector’s indebtedness is not significant due to a lack of capital investments.

In the electronic communications and postal sector, which includes Croatian Post and Transmitters and Connections, without dependent companies, total revenues amount to 1.94 billion kuna, expenses to 1.88 billion kuna, and debt to 555.9 million kuna. This sector received only 0.5 million kuna in state subsidies during 2011.