What DUUDI Plans for State Property in 2017?

The State Office for Management of State Property (DUUDI) has put forward a comprehensive proposal for the management plan of property owned by the Republic of Croatia for the upcoming year, which anticipates various activities aimed at reducing fiscal risk for the state budget and public debt through the activation and responsible management of state property. The proposal for this plan was submitted for public discussion in the middle of last week via the e-consultation web platform, marking the fourth planning document produced by DUUDI as a proposal to the Croatian Government for the management of state property.

The extensive plan, spanning approximately 160 pages across 15 chapters, outlines and elaborates on the planned activities that follow the structure of property management plans in previous years, examines state ownership through various forms of property, and includes other details, such as DUUDI’s intention to seek new pathways by merging private and public financing in 2017, as well as seeing potential for development in achieving brownfield investments.

Plans within DUUDI’s Authority

The plan includes, among other things, activities for 49 companies and six other legal entities under DUUDI’s authority, of which 28 companies and other legal entities are of strategic interest, 19 are of special interest in which the Republic of Croatia holds a majority stake, one is of special interest where it has ownership of less than 50 percent and whose shares are on a regulated capital market (Ina), and one is of special interest where the state has ownership of less than 50 percent (Mali Lošinj Airport).

According to the plans for companies and legal entities under the authority of individual ministries for the upcoming year, for example, for HBOR and HPB, no restructuring or major changes are anticipated, while in the Croatian Lottery and the Agency for Commercial Activities (AKD), investments of around 20 million kuna are planned, mostly from the companies’ own financial resources.

The privatization or sale of the state stake is pending for the company Brijuni Rivijera (which has been announced for over ten years).

For Croatian Forests and Croatian Waters, nothing new is anticipated, but rather that, as before, sustainable comprehensive management of forests and waters in the territory of Croatia will be ensured through management, and no privatization, restructuring, or any form of sale of business shares is anticipated for Croatian Roads in the upcoming year.

In contrast, in HŽ Infrastructure, the plan for the upcoming year includes the optimization of the real estate portfolio with an analysis of the state of real estate and the development of a strategy for seeking potential tenants for business premises and buildings, as well as announcing public tenders for vacant premises to reduce costs and increase revenue, with a focus on leasing premises at 16 main train stations, especially at the main train stations in Zagreb and Split.

In HŽ Cargo, the continuation of the restructuring program, which was completed in June this year for the period from 2016 to 2020, is planned, while no changes are anticipated for airports, transmitters and connections, and Croatian Post.

Plans for the Scope of CERP

The plan for 2017 also includes tasks related to the completion of privatization, restructuring, and management of companies within the scope of the Center for Restructuring and Sale (CERP), the sale of shares and business stakes in these companies, and the use and sale of real estate owned by CERP. It is stated that CERP manages 447 active and 17 inactive companies, among which are not ACI, Croatia Airlines, Port of Rijeka, Croatia Bank, Petrokemija, Končar Electrical Industry, Podravka, and Croatia Insurance, as they have been excluded from the list of companies of special interest by the Government’s decision.

Of the 447 active companies in the state portfolio managed by CERP, the state holds a stake above 50 percent in only 30, while in the majority of them – 417, the state stake does not exceed 50 percent, 212 are fully available for sale, 96 are under reservation (not available for sale), and 109 are partially free for sale. Decisions on the sale of this part of the portfolio will be made individually for each company after analysis, and will also depend on the ratio of available and unavailable state portfolios managed by CERP.

In the minority state portfolio managed by CERP, there are 154 limited liability companies, and this part of the portfolio is difficult to prepare for sale due to the preemptive rights contained in a significant number of acts of establishment of these companies, but according to the plan, CERP will complete all procedures for the sale of shares/business stakes that are not completed by December 31 of this year, initiate the sale of shares of at least 23 companies on the regulated market, announce the sale of shares/business stakes of at least 50 companies through public bidding, and more.

Plans for the majority state portfolio managed by CERP (30 companies in which the stake in the share capital exceeds 50 percent) are partly determined by the duration of pre-bankruptcy settlement procedures, until the completion of which CERP cannot initiate the sale of shares/business stakes in six companies in the majority portfolio (Badel 1862, Dalma, Hotel Medena, Uljanik TESU, Konoplja, and Club Adriatic), while for sale, after meeting the necessary prerequisites, the companies 3. Maj STM, RIZ transmitters, Orljava, Vjesnik, Agroduhan, Knjigovođa, Pleter services, and Borovo are planned.

For restructuring, Jadroplov, Petrokemija, Lipovica, and Meiso are planned, while for sale after the completion of procedures, such as disputes, appeals, lawsuits, and reservations, Gavrilović Mala privreda, Hoteli Makarska, Institute for Safety Zagreb, Jadran, and Panex are planned.

Among other methods of disposing of shares and business stakes in companies managed by CERP, besides sales planned for 2017, activities for the transfer of shares and business stakes without charge are also anticipated, for which CERP is also responsible, specifically for Croatian war veterans from the Homeland War and members of the families of deceased, captured, and missing Croatian defenders from the Homeland War, as well as compensation for property seized during the Yugoslav communist rule.

In addition to shares and business stakes, the plan for 2017 also includes CERP’s responsibilities for managing and disposing of apartments, business premises, and construction land in state ownership, resolving property and legal relations related to renewable energy projects and other infrastructure projects, the exploitation of mineral raw materials in accordance with regulations governing these areas, and a plan for resolving property and legal relations over former military properties and putting them into function.

One of the major plans for 2017 and the following year is the implementation of a new information system for managing state property (ISUDIO) as a multi-phase data and program upgrade of the State Property Register.