August the 28th, 2021 - Seven very long years after the unrealised first attempt, Vukovar Port (Luka Vukovar) is starting the privatisation process once again. In true Croatian style, many unknowns surround the process, and investors will have many a pitfall to deal with.

As Poslovni Dnevnik/Marija Brnic writes, Along with the Pozega-based Lipovica, in which the process of selling the majority ownership stake is underway, the Vukovar Port privatisation process will also be the most important project initiated by the Centre for Restructuring and Sales (CERP).

The Vukovar Port privatisation was also announced in the annual plan of CERP for the year 2021, and the tender, as confirmed to us in CERP, will be announced only at the end of this or the beginning of next year. The reason is the preparation of all the documentation, which requires an expert assessment in terms of value.

According to the regulations, it is being carried out by "external" experts hired by CERP on the basis of annual contracts. However, this year the procedure became ''stuck'' owing to technical reasons, because none of the auditing and brokerage houses that compete by default applied for the first tender for the job.

The estimated value of this work otherwise stands at 240 thousand kuna. Meanwhile, the tender for appraisers has reopened and according to the latest information and signals coming in, it is expected to be successful this time and bids will arrive by September the 10th, 2021.

For Vukovar Port, this means that a new valuation would begin in the autumn. It would be new because the first one was carried out one year ago, and when asked why this procedure is being repeated, CERP said that last year it was all carried out on the basis of data on operations from pre-pandemic 2019 and the first half of 2020, and that due to difficult conditions caused by the coronavirus pandemic, there's now a need to determine the new state of this Vukovar company.

However, privatisation is being prepared, and according to what is currently unofficial information, the interest of potential investors exists, as it did seven years ago, when five offers were received from foreign companies and one from a Croatian company. Now the interest could be even greater, because after Croatia's entry into the Schengen area, Vukovar Port will become an entrance river port to the European Union.

It has been calculated that the candidate for the takeover would be among companies in the field of river transport and trading companies from many countries, from the Netherlands, Austria to Romania and even neighbouring Serbia, but also possibly Croatian ones, such as Petrokemija. That said, so far no one has come forward, only the preparations for privatisation are being monitored, because this venture has too many unknowns and open questions above its proverbial head at the moment.

The first uncertainty that makes it unlikely that the process will be completed in the first round is the problem of the concession that Vukovar Port has until 2026. Namely, the legal framework prevents the Croatian state from issuing a new concession before the expiry of the existing one, nor is it possible, as a seller, to guarantee the future owner that after that time he will receive a new, fifty-year concession.

In five years, therefore, the owner will have to, like other potential interested parties, apply for a public tender for the concession.

Vukovar Port already has investment projects in the pipeline, as there's no possibility of capacity expansion on the existing 2.2 hectares. One of the possibilities would be the eventual project of putting into operation the currently non-operational property of Borovo, whose 18.5 hectares would be purchased by the state, ie the Port Authority, and at that location, Vukovar Port would be interested in building its new transshipment terminals and storage capacities.

For further business and investment projects, however, the realisation of the Danube-Sava Multipurpose Canal project, worth more than one billion euros in total, which envisages the relocation of Vukovar Port from its existing location, will also be important.

This project is built into the state's development strategy, but opposition, from all political options, comes from the level of the City of Vukovar, which sees its implementation as the weakening of Vukovar Port's position and the demolition of the foundations for its development. Which of these options Vukovar Port can expect from any future investor is still difficult to predict or assess and will certainly be the subject of most future lobbying.

The company, which has had 65 employees in recent years, even enjoyed a profit in pandemic-dominated 2020, although revenues, given the general reduction in turnover, were lower, falling from 14 million in 2018 down to 13 million. Looking at previous years, Vukovar Port has had 4.8 million kuna in transferred losses, but it is rare for a company to have no credit indebtedness at all, and the value of the share capital stands at 35.7 million kuna.

From a short conversation with the director, Marijan Kupresak, it has been learned that for last year's results, in addition to the issues caused by the pandemic, the investment in the electrification of the railway was also important, which left a mark on the business this year as well.

Due to intensive work which has been going on, progress was exposed to frequent traffic stops, even greater than announced, and as a consequence of this extraordinary situation, some diverted their goods past Vukovar Port, bypassing it entirely.

The completion of works on the electrification of railway infrastructure is planned by the end of next year, but most of the rough work will be completed earlier, so Vukovar Port expects traffic to finally normalise by the end of this year.

Given that in the meantime some of their partners have switched to more expensive, truck traffic, one of the temporary solutions being negotiated with the competent government ministries is financial compensation to cover part of these price differences.

The announcement that Vukovar Port will finally go into privatisation is an important bit of news on the scene, but given all the unknowns and possible pitfalls for investors, it is difficult to expect that a quick and easy sale process will be done according to the "seen-bought" system.

For more, follow our business section.