Privatization Policy Franjo Misak Assistant to Vice President CROATIAN PRIVATIZATION FUND...

Privatization PolicyPrivatization Policy

Franjo MisakFranjo Misak Assistant to Vice PresidentAssistant to Vice President

CROATIAN PRIVATIZATION FUNDCROATIAN PRIVATIZATION FUND

Privatization PolicyPrivatization Policy

Franjo MisakFranjo Misak Assistant to Vice PresidentAssistant to Vice President

CROATIAN PRIVATIZATION FUNDCROATIAN PRIVATIZATION FUNDSeptember 2001September 2001September 2001September 2001

Croatian Privatization FundCroatian Privatization Fund

The Croatian Privatization Fund was established in 1993 when the Agency The Croatian Privatization Fund was established in 1993 when the Agency

for Restructuring and the Croatian Development Fund merged.for Restructuring and the Croatian Development Fund merged.

The CPF is managed by a Board appointed by the Government. The Board The CPF is managed by a Board appointed by the Government. The Board

is responsible for designing and implementing business policy.is responsible for designing and implementing business policy.

The supervision of the Fund’s operation and management is carried out by The supervision of the Fund’s operation and management is carried out by

the Supervisory Board, whose members are appointed by Parliament. The the Supervisory Board, whose members are appointed by Parliament. The

Supervisory Board reviews the Fund´s financial plans and annual reportsSupervisory Board reviews the Fund´s financial plans and annual reports..

CPFCPF

2

September 2001September 2001

Croatian Privatization Fund PortfolioCroatian Privatization Fund Portfolio

The Croatian Privatizatian Fund is responsible for the privatization of shares owned The Croatian Privatizatian Fund is responsible for the privatization of shares owned

by various government institutions like Pension Funds, Health Services, the by various government institutions like Pension Funds, Health Services, the

Government Agency for Bank Recovery, public enterprises, etc.Government Agency for Bank Recovery, public enterprises, etc.

The portfolio of the Croatian Privatization Fund consists of 1203 enterprisesThe portfolio of the Croatian Privatization Fund consists of 1203 enterprises

In the CPF’s portfolio, a special place is held by companies in the field of tourism In the CPF’s portfolio, a special place is held by companies in the field of tourism

and agriculture since these industries are traditionally considered to be strategic for and agriculture since these industries are traditionally considered to be strategic for

Croatia. Enterprises in the industrial sector are also strategic for Croatia and are Croatia. Enterprises in the industrial sector are also strategic for Croatia and are

looking for investors to help them use existing capacities more effectively, seek looking for investors to help them use existing capacities more effectively, seek

technological innovation, and gain new market share. technological innovation, and gain new market share.

September 2001September 2001CPFCPF

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Cumulative effects of the privatization measuresCumulative effects of the privatization measures (for period 2000-2001) (for period 2000-2001)

number of companies held in the portfolio reduced from 1850 to 1203 number of companies held in the portfolio reduced from 1850 to 1203 companies by way of implementing various privatization models (public companies by way of implementing various privatization models (public tendering, public auction, privatization through bankruptcy proceedings),tendering, public auction, privatization through bankruptcy proceedings),

35% decrease in the value of total equity and state portfolio available for the 35% decrease in the value of total equity and state portfolio available for the privatization (647 companies privatized)privatization (647 companies privatized)

total loss and resulting related losses of the companies held in the portfolio total loss and resulting related losses of the companies held in the portfolio were reduced were reduced

daily portfolio loss reduced from HRK 7.5 to HRK 3.4 milliondaily portfolio loss reduced from HRK 7.5 to HRK 3.4 million insolvency lasting more than 360 days reduced by 85 percentinsolvency lasting more than 360 days reduced by 85 percent increased real portfolio value reported through the net portfolio book valueincreased real portfolio value reported through the net portfolio book value the state portfolio was consolidatedthe state portfolio was consolidated Privatization Plan and Program adopted and is being implemented according Privatization Plan and Program adopted and is being implemented according

to foreseen schedule.to foreseen schedule.


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Privatization of Companies in the Portfolio

privatization of the largest number of companies implemented through bankruptcy privatization of the largest number of companies implemented through bankruptcy and the settlement of capital outlays modelsand the settlement of capital outlays models

PRIVATIZATION OF 647 COMPANIES IN PERIOD 2000 - 2001

392112

98

26 19

Privatized in bankruptcyPrivatized by settlement of the capital outlaysPrivatized by public auctionPrivatized by public tenderigPrivatized by free of charge distribution


5

No. of Companies in State PortfolioNo. of Companies in State Portfolio

NO. OF COMPANIES IN STATE PORTFOLIO - June 2000 - Sept. 2001

1.111

802 (-28%)

432

228 (-48%)

173 (-44%)

307

1.203 (-35%)

1.850

0

200

400

600

800

1.000

1.200

1.400

1.600

1.800

2.000

June 2000 Sept. 2001

0-25% 25-50% 50-100% TOTAL PORTFOLIO

a trend of decrease in number of companies held in the portfolio emphasized a trend of decrease in number of companies held in the portfolio emphasized since June 2000 (35 percent)since June 2000 (35 percent)

647 companies were privatized647 companies were privatized


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Privatization of 877 Share PackagesPrivatization of 877 Share Packages 485 share packages, i.e. 55 percent, were privatized by public auctions, 485 share packages, i.e. 55 percent, were privatized by public auctions,

settlement of capital outlays and open tendering modelssettlement of capital outlays and open tendering models

877

194265

26

392

0

100

200

300

400

500

600

700

800

900

Total no. ofpackages/companies

privatized

capital outlays public auction open tendering bankruptcy

TOTAL NO. OF SOLD SHARE PACKAGES, I.E. COMPANIES


7

Privatization by Public AuctionsPrivatization by Public Auctions 74 percent of offered share packages were sold, making a revenue of HRK 74 percent of offered share packages were sold, making a revenue of HRK

28,782,089.5428,782,089.54 of HRK 18,108,889 asking price, total revenues accounted for 137percent of the asking of HRK 18,108,889 asking price, total revenues accounted for 137percent of the asking

priceprice

355

265

0

50

100

150

200

250

300

350

400

no. of packages

offered for sale sold

RESULTS OF PUBLIC AUCTION (for period Jan. 29, 2001 - July 27, 2001)

100%

74


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Privatization by SettlementPrivatization by Settlement of Capital Outlays of Capital Outlays

the shares with nominal value of HRK 1,125,911,752 were excluded from the state the shares with nominal value of HRK 1,125,911,752 were excluded from the state portfolio for the settlement of capital outlays by the sale on the Varaždin OTC marketportfolio for the settlement of capital outlays by the sale on the Varaždin OTC market

indirect financial effect to the budget amounted to HRK 277,525,245indirect financial effect to the budget amounted to HRK 277,525,245

187

172

160

165

170

175

180

185

190

no. of packages

offered for sale sold

SETTLEMENT OF CAPITAL OUTLAYS - OTC market

100%

92%


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Privatization by Public TenderingPrivatization by Public Tendering the sale accounted for 55 percent of asking price, while the revenues amounted to HRK the sale accounted for 55 percent of asking price, while the revenues amounted to HRK

432,127,503 with additional positive effects432,127,503 with additional positive effects

126.828.343

6.254.444

203.198.350

51.434.323

517.566.114

232.297.588

0

100.000.000

200.000.000

300.000.000

400.000.000

500.000.000

600.000.000

HRK

7 companies1999

10 companies2000.

16 companies2001.

SOLD BY OPEN TENDERING (FOR PERIOD 2000 - 2001)

nominal valueaccomplished amount


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Croatian Privatization Fund PortfolioCroatian Privatization Fund Portfolio In the years 2001 and 2002 the CPF plans to privatize its portfolio that holds In the years 2001 and 2002 the CPF plans to privatize its portfolio that holds

38,5% of the total equity of those companies38,5% of the total equity of those companies

EUR 8.591.467.536

EUR 3.310.636.982

0

1.000.000.000

2.000.000.000

3.000.000.000

4.000.000.000

5.000.000.000

6.000.000.000

7.000.000.000

8.000.000.000

9.000.000.000

Total share capital State portfolio

RELATIONSHIP OF TOTAL EQUITY TO STATE HELD EQUITY IN COMPANIES TO BE PRIVATIZED

in EUR

11


Nominal Value of the Residual Nominal Value of the Residual Portfolio by IndustriesPortfolio by Industries

in the residual state portfolio 43 percent of the nominal value refers to industry in the residual state portfolio 43 percent of the nominal value refers to industry and mining, 21percent to tourism, while 9.3 percent refers to agriculture.and mining, 21percent to tourism, while 9.3 percent refers to agriculture.

RESIDUAL STATE PORTFOLIO - ACTIVITIES

91.214.243 (51)

3.520.448.626 (101)

343.237.850 (1)

1.336.276.189 (64)

5.144.811.197 (150)

1.040.559.644 (186)

336.069.830 (107)

2.288.867.091 (118) 10.397.221.863 (425)

OTHER ACTIVITIES

BUSINESS SERVICES

FINANCIAL MEDIATION

TRANSPORTATION, WAREHOUSING AND COMMUNICATIONS

TOURISM

WHOLESALE AND RETAIL TRADE

CONSTRUCTION INDUSTRY

INDUSTRY AND MINING

AGRICULTURE AND FISHING


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Models of PrivatizationModels of PrivatizationA) Privatization by the settlement of capital expenditures of the Ministry for Pubic Works, A) Privatization by the settlement of capital expenditures of the Ministry for Pubic Works,

Reconstruction and Construction; the Ministry of Judicature, Administration and Local Reconstruction and Construction; the Ministry of Judicature, Administration and Local Self-Administration; and the Ministry of Transport, Connections, and Croatian Waters; Per Self-Administration; and the Ministry of Transport, Connections, and Croatian Waters; Per this model 448 companies or 37,2% of the companies available for privatization are being this model 448 companies or 37,2% of the companies available for privatization are being privatized;privatized;

B) Privatization by the allocation of free shares according to Article 11 of the Law on the B) Privatization by the allocation of free shares according to Article 11 of the Law on the Transformation of Socially-Owned Enterprises (to invalids, families of deceased soldiers, Transformation of Socially-Owned Enterprises (to invalids, families of deceased soldiers, etc.); Per this model 18 companies or 1,4% of the companies available for privatization etc.); Per this model 18 companies or 1,4% of the companies available for privatization are being privatized; are being privatized;

C) Privatization by the allocation of free shares to entitled persons according to Article 45 of C) Privatization by the allocation of free shares to entitled persons according to Article 45 of the Law on Compensation for Seized Property During the Yugoslav Communist Regime; the Law on Compensation for Seized Property During the Yugoslav Communist Regime; Per this model 514 companies or 42,7% of the companies available for privatization are Per this model 514 companies or 42,7% of the companies available for privatization are being privatized; being privatized;

D) Privatization through public tender invitation; Per this model 72 companies or 5,9% of the D) Privatization through public tender invitation; Per this model 72 companies or 5,9% of the companies available for privatization are being privatized;companies available for privatization are being privatized;

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Models of PrivatizationModels of PrivatizationE) E) Privatization through public auction; Per this model 358 companies or 29,7% of the Privatization through public auction; Per this model 358 companies or 29,7% of the

companies available for privatization are being privatized;companies available for privatization are being privatized;F) Privatization with the engagement of privatization consultants; Per this model 23 F) Privatization with the engagement of privatization consultants; Per this model 23

companies or 1,9% of the companies available for privatization are being privatized;companies or 1,9% of the companies available for privatization are being privatized;G) Privatization by the sale of shares at a discount to employees and former G) Privatization by the sale of shares at a discount to employees and former

employees (small shareholding); Per this model 27 companies or 2,2% of the employees (small shareholding); Per this model 27 companies or 2,2% of the companies available for privatization are being privatized;companies available for privatization are being privatized;

H) Privatization within the ESOP program (employee’s shareholding); Per this model H) Privatization within the ESOP program (employee’s shareholding); Per this model 32 companies or 2,6% of the companies available for privatization are being 32 companies or 2,6% of the companies available for privatization are being privatized;privatized;

I) Privatization in bankruptcy; Per this model 16 companies or 1,3% of the companies I) Privatization in bankruptcy; Per this model 16 companies or 1,3% of the companies available for privatizationavailable for privatization are being privatized;are being privatized;

J) Privatization by allocation of free shares to the entitled persons according to Article 8 J) Privatization by allocation of free shares to the entitled persons according to Article 8 of the Law on Rehabilitation of Certain Companies; Per this model 14 companies of the Law on Rehabilitation of Certain Companies; Per this model 14 companies or 1,1% of the companies available for privatization are being privatized.or 1,1% of the companies available for privatization are being privatized.

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Privatization of the Residual Portfolio by Models - 1203 companies

most of the companies, i.e. 81 percent is being privatized by denationalization, settlement of capital most of the companies, i.e. 81 percent is being privatized by denationalization, settlement of capital outlays and public auction models, primarily encompassing up to 25 percent portfoliooutlays and public auction models, primarily encompassing up to 25 percent portfolio

the most significant portfolio that makes up 6 percent of companies is being privatized by open the most significant portfolio that makes up 6 percent of companies is being privatized by open tendering and with the help of advisorstendering and with the help of advisors

PRIVATIZATION OF THE RESIDUAL PORTFOLIO - NUMBER OF COMPANIES

28%

1%

6%

22%

2%

2%

1% 1%6%

31%

MODEL A capital outlaysMODEL B free of charge distributionMODEL C denationalizationMODEL D i F open tendering and advisorsMODEL E public auctionsMODEL G small shareholdingMODEL H ESOPMODEL I bankruptcyMODEL J rehabilitation - debt/98legal disputes


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IndustryIndustry In Croatia, the Industry sector has 25% share in the GNP. The main industrial sectors are textile and clothing, In Croatia, the Industry sector has 25% share in the GNP. The main industrial sectors are textile and clothing,

food processing, chemicals and oil processing, metal processing and shipbuilding, wood processing tools and food processing, chemicals and oil processing, metal processing and shipbuilding, wood processing tools and electricity production equipment. This sector accounts for about 49% of the state portfolio awaiting privatization.electricity production equipment. This sector accounts for about 49% of the state portfolio awaiting privatization.

RELATIONSHIP OF TOTAL SHARE CAPITAL IN INDUSTRY SECTOR TO STATE PORTFOLIO TO BE PRIVATIZED

EUR3.966.166.498

EUR 1.404.864.633

Total share capital State portfolio 16


Privatization models of the state portfolio in Privatization models of the state portfolio in IndustryIndustry

the majority of the state portfolio in the field of industry is to be privatized by the the majority of the state portfolio in the field of industry is to be privatized by the techniques of public tender invitation (MODEL D) and engagement of privatization techniques of public tender invitation (MODEL D) and engagement of privatization consultants (MODEL F)consultants (MODEL F)

PRIVATIZATION OF THE STATE PORTFOLIO OF EUR 1.404.864.633 IN THE FIELD OF INDUSTRY

9% 1%7%

27%

2%24%

23%

5% 1%1%

Model A Model B Model C Model D Model E

Model F Model G Model H Model I Model J

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Mardesic - SaliMardesic - Sali Mardesic JSC is one of six producers of Mardesic JSC is one of six producers of

canned fish products in Croatia, located in canned fish products in Croatia, located in Sali, Dugi otokSali, Dugi otok

total share capital of the company is EUR total share capital of the company is EUR 4.249.135 and CFP is offering for sale sale 4.249.135 and CFP is offering for sale sale 78.42% of the capital78.42% of the capital

domestically there is little price competition domestically there is little price competition in this industry, and the government in this industry, and the government subsidizes the production of these products. subsidizes the production of these products. Internationally, the major competitors are Internationally, the major competitors are companies from Tunisia, Morocco, Spain companies from Tunisia, Morocco, Spain and Thailand. Mardesic’s products satisfy and Thailand. Mardesic’s products satisfy the standards of the European Union.the standards of the European Union.

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AgricultureAgriculture due to the country’s rich natural resources, agriculture is considered traditionally due to the country’s rich natural resources, agriculture is considered traditionally

as strategic sector in Croatia;as strategic sector in Croatia; about 6,6% of the state portfolio being privatized is from this sectorabout 6,6% of the state portfolio being privatized is from this sector

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RELATIONSHIP OF TOTAL SHARE CAPITAL IN AGRICULTURE TO STATE PORTFOLIO TO BE

PRIVATIZED

EUR 571.579.815

EUR 306.742.405

Total share capital State portfolio


the largest share of the state portfolio in the field of agriculture is to be privatized the largest share of the state portfolio in the field of agriculture is to be privatized with engagement of privatization consultants (MODEL F)with engagement of privatization consultants (MODEL F)

PRIVATIZATION OF THE STATE PORTFOLIO OF EUR 306.742.405 IN THE FIELD OF AGRICULTURE

9%

9%

16%

30%

24%

7% 2%0%

0%3%

Model A Model B Model C Model D Model E

Model F Model G Model H Model I Model J

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Privatization models of the state portfolio in Privatization models of the state portfolio in AgricultureAgriculture


IPK Osijek JSC operating in the field of IPK Osijek JSC operating in the field of agriculture, food industry and tradeagriculture, food industry and trade

IPK Group composed od 45 companies IPK Group composed od 45 companies wholly or partly owned by IPKwholly or partly owned by IPK

located in Osjecko-Baranjska County located in Osjecko-Baranjska County with facilities located ih the town of with facilities located ih the town of Osijek and throughout Osjecko-Osijek and throughout Osjecko-Baranjska CountyBaranjska County

total share capital of the company is total share capital of the company is EUR 101.888.311 and CFP is offering EUR 101.888.311 and CFP is offering for sale sale 83,26% of the capitalfor sale sale 83,26% of the capital

IPK Osijek JSC is devided in four IPK Osijek JSC is devided in four groups: Sugar company, Group IPK groups: Sugar company, Group IPK Industry, Group IPK Agriculture, Group Industry, Group IPK Agriculture, Group IPK ServicesIPK Services 21

IPK OsijekIPK Osijek


TourismTourism Croatia has outstanding potential for the development of tourism. In addition to the Adriatic coast that includes over 1,000 islands, there are also inland tourist resorts, Croatia has outstanding potential for the development of tourism. In addition to the Adriatic coast that includes over 1,000 islands, there are also inland tourist resorts,

including seven national parks, the Plitvice Lakes, and others. In the towns along the Adriatic coast there are famous historical sites from Roman times, and including seven national parks, the Plitvice Lakes, and others. In the towns along the Adriatic coast there are famous historical sites from Roman times, and Dubrovnik's beauty is widely regarded as unique in the world. Dubrovnik's beauty is widely regarded as unique in the world.

RELATIONSHIP OF TOTAL SHARE CAPITAL IN TOURISM TO STATE PORTFOLIO TO BE

PRIVATIZED

EUR 1.918.286.928

EUR 695.244.756

Total share capital State portfolio 22


Privatization models of the state portfolio in TourismPrivatization models of the state portfolio in Tourism the majority of the state portfolio in the field of tourism is to be privatized by the the majority of the state portfolio in the field of tourism is to be privatized by the

allocation of free shares to entitled persons according to Article 45 of the Law on allocation of free shares to entitled persons according to Article 45 of the Law on Compensation for Seized Property During the Yugoslav Communist Regime Compensation for Seized Property During the Yugoslav Communist Regime (MODEL C), and with engagement of privatization consultants (MODEL F)(MODEL C), and with engagement of privatization consultants (MODEL F)

PRIVATIZATION OF THE STATE PORTFOLIO OF EUR 695.244.756 IN THE FIELD OF TOURISM

4% 2%19%

2%0%1%

0%

24%

46%

2%

Model A Model B Model C Model DModel E Model F Model G Model HModel I Model J 23


Suncani HvarSuncani Hvar

In his ownership Suncani Hvar JSC holds 10 hotels, auto-camp and tennis centerIn his ownership Suncani Hvar JSC holds 10 hotels, auto-camp and tennis center

total share capital of the company is EUR 44.742.851 and CFP is offering for sale total share capital of the company is EUR 44.742.851 and CFP is offering for sale

sale 74.54% of the capitalsale 74.54% of the capital

located on sunniest island on Adriatic coast - 2700 sunny days per yearlocated on sunniest island on Adriatic coast - 2700 sunny days per year

rich cultural inheritance - Arsenal, the monument of architecture from 1611.rich cultural inheritance - Arsenal, the monument of architecture from 1611.

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Favorable Climate for InvestmentFavorable Climate for Investment

A well established institutional and legal A well established institutional and legal framework, a variety of regions with different framework, a variety of regions with different economic activities, great opportunities in tourism, economic activities, great opportunities in tourism, a favourable location at the crossroads of transport a favourable location at the crossroads of transport routes from west to east and from north to south, a routes from west to east and from north to south, a capable workforce with an education structure capable workforce with an education structure similar to other Central European countries - all similar to other Central European countries - all these factors contribute to the favorable climate for these factors contribute to the favorable climate for investment.investment.

Previously mentioned privatization models and Previously mentioned privatization models and various investment procedures from the new various investment procedures from the new Privatization Law have been adjusted to meet Privatization Law have been adjusted to meet investors needs.investors needs. 25


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Favorable Climate for Investment the previously dispersed portfolio of all state holdings is now united and the the previously dispersed portfolio of all state holdings is now united and the

Croatian Privatizatian Fund is now responsible for the privatization of sharesCroatian Privatizatian Fund is now responsible for the privatization of shares previously owned by various government institutions like Pension Funds, Health previously owned by various government institutions like Pension Funds, Health

Services, the Government Agency for Bank Recovery, public enterprises, etc. an Services, the Government Agency for Bank Recovery, public enterprises, etc. an analysis aimed at total financial consolidation is implemented for every single analysis aimed at total financial consolidation is implemented for every single company;company;

with the implementation of the first consolidation phase the portfolio was with the implementation of the first consolidation phase the portfolio was numerically decreased (from 1850 to 1346 companies), significantly reducing its numerically decreased (from 1850 to 1346 companies), significantly reducing its daily loss (from 7,5 to 5,3 mil kn), its level of indebtedness and its insolvency;daily loss (from 7,5 to 5,3 mil kn), its level of indebtedness and its insolvency;

with the consolidation of the portfolio, prerequisites for a more successful with the consolidation of the portfolio, prerequisites for a more successful privatization were met;privatization were met;

The CPF and other similar institutions are always available to provide information The CPF and other similar institutions are always available to provide information and assistance to anyone who wants toand assistance to anyone who wants to

CROATIAN PRIVATIZATION FUNDCROATIAN PRIVATIZATION FUNDZAGREB, IVANA LUČIĆA 6ZAGREB, IVANA LUČIĆA 6

Tel:++385 1 4569 111Tel:++385 1 4569 111Fax: ++385 1 4569 140Fax: ++385 1 4569 140

http://www.hfp.hrhttp://[email protected]@hfp.hr


Privatization Policy Franjo Misak Assistant to Vice President CROATIAN PRIVATIZATION FUND...

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