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September 5, 2008

Polish shipyard rescue plan involves yet more subsidies

Poland is getting set to present a rescue plan for its shipyards to the European Commission that will involve yet more subsidies and will reveal that the yards are awash in red ink.

Poland has to present viable privatization plans for the shipyards to the European Commission by a September 12 deadline.

The European Commission has been demanding that the shipyards return subsidies they received after Poland joined the European Union in May of 2004, due to non-compliance with European competition and subsidy rules

Polish Radio says the government is now set to sign official outline agreements on the privatization of the yards with investors.

Treasury Minister Aleksander Grad says that "next Tuesday the government will look into it, on Wednesday there will be additional negotiations at the European Commission. On Thursday, experts will meet again back in Poland and on the 12th of September we will submit restructuring programs to Brussels."

What could be a major problem, though, is that those restructuring plans will call for even more subsidies, which have apparently been necessary to entice investors into taking on the yards.

Warsaw Business Journal reports Treasury Minister Grad as saying:

"To make the restructuring effective, it is necessary to provide additional public aid to the shipyards. Shipyards in Gdynia and Gdansk need zloties 835 million ($356 million}, while the Szczecin shipyard needs zloties 400 million ($170.5 million). We realize that these sums might be shocking, but without these funds there will be no chance for saving the firms." Additional financial support will be provided from the Enterprise Restructuring Fund (FRP) and by transferring shares of other companies to the shipyards.

"The shipyard in Szczecin has zloties1.3 billion ($554 million) in losses, while Gdynia has zloties 1.2 billion ($511 million). Gdynia shipyard debts amount to zloties 2 billion ($852 million), while in Szczecin--approximately zloties 1 billion ($426 million). Almost all contracts of these shipyards are non-profitable," said the Minister.

Polish Radio reports there have been rumors that parallel to the last ditch attempts to rescue the shipyards, the government is bracing for a public relations campaign to mitigate the public outrage at the loss of Polish shipyard industry.

"We have found out that the government, directly or via one shipyard, hired a PR company and a law firm, which are preparing the legal and media ground to declare the bankruptcy of the shipyards," Marek Lewandowski, spokesman for the Gdynia shipyard is reported as saying. Aleksander Kozicki, deputy head of the Solidarity trade union at the Gdynia shipyard added that already some press information is being put out, with an aim to calm down the public opinion: "If someone thinks that only by pacifying the public opinion they will manage to get away with the responsibility for the bankruptcy of the shipyards, they are wrong. I cannot say for sure if there will be demonstrations, blockades or rallies--probably all of these interchangeably."

The Treasury Ministry has denied these allegations.


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