ZAGREB, Dec 19 (Reuters) - Croatian energy group INA plans to invest more than four billion kuna ($616 million) to modernise its largest refinery but a second, smaller refinery will be converted into an industrial plant, it said on Wednesday.
The investment plan, approved by INA’s management board on Wednesday, is aimed at stemming losses in its refining division, currently running at around one billion kuna a year.
INA owns two refineries in Croatia, one in the northern Adriatic port of Rijeka, and a smaller one in the central town of Sisak.
The plan foresees major investment in Rijeka to turn it into a top-level European refinery, INA said in a statement.
“Total investments are worth more than 4 billion kuna, which would represent the single largest investment project in the history of the company,” it said.
“The final investment decision is planned for 2019, provided all preconditions assuring return on investment are met,” INA said. The modernised refinery should be ready to operate in 2023.
INA’s biggest shareholder is Hungary’s MOL which owns slightly below half, while the Croatian government controls close to 45 percent.
Under the investment plan, the Sisak refinery will be turned into another type of industrial facility.
The Sisak site would remain a major employer, but it was necessary to convert it from loss-making crude oil processing to “viable alternative industrial activities,” the statement said.
The new business in Sisak may include bio-component refining and petrochemical production, INA said, adding that it could also involve a modern logistics hub, bitumen, renewables and lubricant production.
Without giving details of possible job losses at Sisak, INA said it was prepared to offer alternative jobs to affected workers and severance payments significantly higher than the Croatian average.
Workers at Sisak have repeatedly voiced concerns in recent years about MOL’s alleged plans to shut down the plant, putting pressure on the Croatian government to prevent it.
The company estimated that, if fully implemented, its plans would increase average yearly core profit, or EBITDA, by more than one billion kuna.
MOL and the Croatian government have been at odds for several years about management rights and investment policy at INA. Two years ago, the Zagreb government announced it intended to buy back INA shares from MOL, but little has happened since.
Croatian Prime Minister Andrej Plenkovic recently said that a final decision would depend on the price set by MOL.
In the first nine months of this year, INA’s revenues were 16.23 billion kuna, 21 percent more than in the same period last year. EBITDA amounted to 2.7 billion kuna, roughly the same as in the first nine months of 2017. ($1 = 6.4948 kuna) (Reporting by Igor Ilic; Editing by Adrian Croft)