Saturday, 1 January 2022

Recovery, Higher Credit Rating, Rimac, Large Projects Mark Croatian Economy in 2021

ZAGREB, 1 Jan 2021 - The rebound from the corona crisis, the country's improved credit rating as well as a rise in inflation marked the economic trends in Croatia in 2021.

After 2020, which will be remembered for efforts to curb the COVID-19 pandemic and for the devastating quakes that hit the capital city of Zagreb on 22 March and Sisak-Moslavina County on 28 and 29 December, the outgoing year has been marked by a high growth rate.

In 2020, the economy contracted by 8% and it is set to have rebounded at a rate of 8.1% in 2021, according to the European Commission's forecasts, while the Fitch rating agency forecasts Croatia's recovery at a rate of 8.9% in 2021.

In mid-December, analysts of four major commercial banks presented projections of Croatia's growth at a rate of 9.5%, and the Croatian National Bank projects a 10.8% recovery.

Croatia's credit rating reaches a record high

On 13 November, Fitch upgraded Croatia's rating from BBB- to BBB, the best in Croatia's history, with a positive outlook.

Fitch expects "Croatia to be in a position to join the euro in January 2023 due to its significant progress in meeting convergence and structural reform criteria, despite the pandemic shock, and political support at the wider eurozone level for Croatia's membership."

The euro adoption will support Croatia's rating, "as it would provide the sovereign with reserve currency status, reduce transaction costs and limit exchange rate risk to corporate and household balance sheets."

Commenting on this improvement, Finance Minister Zdravko Marić recalled that the credit rating is important for the price of borrowing for the state, businesses, and citizens as its upgrade lowers the risk premium, which has a favorable effect on the price of capital.

Increasing inflation

Last year was marked by an acceleration in inflation rates.

At the beginning of 2021, inflation was moderate, however, it stepped up in the autumn and November saw 4.8%, a record high rate since February 2013, with analysts projecting that the inflation rate in December is set to have exceeded 5%.

In the EU, record-high inflation rates of 9.3%, 8.6%, and 7.5% were registered in Lithuania, Estonia, and Hungary, respectively, in November.

In Croatia, November's inflation rate was fueled by a 12.9% rise in transport prices, which was spurred by a 26.6% annual increase in fuel prices.

In mid-November, Marić said that that effect was not surprising given all the circumstances, primarily on the global level. However, the overall inflation rate in Croatia is not deviating from the EU average, which is good, he added.

According to Eurostat, the European Union's statistical office, the EU inflation in November reached 5.2% and the euro area registered a 4.9% inflation.

The Maastricht criteria concerning price stability envisage that a euro-area aspirant's inflation rate cannot be higher than 1.5 percentage points above the rate of the three best-performing member states.

The Andrej Plenković cabinet forecast an inflation rate of 2.5% both in 2021 and 2022.

Tourist trade again pulls the economy from the lows

In 2021, the pandemic-hit economy bounced back thanks to trends in the tourism sector.

Both the financial and physical indicators hint at a successful season.

From 1 January to 20 December 2021, tourist turnover was equivalent to 77% of the tourist trade in the pre-pandemic 2019.

Fiscalised receipts in this sector reached 85% of the value registered in the corresponding period in 2019.

Rimac takes over Bugatti

In July, Rimac Automobili, the Croatian carmaker based in Sveta Nedelja west of Zagreb, acquired Bugatti.

The Rimac Automobili company has decided to combine forces with the automotive brand Bugatti Automobiles "to create a new automotive and technological powerhouse" called Bugatti Rimac d.o.o. (in English – LLC), the Croatian company reported on 5 July.

As part of the deal, the newly-formed Rimac Group has become the majority shareholder with a 55% stake.

Croatia's National Recovery and Resilience Plan

The government drafted Croatia's National Recovery and Resilience Plan (NRRP) which consists of 77 reforms and 152 investment plans. Croatia's 2021-2026 NRRP was formally adopted by the EU in July.

Under the EU Recovery and Resilience Facility (RRF), Croatia has €6.3 billion in grants and 3.6 billion in favorable loans at its disposal.

Croatia plans to set aside 40.3% of that money for climate targets and 20.4% for digital transformation. A large part will go for post-earthquake reconstruction.

On 28 September, the European Commission disbursed €818 million to Croatia in a pre-financing payment under the RRF, and that was equivalent to 13% of the country's total financial allocation under the RRF.

The pre-financing payment will help to kick-start the implementation of crucial investment and reform measures outlined in Croatia's NRRP.

The implementation of the NRRP is expected to contribute 1.4 percentage points to Croatia's GDP growth in 2022 and as much in 2023.

Pelješac Bridge built

In late July, Pelješac Bridge was fully joined together, with the installation of the last, 165th segment of its steel span, and it now stretches from Komarna on the coast to Brijesta on the peninsula of Pelješac.

The 2,440-metre bridge has 13 spans, of which the five central spans are each 285 meters long, six 33-meter-high centrally installed pylons made of reinforced concrete, and two lanes, plus a hard shoulder for bridge maintenance.

The navigation profile under the bridge is 200 by 55 meters.

The bridge was designed by Marjan Pipenbaher and built by the China Road and Bridge Corporation. The Chinese company was awarded the job in 2018, offering a price of HRK 2.081 billion, not including VAT, and a completion deadline of 36 months.

Work on the bridge officially started on 31 July 2018.

The bridge and its access roads are expected to be opened to traffic in June 2022, before the start of the peak tourist season.

The decision on financing the project was made by the government in 2017.

LNG terminal off Krk starts operating

The floating terminal for liquefied natural gas (LNG) on the island of Krk began commercial operations on 1 January when the first LNG tanker, the Tristar Ruby, carrying 143,000 cubic meters of liquefied natural gas arrived at Omišalj, marking the launch of the terminal's commercial operations

The terminal's annual capacity is 2.6 billion cubic meters of gas. All of the terminal's capacity has been leased for the next three years, 80% of its capacity until 2027 and around 50% until 2035.

The floating LNG terminal in Omišalj and the Zlobin-Omišalj pipeline which will deliver LNG to Croatia's gas transport system and consumers was formally inaugurated at a ceremony in late January.

The LNG Croatia project is worth €234 million. In 2017, Croatia signed with the European Commission a grant agreement totaling €101.4 million for the construction of the terminal.

Gas transport operator Plinacro said the terminal and the Zlobin-Omišalj pipeline gave Croatia a new supply route that guaranteed energy stability and gas supply.

A compressor station was built in January 2020 to allow for a two-way flow of gas between Croatia and Hungary. With the reconstruction of the Rogatec-Zabok gas pipeline between Slovenia and Croatia, all requirements were met for delivering gas from the LNG terminal to Central and Eastern Europe and Croatia's gas transport system was integrated into European supply routes.

The LNG Croatia company invested HRK 1.7 billion in the project, while Plinacro invested HRK 430 million.

The 16.7-kilometre-long Zlobin-Omišalj pipeline, completed in mid-November 2020, is worth HRK 430 million, with €16.4 million coming from EU funds.

For more, check out our dedicated business section.

Saturday, 4 December 2021

Rimac Bugatti Takeover is Historic for International Image of Croatia

December the 4th, 2021 - The Rimac Bugatti takeover is an absolutely historic event for the Republic of Croatia in terms of placing the country best known for tourism, football and little else on the global business map.

As Poslovni Dnevnik/Zoran Vitas writes, it goes without saying that the Rimac Bugatti takeover is an enormous deal for Croatian business and entrepreneurship. Until just a few years ago, Mate Rimac himself wasn't sure of the fate of his company, and look at him now.

“I'm honoured to be able to lead a new company that joins the forces of the two brands and begin what will be a successful, revolutionary and exciting new chapter for all involved. I'm very curious to see the impact that Bugatti Rimac will have on the industry and I'm looking forward to developing innovative new hypercars and technologies. It's difficult to find a better combination than Rimac and Bugatti. What each side brings in terms of technical expertise, knowledge and history of car development is a perfect recipe. The agility and innovation of Rimac Automobili is the perfect complement to Bugatti's history in designing and manufacturing hypercars that set new standards. We've already started developing new models that we can't wait to present to the public when the time is right,'' said Mate Rimac about the creation of the new company.

It was an important part of Prime Minister Andrej Plenkovic's presentation to French President Emmanuel Macron during his visit to Zagreb last week and today, Rimac is a Croatian model for the rest of the world. As he should be. His personal philosophy is - if you can't be the best at something, then don't do it. Working with Porsche is multi-layered and demanding, as well as very ambitious, as well as dynamic. 

The Rimac Bugatti takeover is something for the history books, and it is high time Croatia had something to add to those which lies outside of the bounds of sportsmanship and tourism.

For more on Croatian entrepreneurs and Croatian companies, check out our dedicated business section.

Friday, 9 July 2021

Porsche Controls 58.2% of Rimac Company Following Spectacular Bugatti Deal

July the 9th, 2021 - The incredible Mate Rimac Bugatti deal has blown the myths about not being able to succeed in Croatia straight out of the water. If he hadn't managed to convince you of that before, which is difficult to believe, he certainly has now. This remarkable Croatian entrepreneur's dogged determination is tireless, and Porsche has become even more deeply involved in the Rimac company.

As Poslovni Dnevnik/Ana Blaskovic writes, drowning in the proverbial Croatian sea of ​​gloomy news about the failure of the vaccination rollout amid the pandemic and a new wave of mutated coronavirus posing a potential threat, the news that young entrepreneur Mate Rimac has taken over the cult figure of the automotive world, Bugatti, resounded like a nuclear bomb.

The historical success of the Rimac company, which operated out of a mere garage back in 2009, is astonishing. Very few people believed in the company's plans to create hypercars right here in Croatia, where cars are imported but not produced, but it turned out to be an astronomical success. The business side of the story, however, went under the radar.

The merger of Rimac Automobili and Bugatti Automobiles created a joint venture, known as Bugatti Rimac (in which the newly formed Rimac Group will hold a majority stake), which will be (in)directly controlled by Porsche with 58.2 percent ownership, while Mate Rimac will remain at the forefront, but with a minority stake of 20.4 percent.

The transaction isn't accompanied by cash flow as such but is a matter of exchanging shares, which reflects the consequent rearrangement of the structure of the Rimac company. With this move, Rimac's startup actually ceases to be a startup and is being additionally integrated within the umbrella of the VW Group, of which Porsche is of course a part. Rimac Automobili is becoming the Rimac Group (divided into Bugatti Rimac and Rimac Technology) in which Mate Rimac formally holds the largest single stake of 37 percent, Porsche 24 percent, Hyundai 12 percent and other shareholders 27 percent.

The Rimac Group will have a 55 percent stake in the Bugatti Rimac package, which includes the separate brands Bugatti Automobiles and Rimac Automobili. The remaining 45 percent of the shares of the joint venture are held by the German manufacturer, which has been following the Rimac company financially for the last three years.

Despite these figures, which lean significantly in the favour of the German investor, it has been agreed that Mate Rimac will remain at the helm, as the CEO of the Rimac Group he will lead the business of Bugatti Rimac and the new company Rimac Technology. It's here that the core business that broke through in the automotive industry remains - the development, production and delivery of battery systems, powertrains and other EV components. All of the above will be 100 percent owned by the Rimac company.

“What's important to note is that the Rimac Group is managed by director Mate Rimac. The owners participate in the management of the company through the Supervisory Board,'' stated an explanation regarding German shares. They added that “Rimac Group is the largest shareholder of Bugatti Rimac d.o.o. where Mate Rimac is also the director. Mate is also the director of Rimac Technology, which is 100 percent owned by the Rimac Group.''

Car buffs who follow such news aren't too surprised by this outcome, although it is almost certain that there was resistance to such a solution. The new Rimac company remains under the control of a young businessman who, despite all the objective obstacles to doing business in Croatia, raised the company from scratch in an industry that is markedly capital intensive. Only twelve years has passed from the aforementioned garage adventures to the presentation of the stunning Nevera, the fastest electric hypercar in the entire world. 

The fact that all of the above was done at all is exceptional, but knowing it has been done by a Croat, in Croatia, is bordering on miraculous.

For more, follow our dedicated business section.

Thursday, 8 July 2021

International Media Praise Historic Mate Rimac Bugatti Deal

July the 8th, 2021 - The amazing Mate Rimac Bugatti deal which has dominated the Croatian media space since its announcement has earned showers of praise from across the world as this remarkable Croatian entrepreneur continues to make automotive history.

As Poslovni Dnevnik writes, the incredible news of the Mate Rimac Bugatti deal has reached the eyes and eyes of the world's media and attracted even more recognition for this Livno-born entrepreneur who is schooling the government in how investments are attracted, following a huge cash injection from no less than Porsche.

CNN states that the Volkswagen Group and Porsche have agreed to create a new company that merges Rimac Automobili, a Croatian company based in Sveta Nedelja near Zagreb that produces electric supercars, with the famous Bugatti.

The CNN article states that Rimac has so far specialised in developing technology for electric cars, including batteries. According to CNN, companies such as Jaguar, Aston Martin and the Swedish supercar manufacturer Koenigsegg are among Rimac's well known clients. The publication also cites Rimc's collaboration with the Italian Pininfarina, a company that was once known for designing for Ferrari.

The Financial Times describes the Mate Rimac Bugatti deal as "a deal that cements Rimac's position as an established force in the automotive industry," Index reports.

The fact that Bugatti will be controlled by an electric car specialist is a big step forward for Bugatti, a company known for its loud hypercars and 16-cylinder engines. The fact that the takeover is by someone from Croatia is astonishing to most, as the country is far from known for even dipping its feet into the car world, at least until Mate Rimac put it on the map.

Advances in battery technology have led to speeds beyond the reach of even the most advanced vehicles powered by internal combustion engines, according to the Financial Times, following the example of Rimac's amazing Nevera, which should be the fastest production car ever produced.

According to the Financial Times, Rimac said that by the end of the decade, Bugatti will produce a fully electric car, but until then it will focus on hybrid models.

For more, follow our business section.

Monday, 22 February 2021

Croatian Entrepreneur Mate Rimac Closer and Closer to Bugatti Takeover

February the 22nd, 2021 - Rimac Automobili, owned by Croatian entrepreneur Mate Rimac, has gone from strength to strength and it seems as if that run is far from over.

As Poslovni Dnevnik writes, Bugatti and the Croatian entrepreneur Mate Rimac are becoming closer than ever in their relations, with a company takeover from Rimac seeming closer to coming to fruition than ever.

"At the moment, we're thinking intensively about how to ensure the development of Bugatti in the best possible way. Croatian entrepreneur Mate Rimac could play a significant role in all of that because the two brands fit very well in a technological sense,'' Porsche's Oliver Blume told Automobilwoche.

The Croatian company Rimac Automobili and Volkswagen's supercar brand Bugatti are a fantastic couple in terms of technology, said Oliver Blume, Porsche's director for German Automobilwoche, Reuters reports. The statement reawakened hope that Croatian entrepreneur Mate Rimac's beloved company could indeed take over the gigantic Bugatti, which has, as Telegram writes, been being talked about for several months now and would mean an enormous amount for Croatia's place on the car map.

Namely, back in September last year, the British portal CarMagazine announced that the Volkswagen Group would hand over Bugatti to Rimac Automobili, in exchange for increasing Porsche's share in Rimac's impressive company headquartered in Sveta Nedelja near Zagreb.

Volkswagen is also the owner of the Porsche brand, which has acquired a 15.5 percent stake in the Croatian company over the years. Back in 2018, they bought a 10 percent stake, and a year later they purchased another 5.5 percent of it. Britain's CarMagazine then claimed that VW's management intended to increase that share to a significantly higher 49 percent.

“There are different scenarios with different structures that we're looking into. I believe that a decision on this issue will be made in the first half of this year,'' noted Oliver Blume.

For more on Mate Rimac, follow our dedicated section.

 

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