To date, MOL has invested a total of over USD 6 billion directly into the Croatian economy. MOL is one of the largest foreign investors in the country and is proud to hold this position. Since it first entered the Croatian market, MOL has supported the development and transformation of Croatia’s economy. As such, MOL has a vested interest in promoting an investor-friendly business environment in Croatia that contributes to INA’s development as a successful regional energy leader in South Eastern Europe.
Saving INA from bankruptcy
MOL played a key role in saving INA from bankruptcy in the wake of the 2008 crisis. MOL provided loans of approximately USD 460 million in 2009-2010 at a time when international financial markets were frozen. INA being one of the largest Croatian companies, employers and tax payers, this initiative was essential for the national economy. Since 2009, INA has consistently made a significant positive contribution to the Croatian economy.
Besides the economic impact, INA has a great influence on Croatia from financial aspects as well. Due the improving financial situation INA could pay out a significant amount of dividend to Croatia.
After the 2016 financial year INA paid out HRK 152 million as dividend, the next year the dividend payout reached HRK 812 million. In 2019 INA’s Management and Supervisory Boards agreed on the proposal of the dividend payout from net profit in the amount of HRK 1.25 billion.
Profoundly modernizing and transforming INA
MOL’s investment and strategic engagement with INA led also to a profound transformation and modernization of the company. Since MOL took control in 2009, INA has been able to massively invest in oil and gas exploration and production in Croatia and internationally. INA has also successfully invested in its refining business and retail network. Since 2003, INA has invested on average 1.6 times more annually than before its privatization.
MOL introduced several rationalization measures and a dedicated efficiency improvement program. As a result, INA’s operational performance and efficiency have been improved considerably. From 2009 to 2012 its operating cash profit was doubled and its indebtedness decreased significantly. The financial indicators of INA improved further between 2012 and 2018.
Further investing in the retail sector in the Balkans
MOL and INA joined forces and successfully won the privatization tender of Energopetrol, the leading petrol retailer and wholesaler in Bosnia-Herzegovina in 2006. MOL participated in the joint venture at INA’s request, as the latter was a state-controlled company at the time and could have been disqualified as a result.
In 2007, with the consent of INA and of the Croatian Government, MOL also acquired Tifon d.o.o., a fuel retailer (36 filling stations) and wholesaler in Croatia. This investment presents further synergies and complementarities with INA.
At the end of 2018 INA had 500 filling stations in Croatia, Bosnia and Herzegovina, Slovenia and Montenegro, 18 more than in 2007.
Contributing to Croatia’s GDP
Croatia was highly exposed to the negative shocks of the 2008 global financial crisis. The country has been in recession since 2009. 2013 was the fifth consecutive year without any real GDP growth.
Since 2009, INA has consistently made a positive contribution to the Croatian economy. The company’s activities within Croatia accounted for 1.7% of Croatian GDP in 2009, and this contribution decreased to 1.3% by 2018. Estimations show that without a strong and financially healthy INA, the growth in Croatian GDP from 2009 to 2018 would have been one percent lower (closer to 14% instead of 15%).
Contributing to the Croatian state budget
A more profitable, efficient and sustainable INA contributes to Croatia’s national budget, both through higher tax contributions and also through the value of INA’s share as the Croatian state itself is a 44% shareholder. Since 2009, INA has contributed approximately HRK 99 billion (~EUR 13.2 billion) in taxes, excise duty and fees to the state budget of Croatia.
As Croatia’s largest company, INA’s financial position has a significant impact on Croatia’s economy and the state budget. In addition to the regular source of income through taxes and other contributions, the reliance on INA’s tax duties was more evident in the immediate aftermath of the global financial crisis in 2009.
The freezing of international financial markets in 2008-2009 led to the near complete loss of liquidity. This undermined INA’s financing abilities, ultimately resulting in outstanding tax liabilities of more than HRK 1.5 billion (~EUR 201 million) to the Croatian state at the end of 2009. At the same time, a number of state owned companies owed INA similar amounts in back payments.
During this critical time MOL stepped in and provided loans totalling USD 460 million during 2009 and 2010 to INA. The majority of these loans immediately went through INA’s accounts and landed in the state budget as payments for overdue tax obligations (based on the First Amendment to the Gas Master Agreement, MOL had to provide loans of HRK 1 billion to INA towards debts owed to the state). This support from MOL was crucial for the stabilization of not only INA, but also for the Croatian state budget. INA fully settled all overdue taxes towards the state by September 2010. However, a significant number of economic entities in Croatia continued to owe sizeable amounts to INA, putting a significant burden on the company’s liquidity situation.
Besides that – due to the improvement of the financial situation of INA – after the year 2016 and 2017 the company paid out a significant dividend to its shareholders, therefore to Croatia as well.
Developing the local economy by choosing local suppliers
With a view to give full transparency of its economic sustainability, MOL Group has presented for the first time the proportion of local suppliers in different countries and regions of its operations in its 2013 Annual Report. This indicator shows that procurement from local suppliers is the highest in Croatia (83% against 72% in Hungary) among MOL’s core countries. Between 2014 and 2018 the ratio of local suppliers’ yearly average was over 80% in Croatia.
Increasing Foreign Direct Investment
To date, MOL has invested a total of over USD 6 billion directly into Croatia and is the second largest foreign investor in the country. MOL’s investment played a key role in maintaining a sustained flow of FDI in Croatia.
Croatia was heavily impacted by the global financial crisis of 2008. Among other effects, it suffered a drastic drop in the inflows of foreign investment capital (or foreign direct investment, FDI). From a peak of about EUR 4.2 billion in 2008 (of which EUR 850 million was generated by MOL’s purchase of additional INA shares from private investors, after the financial crisis broke out) FDI plummeted by 85% to EUR 624 million in 2012 (The Economist). Despite this and the extremely unfavorable financial environment it faced itself, MOL continued to support INA’s ambitious investment program in 2008 and 2009 – all in agreement with the Government of Croatia.
FDI in Croatia by years, millions of EUR
Source: White Book of the Foreign Investors Council of Croatia, 2013