ECONOMY

Battle for water supply looming

The government’s decision to sell off a 20.3 percent stake in the Athens Water & Sewerage Company (EYDAP) to a strategic investor by the end of 2003 is giving a fresh new impetus to the next big entrepreneurial, business and political battle of the current decade: the battle for water. To be sure, the particular procedure adopted for selecting the strategic investor poses a danger of ending up as a fully controlled affair that helps the usually favored «insiders.» The difference this time is that the «list» of insiders is much less opaque and includes the big construction groups that are seeking a new and profitable field of activity (including water and waste) through their evolution into groups of holdings and concessionaires. The way the government has chosen to encourage public enterprises to abstain from such activities has boosted these groups’ appetite for operating as low-risk investors: securing for them, in advance, fields largely protected from competition (due to the continued partial presence of the government and local government authorities). The consortium formed between the country’s largest construction company, Hellenic Technodomiki (whose major shareholders include members of the Bobolas family, who also have sizable interests in the media) with local and prefectural government authorities in the Dodecanese, to manage the island group’s water resources may be limited geographically, but it is still a strong indication of further developments in this general direction. Uneven terms Hellenic Technodomiki is already a partner of EYDAP in a company that has undertaken to install natural gas connections for household and small business users in 23 municipalities in the northern Athens basin (Aghia Paraskevi, Halandri, Neo Psychico, Psychico, Galatsi, Holargos, Kifissia, Maroussi, Melissia, Nea Pendeli, Papagou, Pefki, Pendeli, Filothei, Vrilissia, Ekali, Gerakas, Neo Iraklion, Lykovryssi, Metamorphosis, Nea Erythraia, Nea Halkidona, Nea Ionia and 38 percent of the Athens municipal area itself). It was no coincidence that some of these municipalities border on the Attiki Odos highway now being completed. Such projects look like the pieces of a jigsaw puzzle gradually taking shape before the eyes of a dumbfounded public opinion. Under such uneven terms, it would seem very difficult for even large foreign groups to contest the acquisition of EYDAP’s stake that will be offered for sale. Banking sources take the view that such groups will prefer to participate – even with small shares – in schemes dominated by the big Greek contractors, mainly to establish a base from which to seek a larger role in Greece, neighboring countries and the eastern Mediterranean as the battle for water unfolds. A lucrative field The foremost issue is that of management; that is, who will run EYDAP. The second issue is one of clarifying the exact role of the government in the domain of water supply. To date, it has kept responsibility for the infrastructure networks in Athens and Thessaloniki, and ceded water provision to the two respective listed companies, EYDAP and EYATH. The question now is whether the government will divest itself of the responsibility for the running of more urban networks, reserving for itself only the role of owner and assigning the role of regulator to an independent authority. These developments will also have a bearing on the issue of industry concentration. This will be one of the main questions in the coming battle of water for the management of existing or new supply networks, independent of their ownership status. As the public sector seems unwilling to change and promote the current ownership and management arrangements in the two major urban centers, the multitude of often lossmaking municipal water utilities has encouraged the development of various schemes involving private firms, at local or even regional level; and the battle looks likely to be further extended in the two urban centers themselves. The question arising for the government is whether it will strive to «open» the game to competing investors beyond the tightly controlled environment set by its relations with the «insiders,» in order to quickly and usefully tap the potential for growth in the wider geographical region and in the framework of the new emerging international environment. Besides the distribution of natural gas, EYDAP’s investment program also includes power production and telecommunications. In the first two sectors plans are making progress, but in the third, a plan for the development of an optical fiber network in a consortium with five public transport utilities are reportedly meeting difficulties. The end of state subsidies and a different method of calculating revenues led to a fall in EYDAP’s profit from 108 million euros in 2001 to 48 million last year.