ETA faces a conundrum

The flotation of Hellenic Tourism Properties (ETA), the subsidiary of the public Greek National Tourism Organization (GNTO), originally projected for this month on the Athens bourse, has been derailed following the postponement until June 4 of discussion of a property case by the Council of State, the country’s highest administrative court. The case in question concerns the transfer of 34 of GNTO’s 165 hectares in Anavyssos’s salt pans, some 50 kilometers (31 miles) south of Athens, to ETA, which has been legally challenged by former owners of the area before it came under compulsory purchase on behalf of GNTO. The postponement was agreed to by both the government and ETA, as the 14 former owners received the relevant file on January 30 and did not have time to submit their case. Their claim rests on the argument that the area has to be returned to them after the public purpose for which it was expropriated failed to materialize within a reasonable period of time. They filed their case with the Council of State after ETA rejected their demand. Nevertheless, the postponement of the hearing by the court does not seem likely to affect the government’s plans to list ETA on the Athens Stock Exchange (ASE), in spite of a recommendation by a Council judge, Maria Karamanof, on the Anavyssos case, which seems to cast into doubt the legality of all administration acts to date regarding ETA’s setting up and operation. ETA was set up in 2000 with a view to commercially tapping GNTO’s huge assets by introducing a new privatization model based on the extensive participation of private capital and management and attracting investment from abroad. It has already transferred large interests and the management of the Mont Parnes casino and three organized beaches on the southern Athens coastline to private operators. Other plans include an extension of the existing golf course and the construction of a number of luxury hotels in Afantou, Rhodes, with a budget of about 100 million euros, a conference center at the old Athens airport at Hellenikon, and three marinas on the southern Athens coastline. Most of these have faced considerable delays or have not attracted sufficient interest. In Anavyssos, ETA planned to turn the salt works into a lagoon and create an environmental education park including a botanical garden, organic cultivations, an open-air natural history museum and a mythology theme park. The plan also included various sports facilities. The project was originally planned for completion by 2006 and was estimated to attract more than 1 million visitors annually. The Karamanof recommendation seems to challenge the entire philosophy on which the tapping of public property has been based to date. The judge argues that ETA’s profit-making character should exclude the transfer to it of any public assets, and that the expropriated properties should be returned to their original owners or remain under public ownership if the latter do not want them. She further says that the participation of the State, through GNTO, in ETA’s share capital does not offset the loss of the public properties transferred to it, and that the listing of the company’s shares on the stock market jeopardizes the public ownership of the assets. According to some interpretations of the recommendation, ETA should also be excluded from the joint development, together with private firms, of old army camps which are being closed down. Legal inadequacies An examination of ETA’s prospectus for listing on the ASE reveals gaps in the legal audit of the company and poses a number of questions regarding the transparency and effectiveness of its activities. In particular, the legal audit, carried out by law firm Tryfon Koutalidis (whose clientele includes telecoms equipment and software magnate Socrates Kokkalis), covers only 85 percent of the company’s assets, on the argument that there is no immediate plan to utilize the assets left out and because, according to the categorization that has been carried out, a number of less commercially valued assets will be transferred by ETA to other public agencies. According to the prospectus, the main asset which ETA capitalizes with the listing is the Mont Parnes casino – for which a legal case is pending. The casino, operated by a consortium of Hyatt Regency and construction company Hellenic Technodomiki holding a 49 percent stake, is projected to yield 167 million euros in revenue for ETA (representing 72 percent of its total) in 2004. The consortium has legally challenged its management fee as inadequate. An examination of the prospectus also reveals that the yields which ETA expects from its concessions may have been overrated, being apparently based on contracts that have been subsequently modified in less favorable terms to its interests. Further, its chartered auditors expressed certain reservations regarding its performance in their notes to the financial statements.