SOURCES, ABOUT THE SITUATION AT THE ROMANIAN LOTTERY: Steinmetz, Silberstein and Truică partner with Novomatic to take the slot machines away from the Greeks

Two of the contracts considered as unprofitable, concluded by the Romanian Lottery with the Intracom-Intralot-Lotrom group of Greek companies are generating extreme interest, because their expiration is getting near. The question arises whether the authorities will once again hand over the Lottery to the Greeks, by extending the contracts, or whether the new contracts will be concluded with other companies.

The authorities, starting with the former management of the Romanian Lottery and the Prime Minister Victor Ponta, have promised that the state would no longer cooperate with the Greek government.

Sources close to the situation claim that that may not be the case.

One of the contracts expiring at the end of this year, which was concluded in 2003, concerns video-lottery-terminal type devices (VLT).

Over the last few months, there have been allegations that Novomatic is being favored in the process for the designation of a new company by concluding a new contract for VLTs, a process which is close to completion.

Novomatic owns about 5% of Intralot, one of the Greek companies that has concluded contracts with the Romanian Lottery which were unprofitable for the latter.

Our sources claim, however, that it is not the parent company, Novomatic Austria, that gets involved in this procedure, but rather, a company called Novotalica and which has as its shareholders the Novomatic Group and a company led by Benny Steinmetz (a shareholder in the Roşia Montană project), Tal Silberstein (former advisor of Călin Popescu Tăriceanu, during his time as a prime minister, and consultant of president Traian Băsescu, and who has also been close to several politicians over the years, according to the press) and businessman Remus Truică.

According to the quoted sources, Novotalica is registered in Cyprus.

Sorin Constantinescu, the advisor of the former CEO of the Romanian Lottery, told us, in an interview he gave us in April, that the major problem of the current contract is the fact that the Greeks did not supply VLTs, but rather, slot machines, which is why the Lottery operates just like a regular company, but without paying taxes to the state budget.

"According to Emergency Government Ordinance (OUG) 77/ 2009, if the Lottery provides games for which it does not have a monopoly, it should pay taxes just like any other company", Mr. Constantinescu says.

Also, instead of providing maintenance for their slot machines and sharing the profit with the Lottery, the Greeks have forced the Romanian state to pay for the machines in full and to give them 80% of the profits to boot, he told us.

Sorin Constantinescu said that the search for a new associate was initiated when he was still working at the Lottery: "It is a joint venture. Two months ago, a legislative act was approved which allows the lottery to partner with any private company, without the state owned company having any financial contribution in the partnership. When we have begun the procedure for finding a new company to sign a contract with once the contract with the Greeks expires, we have invited seven reputable companies from Austria, Canada, Great Britain, the United States, the US and the Czech Republic".

Mr. Constantinescu considers that the Romanian Lottery stands to gain regardless of who wins the contract: "The future partner will be designated as a winner based on certain scores. Several factors will be taken under consideration, such as the size of the company, the number of devices it has, its earnings, the countries it operates in, etc. The requirements of the contract, which were approved by the Board of Directors, included, among other things, the requirement that the new company give the Lottery half of the profit and come with a bank comfort letter of 75 million Euros a year. In any case, replacing the existing machines with new ones, will take about a year and at cost at least 100 million Euros".

So far, the contract with the Greeks concerning the slot machines has not been cancelled because it contains a clause which stipulates that, if it were to cancel the contract, the Lottery would have to pay about 40 million Euros.

Aside from this contract, there is another one for the lottery services, one for betting and one for online gambling, all of them concluded with the Intralot-Intracom-Lotrom group of Greek companies. The contract for online gambling was signed in 2005 and will expire in 2015. The Greeks have exclusive rights on that segment, but according to Sorin Constantinescu, the Greek partners have never been active on that segment.

• Sources: Intralot has applied to handle the services of the Lottery for another ten years

A second procedure under way at the Romanian State Lottery, which is almost complete, is the one concerning the contract for the lottery services.

According to market sources, it would seem that three companies were invited to participate, including Intralot.

If another company than Intralot gets appointed to provide the lottery services, the company that gets appointed as a winner will need several months to replace the infrastructure of the state owned company.

Apparently, if it fails to achieve that, the winner of the call for tenders will be required through a contract to ensure the continuation of the contractual services provided by Intralot.

In spring, Sorin Constantinescu told us that the devices used for validating the tickets for the 6/49 game, were bought used, and brought in Romania in 1992. Based on that contract, the Lottery pays 7.5% of the price of each ticket sold to the Greeks.

"A device like that costs 1,000 Euros on the open market. Take that figure and multiply it with 2,000 agencies, that makes 20 million Euros, which would allow us to buy that kind of devices and make back the mount paid back for them in 1-2 months. Instead, we have been paying the Greeks instead for 21 years. Up until now they have taken out of Romania over 1 billion Euros. More than that, we have a transmission system that uses antennas, which has not been used in Europe for years now. We can't open new offices or proxy offices, because people living in apartment buildings won't allow us to install antennas on the roofs. No other country in Europe uses antennas anymore, just us. Everything is a total chaos".

The contracts with the Greeks are part of an investigation conducted by the Competition Council. By the end of the year, the investigation is due to be completed, and the Lottery could be liable to pay a fine between 2% and 45% of its turnover for 2012, for anti-competitive practices.

The sole shareholder of the Romanian Lottery is the Ministry of Public Finances. In spring 2013, Adrian Manolache was appointed as the CEO of the company.