Half a billion dollars waiting for an answer

p2250-Desert-Know-land-1By ERWIN CHLANDA

 

Deals don’t get much bigger than this in Alice Springs: A $500m investment in a string of ventures, including a university for 6000 students, all based in or operating from the Desert Knowledge Precinct, in partnership with Desert Knowledge Australia (DKA), which had been battling for a decade to kick any real goals.

 

Trouble is, after nearly two years that deal is still not a reality, leaving in limbo at least 10 hectares of valuable real-estate in the DKA precinct which, of course, is owned by the public. Meanwhile, the town is desperate for non-government investment.

 

DKA’s partners in this proposed deal are loosely referred to as the Hatzimihail Group, connected to a prominent Greek family in Alice Springs, and an associated company, EFL Tech. The spokesman is Alex Hatzimihail, who provided information for this report.

 

Chief Minister Adam Giles has had – still has? – a hand in the negotiations together with – so far – two DKA boards, two DKA chairmen and two DKA CEOs.

 

In October 2013, the CEO of DKA at the time, John Huigen emailed Mr Hatzimihail: “I had a great couple of days – thanks again for your hospitality. Looking forward to doing great things together.”

 

A communication from DKA in March last year says: “On receipt of the Chief Minister’s letter and funding through to DKA, we will immediately recruit capacity, and build a high-level NTG taskforce to expedite the various approvals etc required.”

 

On January 9 this year Mr Giles, told the promoters of the project that their “business proposal aligns with my Government’s strategic direction.

 

“I look forward to providing even more in depth support for this exciting project following the informed and detailed business plan finalisation including the financial modelling to deliver on the proposed concepts.”

 

At one point the Territory players in the emerging deal were relying, in part, on an ABC news story to work out who’s in charge.

 

This week Ken Johnson, a retired NT public servant and the new chairman of the DKA board, said: “There has not yet been a reply from the Hatzimihail Group” to information requested in February.

 

According to an experienced broker, setting up deals of this kind normally has a time frame of 90 days: It’s either in the can by then, or the deal’s off.

 

What is going on?

 

The Alice Springs News Online has followed this saga – and DKA’s hapless 10-years-plus existence – from the beginning.

 

Mr Huigen, in his email to Mr Hatzimihail in October 2013, said: “I spoke with my Chairman today and he is across the whole situation under the arrangements that we have discussed.”

 

That chairman was Fred Chaney, a former Liberal Federal Minister for Aboriginal Affairs, a former Senior Australian of the Year, and a jetsetting sage on many issues.

 

Mr Huigen, who last week declined a request to talk to the News about these issues, filled in Mr Hatzimihail about DKA’s mission in language that could occupy pride of place in a commercial jargon textbook.

 

Samples: “DKA is a Statutory Corporation of the Northern Territory Government with a national mandate – to build harmony, sustainability and wealth for all desert peoples.

 

“We understand and work in a systems way and use an innovation framework to ensure impact.

 

“Building a robust knowledge economy is a key strategy – it is therefore very appropriate that we work with EFL, which is internationally recognised for its innovation and capacity to turn IP into wealth and opportunity.”

 

The actual substance of this email was this: “The letter serves to confirm our intention to acquire licences for EL technologies for the NT and WA, from EFL Tech International N.V. as an integral component of a suite of activities that we will progress together.

 

“These licences are for exclusive manufacturing and non-exclusive distribution in the two territories.

 

“The licence value is $1m for NT, $1m for WA and $1.5m for manufacturing equipment supply, installation, commissioning in Alice Springs, NT.”

 

So the deal was to be for licences as well as real estate and bricks and mortar, doubtlessly in the DKA precinct.

 

“As mentioned, this licencing arrangement is part of the wider collaboration between DKA and EFL – a collaboration that we are very positive about,” wrote Mr Huigen.

 

Fast forward to May last year when, after several drafts, a Memorandum of Understanding (MOU)  was entered into (the News has a copy), accompanied by upbeat messages from Mr Huigen such as “Looking good, Alex. Exciting! Cheers, John.”

 

Mr Johnson, in an interview this week, suggested that this MOU was non-binding.

 

But is that really the case? The MOU says in part: “This document constitutes an agreement between Desert Knowledge Australia (DKA) and EFL Tech Pty Ltd (EFL).”

 

It also says: “The terms and conditions set out in this Memorandum of Understanding … form an agreement between the parties and will be replaced by a legally binding Agreement.”

 

The signatories were Mr Huigen and Mr Hatzimihail.

 

The parties’ respective “responsibilities” included:-

 

Up to $500m investment will be sought ($300m for property development and International College, $100m for the Technopark, $50m for administration & marketing, and $50m venture capital fund).

 

Mr Hatzimihail said today that – as a result of delays – the item “$50m venture capital fund” would be replaced by “$50m to support local businesses (grant)”.

 

DKA would provide:-

 

• Unoccupied land equating to 5 + 5 hectares located east south east of the existing Desert Knowledge Precinct central courtyard on long term lease arrangement (e.g. 50 + 50 year lease).

 

• Other land can also be made available for any other agreed purpose such as the International College and student accommodation.

 

• Assist with negotiations with the NT Government (NTG) to access NTG land adjacent to the Desert Knowledge Precinct or elsewhere if desirable.

 

EFL Tech would provide:-

 

• Managing the project.

 

• Leading the investment attraction process.

 

• Cornerstone tenancy on the Technopark.

 

• Expertise in student recruitment and international student markets.

 

• Provide DKA with 1.5% shareholding in the newly established entity.

 

• Provide $500,000 contribution in advance to access DKA resources, networks and intellectual property.

 

•Attract commercial partners to invest and/or tenant the Technopark. This will include: Goldman Sachs, Credit Swiss [and others].

 

Mr Hatzimihail said today that – as a result of delays – the line-up of investors will be different, but of a similar calibre.

 

• Project manage the Technopark and student accommodation development.

 

Soon after the signing of this MUO, in the middle of last year, the entire DKA board and Mr Huigen were replaced after a crushing report by local academic Don Zoellner.

 

The new DKA board took over in August 2014, operating – to begin with – under the assumption that it was Mr Giles and the NT Government who were handling the Hatzimihail deal.

 

Mr Johnson said this week the new board’s first meeting had advice from the acting CEO Paul Davis, who has since joined the Hatzimihail group, that “EFL was now dealing with the government, so it wasn’t an issue for the board at that time. Our advice was that the Hatzimihails had taken this to the Northern Territory Government and that was confirmed by a report of the ABC.”

 

NEWS: What was the evidence of this?

 

JOHNSON: All I can say is what is in the ABC News. There had not been any further approach from the Hatzimihail family to the new board. [The negotiation] wasn’t on our radar. We had a lot of issues to deal with. That wasn’t one of them. The ABC seemed to know more about this than we did.

 

NEWS: Where did Mr Davis get the information from?

 

JOHNSON: He did not elaborate on the source of the information.

 

NEWS: Did the NT Government actually say to you, we are taking this over? Was this confirmed by any sort of conversation? The MOU was clearly between the EFL Tech and DKA. Was the ABC report corroborated with any communication with Adam Giles?

 

JOHNSON: No.

 

NEWS: When did the Hatzimihail group approach you again?

 

JOHNSON: The Hatzimihails approached us with a draft lease agreement, back in January [this year]. There had been an outline of a proposal in December which didn’t tell us anything.

 

NEWS: What was your response?

 

Mr Johnson reiterates that the board had asked for details, namely a “business plan and background on his business”.

 

JOHNSON: We are keeping an open mind, see what they can come up with.

 

NEWS: Did you give them a time frame?

 

JOHNSON: No, I didn’t. The ball is in their court. They were the ones pushing the time frame, not us, as you pointed out in your article on January 13. It quotes a deal Mr Hatzimihail said he had with the NT Government.

 

NEWS: You still haven’t got what you are asking for. Will you now set a deadline?

 

JOHNSON: That will be a matter for the board to think about.

 

 

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4 Comments (starting with the most recent)

NB: If you want to reply to a previous comment, start your comment with this notation: @n where n is the number of the comment you want to reply to.
  1. Corey Taylor
    Posted July 6, 2015 at 9:50 pm

    All they should do is a background check on Alex Hatzimihail and his business activities. There would be no further questions.

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  2. Thirsty
    Posted July 2, 2015 at 3:22 pm

    Before we plan for 25% growth, let’s get some data on how much water we have to spend, specifically the Alice Springs water budget. We can’t buy an aquifer for $500 million dollars, or wait 10,000 years for recharge.
    We should also measure growth in the desert currency of “water” and not only money.

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  3. Erwin Chlanda
    Posted June 30, 2015 at 2:31 am

    @ Jane Boon: Thank you for your comment. The report focused on the amount of time this process has taken – about two years – while a person knowledgeable in these matters is quoted as saying that 90 days would be ample.
    A valuable piece of publicly owned land is lying idle while this process continues to be unresolved.
    Erwin Chlanda, Editor

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  4. Jane Boon
    Posted June 29, 2015 at 5:09 pm

    The tone of this article suggests that the board of Desert Knowledge is somehow wrong in trying to gather further details prior to entering into legally binding contracts with this company, and doing Alice Springs a great disservice in the process – but is this not simply due diligence?
    The fact that a business plan has had to be requested and its absence is now holding up proceedings suggests that there isn’t one, which surely begs the question: What kind of company offers up sums of money such as these without a strong business plan providing a foundation for their proposal?
    Am I the only one that feels like this all a bit too good to be true? Perhaps Desert Knowledge have seen this as a red flag, and perhaps the Government would be wise to exercise similar caution.

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