Börsiteade

Pealkiri

The Minister of Economy and Communications will not assist AS Tallinna Vesi’s shareholders or support AS Tallinna Vesi’s privatisation contract from the actions of the Competition Authority

Teade

On 25 June 2012 ASTV received the response from the Minister of Economy and
Communications to the letter from AS Tallinna Vesi’s shareholders dated
30.05.2012. In his response the Minister has stated he is unable to support AS
Tallinna Vesi’s shareholders and the privatisation for the following key
reasons (the complete letter is appended to the notice): 

  1. “The bases of forming water tariffs stipulated in the Public Water Supply
     and Sewerage Act (hereinafter also the PWSSA) § 14 applied before and at
     the time of privatisation and the bases of forming water tariffs stipulated
     in the PWSSA applicable today have stayed unchanged in their essence since
     the law was enforced in 1999, including amongst other things the justified
     profitability component to be added to the water tariff. The fact that
     justified profitability is calculated on the capital invested by the water
     company was also used when providing a meaning to the respective provision
     of the PWSSA that was applicable at the time of privatisation and through
     that when establishing the water tariff.”
  2. “On 12.01.2001, the City of Tallinn and AS Tallinna Vesi signed the
     services agreement in which the parties agreed amongst other things upon
     the bases of forming the water tariffs. As it appears from the above, the
     signing of the services agreement could not have been done in the situation
     of a legal vacuum, but the legislator had established explicit restrictions
     with the PWSSA for forming the water tariffs, the restrictions that as
     stressed above applied also at the time of signing the services agreement
     and were superior to any contract.”

In order for full transparency and to ensure shareholders have access to the
relevant evidence AS Tallinna Vesi would like to make the following points: 

  1. Regarding the minister’s point 1:

  -- The PWSSA at the time of privatisation and until 1 November 2010 stipulated
     “ to operate with justified profitability”
  -- From 1 November 2010 this wording was changed “to operate with justified
     profitability on capital invested by the water undertaking”. It should be
     noted that this change was specifically requested by the Competition
     Authority (see attachment).
  -- The CA itself admitted that it only published its informal l guidelines for
     calculating justified profitability for any sector in January 2010, which
     is after it initiated its first critical report against AS Tallinna Vesi in
     November 2009 (see attachment).

  1. Regarding the minister’s point 2:

In its stock exchange announcement of 26 June ASTV clearly highlighted all the
important decisions made by the National Government of Estonia (including the
Competition Authority) and the City of Tallinn, both of whom benefited
significantly from the privatisation of AS Tallinna Vesi (see link). The
privatisation is a direct result of the actions of the City of Tallinn and the
national Government of Estonia and the key privatisation condition – length of
contract – was pre-set for the investors by the national government with the
written consent of the Competition Authority AS Tallinna Vesi has only followed
the terms of the international privatisation contract and law as stipulated by
the Estonian authorities. 

Furthermore, the Services Agreement that was signed on 12 January 2001 was the
formalisation of the privatisation process that officially started in the
summer of the year 2000. It was not agreed between the City of Tallinn and AS
Tallinna Vesi on 12 January 2001. This is confirmed by the fact that the Levels
of Service and tariff mechanism contained in the International Privatisation
Information Memorandum, that was issued to the bidders in July 2000, are the
same as those formalised in the Services Agreement at privatisation. 

If this wording had existed or had been stipulated in 2000, then the
privatisation would not have happened. 

AS Tallinna Vesi has also noticed an inconsistency in the in the Minister’s
letter. In paragraph 2 on page 2, the Minister states: “The law does not
stipulate that the Competition Authority could proceed from anything else than
the requirements set forth by the legislator or the agreements between third
persons when approving the tariff applications”. For clarification, AS Tallinna
Vesi has to write to the Ministry, who will respond within 30 days. 


         Mariliis Mia Topp
         Head of Communications
         AS Tallinna Vesi
         62 62 275
         [email protected]