Börsiteade

Pealkiri

Response to the Competition Authority and Ministry of Economy Statements

Teade

AS Tallinna Vesi hereby reiterates that the Company applied for a contractual
tariff increase, submitting all necessary documents in accordance with the law,
including a cost-based analysis in order to comply with the Public Water Supply
and Sewerage Act and the recommeded methodology suggested by the Competition
Authority. All agreements contained within the contract were in accordance with
the law at the time of privatisation and have been ever since. At the time of
the privatisation the privatisation terms were agreed for a period of 15 years. 

The Competition Authority did not perform an actual analysis of the agreements
signed during the privatization and claimed that "agreements between any party
and ASTV do not have greater legal strength than the PWSSA". In addition, the
Estonian Authorities have not made an economic analysis of the ASTV's financial
performance since 2001. Such an analysis would demonstrate that the average
real rate of return made by ASTV for the period 2001 to 2010 is 6.5%. 

„Moreover, it is the responsibility of governement authorities to ensure that
any changes in law, or implementation of such laws must be done in such a way
as to ensure that complies with EU legislation and basic principles. This is
especailly the case when an investor has signed a contract in good faith, and
in return for the increase in quality of services and capital it has invested,
has a justifed expectation of the returns permitted over the period of the
contract,“ said AS Tallinna Vesi's CEO Ian Plenderleith. 

Ministry of Economics and the Competition Authority are both incorrectly
claiming that the law adopted in August 2010 does not change the principles of
water service tariff formation, because the legislative change established that
the company may only earn a justified return on capital invested by the water
company. This is plainly untrue, as the wording "on capital invested by the
water undertaking" was only added in 2010. More importantly though, to make
such a claim automatically excludes the possibility to earn a rate of return on
capital invested by the investor during the privatisation upon the acquisition
of the company's shares. 

The objective of the 2001 privatization was the rapid improvement of the
quality of water services. The Company was privatized according to the terms
and conditions of a market led tender to the investor who offered the lowest
real tariff increases to achieve the significant improvement in standards and
the highest price for the shares. In the privatisation process documentation it
is clearly stated that the quickest and most efficient way to achieve these
improved standards was via a privatisation process that offered a long term
contract. Before the privatisation went ahead, the national government of
Estonia granted a 15-year concession. 

"Now, after the legislative change and more particularly its implementation, we
are in a situation where the company and its investors have met all commitments
and honored the contract, but the Estonian authorities claim that the investor
is no longer justified to earn a rate of return on the investment made into
Estonia in 2001," said Plenderleith, adding that this unilateral breach of the
contract in the middle of the contract period is unacceptable and the company
shall use all measures to protect the shareholders who invested into the
company's shares in 2001 and during the IPO. "Since 2001 the real rate of
return on invested capital has been 6,5% and nobody can claim that this is
unjustified profitability." 

The Company is fully committed to honour the Contract to continuously offer
high quality services to the Citizens of Tallinn and having the achivement of
these standards indpendently verified in accordance with good regulatory
practice. In a situation where these standards have been attained, the company
will strive to ensure that its owners receive an acceptable return on invested
capital that corresponds to at least the equivalent return that they would
obtain on investments with the same degree of risk, over the lifetime of the
contract. 


         Priit Koff
         Head of Public Relations
         AS Tallinna Vesi
         +372 62 62 209
         [email protected]