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
priit.koff@tvesi.ee