Estonia, Legislation, Markets and Companies, Water

The company received a response from the Minister of Economy and Communications on June 25, 2012, to a letter from Tallinna Vesi's shareholders dated May 30, 2012. In his response, the Minister stated he was unable to support Tallinna Vesi's shareholders and the privatization for the key reasons, mentioned in a letter.

The Ministry said in a statement that: "The bases of forming water tariffs stipulated in the Public Water Supply and Sewerage Act (PWSSA) 14 applied before and at the time of privatization 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, writes LETA.

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 privatization and through that when establishing the water tariff. On January 12, 2001, the City of Tallinn and 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, 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, Tallinna Vesi made an official statement on this issue: "The PWSSA at the time of privatisation and until November 1, 2010, stipulated "to operate with justified profitability", from November 1, 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 [of Estonia], as the statement says.

The Competition Authority itself admitted that it only published its informal guidelines for calculating justified profitability for any sector in January 2010, which is after it initiated its first critical report against Tallinna Vesi in November 2009, the company said.

The national government of Estonia and the City of Tallinn both benefited from privatization of Tallinna Vesi, the water utility's representatives stated.

The privatization is a direct result of the actions of the City of Tallinn and the national government of Estonia, and a key privatization condition – length of the contract – was pre-set for the investors by the national government with the written consent of the Competition Authority; Tallinna Vesi has only followed terms of the international privatization contract and law as stipulated by the Estonian authorities, the company stated.

The privatization process that officially started in the summer 2000. It was not agreed between the City of Tallinn and Tallinna Vesi on January 12, 2001.

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

Tallinna Vesi has also noticed an inconsistency in the in the Minister's letter.

To clarify the details, Tallinna Vesi has to apply to the Ministry, which will give a response within 30 days.