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Tallinn water sold to a British company

Dec 14, 2000
Kairi Kurm

TALLINN - Tallinn's water utility privatization commission decided on December 6 to sell 50.4 percent of Tallinna Vesi (Tallinn Water) to British International Water UU, leaving itself one golden share.

According to Priit Koit from Suprema Securities, an advisor to the Tallinn city government, the bids of International Water UU for the purchase of shares and for the new water tariffs were the best.

International Water UU offered 1.338 billion kroons ($73 million) for 50.4 percent of the water utility; 641 million kroons for the existent 28 million shares and 697 million kroons for the 30 million new shares created in Tallinna Vesi.

International Water UU will leave the price of water unchanged until 2003 and a 15 percent tariff will apply in 2004 and 2005.

A competing bidder, Generale des Eaux at the same time wanted to increase tariffs in 2001 and offered 488 million kroons for the existing stake. A third bidder Northumbrian Water Group, representing French Suez Lyonnaise, withdrew from bidding earlier, saying the deal was too advantageous for the city.

The selected winner of the bidding will have to be confirmed by the city government by Dec. 21.

Koit said that the new investor will not be able to dictate the water rates, as the figures have to be approved by the local government. "The tariffs have to cover the company's grounded costs and bring in grounded revenues," said Koit.

According to the city government the city demands investments of at least 4 billion kroons in 12 years to complete the construction of a sewer network by 2006.

Koit said that the main task of the new investor is to improve the present situation of the sewer and drain network. He said that about 30 percent of the network is leaking and some pipes date back to 1840.

"The first investments have to be focussed on the pipes and a network has to be established in the regions that are not supplied with pipes," said Koit.

He said that in the first five years the Tallinn sewer and drain network needs at least a 1.2 billion kroon investment. He said that the money paid for the 30 million new shares will probably be invested in Tallinna Vesi, while the 641 million kroons paid for the existing shares will go to the Tallinn city budget.

At present Tallinna Vesi services only one of the 12 regions in Tallinn, which covers about 70 percent of the whole Tallinn territory. The other 11 regions are controlled by a number of small companies. Koit said that the city is planning to organize new bids for these regions and the share of Tallinna Vesi may possibly increase.

The Tallinna Vesi tariffs for water and sewage for citizens is 15 kroons per cubic meter, while the companies have to pay 35 kroons per cubic meter and sponsor the citizens, said Koit.

Rain Tamm from LHV, the Estonian advisor of International Water, did not want to specify the plans of the bidder before the city government had confirmed the bidding.

He said that the city should be delighted with the level of the bid, which is more than two times higher than the 580 million kroon prime price set by the city.

International Water UU is a company formed by British water utilities International Water Group and United Utilities Group. United Utilities is one of the largest water and canalization firms in the world with 28 million consumers in the UK, Australia, Poland, the Philippines, the U.S.A., Bulgaria and other countries. International Water Group is a subsidiary of the construction firm Bechtel and offers water and canalization services to 6 million consumers in the UK, Poland, Australia and the Philippines.

The nine-month profit of Tallinna Vesi was 25 million kroons on turnover of 320 million kroons. The annual turnover for the year 2000 is estimated at 419.1 million kroons on profit of 20 million kroons.

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