Tallinna Vesi told to lower rates

TALLINN - Foreign investors are doubtless keeping a close eye on the ongoing dispute between Tallinna Vesi, the country’s biggest water utility, and the Estonian Competition Authority, reports Aripaev. Last week the authority issued an injunction to the company, demanding that it either submit a proposal by Nov. 14 to cut its service prices or have all current prices unilaterally cut by 36 percent.

The exact percentage is also a topic of debate since the company is interpreting the injunction as saying that the current water tariff must be cut 29 percent.
On the news that the company may lose about 12 million euros in annual earnings due to being forced to lower its water tariff by almost a third, Tallinna Vesi’s share price fell to the lowest level since it started trading in June 2005.

In a stock exchange statement, Tallinna Vesi said that it completely disagrees with the position of the Competition Authority and will seek a court injunction to block the move. According to the company, the injunction is a follow-up to the bomb that the agency dropped in late September calling into question the legal terms under which the company was privatized in 2001.
The company said it was determined to challenge the requirements set by the agency and has pledged to take the matter to court.

A situation in which a company must defend its rights in court after having fulfilled all contractual obligations goes against all international business standards for long-term privatization and the principals of public administration, Tallinna Vesi said in a statement.

According to information available to Aripaev, British shareholders in Tallinna Vesi are using diplomatic channels to put pressure on the Estonian government to seek a solution to the dispute.
Among others, the British Ambassador is said to have become a regular visitor to the Estonian Ministry of Foreign Affairs in an attempt to hammer out an amicable agreement. There have also been claims urging the state not to breach the privatization contract and leave foreign investors’ alone.

Foreign Minister Urmas Paet confirmed that the British Embassy had has contacts with the Ministry and presented its views, but denied having received any demands. British Ambassador to Estonia Peter Carter said to Aripaev that in ten years the company’s core investor, United Utilities, has injected significant amounts in Tallinna Vesi, made sure that the water quality in Tallinn was one of the best in Europe, and is therefore justified to expect a fair return on its investments.
The ambassador added that foreign investors were sensitive to such disputes and were likely to think hard if similar problems occur.