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TVE: CEO Letter to Shareholders

Spekuliantai.lt | 2011-07-11 | NASDAQ OMX biržų naujienos | perskaitė: 1511
Raktiniai žodžiai: Tallinna Vesi, TVE
TVE: CEO Letter to Shareholders

Tallinna Vesi Company Announcement 11.07.2011

CEO Letter to Shareholders

Dear Shareholder,

I am writing to update you on several recent developments since the company's
last correspondence in May. I would also like to personally thank so many of
you for joining me and the Management Board at our Annual General Meeting of
Shareholders on 24 May here in Tallinn.

First, I am pleased to share with you that our Q2 operational results have been
excellent. We will release our Q2 Operations results on 14 July and our
financial results on 29 July 2011.

Additionally, ASTV's Management Board felt it important to update you on the
most recent developments related to the Estonian Competition Authority (CA)'s
move to limit the company's ability to set pricing according to our existing
privatisation contract.

On 06 June, the Estonian Ministry of Economic Affairs and Communications (MoEC)
sent a strongly-worded letter to the shareholders of AS Tallinna Vesi (ASTV),
apparently in response to our latest May shareholder letter. The letter
contained several material factual inaccuracies, for example suggesting that
legislation passed recently retroactively applied to the company's
privatization in 2001. We corrected this point by way of stock exchange
announcement that we published on 8 June:
https://newsclient.omxgroup.com/cdsPublic/viewDisclosure.action?disclosureId=457
249&messageId=556638.

We would like our shareholders to note, once again, that ASTV cannot accept the
attempted unilateral breach of the terms and conditions of the privatisation
contract by the Estonian authorities. We will use all legal measures to protect
the investment made into Estonia in good faith by the investors in 2001, and
based on the same terms and conditions by the investors during and since the
IPO in 2005. ASTV believes in legal certainty and protection of investor
expectations through respect for our contract, which complies with Estonian and
EU law. It is for this reason we have written to the Estonian Legal Chancellor
to request a comparison of ASTV's case and an opinion on the importance of
adhering to legal certainty made by the Minister of Justice in the renewable
energy sector in November 2010, which resulted in the proposed legislation
being halted http://eelnoud.valitsus.ee/main/mount/eoigus/304190#XVZO2WEM.

There are two other developments to which ASTV's management would like to bring
your attention:

On 01 June, ASTV submitted a complaint to the Estonian courts regarding the
CA's 05 May decision rejecting the company's 2011 tariff application. Court
proceedings were initiated on 03 June. The CA has requested and has been
granted an extension until 29 August to respond to our court complaint.
Unfortunately, this translates into yet further delays in a court ruling before
the terms and conditions that were contractually agreed in the market led
privatisation in 2001 can be applied. In spite of these delays it should be
noted that ASTV remains fully committed to honouring the contract to
continuously offer high-quality services to the citizens of Tallinn, and
neither the CA nor the MoEC have made good-faith efforts to engage in a
constructive dialogue on our privatisation contract.

In addition, the CA has informed ASTV that the change in the Public Water
Supply and Sewerage Act (PWSSA), on which it is basing its flawed approach on
tariff rate calculations, can be applied retroactively to ASTV as a result of a
decree by the Minister of Economy. Once again, the CA has proceeded with this
matter without ever engaging in a dialogue with ASTV or its owners, and before
the EU Commission and the Estonian courts have ruled on the legality of their
actions regarding our 2011 tariff application. ASTV has strongly rejected these
measures and voiced its concerns with these new developments in a response sent
to the CA on 8 July. ASTV is a firm believer in corporate transparency, we
believe that utilities have a responsibility for openness with the general
public and their customers, therefore we have published all details related to
our tariff application on our website (incl link).
http://www.tallinnavesi.ee/?op=body&id=728

Finally, I would very much like all our shareholders to understand the
following key points about the privatisation contract and their returns on
invested capital:

-- The privatization contract was in full compliance with the PWSSA on
privatisation and continues to comply with Estonian and EU law.
-- The AMB and its intended implementation by the CA mean a unilateral breach
of the privatisation contract by Estonian authorities.
-- The discussion on best practice regulatory issues is secondary, however
they only support ASTV's position on economic regulation;
-- Returns
- the average real return on invested capital has been 6.5% from 2001 to
2010;
-- Independent verification
- ASTV has had its returns on invested capital calculation verified by
Oxera, and it conforms to World Bank Guidelines;
-- Proven quality
- ASTV provides the highest quality water services with the mid range
tariff for the domestic customers in Estonia. The water tariff is 1.4%
from disposable net income of household and that is well below the 4%
recommended by World Bank for the upper limit.

Please know that we remain vigilant in our resolve to find an agreeable
solution to this matter. As we have stated in the past, we will do everything
necessary to protect the company and the interests of its shareholders and
their investments. It remains my great hope that together we can bring this
issue to a successful resolution.

Yours sincerely,



Ian Plenderleith

CEO & Chairman of the Management Board

AS Tallinna Vesi


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

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