PSIREN

In August 2009 Pealinn, the newssheet of the Tallinn City government, wrote that several bad mistakes were made in the privatization of the Tallinna Vesi water company years ago and the paper described the privatization as mishandled. Numerous "fateful mistakes" were made in the privatization of majority shares in Tallinna Vesi in 2000, the paper wrote with a reference to a legal analysis of the privatization of Tallinna Vesi.

The article reproaches the then city government saying that the water and sewage disposal economy is more like a natural monopoly and it is not possible to create competition by privatization.

Among the numerous gross mistakes made in the privatization deputy mayor of Tallinn Jaanus Mutli points out the fact that the costs of the development of water mains and sewage disposal networks were left to the residents and the City of Tallinn to foot. Mutli also said that the city was stripped of the right to make any management decisions of the shareholding company, as well as of the common water mains and sewage networks and properties.

The Tallinn City government will on Thursday discuss the alienation of majority shares in Tallinna Vesi and the signing of the service contract in 2001.

Baltic News Service August 17, 2009 Monday 3:07 PM EET ESTONIA: MANY BAD MISTAKES MADE IN PRIVATIZATION OF TALLINNA VESI WATER CO LENGTH: 247 words DATELINE: TALLINN Aug 17
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http://www.lexisnexis.com/uk/nexis/results/docview/docview.do?docLinkInd...

This report echoes the criticism in an earlier academic report of the Watertime project, published in 2006, which concluded that the company had not financed any significant investment, had reduced employees by half within 6 years, and had steadily increased prices - all contrary to the expectations of the the contract. EM Vinnari, JJ Hukka, 2007: Great expectations, tiny benefits–Decision-making in the privatization of Tallinn water - Utilities Policy, 2007 http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6VFT-4NHV6XN-1...

This report followed a decision by the city council to commission a report into the legality of the contract signed in 2001. Earlier in 2009, the Estonian Estonian Environment Ministry has drawn up a bill, to amend the Water Act, entitling the competition authority to regulate water supply and sewage tariffs approved by local self-governments. The Tallinn-based water supply and sewage utility Tallinna Vesi, generated huge profits from uncontrolled price hikes over the past years referring to the privatisation contract entitling it to price hikes, while the Tallinn city authorities claim their inability to put a stop to the price hike by the service contract. Minister of Economic Affairs says water and sewage service supply prices will be regulated similarly to district heating tariff regulation, subject to control by the competition authority. Tallinna Vesi netted EEK 296mn (EUR 18.92mn USD 25.47mn)in profit on sales revenues reaching EEK 720mn in 2008, granting a net profit margin of 41.4¤ and capital yield of 18.3%.

Eesti Päevaleht April 3, 2009 Friday Estonia: Uncontrolled water price hike in Tallinna Vesi to be curbed http://www.lexisnexis.com/uk/nexis/results/docview/docview.do?docLinkInd...

Estonian Consumer Protection Authrority says the meters installed by the water supply monopoly, Tallinna Vesi, show excess water consumption. Tallinna Vesi is likewise a monopoly in verification of the water meters. A test in a private household in Tallinn,under which a 3-litre container was filled with tap water, with the filling executed by short intervals, resulted in the metre showing a consumption of six litres. Tallinna Vesi, meanwhile, claims that the exact measuring is impossible. Vallin Baltic, a supplier of water meters to Tallinna Vesi, claims installation and building errors cause meters to show measuring error ranging between 20% to 30% (compared to the respective 7% error margin in Helsinki). The Consumer Protection Authority is committed to require Tallinna Vesi to charge customers only for the amount of water consumed. Tallinna Vesi profit margin was 41% in 2008.

Eesti Päevaleht May 28, 2009 Thursday Estonia: Tallinna Vesi monopoly questioned http://www.lexisnexis.com/uk/nexis/results/docview/docview.do?docLinkInd...

By the end of 2002, International Water and United Utilities had together received a total of EEK636m. They thus recouped within 2 years 93% of the EEK687m of new equity capital they injected into Tallinna Vesi in January 2001.

PSIRU Water privatisation and restructuring in Central and Eastern Europe and NIS countries, 2002 http://www.psiru.org/reports/2003-03-W-CEENIS.doc
http://www.psiru.org/reports/2001-11-W-CEE.doc

Tallinna Vesi was originally created in 2001 as a 50-50 joint venture between Tallinn City Council and a private company, UU Tallinn, which was itself a 50-50 joint venture between United Utilities (UU) and Bechtel. Bechtel then sold its stake partly to UU and partly to the EBRD, so that UU owned 75% of UU Tallinn, and EBRD 25%. Thirty per cent of the company's shares were then floated on the stock exchange, so that the proportion owned by UU Tallinn fell to 35.3%, and Tallinn City Council's share fell to 34.7%.

In 2009 a London-based hedge fund, parvus Asset Management, bought a 11% stake. In August 2009 it was rumoured that United Utilities were selling all their overseas interests, including Tallinn.