Shares in Nasdaq OMX-listed Tallinna Vesi staged a relief rally earlier this week after the local administrative court suspended the immediate imposition of a 29% tariff cut which had previously been prescribed by the Estonian competition authority.
“The court has basically given the best possible decision the company could have hoped for,” said Pavel Lupandin, an analyst at SEB Enskilda. Alhough the market had been pricing in a near-term tariff cut, the fact that the case could now take several years to resolve implies at least a degree of short-term dividend protection.
Lupandin estimates that the tariff cut, should it be fully imposed, would effectively halve Tallinna Vesi’s EBITDA, whilst boosting its debt-to-EBITDA ratio to an uncomfortable 6x.
The regulator now has the right to appeal the administrative court’s decision.
Tallinna Vesi generated 2011 net income of �21.5 million (up 31.1%) on revenues of �51.2 million (up 3.1%).
