Market announcement

Title

Results of operations for the 4th quarter and 2008 financial year (EEK)

Message

MANAGEMENT REPORT                                                               
RESULTS OF OPERATIONS - FOR THE 4th QUARTER 2008                                


Overview                                                                        

During the twelve months of 2008 the Company's total sales increased, year on   
year, by 11.0% to 719.9 mln EEK. Total water and sewerage services sale volumes 
increased in the twelve months of 2008 by 0.3% compared to the same twelve      
months of 2007, respective sales increased by 9.8%. Within the service area     
sales to residential customers increased by 8.7% year on year, sales to         
commercial customers increased by 7.4% year on year, and sales to customers     
outside of the service area increased by 49.4% year on year, reaching 3.8 mln m3
or 26.4 mln EEK. The Company's profit before taxes was 362.2 mln EEK, which is  
an 8.7% increase compared to the same twelve months of 2007. Eliminating the    
one-off nitrogen provision release in the 1st quarter of 2007, profit before tax
in the twelve months of 2008 increased by 13.2%. In 2008 the Company invested   
306.3 mln EEK, of which 265.1 mln EEK was invested in network extension and     
rehabilitation.                                                                 


--------------------------------------------------------------------------------
| mln EEK            |  4 Q  |  4 Q  | Change  |    12    |    12    | Change  |
|                    | 2008  | 2007  |         |  months  |  months  |         |
|                    |       |       |         |   2008   |   2007   |         |
--------------------------------------------------------------------------------
| Sales              | 182,7 | 165,7 |   10,3% |    719,9 |    648,3 |   11,0% |
--------------------------------------------------------------------------------
| Gross profit       | 108,7 | 106,2 |    2,3% |    447,2 |    431,7 |    3,6% |
--------------------------------------------------------------------------------
| Gross profit       |  59,5 |  64,1 |   -7,2% |     62,1 |     66,6 |   -6,7% |
| margin %           |       |       |         |          |          |         |
--------------------------------------------------------------------------------
| Operating profit   | 104,0 |  93,4 |   11,4% |    405,4 |    377,4 |    7,4% |
--------------------------------------------------------------------------------
| Operating profit   |  56,9 |  56,4 |    1,0% |     56,3 |     58,2 |   -3,3% |
| margin %           |       |       |         |          |          |         |
--------------------------------------------------------------------------------
| Profit before      |  92,8 |  82,0 |   13,3% |    362,2 |    333,1 |    8,7% |
| taxes              |       |       |         |          |          |         |
--------------------------------------------------------------------------------
| Net profit         |  92,8 |  82,0 |   13,3% |    296,0 |    277,8 |    6,5% |
--------------------------------------------------------------------------------
| Net profit margin  |  50,8 |  49,5 |    2,7% |     41,1 |     42,9 |   -4,1% |
| %                  |       |       |         |          |          |         |
--------------------------------------------------------------------------------
| ROA %              |   3,6 |   3,2 |   13,3% |     11,6 |     10,9 |    6,5% |
--------------------------------------------------------------------------------
| Debt to total      |  49,9 |  51,8 |   -3,5% |     49,9 |     51,8 |   -3,5% |
| capital employed   |       |       |         |          |          |         |
--------------------------------------------------------------------------------

Gross profit margin - Gross profit / Net sales                                  
Operating profit margin - Operating profit / Net sales                          
Net Profit margin - Net Profit / Net sales                                      
ROA - Net profit /Total Assets                                                  
Debt to Total capital employed - Total Liabilities / Total capital employed     


Profit and Loss Statement                                                       

4th quarter 2008                                                                

Sales                                                                           

In the 4th quarter of 2008 the Company's total sales increased, year on year, by
10.3% to 182.7 mln EEK. Sales in the main operating activity principally        
comprise of sales of water and treatment of wastewater to domestic and          
commercial customers within and outside of the service area, and fees received  
from the City of Tallinn for operating and maintaining the storm water system.  

Sales of water and wastewater services were 163.9 mln EEK, an 8.0% increase     
compared to the 4th quarter of 2007, resulting from the 11.7% increase in       
tariffs from 1 January 2008 for the Company's residential and commercial        
customers combined with the factors described below.                            

Included within this amount were the following increases by sector: within the  
service area sales to residential customers increased by 8.0% to 87.0 mln EEK.  
Sales to commercial customers increased by 4.4% to 66.4 mln EEK. Sales to       
customers outside of the service area - primarily bulk volumes of wastewater    
treatment services provided to the surrounding municipalities - increased by    
40.9% reaching 1.1 mln m3 or 6.9 mln EEK. Over pollution fees received were 3.5 
mln EEK, 31.3% increase compared to the 4th quarter of 2007.                    

In the 4th quarter of 2008, the volumes sold to residential customers dropped   
3.3%. We believe that this is mainly related to the fact that people have moved 
to the surrounding areas of Tallinn.                                            

The volumes sold to commercial customers inside the service area decreased by   
6.4% compared to the relevant period in 2007 due to several factors combined.   
Part of the reduction in sales volumes in Tallinn is due to companies moving to 
the surrounding municipalities, supplemented by companies implementing different
efficiency measures or reducing their production.                               
                                                                                
The real estate market has changed considerably compared to last year. Although 
the number of new apartments and business buildings being constructed in Tallinn
in 2008 remained high, a large share of new buildings still remain vacant as    
commercial customers as well as people in need of space are moving to           
surrounding areas due to more affordable real estate prices.                    

This trend is also reflected in the Company's sales to surrounding areas, which 
has increased by 40.9% in the 4th quarter of 2008 compared to the same period   
last year. This reflects the success of the Company's strategy to re-capture    
customers leaving Tallinn. The Company is actively looking for the further      
expansion opportunities into the neighboring municipalities.                    

The sales from the operation and maintenance of the storm water and fire-hydrant
system increased by 32.2% to 15.1 mln EEK in the 4th quarter of 2008 compared to
the same period in 2007. This is in accordance with the terms and conditions of 
the contract whereby the storm water and fire hydrant costs are invoiced based  
on actual costs and volumes treated. This is contractually agreed up to 2020.   


Cost of Goods Sold and Gross Margin                                             

The cost of goods sold for the main operating activity was 74.0 mln EEK in the  
4th quarter of 2008, an increase of 14.5 mln EEK or 24.4% from the equivalent   
period in 2007.                                                                 

In the 4th quarter of 2008 the Company did not achieve the beneficial 0.5       
coefficient for pollution tax, and as a result the amount of pollution tax      
payable was 7.0 mln EEK compared to 1.7 mln EEK in 4th quarter of 2007.  This   
increase in pollution tax is due to the combination of the coefficient and      
increase in tax rates year on year by 20%, supplemented by increased volume and 
pollution impact. Despite the fact that the pollution level of the incoming     
sewerage does vary and the Company does not have full control over storm water  
outlets regarding the pollution, we are working hard to use the optimum level of
chemicals to achieve the 0.5 coefficient in the following quarters.             

The chemical costs were 5.2 mln EEK, representing a 1.3% increase compared to   
the corresponding period in 2007. This result is the combination of volumes     
treated, chemicals dosed and the price inflation.                               

Electricity costs increased by 1.6 mln EEK or 24.6% in the 4th quarter of 2008  
compared to the 4th quarter of 2007 due to higher electricity prices combined   
with volumes treated.                                                           

Salary expenses increased in the 4th quarter of 2008, year on year, by 2.1 mln  
EEK or 13.9% due to a number of factors. Firstly, increased headcount from the  
new services launched. Secondly, a highly competitive labour market has led to  
significant salary inflation. Finally in the 1st quarter of 2008 the Company    
restructured and combined departments which resulted in transferring cost from  
one line to another.                                                            

Depreciation charges increased in the 4th quarter of 2008 by 2.8 mln EEK or     
15.5% year on year due to new sludge treatment building commissioned in the end 
of 2007. Also in the beginning of 2008 the depreciation rates were revised to   
correspond with the useful life of assets.                                      

Other cost of goods sold in the main operating activity increased by 2.5 mln    
EEK, or 25.4% year on year. This was due to higher costs on a number of support 
services and maintenance and repair contracts, reflecting the increase in labour
and services costs, but also the tightening of warranty requirements regarding  
the emergency repair works in Tallinn.                                          

The cost pressure sets the challenge to the management to identify the further  
efficiency opportunities through review of processes, procedures and            
procurements.                                                                   

As a result of all of the above the Company's gross profit for the 4th quarter  
of 2008 was 108.7 mln EEK, which is an increase of 2.5 mln EEK, or 2.3%,        
compared to the gross profit of 106.2 mln EEK for the 4th quarter of 2007.      

Operating Costs and Operating Margin                                            

Marketing expenses decreased by 0.8 mln EEK to 3.1 mln EEK during the 4th       
quarter of 2008 compared to the corresponding period in 2007. This is partly the
result of the structural changes, balanced by the increase in depreciation      
charges.                                                                        

Mainly as a consequence of structural changes the General administration        
expenses decreased by 1.3 mln EEK to 13.9 mln EEK in the 4th quarter of 2008    
year on year.                                                                   

Other net income/expenses                                                       

In order to more appropriately reflect the substance of different types of      
compensations received, the accounting policy for constructions was changed in  
2008. In accordance with the new policy, any compensation received from the     
local governments are treated as government grants in accordance with IAS 20 and
are recognized as income over the periods necessary to match them with the      
related costs which they are intended to compensate. Accordingly, such          
compensations are deducted from the carrying amount of the pipeline assets      
constructed; any excess of the compensation receivable compared to the related  
construction cost that the compensation is intended to compensate is recognized 
in income once the construction is completed. The net effect of these           
transactions can be seen from other income/expenses and the change in the       
accounting policy is accounted retrospectively.                                 

Until 2007 and also during the first 3 quarters of 2008, the Company accounted  
for any compensations received from customers and local governments for         
constructing new pipelines as income once the construction was completed and    
receipt of the compensation was probable. Compensations were presented in the   
income statement as “Revenues from other operating activities” and the related  
construction costs were presented as “Costs of goods sold (other operating      
activities)”.                                                                   

Income/expenses from constructions totaled a net income of 14.2 mln EEK in the  
4th quarter of 2008 compared to a net income of 5.3 mln EEK in the 4th quarter  
of 2007. The rest of the other income/expenses totaled an expense of 1.9 mln EEK
in the 4th quarter of 2008 compared to an income of 0.9 mln EEK in the 4th      
quarter of 2007.                                                                

As a result of all of the above the Company's operating profit for the 4th      
quarter of 2008 was 104.0 mln EEK, an increase of 10.6 mln EEK compared to an   
operating profit of 93.4 mln EEK achieved in the 4th quarter of 2007. Compared  
to the operating profit in the 4th quarter of 2007, the operating profit has    
increased 11.4%.                                                                

Financial expenses                                                              

Net Financial expenses were 11.2 mln EEK in the 4th quarter of 2008, which is a 
decrease of 0.3 mln EEK or 2.2% compared to the 4th quarter of 2007. The        
Company's interest costs have increased by 2.0% compared to the 4th quarter of  
2007. This is due to the increase in the 6 month Euribor rate. The increase in  
interest expenses is partially offset by an increase in financial income earned 
during the 4th quarter of 2008, as a result of a more favourable cash position  
and increasing interest rates.                                                  

Profit Before Tax                                                               

The Company's profit before taxes for the 4th quarter of 2008 was 92.8 mln EEK, 
which is 10.8 mln EEK higher than the profit before taxes of 82.0 mln EEK for   
the 4th quarter of 2007.                                                        


Results for the twelve months of 2008                                           

During the twelve months of 2008 the Company's total sales increased, year on   
year, by 11.0% to 719.9 mln EEK.  Sales from the Company's main operating       
activities were 719.9 mln EEK. Sales of water and wastewater treatment were     
658.3 mln EEK, a 9.8% increase compared to the twelve months of 2007.           

The Company's profit before taxes for the twelve months of 2008 was 362.2 mln   
EEK, which is 29.1 mln EEK higher than the profit before taxes of 333.1 mln EEK 
in the relevant period in 2007. The results for the twelve months of 2007 were  
impacted by the fact that the Ministry of Environment gave final approval to the
success of the nitrogen project, which resulted in the release of a provision   
worth 13.3 mln EEK for environmental taxes. Looking at the underlying profit    
before taxes for the twelve months of 2007, it shows a 42.4 mln EEK or 13.2%    
increase in 2008 for the same period.                                           


Balance sheet                                                                   

During the twelve months of 2008 the Company invested 306.3 mln EEK into fixed  
assets. Non-current assets were 2,212 mln EEK at 31 December 2008. Current      
assets decreased by 26.2 mln EEK to 347.4 mln EEK in the twelve months of the   
year, customer receivables increased by 3.7 mln EEK. During the twelve months of
2008 cash at bank increased by 51.4 mln EEK.                                    

Current liabilities decreased by 7.0 mln EEK to 192.2 mln EEK in the twelve     
months of the year. This was mainly due to increases in Current portion of      
long-term borrowings by 41.5 mln EEK, as result of the reclassification of the  
loan based on repayment schedule and decrease in Trade payables.                

The Company continues to maintain its leverage level within its target range of 
50% with total liabilities to total capital employed of 49.9% as of 31 December 
2008. Long-term liabilities stood at 1,085.5 mln EEK at the end of December     
2008, consisting almost entirely of the outstanding balance on the two long-term
bank loans.                                                                     


Cash flow                                                                       

During the twelve months of 2008, the Company generated 393.1 mln EEK of cash   
flows from operating activities, an increase of 59.5 mln EEK compared to the    
corresponding period in 2007. Underlying operating profit continues to be the   
main driver for growth, supplemented by debt collection in twelve months of     
2008.                                                                           

In the twelve months of 2008 net cash outflows from investing activities were   
26.8 mln EEK, which is 126.1 mln EEK less than in 2007. This was mainly due to  
the change in constructions compensation mechanism as result of the 30 November 
2007 agreement with the local municipality. In the 1st quarter 2008 the Company 
received the compensation for 2007 constructions.  In 2008 the Company invested 
306.3 mln EEK - 265.1 mln EEK on networks (including 189.7 mln EEK on extension 
and developments), 17.5 mln EEK at Paljassaare wastewater treatment plant and   
sludge treatment, 9.9 mln EEK on water quality (Ülemiste water treatment plant  
and raw water) and 13.7 mln EEK for other investments (IT, capital maintenance, 
meters, etc).                                                                   

The cash outflows from financing activities were 314.9 mln EEK during the twelve
months of 2008 compared to cash outflow of 251.8 mln EEK during the same twelve 
months of 2007, representing the payouts of the dividend and the income tax on  
dividends of respective years. The Company made its first scheduled repayment to
EBRD. Considering the extensive network extension program and related investment
outflows until 2011, the Company does not intend to reduce the loan capital and 
therefore the repayment amount was replaced with a new loan drawdown from       
Nordea. The Company signed the new loan agreement with Nordea in November 2008. 
The total loan facility is 37.5 mln EUR and the interest margin applicable to   
the 6 month Euribor is 115 bps.                                                 

As a result of all of the above factors, the total cash inflow in the twelve    
months of 2008 was 51.4 mln EEK compared to a cash outflow of 71.0 mln EEK in   
the twelve months of 2007. Cash and cash equivalents stood at 229.9 mln EEK as  
at 31 December 2008.                                                            


Employees                                                                       

At the end of the 4th quarter of 2008, the number of employees was 327, compared
to 312 at the end of the 4th quarter of 2007.                                   


Dividends and share performance                                                 

Based on the results of the 2007 financial year, the Company paid 249,010,000   
EEK of dividends. Of this 10,000 EEK was paid to the owner of the B-share       
and 249,000,000 EEK, i.e. 12.45 EEK per share to the owners of the A-shares.    
The dividends were paid out on 13 June 2008, based on the list of shareholders, 
which was fixed on 30 May 2008.                                                 

As of 31 December 2008 AS Tallinna Vesi shareholders, with a direct holding over
5%, were:                                                                       

--------------------------------------------------------------------------------
| United Utilities (Tallinn) BV                         | 35.3%                |
--------------------------------------------------------------------------------
| City of Tallinn	                                | 34.7%                |
--------------------------------------------------------------------------------
| Credit Suisse Securities (Europe) Ltd Prime Brokerage | 5.76%                |
| A/C Prime Brokerage Clients                           |                      |
--------------------------------------------------------------------------------
| HSBC Bank Plc Re Parvus European Absolute             | 5.46%                |
| Opportunities Master Fund                             |                      |
--------------------------------------------------------------------------------

Parvus AM has declared that their shareholding in the clients' accounts exceeds 
10% and AKO Capital has declared their indirect ownership above 5% of the share 
capital.                                                                        

At the end of the quarter, 31 December 2008, the closing price of the AS        
Tallinna Vesi share was 140.66 EEK (8.99 EUR), which is a 12.8% decrease        
compared to the closing price of 161.32 EEK (10.31 EUR) at the beginning of     
quarter,  this is still outperforming the market as the OMX Tallinn index       
dropped by 41.7% during the quarter.                                            



Operational highlights in the twelve months of 2008                             

In 2008 the water quality as measured at the customer's taps again showed       
improvement with over 98% of the samples taken fully compliant with European    
standards against a requirement of 95%. We are pleased to report for 2008 the   
compliance with all requirements of the Levels of Services established by the   
contract with City of Tallinn. Annual compliance at the waste water treatment   
plant was also achieved.                                                        
2008 was the first year of the three year network extension programme and the   
Company delivered the planned lengths in 2008. In total over 34 km of wastewater
pipe, 14.4 km of storm water pipe and 2.9 km of water pipe were constructed,    
thus providing the opportunity for over 1300 customers to connect to the        
wastewater network. The programme continues in 2009 with many of the designs    
already complete and construction contracts being awarded. During the 2008      
network extension programme the Company also took the opportunity to replace    
over 16 km of water pipe to further improve the water quality and pressure      
regimes in the targeted areas.                                                  
Installation of more valves on the water network, replacing connection pipes and
also responding to leakages faster, saw the leakage level reduced to 17.25%, a  
further improvement on the 19.2% achieved in 2007.                              
2008 was a wet year and the Company was very diligent ensuring the cleaning and 
proper function of the street gullies and storm water system and this resulted  
in less flooding issues in the City. The Company also pressure washed over 165  
km of wastewater pipe, 65 km more than in 2007, and as a consequence the number 
of blockages was reduced by more than 6%.                                       
The Company implemented the development component in the 1st quarter of 2008    
according to the Services Agreement Amendment, which was signed with the City of
Tallinn on 30 November 2007. The Services Agreement is extended until 2020 and  
the k-coefficient is also fixed until 2020 - 2% in years 2009 to 2010 and 0% in 
years 2011 to 2020. No extra capital expenditures (in addition to maintenance   
capex and extensions program agreed in the contract) can be imposed on the      
Company until 2020. According to the agreement the network extension            
constructions must be completed by March 2011. To compensate the Company for the
construction and financing costs, a specific development component is included  
into the Tallinn domestic water tariff starting from 1 March 2008 to the end of 
2017, and the City of Tallinn will compensate 4.4 mln EEK every month for the   
storm water constructions until the end of 2011. The development component shall
be compensated to the customers with direct payment to the Company by the City  
of Tallinn. The component is bigger during the construction period (9.00 kroons 
per m3 until 31 December 2011 and 6.10 kroons per m3 in years 2012 to 2017).    
On the 5th of August the Company concluded an operating agreement with Maardu   
City and Maardu Vesi. When the operating contract comes into force, AS Tallinna 
Vesi shall help AS Maardu Vesi to finance the self-financing part required      
within the European Union Assistance Project during the period 2009-2012 with up
to a total of 80 mln EEK over the period. The Company shall get the investment  
back through the capital component to be included in the tariff within 20 years.
On the basis of the cooperation of the companies and the subsidies of the       
European Union the problems regarding the water quality in Maardu shall be      
solved in the forthcoming years and in a longer perspective Maardu shall be     
supplied with drinking water from Ülemiste Water Treatment Plant.               
Administrating the infrastructure of AS Maardu Vesi enables AS Tallinna Vesi to 
increase its customer portfolio and to grow turnover. In addition to the        
required self-financing AS Tallinna Vesi shall provide the customers of AS      
Maardu Vesi with a modern service of operating the assets with a good-quality   
customer service. There are about 20 000 residents living in the operating area 
of AS Maardu Vesi. The operating contract has been planned for the duration of  
30 years. Initially the contract was planned to commence from 1 January 2009,   
assuming the EU funding confirmation in 2008. In January 2009 Maardu Vesi       
received the positive confirmation for their application to use the EU funding. 
Tallinna Vesi shall start to operate the assets and provide full service at the 
latest from 1 April 2009 after the preparation period during which the assets   
are taken over. AS Maardu Vesi shall still remain the owner of all assets.      
The Company submitted the application for the tariff increase from 1st January  
2009 in the 3rd quarter. The City Government approved the 12.8% tariff increase 
for water and wastewater services on 1 October 2008. The tariff increase is     
applicable from 1st January 2009 and consists of 11.4% of CPI increase, 2% of   
k-coefficient and -0.6% of change of law. The 12.8% tariff increase is          
applicable in the main service area and is similar outside the main service     
area, depending still on individual contracts with the municipalities.          
The usage of the web based self service has increased by more than 2 times      
compared to 2007, 9.7% of invoices were issued via web.                         


Additional information:                                                         
Siiri Lahe                                                                      
Chief Financial Officer                                                         
+372 6262 262                                                                   
[email protected]                                                             




--------------------------------------------------------------------------------
| INCOME STATEMENT               |    IV    |    IV    | 12 months | 12 months |
|                                | quarter  | quarter  |           |           |
--------------------------------------------------------------------------------
| (thousand EEK)                 |   2008   |   2007   |   2008    |   2007    |
--------------------------------------------------------------------------------
|                                |          |          |           |           |
--------------------------------------------------------------------------------
| Sales from main operating      |  182 717 |  165 710 |   719 923 |   648 335 |
| activities                     |          |          |           |           |
--------------------------------------------------------------------------------
|                                |          |          |           |           |
--------------------------------------------------------------------------------
| Costs of goods sold (main      |  -73 984 |  -59 469 |  -272 752 |  -216 677 |
| operating activities)          |          |          |           |           |
--------------------------------------------------------------------------------
|                                |          |          |           |           |
--------------------------------------------------------------------------------
| GROSS PROFIT                   |  108 733 |  106 241 |   447 171 |   431 658 |
--------------------------------------------------------------------------------
|                                |          |          |           |           |
--------------------------------------------------------------------------------
| Marketing expenses             |   -3 079 |   -3 838 |   -12 310 |   -13 547 |
--------------------------------------------------------------------------------
| General administration         |  -13 949 |  -15 278 |   -54 546 |   -56 849 |
| expenses                       |          |          |           |           |
--------------------------------------------------------------------------------
| Other income/ expenses (-)     |   12 304 |    6 261 |    25 045 |    16 100 |
--------------------------------------------------------------------------------
|                                |          |          |           |           |
--------------------------------------------------------------------------------
| OPERATING PROFIT               |  104 009 |   93 386 |   405 360 |   377 362 |
--------------------------------------------------------------------------------
|                                |          |          |           |           |
--------------------------------------------------------------------------------
| Financial income / expenses    |  -11 170 |  -11 426 |   -43 199 |   -44 237 |
| (-)                            |          |          |           |           |
--------------------------------------------------------------------------------
|                                |          |          |           |           |
--------------------------------------------------------------------------------
| PROFIT BEFORE TAXES            |   92 839 |   81 960 |   362 161 |   333 125 |
--------------------------------------------------------------------------------
|                                |          |          |           |           |
--------------------------------------------------------------------------------
| Income tax on dividends        |        0 |        0 |   -66 193 |   -55 285 |
--------------------------------------------------------------------------------
|                                |          |          |           |           |
--------------------------------------------------------------------------------
| NET PROFIT FOR THE PERIOD      |   92 839 |   81 960 |   295 968 |   277 840 |
--------------------------------------------------------------------------------
|                                |          |          |           |           |
--------------------------------------------------------------------------------
| Attributable to:               |          |          |           |           |
--------------------------------------------------------------------------------
| Equity holders of A-shares     |   92 829 |   81 950 |   295 958 |   277 830 |
--------------------------------------------------------------------------------
| B-share holder                 |       10 |       10 |        10 |        10 |
--------------------------------------------------------------------------------
|                                |          |          |           |           |
--------------------------------------------------------------------------------
| Earnings per share in kroons   |     4,64 |     4,10 |     14,80 |     13,89 |
--------------------------------------------------------------------------------



--------------------------------------------------------------------------------
| BALANCE SHEET                                     |            |             |
--------------------------------------------------------------------------------
| (thousand EEK)                                    | 31.12.2008 |  31.12.2007 |
--------------------------------------------------------------------------------
|                                                   |            |             |
--------------------------------------------------------------------------------
| ASSETS                                            |            |             |
--------------------------------------------------------------------------------
| CURRENT ASSETS                                    |            |             |
--------------------------------------------------------------------------------
| Cash at bank and in hand                          |    229 860 |     178 420 |
--------------------------------------------------------------------------------
| Customer receivables                              |    108 204 |     104 496 |
--------------------------------------------------------------------------------
| Accrued income and prepaid expenses               |      4 434 |      85 906 |
--------------------------------------------------------------------------------
| Inventories                                       |      3 760 |       3 645 |
--------------------------------------------------------------------------------
| Assets for sale                                   |      1 140 |       1 120 |
--------------------------------------------------------------------------------
| TOTAL CURRENT ASSETS                              |    347 398 |     373 587 |
--------------------------------------------------------------------------------
|                                                   |            |             |
--------------------------------------------------------------------------------
| NON-CURRENT ASSETS                                |            |             |
--------------------------------------------------------------------------------
| Tangible assets                                   |  2 052 316 |   1 992 978 |
--------------------------------------------------------------------------------
| Intangible assets                                 |     40 702 |      49 137 |
--------------------------------------------------------------------------------
| Unfinished assets - non connections               |     24 808 |      48 034 |
--------------------------------------------------------------------------------
| Unfinished pipelines - new connections            |     91 974 |      90 057 |
--------------------------------------------------------------------------------
| Prepayments for fixed assets                      |      1 853 |       5 399 |
--------------------------------------------------------------------------------
| TOTAL NON-CURRENT ASSETS                          |  2 211 653 |   2 185 605 |
--------------------------------------------------------------------------------
| TOTAL ASSETS                                      |  2 559 051 |   2 559 192 |
--------------------------------------------------------------------------------
|                                                   |            |             |
--------------------------------------------------------------------------------
| LIABILITIES                                       |            |             |
--------------------------------------------------------------------------------
|                                                   |            |             |
--------------------------------------------------------------------------------
| CURRENT LIABILITIES                               |            |             |
--------------------------------------------------------------------------------
| Current portion of long-term borrowings           |     82 695 |      41 486 |
--------------------------------------------------------------------------------
| Trade and other payables, incl. dividends         |     63 636 |      86 966 |
--------------------------------------------------------------------------------
| Taxes payable                                     |     23 634 |      26 486 |
--------------------------------------------------------------------------------
| Short-term provisions                             |      2 486 |       2 231 |
--------------------------------------------------------------------------------
| Deferred income                                   |     19 797 |      42 099 |
--------------------------------------------------------------------------------
| TOTAL CURRENT LIABILITIES                         |    192 248 |     199 268 |
--------------------------------------------------------------------------------
|                                                   |            |             |
--------------------------------------------------------------------------------
| NON-CURRENT LIABILITIES                           |            |             |
--------------------------------------------------------------------------------
| Bank loans                                        |  1 084 790 |   1 125 491 |
--------------------------------------------------------------------------------
| Other payables                                    |        735 |         113 |
--------------------------------------------------------------------------------
| TOTAL NON-CURRENT LIABILITIES                     |  1 085 525 |   1 125 604 |
--------------------------------------------------------------------------------
| TOTAL LIABILITIES                                 |  1 277 773 |   1 324 872 |
--------------------------------------------------------------------------------
|                                                   |            |             |
--------------------------------------------------------------------------------
| EQUITY CAPITAL                                    |            |             |
--------------------------------------------------------------------------------
| Share capital                                     |    200 001 |     200 001 |
--------------------------------------------------------------------------------
| Share premium                                     |    387 000 |     387 000 |
--------------------------------------------------------------------------------
| Statutory legal reserve                           |     20 000 |      20 000 |
--------------------------------------------------------------------------------
| Accumulated profit                                |    378 309 |     349 479 |
--------------------------------------------------------------------------------
| Net profit for the period                         |    295 968 |     277 840 |
--------------------------------------------------------------------------------
| TOTAL EQUITY CAPITAL                              |  1 281 278 |   1 234 320 |
--------------------------------------------------------------------------------
| TOTAL LIABILITIES AND EQUITY CAPITAL              |  2 559 051 |   2 559 192 |
--------------------------------------------------------------------------------



--------------------------------------------------------------------------------
| CASH FLOW STATEMENT                               | 12 months  |  12 months  |
--------------------------------------------------------------------------------
| (thousand EEK)                                    |    2008    |    2007     |
--------------------------------------------------------------------------------
|                                                   |            |             |
--------------------------------------------------------------------------------
| CASH FLOWS FROM OPERATING ACTIVITIES              |            |             |
--------------------------------------------------------------------------------
| Operating profit                                  |    405 360 |     377 362 |
--------------------------------------------------------------------------------
| Adjustment for depreciation                       |     89 669 |      79 241 |
--------------------------------------------------------------------------------
| Adjustment for income and expenses from           |    -27 921 |     -14 250 |
| constructions                                     |            |             |
--------------------------------------------------------------------------------
| Other financial income and expenses               |       -891 |      -1 585 |
--------------------------------------------------------------------------------
| Profit from sale of fixed assets                  |       -455 |      -2 422 |
--------------------------------------------------------------------------------
| Expensed fixed assets                             |        -19 |         476 |
--------------------------------------------------------------------------------
| Capitalization of operating expenses              |    -25 210 |     -19 764 |
--------------------------------------------------------------------------------
| Movement in current assets involved in operating  |      9 411 |     -32 062 |
| activities                                        |            |             |
--------------------------------------------------------------------------------
| Movement in liabilities involved in operating     |        758 |        -327 |
| activities                                        |            |             |
--------------------------------------------------------------------------------
| Interest paid                                     |    -57 569 |     -52 986 |
--------------------------------------------------------------------------------
| Total cash flow from operating activities         |    393 133 |     333 683 |
--------------------------------------------------------------------------------
|                                                   |            |             |
--------------------------------------------------------------------------------
| CASH FLOWS FROM INVESTING ACTIVITIES              |            |             |
--------------------------------------------------------------------------------
| Acquisition of fixed assets (incl pipelines       |   -307 197 |    -265 951 |
| construction)                                     |            |             |
--------------------------------------------------------------------------------
| Proceeds from pipelines financed by construction  |    262 987 |     101 840 |
| income                                            |            |             |
--------------------------------------------------------------------------------
| Proceeds from sale of and prepayments received    |        480 |         390 |
| for fixed assets                                  |            |             |
--------------------------------------------------------------------------------
| Proceeds from sale of assets and real estate      |          0 |         242 |
| investments                                       |            |             |
--------------------------------------------------------------------------------
| Interest received                                 |     16 905 |      10 571 |
--------------------------------------------------------------------------------
| Total cash flow from investing activities         |    -26 825 |    -152 908 |
--------------------------------------------------------------------------------
|                                                   |            |             |
--------------------------------------------------------------------------------
| CASH FLOWS FROM FINANCING ACTIVITIES              |            |             |
--------------------------------------------------------------------------------
| Received long-term loans                          |     42 246 |           0 |
--------------------------------------------------------------------------------
| Repayment of long-term loans                      |    -41 911 |           0 |
--------------------------------------------------------------------------------
| Finance lease payments                            |          0 |        -473 |
--------------------------------------------------------------------------------
| Dividends paid                                    |   -249 010 |    -196 010 |
--------------------------------------------------------------------------------
| Income tax on dividends                           |    -66 193 |     -55 285 |
--------------------------------------------------------------------------------
| Total cash flow from financing activities         |   -314 868 |    -251 768 |
--------------------------------------------------------------------------------
|                                                   |            |             |
--------------------------------------------------------------------------------
| Change in cash and bank accounts                  |     51 440 |     -70 993 |
--------------------------------------------------------------------------------
|                                                   |            |             |
--------------------------------------------------------------------------------
| CASH AND EQUIVALENTS AT THE BEGINNING OF THE      |    178 420 |     249 413 |
| PERIOD                                            |            |             |
--------------------------------------------------------------------------------
|                                                   |            |             |
--------------------------------------------------------------------------------
| CASH AND EQUIVALENTS AT THE END OF THE PERIOD     |    229 860 |     178 420 |
--------------------------------------------------------------------------------