Market announcement

Title

Results of operations for the 1st halfyear of 2011

Message

MANAGEMENT REPORT

Privatization Contract and Regulation Overview



The Company's tariffs are still frozen due to the ongoing debate with the
Competition Authority (CA). The Company applied for a contractual 3.5% tariff
increase on 9th November 2010. The Competition Authority rejected the tariff
application without any analysis of the privatization contract and the
Company's performance during the contractual period. The Company's tariff
mechanism and stable regulatory regime has enabled the delivery of all the
objectives required by the privatization without giving excessive returns to
shareholders of the Company.  The Company would like its shareholders to note
that the Company has a contract until 2020 and that the financial performance
of the company should be evaluated over this period of time and not on a single
year basis. The privatization contracts signed in 2001 were structured to
produce lower returns in the early years, increasing over the lifetime of the
contract to give a real (net of inflation) rate of return on invested capital
of 7.0% over the contract period. 



The Company believes in best practice operating performance on behalf of its
customers, and this includes providing that the financial terms and conditions
of the fully legal privatization contract deliver rates of return that are
consistent with the degree of risk being taken and benchmarking this against
other regulatory determinations. The Company has chosen the average real return
on invested capital[1] (ARRIC) calculation in order to prove its returns since
2001, which is the classical formula used for verifying utility profits. 



The ARRIC is expected to remain on a level of 6.2% throughout 2011.  The annual
return is expected to increase in 2011 to 6.5% from 6.4% in 2010. The average
return is still lower than the annual return due to the much lower returns
earned in the early years of the contract. 



ARRIC calculation uses the capital paid for the 50.4% of the shares at
privatization to calculate the Regulatory Asset Base (RAB). This calculation is
recommended by the World Bank for tariff setting for privatized utilities. For
further information on the RAB calculation please see paragraph 3.2 and the
tables 4 and 5 of Appendix 5 of the tariff application[2]. 



Using such a well-established methodology gives clarity and enables investors
to independently verify the financial performance of the Company using the
principles applied in internationally accepted regulatory regimes that have
already been subject to a significant level of economic analysis and challenge.
Furthermore, in accordance with good governance and to ensure the Company's
results are evidence based the Company has had its financial performance
independently verified by the international economics consulting company Oxera.
Oxera completed its analysis of the Company's financial performance in November
2010 and a copy of this report can be found as Appendix 1[3] to the tariff
application. 



Our shareholders will be aware that the Competition Authority is stating that
the profitability is too high, and insisting that their methodology must be
used. With such approach the CA fully disregards the fully legal privatization
contract and the tariff regulation (CPI +/- k) chosen by the earlier regulator
in 2001. 

Estonian Authorities have claimed that the amendments to the PWSSA enforced in
2010 did not change anything regarding the justified profitability calculations
and that only the regulator has changed. The Company has explained via Stock
Exchange announcements that in August 2010 a restriction was included to the
law about the body who has made the investment limiting it only to the
investment made by the water undertaking itself. During the privatization and
until August 2010 the wording of the law enabled to earn a reasonable return on
capital invested by the investors. 

According to the Company's best knowledge the new regulator stepping into
existing valid contract is required to consider the privatization contract and
the regulatory regime chosen by the earlier regulator unless they can prove
that the contract was illegal. 

The CA is only able to claim the excessive profitability by doing the following:

  1. From a contractual perspective
     1. Disregarding all aspects of the fully legal privatization contract
     2. Assigning zero value to the service improvements made as a result of the
        privatization
     3. Without ever analyzing the financial performance of the contract from
        2001 to 2011

  1. And secondly from a regulatory perspective
     1. Ignoring the privatization value of the company, thus denying investors
        the opportunity to earn a return on the full amount of capital invested
        at privatization. This is also in complete contradiction with the CA's
        own references
[4]
         to the World Bank Guidelines
[5]
         used in its analyses of the Company's tariffs and also in its
        methodology for energy sector
[6]
        .
     2. Applying the inconsistent treatment of inflation within its
        calculations. The CA ignores the World Bank recommendation to index the
        asset value of the company by inflation and declares the usage of
        nominal WACC, but despite of repeated enquiries
[7]
         from the Company has not proved the inclusion of the inflation to the
        nominal WACC calculation.



The Company continues to try to engage with the authorities to have a
professional dialogue regarding the fully legal privatization contract and best
practice regulation. 



RESULTS OF OPERATIONS - FOR THE 1st HALF-YEAR 2011

Overview of the financial statements



During the 2nd quarter of 2011 the sales increased by 2.3%, mainly due to the
slight increase in sales volumes. As result of excellent operational
performance and related efficiencies the gross profit increased by 7.1%. Still
the operating profit decreased by 4.0% and the profit before taxes decreased by
1.3%, being impacted by slimmer profits from non-related activities and
negative movement in fair value of financial instruments, both with no cash
impacts. 





mln €                     2 Q     2 Q     Change   6 months    6 months   Change
                          2011    2010               2011        2010           
--------------------------------------------------------------------------------
Sales                      12,8    12,5     2,3%        25,2        24,7    1,8%
Gross profit                7,8     7,3     7,1%        15,4        14,9    2,9%
Gross profit margin %      61,4    58,6     4,7%        61,0        60,4    1,1%
Operating profit            6,9     7,2    -4,0%        13,8        13,9   -0,7%
Operating profit - main     6,7     6,1     8,5%        13,2        12,6    5,4%
 business                                                                       
Operating profit margin    54,0    57,5    -6,1%        54,8        56,2   -2,4%
 %                                                                              
Profit before taxes         5,7     5,8    -1,3%        13,7        11,1   24,3%
Net profit                  1,5    -2,7  -155,7%         9,5         2,6  270,9%
Net profit margin %        11,7   -21,4  -154,5%        37,6        10,3  264,3%
ROA %                       0,8    -1,5  -155,0%         5,3         1,4  266,1%
Debt to total capital      62,9    66,5    -5,5%        62,9        66,5   -5,5%
 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

Main business - water and wastewater activities, excl. connections profit and
government grants 



Profit and Loss Statement

2nd quarter 2011



Sales

  In the 2nd quarter of 2011 the Company's total sales increased, year on year,
by 2.3% to 12.8 mln EUR. 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 11.7 mln EUR, a 2.6% increase
compared to the 2nd quarter of 2010, resulting from the slight rise in sales
volumes as described below. 



Within the service area, sales to residential customers increased by 0.2% to
5.9 mln EUR. Sales to commercial customers increased by 6.7% to 4.6 mln EUR.
Sales to customers outside of the service area increased by 0.7% to 0.92 mln
EUR in the 2nd quarter of 2011. Over pollution fees received were 0.23 mln EUR,
a 6.7% decrease compared to the 2nd quarter of 2010. 



In the 2nd quarter of 2011, the volumes sold to residential customers increased
by 0.6% year on year, compared to decrease we faced in 1st quarter of 2011 and
previous quarters of 2010. 



The volumes sold to commercial customers inside the service area have risen,
reflecting a 7.3% increase compared to the same period in 2010. The sales
volumes increased mainly due to improvement in leisure sector and related
industrial services as result of pick up in tourism sector. The volume increase
exceeds the sales increase due to the proportionally higher increase in waste
water services which tariffs are a bit lower compared to the water tariffs. 



Outside service area sales volumes were 4.3% lower than in the 2nd quarter of
2010. The main factor in this decrease was lower storm water volumes in the 2nd
quarter of 2011 compared to 2010, resulting in sales increase year on year as
storm water tariffs are considerably lower as sewage tariffs. 



The sales from the operation and maintenance of the storm water and
fire-hydrant system decreased by 2.8% to 0.78 mln EUR in the 2nd quarter of
2011 compared to the same period in 2010. 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. 



Cost of Goods Sold and Gross Margin



The cost of goods sold for the main operating activity was 4.9 mln EUR in the
2nd quarter of 2011, a decrease of 0.24 mln EUR or 4.5% from the equivalent
period in 2010. 



The cost reduction was mainly the result of nitrogen removal from the waste
water and related reduction in pollution tax. The pollution tax calculation
depends on waste water treatment results and concentration of different waste
components in treated waste water. In the 2nd quarter of 2011 the Company was
successful to remove all pollutants below the level required for the
application of the beneficial coefficient. Thereby the Company achieved in the
2nd quarter of 2011 the beneficial 0.5 tax coefficient in contrary to the 2nd
quarter of 2010 with coefficient 1.0, and thereby the amount of pollution tax
payable was 0.32 mln EUR compared to 0.70 mln EUR in the 2nd quarter of 2010.
The decrease in volumes treated in 2nd quarter of 2011 also contributed to
lower pollution tax payable, partly balanced by the increase in tax rates year
on year by 14.8%. To mitigate the nitrogen treatment and tax risks discussed
throughout the 2010, we are continuing with the investment into an additional
stage of waste water treatment and according to the construction schedule the
works should be completed in the beginning of the 3rd quarter of 2011. 



Chemical costs were 0.31 mln EUR, representing a 6.2% decrease compared to the
corresponding period in 2010 despite of the slight increase in rates. The need
to dose chemicals was lower in combination of the volumes, concentration of
pollutants and water temperature. 



Electricity costs increased by 0.02 mln EUR or 2.5% in the 2nd quarter of 2011
compared to the 2nd quarter of 2010, mainly due to higher electricity prices as
result of the purchase from the open market. 



Salary expenses within costs of goods sold increased in the 2nd quarter of
2011, year on year, by 0.07 mln EUR or 6.6% in combination of redundancy
payments, performance related pay accrual and small increase in basic salaries.
Other salary lines had similar impact. 



Other cost of goods sold in the main operating activity increased 0.09 mln EUR,
or 9.0% year on year, mainly due to increased asphalting cost compared to 2nd
quarter of 2010. 



As a result of all of the above the Company's gross profit for the 2nd quarter
of 2011 was 7.8 mln EUR, which is an increase of 0.50 mln EUR, or 7.1%,
compared to the gross profit of 7.3 mln EUR for the 2nd quarter of 2010. 



Operating Costs and Operating Margin



Marketing expenses increased by 0.002 mln EUR to 0.18 mln EUR during the 2nd
quarter of 2011 compared to the corresponding period in 2010. This is mainly
the result of a discussed increase in salaries expenses, partly balanced by
savings in other items. 



In the 2nd quarter of 2011 the General administration expenses increased by
0.32 mln EUR year on year to 1.2 mln EUR. Within this group the salary costs
increase was partly related to the transfer of management services to the
salary line. Still the increase in legal consultancies acquired in the process
of tariff dispute exceeded the transfer of cost within other costs. 



Other net income/expenses



The majority of the income in Other net income/expenses relates to
constructions and government grants. The drivers for this income stream are the
networks extension program and the connections activity in Tallinn. Income and
expenses from constructions and government grants totaled a net income of 0.25
mln EUR in the 2nd quarter of 2011 compared to a net income of 1.1 mln EUR in
the 2nd quarter of 2010, this line varies throughout the year depending on
construction volumes and estimates to the profit margins on projects completed.
2011 2nd quarter profits from government grants profits were influenced mainly
by delays in construction and the shortage will be compensated in forthcoming
quarters during the construction program. 



The rest of the other income/expenses totaled an income of 0.20 mln EUR in the
2nd quarter of 2011 compared to an expense of 0.13 mln EUR in the 2nd quarter
of 2010. This line was mainly impacted by the excellent debt collection and
related decrease in bad debt accrual in the 2nd quarter of 2011. 



As a result the Company's underlying operating profit from sales of water and
wastewater for the 2nd quarter of 2011 totaled 6.7 mln EUR compared to 6.1 mln
EUR in the corresponding quarter in 2010. In total the Company's operating
profit for all activities for the 2nd quarter of 2011 was 6.9 mln EUR, a
decrease of 0.30 mln EUR compared to an operating profit of 7.2 mln EUR
achieved in the 2nd quarter of 2010. Year on year the operating profit for the
2nd quarter has decreased by 4.0%. 



Financial expenses



Net Financial revenues/expenses were 1.2 mln EUR in the 2nd quarter of 2011,
which is a positive variance of 0.21 mln EUR or 15.5% compared to the net
expenses in the 2nd quarter of 2010. In both years the financial costs had
adverse impact from the non-cash revaluation of the fair value of swap
agreements, the related cost increase was still lower in the 2nd quarter of
2011. 



The Company has mitigated majority of the long term floating interest risk with
5 interest swap agreements, each with a principal value of 15 mln EUR. At this
point in time the estimated fair value of these swap contracts is still
negative, totaling 1.5 mln EUR, with a negative revaluation in the 2nd quarter
2011 in the amount of 0.77 mln EUR. 



Profit Before Tax



The Company's profit before taxes for the 2nd quarter of 2011 was 5.7 mln EUR,
which is 0.10 mln EUR lower than the profit before taxes of 5.8 mln EUR for the
2nd quarter of 2010. 



 Results for the six months of 2011



During the six months of 2011 the Company's total sales increased, year on
year, by 1.8% to 25.2 mln EUR. Sales of water and wastewater treatment were
23.1 mln EUR, a 1.8% increase compared to the six months of 2010. 



The underlying operating profit from the Company's main business activity,
sales of water and wastewater, for the six months of 2011 increased by 5.4% to
13.2 mln EUR compared to the six months of 2010. 



The Company's profit before taxes for the six months of 2011 was 13.7 mln EUR,
which is a 24.3% increase compared to the relevant period in 2010. 



The Company's net profit for the six months of 2011 was 9.5 mln EUR, which is
6.9 mln EUR higher than the net profit of 2.6 mln EUR in the equivalent period
in 2010. 



Balance sheet



During the six months of 2011 the Company invested 6.6 mln EUR into fixed
assets. Non-current assets were 153.5 mln EUR at 30 June 2011. Current assets
decreased by 7.3 mln EUR to 26.4 mln EUR in the six months of the year, with
customer receivables decreasing by 4.9 mln EUR due to payment of long term
debts by the customers and cash at bank decreasing by 2.4 mln EUR as result of
dividend payment in June 2011. 



Current liabilities decreased by 4.5 mln EUR to 11.4 mln EUR in the six months
of the year. This was mainly due to a 7.6 mln EUR reclassification of Current
portion of long-term borrowings to Non-current liabilities after renewal of the
loan agreement, balanced by increase in Trade payables by 2.9 mln EUR. 



The Equity has decreased by 6.5 mln EUR reflecting the dividend payment partly
balanced by the profit generated during the six months of the year. 



The Company has a leverage level as expected of 62.9%, as usually at end of the
2nd quarter slightly above the target range of 60%, reflecting the temporary
decrease in Equity. Long-term liabilities stood at 101.7 mln EUR at the end of
June 2011, consisting almost entirely of the outstanding balance of three
long-term bank loans. As of 30 June 2011 the total 95 mln EUR loan capital was
recorded within long term liabilities in accordance with the signed loan
agreements. In April 2011 the Company renewed its loan agreement and according
to the loan agreements the first repayment of loans or refinancing should take
place in 2013. The weighted average interest margin for the total available
facility is 0.82%. 



  Cash flow



During the six months of 2011, the Company generated 15.7 mln EUR of cash flows
from operating activities, an increase of 1.3 mln EUR compared to the
corresponding period in 2010. 2011 operating cash flows were above 2010 cash
flows mainly due to the payments of overdue debts in 2011. Underlying operating
profit still continues to be the main contributor to operating cash flows. 



In the six months of 2011 net cash outflows from investing activities were 2.1
mln EUR, which is 1.7 mln EUR more than in 2010. Within the group the increased
compensations received for the construction of pipelines is partly balancing
increase in capital expenditures. In 2011 the Company has given the 1.4 mln EUR
loan to Maardu according to the Operating agreement signed in 2008. The total
20 year loan depends on construction cost and will remain below the total
agreed loan facility of 5.1 mln EUR. At the end of 2nd quarter of 2011 the cash
outflows related to the fixed asset investments were 7.8 mln EUR. 



The cash outflows from financing activities were 16.0 mln EUR during the six
months of 2011 compared to a cash outflow of 12.0 mln EUR during the same six
months of 2010, representing the payouts of the dividends in both years and
loans received in 2010. 



As a result of all of the above factors, the total cash outflow in the six
months of 2011 was 2.4 mln EUR compared to a cash inflow of 2.0 mln EUR in the
six months of 2010. Cash and cash equivalents stood at 10.8 mln EUR as at 30
June 2011 which is 9.9 mln EUR lower than at the corresponding period of 2010. 



Employees



At the end of the 2nd quarter of 2011, the total number of employees was 311
compared to 319 at the end of the 2nd quarter of 2010. The full time equivalent
(FTE) was respectively 297 in 2011 compared to the 303 in 2010. The management
is looking actively for the efficiencies in processes to balance the increase
in individual salaries with more productive company structure. 



Corporate structure



At the end of the quarter, 30 June 2011, the Group consisted of 2 companies.
The subsidiary Watercom OÜ is wholly owned by AS Tallinna Vesi and consolidated
to the results of the Company. 



Share performance



AS Tallinna Vesi is listed on OMX Main Baltic Market with trading code TVEAT
and ISIN EE3100026436. 

As of 30 June 2011 AS Tallinna Vesi shareholders, with a direct holding over
5%, were: 



United Utilities (Tallinn) BV  35.3%
------------------------------------
City of Tallinn                34.7%
------------------------------------



Parvus Asset Management has informed the Company that they own in total 8.96%
of the shares of the Company. 

At the end of the quarter, 30 June 2011, the closing price of the AS Tallinna
Vesi share was 7.40 EUR, which is a 14.99% decrease compared to the closing
price of 8.705 EUR at the beginning of the quarter. During the same period the
OMX Tallinn index dropped by 12.61%. 



Operational highlights in 2011

  -- Company's overall operating performance is continuously good, most of the
     quality aspects exceeding the level of 2010. As result of excellent
     nitrogen removal from the waste water we received the beneficial
     coefficient and reduction in the amount of pollution tax.



  -- Total number of unplanned customer interruptions has decreased by 5 times
     and also the average time of interruptions has decreased by 12%.



  -- The leakage level was by 1.55% less than in 2010.



  -- As a very important development for the customers, the Company has updated
     its promises to the customers, according to which AS Tallinna Vesi would
     compensate any discomfort to its contractual customers based on the
     promises plan if the Company has failed to deliver against one of its own
     customer service pledges. AS Tallinna Vesi's promises are part of an
     on-going commitment to continuously improve service on behalf of our
     customers. These promises require the Company to achieve a standard of
     service that is much higher than that required by the contract with the
     City of Tallinn, and is the only customer focused scheme of its type within
     the utilities sector in the Baltics.



  -- The Company signed the changes to the Nordea's loan agreement on 27 of
     April 2011. The original loan agreement for the amount of 37.5 mln EUR was
     signed in 2005. The repayment term was changed and instead of the
     semiannual repayments from May 2011 the whole loan amount shall be repaid
     at the end of 2015. As result of the change the weighted average interest
     margin will increase to 0.82%.



  -- In the 2nd quarter the Company renewed all its ISO, environmental and
     safety certificates. According to the Company's knowledge we are the only
     water company in Estonia whose operational and environmental performance
     indicators are independently verified.



Key contractual events

  -- Tariffs are still frozen on the 2010 level despite of the fact that on 9
     November 2010 the Company submitted its contract based tariff application
     to the new regulator. The tariff application is fully in accordance with
     the law and the best practice regulation for privatized utilities, such as
     that favoured by Ofwat in the UK and recommended by the World Bank for
     privatized utilities.



On 2nd May the Competition Authority (CA) informed the Company about the
rejection of the tariff application. The CA completely ignored the
privatization contract and did not perform any analysis of the contractual and
financial performance of the Company during the period after privatization. 
The CA is arguing that the Company's profitability is too high using their own
unverified methodology that is not in accordance with the World Bank guidelines
for privatized utilities. The Company has calculated that the average real
return on invested capital from 2001 till 2011 has been 6.2% and the Company
has also had these returns independently verified by the international
economics consulting company, Oxera. 



The Company and its investors cannot accept such unilateral breach of the
privatization terms and contract by Estonian Authorities and the Company
submitted an appeal to the court on 2 June 2011. The CA should comment their
position to the court before the end of August. 



In parallel, on 10th December 2010 AS Tallinna Vesi lodged a complaint to the
European Commission regarding certain measures adopted by the Estonian
authorities. The company believes these measures unilaterally alter the terms
of AS Tallinna Vesi's privatization regime, and without any objective
justification, any form of meaningful prior discussion, or willingness to
engage in dialogue. Therefore they violate EU rules on the freedom of
establishment and the free movement of capital (articles 49 and 63 TFEU). 

As a consequence of this complaint, on 22 February 2011 the European Commission
sent a Request For Information to the Estonian authorities regarding the points
raised by AS Tallinna Vesi in its complaint. The Estonian authorities were due
to respond in early May, however requested and were granted a 30 day extension.
The Estonian authorities did respond to the Commission in early June. 

The Company has published its tariff application and all relevant
correspondence with the CA on its website
(http://www.tallinnavesi.ee/?op=body&id=728) and to the Tallinn Stock Exchange
and will keep its investors informed of all future developments regarding the
further key developments regarding the processing of the tariff application.
Still, at this point in time the Company is unable to say what next year's
tariffs will be as it is unclear at the moment how the CA intends to respond to
the Court and what would be the next steps by the European Commission. 





Additional information:

Siiri Lahe

Chief Financial Officer

+372 6262 262

[email protected]







STATEMENT OF COMPREHENSIVE         II         II         6        6        12   
 INCOME                          quarter    quarter    months   months   months 
(thousand EUR)                     2011       2010     2011     2010      2010  
                                                                                
Revenue                            12 781     12 499   25 186   24 734    49 680
Costs of goods sold                -4 937     -5 172   -9 820   -9 801   -20 684
                                                                                
GROSS PROFIT                        7 844      7 327   15 366   14 933    28 996
                                                                                
Marketing expenses                   -181       -179     -381     -383      -787
General administration             -1 214       -894   -2 088   -1 711    -3 651
 expenses                                                                       
Other income/ expenses (-)            448        928      912    1 062     2 906
                                                                                
OPERATING PROFIT                    6 897      7 182   13 809   13 901    27 464
                                                                                
Financial income                      362        224    1 345      463     1 060
Financial expenses                 -1 515     -1 588   -1 424   -3 314    -3 624
                                                                                
PROFIT BEFORE TAXES                 5 744      5 818   13 730   11 050    24 900
                                                                                
Income tax on dividends            -4 253     -8 495   -4 253   -8 495    -8 495
                                                                                
NET PROFIT FOR THE PERIOD           1 491     -2 677    9 477    2 555    16 405
COMPREHENSIVE INCOME FOR THE        1 491     -2 677    9 477    2 555    16 405
 PERIOD                                                                         
Attributable to:                                                                
Equity holders of A-shares          1 490          0    9 476    2 554    16 404
B-share holder                       0,64       0,00     0,64     0,64      0,64
                                                                                
Earnings per A share (in             0,07       0,00     0,47     0,13      0,82
 euros)                                                                         
Earnings per B share (in              639          0      639      639       639
 euros)                                                                         







STATEMENT OF FINANCIAL POSITION                                                 
(thousand EUR)                                30.06.2011  30.06.2010  31.12.2010
                                                                                
ASSETS                                                                          
CURRENT ASSETS                                                                  
Cash and equivalents                              10 830      20 687      13 235
Customer receivables, accrued income and          15 183      11 439      20 088
 prepaid expenses                                                               
Inventories                                          327         262         306
Non-current assets held for sale                      76          77          76
TOTAL CURRENT ASSETS                              26 416      32 465      33 705
                                                                                
NON-CURRENT ASSETS                                                              
Long-term investment assets                        1 362           0           0
Property, plant and equipment                    150 439     142 866     148 179
Intangible assets                                  1 731       2 275       1 972
Derivatives                                            0           0           0
TOTAL NON-CURRENT ASSETS                         153 532     145 141     150 151
TOTAL ASSETS                                     179 948     177 606     183 856
                                                                                
LIABILITIES                                                                     
                                                                                
CURRENT LIABILITIES                                                             
Current portion of long-term borrowings                0       3 860       7 624
Trade and other payables                           9 257      13 264       6 367
Derivatives                                          791         773         963
Short-term provisions                                114         171         117
Prepayments and deferred income                    1 250         843         810
TOTAL CURRENT LIABILITIES                         11 412      18 911      15 881
                                                                                
NON-CURRENT LIABILITIES                                                         
Deferred income from connection fees               5 901       5 390       5 765
Borrowings                                        94 930      91 183      87 428
Derivatives                                          751       2 494       1 304
Other payables                                       115         115         115
TOTAL NON-CURRENT LIABILITIES                    101 697      99 182      94 612
TOTAL LIABILITIES                                113 109     118 093     110 493
                                                                                
EQUITY CAPITAL                                                                  
Share capital                                     12 000      12 782      12 782
Share premium                                     24 734      24 734      24 734
Statutory legal reserve                            1 278       1 278       1 278
Retained earnings                                 28 827      20 719      34 569
TOTAL EQUITY CAPITAL                              66 839      59 513      73 363
TOTAL LIABILITIES AND EQUITY CAPITAL             179 948     177 606     183 856







CASH FLOW STATEMENT                                       6        6        12  
                                                        months   months   months
(thousand EUR)                                          2011     2010     2010  
                                                                                
CASH FLOWS FROM OPERATING ACTIVITIES                                            
Operating profit                                        13 809   13 901   27 464
Adjustment for depreciation/amortisation                 2 777    2 817    5 620
Adjustment for profit from government grants and          -560   -1 335   -3 312
 connection fees                                                                
Other finance expenses                                      -1      -29      -14
Profit from sale of property, plant and equipment,          -1        0       -3
 and intangible assets                                                          
Expensed property, plant and equipment                       0        5       70
Change in current assets involved in operating           1 090     -680   -8 894
 activities                                                                     
Change in liabilities involved in operating                 47      859    6 297
 activities                                                                     
Interest paid                                           -1 418   -1 090   -2 443
Total cash flow from operating activities               15 743   14 448   24 785
                                                                                
CASH FLOWS FROM INVESTING ACTIVITIES                                            
Loans granted                                           -1 362        0        0
Acquisition of property, plant and equipment, and       -7 793   -4 100  -17 055
 intangible assets                                                              
Compensations received for construction of pipelines     6 285    3 327    6 139
Proceeds from sale of property, plant and equipment,         2        1       16
 and intangible assets                                                          
Interest received                                          721      275    1 109
Total cash flow from investing activities               -2 147     -497   -9 791
                                                                                
CASH FLOWS FROM FINANCING ACTIVITIES                                            
Received loans                                               0   20 000   20 000
Dividends paid                                         -16 001  -31 956  -31 956
Income tax on dividends                                      0        0   -8 495
Total cash flow from financing activities              -16 001  -11 956  -20 451
                                                                                
Change in cash and bank accounts                        -2 405    1 995   -5 457
                                                                                
CASH AND EQUIVALENTS AT THE BEGINNING OF THE PERIOD     13 235   18 692   18 692
                                                                                
CASH AND EQUIVALENTS AT THE END OF THE PERIOD           10 830   20 687   13 235







[1]ARRIC - EBIT from regulated services/regulatory asset base during the
contract period from 2001 

[2] http://www.tallinnavesi.ee/static/files/932.AS Tallinna Vesi Tariff
Application for 2011-2015.pdf 

[3] http://www.tallinnavesi.ee/static/files/729.2010-11-09 to CA tariff
application Annex 1 Annex 4 Eng.pdf 

[4] http://www.konkurentsiamet.ee/?id=14642, pages 30 and 36.

[5]
http://books.google.com/books?id=VYEcSJCWbBUC&lpg=PP1&ots=eri8Xz-21P&dq=martin%2
0pardina&pg=PR1#v=onepage&q&f=false
(Green, Richard; Pardina, Martin Rodriguez (1999). Resetting Price Controls for
Privatized Utilities. A Manual for Regulators. Washington, D.C.: The World
Bank) 

[6] http://www.konkurentsiamet.ee/file.php?18565, page 3

[7] http://www.tallinnavesi.ee/static/files/821.2011-04-07 response4 to CA re
their WACC and inflation Eng.pdf