Market announcement

Title

Results of operations for the 3rd quarter of 2011

Message

MANAGEMENT REPORT

Privatization Contract and Regulation Overview

  During the 3rd quarter and the early part of October 2010 the Company's share
price has been further impacted by the claims of the Competition Authority (CA)
that the privatization contract did not comply with the Public Water and
Sewerage Act (PWSSA) at the time of privatization. 

  Our shareholders will be aware that in June 2011 the company lodged an
official complaint to the Estonian Administrative court due to the CA's refusal
to consider the privatization contract and approve the contractually agreed
tariffs. On 29 August the CA responded to the courts disputing all point made
in our claims. Regrettably the CA has decided not to wait for the court ruling
regarding the legality of the privatization contract and on 10 October the CA
sent a prescription to the company asking it to reduce its current tariffs by
29%. 

  AS Tallinna Vesi does not believe that the prescription or the non approval
of the 2011 tariffs have ever been economically or legally justified and as
such will contest both these decisions in court. 

  The Company would like to highlight that it has fulfilled all aspects of the
privatization contract, including a significant improvement in the quality
requirements, as determined by the Tallinn City Government in 2001 (see the
report about the  Operational Performance[1]). 

  Furthermore, in the interests of an open and professional dialogue to
demonstrate that its return on invested capital has not been excessive the
international economic consulting group Oxera has independently verified that
the average real return on capital invested at the time of privatization is
6.2%, that is slightly lower than the expected 6.5% return in 2011 as the
privatization contract designed the returns to be lower in early years of
contract. Both, the average and the annual return on capital invested are in
accordance with the returns allowed by Ofwat the UK regulator over this same
period[2], and the return permitted by the Dutch Energy regulator Energiekamer,
which allowed a real rate of return of 6% in its regulatory determination of
September 2010. 

  The Company has continuously stated its belief in fully transparent
regulation that takes into account the privatization contract signed in 2001. 



RESULTS OF OPERATIONS - FOR THE 3rd QUARTER 2011

Overview of the financial statements

  In the 3rd quarter 2011 the Company completed an extremely important
environmental project, the construction of the Biofilter, which enables the
Company to fulfill all the European Union requirements to the nitrogen removal
from the waste water, and has made a significant contribution to reduce the
cost of goods sold, as discussed later on in the report.  Otherwise the
Company's underlying performance is good and stable, continuously focused on
improvement of operational performance and customer service. 

  During the 3rd quarter of 2011 the sales increased by 3.7% due to the slight
increase in sales volumes mainly due to increase in tourism sector. As result
of excellent operational performance and related efficiencies the gross profit
increased by 7.1% in the 3rd quarter of 2011 and the operating profit increased
by 8.5% during the same period. Still the profit before taxes decreased by
26.7% in the 3rd quarter of 2011, being impacted by non-cash negative movement
in fair value of financial instruments. 



mln €                              3 Q     3 Q    Change     9       9    Change
                                   2011    2010           months  months        
                                                           2011    2010         
--------------------------------------------------------------------------------
Sales                               13,0    12,5    3,7%    38,2    37,2    2,5%
Gross profit                         7,8     7,2    7,1%    23,1    22,2    4,4%
Gross profit margin %               59,8    57,9    3,3%    60,6    59,6    1,8%
Operating profit                     7,0     6,5    8,5%    20,8    20,4    2,3%
Operating profit - main business     6,5     6,1    5,8%    19,7    18,7    5,6%
Operating profit margin %           54,2    51,9    4,6%    54,6    54,7   -0,2%
Profit before taxes                  4,4     5,9  -26,7%    18,1    17,0    6,6%
Net profit                           4,4     5,9  -26,7%    13,8     8,5   63,2%
Net profit margin %                 33,6    47,5  -29,3%    36,2    22,8   59,2%
ROA %                                2,4     3,4  -29,6%     7,5     4,8   56,7%
Debt to total capital employed      61,3    62,9   -2,6%    61,3    62,9   -2,6%
--------------------------------------------------------------------------------



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

3rd quarter 2011

Sales

  In the 3rd quarter of 2011 the Company's total sales increased, year on year,
by 3.7% to 13.0 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 11.6 mln EUR, a 3.9% increase
compared to the 3rd quarter of 2010, resulting from the slight rise in sales
volumes as described below. 

  Within the service area, sales to residential customers decreased by 0.9% to
5.8 mln EUR. Sales to commercial customers increased by 8.9% to 4.7 mln EUR.
Sales to customers outside of the service area increased by 17.0% to 0.95 mln
EUR in the 3rd quarter of 2011. Over pollution fees received were 0.18 mln EUR,
a 13.9% decrease compared to the 3rd quarter of 2010. 

  In the 3rd quarter of 2011, the volumes sold to residential customers
decreased by 0.6% year on year, reducing the cumulative positive variance after
six months to -0.1% after nine months of 2011. Eliminating the minor impact of
revenues reclassification from inside area to the outside area the domestic
consumption is flat. 

  The volumes sold to commercial customers inside the service area have risen,
reflecting a 9.5% increase compared to the same period in 2010, eliminating a
one-off impact the increase is 7.3%. 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 25.7% higher than in the 3rd quarter
of 2010. The main factor in this increase was higher storm water volumes in the
3rd quarter of 2011 compared to 2010, resulting in sales increase year on year
by 17.0%, as storm water tariffs are considerably lower than sewage tariffs. 

  The sales from the operation and maintenance of the storm water and
fire-hydrant system decreased by 4.9% to 1.0 mln EUR in the 3rd 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 5.2 mln EUR in the
3rd quarter of 2011, a decrease of 0.05 mln EUR or 1.0% 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. 

  To mitigate the nitrogen treatment and tax risks discussed throughout the
2010, we finished the construction and implemented the additional stage in
sewage treatment process in the beginning of the 3rd quarter of 2011. In spite
the increase in volumes treated in 3rd quarter of 2011 and the increase in tax
rates year on year by 14.8%, the treatment results were excellent and resulted
in reduced pollution tax payment. The pollution tax calculation depends on
waste water treatment results and concentration of different waste components
in treated waste water. In the 3rd 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 3rd quarter of 2011
the beneficial 0.5 tax coefficient in contrary to the 3rd quarter of 2010 with
coefficient 1.0, and thereby the amount of pollution tax payable was 0.14 mln
EUR compared to 0.61 mln EUR in the 3rd quarter of 2010. 

  Chemical costs were 0.44 mln EUR, a 10.8% increase compared to the
corresponding period in 2010 representing the increase in rates, mainly in
methanol price. 

  Electricity costs increased by 0.07 mln EUR or 9.5% in the 3rd quarter of
2011 compared to the 3rd quarter of 2010 due to higher electricity prices as
result of the purchase from the open market, but also having adverse impact
from regulated networks fees. 

  Salary expenses within costs of goods sold increased in the 3rd quarter of
2011, year on year, by 0.23 mln EUR or 26.5% in combination of redundancy
payments and performance related pay accrual. Underlying individual salaries
have increased by CPI only, but the cost impact is broadly balanced by
reduction in headcount. Other salary lines had similar impact. 

  Other cost of goods sold in the main operating activity increased 0.03 mln
EUR, or 2.6% year on year, broadly reflecting overall impact to the costs
compared to 3rd quarter of 2010. 

  As a result of all of the above the Company's gross profit for the 3rd
quarter of 2011 was 7.8 mln EUR, which is an increase of 0.52 mln EUR, or 7.1%,
compared to the gross profit of 7.2 mln EUR for the 3rd quarter of 2010. 



Operating Costs and Operating Margin

  Marketing expenses decreased by 0.01 mln EUR to 0.18 mln EUR during the 3rd
quarter of 2011 compared to the corresponding period in 2010. This is mainly
the result of a discussed increase in salaries expenses, more than balanced by
savings in other items. 

  In the 3rd quarter of 2011 the General administration expenses increased by
0.08 mln EUR year on year to 1.0 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 0.45
mln EUR in the 3rd quarter of 2011 compared to a net income of 0.35 mln EUR in
the 3rd quarter of 2010, this line varies throughout the year depending on
construction volumes and estimates to the profit margins on projects completed.
2011 3rd quarter profits from government grants profits were influenced mainly
by delays in construction in previous quarters which was partly compensated in
3rd quarter and will be compensated during the construction program that will
be completed in 1st half of 2012. 

  The rest of the other income/expenses totaled an expense of 0.11 mln EUR in
the 3rd quarter of 2011 compared to an expense of 0.02 mln EUR in the 3rd
quarter of 2010. This line was impacted by the sale of vehicles that are not
needed for operating purposes any more. 

  As a result the Company's operating profit from main services for the 3rd
quarter of 2011 totaled 6.5 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 3rd quarter of 2011 was 7.0 mln EUR, an increase of 0.55 mln
EUR compared to an operating profit of 6.5 mln EUR achieved in the 3rd quarter
of 2010. Year on year the operating profit for the 3rd quarter has increased by
8.5%. 



Financial expenses

  Net Financial revenues/expenses were 2.7 mln EUR in the 3rd quarter of 2011,
which is a negative variance of 2.1 mln EUR or 387.8% compared to the net
expenses in the 3rd quarter of 2010. In both years the financial costs had
adverse impact from the non-cash revaluation of the fair value of swap
agreements, but the related cost increase was considerably higher in the 3rd
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 3.8 mln EUR, with a negative revaluation in the 3rd quarter
2011 in the amount of 2.3 mln EUR. 



Profit Before Tax

  The Company's profit before taxes for the 3rd quarter of 2011 was 4.4 mln
EUR, which is 1.5 mln EUR lower than the profit before taxes of 5.9 mln EUR for
the 3rd quarter of 2010. 



Results for the nine months of 2011

  During the nine months of 2011 the Company's total sales increased, year on
year, by 2.5% to 38.2 mln EUR. Sales of water and wastewater treatment were
34.7 mln EUR, a 2.5% increase compared to the nine months of 2010. 

  The operating profit from the Company's main business activity increased by
5.6% to 19.7 mln EUR during the nine months of 2011 compared to the nine months
of 2010. 

  The Company's profit before taxes for the nine months of 2011 was 18.1 mln
EUR, which is a 6.6% increase compared to the relevant period in 2010. 

  The Company's net profit for the nine months of 2011 was 13.8 mln EUR, which
is 5.3 mln EUR higher than the net profit of 8.5 mln EUR in the equivalent
period in 2010. Increase in net profit is mainly due to the decreased income
tax from 8.5 mln EUR to 4.3 mln EUR as result of lower dividends paid to the
shareholders in 2011 compared to 2010. 



Balance sheet

  During the nine months of 2011 the Company invested 11.9 mln EUR into fixed
assets. Non-current assets were 156.5 mln EUR at 30 September 2011. 

  Current assets decreased by 6.4 mln EUR to 27.3 mln EUR in the nine months of
the year. Customer receivables decreased by 4.4 mln EUR as result of the
payment of long term debts by the customers, still the cash at bank decreased
by 1.9 mln EUR being impacted by dividend payment in June 2011. 

  Current liabilities decreased by 7.0 mln EUR to 8.8 mln EUR in the nine
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. 

  The Company has a leverage level as expected of 61.3%, as usually at end of
the 3rd quarter slightly above the target range of 60%, reflecting the
temporary decrease in Equity of 2.2 mln EUR as a result of the difference in
dividend payment and profit generation during the nine months of the year. 

  Long-term liabilities stood at 103.9 mln EUR at the end of September 2011,
consisting almost entirely of the outstanding balance of three long-term bank
loans. As of 30 April 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 nine months of 2011, the Company generated 23.0 mln EUR of cash
flows from operating activities, an increase of 2.6 mln EUR compared to the
corresponding period in 2010. 2011 operating cash flows were above 2010 cash
flows mainly due to the working capital movement and particularly related to
the payments of overdue debts in 2011. Underlying operating profit still
continues to be the main contributor to operating cash flows. 

  In the nine months of 2011 net cash outflows from investing activities were
4.7 mln EUR, which is 1.9 mln EUR more than in 2010. At the end of 3rd quarter
of 2011 the cash outflows related to the fixed asset investments were 12.8 mln
EUR. Within the group the increased compensations received for the construction
of pipelines is balancing the increase in capital expenditures. In 2011 the
Company has also given the 2.2 mln EUR loan to Maardu according to the
Operating agreement signed in 2008. 

  The cash outflows from financing activities were 20.3 mln EUR during the nine
months of 2011 compared to cash outflows of 20.5 mln EUR during the same nine
months of 2010, representing the payouts of the dividends and income tax in
both years and loans received in 2010. 

  As a result of all of the above factors, the total cash outflow in the nine
months of 2011 was 1.9 mln EUR compared to a cash outflow of 2.7 mln EUR in the
nine months of 2010. Cash and cash equivalents stood at 11.3 mln EUR as at 30
September 2011 which is 4.6 mln EUR lower than at the corresponding period of
2010. 

 
Employees

  At the end of the 3rd quarter of 2011, the total number of employees was 310
compared to 319 at the end of the 3rd quarter of 2010. The full time equivalent
(FTE) was respectively 298 in 2011 compared to the 305 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 September 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 September 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 owned in total 8.32% of the shares of the Company as
per Company's best information as of 30 September 2011. 

  At the end of the quarter, 30 September 2011, the closing price of the AS
Tallinna Vesi share was 7.20 EUR, which is a 2.70% decrease compared to the
closing price of 7.40 EUR at the beginning of the quarter. During the same
period the OMX Tallinn index dropped by 16.69%. 



Operational highlights in 2011



  -- The Company completed the construction of the Biofilter in 3rd quarter of
     2011. This was an extremely important environmental project adding a next
     stage to the treatment process to ensure the further degree of removal of
     nitrogen from the waste water. The Company was already in 2007 recognized
     for its responsibility for the environment when Tallinn was removed from
     the HELCOM's hotspots list after the construction of the previous stage of
     the nitrogen removal process. The construction of the Biofilter will
     benefit to the local bay, neighboring beach areas and forests and ensure
     full accordance to the first class requirements of European Union today and
     in the future.



  -- As a result of excellent nitrogen removal from the waste water we received
     the beneficial coefficient and reduction in the amount of pollution tax.



  -- Company's overall operating performance is continuously good, most of the
     quality aspects exceeding the levels of 2010, increasing the customer
     service standards and operational efficiency. For example:
     -- The quality indicators for water quality have so far been on the highest
        level ever, from taken samples 66.64% were fully in accordance with the
        norms, outperforming considerably the required 95% level.
     -- Total number of sewage blockages has decreased by 19.6%.
     -- Average time of interruptions has decreased by 12.2%.
     -- The leakage level was by 11.5% less than in 2010 reaching a level below
        19%.



  -- 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. Starting from September 2011 we pay
     the penalty for the failures to the customers without expecting for the
     customer to request it.



  -- The Company was nominated for the social responsibility award in Tallinn
     and we received special recognition for being the most child and youth
     friendly company in Tallinn.



Key contractual events

Contractual tariff application

  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 commented their
position to the court on 29th August debating the legality of the Services
Agreement. The court has not announced further proceedings yet. 



Complaint to European Commission

  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 responded to the Commission by the end of June. In
October the Commission sent further questions to the Company for the
commentaries. 



Prescription to reduce the tariffs

  On 10th October 2011 the Company received the prescription from the
Competition Authority to lower the current tariffs by 29%. In addition and in
support of its decision the Competition Authority has taken the extreme action
of declaring the privatisation contract signed in 2001 to be illegal. To quote
“the CA, having familiarised itself with ASTV's claim regarding privatisation,
is of the opinion that in the part concerning the price of water services,
conducting the privatisation with the alleged aim of achieving the lowest
possible tariff increase was not in accordance with the law.” 

The Company  wishes to make it absolutely clear to all its shareholders  that
it completely disagrees with the position taken by the CA, and will seek an
interim injunction from the Estonian Courts to block this action within 30 days
after receipt of the prescription. The Company believes that by declaring the
privatisation illegal and using a Ministerial decree to attempt to force down
ASTV's tariffs the CA as an agency representing the Estonian state and national
government has shown an absolute disregard for legal due process. Furthermore
for the Company to have to defend itself in court for honouring all the terms
and conditions of its contract, including most importantly the improved service
obligations that were contractually required by the Government of the City of
Tallinn in 2001, goes against all the internationally acceptable norms of
business conduct and public governance in long term privatization contracts. 



Disclosure of relevant papers and perspectives

  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 is going to
happen to the tariffs 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. 





STATEMENT OF             III quarter  III quarter  9 months  9 months  12 months
 COMPREHENSIVE INCOME                                                           
(thousand EUR)              2011         2010        2011      2010       2010  
                                                                                
Revenue                       12 975       12 512    38 161    37 215     49 680
Costs of goods sold           -5 212       -5 264   -15 031   -15 052    -20 684
                                                                                
GROSS PROFIT                   7 763        7 248    23 130    22 163     28 996
                                                                                
Marketing expenses              -177         -190      -559      -573       -787
General administration        -1 002         -923    -3 090    -2 634     -3 651
 expenses                                                                       
Other income/ expenses           453          353     1 365     1 415      2 906
 (-)                                                                            
                                                                                
OPERATING PROFIT               7 037        6 488    20 846    20 371     27 464
                                                                                
Financial income                 433          210     1 053       672      1 060
Financial expenses            -3 116         -760    -3 815    -4 073     -3 624
                                                                                
PROFIT BEFORE TAXES            4 354        5 938    18 084    16 970     24 900
                                                                                
Income tax on dividends            0            0    -4 253    -8 495     -8 495
                                                                                
NET PROFIT FOR THE             4 354        5 938    13 831     8 475     16 405
 PERIOD                                                                         
COMPREHENSIVE INCOME           4 354        5 938    13 831     8 475     16 405
 FOR THE PERIOD                                                                 
Attributable to:                                                                
Equity holders of              4 353        5 937    13 830     8 474     16 404
 A-shares                                                                       
B-share holder                  0,64         0,64      0,64      0,64       0,64
                                                                                
Earnings per A share            0,22         0,30      0,69      0,42       0,82
 (in euros)                                                                     
Earnings per B share             639          639       639       639        639
 (in euros)                                                                     







STATEMENT OF FINANCIAL POSITION                                                 
(thousand EUR)                                30.09.2011  30.09.2010  31.12.2010
                                                                                
ASSETS                                                                          
CURRENT ASSETS                                                                  
Cash and equivalents                              11 323      15 949      13 235
Customer receivables, accrued income and          15 656      12 476      20 088
 prepaid expenses                                                               
Inventories                                          287         246         306
Non-current assets held for sale                      83          77          76
TOTAL CURRENT ASSETS                              27 349      28 748      33 705
                                                                                
NON-CURRENT ASSETS                                                              
Long-term investment assets                        2 217           0           0
Property, plant and equipment                    152 631     145 685     148 179
Intangible assets                                  1 693       2 112       1 972
TOTAL NON-CURRENT ASSETS                         156 541     147 797     150 151
TOTAL ASSETS                                     183 890     176 545     183 856
                                                                                
LIABILITIES                                                                     
                                                                                
CURRENT LIABILITIES                                                             
Current portion of long-term borrowings                0       3 856       7 624
Trade and other payables                           6 282       6 017       6 367
Derivatives                                        1 140       1 157         963
Short-term provisions                                  0         168         117
Prepayments and deferred income                    1 416         873         810
TOTAL CURRENT LIABILITIES                          8 838      12 071      15 881
                                                                                
NON-CURRENT LIABILITIES                                                         
Deferred income from connection fees               6 128       5 518       5 765
Borrowings                                        94 934      91 191      87 428
Derivatives                                        2 682       2 217       1 304
Other payables                                       115         115         115
TOTAL NON-CURRENT LIABILITIES                    103 859      99 041      94 612
TOTAL LIABILITIES                                112 697     111 112     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                                 33 181      26 639      34 569
TOTAL EQUITY CAPITAL                              71 193      65 433      73 363
TOTAL LIABILITIES AND EQUITY CAPITAL             183 890     176 545     183 856







CASH FLOW STATEMENT                                9 months  9 months  12 months
(thousand EUR)                                       2011      2010       2010  
                                                                                
CASH FLOWS FROM OPERATING ACTIVITIES                                            
Operating profit                                     20 846    20 371     27 464
Adjustment for depreciation/amortisation              4 236     4 215      5 620
Adjustment for profit from government grants and     -1 125    -1 708     -3 312
 connection fees                                                                
Other finance expenses                                   16       -27        -14
Profit from sale of property, plant and                  55         0         -3
 equipment, and intangible assets                                               
Expensed property, plant and equipment                    6       173         70
Change in current assets involved in operating          404    -1 208     -8 894
 activities                                                                     
Change in liabilities involved in operating             343        15      6 297
 activities                                                                     
Interest paid                                        -1 779    -1 405     -2 443
Total cash flow from operating activities            23 002    20 426     24 785
                                                                                
CASH FLOWS FROM INVESTING ACTIVITIES                                            
Loans granted                                        -2 217         0          0
Acquisition of property, plant and equipment, and   -12 811    -7 740    -17 055
 intangible assets                                                              
Compensations received for construction of            9 320     4 298      6 139
 pipelines                                                                      
Proceeds from sale of property, plant and                11         1         16
 equipment, and intangible assets                                               
Interest received                                     1 037       723      1 109
Total cash flow from investing activities            -4 660    -2 718     -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                              -4 253    -8 495     -8 495
Total cash flow from financing activities           -20 254   -20 451    -20 451
                                                                                
Change in cash and bank accounts                     -1 912    -2 743     -5 457
                                                                                
CASH AND EQUIVALENTS AT THE BEGINNING OF THE         13 235    18 692     18 692
 PERIOD                                                                         
                                                                                
CASH AND EQUIVALENTS AT THE END OF THE PERIOD        11 323    15 949     13 235



[1]https://newsclient.omxgroup.com/cdsPublic/viewDisclosure.action?disclosureId=
475004&messageId=579973 

[2]http://www.ofwat.gov.uk/regulating/reporting/rpt_fpr_2007-08.pdf , page 15






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