Market announcement

Title

Results of Operations - for the 1st quarter 2015

Message

MANAGEMENT REPORT

Contractual Highlights

  -- AS Tallinna Vesi tariffs continue to be on the same level based on
     temporary
injunction granted by the Court for the period of court proceedings to
     protect the Company from the unilateral breach of privatization agreement
     by Estonian Authorities.
  -- AS Tallinna Vesi would like all its shareholders to be fully aware of the
     facts that the Company was privatised
i
n 2001 with the full support and knowledge of the Estonian national
     government, with written confirmations from the Prime Minister and the
     Minister of Finance regarding the key terms of the agreements, and
     utilising the expertise and guidance of the European Bank for
     Reconstruction and Development (EBRD).
  -- At the end of May 2012 the District Court ruled that AS Tallinna Vesi’s
     Services Agreement, that was part of the international privatisation, is a
     public law contract. AS Tallinna Vesi firmly believes that the terms and
     conditions of the international privatisation contract that has been deemed
     a public law contract should not be broken simply by transferring the
     duties of the regulator from one state institution (the City of Tallinn) to
     a different state institution (the Competition Authority). A public law
     contract should enjoy the protection of the Estonian legal system, should
     the contract not be honoured, then the company will have a claim against
     the Estonian state.
  -- In addition
, 
two experts that were included in the dispute, presented their independent
     expert opinions which were of the view that
the tariff regulation methodology chosen in the Services Agreement, is an
     internationally recognised tariff methodology and complied with the PWSSA
     in force at the time of the privatisation.
 AS Tallinna Vesi hopes that the expert opinions facilitate swifter
     resolution of the complaints submitted by the Company against the
     Competition Authority since 1st of June 2011.
  -- In 2015, there has been three hearings in the local court as regards to the
     tariff dispute. The decision from the Administrative court is expected in
     May 2015. At the same time, the Company would like to stress that this
     decision will not likely to be final, as both parties may appeal it to the
     next degree of jurisdiction.

  -- In May 2014, AS Tallinna Vesi submitted a claim against the Competition
     Authority to the Tallinn Administrative Court to avoid the expiry of
     monetary claims. The Company claims compensation for potential damages of
     over 90 million euros for total losses over the lifetime of the
international privatisation contract up to 2020. The total compensation
     claim applies when the tariffs will remain unchanged till 2020. Of this
     amount, around 50 million euros has been already caused by the Competition
     Authority’s refusal to approve tariff increases in the period of 2011 –
     2013.The Court decided to stay the claim proceeding until the maintariff
     dispute is resolved.
  -- It has been three years already during which the Company has made intensive
     effort in trying to agree a solution in order to get the tariff dispute
     solved. Regretfully it has not been achieved.

  -- In October 2014, AS Tallinna Vesi and 
and its shareholder United Utilities (Tallinn) B.V have commenced
     international arbitration proceedings against the Republic of Estonia for
     breaching the international treaty and more specifically “the fair and
     equitable treatment” requirement by changes to the law and activities of
     the public authorities which have deprived AS Tallinna Vesi from tariffs
     approved according to the Services Agreement concluded as part of the
     privatisation in 2001. The arbitration will be carried out through the
     International Centre for the Settlement of Investment Disputes (ICSID),
     which is part of the World Bank Group.
  -- AS Tallinna Vesi has continuously stated its belief in fully transparent
     regulation and its willingness to enter into meaningful and evidence-based
     dialogue that takes into account the privatization contract signed in 2001.
  -- Average real return on capital invested at privatization is still 6.2%
     since 2001.



Financial highlights of 1st quarter 2015

The Group’s sales revenues during the 1st quarter 2015 have increased, being up
2.0% to 13.57 mln euros compared to the same period in 2014. 

The gross profit in the 1st quarter of 2015 has increased 11.2% or 0.81 mln
euros. Increase in gross profit is mainly related to lower pollution tax costs
compared to the comparative period in 2014. 

The pollution tax has been lower in 1st quarter of 2015 compared to the same
period last year as at the beginning of 2014 the Group had problems with 400
times lowered allowed concentrations of heavy metals in the treated effluent,
compared to the previous water permit limits. The problem was resolved with the
issuance of the revised water permit in September 2014. In the revised water
permit the concentration limits for heavy metals have been removed. The revised
water permit is valid till the end of 1st quarter 2018. 

The operating profit from Group’s main activities has increased 18.3% to 6.66
mln euros, mainly due to the lower pollution tax costs, but also due to lower
administrative costs. 

The net profit for the 1st quarter without the additional exceptional changes
that affected the pollution tax in 2014 and impact that resulted from the
change of the fair value of swap contracts was 1.4% or 0.08 mln euros higher
than in the comparative period last year. 

mln €                             1 Q 2013  1 Q 2014  1 Q 2015  Change 15/14
----------------------------------------------------------------------------
Sales                                12,69     13,31     13,57          2,0%
Gross profit                          7,52      7,26      8,07         11,2%
Gross profit margin %                59,28     54,59     59,51          9,0%
Operating profit                      6,16      5,68      6,68         17,6%
Operating profit - main business      6,14      5,63      6,66         18,3%
Operating profit margin %            48,50     42,71     49,26         15,3%
Profit before taxes                   6,21      5,06      6,38         26,1%
Net profit                            6,21      5,06      6,38         26,1%
Net profit margin %                  48,96     38,03     47,04         23,7%
ROA %                                 3,01      2,42      3,01         24,3%
Debt to total capital employed       55,94     55,81     55,85          0,1%
ROE %                                 6,84      5,49      6,82         24,4%
Current ratio                         5,42      4,60      6,81         48,1%
----------------------------------------------------------------------------

Gross profit margin – Gross profit / Net sales

Operating profit margin – Operating profit / Net sales

Net Profit margin – Net Profit / Net sales

ROA – Net profit /average Total Assets for the period

Debt to Total capital employed – Total Liabilities / Total capital employed

ROE – Net profit / Total equity

Current ratio – Current assets / Current liabilities

Main business – water and wastewater activities, excl. connections profit and
government grants, construction services, doubtful debt, other income 



RESULTS OF OPERATIONS - FOR THE 1st QUARTER 2015

Profit and Loss Statement

1st quarter 2015

Sales

As the Company’s tariffs are frozen at the 2010 tariff level, the changes in
the revenues from main activities, i.e. from sales of water and wastewater
services, are fully driven by consumption. 

In the 1st quarter of 2015 the Group’s total sales increased, year on year, by
2.0% to 13.57 mln euros. 90.4% of sales comprise of sales of water and
wastewater services to domestic and commercial customers within and outside of
the service area. 6.2% of sales are the fees received from the City of Tallinn
for operating and maintaining the storm water system and fire hydrants and 3.4%
from other works and services. 

Sales of water and wastewater services were 12.26 mln euros, a 1.8% increase
compared to the 1st quarter of 2014, resulting from the changes in sales
volumes as described below. 

Within the service area, sales to residential customers were at 6.15 mln euros,
showing a 1.8% increase year on year, as revenues from apartment blocks form
the biggest share of our residential sales, the biggest increase came also from
this client group. Sales to commercial customers increased by 0.4% to 4.67 mln
euros. Sales to customers outside of the main service area has increased by
9.1% to 1.25 mln euros. 38.8% or 0.05 mln euros increase in stormwater revenues
were accompanied by higher water and wastewater sales respectively 0.04 mln
euros and 0.02 mln euros. Over pollution fees received were 0.19 mln euros, a
5.2% decrease compared to the 1st quarter of 2014. 

                                                    Quarter 1         Variance  
                                                                       15/14    
Revenues from main operating activities         2015   2014   2013     €       %
 (th.€)                                                                         
Private clients, incl:                         6 154  6 047  5 932   107    1,8%
Water supply service                           3 386  3 327  3 264    59    1,8%
Wastewater disposal service                    2 768  2 720  2 668    48    1,8%
Corporate clients, incl:                       4 672  4 654  4 606    18    0,4%
Water supply service                           2 569  2 580  2 509   -11   -0,4%
Wastewater disposal service                    2 103  2 074  2 097    29    1,4%
Outside service area clients, incl:            1 249  1 145  1 002   104    9,1%
Water supply service                             292    255    253    37   14,5%
Wastewater disposal service                      771    756    661    15    2,0%
Storm water disposal service                     186    134     88    52   38,8%
Over pollution fee                               184    194    179   -10   -5,2%
                                                                                
Storm water treatment and disposal service       844    991    726  -147  -14,8%
 and fire hydrant service                                                       
Construction service and design                  342    130     98   212  163,1%
Other works and services                         123    146    150   -23  -15,8%



The sales from the operation and maintenance of the storm water and
fire-hydrant system in the main service area have decreased by 14.8% to 0.84
mln euros in the 1st quarter of 2015 compared to the same period in 2014. 

The sales of construction activities and design services have increased by
163.1% to 0.34 mln euros in the 1st quarter of 2015 compared to 1st quarter of
2014. 



Cost of Goods Sold and Gross profit

The cost of goods sold for the main operating activity was 5.49 mln euros in
the 1st quarter of 2015, showing 0.55 mln euros or 9.1% decrease compared to
the equivalent period in 2014. The cost decrease is mainly influenced by lower
pollution tax costs, which is balanced by the increased construction services
costs in the 1st quarter of 2015. 

Cost of goods sold (th.€)               Quarter 1        Variance 15/14
                                  2015    2014    2013       €        %
Water abstraction charges          -270    -264    -246     -6    -2,3%
Chemicals                          -360    -412    -420     52    12,6%
Electricity                        -828    -837    -935      9     1,1%
Pollution tax                      -300  -1 076    -216    776    72,1%
Total direct production costs    -1 758  -2 589  -1 817    831    32,1%
Staff costs                      -1 348  -1 228  -1 216   -120    -9,8%
Depreciation and amortization    -1 394  -1 298  -1 299    -96    -7,4%
Construction service and design    -308     -87     -86   -221  -254,0%
Other costs of goods sold          -686    -841    -751    155    18,4%
Other costs of goods sold total  -3 736  -3 454  -3 352   -282    -8,2%
Total cost of goods sold         -5 494  -6 043  -5 169    549     9,1%



Total direct production costs (water abstraction charges, chemicals,
electricity and pollution taxes) decreased by 0.83 mln euros or 32.1% year on
year. Biggest decrease came from pollution tax. Other changes came from a
combination of changes in prices and tax rates and movements in treatment
volumes that affected the cost of goods sold together with the following
additional factors: 

  -- Water abstraction charges increased slightly by 0.01 mln euros or 2.3% to
     0.27 mln euros in the 1st quarter of 2015, driven mainly by 5% raise in tax
     rates.
  -- Total chemicals costs decreased by 0.05 mln euros or 12.6% to 0.36 mln
     euros in the 1st quarter of 2015. Costs change were mainly influenced by
     the decrease in dosage used and chemicals price in sewage treated, which
     was balanced by increase in treated volumes. Chemicals costs were higher in
     water treatment mainly due to raw water quality.
  -- Electricity costs decreased by 0.01 mln euros or 1.1% in the 1st quarter of
     2015 compared to the 1st quarter of 2014. Lower electricity costs were
     mostly derived from the decrease in electricity price and unit costs used,
     worth 0.04 mln euros. Positive effects were slightly reduced by increased
     volumes in treatment plants, worth 0.03 mln euros.
  -- In the 1st quarter of 2015 the pollution tax expense were lower by 0.78 mln
     euros or 72.1%. Lower costs are related to the change in the allowed
     concentration of heavy metals in treated effluent in the changed water
     permit effective in the first two quarters in 2014. Eliminating the one-off
     impact, the pollution tax expenses have been stable increasing only by 0.03
     mln euros or 12.7% in the 1st quarter of 2015 compared to the relevant
     period in 2014.

Without the above mentioned influence, the main contribution to increased
pollution tax costs came from increased volumes treated in the amount of 0.05
mln euros and increased tax rates in the amount of 0.21 mln euros, balanced by
the decreased pollution load in the amount of 0.23 mln euros. 

Other costs of goods sold (staff costs, depreciation, construction services and
other cost of goods sold) in the main operating activity increased by 0.28 mln
euros or 8.2%. Most of the increase came from increase in construction services
and depreciation costs, balanced by the decrease in other costs. 

In 2015 the construction activities have been started earlier than in 2014 due
to favourable weather conditions, increasing the costs related to construction
in the 1st quarter compared to the same period in 2014. Increased staff costs
by 9.8% or 0.12 mln euros are mainly related to the Group having a higher
headcount to provide more efficient and broader range of insourced services.
Decrease in other costs were related to less maintenance works. 

As a result of all above the Group’s gross profit for the 1st quarter of 2015
was 8.07 mln euros, which is increased by 0.81 mln euros or 11.2%, compared to
the gross profit of 7.26 mln euros for the 1st quarter of 2014. 



Other Operating Costs

General administration expenses decreased in total 0.15 mln euros or 11.1%. The
consultation and legal fees and their timing continue to have an impact on the
administrative expenses. 



Other net income/expenses

Other net costs resulted a net expense of 0.04 mln euros, compared to 0.05 mln
euros net expense in the 1st quarter of 2014. The results in the 1st quarters
have mainly been influenced by the change in amount of doubtful receivables. 



Operating profit

As a result of the factors listed above the Group’s operating profit for the
1st quarter of 2015 totalled 6.68 mln euros compared to 5.68 mln euros in the
corresponding quarter in 2014, which shows an increase of 1.00 mln euros or
17.6%. Removing the pollution tax impact in relation to the concentration
limits for heavy metals, the Group’s operating profit had been 3.0% or 0.19 mln
euros higher. 



Financial expenses

The Group’s net financial expenses have decreased 0.32 euros or 51.6% amounting
to 0.30 mln euros in the 1st quarter of 2015. It is mainly impacted by a
positive change of the fair value of the swap contracts. Positive impact is
balanced by a decline in interest income. 

The standalone swap agreements have been signed to mitigate the majority of the
long term floating interest risk, the interest swap agreements are signed for
75 mln euros and 20 mln euros are still with floating interest rate. At this
point in time the estimated fair value of the swap contracts is negative,
totalling 1.43 mln euros. Effective interest rate (incl. swap interests) in the
1st quarter of 2015 was 3.13%, amounting in the interest costs of 0.74 mln
euros, compared to the effective interest rate of 3.07% and the interest costs
of 0.73 mln euros into the 1st quarter of 2014. In April 2015, the Company
signed 4 SWAP contracts in the notional amount of 45 mln euros. The contracts
will become effective from the 1st of June 2015 after the existing contracts
have finished. The interest rates fixed in the new contracts are on average
2.9% lower than for the contracts that will come to an end. 



Profit Before and After Tax

The Group’s profit before and after taxes for the 1st quarter of 2015 was 6.38
mln euros, which is 1.32 mln euros or 26.1% higher than the profit before taxes
of 5.06 mln euros for the 1st quarter of 2014, resulting mainly from increased
revenues and lower pollution tax costs, professional fees and net financial
expenses as described above. Eliminating the influence of the pollution tax and
derivatives fair value, the Group’s profit before and after taxes for the 1st
quarter of 2015 would have been 5.97 mln euros, which is 1.4% or 0.08 mln euros
increase compared to the relevant period in 2014. 



Balance sheet

In the three months of 2015 the Group invested 1.53 mln euros into fixed
assets. As of 31 March 2015 non-current tangible assets amounted to 157.51 mln
euros and total non-current assets amounted to 158.35 mln euros. (31. March
2014: 152.41 mln euros and 153.41 mln euros respectively). 

Compared to the year end of 2014 there has been a reduction in receivables and
prepayments in the amount of 1.53 mln euros to 6.73 mln euros which is mainly
related to collection of money for network extension program. 

Compared to the year end of 2014 the current liabilities have decreased by 0.97
mln euros to 7.86 mln euros. The movement is mainly related to the decrease in
the fair value of the derivatives in the amount of 0.40 mln euros and change in
prepayments in the amount of 0.65 mln euros. 

The Group’s loan balance has remained stable at 95 mln euros. The weighted
average interest risk margin for the total loan facility is 1.04%. 

The Group has a Total debt/Total assets level as expected of 55.9%, in range of
55%-65%, reflecting the Group’s equity profile. This level is consistent with
the same period in 2014 when the total debt/total assets ratio was 55.8%. 

Biggest share of the rest of the long term liabilities is deferred income from
connection fees amounting to 13.54 mln euros (2014: 10.35 mln euros). 

In the 4th quarter of 2011 the Group recorded and noted an exceptional
contingent liability, which could cause an outflow of economic benefits of up
to 36.0 mln euros. In the 4th quarter of 2014 the Group re-evaluated the
liability, which now stands at 40.1 mln euros, as per note 13 to the accounts. 



Cash flows

As of 31 March 2015 the cash position of the Group is strong. At the end of
March 2015 the cash balance of the Group stood at 46.39 mln euros, which is
21.9% of the total assets (2014: 38.19 mln, which was 18.3% of the total
assets). 

The biggest contribution to the cash flows comes from main operations. During
the three months of 2015, the Group generated 8.06 mln euros of cash flows from
operating activities, an increase of 1.09 mln euros compared to the
corresponding period in 2014. 

In 2015 the operating cash flows were above 2014 cash flows due to a change in
operating profit and working capital. Underlying operating profit still
continues to be the main contributor to operating cash flows. The collection of
receivables is continuously strong. 

The Group’s cash flows from investing activities have also been positive for
past two years. In the three months of 2015 the result of net cash flows from
investing activities was a cash inflow of 0.48 mln euros, an increase of 0.34
mln euros compared to the inflow of 0.14 mln euros in the three months of 2014.
This is made up as follows: 

In the three months of 2015 the investments in fixed assets have increased 0.35
mln euros compared to 2014 amounting to 1.86 mln euros. 

The compensations received for the construction of pipelines were 2.29 mln
euros in the three months of 2015, an increase of 0.76 mln euros compared to
same period of 2014. Most of the cash collected for pipes is related to the
sewage network extension program which was ended in 2012. The collection for
extension program ended in March 2015. 

In the three months of 2015, cash outflow from financing amounted to 0.71 mln
euros, which is on the same level compared to previous year. 



Employees

At the end of the 1st quarter of 2015, the total number of employees was 313
compared to 304 at the end of the 1st quarter of 2014. The full time equivalent
(FTE) was respectively 302 in 2015 compared to the 291 in 2014. The management
continues to work actively for the efficiencies in processes to balance the
increase in individual salaries and cost pressure from the market with more
productive company structure. 



Dividends

Dividend allocation to the shareholders is recorded as a liability in the
financial statement of the Company at the time when the profit allocation and
dividend payment is confirmed by the annual general meeting of shareholders. 

According to the dividend policy, which is also published on Company’s website,
the Company will maintain dividends to shareholders at the same amount in real
terms, i.e. dividends will increase in line with inflation each year. 

On the annual general meeting of shareholders on 27th of May 2015 the matter of
dividend pay-out will be voted on. It will be in accordance with the Company’s
dividend policy. 

Dividends will be paid out in June 2015.



Share performance

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

As of 31 March 2015 AS Tallinna Vesi shareholders, with a direct holding over
5%, were: 

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

During the three months of 2015 the shareholder structure has been relatively
stable compared to the end of 2014. At the end of 1st quarter 2015 the pension
funds owned 1.65% of the total shares compared to 1.54% at the end of 4th
quarter 2014. 

As of 31st March 2015, the closing price of the AS Tallinna Vesi share was
14.10 euros, which is a 7.6% (2014: 5.9%) increase compared to the closing
price of 13.10 euros at the beginning of the quarter. During the same period
the OMX Tallinn index increased by 14.3% (2014: -2.6%). 

In the three months of 2015 1 324 deals with the Company’s shares were
concluded (2014: 1 255 deals) during which 309 thousand shares or 1.5%
exchanged their owners (2014: 263 thousand shares or 1.3%). 

The turnover of the transactions was 1 005 thousand euros lower than in 2014
amounting to 4 277 thousand euros. The share price has shown an increase
despite of the on-going contractual debate. 



Operational performance

Similarly to previous years, the first quarter of 2015 can be characterised by
stability. Above all, it gives security to all consumers that they are provided
with a high-quality drinking water, stable water supply and wastewater
discharging service. In addition to the quality of service, we also concentrate
on being a good partner for our customers. The feedback from the customers has
become more and more positive, but despite of that we aim to continue making
efforts to meet and exceed the customers’ expectations. 

Operational indicators for the 1st quarter of 2015

Indicator                                            2014 Q1              2015  
                                                                           Q1   
--------------------------------------------------------------------------------
Drinking water                                                                  
--------------------------------------------------------------------------------
- 
Compliance of water quality at the customers’ tap                   100%    100%
--------------------------------------------------------------------------------
Water loss in the water distribution network                     17.73 %  14.64%
--------------------------------------------------------------------------------
Average duration of water interruptions per                         2.29    3.05
 property in hours                                                              
--------------------------------------------------------------------------------
Wastewater                                                                      
--------------------------------------------------------------------------------
- 
Number of sewer blockages                                            231     220
--------------------------------------------------------------------------------
Number of sewer bursts                                                42      36
--------------------------------------------------------------------------------
Number of customer contacts regarding blockages and                  268     307
 storm water discharge                                                          
--------------------------------------------------------------------------------
Wastewater treatment compliance with environmental   100 % (except for      100%
 standards                                            Zn and Cu)                
--------------------------------------------------------------------------------
Customer Service                                                                
--------------------------------------------------------------------------------
- 
Number of written complaints                                          15      21
--------------------------------------------------------------------------------
Number of customer contacts regarding water quality                   27      27
--------------------------------------------------------------------------------
Number of customer contacts regarding water                           72      79
 pressure                                                                       
--------------------------------------------------------------------------------
Responding written customer contacts within at                     99.4%   99.1%
 least 2 work days                                                              
--------------------------------------------------------------------------------
Number of failed promises                                              4       4
--------------------------------------------------------------------------------
Notification of unplanned water interruptions at                   97.4%   98.1%
 least 1 h before the interruption                                              
--------------------------------------------------------------------------------



Corporate structure

At the end of the quarter, 31 March 2015, 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. 



Corporate Governance

Supervisory Council

Supervisory Council plans and organises the management of the Company and
supervises the activities of the Management Board. According to AS Tallinna
Vesi articles of association Supervisory Council consists of 9 members who are
appointed for two years. 

Supervisory Council has formed three committees to advise Supervisory Council
on audit, remuneration and corporate government matters. 

More information about the Supervisory Council and committees can be found in
the note 12 to the financial statements as well as from the Company’s webpage: 

http://tallinnavesi.ee/en/Investor/Corporate-Governance/Supervisory-Board

http://tallinnavesi.ee/en/Investor/Corporate-Governance/Audit-Committee

http://tallinnavesi.ee/en/Investor/Corporate-Governance/Corporate-Governance-Rep
ort 



Management Board

Management Board is a governing body, which represents and manages AS Tallinna
Vesi in its daily operations in accordance with the legal requirements as well
as the Articles of Association. The Management Board must act economically in
the most efficient way taking into consideration the interest of the Company
and its shareholders and ensure the sustainable development of the Company in
accordance with the set objectives and strategy. 

To ensure that the company’s interests are met in the best way possible, the
Management and Supervisory Boards shall extensively collaborate. Meetings of
Management and Supervisory Board members are held at least once a quarter. In
those meetings the Management Board informs the Supervisory Council about all
significant issues in Company’s business operations, the fulfilment of the
company’s short and long-term goals are being discussed and the risks impacting
them. For every meeting of the Management Board prepares report and submits the
report in advance with the sufficient time for the Supervisory Board to study
it. 

According to the Articles of Association the Management Board consists of 2-5
members, who are elected for 3 years. 

Starting from 2nd of June 2014 there are 3 members of the Management Board of
AS Tallinna Vesi: Karl Heino Brookes (Chairman of the Board, with the powers of
the Management Board Member until 20 March 2017), Aleksandr Timofejev (with the
powers of the Management Board Member until 29 October 2015) and Riina Käi
(with the powers of the Management Board Member until 29 October 2015). 

Additional information on the members of the Management Board can be found from
the Company’s website: 

http://tallinnavesi.ee/en/Investor/Corporate-Governance/Management-Board



Future actions & risks

Legal claim for breach of international treaty

In May 2014, the Supervisory Council of the Company gave notice of potential
international arbitration proceedings against the Republic of Estonia for
breaching the undertakings it is required to abide by in the bilateral
investment treaty. 

In October 2014 AS Tallinna Vesi and its shareholder United Utilities (Tallinn)
B.V have commenced international arbitration proceedings against the Republic
of Estonia for breach of the Agreement on the Encouragement and Reciprocal
Protection of Investments between the Kingdom of The Netherlands and the
Republic of Estonia. 

The claim was filed as three years of intensive negotiation to try and reach an
amicable settlement that has not happened. 

Additional details surrounding this claim can be found via the following links:

https://newsclient.omxgroup.com/cdsPublic/viewDisclosure.action?disclosureId=609
264&messageId=754811 

https://newsclient.omxgroup.com/cdsPublic/viewDisclosure.action?disclosureId=627
851&messageId=779161 



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/en/Investor/Regulation) 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. 

In opposite to the Company the CA has requested the Court procedures to be
closed. Based on misleading information submitted by the CA the Court approved
the CA’s request. ASTV has reapplied for open proceedings. 

At this point in time the Company is unable to say what is going to happen to
the tariffs before Court judgments and outcome of an arbitration. The outcome
and lengths of the Court proceedings and arbitration is outside the control of
the Company. 





STATEMENT OF COMPREHENSIVE INCOME    I quarter  I quarter  12 months
(thousand €)                            2015       2014       2014  
                                                                    
Revenue                                 13 568     13 307     53 241
Costs of goods sold                     -5 494     -6 043    -22 399
                                                                    
GROSS PROFIT                             8 074      7 264     30 842
                                                                    
Marketing expenses                        -137       -167       -456
General administration expenses         -1 214     -1 365     -5 517
Other income/ expenses (-)                 -40        -49        -41
                                                                    
OPERATING PROFIT                         6 683      5 683     24 828
                                                                    
Financial income                            36        134        432
Financial expenses                        -337       -756     -2 532
                                                                    
PROFIT BEFORE TAXES                      6 382      5 061     22 728
                                                                    
Income tax on dividends                      0          0     -4 785
                                                                    
NET PROFIT FOR THE PERIOD                6 382      5 061     17 943
COMPREHENSIVE INCOME FOR THE PERIOD      6 382      5 061     17 943
Attributable to:                                                    
Equity holders of A-shares               6 381      5 060     17 942
B-share holder                            0,60       0,60       0,60
                                                                    
Earnings per A share (in euros)           0,32       0,25       0,90
Earnings per B share (in euros)            600        600        600





STATEMENT OF FINANCIAL POSITION                                                 
(thousand €)                                  31.03.2015  31.03.2014  31.12.2014
                                                                                
ASSETS                                                                          
CURRENT ASSETS                                                                  
Cash and equivalents                              46 393      38 185      38 560
Trade receivables, accrued income and              6 730      16 853       8 261
 prepaid expenses                                                               
Inventories                                          406         371         412
TOTAL CURRENT ASSETS                              53 529      55 409      47 233
                                                                                
NON-CURRENT ASSETS                                                              
Other long-term receivables                            0          36           0
Property, plant and equipment                    157 510     152 410     157 481
Intangible assets                                    835         964         862
TOTAL NON-CURRENT ASSETS                         158 345     153 410     158 343
TOTAL ASSETS                                     211 874     208 819     205 576
                                                                                
LIABILITIES                                                                     
                                                                                
CURRENT LIABILITIES                                                             
Current portion of long-term borrowings              286       2 146         261
Trade and other payables                           4 915       5 545       4 855
Derivatives                                          678       1 793       1 078
Prepayments                                        1 980       2 566       2 631
TOTAL CURRENT LIABILITIES                          7 859      12 050       8 825
                                                                                
NON-CURRENT LIABILITIES                                                         
Deferred income from connection fees              13 535      10 345      12 567
Borrowings                                        96 175      93 584      96 250
Derivatives                                          750         551         761
Other payables                                        23          20          23
TOTAL NON-CURRENT LIABILITIES                    110 483     104 500     109 601
TOTAL LIABILITIES                                118 342     116 550     118 426
                                                                                
EQUITY CAPITAL                                                                  
Share capital                                     12 000      12 000      12 000
Share premium                                     24 734      24 734      24 734
Statutory legal reserve                            1 278       1 278       1 278
Retained earnings                                 55 520      54 257      49 138
TOTAL EQUITY CAPITAL                              93 532      92 269      87 150
TOTAL LIABILITIES AND EQUITY CAPITAL             211 874     208 819     205 576





CASH FLOW STATEMENT                                         3       3       12  
                                                         months  months   months
(thousand €)                                              2015    2014    2014  
                                                                                
CASH FLOWS FROM OPERATING ACTIVITIES                                            
Operating profit                                          6 683   5 683   24 828
Adjustment for depreciation/amortisation                  1 516   1 454    5 851
Adjustment for profit from government grants and            -45     -35     -143
 connection fees                                                                
Other non-cash adjustments                                   -4       0      -33
Profit/loss(+) from sale and write off of property,          -2       3      145
 plant and equipment, and intangible assets                                     
Change in current assets involved in operating             -407    -813    1 165
 activities                                                                     
Change in liabilities involved in operating activities      323     679     -364
Total cash flow from operating activities                 8 064   6 971   31 449
                                                                                
CASH FLOWS FROM INVESTING ACTIVITIES                                            
                                                                                
Acquisition of property, plant and equipment, and        -1 856  -1 511   -9 646
 intangible assets                                                              
Proceeds from sales of property, plant and equipment      2 285   1 522   10 523
Compensations received for construction of pipelines         12       0       13
Interest received                                            40     127      432
Total cash flow from investing activities                   481     138    1 322
                                                                                
CASH FLOWS FROM FINANCING ACTIVITIES                                            
Received loans                                                0       0   20 000
Repayment of loans                                            0       0  -20 000
Interest paid and loan financing costs, incl swap          -631    -671   -2 995
 interests                                                                      
Repayment of finance lease                                  -81     -39     -216
Dividends paid                                                0       0  -18 001
Income tax on dividends                                       0       0   -4 785
Total cash flow from financing activities                  -712    -710  -25 997
                                                                                
Change in cash and bank accounts                          7 833   6 399    6 774
                                                                                
CASH AND EQUIVALENTS AT THE BEGINNING OF THE PERIOD      38 560  31 786   31 786
                                                                                
CASH AND EQUIVALENTS AT THE END OF THE PERIOD            46 393  38 185   38 560








         Karl Heino Brookes
         Chairman of the Management Board
         +372 6262 201
         [email protected]