Börsiteade

Pealkiri

Results of Operations for the 4th quarter 2013

Teade

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.
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,
overturning the Competition Authority’s claim that the tariff mechanism
     specified in the Services Agreement is allegedly a civil law agreement that
     the company cannot rely on in an administrative court. 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.

  -- 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, the
     Minister of Finance, and the Competition Authority itself regarding the key
     terms of the agreements, and utilising the expertise and guidance of the
     European Bank for Reconstruction and Development (EBRD). In addition to
     approving the framework of the privatisation the State of Estonia directly
     benefited as the sovereign guarantee it had been required to provide to
     EBRD to secure the then municipal AS Tallinna Vesi’s loans was passed to
     the Strategic Investor on privatisation. As this privatisation and these
     loans were EBRD sponsored projects, then the state of Estonia was required
     to object if the project did not comply with the PWSSA (Public Water Supply
     and Sewerage Act), it is noteworthy that it did not, in fact it voted in
     favour of both the privatisation and loan re-financing.

  -- During the 1st quarter of 2013 initial court proceedings commenced.
     Currently the date of the next court hearing is not set. AS Tallinna Vesi
     believes in open and transparent regulation and requested open court
     proceedings. On the other hand, the Competition Authority believes its
     methodology to be a “business secret” hence it requested closed court
     proceedings. On 20th of March 2013 the Administrative Court rules that the
     court proceedings would be partially closed, meaning that there could be no
     public discussion of the Competition Authority’s methodology, whilst all
     other aspects of the hearing will be held in open proceedings, i.e. all
     information can be made available to the public.

  -- Discussion of the complaint submitted to the EU Commission is on-going.

  -- Average real return on capital invested at privatization is still 6.2%
     since 2001.

The Company 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. 



Financial highlights of 4th quarter 2013

In the 4th quarter of 2013 the Company continued focusing on the improvement of
customer service and efficiency of operational performance. 

During the 4th quarter 2013 the sales have been flat compared to the same
period in 2012, increasing 0.5% to 13.78 mln euros. 

The gross profit in 4th quarter has been relatively stable decreasing 1.1% or
0.09 mln euros mainly due to slightly increased repair and maintenance works
carried out in 4th quarter of 2013. 

Increased legal and consultation fees that are mostly related to the tariff
dispute has had the main impact on the increase in administration expenses of
19.8% or 0.24 mln euros and hence the decrease in the operating profit from
main business by 3.6% or 0.25 mln euros. 

The decline in operating profit for the 4th quarter in 2013 of 23.6% or 2.02
mln euros to 6.55 mln euros compared to the same period in 2012 was mostly
affected by the fact that the extension program of water and wastewater network
was finished in 2012 and in 2013 there was no profit for the compensation for
pipes (in 2012 the revenues from government grants amounted to 1.77 mln euros). 

mln €            4 Q     4 Q     4 Q    Change     12       12      12    Change
                 2011    2012    2013    13/12   months   months  months   13/12
                                                 2011     2012     2013         
--------------------------------------------------------------------------------
Sales             13,1    13,7    13,8    0,5%     51,2     52,9    53,1    0,3%
Gross profit       7,2     8,4     8,3   -1,1%     30,3     32,6    30,6   -6,2%
Gross profit      54,9    61,2    60,2   -1,6%     59,2     61,6    57,6   -6,4%
 margin %                                                                       
Operating          8,0     8,6     6,6  -23,6%     28,9     28,8    24,8  -14,0%
 profit                                                                         
Operating          5,7     6,8     6,6   -3,6%     25,4     26,7    24,8   -7,4%
 profit - main                                                                  
 business                                                                       
Operating         61,5    62,5    47,5  -24,0%     56,4     54,4    46,6  -14,2%
 profit margin                                                                  
 %                                                                              
Profit before      7,7     8,7     6,2  -28,5%     25,8     27,1    24,6   -9,3%
 taxes                                                                          
Net profit         7,7     8,7     6,2  -28,5%     21,5     22,6    19,9  -11,8%
Net profit        58,7    63,2    44,9  -28,9%     42,0     42,7    37,6  -12,1%
 margin %                                                                       
ROA %              4,0     4,3     3,1  -29,2%     11,2     11,3     9,8  -12,7%
Debt to total     58,9    57,8    57,0   -1,4%     58,9     57,8    57,0   -1,4%
 capital                                                                        
 employed                                                                       
ROE %              9,7    10,2     7,1  -30,6%     27,3     26,7    22,9  -14,3%
Current ratio      4,1     4,3     5,1   18,9%      4,1      4,3     5,1   18,9%
--------------------------------------------------------------------------------

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 



RESULTS OF OPERATIONS - FOR THE 4th QUARTER 2013

Profit and Loss Statement

4th quarter 2013

Sales

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

In the 4th quarter of 2013 the Company’s total sales increased, year on year,
by 0.5% to 13.78 mln euros. 87.9% of sales comprise of sales of water and
treatment of wastewater to domestic and commercial customers within and outside
of the service area, 6.2% of sales from fees received from the City of Tallinn
for operating and maintaining the storm water system and 5.9% from other works
and services. 

Sales of water and wastewater services were 12.11 mln euros, a 2.1% decrease
compared to the 4th quarter of 2012, resulting from the changes in sales
volumes as described below. 

Within the service area, sales to residential customers were at 6.03 mln euros,
showing a 0.2% 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 decreased by 0.5% to 4.78 mln
euros, mainly coming from the sales in industrial sector. Sales to customers
outside of the main service area decreased by 9.2% to 1.16 mln euros in the 4th
quarter of 2013. It was mostly affected by storm water as sales of water and
wastewater increased slightly by 5.4% or 0.05 mln euros. Over pollution fees
received were 0.15 mln euros, a 46.9% decrease compared to the 4th quarter of
2012. 

                                                 Quarter 4       Variance 13/12
Revenues from main operating activities      2013   2012   2011    €       %   
Private clients, incl:                      6 026  6 016  6 019     10     0,2%
Water supply service                        3 329  3 320  3 319      9     0,3%
Wastewater disposal service                 2 697  2 696  2 700      1     0,0%
Corporate clients, incl:                    4 776  4 802  4 574    -26    -0,5%
Water supply service                        2 640  2 613  2 463     27     1,0%
Wastewater disposal service                 2 136  2 189  2 111    -53    -2,4%
Outside service area clients, incl:         1 163  1 282  1 096   -119    -9,3%
Water supply service                          294    264    253     30    11,4%
Wastewater disposal service                   721    699    689     22     3,1%
Storm water disposal service                  148    319    154   -171   -53,6%
Over pollution fee                            146    274    164   -128   -46,7%
                                                                               
Storm water treatment and disposal service    853    927    840    -74    -8,0%
Fire hydrants service                         127     56     77     71   126,8%
Construction service and design               437    161    101    276   171,4%
Other works and services                      250    191    208     59    30,9%



Outside service area sales volumes were 0.56 mln m3 or 24.7% lower than in the
4th quarter of 2012. As already mentioned before the main factor in this
decrease was a reduction in storm water volumes influenced by lower rainfall. 

The sales from the operation and maintenance of the storm water and
fire-hydrant system in the main service area decreased by 0.2% to 0.98 mln
euros in the 4th quarter of 2013 compared to the same period in 2012. According
to the terms and conditions of the contract revenues reflect actual volumes
treated and costs for treating the storm water, therefore this cost pass
through has no impact on profits. 

The sales of construction activities and design services have increased by
171.4% to 0.44 mln euros in the 4th quarter of 2013 compared to 4th quarter in
2012, partly due to mild winter of 2013 allowing construction works. 



Cost of Goods Sold and Gross profit

The cost of goods sold for the main operating activity was 5.48 mln euros in
the 4th quarter of 2013, showing 0.16 mln euros or 3.0% increase compared to
the equivalent period in 2012. The cost increase is highly influenced by the
additional construction works and extra emergency and repair works carried out
in the 4th quarter of 2013. 

Cost of goods sold                      Quarter 4        Variance 13/12
                                  2013    2012    2011     €       %   
Water abstraction charges          -257    -236    -219    -21     8,9%
Chemicals                          -424    -419    -432     -5     1,2%
Electricity                        -826    -964    -818    138   -14,3%
Pollution tax                       -58    -180    -665    122   -67,8%
Staff costs                      -1 202  -1 256  -1 131     54    -4,3%
Depreciation and amortization    -1 266  -1 302  -1 364     36    -2,8%
Construction service and design    -357     -91    -103   -266   292,3%
Other costs of goods sold        -1 094    -877  -1 163   -217    24,7%
Total cost of goods sold         -5 484  -5 325  -5 895   -159     3,0%

Total production costs (water abstraction charges, chemicals, electricity and
pollution taxes) decreased by 0.23 mln euros or 13.0% year on year. Biggest
decreases come from the decrease in pollution tax and electricity. Other
changes came from a combination of increase in prices and tax rates and
movements in treatment volumes that affected the costs of goods sold together
with the following additional factors: 

  -- Water abstraction charges increased only by 0.02 mln euros or 8.8% to 0.26
     mln euros in the 4th quarter of 2013, driven mainly by 5% raise in tax
     rates and raw water volumes.
  -- Total chemical costs remained broadly flat, increasing 1.2% to 0.42 mln
     euros. Costs increase was mainly the result of an increase in chemicals
     price, which was balanced by decrease in volumes used due to less sewage
     treated.
  -- Electricity costs decreased by 0.14 mln euros or 14.3% in the 4th quarter
     of 2013 compared to the 4th quarter of 2012. Lower electricity costs are
     mostly derived from the decrease in treatment volumes and used unit costs,
     worth 0.15 mln euros. Positive effects are reduced slightly by increased
     electricity price worth 0.01 mln euros.
  -- In the 4th quarter of 2013 the pollution tax expense decreased by 0.12 mln
     euros or 67.8%. There was an incident in the wastewater treatment plant in
     the beginning of the year. In the 4th quarter the Company was paid an
     insurance compensation worth 0.15 mln euros. Eliminating the effects of the
     insurance compensation the pollution tax would have increased by 0.03 mln
     euros or 15.5%. The pollution tax increase due to the increase in
     pollutants concentration (worth 0.04 mln euros) and overall increase in tax
     rates by 15% (worth 0.03 mln euros) was balanced by the decrease in volumes
     (worth 0.04 mln euros).

Other cost of goods sold (staff costs, depreciation, construction services and
other cost of goods sold) in the main operating activity increased by 0.39 mln
euros or 11.1%. 67.7% or 0.27 mln euros of the increase in fixed costs is
related to construction services and design, which relates to increased
revenues from pipeline construction as mentioned above, the profit from
construction and design in the 4th quarter was 0,08 mln euros compared to 0.07
mln euros in the comparative period in 2012. The remaining increase is related
to higher repair and maintenance carried out in the 4th quarter of 2013. 

As a result of all of the above the Company’s gross profit for the 4th quarter
of 2013 was 8.29 mln euros, which is a decrease of 0.09 mln euros, or 1.1%,
compared to the gross profit of 8.38 mln euros for the 4th quarter of 2012. 



Other Operating Costs

General administration expenses increased in total 0.24 mln euros or 19.8%,
mainly because of higher consultation and legal fees, balanced by salary
decrease and also changes in the management board. 



Operating profit

As a result of above factors the Company’s operating profit from main services
for the 4th quarter of 2013 totalled 6.55 mln euros compared to 6.80 mln euros
in the corresponding quarter in 2012, which shows a decrease of 0.25 mln euros
or 3.6%. Total operating profit for the 4th quarter of 2013 decreased 2.02 mln
euros. Year on year the operating profit for the 4th quarter has decreased by
23.6%. 



Other net income/expenses

Other net income decreased to a net expenses of 0.15 mln euros, compared to
1.59 mln euros net revenues in the 4th quarter of 2012. The decline in
government grants revenues was the main contributor to Other net income
decrease in the 4th quarter of 2013. 



Financial expenses

The company’s net financial expenses amounted to 0.36 mln euros in the 4th
quarter of 2013, which is a negative change of 0.45 mln euros compared to 0.09
mln euros financial income in the 4th quarter of 2012. 

Main influence being decrease in interest income by 0.44 mln euros or 81.9%
caused by the decrease in the interest bearing receivables. Financial expenses
have been flat compared to 4th quarter of 2012. 

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 2.32 mln euros. 

Effective interest rate (incl. swap interests) in the 4th quarter of 2013 was
3.18%, amounting in the interest costs of 0.77 mln euros, compared to the
effective interest rate of 3.30% and the interest costs of 0.80 mln euros into
the 4th quarter of 2012. 



Profit Before and After Tax

The Company’s profit before taxes for the 4th quarter of 2013 was 6.19 mln
euros, which is 2.47 mln euros lower than the profit before taxes of 8.66 mln
euros for the 4th quarter of 2012, resulting mainly from the decreased
government grant revenues and increased professional fees as described above. 

As the dividends were paid out in June 2013 and 2012 there is no income tax in
the 4th quarter and the Company’s profit after taxes equals to the profit
before taxes amount. 



Results for the twelve months of 2013

During the twelve months of 2013 the Company’s total sales have been relatively
stable increasing, year on year, by 0.3% to 53.09 mln euros. Sales of water and
wastewater treatment were 47.74 mln euros, a 0.4% increase compared to the
twelve months of 2012. 

There has been a slight 0.15 mln euros or 0.6% decline in the sales to
residential customers and 0.29 mln euros or 1.5% of increase in the sales to
the commercial clients. The sales revenues from outside service area clients
for water and wastewater services has also been relatively stable showing an
increase of 0.11 mln euros or 3.0% compared to 12 months in 2012. 

Due to less rainfall, the revenues from storm water treatment in the twelve
months of 2013 remained 0.58 mln euros or 15.5% behind the comparative period
in 2012 in the main service area. 

The operating profit from the Company’s main business activity decreased by
7.4% to 24.75 mln euros during the twelve months of 2013 compared to the twelve
months of 2012. As revenues have been relatively flat, increasing only 0.3% or
0.16 mln euros, then the main reason for a decline comes from the rise in
pollution tax expenses (1.53 mln euros year on year), further influenced by the
drop in government grant profits (1.77 mln euros year on year). Pollution tax
increase is influenced by two factors: first the pollution tax expenses in 2012
were impacted by the reversal of provision in the amount of 0.44 mln euros made
in 2011 and also by the incidents at the wastewater treatment plant in the
first part of the year. 

Net financial expenses decreased by 1.51 mln euros or 88.5%. Interest income
has decreased due to the decrease in interest bearing receivables. 

Interest expenses have mostly been affected by the non-monetary impact of the
change in the fair value of the swap contracts the Company has entered. The
positive non-monetary impact for 2013 expenses is 2.26 mln euros (2012:
negative impact 0.09 mln euros). 

The Company’s profit before taxes for the twelve months of 2013 was 24.56 mln
euros, which is a 9.3% decrease compared to the relevant period in 2012.
Decrease in operating profit was partly compensated by the change in fair value
of swap contracts (2.34 mln euros). 

The Company’s net profit for the twelve months of 2013 was 19.94 mln euros,
which is 2.47 mln euros lower than the net profit of 22.60 mln euros in the
equivalent period in 2012. 



Balance sheet

In the twelve months of 2013 the Company invested 8.65 mln euros into fixed
assets. As of 31 December 2013 non-current fixed assets amounted to 152.25 mln
euros and total non-current assets amounted to 155.50 mln euros. (2012: 149.40
mln euros and 158.11 mln euros respectively). 

The reduction in long-term receivables compared to year end by 5.35 mln euros
to 2.21 mln euros is mainly related to the repayment of AS Maardu Vesi’s loan
to the Company in May in the amount of 3.81 mln euros. Remaining movement is
related to reclassification of long term receivable to short term. 

The increase of current assets in the amount if 4.61 mln euros is mainly
related to collection of receivables and AS Maardu Vesi loan. 

Current liabilities have increased by 1.32 mln euros to 11.21 mln euros in the
twelve months. The increase is related to the fact that in November 2014, there
is scheduled the first repayment of NIB loan in the amount of 2 mln euros.
Other movements are related to decreased payments to suppliers in the amount of
0.72 mln euros and change in derivatives by 0.22 mln euros, balanced by the
increase in Customer prepayments in the amount of 0.24 mln euros. 

The Company has a Total debt/Total assets level as expected of 57.0%, in range
of 55%-65%, reflecting the year end equity profile. This level is consistent
with the same period in 2012 when the total debt/total assets ratio was 57.8%. 

The company’s loan balance has remained stable at 95 mln euros, of which long
term loan amounts to 93 mln euros and short term 2 million euros. The weighted
average interest margin for the total loan facility is 0.96%. 

Biggest share of the rest of the long term liabilities is deferred income from
connection fees amounting to 10.14 mln euros (2012: 7.89 mln euros). 

In the 4th quarter of 2011 the Company recorded and noted an exceptional
contingent liability, which could cause an outflow of economic benefits of up
to 36.0 mln euros. In the 3rd quarter of 2013 the Company re-evaluated the
liability, which now stands at 34.0 mln euros, as per note 13 to the accounts. 



Cash flow

As of 31 December 2013 the cash position of the Company is strong. The cash
flows of the Company has continued to be rather stable, during twelve months of
2013 cash balance has increased by 7.85 mln euros (2012: 9.16 mln euros). At
the end of 2013 the cash balance of the Company stood at 31.8 mln euros, which
is 15.7% of the total assets (2012: 23.9 mln, which is 11.9% of the total
assets). 

The biggest contributor to the cash flows comes from main operations. During
the twelve months of 2013, the Company generated 29.78 mln euros of cash flows
from operating activities, a decrease of 1.92 mln euros compared to the
corresponding period in 2012. 

2013 operating cash flows were below 2012 cash flows mainly due to lower
operating profit and also from a change in profits from government grants.
Underlying operating profit still continues to be the main contributor to
operating cash flows. 

The Company’s cash flows from investing activities have also been positive for
past two years. In the twelve months of 2013 net cash flows from investing
activities resulted in a cash inflow of 3.37 mln euros, an increase of 1.33 mln
euros compared to an inflow of 2.05 mln euros in the twelve months of 2012.
This is made up as follows: 

In 2013 AS Maardu Vesi repaid their loan in full in the amount of 3.81 mln
euros. In 2013 the Company did not grant any additional loans (in 2012: 0.77
mln euros was granted to AS Maardu Vesi). 

In the twelve months of 2013 the investments in fixed assets had decreased 0.82
mln euros compared to 2012 amounting to 9.19 mln euros. 

The compensations received for the construction of pipelines were 7.89 mln
euros in the twelve months of 2013, a decrease of 3.31 mln euros compared to
same period in 2012. 

In the twelve months of 2013, cash outflow from financing amounted to 25.32 mln
euros, which is 0.72 mln euros more than in the same period of 2012, almost
entirely due to higher dividends. 

                                        

Employees

At the end of the 4th quarter of 2013, the total number of employees was 304
compared to 313 at the end of the 4th quarter of 2012. The full time equivalent
(FTE) was respectively 292 in 2013 compared to the 301 in 2012. 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 the 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 held on 21st May 2013, 87 cents
dividends per share and the total dividend pay-out from the profit of 2012 net
income in the amount of 17.4 mln euros was approved. It is in accordance with
the Company’s dividend policy. Compared to 2012 dividends of 84 cents per
share, the increase is equal to the inflation. 

Dividends were paid out on 13th and 14th of June 2013.



Share performance

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

As of 31 December 2013 AS Tallinna Vesi shareholders, with a direct holding
over 5%, were: 

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

Pension funds have continued to increase their portfolios during the 4th
quarter of 2013, owning 2.56% of the total shares compared to 1.57% at the end
of 1st quarter 2012. 

As of 31 December 2013, the closing price of the AS Tallinna Vesi share was
11.90 euros, which is a 15.5% increase compared to the closing price of 10.30
euros at the beginning of the quarter. During the same period the OMX Tallinn
index decreased by 2.3%. 

In 12 months in 2013 the share price has increased 29.3%. (in 2012: 46.3%),
whilst the OMX Tallinn index increased by 11.4% (2012: 38.2%). 

In 2013 5 469 deals with the Company’s shares were concluded (2012: 4 427
deals) during which 1 853 thousand shares or 9.3% exchanged their owners (2012:
2 376 thousand shares or 11.9%). 

The turnover of the transactions was 552 thousand euros higher than in 2012
amounting to 19 139 thousand euros. The share price has shown an increase
despite of the on-going contractual debate. 



Corporate structure

At the end of the quarter, 31 December 2013, 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. 

In the annual general meeting that was held on 21st May 2013 the independent
member Valdur Laid was recalled from the Supervisory Council and new
independent member Allar Jõks was appointed. 

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 1st June 2013 there are 4 members of the Management Board of AS
Tallinna Vesi: Ian Plenderleith (Chairman of the Board), Ilona Nurmela,
Aleksandr Timofejev and Riina Käi. 

Additional information about 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

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). The
process is on-going. 



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. 

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. 

Still, at this point in time the Company is unable to say what is going to
happen to the tariffs before Court judgments and what would be the next steps
by the European Commission. The outcome and lengths of the Court proceedings is
outside the control of the Company. 







STATEMENT OF COMPREHENSIVE INCOME   IV quarter  IV quarter  12 months  12 months
(thousand €)                           2013        2012        2013       2012  
                                                                                
Revenue                                 13 778      13 709     53 087     52 924
Costs of goods sold                     -5 484      -5 325    -22 505    -20 337
                                                                                
GROSS PROFIT                             8 294       8 384     30 582     32 587
                                                                                
Marketing expenses                        -152        -196       -690       -772
General administration expenses         -1 440      -1 202     -5 060     -4 740
Other income/ expenses (-)                -151       1 586        -75      1 696
                                                                ,               
OPERATING PROFIT                         6 551       8 572     24 757     28 771
                                                                                
Financial income                            98         542        681      1 591
Financial expenses                        -456        -451       -877     -3 297
                                                                                
PROFIT BEFORE TAXES                      6 193       8 663     24 561     27 065
                                                                                
Income tax on dividends                      0           0     -4 625     -4 466
                                                                                
NET PROFIT FOR THE PERIOD                6 193       8 663     19 936     22 599
COMPREHENSIVE INCOME FOR THE             6 193       8 663     19 936     22 599
 PERIOD                                                                         
Attributable to:                                                                
Equity holders of A-shares               6 192       8 662     19 935     22 598
B-share holder                            0,60        0,60       0,60       0,60
                                                                                
Earnings per A share (in euros)           0,31        0,43       1,00       1,13
Earnings per B share (in euros)            600         600        600        600





STATEMENT OF FINANCIAL POSITION                                               
(thousand €)                                            31.12.2013  31.12.2012
                                                                              
ASSETS                                                                        
CURRENT ASSETS                                                                
Cash and equivalents                                        31 786      23 935
Trade receivables, accrued income and prepaid expenses      15 010      18 323
Inventories                                                    429         356
TOTAL CURRENT ASSETS                                        47 225      42 614
                                                                              
NON-CURRENT ASSETS                                                            
Other long-term receivables                                  2 213       7 560
Property, plant and equipment                              152 246     149 400
Intangible assets                                            1 037       1 154
TOTAL NON-CURRENT ASSETS                                   155 496     158 114
TOTAL ASSETS                                               202 721     200 728
                                                                              
LIABILITIES                                                                   
                                                                              
CURRENT LIABILITIES                                                           
Current portion of long-term borrowings                      2 146         115
Trade and other payables                                     4 761       5 482
Derivatives                                                  1 816       2 039
Prepayments                                                  2 490       2 252
TOTAL CURRENT LIABILITIES                                   11 213       9 888
                                                                              
NON-CURRENT LIABILITIES                                                       
Deferred income from connection fees                        10 143       7 892
Borrowings                                                  93 618      95 717
Derivatives                                                    507       2 538
Other payables                                                  32          20
TOTAL NON-CURRENT LIABILITIES                              104 300     106 167
TOTAL LIABILITIES                                          115 513     116 055
                                                                              
EQUITY CAPITAL                                                                
Share capital                                               12 000      12 000
Share premium                                               24 734      24 734
Statutory legal reserve                                      1 278       1 278
Retained earnings                                           49 196      46 661
TOTAL EQUITY CAPITAL                                        87 208      84 673
TOTAL LIABILITIES AND EQUITY CAPITAL                       202 721     200 728





CASH FLOW STATEMENT                                                12       12  
                                                                 months   months
(thousand €)                                                     2013     2012  
                                                                                
CASH FLOWS FROM OPERATING ACTIVITIES                                            
Operating profit                                                 24 757   28 771
Adjustment for depreciation/amortisation                          5 809    5 879
Adjustment for profit from government grants and connection        -117   -2 043
 fees                                                                           
Other non-cash adjustments                                           11     -153
Profit/loss(+) from sale and write off of property, plant and      -138       -6
 equipment, and intangible assets                                               
Change in current assets involved in operating activities          -433     -160
Change in liabilities involved in operating activities              -92     -568
Total cash flow from operating activities                        29 797   31 720
                                                                                
CASH FLOWS FROM INVESTING ACTIVITIES                                            
Loans granted                                                         0     -765
                                                                  3 814        0
Acquisition of property, plant and equipment, and intangible     -9 187  -10 011
 assets                                                                         
Proceeds from sales of property, plant and equipment                165       38
Compensations received for construction of pipelines              7 885   11 198
Interest received                                                   693    1 585
Total cash flow from investing activities                         3 370    2 045
                                                                                
CASH FLOWS FROM FINANCING ACTIVITIES                                            
Interest paid and loan financing costs, incl swap interests      -3 154   -3 272
Repayment of finance lease                                         -136      -61
Dividends paid                                                  -17 401  -16 801
Income tax on dividends                                          -4 625   -4 466
Total cash flow from financing activities                       -25 316  -24 600
                                                                                
Change in cash and bank accounts                                  7 851    9 165
                                                                                
CASH AND EQUIVALENTS AT THE BEGINNING OF THE PERIOD              23 935   14 770
                                                                                
CASH AND EQUIVALENTS AT THE END OF THE PERIOD                    31 786   23 935






         Ian John Alexander Plenderleith
         Chairman of the Management Board
         +372 6262 201
         [email protected]