Börsiteade

Pealkiri

Results of operations - for the 1st quarter 2016

Teade

MANAGEMENT REPORT

Chairman's summary

The 1st quarter of 2016 is off to an excellent start. The majority of key
performance indicators (KPI) are on track, which given the colder weather and
associated increase in network disruption, is very good and a testament of all
the hard work done by AS Tallinna Vesi staff, during the winter period. 

In the 1st quarter of 2016, the water quality was 100% compliant, according to
6,510 analyses of the 772 samples taken. Average network leakage for the period
was 17.51%, which is higher than the same period in 2015 (14.64%), but
attributable to the colder ambient temperatures, resulting in a higher number
of bursts on the clean water network. With the advent of warmer weather, we
hope to see a corresponding reduction in network leakage, helping us to achieve
the targeted year end KPI of 15%. 

Besides providing premium drinking water, we are also responsible for a
wastewater discharge service to nearly one third of Estonia’s population
(440,000). It is therefore extremely important that the wastewater treatment
plant in Paljassaare works effectively and in accordance with the stipulated
quality requirements, set by the Estonian Ministry of Environment. During the
1st quarter of 2016, the final effluent leaving Paljassaare was 100% compliant
with the stipulated limits and no pollution incidents have occurred on the
network. 

We continue to make targeted capital investments, renovating or replacing
assets based on previous condition surveys and performance data, to ensure the
continued reliability of the infrastructure. This includes the 5+5 programme,
where 5 km of water and wastewater network is replaced each year. 

Delivering good operational and financial performance is only possible through
the continued motivation, commitment and performance of AS Tallinna Vesi staff.
We remain focused on the development and training of internal staff and
ensuring appropriate succession plans are in place. An example of this, is the
company’s ongoing graduate and apprentice programmes, which will also inject
fresh talent into the business for the future. 

Operational performance for the three months of 2016

Indicator                                                 2015 3      2016 3    
                                                           months      months   
--------------------------------------------------------------------------------
Drinking water                                                                  
--------------------------------------------------------------------------------
- 
Compliance of water quality at the customers’ tap               100%        100%
--------------------------------------------------------------------------------
Water loss in the water distribution network                  14.64%      17.51%
--------------------------------------------------------------------------------
Average duration of water interruptions per property in   3.05 h      3.49 h    
 hours                                                                          
--------------------------------------------------------------------------------
Wastewater                                                                      
--------------------------------------------------------------------------------
- 
Number of sewer blockages                                        220         188
--------------------------------------------------------------------------------
Number of sewer bursts                                            36          26
--------------------------------------------------------------------------------
Wastewater treatment compliance with environmental              100%        100%
 standards                                                                      
--------------------------------------------------------------------------------
Customer Service                                                                
--------------------------------------------------------------------------------
- 
Number of written complaints                                      21          11
--------------------------------------------------------------------------------
Number of customer contacts regarding water quality               27          13
--------------------------------------------------------------------------------
Number of customer contacts regarding water pressure              79          58
--------------------------------------------------------------------------------
Number of customer contacts regarding blockages and              307         300
 discharge of storm water                                                       
--------------------------------------------------------------------------------
Responding written customer contacts within at least 2         99.1%       98.1%
 work days                                                                      
--------------------------------------------------------------------------------
Number of failed promises                                          4           0
--------------------------------------------------------------------------------
Notification of unplanned water interruptions at least 1       98.1%       96.5%
 h before the interruption                                                      
--------------------------------------------------------------------------------



Contractual Highlights

  -- Tariffs of AS Tallinna Vesi 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 unilateral breach of privatization
     agreement by the Estonian Authorities.
  -- The Company was privatised 
in 2001 with the support and knowledge of the Estonian national government.
  -- 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 believes that the terms and
     conditions of the international privatisation contract, that has been
     deemed a public law contract, should enjoy the protection of the Estonian
     legal system.
  -- 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 over
     the lifetime of the international privatisation contract up to 2020. The
     claim estimation includes future volumes and expectations for consumer
     price index (CPI). As the CPI has been recently lower than at the time of
     submitting the estimated, the estimated undiscounted value of the claim is
     around 74 million euros compared to over the 90 million euros submitted.
     The Court decided to stay the claim proceeding until the main tariff
     dispute is resolved.
  -- On 5th of June 2015, the Tallinn Administrative Court dismissed the
     Company’s complaint in local tariff dispute. The reasoning of the dismissal
     of complaints was released not until 12th of October 2015. Tallinn
     Administrative Court formed an opinion that the tariffs part of the
     Services Agreement, which has been deemed to be as a public law contract by
     the Estonian Courts in 2012, is not binding on the Competition Authority.
     AS Tallinna Vesi filed the appeal to the Tallinn District Court on 11th of
     November 2015.
  -- I
n October 2014, in parallel to the local dispute about tariffs, AS Tallinna
     Vesi 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.
  -- On 17th of June 2015, the timetable of the International Arbitration
     Proceedings was determined, with the final hearing set for November 2016.
     Procedural orders and decisions issued during the arbitration process,
     subject to the redaction of the confidential information, are available on
     the
ICSID website
.
  -- International Arbitration Proceedings are being held in parallel and
     separately from local Court dispute
.
  -- There has been no hearings in disputes in the 1st quarter of 2016.
  -- It has been four 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.
  -- 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.





Financial highlights of 1st quarter 2016

The Group’s sales revenues during the 1st quarter of 2016 were EUR 14.37
million, being up by 5.9% or EUR 0.80 million compared to the same period in
2015. 

The gross profit in the 1st quarter of 2016 was EUR 8.34 million, showing an
increase by 3.3% or EUR 0.26 million. Increase in gross profit was related to
higher water, wastewater and storm water revenues, but moreover with higher
revenues from construction and asphalting services, which was balanced by
higher costs related to construction and asphalting services and increased
staff costs. 

The operating profit was EUR 6.63 million, showing a slight decrease by 0.8% or
EUR 0.05 million. The operating profit was impacted by the above mentioned
changes in gross profit, which was balanced by some increases in staff costs
and continuously high legal costs. 

The net profit for the 1st quarter of 2016 was EUR 5.64 million, being down by
11.7% or EUR 0.75 million.  The net profit was mainly impacted by above
mentioned changes in operating profit and higher financial expenses. Higher
financial expenses were mostly influenced by the negative change in the fair
value of swap contracts in the 1st quarter of 2016. The net profit for the 1st
quarter of 2016 and 2015 without the impact resulted from the change of the
fair value of swap contracts was EUR 6.29 million and EUR 5.97 million
respectively. 

EUR million                       Q1 2014  Q1 2015  Q1 2016  Change 16/15
-------------------------------------------------------------------------
Sales                               13.31    13.57    14.37          5.9%
Gross profit                         7.26     8.07     8.34          3.3%
Gross profit margin %               54.59    59.51    58.02         -2.5%
Operating profit                     5.68     6.68     6.63         -0.8%
Operating profit - main business     5.63     6.66     6.55         -1.7%
Operating profit margin %           42.71    49.26    46.15         -6.3%
Profit before taxes                  5.06     6.38     5.64        -11.7%
Net profit                           5.06     6.38     5.64        -11.7%
Net profit margin %                 38.03    47.04    39.23        -16.6%
ROA %                                2.42     3.01     2.61        -13.3%
Debt to total capital employed %    55.81    55.85    56.15          0.5%
ROE %                                5.49     6.82     5.96        -12.7%
Current ratio                        4.60     6.81     5.79        -15.0%
-------------------------------------------------------------------------

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 and asphalting services, doubtful debt, other
income 



RESULTS OF OPERATIONS FOR THE 1st QUARTER 2016

Profit and Loss Statement

1st quarter 2016

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 2016 the Group’s total sales were EUR 14.37 million,
showing an increase by 5.9% or EUR 0.80 million year on year. 87.1% of sales
comprise of sales of water and wastewater services to domestic and commercial
customers within and outside of the service area. 6.6% of sales are the fees
received from the City of Tallinn for operating and maintaining the storm water
system and fire hydrants and 6.3% from other works and services. 

Revenues from main operating activities            Quarter 1          Variance  
 (EUR thousand)                                                        16/15    
                                             2016    2015    2014    EUR       %
Total water supply and waste water          12,522  12,259  12,040   263    2.1%
 disposal service, incl:                                                        
Private clients, incl:                       6,338   6,154   6,047   184    3.0%
Water supply service                         3,485   3,386   3,327    99    2.9%
Wastewater disposal service                  2,853   2,768   2,720    85    3.1%
Corporate clients, incl:                     4,883   4,672   4,654   211    4.5%
Water supply service                         2,673   2,569   2,580   104    4.0%
Wastewater disposal service                  2,210   2,103   2,074   107    5.1%
Outside service area clients, incl:          1,130   1,249   1,145  -119   -9.5%
Water supply service                           308     292     255    16    5.5%
Wastewater disposal service                    670     771     756  -101  -13.1%
Storm water disposal service                   152     186     134   -34  -18.3%
Over pollution fee                             171     184     194   -13   -7.1%
                                                                                
Storm water treatment and disposal service     945     844     991   101   12.0%
 and fire hydrant service                                                       
Construction service, design and               761     344     130   417  121.2%
 asphalting                                                                     
Other works and services                       141     121     146    20   16.5%



Sales from water and wastewater services were EUR 12.52 million, showing a 2.1%
or EUR 0.26 million increase compared to the 1st quarter of 2015, resulting
from the changes in sales volumes as described below: 

  -- There has been a slight increase in all residential customer groups within
     the service area in the 1st quarter of 2016 compared to the same period in
     2015 resulting a total increase in private customers’ revenues by 3.0% to
     EUR 6.34 million.
  -- Sales to commercial customers within the service area have increased by
     4.5% to EUR 4.88 million. Increase is mostly related to industrial and
     other customer segment.
  -- Sales to customers outside the main service area have shown a decrease by
     9.5% to EUR 1.13 million. Wastewater revenues decreased by 13.1% to EUR
     0.67 million and storm water revenues decreased by 18.3% to EUR 0.15
     million, while water revenues increased by 5.5% to EUR 0.31 million.
     Decrease in the revenues from customers outside the main service area is
     mainly related to the sales to Viimsi, as they started to use their new
     wastewater treatment facilities.
  -- Over pollution fees received have decreased by 7.1% to EUR 0.17 million.

Sales from the operation and maintenance of the main service area storm water
and fire-hydrant system were EUR 0.95 million, showing an increase of 12.0% or
EUR 0.10 million in the 1st quarter of 2016 compared to the same period in
2015. 

Sales of construction, design and asphalting services were EUR 0.76 million,
having increased by 121.2% or EUR 0.42 million year on year. The increase was
mainly related to the higher construction revenues resulted from an ongoing big
project started at the end of 2015. 



Cost of Goods Sold and Gross profit

The cost of goods sold amounted to EUR 6.03 million in the 1st quarter of 2016,
showing 9.8% or EUR 0.54 million increase compared to the equivalent period in
2015. The cost increase is mainly influenced by increase in construction and
asphalting services related costs and also by higher staff costs. 

Cost of goods sold (EUR thousand)                 Quarter 1           Variance  
                                                                       16/15    
                                            2016    2015    2014    EUR        %
Water abstraction charges                    -291    -270    -264   -21    -7.8%
Chemicals                                    -342    -360    -412    18     5.0%
Electricity                                  -810    -828    -837    18     2.2%
Pollution tax                                -336    -300  -1,076   -36   -12.0%
Total direct production costs              -1,779  -1,758  -2,589   -21    -1.2%
Staff costs                                -1,418  -1,348  -1,228   -70    -5.2%
Depreciation and amortization              -1,431  -1,394  -1,298   -37    -2.7%
Construction service, design and             -675    -308     -87  -367  -119.2%
 asphalting                                                                     
Other costs of goods sold                    -729    -686    -841   -43    -6.3%
Other costs of goods sold total            -4,253  -3,736  -3,454  -517   -13.8%
Total cost of goods sold                   -6,032  -5,494  -6,043  -538    -9.8%

Total direct production costs (water abstraction charges, chemicals,
electricity and pollution tax) were EUR 1.78 million, showing 1.2% or EUR 0.02
million increase year on year. Changes in direct production costs came from a
combination of changes in prices and in treated volumes that affected the cost
of goods sold together with the following additional factors: 

  -- Water abstraction charges increased by 7.8% to EUR 0.29 million, driven
     mainly by increase in treated volumes.
  -- Chemicals costs decreased by 5.0% to EUR 0.34 million, driven mainly by
     20.5% lower methanol price used in wastewater treatment, worth EUR 0.034
     million, which was balanced by higher usage of methanol in the wastewater
     treatment process, worth EUR 0.017 million.
  -- Electricity costs decreased by 2.2% to EUR 0.81 million. Electricity costs
     decrease was related to lower electricity prices, balanced by higher
     electricity usage per m3 in both treatment processes and increase in
     treated volumes.
  -- Pollution tax expense increased by 12.0% to EUR 0.34 million, driven mainly
     by increase in treated volumes compared to the 1st quarter of 2015.

Other costs of goods sold (staff costs, depreciation, construction and
asphalting services costs and other costs of goods sold) amounted to EUR 4.25
million, having increased by 13.8% or EUR 0.52 million. Most of the increase
came from costs related to construction and asphalting services and higher
staff costs. Staff costs increased by 5.2% to EUR 1.42 million. It was partly
driven by higher headcount and also increase in salaries compared to the same
period in 2015. Increase in construction and asphalting services costs by
119.2% to EUR 0.68 million was related to increased construction and asphalting
revenues from a big overcoming project mentioned earlier. 

As a result of all above the Group’s gross profit for the 1st quarter of 2016
was EUR 8.34 million, showing an increase of 3.3% or EUR 0.26 million, compared
to the gross profit of EUR 8.07 million for the comparative period of 2015. 



Administrative and marketing expenses

Administrative and marketing expenses were EUR 1.66 million, showing an
increase of 22.5% or EUR 0.30 million. Increased legal and consultation fees
continue to be at a high level during the time the Company has ongoing local
and international disputes. Increase in salary expenses was mostly related to
higher headcount but also to some increase in salaries. 



Operating profit

As a result of the factors listed above the Group’s operating profit for the
1st quarter of 2016 totalled EUR 6.63 million, being 0.8% or EUR 0.05 million
lower than in the corresponding quarter of 2015. The Group’s operating profit
from main business was 1.7% or EUR 0.11 million lower compared to 2015. 



Financial expenses

The Group’s net financial income and expenses have resulted a net expense of
EUR 1.00 million, compared to net expense of EUR 0.30 million in the 1st
quarter of 2015. It is mainly impacted by a negative change of the fair value
of the swap contracts year on year (EUR -1.07 million), which was balanced by
decrease in interest costs (EUR 0.39 million). 

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
EUR 75 million and EUR 20 million are still with floating interest rate. At
this point in time the estimated fair value of the swap contracts is negative,
totalling EUR 1.66 million. Effective interest rate of loans (incl. swap
interests) in the 1st quarter of 2016 was 1.47%, amounting to interest costs of
EUR 0.35 million, compared to the effective interest rate of 3.11% and the
interest costs of EUR 0.74 million in the 1st quarter of 2015. 



Profit Before and After Tax

The Group’s profit before taxes and net profit for the 1st quarter of 2016 was
EUR 5.64 million, being 11.7% or EUR 0.75 million lower than for the 1st
quarter of 2015, resulting mainly from increased revenues, balanced by the
increased costs and net financial expenses as described above. Eliminating the
influence of the derivatives fair value, the Group’s profit before taxes and
net profit for the 1st quarter of 2016 would have been EUR 6.29 million,
showing an increase by 5.4% or EUR 0.32 million compared to the relevant period
in 2015. 



Statement of financial position

In the three months of 2016 the Group invested EUR 2.00 million into fixed
assets. As of 31st March 2016 non-current tangible assets amounted to EUR
163.12 million and total non-current assets amounted to EUR 163.91 million
(31st March 2015: EUR 157.51 million and EUR 158.35 million respectively). 

Compared to the year end of 2015 the receivables and prepayments have shown an
increase in the amount of EUR 0.18 million to EUR 7.35 million. Increase is
mostly related to construction activities. The collection rate of receivables
continues to be high being 99.8% compared to 99.7% in the 1st quarter of 2015. 

Current liabilities have increased by EUR 0.55 million to EUR 8.97 million
compared to the year end of 2015.  The increase in trade and other payables by
EUR 0.57 million is related to increased investment related liabilities. 

The Group’s loan balance has remained stable at EUR 95 million. The weighted
average interest risk margin for the total loan facility is 0.95%. 

The Group has a Total debt/Total assets level as expected of 56.2%, in range of
55%-65%, reflecting the Group’s equity profile. This level is consistent with
the same period in 2015 when the Total debt/Total assets ratio was 55.9%. 

Deferred income from connection fees has grown compared to the end of 2015 by
EUR 0.31 million to 15.34 million. 



Contingent liability regarding the tariff risk

In the 4th quarter of 2011 the Group evaluated and noted an exceptional
off-balance sheet contingent liability, which could cause an outflow of
economic benefits of up to EUR 36.0 million. In the 4th quarter of 2015 the
Group re-evaluated the liability, which now stands at EUR 42.8 million, as per
note 13 to the accounts. The re-evaluation is made annually at the end of the
year. 



Cash flows

As of 31st March 2016 the cash position of the Group is strong. At the end of
March 2016 the cash balance of the Group stood at EUR 44.17 million, which is
20.5% of the total assets (31st March 2015: EUR 46.39 million, forming 21.9% of
the total assets). 

The biggest contribution to the cash flows comes from main operations. During
the three months of 2016, the Group generated EUR 8.76 million of cash flows
from operating activities, an increase of EUR 0.70 million compared to the
corresponding period in 2015. Underlying operating profit continues to be the
main contributor to operating cash flows. The collection of receivables
continues to be strong. 

In the three months of 2016 the result of net cash flows from investing
activities was a cash outflow of EUR 2.05 million, a decrease of EUR 2.53
million compared to the cash inflow of EUR 0.48 million in the three months of
2015. This is made up as follows: 

  -- In the three months of 2016 the investments in fixed assets have increased
     by EUR 0.38 million compared to 2015 amounting to EUR 2.24 million.
  -- The compensations received for the construction of pipelines were EUR 0.15
     million in the three months of 2016, showing a decrease of EUR 2.14 million
     compared to the same period of 2015. It is mostly related to the extension
     program for which last payments were received in the 1st quarter of 2015.

In the three months of 2016 cash outflow from financing activities amounted to
EUR 0.35 million, decreasing by EUR 0.36 million compared to the same period in
2015. The change was mainly related to reduction in interest payments by EUR
0.34 million related to renewal of swap contracts in 2nd quarter of 2015. 

                                        

Employees

Competent and engaged employees are key to any business. The Group is committed
to creating a work environment where everyone is respected and valued. We have
described our human resource management procedures, including but not limited
to recruitment, remuneration, evaluation and training policies. We follow
equality principles in selecting and managing people which translates into
providing, when feasible, equal opportunities to everyone. Understanding and
appreciating the diversity of our staff, we ensure that everyone is treated
fairly and equally and that they have access to the same opportunities as is
reasonably practicable. We aim to ensure that no employees are discriminated
against due to, but not exclusive to, age; gender; religion; cultural or ethnic
origin; disability; sexuality orientation or marital status. 

At the end of the 1st quarter of 2016, the total number of employees was 319
compared to 313 at the end of the 1st quarter of 2015. The full time equivalent
(FTE) was respectively 307 in 2016 compared to the 302 in 2015. Average number
of employees (FTE) during the 1st quarter was respectively 309 in 2016 and 301
in 2015. 

By gender, employee allocation was as follows:

As of 31st March 2016  Women  Men   Total
                                         
Group                  97   222       319
-----------------------------------------
-----------------------------------------
Management Team        13    13        26
Executive Team          6     3         9
Management Board        1     2         3
                                         
Supervisory Board       0     9         9
                                         



As of 31st March 2015  Women  Men   Total
                                         
Group                  96   217       313
-----------------------------------------
-----------------------------------------
Management Team        11    13        24
Executive Team          5     3         8
Management Board        1     2         3
                                         
Supervisory Board       0     9         9
                                         

The total salary cost was EUR 2.08 million, including EUR 0.08 million paid to
Management and Supervisory Council members. The off-balance sheet potential
salary liability could rise up to EUR 0.08 million should the Council want to
replace the current Management Board members. 



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 2nd of June 2016 the matter of
dividend pay-out will be voted on. 

Dividends will be paid out in June 2016.



Share performance

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

As of 31st March 2016 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 2016 the shareholder structure has been relatively
stable compared to the end of 2015. At the end of 1st quarter 2016 the pension
funds owned 1.87% of the total shares compared to 1.89% at the end of 4th
quarter 2015. 

As of 31st March 2016, the closing price of AS Tallinna Vesi share was EUR
14.80, which is 7.2% (2015: 7.6%) higher compared to the closing price of EUR
13.80 at the beginning of the quarter. During the same period the OMX Tallinn
index increased by 8.0% (2015: 14.3%). 

In the three months of 2016, 1,514 deals with the Company’s shares were
concluded (2015: 1,324 deals) during which 258 thousand shares or 1.3%
exchanged their owners (2015: 309 thousand shares or 1.5%). 

The turnover of the transactions was EUR 0.67 million lower than in 2015,
amounting to EUR 3.61 million. 



Corporate structure

As of 31st March 2016, 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. There has been no changes in Supervisory Council
members in the 1st quarter of 2016. 

Supervisory Council has formed three committees to advise Supervisory Council
on audit, remuneration and corporate governance 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 20th of March 2017), Aleksandr Timofejev
(with the powers of the Management Board Member until 29th of October 2018) and
Riina Käi (with the powers of the Management Board Member until 29th of October
2018). 

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 related with the 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 will keep the investment community informed of all relevant
developments of the tariff dispute, both locally as well as internationally. AS
Tallinna Vesi has published all relevant materials on its website
(http://www.tallinnavesi.ee/en/Investor/Regulation) and to the Tallinn Stock. 

At this point in time the Company will not speculate on future developments,
possible outcomes or timing of the proceedings. 





STATEMENT OF COMPREHENSIVE INCOME    I quarter  I quarter  12 months
(EUR thousand)                          2016       2015       2015  
                                                                    
Revenue                                 14 369     13 568     55 928
Costs of goods sold                     -6 032     -5 494    -23 679
                                                                    
GROSS PROFIT                             8 337      8 074     32 249
                                                                    
Marketing expenses                        -127       -137       -435
General administration expenses         -1 528     -1 214     -6 086
Other income/ expenses (-)                 -50        -40       -150
                                                                    
OPERATING PROFIT                         6 632      6 683     25 578
                                                                    
Financial income                            15         36         95
Financial expenses                      -1 010       -337     -1 315
                                                                    
PROFIT BEFORE TAXES                      5 637      6 382     24 358
                                                                    
Income tax on dividends                      0          0     -4 500
                                                                    
NET PROFIT FOR THE PERIOD                5 637      6 382     19 858
COMPREHENSIVE INCOME FOR THE PERIOD      5 637      6 382     19 858
Attributable to:                                                    
Equity holders of A-shares               5 636      6 381     19 857
B-share holder                            0,60       0,60       0,60
                                                                    
Earnings per A share (in euros)           0,28       0,32       0,99
Earnings per B share (in euros)            600        600        600





STATEMENT OF FINANCIAL POSITION                                                 
(EUR thousand)                                31.03.2016  31.03.2015  31.12.2015
                                                                                
ASSETS                                                                          
CURRENT ASSETS                                                                  
Cash and equivalents                              44 174      46 393      37 819
Trade receivables, accrued income and              7 349       6 730       7 174
 prepaid expenses                                                               
Inventories                                          405         406         447
TOTAL CURRENT ASSETS                              51 928      53 529      45 440
                                                                                
NON-CURRENT ASSETS                                                              
Other long-term receivables                            0           0           0
Derivatives                                            0           0         142
Property, plant and equipment                    163 122     157 510     162 732
Intangible assets                                    791         835         758
TOTAL NON-CURRENT ASSETS                         163 913     158 345     163 632
TOTAL ASSETS                                     215 841     211 874     209 072
                                                                                
LIABILITIES                                                                     
                                                                                
CURRENT LIABILITIES                                                             
Current portion of long-term borrowings              444         286         328
Trade and other payables                           6 159       4 915       5 586
Derivatives                                          594         678         523
Prepayments                                        1 771       1 980       1 983
TOTAL CURRENT LIABILITIES                          8 968       7 859       8 420
                                                                                
NON-CURRENT LIABILITIES                                                         
Deferred income from connection fees              15 338      13 535      15 030
Borrowings                                        95 807      96 175      95 974
Derivatives                                        1 071         750         628
Other payables                                        13          23          13
TOTAL NON-CURRENT LIABILITIES                    112 229     110 483     111 645
TOTAL LIABILITIES                                121 197     118 342     120 065
                                                                                
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                                 56 632      55 520      50 995
TOTAL EQUITY CAPITAL                              94 644      93 532      89 007
TOTAL LIABILITIES AND EQUITY CAPITAL             215 841     211 874     209 072





CASH FLOW STATEMENT                                         3       3       12  
                                                         months  months   months
(EUR thousand)                                            2016    2015    2015  
                                                                                
CASH FLOWS FROM OPERATING ACTIVITIES                                            
Operating profit                                          6 633   6 683   25 578
Adjustment for depreciation/amortisation                  1 561   1 516    6 184
Adjustment for revenues from connection fees                -53     -45     -194
Other non-cash adjustments                                   -3      -4      -15
Profit/loss(+) from sale and write off of property,          -7      -2        2
 plant and equipment, and intangible assets                                     
Change in current assets involved in operating             -133    -407     -897
 activities                                                                     
Change in liabilities involved in operating activities      761     323      453
Total cash flow from operating activities                 8 759   8 064   31 111
                                                                                
CASH FLOWS FROM INVESTING ACTIVITIES                                            
Loans granted                                                 0       0        0
Repayment of loan                                             0       0        0
Acquisition of property, plant and equipment, and        -2 235  -1 856  -13 495
 intangible assets                                                              
Compensations received for construction of pipelines        149   2 285    6 499
Proceeds from sales of property, plant and equipment         18      12       30
 and intangible assets                                                          
Interest received                                            15      40       99
Total cash flow from investing activities                -2 053     481   -6 867
                                                                                
CASH FLOWS FROM FINANCING ACTIVITIES                                            
Received loans                                                0       0        0
Repayment of loans                                            0       0        0
Interest paid and loan financing costs, incl swap          -288    -631   -2 178
 interests                                                                      
Repayment of finance lease                                  -63     -81     -306
Dividends paid                                                0       0  -18 001
Income tax on dividends                                       0       0   -4 500
Total cash flow from financing activities                  -351    -712  -24 985
                                                                                
Change in cash and bank accounts                          6 355   7 833     -741
                                                                                
CASH AND EQUIVALENTS AT THE BEGINNING OF THE PERIOD      37 819  38 560   38 560
                                                                                
CASH AND EQUIVALENTS AT THE END OF THE PERIOD            44 174  46 393   37 819








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