Börsiteade

Pealkiri

Results of operations for the 1st quarter 2017

Teade

MANAGEMENT REPORT

CHAIRMAN'S SUMMARY

In the 1st quarter of 2017 the operational and financial performance of the
Company’s has been excellent. All key performance indicators are on track and
overall network leakage is below 14%, which represents the best performance in
the Company’s history and a testament of all the hard work done by AS Tallinna
Vesi staff and targeted Capital investments. 

The water quality in the 1st quarter of 2017 was 100% compliant based on the
738 samples taken and 6,160 analysis made. 

Besides providing quality drinking water, we are also responsible for a
wastewater discharge service to nearly one third of Estonia’s population
(460,000). 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. Throughout
the 1st quarter of 2017, the final effluent leaving Paljassaare was 100%
compliant with all stipulated requirements. 

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 drinking water and 5 km wastewater network are 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 our employees and ensuring
appropriate succession plans are in place. 

OPERATIONAL INDICATORS FOR THREE MONTHS OF 2017

Indicator                                                           2017    2016
--------------------------------------------------------------------------------
Drinking water                                                                  
--------------------------------------------------------------------------------
Compliance of water quality at the customers’ tap                 100,0%  100,0%
Water loss in the water distribution network                       13,7%   17,5%
Average duration of water interruptions per property in hours      3,02h   3,49h
Waste water                                                                     
--------------------------------------------------------------------------------
Number of sewer blockages                                            195     188
Number of sewer bursts                                                39      26
Wastewater treatment compliance with environmental standards      100,0%  100,0%
Customer service                                                                
--------------------------------------------------------------------------------
Number of written complaints                                           9      11
Number of customer contacts regarding water quality                   24      13
Number of customer contacts regarding water pressure                  38      58
Number of customer contacts regarding blockages and discharge of     269     300
 storm water                                                                    
Responding written customer contacts within at least 2 work days   99,9%   98,1%
Number of failed promises                                              3       0
Notification of unplanned water interruptions at least 1 h        100,0%   96,5%
 before the interruption                                                        



  CONTRACTUAL HIGHLIGHTS

  -- Tariffs of AS Tallinna Vesi continue to be on the same level, based on a
     temporary injunction granted by the Court for the period of court
     proceedings back in 2011.
  -- 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, which 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 previously been deemed a
     public law contract, should be protected by 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 is claiming compensation for potential damages
     over the lifetime of the international privatisation contract, up until
     2020. The claim is based on estimated future volumes and level of consumer
     price index (CPI). In recent years, CPI has been lower than at the time the
     claim was originally calculated, with a current undiscounted value of EUR
     73 million, compared to the original of EUR 90 million.
  -- On 5th of June 2015, the Tallinn Administrative Court dismissed the
     Company’s complaint in the local tariff dispute. The reasoning for the
     dismissal, was not made disclosed 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.
  -- On 23rd November 2016, the hearing in District Court took place and on the
     26th January 2017, the District Court dismissed AS Tallinna Vesi’s appeal.
  -- The Company submitted its Cassation to the Court on 27th February 2017, and
     is currently awaiting a decision as to whether or not the case will be
     heard.
  -- 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 of 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. 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 are
     not linked to the local dispute
.
  -- In February 2016, the Republic of Estonia submitted their Memorial, with AS
     Tallinna Vesi and United Utilities (Tallinn) B.V, responding with their
     counter Memorial in June 2016 to which Government of Estonia submitted
     their rejoinder in September 2016.
  -- The International Arbitration hearings were held on 7-11 and 14-15 November
     2016 in Paris.
  -- Both parties submitted their Post Hearing Briefs in February 2017, with the
     final verdict expected in the summer of 2017.
  -- AS Tallinna Vesi has continuously stated its belief in fully transparent
     regulation, and its willingness to enter into meaningful and evidence-based
     dialogue, which takes into account the privatisation contract that was
     originally signed back in 2001.

FINANCIAL HIGHLIGHTS FOR THE 1st QUARTER 2017

The Group’s sales revenues during the 1st quarter of 2017 were EUR 13.78
million, being down by 4.1% or EUR 0.59 million compared to the same period in
2016. 

The gross profit in the 1st quarter of 2017 was EUR 8.21 million, showing a
decrease of 1.5% or EUR 0.13 million. Decrease in gross profit was mainly
related to lower storm water revenues and profit from construction and
asphalting services, higher electricity costs and other costs of goods sold
costs. It was balanced by higher water and wastewater revenues and by lower
depreciation and pollution tax expenses. 

The operating profit was EUR 6.49 million, showing a decrease of 2.2% or EUR
0.15 million. The operating profit was mostly impacted by the above mentioned
changes in gross profit. 

The net profit for the 1st quarter of 2017 was EUR 6.36 million, being higher
by 12.8% or EUR 0.72 million. The net profit was mainly impacted by above
mentioned changes in operating profit, balanced by lower financial expenses,
which in itself were mostly influenced by the positive change in the fair value
of swap contracts in the 1st quarter of 2017 compared to the negative change in
the same quarter of 2016. The net profit for the 1st quarter of 2017 and 2016
without the impact resulted from the change of the fair value of swap contracts
was EUR 6.11 million and EUR 6.29 million respectively, being lower by 3.0% or
EUR 0.19 million year-on-year. 

MAIN FINANCIAL INDICATORS

EUR million,                      1st quarter                           Change
except key ratios                  2013   2014   2015   2016   2017  2017/2016
------------------------------------------------------------------------------
Sales                             12.69  13.31  13.57  14.37  13.78      -4.1%
Gross profit                       7.52   7.26   8.07   8.34   8.21      -1.5%
Gross profit margin %             59.28  54.59  59.51  58.02  59.56       2.7%
Operating profit                   6.16   5.68   6.68   6.63   6.49      -2.2%
Operating profit - main business   6.14   5.63   6.66   6.55   6.48      -1.1%
Operating profit margin %         48.50  42.71  49.26  46.15  47.07       2.0%
Profit before taxes                6.21   5.06   6.38   5.64   6.36      12.8%
Net profit                         6.21   5.06   6.38   5.64   6.36      12.8%
Net profit margin %               48.96  38.03  47.04  39.23  46.16      17.7%
ROA %                              3.01   2.42   3.01   2.61   2.91      11.4%
Debt to total capital employed %  55.94  55.81  55.85  56.15  56.19       0.1%
ROE %                              6.84   5.49   6.82   5.96   6.64      11.5%
Current ratio                      5.42   4.60   6.81   5.79   5.46      -5.8%
------------------------------------------------------------------------------

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, design and asphalting services, doubtful debt 



FINANCIAL RESULTS FOR THE 1st QUARTER 2017

STATEMENT OF COMPREHENSIVE INCOME

SALES

As the Company’s tariffs are frozen at the 2010 tariff level, the changes in
the main activities revenues, i.e. from sales of water and wastewater services,
are fully driven by consumption with no considerable seasonality in the main
business. The Company does not expect significant changes in the consumption in
future. There has been incremental increase in consumption in the past and that
is expected to continue. 

In the 1st quarter of 2017 the Group’s total sales were EUR 13.78 million,
showing a decrease by 4.1% or EUR 0.59 million year-on-year. 92.4% of sales
comprise of sales of water and wastewater services to domestic and commercial
customers within and outside of the service area. 5.4% of sales are the fees
received from the City of Tallinn for operating and maintaining the storm water
system and fire hydrants, 1.3% from construction and asphalting services and
1.0% from other works and services. The construction and asphalting services
sales are more seasonal and the Company continues to seek possibilities to keep
and to grow these services revenues. 

                                                 1st quarter          Variance  
                                                                     2017/2016  
EUR thousand                                  2017    2016    2015   EUR       %
--------------------------------------------------------------------------------
Private clients, incl:                       6,347   6,338   6,154     9    0.1%
--------------------------------------------------------------------------------
Water supply service                         3,489   3,485   3,386     4    0.1%
Waste water disposal service                 2,858   2,853   2,768     5    0.2%
Corporate clients, incl:                     5,063   4,883   4,672   180    3.7%
--------------------------------------------------------------------------------
Water supply service                         2,771   2,673   2,569    98    3.7%
Waste water disposal service                 2,292   2,210   2,103    82    3.7%
Outside service area clients, incl:          1,108   1,130   1,249   -22   -1.9%
--------------------------------------------------------------------------------
Water supply service                           329     308     292    21    6.8%
Waste water disposal service                   683     670     771    13    1.9%
Storm water disposal service                    96     152     186   -56  -36.8%
Over pollution fee                             210     171     184    39   22.8%
--------------------------------------------------------------------------------
Total water supply and waste water          12,728  12,522  12,259   206    1.6%
 disposal service                                                               
Storm water treatment and disposal service     741     945     844  -204  -21.6%
 and fire hydrants service                                                      
Construction service, design and               181     761     344  -580  -76.2%
 asphalting                                                                     
Other works and services                       131     141     121   -10   -7.1%
--------------------------------------------------------------------------------
SALES REVENUES TOTAL                        13,781  14,369  13,568  -588   -4.1%



Sales from water and wastewater services were EUR 12.73 million, showing a 1.6%
or EUR 0.21 million increase compared to the 1st quarter of 2016, resulting
from the changes in sales volumes as described below: 

  -- There has been an increase in private customers’ revenues by 0.1% to EUR
     6.35 million. The increase in domestic customer consumption volumes came
     from apartment blocks, which is also our biggest private customer group. At
     the same time, there was a slight in individual houses and other customer
     groups.
  -- Sales to corporate customers within the service area increased by 3.7% to
     EUR 5.06 million. Increase was mostly related to increase in sales of
     industrial and leisure segments.
  -- Sales to customers outside the main service area have shown a decrease by
     1.9% to EUR 1.11 million. It was mainly driven by decrease in storm water
     revenues by 36.8% to EUR 0.10 million, due to lower snow melting water and
     stormwater volumes in the 1st quarter of 2017. While there has been a
     decrease in storm water sales, the sales of water supply and waste water
     disposal services to outside areas in total have increased.
  -- Over pollution fees
received have increased by 22.8% to EUR 0.21 million.

Sales from the operation and maintenance of the main service area storm water
and fire hydrant system were EUR 0.74 million, showing a decrease of 21.6% or
EUR 0.20 million in the 1st quarter of 2017 compared to the same period in
2016. 

Sales of construction, design and asphalting services were EUR 0.18 million,
decreasing by 76.2% or EUR 0.58 million year-on-year. The decrease was related
to lower pipe construction services revenues during the 1st quarter of 2017. 



COST OF GOODS/ SERVICES SOLD AND GROSS PROFIT

The cost of goods sold amounted to EUR 5.57 million in the 1st quarter of 2017,
showing 7.6% or EUR 0.46 million decrease compared to the equivalent period in
2016. The cost decrease is mainly influenced by decrease in construction and
asphalting services related costs and also by lower depreciation and pollution
tax expenses, which was partly balanced by higher electricity and other costs
of goods sold costs. 

                                                 1st quarter          Variance  
                                                                     2017/2016  
EUR thousand                                  2017    2016    2015   EUR       %
--------------------------------------------------------------------------------
Water abstraction charges                     -296    -291    -270    -5   -1.7%
Chemicals                                     -333    -342    -360     9    2.6%
Electricity                                   -854    -810    -828   -44   -5.4%
Pollution tax                                 -292    -336    -300    44   13.1%
--------------------------------------------------------------------------------
Total direct production costs               -1,775  -1,779  -1,758     4    0.2%
Staff costs                                 -1,421  -1,418  -1,348    -3   -0.2%
Depreciation and amortization               -1,351  -1,431  -1,394    80    5.6%
Construction service, design and              -138    -675    -308   537   79.6%
 asphalting                                                                     
Other costs of goods/services sold            -888    -729    -686  -159  -21.8%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Other costs of goods/services sold total    -3,798  -4,253  -3,736   455   10.7%
                                                                                
--------------------------------------------------------------------------------
Total cost of goods/services sold           -5,573  -6,032  -5,494   459    7.6%



Total direct production costs (water abstraction charges, chemicals,
electricity and pollution tax) were EUR 1.78 million, being on same level as
last year same period. 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 1.7% to EUR 0.30 million, driven mainly by increase in treated
     volumes.
  -- Chemicals
costs decreased by 2.6% to EUR 0.33 million, driven mainly by lower usage
     of coagulant and methanol in the wastewater treatment process, worth in
     total EUR 0.07 million. Savings were balanced by 17.7% higher methanol
     price and 13.5% higher coagulant price, worth in total EUR 0.02 million,
     and higher use of polymers, worth EUR 0.03 million. Lower total
     year-on-year chemicals costs in wastewater treatment process were offset by
     increase in usage of different chemicals in water treatment due to higher
     treated water volumes and higher dosage of different chemicals due to poor
     raw water quality, worth in total EUR 0.02 million.
  -- Electricity costs
increased by 5.4% to EUR 0.85 million. It was related to on average 8.0%
     higher electricity prices, worth EUR 0.07 million, balanced by decrease in
     treated wastewater volumes, worth EUR 0.02 million.
  -- Pollution tax expense
decreased by 13.1% to EUR 0.29 million, mainly due to decrease in treated
     wastewater volumes, balanced by higher pollution load of different
     pollutants.

Other costs of goods sold (staff costs, depreciation, construction and
asphalting services costs and other costs of goods sold) amounted to EUR 3.80
million, having decreased by 10.7% or EUR 0.46 million. The decrease came
mostly from costs related to construction and asphalting services and
depreciation, balanced by increase of other costs of goods sold. Decrease in
construction and asphalting services costs by 79.6% to EUR 0.14 million was
related to a decrease in construction and asphalting services revenues
mentioned earlier. Other costs of goods sold increase is mainly related to
timing of asset maintenance works and higher use of different rental
mechanisms. 

As a result of all above the Group’s gross profit for the 1st quarter of 2017
was EUR 8.21 million, showing a decrease of 1.5% or EUR 0.13 million, compared
to the gross profit of EUR 8.34 million for the comparative period of 2016. 



ADMINISTRATIVE AND MARKETING EXPENSES

Administrative and marketing expenses were relatively stable amounting to EUR
1.67 million. The slight increase was related to some increase of the IT
purchases and consultation costs. Increase was balanced by lower staff costs
due to some vacancies and slightly lower tariff dispute related costs. 



OPERATING PROFIT

As a result of the factors listed above the Group’s operating profit for the
1st quarter of 2017 amounted to EUR 6.49 million, being 2.2% or EUR 0.15
million lower than in the corresponding period of 2016. The Group’s operating
profit from main business was EUR 6.48 million, being 1.1% or EUR 0.07 million
lower compared to 2016. 



FINANCIAL EXPENSES

The Group’s net financial income and expenses have resulted a net expense of
EUR 0.13 million, compared to net expense of EUR 1.00 million in the 1st
quarter of 2016. The decrease was mainly impacted by a positive change in the
fair value of the swap contracts year-on-year, worth EUR 0.91 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,
amounting to EUR 1.07 million. Effective interest rate of loans (incl. swap
interests) in the 1st quarter of 2017 was 1.60%, amounting to interest costs of
EUR 0.38 million, compared to the effective interest rate of 1.47% and the
interest costs of EUR 0.35 million in the 1st quarter of 2016. 



PROFIT BEFORE TAXES AND NET PROFIT

The Group’s profit before taxes and net profit for the 1st quarter of 2017 were
EUR 6.36 million, being 12.8% or EUR 0.72 million higher than for the 1st
quarter of 2016. Eliminating the effects of the change in derivatives fair
value, the Group’s net profit for the 1st quarter of 2017 would have been EUR
6.11 million, showing a decrease by 3.0% or EUR 0.19 million compared to the
relevant period in 2016. 



STATEMENT OF FINANCIAL POSITION

In the three months of 2017 the Group invested into fixed assets EUR 2.21
million. As of 31.03.2017, non-current tangible assets amounted to EUR 171.88
million and total non-current assets amounted to EUR 172.70 million
(31.03.2016: EUR 163.12 million and EUR 163.91 million respectively). 

Compared to the year end of 2016 the trade receivables, accrued income and
prepaid expenses have shown a decrease in the amount of EUR 0.26 million to EUR
6.91 million. The collection rate of receivables continues to be high, being
99.4% compared to 99.8% in the 1st quarter of 2016. 

Current liabilities have decreased by EUR 2.23 million to EUR 8.41 million
compared to the year end of 2016. Decrease mainly derives from decrease in
trade and other payables by EUR 1.90 million and decreased prepayments of
connections in construction process by EUR 0.31 million. It is related to
decreased construction activities and investments related liabilities. 

Deferred income from connection fees has grown compared to the end of 2016 by
EUR 1.12 million to EUR 18.17 million. 

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 to 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 2016, when the Total debt to assets ratio was also 56.2%. 



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 million. In the 1st quarter of 2017 the Group
re-evaluated the liability, which now stands at EUR 43 million (4th quarter of
2016 EUR 43 million), as per note 14 to the accounts. 



CASH FLOW

As of 31.March 2017, the cash position of the Group is strong. At the end of
March 2017 the cash balance of the Group stood at EUR 38.51 million, which is
17.6% of the total assets (31. March 2016: EUR 44.17 million, forming 20.5% of
the total assets). 

The biggest contribution to the cash flows comes from main operations. During
the three months of 2017, the Group generated EUR 7.22 million of cash flows
from operating activities, a decrease of EUR 1.54 million compared to the
corresponding period in 2016. Underlying operating profit continues to be the
main contributor to operating cash flows. 

In the three months of 2017 the result of net cash flows from investing
activities was a cash outflow of EUR 2.27 million, an increase of EUR 0.22
million compared to the cash outflow of EUR 2.05 million in the three months of
2016. This is made up as follows: 

  -- The cash outflows from investments in fixed assets have increased by EUR
     0.93 million compared to 2016 amounting to EUR 3.17 million.
  -- The compensations received for the construction of pipelines were EUR 0.87
     million, showing an increase of EUR 0.72 million compared to the same
     period of 2016.

In the three months of 2017 cash outflow from financing activities amounted to
EUR 0.42 million, increasing by EUR 0.07 million compared to the same period in
2016. The change was mainly related to increase in interest payments by EUR
0.06. 



EMPLOYEES

We believe it is important to treat our employees equally, involve them in the
decision-making process and to inform them regularly. We consider the
involvement of our staff in the decision-making process instrumental for them
to understand and be able to support the Company in its pursuits. Our staff can
vary to a large degree in age, nationality, nature of work and in many other
aspects. This requires us to be resourceful and flexible in our communication
with the staff in order to involve, engage and listen to them. This is done
using several opportunities and channels of communication, such as regular
staff meetings with the management, information boards, intranet, informative
letters, team events and a quarterly internal newsletter. Estonian is not a
communication language for quite a number of our staff. Therefore, we organise
Estonian classes at the Company’s expense to make the staff, whose mother
tongue is not Estonian, also feel as part of our unified team. At the same
time, we provide the majority of important information also in Russian. 

We have described our human resource 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 they
have access to the same opportunities as is reasonable and 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,
sexual orientation or marital status. 

At the end of the 1st quarter of 2017, the total number of employees was 312
compared to 319 at the end of the 1st quarter of 2016. The full time equivalent
(FTE) was respectively 303 in 2017 compared to the 307 in 2016. Average number
of employees (FTE) during the three months was respectively 301 in 2017 and 310
in 2016. 

By gender, employee allocation was as follows:

As of 31.03.2017   Women  Men  Total
Group                 87  220    307
------------------------------------
------------------------------------
Management Team       12   13     25
Executive Team         4    4      8
Management Board       1    2      3
                                    
Supervisory Board      0    9      9



As of 31.03.2016   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



The total salary costs were EUR 2.05 million for the 1st quarter of 2017,
including EUR 0.08 million paid to Management and Supervisory Council members
(excluding social taxes). 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. 

The dividend policy has been related keeping the dividends in real term i.e.
dividends amounts have been increased in line with inflation. Every year the
Supervisory Board evaluates the proposal of the dividends to be paid out to the
shareholders and approves it to be presented to the voting to the Annual
General Meeting of shareholders, considering all circumstances. 

The Annual General Meeting of Shareholders will be held on 01st June 2017.
Dividends will be paid out in June 2017. 

                                        

SHARE PERFORMANCE

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

As of 31.03.2017, 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 2017 the shareholder structure has been relatively
stable compared to the end of 2016. At the end of 1st quarter 2017 the pension
funds shareholding has stayed the same, being 2.1% of the total shares,
compared to the end of 2016. 

As of 31.03.2017, the closing price of AS Tallinna Vesi share was EUR 14.00,
which is 1.4% (2016: 7.2%) higher compared to the closing price of EUR 13.80 at
the beginning of the quarter. During the 1st quarter the OMX Tallinn index
increased by 4.3% (2016: 8.0%). 

In the three months of 2017, 1,784 deals with the Company’s shares were
concluded (2016: 1,514 deals) during which 246 thousand shares or 1.2% of total
shares exchanged their owners (2016: 258 thousand shares or 1.3%). 

The turnover of the transactions was EUR 0.22 million lower than in 2016,
amounting to EUR 3.39 million. 



CORPORATE STRUCTURE

As of 31st March 2017, 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 2017. Tallinn City reappointed Mr Toivo Tootsen
with the powers of the Supervisory Council Member until 06th April 2019. 

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: 

https://www.tallinnavesi.ee/en/about-us/corporate-governance/supervisory-council
/ 

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 21st March 2020), Aleksandr Timofejev (with
the powers of the Management Board Member until 29th October 2018) and Riina
Käi (with the powers of the Management Board Member until 29th 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. 

The hearings of international arbitration took place in Paris in November 2016
and the decision is expected in 2017. 

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
https://www.tallinnavesi.ee/en/investor/stock-announcements) and to the Tallinn
Stock Exchange. 

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





STATEMENT OF COMPREHENSIVE INCOME         I quarter  I quarter  12 months
(EUR thousand)                               2017       2016       2016  
                                                                         
Revenue                                      13,781     14,369     58,982
Costs of goods sold                          -5,573     -6,032    -25,721
GROSS PROFIT                                  8,208      8,337     33,261
-------------------------------------------------------------------------
                                                                         
Marketing expenses                             -100       -127       -365
General administration expenses              -1,566     -1,528     -7,799
Other income/ expenses (-)                      -55        -50       -470
OPERATING PROFIT                              6,487      6,632     24,627
-------------------------------------------------------------------------
                                                                         
Interest income                                   4         15         41
Interest expense                               -380       -350     -1,447
Other financial income (+)/ expenses (-)        250       -660       -331
PROFIT BEFORE TAXES                           6,361      5,637     22,890
-------------------------------------------------------------------------
                                                                         
Income tax on dividends                           0          0     -4,500
                                                                         
NET PROFIT FOR THE PERIOD                     6,361      5,637     18,390
-------------------------------------------------------------------------
-------------------------------------------------------------------------
COMPREHENSIVE INCOME FOR THE PERIOD           6,361      5,637     18,390
                                                                         
Attributable profit to:                                                  
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Equity holders of A-shares                    6,360      5,636     18,389
B-share holder                                 0.60       0.60       0.60
                                                                         
Earnings per A share (in euros)                0.32       0.28       0.92
Earnings per B share (in euros)                 600        600        600





STATEMENT OF FINANCIAL POSITION                                                 
(EUR thousand)                                31.03.2017  31.03.2016  31.12.2016
                                                                                
ASSETS                                                                          
CURRENT ASSETS                                                                  
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Cash and equivalents                              38,514      44,174      33,987
Trade receivables, accrued income and              6,911       7,349       7,167
 prepaid expenses                                                               
Inventories                                          456         405         449
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL CURRENT ASSETS                              45,881      51,928      41,603
                                                                                
NON-CURRENT ASSETS                                                              
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Property, plant and equipment                    171,881     163,122     171,177
Intangible assets                                    819         791         830
--------------------------------------------------------------------------------
TOTAL NON-CURRENT ASSETS                         172,700     163,913     172,007
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL ASSETS                                     218,581     215,841     213,610
                                                                                
LIABILITIES AND EQUITY                                                          
CURRENT LIABILITIES                                                             
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Current portion of long-term borrowings              245         444         264
Trade and other payables                           5,129       6,159       7,030
Derivatives                                          612         594         610
Prepayments                                        2,423       1,771       2,735
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES                          8,409       8,968      10,639
                                                                                
NON-CURRENT LIABILITIES                                                         
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Deferred income from connection fees              18,170      15,338      17,050
Borrowings                                        95,771      95,807      95,795
Derivatives                                          459       1,071         715
Other payables                                        15          13          15
--------------------------------------------------------------------------------
TOTAL NON-CURRENT LIABILITIES                    114,415     112,229     113,575
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL LIABILITIES                                122,824     121,197     124,214
                                                                                
EQUITY                                                                          
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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                                 57,745      56,632      51,384
TOTAL EQUITY                                      95,757      94,644      89,396
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL LIABILITIES AND EQUITY                     218,581     215,841     213,610





CASH FLOW STATEMENT                                         3       3       12  
                                                         months  months   months
(EUR thousand)                                            2017    2016    2016  
                                                                                
CASH FLOWS FROM OPERATING ACTIVITIES                                            
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Operating profit                                          6,487   6,632   24,627
Adjustment for depreciation/amortisation                  1,497   1,561    6,405
Adjustment for revenues from connection fees                -61     -53     -218
Other non-cash adjustments                                    0      -3      -15
Profit/loss(+) from sale and write off of property,          -4      -7      -42
 plant and equipment, and intangible assets                                     
Change in current assets involved in operating              249    -132       41
 activities                                                                     
Change in liabilities involved in operating activities     -951     761    1,074
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total cash flow from operating activities                 7,217   8,759   31,872
                                                                                
CASH FLOWS FROM INVESTING ACTIVITIES                                            
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Acquisition of property, plant and equipment, and        -3,167  -2,235  -14,526
 intangible assets                                                              
Compensations received for construction of pipelines        872     149    3,002
Proceeds from sales of property, plant and equipment         21      18       50
 and intangible assets                                                          
Interest received                                             4      15       45
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total cash flow from investing activities                -2,270  -2,053  -11,429
                                                                                
CASH FLOWS FROM FINANCING ACTIVITIES                                            
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Interest paid and loan financing costs, incl swap          -341    -288   -1,510
 interests                                                                      
Repayment of finance lease                                  -79     -63     -264
Dividends paid                                                ,       0  -18,001
Income tax on dividends                                       0       0   -4,500
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total cash flow from financing activities                  -420    -351  -24,275
                                                                                
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Change in cash and CASH EQUIVALENTS                       4,527   6,355   -3,832
                                                                                
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE        33,987  37,819   37,819
 PERIOD                                                                         
                                                                                
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD       38,514  44,174   33,987








         Karl Heino Brookes
         Chairman of the Management Board
         +372 62 62 200
         [email protected]