Börsiteade

Pealkiri

Financial results for the 1st Quarter 2018

Teade

MANAGEMENT REPORT

Chairman´s summary

The  performance of  AS Tallinna  Vesi in  the 1(st) quarter  of 2018 once again
reflects  improvements in several operational,  as well as financial indicators,
compared  to previous years. Consistently high standards were achieved regarding
the  parameters  reflecting  the  quality  of  both  drinking  water and treated
effluent, as well as customer service.

Financial performance

The  Group's total sales  during the 1(st) quarter  of 2018 increased by 2.1% to
14.08 million, as we witnessed an increase in sales in all our main water supply
and  waste water disposal related services. Sales to private customers increased
by  1.3% and sales  to corporate  customers by  1.6%. Group's net profit was EUR
6.53 million, showing an increase of 2.7% year-on-year.

Excellent operational results

The  quality of drinking water remained excellent in the 1(st) quarter of 2018.
Water  samples  taken  from  customers'  taps  were  99.87% compliant  with  all
requirements. We are also delighted to see a reduction in the number of customer
contacts regarding water quality year on year.

We  work tirelessly  to provide  our customers  and end  users with a stable and
uninterrupted  service. We are pleased to  see that the average water disruption
time  to individual properties, has further  reduced from 3 hours 1 minute to 2
hours  52 minutes. The issues  with the sewerage  network have also reduced, and
the number of sewer blockages dropped to 156 during the first three months.

Water  losses  showed  a  slight  increase  in  the first three months of 2018,
compared  to  the  previous  year,  15.19% v  13.73%. This is still an excellent
result, with the slight decline in performance resulting from the longer winter,
which made leakage detection difficult under the continuous blanket of snow.

In  the 1(st) quarter  of 2018, the  treated effluent  at Paljassaare Wastewater
Treatment Plant was compliant with all stipulated quality requirements.

Tariff application

Shortly  before the end of the year,  the Estonian Supreme Court made a decision
on  the tariff dispute between Tallinna Vesi and Estonian Competition Authority.
The  price of water  and wastewater service,  is now subject  to approval by the
Competition  Authority  using  their  methodology.  On  28(th) of  February,  AS
Tallinna  Vesi  submitted  its  application  for  the  approval of the new water
tariffs to Competition Authority. The tariffs calculated in the Company's tariff
application,  are close  to the  currently applicable  water tariffs, which have
remained unchanged since 2010.

This is the first tariff application for Tallinna Vesi, which has been submitted
based  on the Competition  Authority's recommendatory methodology. Consequently,
there  are  several  key  points  in  the  tariff application that have required
further discussions with the Competition Authority, who has reviewed the initial
application  and  suggested  several  additions  for  it  to  meet  all  of  the
requirements.  Therefore,  it  is  still  unclear,  when the new tariffs will be
approved.

Tallinna   Vesi   still  awaiting  the  final  verdict  from  the  International
Arbitration,  on whether the investor's  interests have been adversely affected,
and whether this should be compensated.


OPERATIONAL INDICATORS FOR THREE MONTHS OF 2018

 Indicator                             Unit       2018        2017         2016
-------------------------------------------------------------------------------
 Compliance  of  water  quality at the
 customers' tap                         %          99.9       100.0       100.0

 Water  loss in the water distribution
 network                                %          15.2        13.7        17.5

 Average     duration     of     water
 interruptions per property in hours    h          2.86        3.02        3.49

 Number of sewer blockages              No          156         195         188

 Number of sewer bursts                 No           25          39          26

 Wastewater  treatment compliance with
 environmental standards                %         100.0       100.0       100.0

 Number of written complaints           No           21           9          11

 Number of customer contacts regarding
 water quality                          No           14          24          13

 Number of customer contacts regarding
 water pressure                         No           37          38          58

 Number of customer contacts regarding
 blockages   and  discharge  of  storm
 water                                  No          250         269         300

 Responding  written customer contacts
 within at least 2 work days            %         100.0        99.9        98.1

 Number of failed promises              No            3           3           0

 Notification   of   unplanned   water
 interruptions at least 1 h before the
 interruption                           %          96.7       100.0        96.5





FINANCIAL HIGHLIGHTS FOR THE 1(st) QUARTER 2018

The  Group's sales  revenues during  the 1(st) quarter  of 2018 were  EUR 14.08
million,  being up by  2.1% or EUR 0.30 million  compared to the  same period in
2017.

The  gross profit in the 1(st) quarter  of 2018 was EUR 8.32 million, showing an
increase  of  1.4% or  EUR  0.11 million.  Increase  in  gross profit was mainly
related  to higher  water, wastewater  and storm  water revenues, accompanied by
lower  electricity costs and  depreciation. It was  balanced by higher staff and
chemicals costs.

The  operating profit was  EUR 6.80 million, showing  an increase of 4.8% or EUR
0.31 million.  In addition to  the above-mentioned changes  in gross profit, the
operating  profit was mainly  impacted by lower  tariff dispute related costs in
the 1(st) quarter of 2018.

The  net profit for  the 1(st) quarter of  2018 was EUR 6.53 million, showing an
increase  by 2.7% or  EUR 0.17 million.  The net  profit was  mainly impacted by
above  mentioned  changes  in  the  operating  profit,  and  by higher financial
expenses.  The changes in  the financial expenses  were mostly influenced by the
lower  positive change in the fair value  of swap contracts in the 1(st) quarter
of  2018 compared to the  positive change in  the same quarter  of 2017. The net
profit  for the 1(st) quarter of 2018 and  2017 without the impact resulted from
the  change of  the fair  value of  swap contracts  was EUR 6.45 million and EUR
6.11 million  respectively, being  higher by  5.6% or EUR  0.34 million year-on-
year.


MAIN FINANCIAL INDICATORS

  EUR million,                       1(st) quarter

  except key ratios                   2018    2017    2016   Change 2018/2017
------------------------------------------------------------------------------
  Sales                              14.08   13.78   14.37               2.1%

  Gross profit                        8.32    8.21    8.34               1.4%

  Gross profit margin %              59.10   59.56   58.02              -0.8%

  Operating profit                    6.80    6.49    6.63               4.8%

  Operating profit - main business    6.73    6.48    6.55               3.9%

  Operating profit margin %          48.29   47.07   46.15               2.6%

  Profit before taxes                 6.53    6.36    5.64               2.7%

  Profit before taxes margin %       46.42   46.16   39.23               0.6%

  Net profit                          6.53    6.36    5.64               2.7%

  Net profit margin %                46.42   46.16   39.23               0.6%

  ROA %                               2.83    2.94    2.65              -4.0%

  Debt to total capital employed %   60.56   56.19   56.15               7.8%

  ROE %                               7.33    6.87    6.14               6.8%

  Current ratio                       6.98    5.46    5.79              27.8%
------------------------------------------------------------------------------



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 / Average Total equity for the period

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 1(st) QUARTER 2018

Statement of comprehensive income

SALES

As  in the 1(st) quarter of 2018 the Company's  tariffs were 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.  In the future, the Company does
not  expect significant changes  in the consumption.  There has been incremental
increase in consumption in the past and that is expected to continue.

At the end of 2017, the Supreme Court made a negative decision as regards to the
Company's  cassation  as  a  result  of  which,  the  Company's  tariffs will be
regulated  under  the  Competition  Authority's  methodology. On 28(th) February
2018 Company  submitted its tariff application for  Tallinn and Saue area to the
Competition  Authority. The  tariffs applied  for are  similar to  the water and
waste water tariffs currently charged in the area. The Competition Authority had
reviewed  the tariff application  and asked additional  information, in order to
the  application  to  meet  set  requirements.  The  Company needs to submit the
amended  tariff application by  2(nd) May 2018. Competition Authority  has up to
90 days to review the application starting from receiving the application, which
meets all the requirements. The new tariffs that will be approved and applied in
the  area will  be known  after the  full process  is completed  and Competition
Authority has approved new tariffs.

In  the  1st quarter  of  2018 the  Group's  total sales were EUR 14.08 million,
showing  an increase  by 2.1% or  EUR 0.30 million  year-on-year. 91.4% of sales
comprise  of sales of  water and wastewater  services to domestic and commercial
customers  within and outside  of the service  area. 5.7% of sales  are the fees
received  from the City of Tallinn for operating and maintaining the storm water
system  and fire  hydrants, 2.0% 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.

                                                               Variance
                                    1(st) quarter              2018/2017

 EUR thousand                         2018     2017     2016   EUR            %
-------------------------------------------------------------------------------
 Private clients, incl:              6,428    6,347    6,338    81 1.3%
-------------------------------------------------------------------------------
 Water supply service                3,532    3,489    3,485    43         1.2%

 Waste water disposal service        2,896    2,858    2,853    38         1.3%

 Corporate clients, incl:            5,142    5,063    4,883    79         1.6%
-------------------------------------------------------------------------------
 Water supply service                2,784    2,771    2,673    13         0.5%

 Waste water disposal service        2,358    2,292     2,21    66         2.9%

 Outside   service   area  clients,
 incl:                               1,112    1,108     1,13     4         0.4%
-------------------------------------------------------------------------------
 Water supply service                  334      329      308     5         1.5%

 Waste water disposal service          688      683      670     5         0.7%

 Storm water disposal service           90       96      152    -6        -6.3%

 Over pollution fee                    182      210      171   -28       -13.3%
-------------------------------------------------------------------------------
 Total water supply and waste water
 disposal service                   12,864   12,728   12,522   136         1.1%

 Storm water treatment and disposal
 service and fire hydrants service     796      741      945    55         7.4%

 Construction  service,  design and
 asphalting                            283      181      761   102        56.4%

 Other works and services              134      131      141     3         2.3%
-------------------------------------------------------------------------------
 SALES REVENUES TOTAL               14,077   13,781   14,369   296         2.1%


Sales from water and wastewater services were EUR 12.86 million, showing a 1.1%
or  EUR 0.14 million increase  compared to the  1(st) quarter of 2017, resulting
from the changes in sales volumes as described below:

  * There has been an increase in private customers' revenues of 1.3% to EUR
    6.43 million. The increase in domestic customer consumption volumes came
    mainly from apartment blocks, which is also our biggest private customer
    group. There was a slight decrease in an individual houses segment
    consumption.
  * Sales to corporate customers within the service area increased by 1.6% to
    EUR 5.14 million. Increase was related to an increase in the sales of
    industrial and other commercial customer segments. At the same time the
    consumption of leisure sector customers decreased.
  * Sales to customers outside the main service area increased by 0.4% to EUR
    1.11 million. It was mainly impacted by a small increase in the sales of
    water supply and waste water disposal services, balanced by decrease in the
    sales of storm water disposal service.
  * Over pollution fees received have decreased by 13.3% to EUR 0.18 million.

Sales  from the operation and  maintenance of the main  service area storm water
and  fire hydrant  system amounted  to EUR  0.80 million, showing an increase of
7.4% or  EUR  0.05 million  in  the  1(st) quarter  of 2018 compared to the same
period in 2017, driven mainly by 14.5% higher storm water volumes.

Sales  of construction,  design and  asphalting services  were EUR 0.28 million,
increasing  by 56.4% or EUR 0.10 million  year-on-year. The increase was related
to higher pipe construction services revenues during the 1(st) quarter of 2018.

COST OF GOODS/ SERVICES SOLD AND GROSS PROFIT

The  cost of  goods sold  amounted to  EUR 5.78 million  in the 1(st) quarter of
2018, increasing  by 3.3% or EUR 0.18 million  compared to the equivalent period
in  2017. The increase  was mainly  influenced by  increase in  construction and
asphalting  services  related  costs,  chemicals  and  staff  costs, balanced by
decrease in electricity and depreciation expenses.

                                                               Variance
                                          1(st) quarter        2018/2017

 EUR thousand                               2018   2017   2016  EUR           %
-------------------------------------------------------------------------------
 Water abstraction charges                  -291   -296   -291    5        1.7%

 Chemicals                                  -435   -333   -342 -102      -30.6%

 Electricity                                -759   -854   -810   95       11.1%

 Pollution tax                              -277   -292   -336   15        5.1%
-------------------------------------------------------------------------------
 Total direct production costs            -1,762 -1,775 -1,779   13        0.7%

 Staff costs                              -1,593 -1,421 -1,418 -172      -12.1%

 Depreciation and amortization            -1,283 -1,351 -1,431   68        5.0%

 Construction    service,    design   and
 asphalting                                 -241   -138   -675 -103      -74.6%

 Other costs of goods/services sold         -878   -888   -729   10        1.1%
-------------------------------------------------------------------------------
 Other costs of goods/services sold total -3,995 -3,798 -4,253 -197       -5.2%
-------------------------------------------------------------------------------
 Total cost of goods/services sold        -5,757 -5,573 -6,032 -184       -3.3%




Total direct production costs (water abstraction charges, chemicals, electricity
and pollution tax expenses) amounted to EUR 1.76 million, showing a slight 0.7%
or  EUR 0.01 million decrease compared to the equivalent period in 2017. 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 decreased by 1.7% to EUR 0.29 million, driven
    mainly by overall 1.0% decrease in subtracted water volumes.
  * Chemicals costs increased by 30.6% to EUR 0.44 million, driven by higher
    usage of methanol and coagulant to remove pollutants and 8.8% higher
    methanol price in the waste water treatment process, worth respectively EUR
    0.05 million, EUR 0.02 million and EUR 0.02 million. Higher chemicals costs
    in wastewater treatment process were accompanied by higher dosage of
    coagulant in water treatment process due to poor raw water quality, worth
    EUR 0.01 million.
  * Electricity costs decreased by 11.1% to EUR 0.76 million, driven by on
    average 13.7% lower electricity prices (including networks fees), worth EUR
    0.12 million. Lower costs from prices were partly balanced by increase in
    treated waste water volumes, worth EUR 0.03 million.
  * Pollution tax expense decreased by 5.1% to EUR 0.28 million, mainly due to
    lower pollution load of pollutants, balanced by 4.0% increase in treated
    waste water volumes, worth respectively EUR +0.03 million and EUR -0.01
    million.

Other   costs  of  goods  sold  (staff  costs,  depreciation,  construction  and
asphalting  services costs and other costs of  goods sold) amounted to EUR 3.99
million,  having increased by 5.2% or EUR 0.20 million. The increase came mostly
from  staff and costs related to  construction and asphalting services, balanced
by  decrease in depreciation  costs. Staff costs  increase by 12.1% to EUR 1.59
million was related to change of salaries from the beginning of the year for all
employees  based  on  CPI  increase  and  higher  workload  during  winter time,
accompanied  by redundancy  payments related  to structural  changes made in the
1(st) quarter  2018 to increase  efficiency in  Company's processes. Increase in
construction  and  asphalting  services  costs  by 74.6% to EUR 0.24 million was
related  to  an  increase  in  construction  and  asphalting  services  revenues
mentioned  earlier  and  project  specific  changes. Decrease in depreciation by
5.0% to  EUR  1.28 million  was  mainly  related  to lower cost of machinery and
equipment depreciation year-on-year.

As a result of all above the Group's gross profit for the 1(st) quarter of 2018
was  EUR 8.32 million, showing an increase of 1.4% or EUR 0.11 million, compared
to the gross profit of EUR 8.21 million for the comparative period of 2017.

ADMINISTRATIVE AND MARKETING EXPENSES

Administrative  and  marketing  expenses  amounted  to  EUR 1.49 million, having
decreased by 10.6% or EUR 0.18 million. The decrease was mainly related to lower
tariff dispute related costs.

OPERATING PROFIT

As  a result of  the factors listed  above the Group's  operating profit for the
1(st) quarter  of  2018 amounted  to  EUR  6.80 million, being 4.8% or EUR 0.31
million  higher than in the corresponding  period of 2017. The Group's operating
profit  from main business was EUR  6.73 million, being 3.9% or EUR 0.25 million
higher compared to 2017.

FINANCIAL EXPENSES

The Group's net financial income and expenses have resulted a net expense of EUR
0.26 million,  compared to net expense of  EUR 0.13 million in the 1(st) quarter
of 2017. The increase was mainly impacted by a lower positive change in the fair
value  of  the  swap  contracts  year-on-year  and  lower  interest costs, worth
respectively EUR -0.17 million and EUR +0.03 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  0.67 million. Effective  interest rate  of loans  (incl. swap
interests)  in the 1(st) quarter of  2018 was 1.46%, amounting to interest costs
of  EUR 0.35 million, compared  to the effective  interest rate of 1.60% and the
interest costs of EUR 0.38 million in the 1(st) quarter of 2017.

PROFIT BEFORE TAXES AND NET PROFIT

The  Group's profit before taxes  and net profit for  the 1(st) quarter of 2018
were EUR 6.53 million, being 2.7% or EUR 0.17 million higher than for the 1(st)
quarter of 2017. Eliminating the effects of the change of the fair value of swap
contracts  the Group's net  profit for the  1(st) quarter of 2018 and 2017 would
have  been  EUR  6.45 million  and  EUR  6.11 million  respectively,  showing an
increase of 5.6% or EUR 0.34 million year-on-year.

STATEMENT OF FINANCIAL POSITION

In  the three  months of  2018 the Group  invested into  fixed assets  EUR 0.85
million.  As of 31.03.2018, non-current tangible  assets amounted to EUR 173.90
million and total non-current assets amounted to EUR 174.70 million (31.03.2017:
EUR 171.88 million and EUR 172.70 million respectively).

Compared  to  the  year  end  of  2017 the trade receivables, accrued income and
prepaid  expenses have shown a decrease in the amount of EUR 1.03 million to EUR
6.68 million.  Decrease mainly derives from lower trade receivables by EUR 1.24
million,  being mainly  impacted by  construction activities. The collectability
rate continues to be high at 99.8% level.

Current  liabilities  have  decreased  by  EUR  1.14 million to EUR 8.51 million
compared to the year end of 2017. Decrease mainly derives from decrease in trade
and  other payables by EUR 1.19 million, being related to lower payables related
to pipe construction services and investments.

Deferred  income from connection fees  has grown compared to  the end of 2017 by
EUR 0.43 million to EUR 20.06 million.

Provision for possible third party claims has not changed compared to the end of
2017. At  the end of  2017, the Company formed  a provision of EUR 17.52 million
for  possible third-party claims as a result  of the Supreme Court Decision from
12(th) December  2017. More detailed information about  the provision is in Note
5 to the financial statements.

The  Group's loan  balance has  remained stable  at EUR 95 million. The weighted
average interest risk margin for the total loan facility is 0.79%. At the end of
September  2017, the Company refinanced its long-term  loan in the amount of EUR
37.5 million.

The  Group has  a Total  debt to  assets level  of 60.6%, in  range of 55%-65%,
reflecting  the Group's equity profile. In  comparative period of 2017 the total
debt to assets ratio was 56.2%.

CASH FLOW

As  of 31.03.2018, the cash position of the Group is strong. At the end of March
2018, the  cash balance of the Group stood at EUR 52.31 million, which is 22.3%
of  the total assets (31.03.2017: EUR  38.51 million, forming 17.6% of the total
assets).

The  biggest contribution to  the cash flows  comes from main operations. During
the  three months  of 2018, the  Group generated  EUR 8.80 million of cash flows
from  operating  activities,  an  increase  of  EUR 1.59 million compared to the
corresponding  period in 2017. Underlying  operating profit continues  to be the
main contributor to operating cash flows.

In  the  three  months  of  2018 the  result  of  net  cash flows from investing
activities  was a  cash outflow  of EUR  1.05 million, a  decrease of  EUR 1.22
million  compared to the cash outflow of EUR 2.27 million in the three months of
2017. This is made up as follows:

  * The cash outflows from investments in fixed assets have decreased by EUR
    1.51 million compared to 2017 amounting to EUR 1.66 million.
  * The compensations received for the construction of pipelines were EUR 0.59
    million, showing a decrease of EUR 0.30 million compared to the same period
    of 2017.

In  the three months of 2018 cash  outflow from financing activities amounted to
EUR 0.42 million, being at the same level compared to the same period in 2017.


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 1(st) quarter of 2018, the total number of employees was 315
compared  to  312 at  the  end  of  the  1(st) quarter  of  2017. The  full time
equivalent  (FTE)  was  respectively  301 in  2018 compared to the 303 in 2017.
Average  number of employees (FTE) during the three months was respectively 299
in 2018 and 301 in 2018.

 By gender, employee allocation was as follows:

                    As of 31.03.2018         |  As of 31.03.2017
                                             |
                    Women     Men     Total  |  Women     Men     Total
---------------------------------------------+-------------------------
 Group                 96     219       315  |     87     225       312
---------------------------------------------+-------------------------
 Management Team       14      13        27  |     12      13        25
                                             |
 Executive Team         4       4         8  |      4       4         8
                                             |
 Management Board       1       2         3  |      1       2         3
                                             |
 Supervisory Board      0       9         9  |      0       9         9


The  total salary  costs were  EUR 2.25 million  for the 1(st) quarter of 2018,
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 0.09 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 Company's dividend policy up to 2017 was related to keeping the dividends in
real  term i.e.  dividends amounts  have been  increased in line with inflation.
Every year the Supervisory Council 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
Supervisory  Council decided in its meeting  held on 26(th) April 2018 to make a
proposal  to Annual General Meeting to pay  out EUR 0.36 per A share and 600 EUR
per B share from the 2017 profits. The pay-out is equal to earnings per share in
2017.

The Annual General Meeting of shareholders will be held on 31(st) May 2018.

Dividends will be paid out in June 2018.

SHARE PERFORMANCE

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

As of 31.03.2018, 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 2018 the shareholder  structure has been relatively
stable compared to the end of 2017. At the end of 1(st) quarter 2018 the pension
funds  shareholding  has  decreased  slightly,  being  1.37% of the total shares
compared to 1.43% at the end of 2017.

As  of 31.03.2018, the closing price  of AS Tallinna Vesi  share was EUR 10.70,
which is 4.9% (2017: +1.4%) higher compared to the closing price of EUR 10.20 at
the  beginning of  the quarter.  During the  1(st) quarter the OMX Tallinn index
increased by 2.2% (2017: 4.3%).

In  the  three  months  of  2018, 1,325 deals  with  the  Company's  shares were
concluded  (2017: 1,784 deals) during which 260 thousand shares or 1.3% of total
shares exchanged their owners (2017: 246 thousand shares or 1.2%).

The  turnover  of  the  transactions  was  EUR 581 thousand lower than in 2017,
amounting to EUR 2.81 million.


CORPORATE STRUCTURE

As of 31.03.2018, 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.  Changes  in  the Supervisory Council members in the
1(st) quarter  of 2018 were as  follows: Mr Steven  Fraser term as a Supervisory
Council  member  expired  on  21(st) January  2018 and a new Supervisory Council
member Mr Keith Haslett was nominated (term valid until 22.01.2020).

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 14 to the financial statements as well as from the Company's webpage:

About      us      >      Management     board     >     Supervisory     council
(https://tallinnavesi.ee/en/ettevote/management-board/supervisory-council/)

About us > Audit committee (https://tallinnavesi.ee/en/ettevote/auditcommittee/)

About   us   >   Principles   of   governance   >  Corporate  governance  report
(https://tallinnavesi.ee/en/ettevote/strategic-objectives/corporate-governance-
report/)

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  Board  and  Supervisory  Council  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
Council 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 2(nd) 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 21(st) March 2020), Aleksandr Timofejev (with
the  powers of the Management Board  Member until 29(th) October 2018) and Riina
Käi (with the powers of the Management Board Member until 29(th) October 2018).

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

About  us  >  Management  board (https://tallinnavesi.ee/en/ettevote/management-
board/)

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 1(st) half of 2018.

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. AS Tallinna Vesi has published all relevant
materials    on    its    website    (https://tallinnavesi.ee/en/investor/stock-
announcements/) and to the Tallinn Stock Exchange.


 STATEMENT OF COMPREHENSIVE
 INCOME                          1(st) quarter     1(st) quarter     12 months

 (EUR thousand)                      2018              2017             2017



 Revenue                                14,077            13,781         59,815

 Costs of goods sold                    -5,757            -5,573        -25,725
-------------------------------------------------------------------------------
 GROSS PROFIT                            8,320             8,208         34,090



 Marketing expenses                       -112              -100           -356

 General administration expenses        -1,379            -1,566         -5,028

 Other income/ expenses (-)                -31               -55        -17,841
-------------------------------------------------------------------------------
 OPERATING PROFIT                        6,798             6,487         10,865



 Interest income                             4                 4             15

 Interest expense                         -348              -380         -1,502

 Other financial income (+)/
 expenses (-)                               80               250            543
-------------------------------------------------------------------------------
 PROFIT BEFORE TAXES                     6,534             6,361          9,921



 Income tax on dividends                     0                 0         -2,700



 NET PROFIT FOR THE PERIOD               6,534             6,361          7,221
-------------------------------------------------------------------------------
 COMPREHENSIVE INCOME FOR THE
 PERIOD                                  6,534             6,361          7,221



 Attributable to:                                              0              0
-------------------------------------------------------------------------------
 Equity holders of A-shares              6,533             6,360          7,220

 B-share holder                           0.60              0.60           0.60



 Earnings per A share (in euros)          0.33              0.32           0.36

 Earnings per B share (in euros)           600               600            600







 STATEMENT OF FINANCIAL POSITION

 (EUR thousand)                     31.03.2018        31.03.2017     31.12.2017



 ASSETS

 CURRENT ASSETS
-------------------------------------------------------------------------------
 Cash and equivalents                   52,306            38,514         44,973

 Trade receivables, accrued
 income and prepaid expenses             6,685             6,911          7,716

 Inventories                               436               456            457
-------------------------------------------------------------------------------
 TOTAL CURRENT ASSETS                   59,427            45,881         53,146



 NON-CURRENT ASSETS
-------------------------------------------------------------------------------
 Property, plant and equipment         173,902           171,881        174,451

 Intangible assets                         797               819            811
-------------------------------------------------------------------------------
 TOTAL NON-CURRENT ASSETS              174,699           172,700        175,262
-------------------------------------------------------------------------------
 TOTAL ASSETS                          234,126           218,581        228,408



 LIABILITIES AND EQUITY

 CURRENT LIABILITIES
-------------------------------------------------------------------------------
 Current portion of long-term
 borrowings                                345               245            264

 Trade and other payables                5,011             5,129          6,200

 Derivatives                               452               612            578

 Prepayments                             2,702             2,423          2,609
-------------------------------------------------------------------------------
 TOTAL CURRENT LIABILITIES               8,510             8,409          9,651



 NON-CURRENT LIABILITIES
-------------------------------------------------------------------------------
 Deferred income from connection
 fees                                   20,058            18,170         19,632

 Borrowings                             95,423            95,771         95,565

 Derivatives                               219               459            178

 Provision for possible third
 party claims                           17,522                 0         17,522

 Other payables                             44                15             44
-------------------------------------------------------------------------------
 TOTAL NON-CURRENT LIABILITIES         133,266           114,415        132,941
-------------------------------------------------------------------------------
 TOTAL LIABILITIES                     141,776           122,824        142,592



 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                      54,338            57,745         47,804
-------------------------------------------------------------------------------
 TOTAL EQUITY                           92,350            95,757         85,816
-------------------------------------------------------------------------------
 TOTAL LIABILITIES AND EQUITY          234,126           218,581        228,408









 CASH FLOW STATEMENT               3 months          3 months        12 months

 (EUR thousand)                      2018              2017             2017



 CASH FLOWS FROM OPERATING
 ACTIVITIES
-------------------------------------------------------------------------------
 Operating profit                        6,798             6,487         10,865

 Adjustment for
 depreciation/amortisation               1,423             1,497          6,170

 Adjustment for revenues from
 connection fees                           -69               -61           -258

 Other non-cash adjustments                 -5                 0            -26

 Profit/loss(+) from sale and
 write off of property, plant
 and equipment, and intangible
 assets                                     -1                -4            -12

 Change in current assets
 involved in operating
 activities                              1,035               249           -558

 Change in liabilities involved
 in operating activities                  -376              -951         17,064

 TOTAL CASH FLOW FROM OPERATING
 ACTIVITIES                              8,805             7,217         33,245



 CASH FLOWS FROM INVESTING
 ACTIVITIES
-------------------------------------------------------------------------------
 Acquisition of property, plant
 and equipment, and intangible
 assets                                 -1,660            -3,167         -9,761

 Compensations received for
 construction of pipelines                 589               872          2,698

 Proceeds from sales of
 property, plant and equipment
 and intangible assets                      15                21             62

 Interest received                           4                 4             15
-------------------------------------------------------------------------------
 TOTAL CASH FLOW FROM INVESTING
 ACTIVITIES                             -1,052            -2,270         -6,986



 CASH FLOWS FROM FINANCING
 ACTIVITIES
-------------------------------------------------------------------------------
 Interest paid and loan
 financing costs, incl swap
 interests                                -355              -341         -1,512

 Repayment of finance lease                -65               -79           -260

 Dividends paid                              0                 0        -10,801

 Income tax on dividends                     0                 0         -2,700
-------------------------------------------------------------------------------
 TOTAL CASH FLOW FROM FINANCING
 ACTIVITIES                               -420              -420        -15,273


-------------------------------------------------------------------------------
 CHANGE IN CASH AND CASH
 EQUIVALENTS                             7,333             4,527         10,986


-------------------------------------------------------------------------------
 CASH AND CASH EQUIVALENTS AT
 THE BEGINNING OF THE PERIOD            44,973            33,987         33,987


-------------------------------------------------------------------------------
 CASH AND CASH EQUIVALENTS AT
 THE END OF THE PERIOD                  52,306            38,514         44,973






Karl Heino Brookes

Chairman of the Management Board

+372 62 62 200

[email protected] (mailto:[email protected])

Attachment

  * Q1 2018 Eng final (https://prlibrary-
    eu.nasdaq.com/Resource/Download/07ce717b-412c-4790-85d1-4f51a7317969)