Börsiteade

Pealkiri

Results of operations for the 4th quarter of 2011

Teade

MANAGEMENT REPORT

Privatization Contract and Regulation Overview

During the 4th quarter the Company’s share price has been further impacted by
the Competition Authority’s (CA) prescription to reduce the tariffs by 29% and
by the claims that the privatization contract did not comply with the Public
Water and Sewerage Act (PWSSA) at the time of privatization. 

Our shareholders will be aware that in June 2011 the company lodged an official
complaint to the Estonian Administrative court due to the CA’s refusal to
consider the privatization contract and approve the contractually agreed
tariffs. On 29 August the CA responded to the courts disputing all points made
in our claims. Regrettably the CA has decided not to wait for the court ruling
regarding the legality of the privatization contract and on 10 October the CA
sent a prescription to the company asking it to reduce its current tariffs by
29%. The Company has lodged another claim against the prescription and has
asked for the temporary injunction from the Estonian Administrative Court. The
court has postponed the decision until 6 February 2012. 

AS Tallinna Vesi does not believe that the prescription or the non approval of
the 2011 tariffs have ever been economically or legally justified and as such
will contest both these decisions in court. 

The Company would like to highlight that it has fulfilled all aspects of the
privatization contract, including a significant improvement in the quality
requirements, as determined by the Tallinn City Government in 2001 (see the
report about the  Operational Performance ). 

Furthermore, in the interests of an open and professional dialogue to
demonstrate that its return on invested capital has not been excessive the
international economic consulting group Oxera has independently verified that
the average real return on capital invested at the time of privatization is
6.2%, that is slightly lower than the expected 6.5% return in 2011 as the
privatization contract designed the returns to be lower in early years of
contract. Both, the average and the annual return on capital invested are in
accordance with the returns allowed by Ofwat the UK regulator over this same
period , and the return permitted by the Dutch Energy regulator Energiekamer,
which allowed a real rate of return of 6% in its regulatory determination of
September 2010. 

The Company has continuously stated its belief in fully transparent regulation
and its willingness to enter into meaningful dialogue that takes into account
the privatization contract signed in 2001. 


RESULTS OF OPERATIONS - FOR THE 4th QUARTER 2011

Overview of the financial statements

In the 4th quarter of 2011 the Company’s underlying performance was good and
stable, continuously focused on improvement of operational performance and
customer service. During the 4th quarter of 2011 the sales increased by 4.9% as
result of the slight increase in sales volumes mainly due to increase in
tourism and related sectors. As result of excellent operational performance and
related efficiencies the gross profit increased by 5.1% in the 4th quarter of
2011 and the underlying operating profit increased by 5.9%. Total operating
profit increased by 13.4% during the same period as result of completion of
considerable proportion of the construction program. Still the profit before
taxes decreased by 3.1% in the 4th quarter of 2011, being impacted by non-cash
negative movement in fair value of financial instruments. 


mln €                    4 Q     4 Q    Change   12 months    12 months   Change
                         2011    2010              2011         2010            
--------------------------------------------------------------------------------
Sales                     13,1    12,5    4,9%         51,2         49,7    3,1%
Gross profit               7,2     6,8    5,1%         30,3         29,0    4,5%
Gross profit margin %     54,9    54,8    0,2%         59,2         58,4    1,4%
Operating profit           8,0     7,1   13,4%         28,9         27,5    5,2%
Operating profit -         5,7     5,4    5,9%         25,4         24,2    5,2%
 main business                                                                  
Operating profit          61,5    56,9    8,1%         56,4         55,3    2,0%
 margin %                                                                       
Profit before taxes        7,7     7,9   -3,1%         25,8         24,9    3,5%
Net profit                 7,7     7,9   -3,1%         21,5         16,4   31,1%
Net profit margin %       58,7    63,6   -7,7%         42,0         33,0   27,1%
ROA %                      4,0     4,3   -7,3%         11,2          8,9   25,5%
Debt to total capital     58,9    60,1   -1,9%         58,9         60,1   -1,9%
 employed                                                                       
--------------------------------------------------------------------------------

Gross profit margin – Gross profit / Net sales
Operating profit margin – Operating profit / Net sales
Net Profit margin – Net Profit / Net sales
ROA – Net profit /Total Assets
Debt to Total capital employed – Total Liabilities / Total capital employed
Main business – water and wastewater activities, excl. connections profit and
government grants 


Profit and Loss Statement

4th quarter 2011


Sales

In the 4th quarter of 2011 the Company’s total sales increased, year on year,
by 4.9% to 13.1 mln EUR. Sales in the main operating activity principally
comprise of sales of water and treatment of wastewater to domestic and
commercial customers within and outside of the service area, and fees received
from the City of Tallinn for operating and maintaining the storm water system. 

Sales of water and wastewater services were 11.9 mln EUR, a 4.3% increase
compared to the 4th quarter of 2010, resulting from the slight rise in sales
volumes as described below. 

Within the service area, sales to residential customers remained on the same
level, with minor 0.1% decrease to 6.0 mln EUR. Sales to commercial customers
increased by 5.5% to 4.6 mln EUR. Sales to customers outside of the service
area increased by 32.7% to 1.1 mln EUR in the 4th quarter of 2011. Over
pollution fees received were 0.16 mln EUR, an 8.1% decrease compared to the 4th
quarter of 2010. 

In the 4th quarter of 2011, the volumes sold to residential customers increased
by 0.2% year on year, the cumulative variance after twelve months being still
negative by -0.1% after negative 3rd quarter of 2011. Eliminating the minor
impact of revenues reclassification from inside area to the outside area the
domestic consumption is flat. 

The volumes sold to commercial customers inside the service area have risen,
reflecting a 6.2% increase compared to the same period in 2010. The sales
volumes increased mainly due to improvement in leisure sector and related
industrial and transportation services as result of pick up in tourism sector.
The volume increase exceeds the sales increase due to the proportionally higher
increase in waste water services which tariffs are a bit lower compared to the
water tariffs. 

Outside service area sales volumes were 46.5% higher than in the 4th quarter of
2010. The main factor in this increase was higher storm water volumes in the
4th quarter of 2011 compared to 2010, resulting in sales increase year on year
by 32.7%, as storm water tariffs are considerably lower than sewage tariffs. 

The sales from the operation and maintenance of the storm water and
fire-hydrant system increased by 14.5% to 0.92 mln EUR in the 4th quarter of
2011 compared to the same period in 2010. This is in accordance with the terms
and conditions of the contract whereby the storm water and fire hydrant costs
are invoiced based on actual costs and volumes treated. 


Cost of Goods Sold and Gross Margin

The cost of goods sold for the main operating activity was 5.9 mln EUR in the
4th quarter of 2011, an increase of 0.26 mln EUR or 4.7% from the equivalent
period in 2010. The cost increase was mainly the result of increased treatment
volumes by 6.3% that affected all variable costs. 

To mitigate the nitrogen treatment and tax risks discussed throughout the 2010,
we finished the construction and implemented the additional stage in sewage
treatment process in the beginning of the 3rd quarter of 2011. In spite the
increase in volumes treated in 4th quarter of 2011 and the increase in tax
rates year on year by 14.8%, the treatment results were excellent and resulted
in reduced pollution tax payment. The pollution tax calculation depends on
waste water treatment results and concentration of different waste components
in treated waste water. In the 4th quarter of 2011 the Company was successful
to remove all pollutants below the level required for the application of the
beneficial coefficient. Thereby the Company achieved in the 4th quarter of 2011
the beneficial 0.5 tax coefficient in contrary to the 4th quarter of 2010 with
coefficient 1.0, and thereby the amount of pollution tax payable was 0.67 mln
EUR compared to 0.74 mln EUR in the 4th quarter of 2010. We still have to note
that the Company accounted for a one-off negative provision for pollution tax
in Maardu related to storm water outlet not fully in control of the Company.
Eliminating the 0.44 mln EUR provision the pollution tax would have been 69.1%
lower than in the 4th quarter of 2010. 

Chemical costs were 0.43 mln EUR, a 15.5% increase compared to the
corresponding period in 2010 reflecting the increase in rates, mainly in
methanol price. 

Electricity costs increased by 0.09 mln EUR or 12.2% in the 4th quarter of 2011
compared to the 4th quarter of 2010 having adverse impact from higher
electricity prices as result of the purchase from the open market, but also
from regulated networks fees. 

Salary expenses within costs of goods sold decreased in the 4th quarter of
2011, year on year, by 0.05 mln EUR or 4.3% as result of different timing in
annual bonus accrual throughout the year. Underlying individual salaries have
increased by CPI only and the cost impact is broadly balanced by reduction in
headcount. 

Other cost of goods sold in the main operating activity increased 0.15 mln EUR,
or 13.1% year on year, mainly due to the increase in asphalting cost related to
the networks emergency works reflecting increase in rates of raw materials but
also increased volumes.  Other increases in rates were broadly balanced by
internal efficiencies. 

As a result of all of the above the Company’s gross profit for the 4th quarter
of 2011 was 7.2 mln EUR, which is an increase of 0.35 mln EUR, or 5.1%,
compared to the gross profit of 6.8 mln EUR for the 4th quarter of 2010. 


Operating Costs and Operating Margin

Marketing expenses decreased by 0.02 mln EUR to 0.19 mln EUR during the 4th
quarter of 2011 compared to the corresponding period in 2010. This is mainly
the result of a savings targeted efficiencies in number of other items. 

In the 4th quarter of 2011 the General administration expenses increased by
0.19 mln EUR year on year to 1.2 mln EUR. Still the increase in legal
consultancies acquired in the process of tariff dispute exceeded the prescribed
transfer of cost and caused increase in other costs. Within this group the
salary costs increase was partly related to the transfer of management services
to the salary line. 


Other net income/expenses

The majority of the income in Other net income/expenses relates to
constructions and government grants. The drivers for this income stream are the
networks extension program and the connections activity in Tallinn. Income and
expenses from constructions and government grants totaled a net income of 2.4
mln EUR in the 4th quarter of 2011 compared to a net income of 1.7 mln EUR in
the 4th quarter of 2010, this line varied throughout the year and is dependent
on construction volumes and estimates to the profit margins on projects
completed. 2011 4th quarter profits from government grants profits were
influenced mainly by delays in construction in previous quarters which were
completed and compensated in 4th quarter. The extensive construction program is
expected to be completed in 1st half of 2012. 

The rest of the other income/expenses totaled an expense of 0.10 mln EUR in the
4th quarter of 2011 compared to an expense of 0.23 mln EUR in the 4th quarter
of 2010, reflecting mainly the impact from the different timing of profits from
construction of individual connection points. 

As a result the Company’s operating profit from main services for the 4th
quarter of 2011 totaled 5.7 mln EUR compared to 5.4 mln EUR in the
corresponding quarter in 2010. In total the Company’s operating profit for all
activities for the 4th quarter of 2011 was 8.0 mln EUR, an increase of 0.9 mln
EUR compared to an operating profit of 7.1 mln EUR achieved in the 4th quarter
of 2010. Year on year the operating profit for the 4th quarter has increased by
13.4%. 


Financial expenses

Net Financial revenues/expenses were 0.36 mln EUR in the 4th quarter of 2011,
which is a negative variance of 1.2 mln EUR or 143.2% compared to the net
expenses in the 4th quarter of 2010. In both years the financial costs were
impacted from the non-cash revaluation of the fair value of swap agreements, in
the 4th quarter of 2010 the impact was positive by 1.1 mln EUR and in the
relevant quarter of 2011 the impact was negative by 0.67 mln EUR. 

The Company has mitigated majority of the long term floating interest risk with
5 interest swap agreements, each with a principal value of 15 mln EUR. At this
point in time the estimated fair value of these swap contracts is still
negative, totaling 4.5 mln EUR, with a negative revaluation in the 4th quarter
2011 in the amount of 0.67 mln EUR. 


Profit Before Tax

The Company’s profit before taxes for the 4th quarter of 2011 was 7.7 mln EUR,
which is 0.25 mln EUR lower than the profit before taxes of 7.9 mln EUR for the
4th quarter of 2010. 


Results for the twelve months of 2011

During the twelve months of 2011 the Company’s total sales increased, year on
year, by 3.1% to 51.2 mln EUR. Sales of water and wastewater treatment were
46.5 mln EUR, a 3.0% increase compared to the twelve months of 2010. 

The operating profit from the Company’s main business activity increased by
5.2% to 25.4 mln EUR during the twelve months of 2011 compared to the twelve
months of 2010. 

The Company’s profit before taxes for the twelve months of 2011 was 25.8 mln
EUR, which is a 3.5% increase compared to the relevant period in 2010. 

The Company’s net profit for the twelve months of 2011 was 21.5 mln EUR, which
is 5.1 mln EUR higher than the net profit of 16.4 mln EUR in the equivalent
period in 2010. Increase in net profit is mainly due to the decreased income
tax from 8.5 mln EUR to 4.3 mln EUR as result of lower dividends paid to the
shareholders in 2011 compared to 2010. 


Balance sheet

During the twelve months of 2011 the Company invested 16.5 mln EUR into fixed
assets. Non-current assets were 150.7 mln EUR at 31 December 2011. 

Current assets increased by 7.7 mln EUR to 41.4 mln EUR in the twelve months of
the year. Customer receivables increased by 6.2 mln EUR as result of the
increase in accrued income related to long term construction projects and
payment schedules, and the cash at bank increased by 1.5 mln EUR. 

Current liabilities decreased by 7.4 mln EUR to 8.5 mln EUR in the twelve
months of the year. This was mainly due to a 7.6 mln EUR reclassification of
Current portion of long-term borrowings to Non-current liabilities after
renewal of the loan agreement. 

The Company has a leverage level as expected of 58.9%, in the target range of
60%, reflecting the increase in Equity of 5.5 mln EUR as a result of the higher
profit generation compared to the dividend payment in 2011. 

Long-term liabilities stood at 113.2 mln EUR at the end of December 2011,
consisting almost entirely of the outstanding balance of three long-term bank
loans. As of 30 April 2011 the total 95 mln EUR loan capital was recorded
within long term liabilities in accordance with the signed loan agreements. In
April 2011 the Company renewed its loan agreement and according to the loan
agreements the first repayment of loans or refinancing should take place in
2013. The weighted average interest margin for the total available facility is
0.82%. 

It has to be noted that in the 4th quarter of 2011 the Company disclosed an
exceptional contingent liability, which could cause an outflow of economic
benefits of up to 36.0 mln euros, as per note 13 to the interim accounts. 


Cash flow

During the twelve months of 2011, the Company generated 30.2 mln EUR of cash
flows from operating activities, an increase of 5.4 mln EUR compared to the
corresponding period in 2010. 2011 operating cash flows were above 2010 cash
flows mainly due to the working capital movement and particularly related to
the payments of overdue debts in 2011. Underlying operating profit still
continues to be the main contributor to operating cash flows. 

In the twelve months of 2011 net cash outflows from investing activities were
8.4 mln EUR, which is 1.4 mln EUR less than in 2010. At the end of 4th quarter
of 2011 the cash outflows related to the fixed asset investments were 18.5 mln
EUR. Within the group the increased compensations received for the construction
of pipelines is balancing the increase in capital expenditures. In 2011 the
Company has also given the 3.2 mln EUR loan to Maardu according to the
Operating agreement signed in 2008. 

The cash outflows from financing activities were 20.3 mln EUR during the twelve
months of 2011 compared to cash outflows of 20.5 mln EUR during the same twelve
months of 2010, representing the payouts of the dividends and income tax in
both years and loans received in 2010. 

As a result of all of the above factors, the total cash inflow in the twelve
months of 2011 was 1.5 mln EUR compared to a cash outflow of 5.5 mln EUR in the
twelve months of 2010. Cash and cash equivalents stood at 14.8 mln EUR as at 31
December 2011 which is 1.5 mln EUR higher than at the corresponding period of
2010. 


Employees

At the end of the 4th quarter of 2011, the total number of employees was 311
compared to 319 at the end of the 4th quarter of 2010. The full time equivalent
(FTE) was respectively 299 in 2011 compared to the 305 in 2010. The management
continues to work actively for the efficiencies in processes to balance the
increase in individual salaries and cost pressure from the market with more
productive company structure. 


Corporate structure

At the end of the quarter, 31 December 2011, 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. 

Share performance

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

As of 31 December 2011 AS Tallinna Vesi shareholders, with a direct holding
over 5%, were: 



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

Parvus Asset Management owned in total 7.79% of the shares of the Company as
per Company’s best information as of 31 December 2011. 

At the end of the quarter, 31 December 2011, the closing price of the AS
Tallinna Vesi share was 6.29 EUR, which is a 12.64% decrease compared to the
closing price of 7.20 EUR at the beginning of the quarter. During the same
period the OMX Tallinn index dropped by 1.01%. 



Operational highlights in 2011

•    Company’s overall operating performance is continuously good, most of the
quality aspects exceeding the levels of 2010, increasing the customer service
standards and operational efficiency. For example: 
o    The quality indicators for water quality have so far been on the highest
level ever, from taken samples 99.66% were fully in accordance with the norms,
outperforming considerably the required standard 95% at customers’ taps. 
o    Total number of sewage blockages has decreased by 18.1%.
o    Total time of interruptions has decreased by 37.9%.
o    The leakage level is below 18%, over 3% less than in 2010.
o    As a result of excellent nitrogen removal from the waste water we received
the beneficial coefficient and reduction in the amount of pollution tax. 

•    The Company connected Maardu to the Tallinn water and sewerage network. It
resolved the water quality and environmental risk issues for the City of
Maardu, providing the most cost efficient and sustainable solution for
provision of high quality water services. 

Key contractual events

Contractual tariff application

Tariffs are still frozen on the 2010 level despite of the fact that on 9
November 2010 the Company submitted its contract based tariff application to
the new regulator. The tariff application is fully in accordance with the law
and the best practice regulation for privatized utilities, such as that
favoured by Ofwat in the UK and recommended by the World Bank for privatized
utilities. 

On 2nd May the Competition Authority (CA) informed the Company about the
rejection of the tariff application. The CA completely ignored the
privatization contract and did not perform any analysis of the contractual and
financial performance of the Company during the period after privatization. 
The CA is arguing that the Company’s profitability is too high using their own
unverified methodology that is not in accordance with the World Bank guidelines
for privatized utilities. The Company has calculated that the average real
return on invested capital from 2001 till 2011 has been 6.2% and the Company
has also had these returns independently verified by the international
economics consulting company, Oxera. 

The Company and its investors cannot accept such unilateral breach of the
privatization terms and contract by Estonian Authorities and the Company
submitted an appeal to the court on 2 June 2011.  The outcome and lengths of
the Court proceedings is outside the control of the Company. 

Complaint to European Commission

In parallel, on 10th December 2010 AS Tallinna Vesi lodged a complaint to the
European Commission regarding certain measures adopted by the Estonian
authorities. The company believes these measures unilaterally alter the terms
of AS Tallinna Vesi's privatization regime, and without any objective
justification, any form of meaningful prior discussion, or willingness to
engage in dialogue. Therefore they violate EU rules on the freedom of
establishment and the free movement of capital (articles 49 and 63 TFEU). 
As a consequence of this complaint, on 22 February 2011 the European Commission
sent a Request For Information to the Estonian authorities regarding the points
raised by AS Tallinna Vesi in its complaint. The Estonian authorities were due
to respond in early May, however requested and were granted a 30 day extension.
The Estonian authorities responded to the Commission by the end of June. In
October the Commission sent further questions to the Company for the
commentaries. The process is ongoing. 


Prescription to reduce the tariffs


On 10th October 2011 the Company received the prescription from the Competition
Authority to lower the current tariffs by 29%. In addition and in support of
its decision the Competition Authority has taken the extreme action of
declaring the privatisation contract signed in 2001 to be illegal. To quote
“the CA, having familiarised itself with ASTV’s claim regarding privatisation,
is of the opinion that in the part concerning the price of water services,
conducting the privatisation with the alleged aim of achieving the lowest
possible tariff increase was not in accordance with the law.” 
The Company  wishes to make it absolutely clear to all its shareholders  that
it completely disagrees with the position taken by the CA, and will seek an
interim injunction from the Estonian Courts to block this action within 30 days
after receipt of the prescription. The Company believes that by declaring the
privatisation illegal and using a Ministerial decree to attempt to force down
ASTV’s tariffs the CA as an agency representing the Estonian state and national
government has shown an absolute disregard for legal due process. Furthermore
for the Company to have to defend itself in court for honouring all the terms
and conditions of its contract, including most importantly the improved service
obligations that were contractually required by the Government of the City of
Tallinn in 2001, goes against all the internationally acceptable norms of
business conduct and public governance in long term privatisation contracts. 
Therefore the Company has lodged another claim against the CA regarding the
prescription and has asked for the temporary injunction from the Estonian
Administrative Court. The Court has postponed the decision regarding the
temporary injunction until 6 February 2012. The outcome and lengths of the
Court proceedings is outside the control of the Company. 


Disclosure of relevant papers and perspectives


The Company has published its tariff application and all relevant
correspondence with the CA on its website
(http://www.tallinnavesi.ee/?op=body&id=728) and to the Tallinn Stock Exchange
and will keep its investors informed of all future developments regarding the
further key developments regarding the processing of the tariff application.
Still, at this point in time the Company is unable to say what is going to
happen to the tariffs as it is unclear at the moment how the CA intends to
respond to the Court and what would be the next steps by the European
Commission. 


Additional information:
Siiri Lahe
Chief Financial Officer
+372 6262 262
[email protected]





STATEMENT OF COMPREHENSIVE INCOME   IV quarter  IV quarter  12 months  12 months
(thousand EUR)                         2011        2010        2011       2010  
                                                                                
Revenue                                 13 079      12 465     51 240     49 680
Costs of goods sold                     -5 895      -5 631    -20 927    -20 684
                                                                                
GROSS PROFIT                             7 184       6 834     30 313     28 996
                                                                                
Marketing expenses                        -190        -214       -748       -787
General administration expenses         -1 204      -1 017     -4 294     -3 651
Other income/ expenses (-)               2 254       1 490      3 619      2 906
                                                                                
OPERATING PROFIT                         8 044       7 093     28 890     27 464
                                                                                
Financial income                           910         387      1 947      1 060
Financial expenses                      -1 272         450     -5 071     -3 624
                                                                                
PROFIT BEFORE TAXES                      7 682       7 930     25 766     24 900
                                                                                
Income tax on dividends                      0           0     -4 253     -8 495
                                                                                
NET PROFIT FOR THE PERIOD                7 682       7 930     21 513     16 405
COMPREHENSIVE INCOME FOR THE             7 682       7 930     21 513     16 405
 PERIOD                                                                         
Attributable to:                                                                
Equity holders of A-shares               7 681       7 929     21 512     16 404
B-share holder                            0,64        0,64       0,64       0,64
                                                                                
Earnings per A share (in euros)           0,38        0,40       1,08       0,82
Earnings per B share (in euros)            639         639        639        639



STATEMENT OF FINANCIAL POSITION                                                 
(thousand EUR)                                            31.12.2011  31.12.2010
                                                                                
ASSETS                                                                          
CURRENT ASSETS                                                                  
Cash and equivalents                                          14 770      13 235
Customer receivables, accrued income and prepaid              26 277      20 088
 expenses                                                                       
Inventories                                                      248         306
Non-current assets held for sale                                  73          76
TOTAL CURRENT ASSETS                                          41 368      33 705
                                                                                
NON-CURRENT ASSETS                                                              
Long-term investment assets                                    3 151           0
Property, plant and equipment                                145 973     148 179
Intangible assets                                              1 577       1 972
TOTAL NON-CURRENT ASSETS                                     150 701     150 151
TOTAL ASSETS                                                 192 069     183 856
                                                                                
LIABILITIES                                                                     
                                                                                
CURRENT LIABILITIES                                                             
Current portion of long-term borrowings                            0       7 624
Trade and other payables                                       5 789       6 367
Derivatives                                                    1 552         963
Short-term provisions                                              0         117
Prepayments and deferred income                                1 146         810
TOTAL CURRENT LIABILITIES                                      8 487      15 881
                                                                                
NON-CURRENT LIABILITIES                                                         
Deferred income from connection fees                           6 824       5 765
Borrowings                                                    94 938      87 428
Derivatives                                                    2 936       1 304
Other payables                                                     9         115
TOTAL NON-CURRENT LIABILITIES                                104 707      94 612
TOTAL LIABILITIES                                            113 194     110 493
                                                                                
EQUITY CAPITAL                                                                  
Share capital                                                 12 000      12 782
Share premium                                                 24 734      24 734
Statutory legal reserve                                        1 278       1 278
Retained earnings                                             40 863      34 569
TOTAL EQUITY CAPITAL                                          78 875      73 363
TOTAL LIABILITIES AND EQUITY CAPITAL                         192 069     183 856



CASH FLOW STATEMENT                                              12        12   
                                                               months    months 
(thousand EUR)                                                  2011      2010  
                                                                                
CASH FLOWS FROM OPERATING ACTIVITIES                                            
Operating profit                                                28 890    27 464
Adjustment for depreciation/amortisation                         5 729     5 620
Adjustment for profit from government grants and connection     -3 484    -3 312
 fees                                                                           
Other finance expenses                                              35       -14
Profit from sale of property, plant and equipment, and              55        -3
 intangible assets                                                              
Expensed property, plant and equipment                              10        70
Change in current assets involved in operating activities          720    -8 894
Change in liabilities involved in operating activities           1 306     6 297
Interest paid                                                   -3 051    -2 443
Total cash flow from operating activities                       30 210    24 785
                                                                                
CASH FLOWS FROM INVESTING ACTIVITIES                                            
Loans granted                                                   -3 151         0
Acquisition of property, plant and equipment, and intangible   -18 506   -17 055
 assets                                                                         
Compensations received for construction of pipelines            11 284     6 139
Proceeds from sale of property, plant and equipment, and            13        16
 intangible assets                                                              
Interest received                                                1 939     1 109
Total cash flow from investing activities                       -8 421    -9 791
                                                                                
CASH FLOWS FROM FINANCING ACTIVITIES                                            
Received loans                                                       0    20 000
Dividends paid                                                 -16 001   -31 956
Income tax on dividends                                         -4 253    -8 495
Total cash flow from financing activities                      -20 254   -20 451
                                                                                
Change in cash and bank accounts                                 1 535    -5 457
                                                                                
CASH AND EQUIVALENTS AT THE BEGINNING OF THE PERIOD             13 235    18 692
                                                                                
CASH AND EQUIVALENTS AT THE END OF THE PERIOD                   14 770    13 235




         Siiri Lahe
         Chief Financial Officer
         +372 6262 262
         [email protected]