Börsiteade

Pealkiri

Financial results for the 1st Quarter 2019

Teade

Management report

Chairman´s summary

2019 has   started   successfully  for  Tallinna  Vesi,  with  respect  to  both
operational  and financial performance. We saw  growth in both the operating and
net  profit  of  the  Group,  due  to  higher  sales revenues from water supply,
wastewater  and  stormwater  services,  as  well  as increased profit related to
external construction services.

Strong financial performance

In  the 1(st) quarter of  2019, the Company's sales  revenue was EUR14.66 million,
which  is 4.2% higher  year-on-year. Tallinna Vesi's  gross profit  decreased by
0.7%, amounting  to EUR8.26 million. Slight decrease  in gross profit was balanced
by  lower administrative  and financial  costs. Tallinna  Vesi's net  profit was
EUR6.68  million showing an increase of 2.3% in comparison with the same period of
2018.

Reliable water supply and wastewater service

The  quality of drinking water was excellent in the 1(st) quarter of 2019. Water
samples taken from customers' taps, were 99.73% compliant with the requirements.
A   total  of  744 water  samples  were  taken  during  the  1(st) quarter.  The
professionalism  of specialists managing the treatment process at Ülemiste Water
Treatment  Plant,  as  well  as  renewal  and  maintenance of water network, are
instrumental  in ensuring high quality water to our customers. The average water
disruption  time  to  individual  properties  was  2 hours and 35 minutes in the
1(st) quarter  of 2019, whereas,  the result  in the  same period of 2018 was 2
hours and 52 minutes.

The level of leakages in the water network continues to be at a record low. This
year we achieved 12.86% for the level of leakages in the first quarter, which is
quite  an improvement in comparison with 15.19%, in the 1(st) quarter last year.
We  continue  to  make  targeted  capital  investments  to  ensure the continued
reliability  of the infrastructure.  In the 1(st) quarter  of 2019, we performed
reconstruction  works on water pipes and sewers on Reidi street, Gonsiori street
and Hiiu-Suurtüki crossroads in collaboration with the City of Tallinn.

In   the   1(st) quarter  of  2019, the  treated  effluent  leaving  Paljassaare
Wastewater  Treatment  Plant  was  fully  compliant  with the stipulated quality
requirements.  For the  purpose of  assessing the  treatment efficiency  and the
quality of wastewater, we monitor pollutants in both the incoming wastewater and
treated  effluent discharged  into the  sea. Wastewater  laboratory analyses the
samples taken from different stages of the wastewater treatment process, and the
information  received  thereby,  allows  us  to  further  improve  the treatment
efficiency and effluent quality.

High service standards

Besides  outstanding financial and operational  performance, the Company has set
itself   high  standards  to  provide  first-class  customer  service.  We  have
established  clear and challenging targets and give promises to our customers in
terms  of the speed of  our response and problem-solving.  No promises have been
broken  in 2019. We also think  it is fundamental to  provide our customers with
important  information, or  respond to  their questions  as quickly as possible.
Therefore,  we measure  the speed  of our  responses, and  have set  a target to
respond within two working days, to non-complex written requests.

In  order to further  improve customer satisfaction,  we continue to develop our
customer  interaction channels, and look for  ways to make the processes quicker
and   more   convenient.  This  year  we  are  introducing  a  new  self-service
environment,  and  we  are  also  in  the  process of upgrading the mobile phone
application, to enhance its functionality and provide better information.

Raising environmental awareness and supporting the community

Contributing  to the environmental education  of children, youngsters and adults
has  become a natural part of our day-to-day activities. In the 1(st) quarter of
2019, another  Doors Open  Day was  held at  Ülemiste Water  Treatment Plant, in
which  people  show  increasingly  more  interest.  We  also held numerous water
seminars  in  kindergartens  and  schools,  and  hosted several tours for bigger
groups in our water and wastewater treatment plants. In cooperation with Tallinn
City Museum we are publishing this spring an interesting history book that looks
into the early period of water supply in Tallinn.

We  opened new public water tap in in  SuperSkypark, at the newly opened T1 Mall
of  Tallinn and plan to further improve  the availability of tap water in public
spaces  during 2019. Our aim  is to encourage  people to be more environmentally
friendly in their daily routines.

Tariff application

The  process of setting the new tariffs for water supply and wastewater disposal
services  is  still  ongoing  between  Tallinna  Vesi  and  Estonian Competition
Authority.  In  December  2018, the  Competition  Authority issued a decision on
Tallinna Vesi's application for the approval of the prices of water services and
related  extra services in Tallinn and  Saue service area. Competition Authority
decided  to approve  the prices  of related  extra services, however, refused to
approve the prices of water services. At the beginning of 2019, AS Tallinna Vesi
challenged  Competition  Authority´s  decision.  Tallinna  Vesi's  challenge was
dismissed.  Consequently,  Tallinna  Vesi  disputed  the Competition Authority's
decision in the Administrative Court and is now waiting for Court's decision.

AS  Tallinna Vesi is still awaiting a  verdict from the ICSID Arbitration Panel,
which is to decide whether investors are entitled to a compensation as per their
damages claim. The decision is expected by 3 May 2019.

OPERATIONAL INDICATORS FOR THREE MONTHS OF 2019

 Indicator                                         Unit 2019 Q1 2018 Q1 2017 Q1
-------------------------------------------------------------------------------
 Compliance of water quality at the customers' tap  %      99.7    99.9   100.0

 Water loss in the water distribution network       %      12.9    15.2    13.7

 Average   duration  of  water  interruptions  per
 property in hours                                  h      2.59    2.86    3.02

 Number of sewer blockages                          No      159     156     195

 Number of sewer bursts                             No       29      25      39

 Wastewater      treatment     compliance     with
 environmental standards                            %     100.0   100.0   100.0

 Number of customer complaints*                     No       40      21       9

 Number   of  customer  contacts  regarding  water
 quality                                            No       27      14      24

 Number   of  customer  contacts  regarding  water
 pressure                                           No       54      37      38

 Number  of customer  contacts regarding blockages
 and discharge of storm water                       No      328     250     269

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

 Number of failed promises                          No        0       3       3

 Notification  of unplanned water interruptions at
 least 1 h before the interruption                  %      97.2    96.7   100.0

*Until  2018, this  figure  included  only  the  customer complaints received in
writing.  The number for 2018 and 2019 includes  the complaints received both in
writing and by phone.

FINANCIAL HIGHLIGHTS FOR THE 1(st) QUARTER OF 2019

The Group's sales revenues during the 1(st) quarter of 2019 were EUR14.66 million,
being up by 4.2% or EUR0.58 million compared to the same period in 2018.

The  gross  profit  in  the  1(st) quarter  of 2019 was EUR8.26 million, showing a
slight  decrease of 0.7% or EUR0.06 million.  Decrease in gross profit was related
to  higher  electricity  and  staff  costs,  accompanied by higher pollution tax
expenses  and depreciation.  Higher costs  were almost  fully balanced by higher
water,  wastewater and  stormwater revenues,  accompanied by higher construction
services related profit and lower chemicals costs.

The  operating profit  was EUR6.89  million, showing  an increase of 1.4% or EUR0.09
million.  In addition to above-mentioned changes  in gross profit, the operating
profit was also impacted by lower administrative and other expenses.

The  net  profit  for  the  1(st) quarter  of 2019 was EUR6.68 million, showing an
increase  by 2.3% or EUR0.15 million. The net  profit was mainly impacted by above
mentioned  changes  in  the  operating  profit,  accompanied  by lower financial
expenses.  The changes in the financial expenses were mostly influenced by lower
interest  expenses, balanced by lower positive change  in the fair value of swap
contracts  in the 1(st) quarter  of 2019 compared to  the positive change in the
same  quarter of  2018. The net  profit for  the 1(st) quarter of 2019 and 2018
without  the impact resulted from the change of the fair value of swap contracts
was  EUR6.65 million and EUR6.45 million respectively, being higher by 3.0% or EUR0.20
million year-on-year.

MAIN FINANCIAL INDICATORS

                                              1(st) quarter
 EUR million,
 except key ratios                           2019  2018  2017 Change 2019/ 2018
-------------------------------------------------------------------------------
 Sales                                      14.66 14.08 13.78              4.2%

 Gross profit                                8.26  8.32  8.21             -0.7%

 Gross profit margin %                      56.33 59.10 59.56             -4.7%

 Operating  profit before  depreciation and
 amortisation                                8.39  8.22  7.98              2.1%

 Operating  profit before  depreciation and
 amortisation margin %                      57.24 58.40 57.93             -2.0%

 Operating profit                            6.89  6.80  6.49              1.4%

 Operating profit - main business            6.78  6.73  6.48              0.7%

 Operating profit margin %                  47.00 48.29 47.07             -2.7%

 Profit before taxes                         6.68  6.53  6.36              2.3%

 Profit before taxes margin %               45.58 46.42 46.16             -1.8%

 Net profit                                  6.68  6.53  6.36              2.3%

 Net profit margin %                        45.58 46.42 46.16             -1.8%

 ROA %                                       2.63  2.83  2.94             -7.0%

 Debt to total capital employed %           57.78 60.56 56.19             -4.6%

 ROE %                                       6.30  7.33  6.87            -14.1%

 Current ratio                               6.28  6.98  5.46            -10.0%

 Quick ratio                                 6.24  6.93  5.40            -10.0%

 Investments into fixed assets               3.41  0.85  2.21            300.0%

 Payout ratio %                                na    na 99.72                na
-------------------------------------------------------------------------------

Gross profit margin - Gross profit / Net sales

Operating  profit  before  depreciation  and  amortisation  - Operating profit +
depreciation and amortisation

Operating  profit before depreciation and amortisation margin - Operating profit
before depreciation and amortisation / 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

Quick ratio - (Current assets - Stocks) / Current liabilities

Payout ratio - Total Dividends per annum/ Total Net Income per annum

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 OF 2019

Statement of comprehensive income

SALES

As  in the 1(st) quarter of 2019 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  (CA) methodology.  On 28/02/2018
Company  submitted its tariff application  for Tallinn and Saue  area to the CA.
The  tariffs  applied  for  were  similar  to  the  water and wastewater tariffs
currently  charged in the area. The  amended tariff application was submitted on
2/05/2018. From 4/05/2018 the CA started the tariff application review. With its
decision  from 4/12/2018 CA did  not approve the  prices of water and wastewater
services  in Tallinn and Saue  service area. With the  same decision CA approved
prices  for  services  directly  related  to  water  and wastewater services. On
6/12/2018 CA  notified the company  of the possible  initiation of a supervisory
review  procedure,  to  which  the  Company  responded on time on 23/04/2019. On
3/01/2019 the  Company challenged  CA's decision  from 4/12/2018 for refusing to
approve  the  prices  of  water  and  wastewater services, that AS Tallinna Vesi
applied  for in Tallinn and Saue service area. On 12/02/2019 the CA informed the
Company  that they will  not satisfy the  Company's challenge. On 14/03/2019 the
Company  submitted a complaint  to the Tallinn  Administrative Court, related to
the  Competition Authority´s negative decision from 4/12/2018. On 13/09/2018 the
Company  submitted supplemented  tariff application  additionally to Tallinn and
Saue  area also to Harku and surrounding  areas water companies. CA has informed
the  Company that the  supplemented application meets  also all the requirements
and  that they have extended the review  from 30 days to 90 days starting as the
application  is complicated. On 18/04/2019 the CA  sent a request to the Company
regarding  the application, to which the Company must respond by 13/05/2019. 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 the
tariffs.  The tariffs  could also  change if  the CA establishes temporary water
tariffs in accordance with the procedure specified in applicable law.

In  the  1(st) quarter  of  2019 the  Group's  total  sales were EUR14.66 million,
showing  an  increase  by  4.2% or  EUR0.58  million  year-on-year. 88.9% of sales
comprise  of sales of  water and wastewater  services to domestic and commercial
customers  within and outside  of the service  area. 6.4% of sales  are the fees
received  from the City of Tallinn for operating and maintaining the storm water
system  and fire  hydrants, 3.8% from  construction and  asphalting services and
0.9% 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        2019/2018

 EUR thousand                                 2019   2018   2016  EUR           %
-------------------------------------------------------------------------------
 Private clients, incl:                    6,491  6,428  6,347   63        1.0%
-------------------------------------------------------------------------------
 Water supply service                      3,567  3,532  3,489   35        1.0%

 Wastewater disposal service               2,924  2,896  2,858   28        1.0%

 Corporate clients, incl:                  5,002  5,142  5,063 -140       -2.7%
-------------------------------------------------------------------------------
 Water supply service                      2,734  2,784  2,771  -50       -1.8%

 Wastewater disposal service               2,268  2,358  2,292  -90       -3.8%

 Outside service area clients, incl:       1,346  1,112  1,108  234       21.0%
-------------------------------------------------------------------------------
 Water supply service                        385    334    329   51       15.3%

 Wastewater disposal service                 815    688    683  127       18.5%

 Storm water disposal service                146     90     96   56       62.2%

 Over pollution fee                          194    182    210   12        6.6%
-------------------------------------------------------------------------------
 Total   water   supply   and  wastewater
 disposal service                         13,033 12,864 12,728  169        1.3%

 Storm  water treatment  and disposal and
 fire hydrants service                       944    796    741  148       18.6%

 Construction    service,    design   and
 asphalting                                  558    283    181  275       97.2%

 Other works and services                    129    134    131   -5       -3.7%
-------------------------------------------------------------------------------
 SALES REVENUES TOTAL                     14,664 14,077 13,781  587        4.2%

Sales  from water and wastewater services were EUR13.03 million, showing a 1.3% or
EUR0.17 million increase compared to the 1(st) quarter of 2018, resulting from the
changes in sales volumes as described below:

  * There has been an increase in private customers' revenues of 1.0% to EUR6.49
    million. The increase in domestic customer consumption volumes came mainly
    from apartment blocks, which is also our biggest private customer group.
  * Sales to corporate customers within the service area decreased by 2.7% to
    EUR5.00 million. Decrease was related to lower consumption in the sales of
    industrial and other commercial customer segment, caused by lower
    consumption of different customers with biggest impact from Tallinn prison
    moving out to Rae municipality. It was balanced by higher consumption in the
    sales of leisure segment impacted by two new leisure centres in Tallinn.
  * Sales to customers outside the main service area increased by 21.0% to EUR1.35
    million. It was impacted by an increase in all services, caused by higher
    water supply to Rae area accompanied by higher consumption of waste and
    storm water disposal services in all areas.
  * Over pollution fees received have increased by 6.6% to EUR0.19 million.

Sales  from the operation and  maintenance of the main  service area storm water
and  fire hydrant  system were  EUR0.94 million,  showing an  increase of 18.6% or
EUR0.15 million compared to the same period in 2018, driven mainly by 33.6% higher
storm water volumes, balanced partly by lower cost per m(3).

Sales  of  construction,  design  and  asphalting  services  were EUR0.56 million,
increasing  by  97.2% or  EUR0.27  million  year-on-year.  The increase was mainly
related  to higher pipe construction and asphalting services revenues during the
1(st) quarter of 2019.

COST OF GOODS AND SERVICES SOLD AND GROSS PROFIT

The  cost of  goods and  services sold  amounted to  EUR6.40 million in the 1(st)
quarter of 2019, increasing by 11.2% or EUR0.65 million compared to the equivalent
period  in 2018. The increase was influenced by higher costs in all groups, with
only exception of lower chemicals costs.

                                                                   Variance
                                             1(st) quarter        2019/2018

 EUR thousand                                 2019   2018   2016  EUR           %
-------------------------------------------------------------------------------
 Water abstraction charges                  -292   -291   -296   -1       -0.3%

 Chemicals                                  -405   -435   -333   30        6.9%

 Electricity                              -1,004   -759   -854 -245      -32.3%

 Pollution tax                              -367   -277   -292  -90      -32.5%
-------------------------------------------------------------------------------
 Total direct production costs            -2,068 -1,762 -1,775 -306      -17.4%

 Staff costs                              -1,645 -1,593 -1,421  -52       -3.3%

 Depreciation and amortisation            -1,340 -1,283 -1,351  -57       -4.4%

 Construction    service,    design   and
 asphalting                                 -445   -241   -138 -204      -84.6%

 Other costs of goods/services sold         -906   -878   -888  -28       -3.2%
-------------------------------------------------------------------------------
 Other costs of goods/services sold total -4,336 -3,995 -3,798 -341       -8.5%
-------------------------------------------------------------------------------
 Total cost of goods/services sold        -6,404 -5,757 -5,573 -647      -11.2%

Total direct production costs (water abstraction charges, chemicals, electricity
and  pollution tax expenses) amounted to EUR2.07 million, showing a 17.4% or EUR0.31
million  increase compared to  the equivalent period  in 2018. 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:

  * Chemicals costs decreased by 6.9% to EUR0.40 million, driven mainly by lower
    usage of methanol and polymers to remove Nitrogen and sludge from
    wastewater, worth respectively EUR0.02 million and EUR0.01 million.
  * Electricity costs increased by 32.3% to EUR1.00 million, driven mainly by on
    average 35.5% higher average price of electricity, accompanied by 16.3%
    higher wastewater volumes to waste and stormwater pumping stations, worth
    respectively EUR0.26 million and EUR0.03 million. Higher costs were partly
    balanced by 0.5% decrease in treated volumes in water treatment process,
    worth EUR0.02 million.
  * Pollution tax expense increased by 32.5% to EUR0.37 million, mainly due to
    16.3% higher treated wastewater volumes and higher pollution load of BOD7
    and suspended solids, worth respectively EUR0.05 million, EUR0.02 million and
    EUR0.01 million.

Other   costs  of  goods  sold  (staff  costs,  depreciation,  construction  and
asphalting  services  costs  and  other  costs  of goods sold) amounted to EUR4.34
million,  having increased  by 8.5% or  EUR0.34 million.  The increase came mostly
from costs related to construction and asphalting services, accompanied by other
different costs by following reasons:

  * Staff costs increased by 3.3% to EUR1.64 million. It was mainly driven by
    higher workload in Watercom related to higher construction services revenues
    mentioned as more construction done by own staff, accompanied by review of
    bonus reserve in the 1(st) quarter of 2019.
  * Depreciation increased by 4.4% to EUR 1.34 million, being mainly impacted by
    change of recognising the leases according to accounting standard IFRS 16
    Leases, mentioned in note 5 to the financial statements.
  * Construction and asphalting services costs increased by 84.6% to EUR0.44
    million, mainly due to higher construction and asphalting services revenues
    mentioned earlier and project specific changes.
  * Other costs of goods/services sold increased by 3.2% to EUR0.91 million,
    mainly because of 8.4% or EUR0.03 million higher asset maintenance costs,
    driven mainly by higher different maintenance and repair works related costs
    in wastewater treatment.

As a result of all above the Group's gross profit for the 1(st) quarter of 2019
was  EUR8.26 million, showing a decrease of 0.7% or EUR0.06 million, compared to the
gross profit of EUR8.32 million for the comparative period of 2018.

ADMINISTRATIVE AND MARKETING EXPENSES, OTHER INCOME AND EXPENSES

Administrative   and  marketing  expenses  amounted  to  EUR1.37  million,  having
decreased  by  7.8% or  EUR0.12  million.  The  lower costs were mainly related to
decrease in tariff dispute related costs.

Other  income  and  expenses  amounted  to  net  income of EUR0.01 million, having
decreased by 119.4% or EUR0.04 million compared to net expense of EUR0.03 million in
comparative  period. The decrease  was mostly impacted  by higher penalty income
received,  balanced  by  lower  positive  change  in doubtful receivables, worth
respectively +EUR0.04 million and -EUR0.02 million.

OPERATING PROFIT

As  a result of  the factors listed  above the Group's  operating profit for the
1(st) quarter  of 2019 amounted  to EUR6.89  million, being  1.4% or EUR0.09 million
higher  than in the  corresponding period of  2018. The Group's operating profit
from  main  business  was  EUR6.78  million,  being  0.7% or  EUR0.05 million higher
compared to 2018.

FINANCIAL EXPENSES

The  Group's net financial  income and expenses  have resulted a  net expense of
EUR0.21  million, compared to net expense of EUR0.26 million in the 1(st) quarter of
2018. The  decrease was  mainly impacted  by lower  interest costs,  balanced by
lower  positive change  in the  fair value  of the  swap contracts year-on-year,
worth  respectively +EUR0.10 million  and -EUR0.04 million.  Lower interest cost was
related to Swap contract, which ended in November 2018.

The  standalone  swap  agreements  have  been  signed  to mitigate the long-term
floating interest risk. The interest swap agreements are signed for EUR45 million,
EUR50 million are with floating interest rate. At this point in time the estimated
fair  value  of  the  swap  contracts  is  negative, amounting to EUR0.34 million.
Effective  interest rate of loans (incl. swap interests) in the 1(st) quarter of
2019 was  1.05%, amounting to interest  costs of EUR0.25  million, compared to the
effective  interest rate of 1.46% and the interest costs of EUR0.35 million in the
1(st) quarter of 2018.

PROFIT BEFORE TAXES AND NET PROFIT

The Group's profit before taxes and net profit for the 1(st) quarter of 2019 was
EUR6.68  million,  being  2.3% or  EUR0.15  million  higher than for the comparative
period  of 2018. Eliminating the effects of the change of the fair value of swap
contracts  the Group's net  profit for the  1(st) quarter of 2019 and 2018 would
have  been EUR6.65 million and EUR6.45  million respectively, showing an increase of
3.0% or EUR0.20 million year-on-year.

Statement of financial position

In  the three months of 2019 the Group invested into fixed assets EUR3.41 million.
As  of 31/03/2019, non-current tangible  assets amounted to  EUR181.17 million and
total  non-current  assets  amounted  to  EUR182.46  million  (31/03/2018: EUR173.90
million and EUR174.70 million respectively).

Due  to  the  changes  in  IFRS  (International  Financial  reporting Standard),
starting  from  1/01/2019 leases  are  no  longer classified either operating or
finance leases and instead, the Group started to recognise operating leases with
a  term  of  more  than  12 months  as  Right-of-use  assets  and  corresponding
liabilities as liabilities. Consequently, the non-current assets and liabilities
increased  by EUR0.70  million on  1/01/2019. See more  in note 5 to the financial
statements.

Compared  to  the  year  end  of  2018 the trade receivables, accrued income and
prepaid  expenses have been relatively stable showing a slight decrease of EUR0.24
million  to EUR7.39 million. Decrease mainly  derives lower trade receivables from
construction  activities,  which  were  balanced  by  higher  accrued income and
prepayments,  respectively by -EUR0.74 million, +EUR0.28 million and +EUR0.21 million.
The collectability rate continues to be high at 99.79% level, which is by 0.03%
lower than as of March 2018.

Current  liabilities have decreased by EUR0.81  million to EUR12.22 million compared
to  the year end of 2018, mainly deriving from lower construction activities and
investments  related trade  payables and  prepayments for  connections, which is
balanced  by higher current  liabilities from the  right-of-use assets mentioned
above, respectively -EUR0.59 million, -EUR0.61 million +EUR0.19 million.

Deferred  income from connection fees  has grown compared to  the end of 2018 by
EUR3.05 million to EUR25.79 million.

Provision for possible third-party claims has not changed compared to the end of
2018, being  EUR19.07 million. More detailed information about the provision is in
Note 6 to the financial statements.

The  Group's  loan  balance  has  remained  stable  at EUR95 million. The weighted
average interest risk margin for the total loan facility is 0.79%.

The  Group has  a Total  debt to  assets level  of 57.8%, in  range of 55%-65%,
reflecting  the Group's equity profile. In comparative period of 2018, the total
debt to assets ratio was 60.6%.

Cash flow

As  of 31/03/2019, the cash position of the Group is strong. At the end of March
2019, the  cash balance of the Group stood  at EUR68.83 million, which is 26.6% of
the  total  assets  (31/03/2018:  EUR52.31  million,  forming  22.3% of  the total
assets).

The  biggest contribution to  the cash flows  comes from main operations. During
the  three months of 2019, the Group generated  EUR8.29 million of cash flows from
operating  activities, a decrease of EUR0.52 million compared to the corresponding
period in 2018. Underlying operating profit continues to be the main contributor
to operating cash flows.

In  the  three  months  of  2019 the  result  of  net  cash flows from investing
activities  was a  cash outflow  of EUR0.87  million, a  decrease of EUR0.18 million
compared  to the cash outflow of EUR1.05 million in the three months of 2018. This
is made up as follows:

  * The cash outflows from investments in fixed assets has been almost at the
    same level as in comparative period, amounting respectively to EUR1.67 million
    in 2019 and EUR1.66 million in 2018.
  * The compensations received for the construction of pipelines were EUR0.79
    million, showing an increase of EUR0.20 million compared to the same period of
    2018.

In  the three months of 2019 cash  outflow from financing activities amounted to
EUR0.36 million, decreasing by EUR0.06 million compared to the same period in 2018.
The change was mainly related to lower interest payments.

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 organize 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 2019, the total number of employees was 314
compared  to 315 at the end of the same period in 2018. The full time equivalent
(FTE)  was respectively 299 in 2019 compared  to the 303 in 2018. Average number
of  employees during  the three  months was  respectively 299 in 2019 and 301 in
2018.

 By gender, employee allocation was as follows:

                      As of 31/03/2019    | As of 31/03/2018
                                          |
                      Women   Men   Total | Women   Men   Total
------------------------------------------+---------------------
  Group                  91   223     314 |    96   219     315
------------------------------------------+---------------------
  Management Team        14    14      28 |    14    13      27
                                          |
  Executive Team          4     4       8 |     4     4       8
                                          |
  Management Board        1     2       3 |     1     2       3
                                          |
  Supervisory Board       1     8       9 |     0     9       9

The  total  salary  costs  were  EUR2.29  million  for the 1(st) quarter of 2019,
including  EUR0.08  million  paid  to  Management  and Supervisory Council members
(excluding social taxes). The off-balance sheet potential salary liability could
be up to EUR0.09 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 2018 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 25 April 2019 to make a
proposal  to Annual General Meeting to pay  out EUR 0.75 per A share and 600 EUR
per B share from the 2018 profits. The pay-out is equal to 62.1% of earnings per
share in 2018.

The Annual General Meeting of shareholders will be held on 30/05/2019.

SHARE PERFORMANCE

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

As of 31/03/2019, 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 2019 the shareholder  structure has been relatively
stable  compared to the end of 2018. At the end of the 1(st) quarter of 2019 the
pension  funds  shareholding  has  decreased,  being  1.02% of  the total shares
compared to 1.33% at the end of 2018.

As  of 31/03/2019, the closing price of AS Tallinna Vesi share was EUR10.60, which
is  10.4% (2018: 4.9%)  higher  compared  to  the  closing price of EUR9.60 at the
beginning  of  the  quarter.  During  the  1(st) quarter  the  OMX Tallinn index
increased by 6.5% (2018: 2.2%).

In  the three months of 2019, 794 deals with the Company's shares were concluded
(2018:  1,325 deals) during  which 166 thousand  shares or  0.8% of total shares
exchanged their owners (2018: 260 thousand shares or 1.3%).

The  turnover  of  the  transactions  was  EUR1.10  million  lower  than  in 2018
comparative period, amounting to EUR1.71 million.

CORPORATE STRUCTURE

As of 31/03/2019, 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 2019 were as follows: Mr  Toivo Tootsen' term as a Supervisory
Council member was extended until 7/04/2021.

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 15 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  21/03/2020), Aleksandr Timofejev  (with the
powers  of the Management Board Member until 29/10/2021) and Riina Käi (with the
powers of the Management Board Member until 29/10/2021).

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 on 3/05/2019.

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          1st quarter 1st quarter   12 months

 (EUR thousand)                               2019        2018          2018



 Revenue                                         14,664      14,077      62,780

 Costs of goods sold                             -6,404      -5,757     -28,594
-------------------------------------------------------------------------------
 GROSS PROFIT                                     8,260       8,320      34,186



 Marketing expenses                                -112        -112        -386

 General administration expenses                 -1,261      -1,379      -5,025

 Other income/ expenses (-)                           6         -31      -1,836
-------------------------------------------------------------------------------
 OPERATING PROFIT (+)/LOSS (-)                    6,893       6,798      26,939



 Interest income                                      8           4          21

 Interest expense                                  -216        -268      -1,010

 PROFIT (+)/LOSS (-) BEFORE TAXES                 6,685       6,534      25,950



 Income tax on dividends                              0           0      -1,800



 NET PROFIT (+)/LOSS (-) FOR THE PERIOD           6,685       6,534      24,150
-------------------------------------------------------------------------------
 COMPREHENSIVE INCOME (+)/LOSS (-) FOR THE
 PERIOD                                           6,685       6,534      24,150



 Attributable profit (+)/loss(-) to:
-------------------------------------------------------------------------------
 Equity holders of A-shares                       6,684       6,533      24,149

 B-share holder                                    0.60        0.60        0.60



 Earnings per A share (in euros)                   0.33        0.33        1.21

 Earnings per B share (in euros)                    600         600         600



 STATEMENT OF FINANCIAL POSITION

 (EUR thousand)                                    31/03/19 31/03/18   31/12/2018



 ASSETS

 CURRENT ASSETS
-------------------------------------------------------------------------------
 Cash and cash equivalents                         68,828   52,306       61,769

 Trade receivables, accrued income and prepaid
 expenses                                           7,390    6,685        7,631

 Inventories                                          537      436          498
-------------------------------------------------------------------------------
 TOTAL CURRENT ASSETS                              76,755   59,427       69,898



 NON-CURRENT ASSETS
-------------------------------------------------------------------------------
 Property, plant and equipment                    181,171  173,902      179,185

 Intangible assets                                    623      797          665

 Right-of-use assets                                  664        0            0
-------------------------------------------------------------------------------
 TOTAL NON-CURRENT ASSETS                         182,458  174,699      179,850
-------------------------------------------------------------------------------
 TOTAL ASSETS                                     259,213  234,126      249,748



 LIABILITIES AND EQUITY

 CURRENT LIABILITIES
-------------------------------------------------------------------------------
 Current portion of long-term borrowings            4,052      345        3,823

 Trade and other payables                           5,694    5,011        6,047

 Derivatives                                          139      452          207

 Prepayments                                        2,334    2,702        2,955
-------------------------------------------------------------------------------
 TOTAL CURRENT LIABILITIES                         12,219    8,510       13,032



 NON-CURRENT LIABILITIES
-------------------------------------------------------------------------------
 Deferred income from connection fees              25,792   20,058       22,745

 Borrowings                                        92,437   95,423       91,919

 Derivatives                                          201      219          173

 Provision for possible third party claims         19,068   17,522       19,068

 Other payables                                        46       44           46
-------------------------------------------------------------------------------
 TOTAL NON-CURRENT LIABILITIES                    137,544  133,266      133,951
-------------------------------------------------------------------------------
 TOTAL LIABILITIES                                149,763  141,776      146,983



 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                                 71,438   54,338       64,753
-------------------------------------------------------------------------------
 TOTAL EQUITY                                     109,450   92,350      102,765
-------------------------------------------------------------------------------
 TOTAL LIABILITIES AND EQUITY                     259,213  234,126      249,748









 CASH FLOWS STATEMENT                            3 months 3 months   12 months

 (EUR thousand)                                    2019     2018       2018



 CASH FLOWS FROM OPERATING ACTIVITIES
-------------------------------------------------------------------------------
 Operating profit                                   6,893    6,798       26,939

 Adjustment for depreciation/amortisation           1,502    1,423        5,790

 Adjustment for revenues from connection fees         -86      -69         -295

 Other non-cash adjustments                             0       -5          -20

 Profit/loss(+) from sale and write off of
 property, plant and equipment, and intangible
 assets                                                -5       -1         -115

 Change in current assets involved in operating
 activities                                           208    1,035           54

 Change in liabilities involved in operating
 activities                                          -224     -376        1,939
-------------------------------------------------------------------------------
 TOTAL CASH FLOW FROM OPERATING ACTIVITIES          8,288    8,805       34,292



 CASH FLOWS FROM INVESTING ACTIVITIES
-------------------------------------------------------------------------------
 Acquisition of property, plant and equipment,
 and intangible assets                             -1,670   -1,660      -10,736

 Compensations received for construction of
 pipelines, incl connection fees                      787      589        3,716

 Proceeds from sales of property, plant and
 equipment and intangible assets                        7       15          160

 Interest received                                      7        4           17
-------------------------------------------------------------------------------
 TOTAL CASH FLOW FROM INVESTING ACTIVITIES           -869   -1,052       -6,843



 CASH FLOWS FROM FINANCING ACTIVITIES
-------------------------------------------------------------------------------
 Interest paid and loan financing costs, incl
 swap interests                                      -258     -355       -1,394

 Lease payments                                      -102      -65         -258

 Dividends paid                                         0        0       -7,201

 Income tax on dividends                                0        0       -1,800
-------------------------------------------------------------------------------
 TOTAL CASH FLOW FROM FINANCING ACTIVITIES           -360     -420      -10,653


-------------------------------------------------------------------------------
 CHANGE IN CASH AND CASH EQUIVALENTS                7,059    7,333       16,796


-------------------------------------------------------------------------------
 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF
 THE PERIOD                                        61,769   44,973       44,973


-------------------------------------------------------------------------------
 CASH AND CASH EQUIVALENTS AT THE END OF THE
 PERIOD                                            68,828   52,306       61,769





Karl Heino Brookes

Chairman of the Management Board

+372 62 62 200

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