MANAGEMENT REPORT
Privatization Contract and Regulation Overview
During the 3rd quarter and the early part of October 2010 the Company’s share price has been further impacted by the claims of the Competition Authority (CA) 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 point 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%.
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[1]).
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[2], 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 that takes into account the privatization contract signed in 2001.
RESULTS OF OPERATIONS - FOR THE 3rd QUARTER 2011
Overview of the financial statements
In the 3rd quarter 2011 the Company completed an extremely important environmental project, the construction of the Biofilter, which enables the Company to fulfill all the European Union requirements to the nitrogen removal from the waste water, and has made a significant contribution to reduce the cost of goods sold, as discussed later on in the report. Otherwise the Company’s underlying performance is good and stable, continuously focused on improvement of operational performance and customer service.
During the 3rd quarter of 2011 the sales increased by 3.7% due to the slight increase in sales volumes mainly due to increase in tourism sector. As result of excellent operational performance and related efficiencies the gross profit increased by 7.1% in the 3rd quarter of 2011 and the operating profit increased by 8.5% during the same period. Still the profit before taxes decreased by 26.7% in the 3rd quarter of 2011, being impacted by non-cash negative movement in fair value of financial instruments.
| mln € | 3 Q 2011 | 3 Q 2010 | Change | 9 months 2011 | 9 months 2010 | Change |
| Sales | 13,0 | 12,5 | 3,7% | 38,2 | 37,2 | 2,5% |
| Gross profit | 7,8 | 7,2 | 7,1% | 23,1 | 22,2 | 4,4% |
| Gross profit margin % | 59,8 | 57,9 | 3,3% | 60,6 | 59,6 | 1,8% |
| Operating profit | 7,0 | 6,5 | 8,5% | 20,8 | 20,4 | 2,3% |
| Operating profit - main business | 6,5 | 6,1 | 5,8% | 19,7 | 18,7 | 5,6% |
| Operating profit margin % | 54,2 | 51,9 | 4,6% | 54,6 | 54,7 | -0,2% |
| Profit before taxes | 4,4 | 5,9 | -26,7% | 18,1 | 17,0 | 6,6% |
| Net profit | 4,4 | 5,9 | -26,7% | 13,8 | 8,5 | 63,2% |
| Net profit margin % | 33,6 | 47,5 | -29,3% | 36,2 | 22,8 | 59,2% |
| ROA % | 2,4 | 3,4 | -29,6% | 7,5 | 4,8 | 56,7% |
| Debt to total capital employed | 61,3 | 62,9 | -2,6% | 61,3 | 62,9 | -2,6% |
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
3rd quarter 2011
Sales
In the 3rd quarter of 2011 the Company’s total sales increased, year on year, by 3.7% to 13.0 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 11.6 mln EUR, a 3.9% increase compared to the 3rd quarter of 2010, resulting from the slight rise in sales volumes as described below.
Within the service area, sales to residential customers decreased by 0.9% to 5.8 mln EUR. Sales to commercial customers increased by 8.9% to 4.7 mln EUR. Sales to customers outside of the service area increased by 17.0% to 0.95 mln EUR in the 3rd quarter of 2011. Over pollution fees received were 0.18 mln EUR, a 13.9% decrease compared to the 3rd quarter of 2010.
In the 3rd quarter of 2011, the volumes sold to residential customers decreased by 0.6% year on year, reducing the cumulative positive variance after six months to -0.1% after nine months 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 9.5% increase compared to the same period in 2010, eliminating a one-off impact the increase is 7.3%. The sales volumes increased mainly due to improvement in leisure sector and related industrial 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 25.7% higher than in the 3rd quarter of 2010. The main factor in this increase was higher storm water volumes in the 3rd quarter of 2011 compared to 2010, resulting in sales increase year on year by 17.0%, 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 decreased by 4.9% to 1.0 mln EUR in the 3rd 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 5.2 mln EUR in the 3rd quarter of 2011, a decrease of 0.05 mln EUR or 1.0% from the equivalent period in 2010. The cost reduction was mainly the result of nitrogen removal from the waste water and related reduction in pollution tax.
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 3rd 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 3rd 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 3rd quarter of 2011 the beneficial 0.5 tax coefficient in contrary to the 3rd quarter of 2010 with coefficient 1.0, and thereby the amount of pollution tax payable was 0.14 mln EUR compared to 0.61 mln EUR in the 3rd quarter of 2010.
Chemical costs were 0.44 mln EUR, a 10.8% increase compared to the corresponding period in 2010 representing the increase in rates, mainly in methanol price.
Electricity costs increased by 0.07 mln EUR or 9.5% in the 3rd quarter of 2011 compared to the 3rd quarter of 2010 due to higher electricity prices as result of the purchase from the open market, but also having adverse impact from regulated networks fees.
Salary expenses within costs of goods sold increased in the 3rd quarter of 2011, year on year, by 0.23 mln EUR or 26.5% in combination of redundancy payments and performance related pay accrual. Underlying individual salaries have increased by CPI only, but the cost impact is broadly balanced by reduction in headcount. Other salary lines had similar impact.
Other cost of goods sold in the main operating activity increased 0.03 mln EUR, or 2.6% year on year, broadly reflecting overall impact to the costs compared to 3rd quarter of 2010.
As a result of all of the above the Company’s gross profit for the 3rd quarter of 2011 was 7.8 mln EUR, which is an increase of 0.52 mln EUR, or 7.1%, compared to the gross profit of 7.2 mln EUR for the 3rd quarter of 2010.
Operating Costs and Operating Margin
Marketing expenses decreased by 0.01 mln EUR to 0.18 mln EUR during the 3rd quarter of 2011 compared to the corresponding period in 2010. This is mainly the result of a discussed increase in salaries expenses, more than balanced by savings in other items.
In the 3rd quarter of 2011 the General administration expenses increased by 0.08 mln EUR year on year to 1.0 mln EUR. Within this group the salary costs increase was partly related to the transfer of management services to the salary line. Still the increase in legal consultancies acquired in the process of tariff dispute exceeded the transfer of cost within other costs.
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 0.45 mln EUR in the 3rd quarter of 2011 compared to a net income of 0.35 mln EUR in the 3rd quarter of 2010, this line varies throughout the year depending on construction volumes and estimates to the profit margins on projects completed. 2011 3rd quarter profits from government grants profits were influenced mainly by delays in construction in previous quarters which was partly compensated in 3rd quarter and will be compensated during the construction program that will be completed in 1st half of 2012.
The rest of the other income/expenses totaled an expense of 0.11 mln EUR in the 3rd quarter of 2011 compared to an expense of 0.02 mln EUR in the 3rd quarter of 2010. This line was impacted by the sale of vehicles that are not needed for operating purposes any more.
As a result the Company’s operating profit from main services for the 3rd quarter of 2011 totaled 6.5 mln EUR compared to 6.1 mln EUR in the corresponding quarter in 2010. In total the Company’s operating profit for all activities for the 3rd quarter of 2011 was 7.0 mln EUR, an increase of 0.55 mln EUR compared to an operating profit of 6.5 mln EUR achieved in the 3rd quarter of 2010. Year on year the operating profit for the 3rd quarter has increased by 8.5%.
Financial expenses
Net Financial revenues/expenses were 2.7 mln EUR in the 3rd quarter of 2011, which is a negative variance of 2.1 mln EUR or 387.8% compared to the net expenses in the 3rd quarter of 2010. In both years the financial costs had adverse impact from the non-cash revaluation of the fair value of swap agreements, but the related cost increase was considerably higher in the 3rd quarter of 2011.
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 3.8 mln EUR, with a negative revaluation in the 3rd quarter 2011 in the amount of 2.3 mln EUR.
Profit Before Tax
The Company’s profit before taxes for the 3rd quarter of 2011 was 4.4 mln EUR, which is 1.5 mln EUR lower than the profit before taxes of 5.9 mln EUR for the 3rd quarter of 2010.
Results for the nine months of 2011
During the nine months of 2011 the Company’s total sales increased, year on year, by 2.5% to 38.2 mln EUR. Sales of water and wastewater treatment were 34.7 mln EUR, a 2.5% increase compared to the nine months of 2010.
The operating profit from the Company’s main business activity increased by 5.6% to 19.7 mln EUR during the nine months of 2011 compared to the nine months of 2010.
The Company’s profit before taxes for the nine months of 2011 was 18.1 mln EUR, which is a 6.6% increase compared to the relevant period in 2010.
The Company’s net profit for the nine months of 2011 was 13.8 mln EUR, which is 5.3 mln EUR higher than the net profit of 8.5 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 nine months of 2011 the Company invested 11.9 mln EUR into fixed assets. Non-current assets were 156.5 mln EUR at 30 September 2011.
Current assets decreased by 6.4 mln EUR to 27.3 mln EUR in the nine months of the year. Customer receivables decreased by 4.4 mln EUR as result of the payment of long term debts by the customers, still the cash at bank decreased by 1.9 mln EUR being impacted by dividend payment in June 2011.
Current liabilities decreased by 7.0 mln EUR to 8.8 mln EUR in the nine 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 61.3%, as usually at end of the 3rd quarter slightly above the target range of 60%, reflecting the temporary decrease in Equity of 2.2 mln EUR as a result of the difference in dividend payment and profit generation during the nine months of the year.
Long-term liabilities stood at 103.9 mln EUR at the end of September 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%.
Cash flow
During the nine months of 2011, the Company generated 23.0 mln EUR of cash flows from operating activities, an increase of 2.6 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 nine months of 2011 net cash outflows from investing activities were 4.7 mln EUR, which is 1.9 mln EUR more than in 2010. At the end of 3rd quarter of 2011 the cash outflows related to the fixed asset investments were 12.8 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 2.2 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 nine months of 2011 compared to cash outflows of 20.5 mln EUR during the same nine 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 outflow in the nine months of 2011 was 1.9 mln EUR compared to a cash outflow of 2.7 mln EUR in the nine months of 2010. Cash and cash equivalents stood at 11.3 mln EUR as at 30 September 2011 which is 4.6 mln EUR lower than at the corresponding period of 2010.
Employees
At the end of the 3rd quarter of 2011, the total number of employees was 310 compared to 319 at the end of the 3rd quarter of 2010. The full time equivalent (FTE) was respectively 298 in 2011 compared to the 305 in 2010. The management is looking actively for the efficiencies in processes to balance the increase in individual salaries with more productive company structure.
Corporate structure
At the end of the quarter, 30 September 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 30 September 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 8.32% of the shares of the Company as per Company’s best information as of 30 September 2011.
At the end of the quarter, 30 September 2011, the closing price of the AS Tallinna Vesi share was 7.20 EUR, which is a 2.70% decrease compared to the closing price of 7.40 EUR at the beginning of the quarter. During the same period the OMX Tallinn index dropped by 16.69%.
Operational highlights in 2011
- The Company completed the construction of the Biofilter in 3rd quarter of 2011. This was an extremely important environmental project adding a next stage to the treatment process to ensure the further degree of removal of nitrogen from the waste water. The Company was already in 2007 recognized for its responsibility for the environment when Tallinn was removed from the HELCOM’s hotspots list after the construction of the previous stage of the nitrogen removal process. The construction of the Biofilter will benefit to the local bay, neighboring beach areas and forests and ensure full accordance to the first class requirements of European Union today and in the future.
- As a result of excellent nitrogen removal from the waste water we received the beneficial coefficient and reduction in the amount of pollution tax.
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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:
- The quality indicators for water quality have so far been on the highest level ever, from taken samples 66.64% were fully in accordance with the norms, outperforming considerably the required 95% level.
- Total number of sewage blockages has decreased by 19.6%.
- Average time of interruptions has decreased by 12.2%.
- The leakage level was by 11.5% less than in 2010 reaching a level below 19%.
- As a very important development for the customers, the Company has updated its promises to the customers, according to which AS Tallinna Vesi would compensate any discomfort to its contractual customers based on the promises plan if the Company has failed to deliver against one of its own customer service pledges. AS Tallinna Vesi’s promises are part of an on-going commitment to continuously improve service on behalf of our customers. These promises require the Company to achieve a standard of service that is much higher than that required by the contract with the City of Tallinn, and is the only customer focused scheme of its type within the utilities sector in the Baltics. Starting from September 2011 we pay the penalty for the failures to the customers without expecting for the customer to request it.
- The Company was nominated for the social responsibility award in Tallinn and we received special recognition for being the most child and youth friendly company in Tallinn.
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 CA commented their position to the court on 29th August debating the legality of the Services Agreement. The court has not announced further proceedings yet.
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.
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 privatization contracts.
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.
| STATEMENT OF COMPREHENSIVE INCOME | III quarter | III quarter | 9 months | 9 months | 12 months |
| (thousand EUR) | 2011 | 2010 | 2011 | 2010 | 2010 |
| Revenue | 12 975 | 12 512 | 38 161 | 37 215 | 49 680 |
| Costs of goods sold | -5 212 | -5 264 | -15 031 | -15 052 | -20 684 |
| GROSS PROFIT | 7 763 | 7 248 | 23 130 | 22 163 | 28 996 |
| Marketing expenses | -177 | -190 | -559 | -573 | -787 |
| General administration expenses | -1 002 | -923 | -3 090 | -2 634 | -3 651 |
| Other income/ expenses (-) | 453 | 353 | 1 365 | 1 415 | 2 906 |
| OPERATING PROFIT | 7 037 | 6 488 | 20 846 | 20 371 | 27 464 |
| Financial income | 433 | 210 | 1 053 | 672 | 1 060 |
| Financial expenses | -3 116 | -760 | -3 815 | -4 073 | -3 624 |
| PROFIT BEFORE TAXES | 4 354 | 5 938 | 18 084 | 16 970 | 24 900 |
| Income tax on dividends | 0 | 0 | -4 253 | -8 495 | -8 495 |
| NET PROFIT FOR THE PERIOD | 4 354 | 5 938 | 13 831 | 8 475 | 16 405 |
| COMPREHENSIVE INCOME FOR THE PERIOD | 4 354 | 5 938 | 13 831 | 8 475 | 16 405 |
| Attributable to: | |||||
| Equity holders of A-shares | 4 353 | 5 937 | 13 830 | 8 474 | 16 404 |
| B-share holder | 0,64 | 0,64 | 0,64 | 0,64 | 0,64 |
| Earnings per A share (in euros) | 0,22 | 0,30 | 0,69 | 0,42 | 0,82 |
| Earnings per B share (in euros) | 639 | 639 | 639 | 639 | 639 |
| STATEMENT OF FINANCIAL POSITION | |||
| (thousand EUR) | 30.09.2011 | 30.09.2010 | 31.12.2010 |
| ASSETS | |||
| CURRENT ASSETS | |||
| Cash and equivalents | 11 323 | 15 949 | 13 235 |
| Customer receivables, accrued income and prepaid expenses | 15 656 | 12 476 | 20 088 |
| Inventories | 287 | 246 | 306 |
| Non-current assets held for sale | 83 | 77 | 76 |
| TOTAL CURRENT ASSETS | 27 349 | 28 748 | 33 705 |
| NON-CURRENT ASSETS | |||
| Long-term investment assets | 2 217 | 0 | 0 |
| Property, plant and equipment | 152 631 | 145 685 | 148 179 |
| Intangible assets | 1 693 | 2 112 | 1 972 |
| TOTAL NON-CURRENT ASSETS | 156 541 | 147 797 | 150 151 |
| TOTAL ASSETS | 183 890 | 176 545 | 183 856 |
| LIABILITIES | |||
| CURRENT LIABILITIES | |||
| Current portion of long-term borrowings | 0 | 3 856 | 7 624 |
| Trade and other payables | 6 282 | 6 017 | 6 367 |
| Derivatives | 1 140 | 1 157 | 963 |
| Short-term provisions | 0 | 168 | 117 |
| Prepayments and deferred income | 1 416 | 873 | 810 |
| TOTAL CURRENT LIABILITIES | 8 838 | 12 071 | 15 881 |
| NON-CURRENT LIABILITIES | |||
| Deferred income from connection fees | 6 128 | 5 518 | 5 765 |
| Borrowings | 94 934 | 91 191 | 87 428 |
| Derivatives | 2 682 | 2 217 | 1 304 |
| Other payables | 115 | 115 | 115 |
| TOTAL NON-CURRENT LIABILITIES | 103 859 | 99 041 | 94 612 |
| TOTAL LIABILITIES | 112 697 | 111 112 | 110 493 |
| EQUITY CAPITAL | |||
| Share capital | 12 000 | 12 782 | 12 782 |
| Share premium | 24 734 | 24 734 | 24 734 |
| Statutory legal reserve | 1 278 | 1 278 | 1 278 |
| Retained earnings | 33 181 | 26 639 | 34 569 |
| TOTAL EQUITY CAPITAL | 71 193 | 65 433 | 73 363 |
| TOTAL LIABILITIES AND EQUITY CAPITAL | 183 890 | 176 545 | 183 856 |
| CASH FLOW STATEMENT | 9 months | 9 months | 12 months |
| (thousand EUR) | 2011 | 2010 | 2010 |
| CASH FLOWS FROM OPERATING ACTIVITIES | |||
| Operating profit | 20 846 | 20 371 | 27 464 |
| Adjustment for depreciation/amortisation | 4 236 | 4 215 | 5 620 |
| Adjustment for profit from government grants and connection fees | -1 125 | -1 708 | -3 312 |
| Other finance expenses | 16 | -27 | -14 |
| Profit from sale of property, plant and equipment, and intangible assets | 55 | 0 | -3 |
| Expensed property, plant and equipment | 6 | 173 | 70 |
| Change in current assets involved in operating activities | 404 | -1 208 | -8 894 |
| Change in liabilities involved in operating activities | 343 | 15 | 6 297 |
| Interest paid | -1 779 | -1 405 | -2 443 |
| Total cash flow from operating activities | 23 002 | 20 426 | 24 785 |
| CASH FLOWS FROM INVESTING ACTIVITIES | |||
| Loans granted | -2 217 | 0 | 0 |
| Acquisition of property, plant and equipment, and intangible assets | -12 811 | -7 740 | -17 055 |
| Compensations received for construction of pipelines | 9 320 | 4 298 | 6 139 |
| Proceeds from sale of property, plant and equipment, and intangible assets | 11 | 1 | 16 |
| Interest received | 1 037 | 723 | 1 109 |
| Total cash flow from investing activities | -4 660 | -2 718 | -9 791 |
| CASH FLOWS FROM FINANCING ACTIVITIES | |||
| Received loans | 0 | 20 000 | 20 000 |
| Dividends paid | -16 001 | -31 956 | -31 956 |
| Income tax on dividends | -4 253 | -8 495 | -8 495 |
| Total cash flow from financing activities | -20 254 | -20 451 | -20 451 |
| Change in cash and bank accounts | -1 912 | -2 743 | -5 457 |
| CASH AND EQUIVALENTS AT THE BEGINNING OF THE PERIOD | 13 235 | 18 692 | 18 692 |
| CASH AND EQUIVALENTS AT THE END OF THE PERIOD | 11 323 | 15 949 | 13 235 |
[1] https://newsclient.omxgroup.com/cdsPublic/viewDisclosure.action?disclosureId=475004&messageId=579973
[2] http://www.ofwat.gov.uk/regulating/reporting/rpt_fpr_2007-08.pdf , page 15
Siiri Lahe
Chief Financial Officer
+372 6262 262
siiri.lahe@tvesi.ee
