AS Tallinn Vesi’s sales revenue compared to the second quarter increased

AS Tallinna Vesi’s sales revenue in the 3^rd quarter of 2022 was €13 million. The decline in sales of construction services was offset by increased consumption of water services among commercial customers and an increase in stormwater service revenue. The quality of water and wastewater services continued to be high and a number of large-scale reconstruction projects were carried out.

AS Tallinna Vesi’s sales from water services provided to commercial customers was €4.34 million in the 3^rd quarter of this year, which is about 13% more than at the same time last year. The consumption of water services by commercial customers increased mainly in the leisure sector: hotels and spas, trade and sports center, and in the rental services sector and port.

A significant impact on the small increase in sales revenue was caused by a significant decrease in the volume of construction services due to instability in the construction sector. The surge in energy prices had a direct impact on the Company's profits, which were down 58.5% from the same period last year. The drop in profit compared to last year was also significantly affected by retaining the provision for potential third-party claims at the third-quarter level of 2021.

According to Aleksandr Timofejev, Chairman of the Board of AS Tallinna Vesi, water services revenue accounted for 88% of sales revenue. “Lifting of the COVID-19 related restrictions in the 1^st quarter and the extremely favourable prices of water services, which did not reflect the increase in electricity prices, play an important role here. The new prices for water services agreed with the Competition Authority started to apply as of 1 October 2022,” Timofejev explained.

Construction services accounted for 10.3% of the Group's revenue, which has been affected by the start of some major projects being delayed, and construction services are expected to recover in part in the last quarter.

The sales from water services provided to private customers, compared to the same period last year, decreased in the 3^rd quarter by 1.1% to €4.84 million, resulting from a drop in the consumption of the largest private customer group, the apartment buildings.

AS Tallinna Vesi’s gross profit for the 3^rd quarter of 2022 was €3.58 million. The Company's nine-month gross profit fell by 22% due to increasing operational costs. The main impacts came from the increase in electricity, salary, chemical and gas costs. To minimise the impact, we try to optimize the amount of chemicals used in treatment processes and, where possible, consume electricity smartly by closely monitoring electricity exchange prices and timing our consumption accordingly.

The Company’s operating profit was €2.44 million in the 3^rd quarter. Operating profit fell by €3.07 million compared to the 3^rd quarter of last year. The nine-month operating profit for 2022 was €8.52 million, showing a decrease of €6.84 million compared to the previous year, driven by both sharp increase in electricity costs and the retaining of the provision for potential third-party claims at third-quarter levels of 2021. When eliminating the impact of the change in operating profit resulting from the provision for potential third-party claims, the Company's operating profit would have been €4.30 million in the 3^rd quarter of 2021. Operating profit for the 3^rd quarter of 2022 would be €1.86 million or 43.3% down from the same period last year.

The Company’s net profit was €2.22 million in the 3^rd quarter of 2022, which is €3.12 down from the same period last year. The decrease in net profit was affected by changes in operating profit and net financial costs.

In September, AS Tallinna Vesi and OP Corporate Bank plc Estonian Branch signed the amendments to the 28 September 2017 loan agreement. As a result of the amendments to the loan agreement, the previous loan repayment date of 28 September 2023 was changed to 28 September 2024. The amendment to the loan agreement has induced an increase in AS Tallinna Vesi's loan interest risk margin from 0.60% to 0.63%. The loan will still be repaid in one installment and all other terms of the loan agreement remain the same.

Investments have significantly increased in 2022. In nine months, AS Tallinna Vesi invested €15.66 million in the fixed assets, the investments increased by €5.71 million compared to the same period last year. In the nine months of 2022, AS Tallinna Vesi rehabilitated nearly 17 kilometres of pipelines. “The pipeline reconstruction has been going according to plan throughout this year and the work will continue in the last quarter,” Timofejev said.

In the 3^rd quarter, extensive reconstruction work started and continued on the Street of Vana-Kalamaja, and Rannamõisa and Järvevana roads. “On Vana-Kalamaja Street alone, we will be laying nearly 4 kilometers of new pipes,” Timofejev pointed out.

Negotiations on a new Administrative Contract between the City of Tallinn and AS Tallinna Vesi for the period 01.12.2022-30.11.2032 are closing. At the same time, AS Tallinna Vesi has applied for its appointment as a water undertaker in the main service area of the public water supply and sewerage system with a term of administrative duty of 10 years, i.e. until 30.11.2032. The Administrative Contract currently awaits the resolution of the AS Tallinna Vesi’s Supervisory Council on 01.11.2022 and the approval of the Tallinn City Council on 03.11.2022 and can then be found publicly in the document management system of Tallinn City Government and on the website of AS Tallinna Vesi.

The preparation of a Public Water Supply and Sewerage Development Plan for the next 12 years is also currently under way. The aim of that is to give a clear direction to the development of the water sector in Tallinn and it will also be the basis for the preparation of the Development and Investment Plan of AS Tallinna Vesi.

“In August, we started with the installation of remote water meters. Due to the global supply shortage of chips, the start of mass installation has been delayed until November, the goal is to finish the installation work by 2026,” Timofejev emphasized.

In order to ensure the continuity of the services provided by the Company and the sustainability of its processes, AS Tallinna Vesi continued in the 3^rd quarter with several large projects, including modernizing the Rummu Water Pumping Station, which will ensure high-quality drinking water in the Lasnamäe and Pirita areas, and the installation of UV equipment in various borehole pumping stations to create an additional microbiological treatment barrier. At the Wastewater Treatment Plant, work continues on strategically important projects such as modernizing the shaft at the Main Pumping Station and the effluent outlet tower, the first of which plays an important role in receiving the wastewater at the treatment plant and the latter in discharging treated effluent to the sea. We have also completed a new point of reception for sewage sludge from the septic trucks and have started preparations for the replacement of one of the large pumps at the Main Pumping Station. The pump replacement is scheduled for the 1^st quarter in 2023.

Over the nine months of 2022, the Company has continued to provide reliable and high-quality water and wastewater services, as reflected in the very high level of quality indicators. During the nine months of this year, the Company took 2,426 water samples, 99.8% of which met all quality requirements in full and only 4 samples had to be considered non-compliant. The quality of tap water continues to be excellent despite high outdoor temperatures. According to Timofejev, excellent quality of tap water has been ensured by an even more efficient water treatment process, preventative works on water network and investments in water pumping stations. In the 4^th quarter, we plan to introduce a new technology for cleaning water pipes, which works using the crushed ice pressure wash method. Today, the technology is widely used in the US and Japan, but still completely new to our region.

Also, the wastewater treated at the Wastewater Treatment Plant and discharged to the Baltic Sea met all the strict requirements both in the 3^rd quarter and throughout the year of 2022. “Today, the wastewater that has undergone the treatment process is significantly cleaner than the water in the Baltic Sea and has an extremely positive impact on marine life,” Timofejev explained.

The level of water loss in the water network remained low in the 3^rd quarter – 13.4%, similarly to the previous year. In the nine-month view, the level of water loss is somewhat higher than last year because of the snowy and cold winter that made it difficult to detect leaks and access pipelines in the 1^st quarter, high outdoor temperatures and low soil water levels also had an impact.

AS Tallinna Vesi is the largest water utility in Estonia, providing services to more than 24,600 private customers and businesses and 470,000 end consumers in Tallinn and its surrounding municipalities: Cities of Maardu and Saue and Harku Municipality. Tallinna Vesi is listed on the main list of the Nasdaq Tallinn Stock Exchange.

Main financial indicators

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 services related activities, excl. connections profit and government grants, construction services, doubtful receivables

Maria Tiidus

Head of Communications

AS Tallinna Vesi

(+372) 626 2271

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