AS Tallinna Vesi Annual Report 2020
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AS TALLINNA VESI
Annual Report 2020
AS Tallinna Vesi Annual Report 2020
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1. CHAIRMAN’S STATEMENT .............................................................................................................. 4
2. OUR COMPANY ................................................................................................................................. 7
3. OUR PERFORMANCE IN 2020 ......................................................................................................... 9
3.1 Operational highlights in 2020.......................................................................................................9
3.2 Financial highlights in 2020 ......................................................................................................... 10
3.3 Highlights of the year ................................................................................................................... 11
4. STRATEGY ....................................................................................................................................... 13
4.1 How we create value .................................................................................................................... 13
4.2 Strategic objectives in 2018-2022 ............................................................................................... 15
5. OPERATIONAL RESULTS OF 2020 ................................................................................................ 18
5.1 Ensuring quality of our services .................................................................................................. 18
5.2 Environment ................................................................................................................................. 21
5.3 Objectives: operational performance .......................................................................................... 26
5.4 Our customers ............................................................................................................................. 27
5.5 Objectives: customers ................................................................................................................. 31
5.6 Community and public ................................................................................................................. 31
5.7 Employees .................................................................................................................................... 34
5.8 Occupational health and safety ................................................................................................... 37
5.9 Objectives: employees ................................................................................................................. 40
6. FINANCIAL RESULTS OF 2020 ...................................................................................................... 41
6.1 Economic environment ................................................................................................................ 41
6.2 Statement of comprehensive income ......................................................................................... 43
6.3 Statement of financial position ................................................................................................... 46
6.4 Cash flow ...................................................................................................................................... 47
6.5 Investors ....................................................................................................................................... 48
6.6 Activities of the subsidiary Watercom OÜ ................................................................................... 53
6.7 Objectives: financial performance .............................................................................................. 54
7. CORPORATE GOVERNANCE .......................................................................................................... 55
7.1 Corporate Governance Report .................................................................................................... 55
7.2 Risk management process .......................................................................................................... 69
8. MANAGEMENT CONFIRMATION ...................................................................................................... 73
9. CONSOLIDATED STATEMENT OF FINANCIAL POSITION ............................................................... 74
10. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME .................................................... 75
11. CONSOLIDATED STATEMENT OF CASH FLOWS ........................................................................... 76
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12. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY .............................................................. 77
13. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT .......................................................... 78
14. CONFIRMATION OF THE MANAGEMENT AND SUPERVISORY BOARDS ................................... 120
15. PRINCIPLES OF SUSTAINABILITY REPORTING .......................................................................... 121
Annex 1: GRI Index ............................................................................................................................... 124
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1. CHAIRMAN’S STATEMENT
The challenges of 2020 arrived unexpectedly for Tallinna Vesi, as they did for many other
companies worldwide. The outbreak of COVID-19 required the Company to make a number of
changes in its working arrangements. We responded quickly to the changing situation and
continued to ensure uninterrupted services to customers and safeguard employees, however,
our financial performance was impacted compared to the pre-crisis period. Despite this, we
managed to achieve a record performance in a number of quality parameters, related to
operations and customer service.
NEW WORKING ARRANGEMENTS
In order to ensure the continued supply of uninterrupted services to our customers and the
continued safety of staff, we made a number of changes in our working arrangements in spring
and in autumn, related to the COVID-19 pandemic. Office staff transferred to working from home,
and operational employees at the Company’s facilities started working in shifts. Interaction with
customers and other parties moved to digital channels where possible. The new working
arrangements required considerable changes – creating opportunities for remote work and
relevant trainings, providing additional personal protective equipment and seeking logistical
solutions. The situation required considerable communications to explain the changes, and
support in managing the new situation.
SUSTAINABLE FINANCIAL POSITION
The year 2020 was quite different to previous financial years – we saw a decrease in our sales
revenue and net profit compared to the previous year. Financial performance was affected by the
reduced tariffs applicable since the end of last year, and decreased commercial consumption
driven by the virus restrictions, particularly in the hospitality sector. In response, we reduced
costs where possible to counteract the decline. A more detailed overview of the financial
indicators is provided within the following pages of the report.
In 2020, we also defined the Company’s dividend policy to provide investors with increased future
clarity. According to the policy, we aim to distribute 50%-80% of the annual profit as dividends.
Dividend payments shall be assessed annually, considering ASTV’s earnings, investment needs,
liquidity position and long-term financial objectives.
Activities of Tallinna Vesi’s subsidiary Watercom were also impacted by the COVID-19 pandemic.
Work continued on the contracts and projects secured in the previous year, together with new
pipe and road construction tenders that Watercom was awarded in 2020. Despite the drop in
revenues, Watercom delivered excellent margins to the group, through increased efficiency and
financial focus on in-flight projects.
The role of Tallinna Vesi’s subsidiary Watercom as its non-regulated business, is becoming
increasingly important in counteracting some of the effects of the regulatory regime applied to
water companies, and the changing economic environment.
IMPROVING QUALITY PARAMETERS
A number of quality parameters for our services showed significant improvement in 2020. Once
again, we achieved excellent results with respect to the quality of drinking water samples,
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according to the required externally set standards. This is a result of targeted investments into
the network and enhanced maintenance regimes, which the Company introduced, following the
introduction of a more sensitive water quality test into Estonia.
In order to operate efficiently, and use water resources sparingly, we have made great efforts to
reduce leakages in the water network. The all-time low record in leakage rate of 12.42% that the
Company achieved in 2020, is a testament to that work. We consider this a success story, because
our leakage performance is comparable with the best performing water companies in Europe.
The consistent improvement in leakage rates since privatisation, demonstrates appropriate
capital investments into the network.
Environmental awareness is fundamental in everything we do, in ensuring the appropriate
management and conservation of our wider catchment area, as well as in operating our
Wastewater Treatment Plant at Paljassaare.
We work hard to limit interruptions in the water network and minimise their duration when they
occur. During 2020, the average water disruption time remained stable. The number of sewer
blockages and sewer collapses showed a significant improvement compared to 2019.
In 2020, we completed and commenced a number of major network renovation and construction
projects. The reconstruction of the mechanical treatment stage at Paljassaare wastewater
treatment plant was started, as is one of the largest projects of the past decade. This major
project, with a budget of €7.6 million, will continue throughout 2021, with completion expected in
the first quarter of 2022. Completion of this project will further enhance the quality and resilience
of wastewater treatment process.
We carried out other major renovation projects: reconstruction of the water pipe supplying
residents in Lasnamäe and Maardu, part of the water pipe on Järvevana Rd, investment into new
technology and telemetry in pumping stations in Pirita-Kose and Northern Tallinn. We also
reconstructed a large collector at Kadaka Blvd, which directs wastewater from Saku, Saue,
Laagri and parts of the Nõmme District, to the Company’s wastewater treatment plant at
Paljassaare.
Network renovation reduces the likelihood and impact of interruptions in the wider network.
Besides renovation, we consistently maintain our networks, which was facilitated last year by the
warmer winter, allowing additional work.
IMPROVED ENVIRONMENTAL AWARENESS
In the annual customer satisfaction survey, 91% of the end consumers stated that they drink tap
water. Tallinna Vesi has been consistent in growing people’s trust in tap water, and
environmental awareness. This was achieved by delivering bespoke campaigns, promoting the
knowledge in media and working closely with kindergartens, schools and local communities.
In early 2020, we ran an advertising campaign "Mythbusters" on television, social media and
cinemas, with the aim of illustrating in a humorous way, how much work it takes to treat drinking
water, and why it is important to prevent garbage from entering the sewers. We also continued
to support sports and community events, by delivering free drinking water from our fleet of
bespoke tankers.
Unfortunately, we had to postpone our traditional open-door days at the treatment plants, due to
COVID-19, but we intend to continue those as and when the virus restrictions are eased. We are
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also in the process of developing audiovisual materials, to raise environmental awareness
among children and young people.
EXCELLENT CUSTOMER SERVICE
As a provider of vital services to over one third of Estonia’s population, it is crucial that we
maintain very high standards in customer service. Besides the high-quality service, we
consistently monitor our performance in terms of keeping our promises made to customers,
giving swift responses and reducing the likelihood of complaints. We managed to maintain high
standards in keeping our promises, and only had one failure in 2020.
Each year, an extensive customer satisfaction survey is carried out among our customers by the
independent research company Kantar Emor. The results of the 2020, once again, showed
consistently high levels of customer satisfaction with our services. We will continue to make
further improvements in this area, and will adopt modern technology where possible, to enhance
and simplify customer interaction.
OUTLOOK FOR 2021
According to external forecasts, the impact of the COVID-19 pandemic will gradually start to
reverse in 2021 as the vaccine is rolled out. We are therefore optimistic that consumption of our
services will also revert back to pre-pandemic volumes in the longer term.
Our most important task is to provide a reliable and secure service to our customers, and we will
commence and continue several key projects related to network renovation.
The beginning of 2021 has brought announcements of a contemplated change of owners: a
contract has been concluded whereby the City of Tallinn and Utilitas will buy the shareholding of
United Utilities in Tallinna Vesi. Once this transaction is complete, the new owners will be more
specific about the future visions of the company. However, I am convinced that the provision of
excellent water and wastewater services to customers will continue to be a priority for Tallinna
Vesi.
The Company's subsidiary Watercom will continue to provide services in appropriate external
sectors and continues to seek opportunities to develop existing and new services. We are
therefore optimistic that Watercom will continue to grow external sales and profits in the longer
term.
Finally, I would like to thank my colleagues in Tallinna Vesi, Watercom and United Utilities, and
all our customers, suppliers and business partners for their continued support and
understanding that helped the Company to adapt to the changing environment, and make 2020
a successful year despite the coronavirus.
Karl Heino Brookes
Chairman of the Management Board
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2. OUR COMPANY
Tallinna Vesi is the largest water utility in Estonia, providing drinking water and wastewater
services to nearly one third of Estonian population. We serve over 24,600 private customers and
businesses and approximately 470,000 end consumers in Tallinn and its surrounding areas: City
of Maardu, City of Saue and Harku Small Town.
As of 31 December 2020, Tallinna Vesi employed
333 people.
Ülemiste Water Treatment Plant (left) and Paljassaare Wastewater Treatment Plant (right).
We have two main treatment plants, Ülemiste Water Treatment Plant and Paljassaare
Wastewater Treatment Plant. Every day, we treat an average of 66,000 m³ of water and 130,000
m³ of wastewater in our plants. Tallinna Vesi also has an accredited water laboratory and an
accredited wastewater laboratory.
Tallinna Vesi was privatised in 2001 and based on the Services Agreement signed with the City of
Tallinn upon privatisation, the Company is required to fulfil 97 levels of services. The c
urrent
mandate is effective until 30 November 2025 as per the exclusive right to provide water and
wastewater services in Tallinn.
The public water supply system includes more than 1,200 km of water pipes, 22 water pumping
stations and 46 ground water pumping stations with 92 boreholes. The catchment
area in Harju
and Järva Counties covers around 1,800 km
2
. The public sewerage system comprises more than
1,185 km of wastewater network, 507 km of stormwater network and 177 wastewater and
stormwater pumping stations across the service
area.
Tallinna Vesi Group consists of two companies. Tallinna Vesi is listed on Nasdaq Baltic market.
As of 31 December 2020, Tallinna Vesi’s shareholders, with a direct holding over 5% were United
Utilities (Tallinn) B.V. and the City of Tallinn.
Tallinna Vesi’s subsidiary, Watercom was founded in 2010, aimed at providing services to the
Company and to diversify the product range on offer and develop a non-regulated business.
Watercom OÜ is wholly owned by Tallinna Vesi and consolidated to the results of the Group
(hereinafter referred to as Group). The Group structure has remained unchanged in the past few
years.
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OUR MAIN PRODUCTS AND SERVICES
Collection,
treatment and
supply of water
Water and
wastewater
services
Collection, treatment
and disposal of
wastewater and
stormwater
Laboratory
services
Design works
Pipe construction
works
Owner
supervision and
project
management
Transportation
services and road
construction
OUR MISSION AND VISION
We have the responsibility to supply high-quality drinking water to consumers, ensure a reliable
service and collect and treat wastewater and stormwater in an environmentally conscious
manner.
OUR MISSION
We create a better
life with pure water.
OUR VISION
Everyone wants to be our
customer, employee and
partner, because we are
the leading water services
company in the Baltics.
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3. OUR PERFORMANCE IN 2020
3.1 Operational highlights in 2020
WATER QUALITY
Water quality continues to be high. The
water samples taken from customer taps
were 99.71% compliant with all quality
requirements.
This is a result of further investments into
the network and enhanced maintenance
regimes, which were introduced following
the introduction of a more sensitive water
quality test into Estonia in 2019.
LEAKAGE LEVEL IN WATER NETWORK
In order to operate efficiently and use water
resources sparingly, we have made great
efforts to reduce leakages in the water
network. The all-time low record of 12.42%
in leakage rate that the Company achieved in
2020, is a testament to that work.
AVERAGE INTERRUPTION PER
PROPERTY IN HOURS
We work hard to limit interruptions in the
water network and minimise their duration
when they occur. During 2020, the average
water disruption time remained stable at 2
hours and 56 minutes per property
compared to 2 hours and 59 minutes in 2019.
NUMBER OF SEWER BLOCKAGES
The number of sewer blockages has
reduced by 13% compared to the year
before. A contributing factor to that was the
warmer winter that facilitated additional
maintenance on the network.
99.93% 99.93%
99.93%
99.04%
99.71%
2016 2017 2018 2019 2020
15.07%
13.82%
13.71%
12.97%
12.42%
2016 2017 2018 2019 2020
3.44
3.14
3.27
2.99
2.93
2016 2017 2018 2019 2020
670
654
603
532
463
2016 2017 2018 2019 2020
hours
number
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3.2 Financial highlights in 2020
SALES
Sales decreased by 18.5% or €11.71 million
compared to 2019, primarily due to the tariff
reductions effective from 01/12/2019 and
lower commercial consumption because of
the COVID-19 pandemic as the hospitality and
entertainment sectors were operating with
less or no visitors and less people were
working in offices.
GROSS AND OPERATING PROFIT
The gross profit decreased by 34.5% or
€11.73 million to €22.23 million. The
changes reflected higher staff and other
purchase costs for goods and services,
whilst the costs related to construction
services as well as electricity and pollution
tax costs were lower. The decrease in gross
profit was mainly attributable to the lower
sales result.
The operating profit showed a reduction of
32.1% or €10.29 million to €21.78 million.
The decrease was mainly a consequence of
lower water service revenues from the main
service area due to the new tariff effective
from 1/12/2019 and lower consumption of
businesses as well as change in the
provision for possible third-party claims
(more information on the provision related to
possible third-party claims is in Note 15),
accompanied by the additional legal costs
resulting from the ICSID award, which
ordered the Company to pay 25% of
Estonia’s legal costs in 2019 relating to the
arbitration procedure.
NET PROFIT
The net profit decreased by 39.7% or €11.03
million to €16.73 million. In addition to the
changes above it resulted from lower
financial expenses mainly in relation to
lower interest costs.
TOTAL DIVIDEND PER SHARE PAY-OUT
Total dividends per share pay-out from the
2019 net profit was €1.00 per share, which
is equal to the 72.05% payout ratio in 2019.
58.98
59.82
62.78
63.42
51.72
2016 2017 2018 2019 2020
33.26
34.09
34.19
33.95
22.23
24.63
10.87
26.94
32.08
21.78
2016 2017 2018 2019 2020
Gross profit Operating profit
18.39
7.22
24.15
27.76
16.73
2016 2017 2018 2019 2020
0.9
0.54
0.36
0.75
1,00
2016 2017 2018 2019 2020
€
€
m
€
m
€
m
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3.3 Highlights of the year
INVESTMENT OF THE PAST DECADE
In 2020, we commenced the reconstruction of
the mechanical treatment stage at
Paljassaare Wastewater Treatment Plant.
With a total cost of €7.6 million, it is the largest
investment of the past decade for Tallinna
Vesi. We are renovating the very first part of
the wastewater treatment plant, i.e. the
treatment stage, which removes larger
debris, sand and grease from the wastewater.
This major project is ahead of schedule and
will continue throughout 2021.
LARGE PROJECTS ON WATER AND
SEWER NETWORK
In 2020, we renovated 4.7 kilometres of water
pipes and 3.8 kilometres of sewers and
worked on several major projects. In order to
enhance the reliability of water supply service,
the largest work took place in the area of
Punane Street in Lasnamäe, where we
reconstructed the water main supplying more
than 100,000 inhabitants in Tallinn and
Maardu.
We renovated part of the water main on
Järvevana Road, thus improving the security
of water supply in the Mustamäe and Õismäe
districts of Tallinn. We upgraded the pumping
stations in Pirita-Kose and Northern Tallinn
with new technology and telemetry.
During 2020, we also reconstructed a large
collector at Kadaka Blvd, which directs
wastewater from Saku, Saue, Laagri and
approximately half of the properties in
Nõmme district to Paljassaare Wastewater
Treatment Plant.
The reconstruction project was essential to
ensure continued and uninterrupted service
in these areas in the future. A temporary
pressure line was built as a bridge over the
road to keep the traffic going during the
works, which was the longest overground
pumping line ever to have been constructed in
the Baltic States.
AVAILABILITY OF SAFE TAP WATER
In order to make tap water more accessible
also in public urban space, we maintain 8
public drinking water taps in Tallinn. In 2020,
we started collaboration with the Port of
Tallinn and installed stickers emphasizing the
reliability of tap water at five drinking water
fountains in the Port’s D-terminal.
RAISING ENVIRONMENTAL AWARENESS
In early 2020, we ran an advertising campaign
"Mythbusters" on television, in social media
and cinemas, aimed at illustrating in a
humorous way how much work it takes to
treat drinking water and why it is important to
prevent garbage from entering the sewers.
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SUPPORT TO THE LOCAL COMMUNITY
During 2020, we also continued to support the
wider community and provided support to a
number of organisations, good causes and
charities, including:
• Years of cooperation with and support to
the Estonian Disabled Athlete Sports
Association;
• Assistance to the Kindergarten Õunake
for disabled children;
• A donation to the Estonian Association of
Parents of Children with Cancer, helping
to provide the support services for
families struggling with a serious illness;
• A donation to the Tallinn Centre for
Children at Risk which, thanks to the
support, is able to enhance the
development activities for the recovery
and future coping of children without
parental care;
• Engagement with SPIN project which
aims to develop and strengthen young
people's social and self-management
skills, and to provide young people with
development opportunities and
enjoyment through sports;
• We continued to support sports and
community events by providing free
drinking water. We were present at, for
example, Stamina running and walking
events, family day of Association of Large
Families in Harjumaa NGO, summer youth
festivals organized by the Tallinn Sports
and Youth Department, the Investment
Festival and many other events.
WATERCOM´S CONTINUED SUCCESS
In 2020, Tallinna Vesi's subsidiary Watercom
acquired new equipment to further improve
its performance efficiency. In May, a new
custom-built Scania jet-wash vehicle was put
into operation to effectively clean sewers,
manholes and pumping stations. In addition,
new excavators were introduced to help carry
out excavations efficiently in the event of
water emergencies or construction.
In 2020, Watercom launched a new service -
pipe disinfection.
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4. STRATEGY
4.1 How we create value
We create a better life with pure water, through commitment. We work tirelessly and
passionately to achieve the Company’s goals and objectives.
As a large company, Tallinna Vesi holds an important place in the community and has the
responsibility to look out both for the employees, customers, consumers, investors, partners,
the state and the environment. A large quantity of our economic value created is re-distributed.
In addition to providing a vital service, Tallinna Vesi gives back to the society through taxes,
partnership with other organisations, investments into the infrastructure and dividends.
BREAKDOWN OF THE VALUE GENERATED AND DISTRIBUTED BY THE COMPANY
HOW WE DELIVER VALUE TO DIFFERENT STAKEHOLDERS
Main stakeholders of the Company are the customers, wider local community, employees,
investors and partners.
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DELIVERING SOCIAL VALUE
Customers
Our key priority is to provide our customers with a high-quality service, which
they can rely on continuously, 24/7. We are fully aware of our responsibilities
and deliver our promises.
• We anticipate our customers’ needs before those become problems.
• We embrace the latest technology to enhance customer communications.
• We deliver our promises.
Employees
We value the contribution of our employees and seek to ensure their continued motivation and
commitment.
We create a working environment that encourages everyone to innovate and deliver a high-
quality service.
• Health and Safety is paramount in everything we do.
• We encourage continuous improvement and share best practice.
• We constantly train and develop our workforce.
• We live by our values: commitment, customer focus, teamwork, creativity, proactivity.
Community
We play an active part in local communities and seek to minimise our operational and
environmental impact wherever possible.
DELIVERING ENVIRONMENTAL VALUE
Quality and environment
We value the natural environment we operate in and therefore use natural
resources sparingly and continuously seek new ways for more sustainable
operations.
• We continuously seek to improve our service, through improved productivity and by adopting
the latest technology.
• We minimise our environmental footprint wherever possible.
Environmental awareness
We work with local communities to promote environmental thinking and awareness.
• We are good corporate citizens and support local communities.
• We make efforts to raise public´s environmental awareness through seminars, field tours
and campaigns.
• We support and cooperate with universities and research institutions.
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DELIVERING ECONOMIC VALUE
Investors
We aim to be transparent and honest thorough our business activities, giving
timely and accurate information to our shareholders. All stakeholders are
treated equally, and we are focused on a path of continuous improvement,
whilst ensuring continued sustainability.
• We spend and invest wisely.
• We seek opportunities for incremental growth.
Partners
We build and develop strategic relationships with partners and suppliers to create additional
efficiency and enhance customer service.
• We treat our partners fairly.
• Our ways of business are transparent and ethical.
4.2 Strategic objectives in 2018-2022
We have established five strategic objectives, which balance the expectations of our various
stakeholders. Fundamental to the successful delivery of our strategic objectives is the need to
work closely with all our stakeholders.
Operational
Excellence
Satisfied
Customers and
Community
Professional
and Committed
Employees
Sustainable
Financial
Performance
Sustainable
Growth of
Watercom
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OPERATIONAL EXCELLENCE
The Company’s continued priority will be to provide a reliable and high-quality drinking water
service to our customers, and to ensure that all our activities, from water catchment to
wastewater treatment, are enacted in accordance with strict environmental legislation.
With timely investments, we prevent bigger disruptions to our operational processes that may
put our compliance at risk and cause significant reputational damage to the Company. Adoption
of new technology and work methods will help us to operate in a more efficient and safer manner.
To achieve Operational Excellence, we need to:
• Invest into assets in a timely manner
• Adopt sustainable practices and best technologies
SATISFIED CUSTOMERS AND COMMUNITY
Tallinna Vesi provides vital services to the population within its service area. We are responsible
for a continuous supply of high-quality drinking water, and a reliable wastewater service.
Great customer service relies on understanding our precise customer needs, anticipating
problems and resolving complaints quickly and courteously. We want our customers to have
trust in us and confidence in our service.
To keep our customers satisfied, we need to be able to communicate through a diverse range of
media platforms.
To ensure the customers and community are satisfied, we need to:
• Deliver on our promises
• Simplify and reduce the need for interaction
PROFESSIONAL AND COMMITTED EMPLOYEES
Achieving operational excellence is not possible without the continued commitment of our
workforce. We consider our people as our greatest asset, and we offer an environment where
people with passion and commitment can work together, not only towards the achievement of
corporate goals, but also towards personal career goals, supported by training and continuous
development of staff.
Ensuring the continued health and safety of employees, and third parties who interface with the
Company’s activities, is of vital importance. It is central to everything we do and safety will never
be compromised. We ensure a safe working environment, making sure that our facilities and
equipment fulfil the relevant safety standards and legislation.
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Considering the age profile in the Company it is of critical importance that we establish a
systematic approach to succession planning. We believe it is advantageous to build teams with
both new and experienced staff, to generate fresh and innovative ideas that are built on a solid
base of practical experience.
We encourage our employees to continuously learn and develop themselves. We support the
progression of staff internally, and provide career development opportunities when possible.
To ensure the commitment and professionalism of our employees, we need to:
• Create a positive health and safety culture
• Plan succession in a systematic manner
• Develop a motivating working environment
SUSTAINABLE FINANCIAL PERFORMANCE
We are committed to increasing shareholder value – delivering an appropriate rate of return,
combining the distribution of dividends, whilst improving the share price.
A sustainable revenue stream with a high collectability rate is essential to providing sufficient
cash flows to cover operating costs and finance sustainable investments, whilst ensuring an
adequate rate of return to our investors.
A strong capital structure of the Company is essential to support the delivery of shareholder
value and provide sufficient financing for investments.
To ensure the sustainability of the Company´s financial performance, we need to:
• Maintain a sustainable revenue stream
• Ensure strong capital structure
• Deliver shareholder value
SUSTAINABLE GROWTH – WATERCOM
We keep looking for ways to increase shareholder value by ensuring the growth of Watercom.
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5. OPERATIONAL RESULTS OF 2020
5.1 Ensuring quality of our services
To ensure the best quality of service for our customers, besides legislative requirements, we are
contractually required to comply with 97 levels of service. This responsibility stems from the
Services Agreement concluded with the City of Tallinn in 2001. Our performance and compliance
with the levels of service are reviewed annually by an independent monitoring unit – Supervisory
Foundation for Water Companies in Tallinn – to whom we submit annual Levels of Service
Reports.
In 2020, the Company delivered all contractual levels of service.
Besides the 97 levels of service, the Services Agreement requires us to comply with the following
management systems:
• since 2001, ISO 17025 Quality Management System of Laboratories;
• since 2002, ISO 9001 Quality Management System;
• since 2003, ISO 14001 Environmental Management System.
Our environmental activity and environmental management system are in compliance with the
requirements of the international environmental standard ISO 14001 and EU Eco Management
and Audit Scheme (EMAS) Regulation. Doing business in an environment-friendly manner and
the safety of our employees is fundamental to us, therefore we have voluntarily implemented the
following management systems:
• since 2005, EMAS-compliant European Eco-Management and Audit Scheme;
• since 2007, OHSAS 18001 Occupational Health and Safety Management System.
In recent years, the activity of the Company and its management systems fully complied with all
applicable quality, environmental, occupational safety and working environment standards and
systems as well as legal requirements. Such compliance is regularly monitored via internal
audits and was confirmed via the external audit undertaken by AS Metrosert. Environment
Agency issued the certificate of registration for Eco-Management and Audit Scheme EMAS to the
Company for the following three years.
According to AS Metrosert, the management systems have been appropriately developed and
improved, and the Company’s activity complies with the requirements set forth in the standards.
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UNINTERRUPTED SERVICES
Our role is to ensure the availability of high-quality water services to our customers and
community 24 hours a day and 365 days a year. Stringent control over drinking water and
consistently high-quality levels in all segments of our products and services are fundamental to
ensure the provision of uninterrupted services. Effective water treatment and functioning of the
water network as well as prevention of problems through regular maintenance and efficient,
prompt and smooth disposal of wastewater and treatment thereof in compliance with strict
requirements contribute to the continuous availability of a stable service.
Our target each year is to fulfil all the 97 service levels as set out in the Services Agreement. In
2020, the Company delivered all contractual levels of service. We are committed to notify our
customers on time of the planned works that may impact the service. We give an advance notice
to all customers affected by a planned interruption 5 days before it takes place. We managed to
deliver that objective 100% in 2020.
Among the 97 levels of service there is also one concerning the duration of unplanned
interruptions. Therefore, we make continuous efforts to provide uninterrupted services to our
customers and minimise the duration of unplanned interruptions. Last year we had no unplanned
interruptions lasting longer than 12 hours. One of the targets we set for 2020 was to keep 87%
of unplanned interruptions to water supply under five hours. The interruptions that last long
cause more discomfort for customers, thus we strive to keep the interruptions as short as
possible whilst repairing water bursts. We managed to meet that target – 91% of interruptions
lasted less than five hours. Average duration of interruptions in 2020 was 2 hours and 56 minutes
(2 hours and 59 minutes in 2019).
Interruptions entail unexpected discomfort, which is why we have prepared measures to alleviate
the situation for our customers. In case of interruptions, we employ the measures to mitigate
the inconveniences resulting from an interruption to the service. For instance, if needed, we
provide our customers with temporary water tanks. Furthermore, we were able to notify the
customers in advance of any unplanned interruptions in 98.9% of the events (2019: 96.2%).
Stable high quality and economic sustainability of services is largely dependent on the planning
of investments. Both the preventive maintenance and timely investments into the infrastructure
are instrumental for the Company to be able to deliver its main duties. The investments made
have a direct impact also on the key performance indicators of the Company such as customer
satisfaction, level of leakages, sewer blockages and water bursts etc.
In 2020, the investments in our main water treatment infrastructure amounted to €1,430
thousand (€1,548 thousand in 2019), amongst which the largest projects were the reconstruction
of pipes inside the Building A at the Water Treatment Plant and the pumping station on Kolde
Blvd. €7,436 thousand was invested in wastewater treatment (€603 thousand in 2019), including
the reconstruction of mechanical treatment facilities and the effluent outlet tower, and the
replacement of a pump in the main pumping station at Paljassaare. Key investments in water
and wastewater networks were the reconstruction of pipes on Kadaka Blvd, Punane Str and
Järvevana Rd. The total level of investments in water and wastewater network was €5,353
thousand (€5,142 thousand in 2019). The cost of new connection points was €3,862 thousand in
2020 (€8,031 thousand in 2019).
AS Tallinna Vesi Annual Report 2020
20
DRINKING WATER QUALITY
Tallinna Vesi provides water service to nearly one third of Estonian
population. We recognise the significant responsibility we have to bring
high-quality drinking water to each of our consumers. The quality of
drinking water affects the quality of life and health of all our consumers
including partners and investors, which makes ensuring the stable supply
of high-quality water at the customer taps our highest priority. To achieve
our water quality objective, we carry out the flushing programme, monitor
the quality of water leaving the Water Treatment Plant and take regular samples from the
customer taps.
The quality of drinking water is subject to strict legal requirements. The quality must comply with
Regulation No 61 “Quality and control requirements and analysis methods for drinking water”,
issued by the Minister of Social Affairs on the basis of the Estonian Water Act and the European
Drinking Water Directive 93/83/EC. The regulation was renewed in September 2019 and among
other changes, the limit values of residual chlorine were increased to further safeguard the
quality of water.
In addition to legislative requirements, we have also agreed upon additional quality standards in
the Services Agreement concluded with the City of Tallinn. In terms of water quality, we have
outperformed those requirements assuring a supply of good-quality drinking water to each and
every one of our customers. The results of all analyses are public and made available on the
Company website.
Water quality is inspected by following the drinking water monitoring programme approved by
the Health Board. There are approximately 120 sampling points in Tallinn, including
kindergartens, schools and other institutions, evenly spread out across the entire service area.
The programme specifies the sampling points, sampling frequency and the parameters to be
analysed. Samples are taken from raw water (Lake Ülemiste and its catchment area and from
ground water), from the treatment process and from consumers’ taps.
The quality of drinking water in Tallinn remains very good. In 2020, we took a total of 3,099
samples across the service area (2019: 3,006). In 2019, the water samples taken from customer’s
taps were 99.04% compliant with all quality requirements, in 2020 this same parameter reached
99.71%. This is a result of further investments into the network and enhanced maintenance
regimes, which were introduced following the introduction of a more sensitive water quality test
into Estonia.
During recent years Tallinna Vesi has made further developments in the water network and
improved the effectiveness of maintenance system in order to ensure consistent supply of high-
quality drinking water.
We have a separate laboratory unit, which has been accredited by the Estonian Accreditation
Centre since 2001. The laboratory unit consists of a water and microbiology laboratory at
Ülemiste Water Treatment Plant and a wastewater laboratory at Paljassaare Wastewater
Treatment Plant. Water analyses are made in our water and microbiology laboratory, which is
also one of the largest laboratories in Estonia. The quality of analyses is guaranteed by the
AS Tallinna Vesi Annual Report 2020
21
attested samplers, accredited quality management system (ISO 17025) and modern equipment,
as well as the professional staff who enable us to offer a wide range of services also externally.
Water quality is independently monitored by the Northern Services of the Health Board and the
Supervisory Foundation for Water Companies in Tallinn. Our laboratories are supervised by the
Estonian Accreditation Centre.
Our accredited water laboratory and our accredited wastewater laboratory conduct
approximately 150,000 analyses per annum, out of which about 2/3 are chemical and
microbiological analyses of drinking water and 1/3 is chemical analyses of wastewater.
Water
2020
2019
2018
2017
2016
Compliance of water
quality at the consumers’
taps
99.71%
99.04%
99.93%
99.93%
99.93%
Leakages in the water
network
12.42%
12.97%
13.71%
13.82%
15.07%
Average duration of water
interruptions per property
in hours
2.93
2.99
3.27
3.14
3.44
5.2 Environment
ENVIRONMENTAL COMPLIANCE
We provide pure drinking water to the network to supply our customers and safely collect, treat
and recycle wastewater back to the environment. We rely directly on natural water resources,
which we highly appreciate and care for. Thus, we do our best to employ these resources
sustainably and contribute to the well-being of the environment.
We are the most regulated water company in Estonia. To ensure the fulfilment of environmental
requirements set for water companies, we are required to comply with legislative acts issued by
the European Union (EU) and the Parliament of Estonia as well as by the local governments. At
the EU level, this means above all the compliance with the Water Framework Directive No
2000/60/EC of the EU Council. At national level, the Company is required to comply, amongst
others, with the Water Act, the Public Water Supply and Sewerage Act, the General Part of the
Environmental Code Act, the Environmental Liability Act, the Environmental Monitoring Act, the
Waste Act, the Chemicals Act, the Atmospheric Air Protection Act and any regulations adopted
on the basis thereof. At local level, the Company has to abide by various guidelines and
regulations established by the local governments in Tallinn and neighbouring municipalities.
Consequently, the environmental impact of our daily activities as a company is well mapped and
managed.
We act in accordance with the requirements of the environmental permits issued to us and
comply with the precepts issued by the Environmental Board. The following environmental
permits have been issued to Tallinna Vesi:
AS Tallinna Vesi Annual Report 2020
22
• 4 permits for the special use of water;
• 1 waste permits;
• 1 ambient air pollution permits.
In order to keep our main activities operational, we must rely on resources
that have an environmental impact.
The Company's core activity is highly
dependent on the use of electricity. We continue striving for higher efficiency
in our electricity consumption. For instance, we are maximizing the use of
biogas, which is a product of sludge digestion process, in local heat
production. To reduce ambient air pollution, the Company is limiting the
amount of pollutants emitted from Ülemiste and Paljassaare boiler houses,
such as nitrogen dioxide, carbon monoxide, volatile organic compounds and C0
2
greenhouse gas
emissions.
A more detailed overview of our environmental performance is provided in our environmental
report. The environmental report is available for reading on Tallinna Vesi's website. The 2020
environmental report is due to be released in the first half of 2021 and will then be up on the
Company website.
In 2020, the Company did not have any non-compliances with the
requirements of environmental permits.
SUSTAINABLE USE OF WATER
To provide a sustainable service, it is crucial to ensure the availability of
sufficient quantity and quality of raw water in the lake. To provide drinking
water to the citizens of Tallinn, we extract water from its natural
environment. Tallinna Vesi supplies customers with drinking water
extracted from both surface water resources in Lake Ülemiste and ground
water sources. We are determined to use the water sustainably and
continue to increase the efficiency of our water usage.
Ground water is a limited and slowly renewable natural resource, which is the reason why we
have gradually been reducing the share of ground water in water treatment, thus serving the
purpose of sustainable use of water. About 10% of consumers use regional ground water and
90% of drinking water is produced from surface water, with Lake Ülemiste as the main source
for the residents of Tallinn, leading it to be declared a non-public water body.
Surface water: 25,241 th. m
3
(2019: 25,000 th. m
3
)
Ground water: 2,734 th. m
3
(2019: 2,680 th. m
3
)
Lake Ülemiste has an extensive surface water catchment system, serving also as a source for
additional water during dry periods. In 2020, the Water Treatment Plant produced an average of
66,400 m
3
of water per day (2019: 65,733 m
3
). That quantity has been relatively stable over the
years. We saw a slight increase in average water consumption per capita to 98.2 litres per day in
Tallinn and Saue (Tallinna Vesi’s main service area) in 2020 as a result of more customers
working from home.
AS Tallinna Vesi Annual Report 2020
23
As part of our pursuit of a sustainable use of water, our actions are also targeted to reducing
leakages in the water network.
Higher level of leakages also means higher use of process water
and energy for the Company with an effect on both the natural environment and the Company’s
profitability. Therefore, one of our
main objectives is to keep leakages i.e. losses of pure water
in the water network, at minimum. Lowering the level of leakages also diminishes the demand
for water extraction as well as the risks of soil erosion. Besides the increased value the lower
levels of leakages provide in terms of environmental sustainability, they also reduce our own
costs due to smaller losses in treated water. This, in turn, affects directly and indirectly our
employees, investors and customers as well as the public sector and the community.
About 20 years ago the level of leakages exceeded 35%, while in 2020, the level of leakages was
12.42% (2019: 12.97%). This is the all-time low record in the Company history. The reduction in
the level of leakages has been facilitated by our consistent efforts to use the water resource
sustainably and with lower losses. To achieve this result, we have acquired new equipment for
faster detection and enhanced remote inspection. Detecting and fixing leakages as fast as
possible and regular preventive action continue to contribute further to the reduction in leakages
levels.
AS Tallinna Vesi Annual Report 2020
24
EFFLUENT QUALITY
Besides a sustainable use of water, we are also determined to improve the natural and living
environment around the Baltic Sea. Therefore, we safely collect, treat and recycle wastewater
back to the environment. We treat wastewater collected in Tallinn and its nearest surrounding
areas. The treatment process in Paljassaare Wastewater Treatment Plant is based on the
activated sludge method and it has three treatment stages: mechanical, biological and chemical
treatment. Nitrogen removal efficiency has been improved with a biological filter, which is based
on the activity of denitrification bacteria.
The quality of the effluent discharged into the sea has a direct impact on the
marine environment, and therefore, directly and/or indirectly constitutes an
important aspect for all our stakeholders. We are committed to reducing the
adverse environmental impact, maintaining high standards and achieving
results that can outperform the standards that have been set for treated
effluent discharged into the Baltic Sea.
In 2020, 52.5 million m
3
of wastewater (2019: 49.7 million m
3
) was treated and discharged into
the Baltic Sea.
The quality of effluent discharged into the sea is established by legal acts and water permits. The
concentration of pollutants in wastewater taken into the treatment plant and in the effluent
leaving the plant are monitored in order to assess the efficiency of the treatment process and
the quality of effluent. The wastewater laboratory carries out analyses at different wastewater
treatment stages. Such results provide essential information allowing us to further improve the
efficiency of the treatment processes and the quality of effluent.
Compared to regulatory requirements the treatment efficiency of Paljassaare Wastewater
Treatment Plant outperformed all parameters in 2020:
REQUIREMENT
2020
2019
Biological oxygen
demand (BOD)
80%
98%
97%
Chemical oxygen
demand (COD)
75%
88%
91%
Suspended solids
90%
98%
97%
Total nitrogen (N
tot
)
80%
86%
85%
Total phosphorus (P
tot
)
80%
92%
92%
Oil products
75%
90%
85%
Our work is largely dependent on the weather: for example, it affects the quality and quantity of
water entering the plants, wastewater parameters as well as the amount of energy and
chemicals required in the treatment processes. Therefore, extreme weather conditions pose a
great challenge as they may have significant impact on our business. The strongest impact on
the activities of the Company and its stakeholders (including employees, community, customers
and the public) result from extreme weather events, such as heavy downpours. Heavy downpour
and peaking quantities of stormwater may cause flooding and short-term inability of the sewage
and stormwater network to take in such large amounts of water. Moreover, it may result in the
AS Tallinna Vesi Annual Report 2020
25
incapacity of the Wastewater Treatment Plant to take in and/or fully treat such large amounts of
sewage. Under such circumstances and to avoid major damages, we are, from time to time,
forced to discharge sewage into the sea or to open emergency outlets to conduct highly diluted
wastewater into the sea.
During heavy showers in 2020, we were compelled to open the emergency outlets in the main
pumping station 6 times (2019: 3 times), all for a short period of time, in order to avoid major
damages. A total of 234,124 m
3
(2019: 80,135 m
3
) of wastewater diluted by stormwater (dilution
at least ¼) was discharged into the sea during those events.
An effective operation and minimization of the risks are fundamental in
keeping such occurrences as rare as possible. Moreover, in cooperation
with the local authorities the separate sewerage system continues to be
developed further, allowing stormwater to be led straight to the receiving
water and only wastewater is to be conducted to the Wastewater Treatment
Plant.
A series of investments have been planned over the next years that will provide additional security
and minimise the risk of any future pollution incidents. In 2020, Tallinna Vesi commenced the
reconstruction of the mechanical treatment stage at Paljassaare wastewater treatment plant –
one of largest projects of the past decade for the Company. This major project is currently ahead
of schedule and will continue throughout 2021, with completion expected in early 2022.
Completion of this project will further enhance the quality and resilience of the wastewater
treatment process.
AS Tallinna Vesi Annual Report 2020
26
Wastewater
2020
2019
2018
2017
2016
Number of sewer blockages
463
532
603
654
670
Number of sewer bursts
80
103
88
135
107
Compliance of effluent leaving
Wastewater Treatment Plant
100%
100%
100%
100%
100%
5.3 Objectives: operational performance
OPERATIONAL OBJECTIVES OF 2020
No cases of non-compliance with levels of service agreed in the Services
Agreement (0)
Achieved
Leakage level in the water network ≤13.75%
Achieved
Cases of non-compliance with water permit requirements (0)
Achieved
≥ 87% of water interruptions last ≤ 5 hours
Achieved
OPERATIONAL OBJECTIVES OF 2021
Implementation of wastewater treatment investments (key projects:
mechanical treatment, pump replacement, reconstruction of the main
pumping shaft) on time and without pollution incidents
0 pollution
incidents; key
projects
completed on
time
Leakage level in the water network
≤13.00%
Cases of non-compliance with water permit requirements
0
Water quality in the water network
≥99,6%
AS Tallinna Vesi Annual Report 2020
27
5.4 Our customers
We provide water supply and sewerage services to over 24, 600 contractual customers and
approximately 470,000 end consumers in Tallinn and surrounding areas. We are responsible for
serving almost one third of the Estonian population with reliable and high-quality water supply
and sewerage services. Over the years, the proportions of our customer groups have remained
relatively stable.
Good customer service relies on understanding our customers’ needs, anticipating problems
and giving expert advice. It is also important to resolve complaints quickly and skilfully and to be
an advisory partner to the customers in any situation. We want our customers to trust us and
have confidence in our service.
Our responsible customer service is primarily represented in three activities: proactive
communication, consistent monitoring of complaints and issues and specific promises related
to ensuring the availability of service and providing information.
We have implemented a unique system of promises that provides for an automatic payment of
compensation to a customer for each promise we fail to deliver. In 2020, we only had one failure,
which affected 2 customers (2019: 141 customers). We were unable to clear a sewer blockage
quickly enough due to a malfunction of the emergency line. We analysed the case thoroughly,
made improvements to the procedure and also paid the compensation to the customers.
66%
25%
9%
Customer groups 2020
Private
houses
Apartment
associations
Commercial
customers
62%
26%
12%
Customer groups 2019
Private
houses
Apartment
associations
Commercial
customers
AS Tallinna Vesi Annual Report 2020
28
OUR PROMISES TO CUSTOMERS:
We deliver high-quality water
We will respond to the issues you may have with water quality and pressure on the following
working day at the latest.
We keep the environment safe
We will clear public sewer blockages within 12 hours at the latest.
We quickly respond to our customers’ requests
We will respond to the questions received via customer information line within 2 and those
received by e-mail within 3 working days at the latest.
We are accurate in billing
If there are doubts about the accuracy of a water meter, we will carry out an extraordinary
verification and notify you of the results within 2 working days. Should the bill prove to be
inaccurate, we will issue a corrected bill on the next working day at the latest.
We keep to our agreements
In case of planned interruptions, we ensure the water supply by the promised time, or sooner. In
case of unplanned interruptions due to emergency repair works, we will restore the water supply
in 12 hours at the latest. If an appointment or a visit has been agreed by our specialist, we will
arrive at the agreed time.
The number of customer contacts generally serves as an indicator of the quality of customer
service provided by a company - in the case of a service that goes unnoticed by the customer, the
need to contact the company is reduced. The approximately 25% reduction in customer inquiries
concerning the most common issues, i.e. water quality, pressure and sewer blockages, in 2020
is a positive trend.
Customer Service
2020
2019
2018
2017
2016
Number of customer complaints*
40**/
(181*)
167*
158*
36
45
Number of customer contacts
regarding water quality
323
508
258
219
166
Number of customer contacts
regarding water pressure
359
478
439
298
339
Number of customer contacts
regarding blockages and discharge
of stormwater
864
1,047
1,043
1,111
1,190
% of written contacts answered in
accordance to required deadline***
100.0%
100.0%
100.0%
99.9%
99.5%
Number of failed promises
2
141
33
5
4
Results of the annual customer
satisfaction survey (TRI*M
index)****
54
54
53
90
94
Number of contacts per customer
1.0
0.8
1.0
1.1
1.3
AS Tallinna Vesi Annual Report 2020
29
Notification of unplanned water
interruptions at least 1 h before the
interruption
98.9%
96.2%
95.2%
98.2%
98.8%
*Until 2018, this figure included only the customer complaints received in writing and from customers in
Tallinn. The number for 2018 includes the complaints received both in writing and by phone and from all
our current service area.
** From 2020, only the cases in the Company’s control are classified as complaints. Numbers with * are
based on the same methodology.
*** In 2013-2016 the numbers reflect the indicator „Responding to written customer contacts within 2
working days“.
**** From 2018, the methodology for calculating TRI*M index is different. Due to this, the results are not
comparable to previous years.
CUSTOMER SATISFACTION
Systematic and regular feedback from our customers and consumers is instrumental for us. It
helps us to get a fair assessment of our activities and to understand our strengths, as well as
our weaknesses, which we should address more in the future.
The main purpose of the survey was to map the changes in the strength of AS Tallinna Vesi's
customer relationships as well as the factors shaping it and obtaining feedback on the
effectiveness of our operations from our customers and consumers. 923 customers and 486 end
consumers responded to the survey.
Satisfaction is measured using TRI*M method developed by the research company to
characterise the strength of customer relationships and to allow benchmarking with other
companies.
This model focuses on two elements:
• TRI*M index measures the strength of customer relationships and comprises, two elements –
general satisfaction and the extent to which a company distinguishes from the other similar
utility companies;
• TRI*M grid analysis to highlight the strengths and weaknesses of a company.
The analysis revealed that compared to previous years, end-consumer ratings to Tallinna Vesi
have increased, but ratings from commercial customers have somewhat decreased. The average
customer relationship strength index for the various segments has remained stable and
continues to show a very strong level. Therefore, the assessments of the quality and service level
of Tallinna Vesi's service in the overall view of the customer groups have remained uniformly
high over the years. Overall satisfaction with the services of Tallinna Vesi in all customer groups
remains at a high level in the range of 98-109 points, and in various segments 78-85% of the
respondents are satisfied with the services.
The end-consumer segment shows an upward trend in ratings. Residential customers stand out
with the highest overall satisfaction. Compared to the previous year, the ratings to problem
AS Tallinna Vesi Annual Report 2020
30
handling increased. Among commercial customers, we saw a slight decrease in satisfaction with
the handling of problems, including mostly among representatives of apartment associations.
According to the answers, the price-quality ratio of water services has improved, which is a
positive change in all segments.
For 2021, we have set a target that on average more than 81% of customers answer the question
about their general satisfaction that they are either completely satisfied or mostly satisfied with
the services of Tallinna Vesi (2020: 80.6%).
SATISFACTION OF OUR CUSTOMERS AND END CONSUMERS IN 2018-2020
High-quality service and a guaranteed water supply lay the basis of a strong customer
relationship. Ratings given to the quality of service are generally very high, especially by those,
who drink tap water. The quality of water along with its clarity, taste and cleanliness of pipes also
serve as the prioritised indicators that matter to our end consumers. Tap water is used as
drinking water, either directly from the tap or after filtration by 91% of respondents (2019: 90%).
As in previous years, the messages „Drink tap water”, “Tap water is drinking water”, etc. related
to tap water have been noticed in all segments, and over the years, it has also led to changes in
consumers' daily habits.
Even though the customers' feedback to our services continues to be good, we need to continue
making efforts in maintaining and increasing customer satisfaction through further
improvements in the quality of services provided and in the quality of customer service itself.
In 2020, our work was also affected by changes due to restrictions related to the coronavirus,
when operations could be arranged in the most flexible way on digital channels. The changed
situation affected more those customers who had previously been used to visiting our customer
service front office in matters related to contracts and settlements. This increased the number
of repeat contacts and our customers had to get used to the changed circumstances. The
Company sees problem handling and proactive communications to customers as our primary
areas for further improvement.
61
53
50
51
54
57
55
49
55
54
55
52 52
53 53
0
10
20
30
40
50
60
70
End consumers Private house
owners
Apartment blocks Other commercial
customers
Average result
2020 2019 2018
AS Tallinna Vesi Annual Report 2020
31
We continue to issue our electronic customer information newsletter 3-4 times a year, in which
we address matters that interest customers based on their regular feedback. We will also
continue to develop digital communication and information channels for our customers. We are
constantly improving the self-service environment to increase the share of customers who use
electronic channels. In 2021, several IT developments will be completed, which will further
enhance the reliability and convenience of the self-service environment.
In addition to the annual customer satisfaction surveys, it is essential for us to have regular
feedback on our service quality. Therefore, we ask our customers to rate our work on a monthly
basis, and in 2020 we achieved an overall rating of 4.1 points on a 5-point scale system.
5.5 Objectives: customers
CUSTOMER SERVICE OBJECTIVES IN 2020
≤950 repeated customer contacts
Achieved
Average general customer satisfaction (annual) ≥80%
Achieved
≥77% of meter readings submitted via self-service channels
Not achieved
Cases of promises failed (5 promises to customers) ≤5
Achieved
CUSTOMER SERVICE OBJECTIVES IN 2021
No of repeated customer contacts
≤900
Average general customer satisfaction (annual)
>81%
≥77% of meter readings, submitted via self-service channels
≥ 77%
No of customer complaints
≤50
5.6 Community and public
The community we operate in and people whose lives our work impacts are of vital importance
to us. We therefore consider it essential to actively engage in and support the community we
operate in. Our aim is to distribute messages that help to improve the environmental awareness,
and to provide environment themed educational study materials and programs for free.
SPONSORSHIP STRATEGY
Whilst making decisions about sponsorship projects, we keep in mind the following principles:
•
Defined impact area. Tallinna Vesi´s sponsorship focuses on the main service area of the
Company – Tallinn and surrounding areas.
•
Projects closely linked to our main activities, i.e. providing local communities with water and
wastewater services.
•
Involvement of employees. Tallinna Vesi´s employees need to be aware of the Company´s
sponsorship activities and should be involved in those as much as possible.
AS Tallinna Vesi Annual Report 2020
32
•
Systematic approach and consistency. Tallinna Vesi supports the same areas from year to
year to provide continuity and clarity in its approach to sponsorship. The decision-making
process is clear to applicants.
Tallinna Vesi mainly supports initiatives that are related to environmental education or local
community or people with fewer opportunities.
ENVIRONMENTAL EDUCATION
Our business is closely related to one of the most important and valuable
natural resources – water. We understand the impact we have on the natural
environment and try to minimize our environmental footprint. In our
sponsorship activities, we dedicate our efforts to educate the community on
water-related environmental matters in order to improve the environmental
awareness of the youth.
While approximately ten years ago in 2011, only 48% of people trusted to drink tap water, the
number of people drinking tap water had grown to 91% by the end of 2020 (2019: 90%).
In early 2020, we ran an advertising campaign "Mythbusters" on television, social media and
cinemas, with the aim of illustrating in a humorous way how much work it takes to treat drinking
water and why it is important to prevent garbage from entering the sewers.
Tallinna Vesi produces and distributes educational materials for kindergartens and schools.
Normally, each year our employees devote their time to hold water seminars in schools and
kindergartens.
Due to the COVID-19 restrictions we were unable to carry out as many initiatives promoting
environmental awareness as we intended to in 2020. By mid-March, we had managed to hold
one tour at the water treatment plant, have 240 children attending our water seminars, and were
present with educational materials in the New World Street Festival. We will continue our wide
range of activities to promote environmental awareness as soon as it becomes possible again.
We will also be developing digital educational videos aimed at promoting environmental
awareness among children and young people.
Tallinna Vesi is also helping the event organisers encourage the use of tap water as drinking
water by providing them with various posters and materials to spread the message. In 2020, we
continued to support sports and community events by providing free drinking water on site. We
were present at, for example, Stamina running and walking events, family day of Association of
Large Families in Harjumaa NGO, summer youth festivals organized by the Tallinn Sports and
Youth Department, the Investment Festival and many other events.
LOCAL COMMUNITY
Tallinna Vesi supports the community initiatives by providing water tanks at the events. Along
with the City of Tallinn, we also set up public water taps both indoors and outdoors to improve
the availability of tap water in public space. We have carefully chosen a few projects and
AS Tallinna Vesi Annual Report 2020
33
organisations to donate to and we encourage active participation among our employees by
allowing our teams to take a day off to attend charity initiatives.
During 2020, we also continued to support the wider community and provided support to a
number of organisations, good causes and charities, including:
• Years of cooperation with and support to the Estonian Disabled Athlete Sports Association;
• Assistance to the Kindergarten Õunake for disabled children;
• A donation to the Estonian Association of Parents of Children with Cancer, helping to provide
support services for families struggling with a serious illness;
• A donation to the Tallinn Centre for Children at Risk which, thanks to the support, is able to
enhance the development activities for the recovery and future coping of children without
parental care;
• Engagement with SPIN project which aims to develop and strengthen young people's social
and self-management skills and to provide young people with development opportunities
and enjoyment through sports.
AS Tallinna Vesi Annual Report 2020
34
5.7 Employees
Tallinna Vesi’s mission is to create a better life with pure water. Each member of our staff follows
this mission whilst carrying out their daily tasks. The top priority is to provide our customers with
the service that meets high quality standards. To enable our staff to successfully deliver our
mission we create a supportive working environment and provide good working conditions. We
value our people highly and aim to be a valued employer. Tallinna Vesi is a socially responsible
company, appreciating the employees and developing them by offering new challenges, whilst
also implementing a systematic approach to succession planning. The policies followed in the
management of the Company are available on the Company website.
At the end of last year, a total of 333 people were working in Tallinna Vesi and its subsidiary
Watercom (2019: 325), 95.8% of them worked full-time and 4.2% part-time (2019: 96.6% and 3.4%
respectively). Majority of the employees were placed in Tallinn.
In order to engage our employees, we involve them in the decision-making process. 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, MS Teams meetings, intranet, informative
letters, team events and internal quarterly newsletters.
Our employees are loyal to the Company. The person with the longest service has been with the
Company for 56 years (2019: 55.2 years). The average number of years in the Company is 10.4
years (2019: 10.3 years). Our voluntary employee turnover decreased notably in 2020 and reached
5.7% (2019: 9.3%). All the employees voluntarily leaving the Company are asked to give feedback
on their reasons for leaving. Increased mobility of people i.e. change of residence or commencing
studies, is one frequently mentioned reason. The total employee turnover was 12.3% (2019:
16.8%).
Although the number of our staff has been relatively stable in the last few years, the average age
is quite high at 45 years also in 2020 (2019: 45 years). Therefore, we need to focus on employment
as well as on succession planning. The age profile within the Group is as follows:
Groups of staff by age
<30 years
31-50 years
>50 years
2020
2019
2020
2019
2020
2019
Management Board
0
0
2
2
1
1
Executive Team*
0
0
8
8
1
1
Management Team
0
1
28
24
4
4
All staff
54
57
159
152
120
116
*
Includes the Management Board
AS Tallinna Vesi Annual Report 2020
35
*
Includes the Management Board
Considering variations within the team, it is essential to follow equality principles both 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. To ensure equal treatment, we have signed a collective agreement
with the Trade Union of Water Supply and Sewerage Staff. Even though less than 10% of our staff
belong to the trade union, the contractual obligations and benefits agreed upon in the agreement
extend to all our employees.
Almost all members of staff have the opportunity to receive annual performance related pay
(PRP), which is based on very clear and transparent principles as well as the delivery of a
balanced combination of personal and company objectives, which are set annually. Every year
the corporate KPI targets are agreed, and in 2020, 80% (2019: 80%) of the total PRP was
dependent on the fulfilment of corporate objectives and. 20% (2019:20%) of the PRP was
dependent on the personal objectives of each employee.
COMMITMENT IN THE TEAM
Two-way interaction is of paramount importance in the teamwork and therefore, feedback from
the employees plays an important role in the company culture. Every year since 2009, in
cooperation with Kantar Emor, we have conducted an extensive employee satisfaction survey to
collect honest feedback from our employees. The employee survey reveals the ratings on our
approach to employee management and the working conditions provided. In 2020, we decided to
start having the Kantar Emor satisfaction survey every second year, and in the years between,
we will measure the employee satisfaction with a shorter Pulse survey.
In 2020, 88% (2019: 96%) of our employees participated in the survey, which shows that our
employees understand the importance of their feedback. In the Pulse survey, we used the
composite employee satisfaction index for the first time instead of the previous TRI * M index.
Groups of staff
by gender
Total number
Women
Men
Women/Men
2020
2019
2020
2019
2020
2019
2020
2019
Management
Board
3
3
1
1
2
2
33%/67%
33%/67%
Executive
Team*
9
9
4
5
5
4
44%/56%
56%/44%
Management
Team
32
29
14
13
18
16
44%/56%
45%/55%
All staff
333
325
92
89
241
236
28%/72%
27%/73%
AS Tallinna Vesi Annual Report 2020
36
In measuring the composite satisfaction index, the Company´s goal was 3.8 on a 5-point scale
and the result was 4.06.
DEVELOPMENT OF STAFF AND SUCCESSION PLANNING
Considering the age structure in the Company, it is critical for us to have a systematic approach
and action plan for succession planning. To continue developing and improving our results, we
need to maintain the company-specific knowledge but also bring new and fresh energy to the
Company. We believe that the teams, containing both recently graduated and more experienced
people of advanced age, make the strongest teams of all. The performance of the Company
depends on the skills and professionalism of the staff.
2020 was a challenge for all of us due to the COVID-19, including recruiting new staff. Compared
to previous years, the number of candidates applying for various positions increased, but the
number of suitable candidates decreased. Therefore, the recruitment process was often
challenging due to the difficulties in finding suitable candidates. There were also competitions
that attracted fewer candidates than in previous years.
Even though all our vacancies are public, we always circulate the job offers internally as well.
We support the development of staff internally, provide career opportunities within the Company.
We inspire our staff to develop and rotate between different teams. In 2020, internal succession
happened in 7 occasions (2019:19), which is a good result. The discussion of the plans for
professional development always constitutes a part of the annual performance interviews, which
are held at the beginning of each calendar year with all employees (100%). Interim reviews are
performed with specialists and managers also in July-August. We encourage our employees to
continuously learn and develop themselves and we try to find development opportunities, which
serve the interests of both the employees and the Company.
In 2020, the majority of trainings concerned occupational safety - work environment and health,
safety at various works, first aid and fire safety. Various management trainings and professional
trainings for specialists were also important for the Company. The average number of training
days in 2020 was 1.48 days per employee (2019: 2.8 days, 2018: 1.9 days). The trainings were
certainly affected by the global situation, as due to the COVID-19 pandemic, the trainings moved
online and the Company had to adapt to the new situation as well. One of the major occupational
safety trainings was the chlorine hazards and safety training provided to the Water Treatment
Plant employees in 2020. The fire work certificates of many employees were renewed (both in
the form of contact training and online training). The newly selected Company's working
environment specialists were also trained in the form of e-learning, and all employees exposed
to hazardous chemicals and biocides in their work underwent an online training in chemical
safety. We also tried to continue with the Estonian and Russian language courses started in 2019,
but unfortunately these were suspended by COVID-19. In 2020, we also started a program of
short seminars aimed at the development of managers, where the first topic was creating and
maintaining team spirit in remote working conditions.
Additionally, we provide trainings and support to our managers to be able to effectively manage
their teams. We have developed and established the Good Leadership Standard. For new
employees we offer the possibility to participate in the leadership development program and use
either a coach or a mentor if needed. Despite working remotely, internal trainings also took place
in 2020 (25% internal vs. 75% external), although to a lesser extent than before, our own Health
AS Tallinna Vesi Annual Report 2020
37
and Safety Team diligently trained employees on various safety requirements. When organizing
training days and planning training opportunities, decisions are made on the basis of the training
needs of the employees, not on the basis of their gender or age.
In 2020, we continued with our succession program for apprentices and trainees.
This program allows us to engage young people in the Company’s activities already whilst they
are studying. We provide them with valuable work experience and development opportunities in
the largest water company in Estonia. Through this program we have employed 6 new young
specialists and skilled workers.
Every department has identified their high potential employees (talents) and different
development activities are provided for them throughout the year based on their annual
performance interviews. Talent management is aimed at motivating, engaging and retaining
employees to incentivise them to perform even better.
The Company has clear salary procedures and principles, which provide transparent and
systematic approach in payment systems and increase the motivation of employees.
We also continue to employ the Good Retirement Practice, which means that all retirements are
planned ahead to ensure the transfer of know-how from the more experienced staff to the young
members and to thank the retirees for their commitment. In the positions, which require
significant company-specific knowledge and skills, the employee who is about to retire and young
specialist work alongside each other for 2-6 months. By providing such transfer of knowledge
and experience to the learning employee, we value the experience of the retiring employee and
contribute to the professionalism of the new employee. The Company also pays retirees a
company benefit depending on the duration of employment. 3 employees retired during 2020
(2019: 6).
The year was difficult due to the spread of the coronavirus. In order to be able to offer our service
uninterrupted, we performed various supportive activities to maintain the health of our
employees. One of the most important has been the reorganisation of work, which for people
meant a transition to remote working for office staff and led to the changed ways of
communication and working arrangements. Regarding remote working, the Company has put in
place the remote work rules and the associated risks were assessed. In terms of skilled workers,
some workers started working in shifts to stay healthy and ensure the service to our customers.
In addition, we provided transportation for travelling to work and back home, reorganised
catering and provided personal protective equipment. In order to involve employees, meetings
were held in MS Teams, an overview of the Company's activities was given by video, and web
trainings were organised. We reminded the staff of the importance of healthy habits and offered
more flexibility in using Stebby.
5.8 Occupational health and safety
Occupational safety is an inseparable part of our business, being central to everything we do. We
believe that no work assignment is worth getting injured for. Safe and good working environment
is a key focus for us as an employer in ensuring that our employees are cared for and do not risk
AS Tallinna Vesi Annual Report 2020
38
their health or lives during work. Occupational health and safety is also
crucial considering Tallinna Vesi’s employer brand – we strive to be a
valued employer, who provides a working environment where people are
happy to come to in the morning, knowing that they have everything they
need to have a safe and nice day at work. Occupational health and safety is
a constantly evolving area, which does not allow the employers to become
too comfortable – there are always further improvements to consider. In
addition to the Working Environment Council of 10 members, the Company also has 10 working
environment representatives elected by different units. Our Quality, Health & Safety Manager
organises regular meetings with the working environment representatives to discuss all issues
relating to the working environment in the Company. All actions along with the responsible
persons, deadlines and targeted outcomes are entered into one table, which is available for all
staff to read, and the delivery of those actions is constantly monitored. Overview of the issues
raised by the representatives is also presented in the Working Environment Council meetings.
Our target is for the working environment representatives and Working Environment Council
members to have greater role and impact than before.
Our Company’s working environment performance is compliant with the requirements of both
national legislation and international occupational health and safety management system
standard ISO 45001:2018. In 2020, the Health and Safety Team carried out 427 safety audits in
total (2019: 449). Compliance of emergency and construction sites (at least 96% compliant sites)
has also been set as the Company’s overall objective. In 2020, 98.08% (2019: 97.12%) of the
Company’s audited sites met the safety requirements. In connection with the ongoing COVID-19
crisis, the Management decided in early November to suspend general internal working
environment checks. Internal working environment checks could only be performed by members
of the Health and Safety Team.
Furthermore, the Working Environment Council members and managers carry out additional
safety audits on work sites and in operations units. Negative findings are dealt with by agreeing
upon improvement actions and checking the delivery of those later. The actions can include an
extra training course, guidance, purchase of safer tools/equipment or an additional sign.
To ensure the safety of our own employees, it is important that our subcontractors and
cooperation partners also maintain high standards in occupational safety. We wish to set a good
example to them. Therefore, we also check the compliance with the safety requirements of our
cooperation partners and subcontractors on a regular basis.
One of the main indicators for assessing our occupational health and safety performance is the
accident frequency rate (AFR), which demonstrates how many work accidents with major injuries
or with >3 days lost have there been per 100,000 working hours. AFR has been monitored in the
Company since 2015 and it has also been one of the Company objectives. In 2020, the accident
frequency rate was 0 (2019: 0.36).
TOTAL NUMBER OF WORK ACCIDENTS
In 2020, there were no work accidents registered (2019:5). However, going forward we intend to
be more effective in preventing such minor work accidents and will pay particular attention to
obtaining information on dangerous occurrences, safety observations and near misses from our
staff. In 2020, 79 (2019: 219) of such observations were made by the staff. Based on the
AS Tallinna Vesi Annual Report 2020
39
information received from the employees we aim to make the improvements in order to prevent
any possible accidents in the future.
The number of observations received in 2020 was significantly lower than before, as a large
number of staff was working from home due to the spread of coronavirus.
To reduce any potential risks, we continue contributing to the safety of our Company’s working
environment. Employees’ safety awareness is definitely the key aspect in creating and
maintaining safe working environment. Involvement of our staff in various working environment-
related initiatives and activities is fundamental in improving the safety awareness. We organise
informative meetings to give the staff an opportunity to share information. We try to improve the
staff’s awareness of safety issues also through discussions and different printed materials and
safety videos. Systematic engagement of employees has resulted in considerably increased
attention towards one's working environment, which is where the occupational safety starts in
the first place.
We carry out working environment trainings on a regular basis. The list of topics addressed in
2020 amongst others was as follows:
• training and in-service training on first aid,
• fire safety training for the staff,
• hot works training,
• various trainings on safe handling of chemicals,
• various electrical safety trainings, various trainings for working environment
representatives, trainings for construction site coordinators,
• evacuation drills,
• training on disinfection of water pipes, personal hygiene and safety measures.
In 2020, we carried out also other activities to improve safety and working environment. All the
initiatives above as well as several other actions help us to make our working environment safer
and more comfortable for our employees.
1
4 4
5
0
AS Tallinna Vesi Annual Report 2020
40
5.9 Objectives: employees
EMPLOYEE RELATED OBJECTIVES OF 2020
Work accidents frequency rate (excluding unavoidable accidents) ≤0,2
Achieved
Compliance at Tallinna Vesi’s and Watercom’s sites according to safety
audits ≥95%
Achieved
Number of safety observations (positive or negative) or near misses ≥ 200
Not achieved
Employee commitment (according to annual employee satisfaction
survey) ≥72
N/A* Pulse
survey index 4.1
EMPOLOYEE RELATED OBJECTIVES OF 2021
Work accident frequency rate
≤ 0.2
Compliance at Tallinna Vesi´s and Watercom´s sites according to safety
audits
≥ 96.5%
Number of safety observations (positive or negative) or near misses
≥ 200**
Employee commitment (based on the employee survey every second year)
≥ 72
* In 2020, a survey was conducted based on the new Pulse methodology and the Company
achieved an overall satisfaction index of 4.1 points. In the future, a more thorough survey based
on TRI*M methodology will take place every second year, and shorter Pulse surveys in the
intervening years. Such an approach makes it possible to obtain optimal and consistently up-to-
date information, as well as implement the resulting action plan more efficiently.
**to be reviewed in Q1, 2021.
AS Tallinna Vesi Annual Report 2020
41
6. FINANCIAL RESULTS OF 2020
6.1 Economic environment
Given that Tallinna Vesi operates only in Estonia, our activities are mainly dependent on the
trends in Estonian economy.
According to the Ministry of Finance’s forecast, Estonia’s Gross Domestic Production (GDP)
growth in the first half of 2020 was due to pandemic much lower than expected, reaching 3.9%.
It was mostly driven by the domestic demand and rapid decrease in export. The real GDP
decrease is expected to be 3% in 2020 (-5.5% real growth). The decrease is related to the
pandemic due to which certain services are not rendered and consumed, also investments in
general have reduced. For the period 2021-2023 the economic growth is expected to be around
3.3% per annum.
Forecast for economic growth in 2019-2023 (%)
2019
2020
2021
2022
2023
2024
1. GDP real growth
5.0
-5.5
4.5
3.5
3.0
2.3
2. GDP nominal growth
8.4
-5.6
6.4
6.0
5.8
4.6
2a. GDP in current
prices (€bln)
28.1
26.5
28.2
29.9
31.7
33.1
*Source: Ministry of Finance 2020 summer forecast
The inflation stopped in 2020 at 2.3%. Due to the impact of the COVID-19 crisis, the CPI started
falling in April 2020 by -1% monthly. The returning growth in the number of COVID-19 cases in
August resulted in a low CPI in the 3
rd
and 4
th
quarter, adding up for the 2020 CPI to decrease by
0.4%. The CPI is expected to increase at the beginning of 2021 and be around 1.4% by the year
end.
Changes in CPI and construction price index have direct impact on both operating and capital
expenditures of Tallinna Vesi. According to the Statistics Estonia, average construction price
index increased compared to 2019 by 0.4% (2019: 1.9%). The strongest impact on the index came
from 0.1% increase in salaries, accompanied by 1.5% increase in the construction machinery
prices and 0.5% increase in construction material prices.
Tallinna Vesi is also dependent on the labour market. Labour market was strongly impacted by
the crisis, the fall was slightly eased by the Government’s salary compensation system. The
unemployment remained around 7.6% according to the Summer Macroeconomic Prognosis of
Ministry of Finance of Estonia. Highest unemployment increase occurred in the hospitality
sector, also in the construction and commercial sectors. Although the pandemic has raised the
unemployment, the skilled staff is still rather difficult to find. Regardless of the COVID-19 crisis,
the nominal growth in salaries during the first three quarters of 2020 was around 3% (Statistics
Estonia) and in 2021 it is expected to be minor in Estonia, which has an impact on Tallinna Vesi’s
profitability. Changes in the average salaries affect both the operating and capital expenditures.
AS Tallinna Vesi Annual Report 2020
42
MAIN FINANCIAL INDICATORS OF TALLINNA VESI
Main financial indicators
PERFORMANCE
€ million,
except key ratios and share data
2020
2019
2018
2017
2016
Sales
51.72
63.42
62.78
59.82
58.98
Gross profit
22.23
33.95
34.19
34.09
33.26
Operating profit before depreciation
and amortisation (EBITDA)
28.07
38.18
32.73
17.04
31.03
Operating profit
21.78
32.08
26.94
10.87
24.63
Operating profit - main business
21.32
31.19
26.22
10.25
24.46
Profit before taxes
21.34
31.30
25.95
9.92
22.89
Net profit
16.73
27.76
24.15
7.22
18.39
Gross profit margin %
42.98
53.53
54.45
56.99
56.39
EBITDA margin %
54.27
60.21
52.13
28.49
52.61
Operating profit margin %
42.12
50.57
42.91
18.16
41.75
Profit before taxes margin %
41.27
49.36
41.33
16.59
38.81
Net profit margin %
32.35
43.77
38.47
12.07
31.18
ROA %
6.45
10.83
10.10
3.27
8.70
Debt to total assets %
56.09
56.05
58.85
62.43
58.15
ROE %
14.69
25.43
25.61
8.24
20.62
Current ratio
3.85
5.48
5.36
5.51
3.91
Number of full-time equivalent
employees, at the end of the year
332
314
296
300
301
Share price, at the end of the year
13.25
11.70
9.60
10.20
13.80
Share capital
12.00
12.00
12.00
12.00
12.00
Earnings per share
0.84
1.39
1.21
0.36
0.92
Dividend per share
n/a*
n/a
*
0.75
0.36
0.54
Cash balance, at the end of the year
44.51
64.78
61.77
44.97
33.99
Investments to fixed assets
19.42
16.09
10.40
9.47
14.95
EBITDA: Operating profit + depreciation and amortisation
Gross profit margin: Gross profit / Sales
EBITDA margin: EBITDA / Sales
Operating profit margin: Operating profit / Sales
Profit before taxes margin: Profit before taxes / Sales
Net profit margin: Net profit / Sales
ROA: Net profit /Average Total assets for the period
Debt to Total capital employed: Total liabilities / Total capital employed
ROE: Net profit / Average Total equity for the period
Current ratio: Current assets / Current liabilities
Main business: water services related activities, excl. connections profit and government grants,
construction services, doubtful debt
*Dividends for 2020 have not been declared at the time of issuing the report.
AS Tallinna Vesi Annual Report 2020
43
6.2 Statement of comprehensive income
SALES
Tallinna Vesi’s tariffs were frozen at 2010 level until 1 December 2019, as on 18 October 2019,
the Competition Authority approved the tariffs of Tallinna Vesi. Additional information about the
tariff is provided in Note 15 to the consolidated financial statements and in 2020 quarterly
reports. Consequently, the changes in the main activity’s revenues, i.e. from sales of water and
wastewater services, were driven by lower tariffs and changes in the consumption of water
services due to the coronavirus outbreak, which raised the consumption in private sector and
reduced it in commercial sector. Private customers tariffs in the main service area reduced on
average around 27% and commercial tariffs 15%. According to Estonia’s macroeconomic
forecast, we expect a short-term decrease in our water services consumption also in the first
half of 2021. In the long-term, the Company does not expect significant changes in the water
services consumption.
In 2020, the Group’s total sales were €51.72 million, showing a decrease by 18.5% or €11.71
million year-on-year. 88.6% of the total sales came from the sale of water services to within and
outside the service area, 10.1% from construction services and 1.3% from other services. The
sale of construction services is more seasonal and the Group continues to seek possibilities to
maintain and grow the revenues of these services.
€ thousand
for the year ended 31 December
Variance 2020/2019
2020
2019
2018
€
%
Water supply service
8,106
13,781
14,179
-5,675
-41.2%
Wastewater disposal service
12,048
11,719
11,586
329
2.8%
Total from private customers
20,154
25,500
25,765
-5,346
-21.0%
Water supply service
7,209
11,482
11,733
-4,273
-37.2%
Wastewater disposal service
7,417
9,317
9,513
-1,900
-20.4%
Total from commercial customers
14,626
20,799
21,246
-6,173
-29.7%
Water supply service
1,593
1,622
1,465
-29
-1.8%
Wastewater disposal service
3,298
3,193
2,893
105
3.3%
Stormwater disposal service
291
426
322
-135
-31.7%
Total from outside service area
customers
5,182
5,241
4,680
-60
-1.1%
Stormwater treatment and disposal and
fire hydrants service
4,588
4,002
3,562
586
14.6%
Overpollution charges and discharging
1,250
1,324
960
-74
-5.6%
Total from water services
45,800
56,866
56,213
-11,066
-19.5%
Construction services
5,222
5,960
5,950
-738
-12.4%
Other services
695
597
617
98
16.4%
TOTAL REVENUE
51,717
63,423
62,780
-11,706
-18.5%
AS Tallinna Vesi Annual Report 2020
44
Sales from water services were €45.80 million, showing a 19.5% or €11.07 million decrease
compared to the twelve months of 2019, and resulted from the changes in the tariffs and sales
volumes as described below:
• There has been a decrease in sales to private customers by 21.0% to €20.15 million, mainly
related to the 27% lower water tariffs from 1/12/2019, accompanied by 5.2% increase in
consumption, worth -€6.67 million and +€1.33 million respectively. Higher sales in domestic
customer consumption came mainly from apartment blocks, which is also our biggest
private customer group, and were accompanied by individual houses.
• Sales to commercial customers within the service area has decreased by 29.7% to €14.63
million. The decrease is related to the 15% lower water tariffs from 1/12/2019, accompanied
by 18.5% decrease in consumption, worth -€2.31 million and -€3.86 million respectively.
Lower sales in commercial customers is related to decrease in the sales of all commercial
customer segments. The commercial customer sales were impacted by pandemic as hotels
and spas and entertainment facilities were operating with lower number of visitors and less
people were working in offices.
• Sales to customers outside the main service area decreased by 1.1% to €5.18 million, being
impacted by a decrease in the sales of water and stormwater services and water supply
services and were partly offset by higher wastewater service revenues, being also mainly
impacted by changes in tariffs, balanced by higher water and stormwater volumes.
• Sales from the operation and maintenance of the main service area stormwater and fire
hydrants system in the twelve months of 2020 amounted to €4.58 million, showing an
increase of 14.6% or €0.58 million year-on-year, driven mainly by averagely 10% higher
stormwater volumes, offset by lower cost per m3.
• Overpollution charges and discharging revenues have decreased by 5.6% to €1.25 million.
COST OF GOODS AND SERVICES SOLD AND GROSS PROFIT
Cost of goods and services sold were €29.49 million, increasing by 0.1% or €0.02 million
compared to the equivalent period in 2019.
€
thousand
for the year ended 31 December
Variance 2020/2019
2020
2019
2018
€
%
Water abstraction charges
-1,237
-1,219
-1,187
-18
-1.5%
Chemicals
-1,567
-1,664
-1,744
97
5.8%
Electricity
-3,256
-3,566
-2,849
310
8.7%
Pollution tax
-989
-1,089
-963
100
9.2%
Total direct production costs
-7,049
-7,538
-6,743
489
6.5%
Staff costs
-7,247
-6,602
-6,283
-645
-9.8%
Depreciation and
amortisation
-5,521
-5,420
-5,177
-101
-1.9%
Construction services
-4,256
-5,096
-5,204
840
16.5%
Other costs of goods sold
-5,418
-4,814
-5,187
-604
-12.5%
Total other costs of
goods/services sold
-22,442
-21,932
-21,851
-510
-2.3%
Total cost of goods/services
sold
-29,491
-29,470
-28,594
-21
-0.1%
Total direct production costs (water abstraction charges, chemicals, electricity and pollution tax
expenses) amounted to €7.05 million, showing a 6.5% or €0.49 million decrease compared to the
AS Tallinna Vesi Annual Report 2020
45
equivalent period in 2019. Changes in direct production costs came from a combination of
changes in prices and in treated volumes that affected the cost of goods sold together with the
following additional factors:
• Water abstraction charges increased by 1.5% to €1.24 million, driven mainly by higher water
volumes abstracted to water treatment process.
• Chemicals costs decreased by 5.8% to €1.57 million, driven mainly by on average 28% lower
price of methanol, accompanied by lower usage of methanol and polymer in wastewater
treatment to remove Nitrogen and Phosphorus, worth €0.13 million and €0.03 million
respectively. Lower wastewater treatment costs were partly balanced by higher usage of
coagulant in water treatment process, worth -€0.07 million.
• Expenses on electricity dropped by 8.7% or €0.31 million resulting in costs worth €3.25
million mainly due to 9.2% lower price and lower usage of electricity at the wastewater
treatment plant.
Other costs of goods sold (staff costs, depreciation, construction and asphalting services costs
and other costs of goods sold) amounted to €22.44 million, having increased by 2.3% or €0.51
million. The increase in other costs of goods sold were mainly driven by 12.5% higher other costs
of goods and services sold which amounted to €5.42 million and 9.8% higher staff costs
amounting to €7.25 million. In addition, it was accompanied by 16.5% lower costs relating to
construction services amounting to €4.25 million.
Consequently, the Group’s gross profit for the twelve months of 2020 was €22.23 million, showing
a decrease of 34.5% or €11.73 million compared to the comparative period of 2019.
ADMINISTRATIVE AND MARKETING EXPENSES. OTHER INCOME AND EXPENSES
Administrative and marketing expenses were €5.01 million, showing a decrease by 17.6% or
€1.07 million, being mainly impacted by lower legal costs resulting from the ICSID award
according to which Tallinna Vesi was liable to pay for 25% of Estonian legal costs related to this
matter.
Other income and expenses in 2020 amounted to a net income of €4.57 million compared to net
income of €4.20 million in 2019. The change was mainly impacted by higher connection fees
compared to 2019 in the amount of €0.54 and €0.39 respectively accompanied with positive
change in the amount of €4.81 million in the expense for provision formed for possible third-
party claims in 2019 compared to slightly lower positive change in 2019 in the amount of €4.63
million, if those are to be recognised by the court. This estimate marks the maximum difference
between revenues calculated with tariffs established based on the Services Agreement and the
tariffs based on the Company's estimation, with the reservation to a possible fluctuation.
According to the law, the tariffs established based on the Services Agreement were in force until
the Competition Authority approved the new tariffs, and the Company implemented these tariffs
in line with the law. The Company has acted in good faith and in reliance on the applicable legal
acts. Thus, the Company does not consider itself liable to the customers for any claims related
to the tariffs it had applied until the new tariffs approved by the Competition Authority were duly
implemented. Additional information is provided in Note 15 to the consolidated financial
statements.
OPERATING PROFIT
AS Tallinna Vesi Annual Report 2020
46
As a result of the factors listed above, the Group’s operating profit for 2020 amounted to €21.78
million, being 32.1% or €10.29 million lower than in the corresponding period of 2019, mainly
influenced by lower revenues in main service area that is affected by lower tariffs starting from
01/12/2019 and decrease in consumption of commercial customers.
FINANCIAL EXPENSES
The Group’s net financial income and expenses have resulted in a net expense of €0.44 million,
compared to net expense of €0.77 million in the twelve months of 2019. The decrease was
impacted by lower interest costs and higher positive change in the fair value of the swap
contracts year-on-year, worth €0.48 million and €0.18 million respectively.
The standalone swap agreements were signed to mitigate the long-term floating interest risk.
The interest swap agreements were signed for €37.5 million and ended in November 2020, €50.22
million are with floating interest rate. By the end of 2020, the whole loan amount of €87.72 million
is bearing an effective interest rate (incl. swap interests) of 0.76% resulting in interest costs of
€0.67. In 2019, the effective interest rate was 1.02%, resulting in interest costs of €0.95 million.
PROFIT BEFORE TAXES AND NET PROFIT
The Group’s profit before taxes for 2020 were €21.34 million, being 31.8% or €9.96 million lower
than for the relevant period of 2019. The Group’s net profit for the twelve months of 2020 was
€16.73 million, being 39.7% or €11.03 million lower than for the equivalent period of 2019.
Eliminating the effects of the change in the derivatives fair value and the change in the provision
for the possible third-party claims, the Group’s net profit for the twelve months of 2020 would
have been €11.70 million, showing a decrease by 49.1% or €11.28 million year-on-year.
6.3 Statement of financial position
The cash balance of the Group remains strong being €44.51 million, which is 17.4% of the total
assets (31/12/2019: €64.78 million, forming 24.6% of the total assets).
In 2020, the Group invested €19.42 million. As of 31/12/2020, non-current tangible assets
amounted to €201.07 million and total non-current assets amounted to €203.43 million
(31/12/2019: €189.63 million and €190.34 million respectively).
Compared to the year end of 2019, the trade receivables, accrued income and prepaid expenses
have shown a decrease in the amount of €0.22 million to €7.02 million. Decrease mainly derives
from lower trade receivables related to water and construction services and lower accrued
income, by €0.44 million and €0.06 million respectively. The collectability rate continues to be
high at 99.55% level, as of December 2019 the collectability rate was 99.73%.
Current liabilities have increased by €0.31million to €13.55 million compared to the year end of
2019.
Deferred income from connection fees has grown compared to the end of 2019 by €3.49 million
to €34.56 million.
Provision for possible third-party claims has decreased compared to the end of 2019 by €4.81
million to €9.63 million by changes mentioned in the section of the 4th quarter Other income and
expenses results. More detailed information about the provision is presented in Note15 to the
financial statements.
AS Tallinna Vesi Annual Report 2020
47
The Group’s loan balance has decreased, being €87.72 million. In May 2019, the Company started
to return the old NIB loan with 11 equal semi-annual payments. The weighted average loan
interest risk margin is 0.66%.
Deferred Tax Liability is recorded according to International Financial Reporting Standards
(IFRS) Interpretation Committee agenda decision in June 2020, according to which deferred tax
shall be recognized for all taxable differences associated with investments in subsidiaries unless
it is probable that the profits will not be distributed in the foreseeable future (IAS 12.39-40). AS
Tallinna Vesi has assessed the impact of the IFRS Interpretation Committee agenda decision and
has reached a conclusion of the amount not being material, therefore no correction into previous
reporting periods is made and the total impact of deferred tax amount is recognized in financial
statements for the year 2020.
The Group has a total debt to assets level of 56.09%, in range of 55%-65%, reflecting the Group’s
equity profile. In the comparative period of 2019, the total debt to assets ratio was 56.05%.
6.4 Cash flow
As of 31/12/2020, the cash position of the Group is strong. At the end of December 2020, the cash
balance of the Group stood at €44.51 million, which was 17.4% of the total assets (31/12/2019:
€64.78 million, forming 24.6% of the total assets).
The biggest contribution to the cash flows comes from the main operating activities. During the
twelve months of 2020, the Group generated €22.62 million of cash flows from operating
activities, a decrease of €11.40 million compared to the corresponding period in 2019. Underlying
operating profit continues to be the main contributor to operating cash flows.
In the twelve months of 2020, the result of net cash flows from investing activities was a cash
outflow of €13.62 million, an increase of €6.25 million compared to the cash outflow of €7.37
million in the twelve months of 2019. This is made up as follows:
• The cash outflows from investments in fixed assets have increased by €5.24 million
compared to 2019, amounting to €15.68 million.
• The compensations received for pipe construction were €1.99 million, showing a
decrease of €1.01 million compared to the same period of 2019.
In the twelve months of 2020, the cash outflow from financing activities amounted to €29.26
million, increasing by €5.62 million compared to the same period in 2019. The change was mainly
related to higher dividend payment, balanced partly by lower interest payments, by +€4.92 million
and -€0.34 million respectively.
AS Tallinna Vesi Annual Report 2020
48
6.5 Investors
We aim to be transparent and honest through our business activities, giving timely and accurate
information to our shareholders. We treat all our shareholders equally and are dedicated to
efficiency while ensuring the sustainability of the Company.
Shareholders by type as of 31 December 2020
AS Tallinna Vesi Annual Report 2020
49
Distribution of share capital by size of share ownership as of 31 December 2020
Share-
holders
2020 (2019)
Shareholders
% 2020 (2019)
No. of shares
2020 (2019)
% of share
capital
2020 (2019)
1 - 100
4,842 (2,334)
58.2% (42.5%)
174,694 (112,845)
0.9% (0.6%)
101 – 200
1,092 (925)
13.1% (16.8%)
167,914 (144,317)
0.8% (0.7%)
201 – 300
532 (480)
6.4% (8.7%)
137,315 (124,541)
0.7% (0.6%)
301 - 500
562 (497)
6.8% (9.0%)
232,736 (206,321)
1.2% (1.0%)
501 - 1,000
568 (539)
6.8% (9.8%)
431,077 (405,505)
2.2% (2.0%)
1,001 - 5,000
571 (558)
6.9% (10.2%)
1,252,070 (1,205,173)
6.3% (6.0%)
5,001 - 10,000
77 (82)
0.9% (1.5%)
571,095 (598,039)
2.9% (3.0%)
10,001 - 50,000
57 (59)
0.7% (1.1%)
1,125,283 (1,167,807)
5.6% (5.8%)
50,000 +
19 (19)
0.2% (0.3%)
15,907,816 (16,035,452)
79.5% (80.2%)
TOTAL 2020
8,320
100.0%
20,000,000
100.0%
TOTAL 2019
5,493
100.0%
20,000,000
100.0%
Investor communication
Tallinna Vesi is a listed company and its shares have been listed on Nasdaq Baltic market since
1 June 2005. A company’s market value is a good indication of the overall value of the company
and the investors’ perceptions of its business prospects. Market value is affected not only by
factors controlled by the Company but also by those, which cannot be controlled. Profitability and
cost effectiveness are major influences on market value and can be controlled by the
Management Board of the Company.
Given the new water and wastewater service tariffs approved by the Estonian Competition
Authority on 18 October 2019, which were applied by Tallinna Vesi from 1 December 2019
onwards, the prices decreased on average by 27% for private customers and by 15% for
commercial customers. The change in tariffs had the biggest impact on our decreased revenue
stream in 2020, accompanied by impact from the COVID-19 pandemic-related increase in private
customer and outside area consumption and decreased commercial customers consumption. In
addition, similarly to 2019, attention was paid to the growth of non-regulated revenues, i.e.
construction revenues, but the pandemic also had a negative impact on this revenue stream.
Continuing and transparent communication is one of the main factors in maintaining excellent
investor relations. Therefore, we continue to regularly communicate our targets, strategy and
performance to the investors as well as to all other stakeholders. Each quarter, we introduce the
Company’s quarterly financial results to the investors and take part in discussions on the
webinars. Additionally, we hold regular meetings with key institutional shareholders and
potential investors and the Company’s Management Board. All shareholders are welcome to ask
questions from the members of the Management Board and the Supervisory Board at the Annual
General Meeting of Shareholders.
We have worked hard on our investor relations programme since the listing of Tallinna Vesi on
the Tallinn Stock Exchange and will continue to do so in the following years. In order to further
AS Tallinna Vesi Annual Report 2020
50
improve the transparency of our Management Board’s activities to shareholders, we applied and
have reported good corporate governance recommendations on a regular basis since 2006.
Our contribution to maintaining excellent investor relations has also been recognised externally.
DIVIDENDS
Dividend allocation to the shareholders is recorded as a liability in the financial statement of
Tallinna Vesi at the time when the profit allocation and dividend payment are confirmed by the
Annual General Meeting of shareholders.
In 2020, Tallinna Vesi’ Supervisory Council approved a new divided policy, which is also published
on Tallinna Vesi’s website and states that Tallinna Vesi aims to distribute 50%-80% of the annual
profit as dividends. Dividend payments shall be assessed annually considering ASTV’s earnings,
investment needs, liquidity position and long-term financial objectives.
In the Annual General Meeting of shareholders held on 28 May 2020, €1.00 dividends per share
and the total dividend pay-out from the profit of 2019 net income in the amount of €20.0 million
was approved, which forms 72.0% from earnings per share in 2019.
Dividends were paid out on 26 June 2020. Dividend pay-outs in the last five years have been as
follows:
18,001
10,801
7,201
15,001
20,001
0.90
0.54
0.36
0.75
1.00
0.00
0.20
0.40
0.60
0.80
1.00
1.20
0
5,000
10,000
15,000
20,000
25,000
2016 2017 2018 2019 2020
Dividend pay-out Dividend per share
AS Tallinna Vesi Annual Report 2020
51
SHARE PERFORMANCE
Tallinna Vesi is listed on Nasdaq Baltic market with trading code TVEAT and ISIN EE3100026436.
As of 31 December 2020, Tallinna Vesi shareholders, with a direct holding over 5%, were United
Utilities (Tallinn) B.V. (35.3%) and City of Tallinn (34.7%).
The shareholder structure has been relatively stable throughout 2020 compared to the end of
2019. At the end of 2020, the pension funds owned 0.69% of the total shares compared to 0.97%
at the end of 2019.
As of 31 December 2020, the closing price of Tallinna Vesi’s share was €13.25, which is 13.25%
higher than at the beginning of the year €11.70 (in 2019: the price increased by 21.88% compared
to the opening price in 2019 of €9.6). During 2020 the OMX Tallinn index increased less than
Tallinna Vesi share, increasing by 5.00% (2019: increase by 10.05%).
22,812 deals with the Tallinna Vesi’s shares were concluded in 2020 (2019: 3,996 deals), during
which 1,403 thousand shares or 7.0% of total shares changed their owners (2019: 595 thousand
or 3.0%).
The turnover of the transactions was €11.01 million higher than in 2019, amounting to €17.49
million (2019: €6.48 million).
CLOSING PRICE AND ADJUSTED OMXT VS TRANSACTIONS TURNOVER
AS Tallinna Vesi Annual Report 2020
52
SHARE PRICE STATISTICS
€
2020
2019
2018
2017
2016
Share price, open
11.70
9.60
10.20
13.70
13.80
Share price, at the end of the year
13.25
11.70
9.60
10.20
13.80
Share price, low
10.70
9.54
9.54
8.52
13.30
Share price, high
13.70
11.95
11.35
14.00
15.10
Share price, average
12.64
10.98
10.39
12.81
14.12
Traded volume, thousand
1,403
595
765
1,346
1,048
Turnover, € million
17.49
6.48
7.95
16.48
14.71
Capitalisation, € million
265
234
192
204
276
Earnings per share
0.84
1.39
1.21
0.36
0.92
Dividend per share
n/a*
1.00
0.75
0.36
0.54
Dividend / net profit
n/a*
72%
62%
100%
58%
P/E
15.77
8.42
7.93
28.33
15.00
P/BV
2.4
2.0
1.9
2.4
3.1
P/E = share price at the end of the year / earnings per share
P/BV = share price at the end of the year / book value per share
Capitalization = share price at the end of the year * No of shares
In 2005 the listing price was
€
9.25
*Dividends for 2020 have not been declared at the time of issuance of the report.
AS Tallinna Vesi Annual Report 2020
53
6.6 Activities of the subsidiary Watercom OÜ
Watercom was established by Tallinna Vesi in 2010.
Watercom provides the following services:
• Construction services and design of pipes;
• Services related to road maintenance;
• Project management and owner’s supervision;
• Jet washing and transportation.
Watercom is certified by the following standards: ISO 9001:2015, ISO 14001:2015 and OHSAS
18001:2015.
WATERCOM’S MAIN OBJECTIVES AND DEVELOPMENT TRENDS IN THE NEXT YEAR
2020 was an active and successful year for Watercom despite the pandemic affecting the overall
economic climate. The challenging target set for external profit was not achieved, however, the
growth is expected to be sustained also in 2021. In 2020, Watercom could not deliver more
external revenue, but was able to grow external profit higher than ever before. This has always
been one of the main objectives of Watercom and we hope to maintain the same pace in 2021.
In 2020, Watercom successfully launched a new pipe disinfection service for internal and external
customers. Also, Watercom made the largest investment after establishing the company by
purchasing a new jet-wash vehicle and 4 new excavators in Transportation department, to
further enhance efficiency and grow revenues.
Outlook for 2021 remains positive with expectations to find new opportunities to achieve the
highest ever external sales and profit figures despite the current economic situation. Watercom
will continue monitoring various possibilities of further development and launching new services
to grow externally.
PIPE AND ROAD CONSTRUCTION
In 2020, the construction of water and wastewater
networks for developers, companies and
individuals was Watercom’s main activity.
Construction of pipes is carried out under the
trademark Veemees. Similar to previous years,
the focus was on feasible construction projects
and procurements in Tallinn and elsewhere in
Estonia. Watercom was able to win several
procurements from the external market.
2020 was a reasonably good year in the construction sector despite the pandemic – an increase
in financing provided by the European Union Cohesion Fund and state funds was offset by setback
in real estate development in Tallinn and nearby areas as the start of some projects were
postponed. Construction market is still extremely competitive and therefore, efficient cost
AS Tallinna Vesi Annual Report 2020
54
management is crucial in achieving sustainable profitability. In 2020, the construction margin
was raised through the improved controls to manage costs more efficiently. Although the
construction market was active in 2020, it is still unclear how the pandemic affects the real estate
market and especially the financial situation of developers as we have noticed a decreasing trend
in demand after the start of pandemic in the 2
nd
quarter of 2020. With some of the developers
and main contractors unfreezing their postponed projects we expect the pressure to ease a little
bit in 2021, however, we expect the construction market to normalise in 2022.
External road construction market was more active in 2020, and Watercom won procurements
and carried out several external works in Tallinn and surrounding municipalities.
OTHER SERVICES
During 2020, Watercom carried out several supervision contracts for the tender on public water
supply and sewerage system in Türisalu and Vändra it had won from the market in 2019.
Watercom is also concentrating on smaller external supervision projects in Tallinn and
surrounding municipalities. In 2021, Watercom will continue to seek additional possibilities to
retain and increase the sales of supervision services by participating in various procurements.
Jet washing and transportation services are mostly provided within the Group, but are also
available to external customers. Proactive jet washing program has helped to keep much better
control on the number of sewer blockages. In 2020, Watercom invested to new machinery to
provide services more efficiently and grow jet washing and transportation revenues.
6.7 Objectives: financial performance
FINANCIAL OBJECTIVES OF 2020
Watercom’s external profit ≥€0.67 million
Not achieved
Savings compared to 2019 budget ≥€0.25 million
Achieved
FINANCIAL OBJECTIVES OF 2021
Watercom’s external profit
≥€0.6 million
Stretch compared to budgeted EBITDA, excl. Covid-19 impacts and
extraordinary costs
≥€0.5 million
AS Tallinna Vesi Annual Report 2020
55
7. CORPORATE GOVERNANCE
7.1 Corporate Governance Report
Corporate governance is a system of principles for the control and management of a company.
These principles are regulated by law, by the Articles of Association and by the internal rules of
a company. As of 1 January 2006, the companies listed on the Nasdaq Tallinn Stock Exchange
have been encouraged to follow the Corporate Governance Recommendations issued by the
Financial Supervision Authority. Tallinna Vesi is committed to following those recommendations
and has acted accordingly throughout 2020.This report covers the principles applied as of 31
December 2020.
Tallinna Vesi is committed to high standards of corporate governance, for which the Management
Board and the Supervisory Board are accountable to the shareholders. The corporate
governance model and operational structure are designed to ensure that all employees work
towards the common objectives of the Company. Good corporate governance, internal controls
and risk management are all key elements to a successful business. Good corporate governance,
transparency, sustainability, internal controls and risk management are fundamental
components to build and maintain the trust and credibility of all stakeholders of the Company.
Tallinna Vesi considers it crucial to be transparent in its methods of operation through its
corporate disclosures and relations with stakeholders. Tallinna Vesi has received recognition for
the best investor relations by Nasdaq Baltic on several occasions.
Since 2010, Tallinna Vesi has been a member of the Baltic Institute of Corporate Governance,
which promotes the best practices of corporate governance in the region.
Investor Relations and Disclosure of Information
Corporate Governance Recommendations statements are available on Tallinna Vesi’s website
https://www.tallinnavesi.ee. The Corporate Governance Recommendations Report is an integral
part of the Annual Report of Tallinna Vesi, which is prepared at the end of each financial year.
Annual reports are made public on the Nasdaq Tallinn Stock Exchange and are also available on
the Company’s website.
Tallinna Vesi discloses the following year’s financial calendar on the Nasdaq Tallinn Stock
Exchange prior to the end of each calendar year. Such information includes the release dates of
quarterly as well as annual financial information and the date of Annual General Meeting (AGM)
of Shareholders. All information disclosed via the Nasdaq Tallinn Stock Exchange is also
subsequently made available on Tallinna Vesi’s website.
Additionally, prior to the AGM, Tallinna Vesi discloses the following information on its website:
• AGM notice;
• background information about the agenda, including the Annual Report to be approved, the
Supervisory Board´s report and the Auditor´s report;
• information about the Supervisory Board member(s) to be elected and the auditor candidate;
• the total number of voting rights and number of voting rights by share type;
AS Tallinna Vesi Annual Report 2020
56
• procedure for adding items to the agenda and presenting draft resolutions;
• procedure for inquiring about the Company’s activities from the Management Board;
• the list of identification documents required for attending the general meeting, including the
form for power of attorney.
Decisions of the General Meetings and Management Board presentations are being published
shortly after the meeting via Nasdaq Tallinn Stock Exchange. Finalised and certified minutes of
the General Meetings are published within seven days following the date of the General Meeting.
All documents and information published via Nasdaq Tallinn Stock Exchange are available on
Tallinna Vesi’s website.
Tallinna Vesi holds regular discussions with its major shareholders and potential investors. To
this end, the Company holds General Meetings for shareholders, not less than once a year, to
keep shareholders informed and to provide them with an opportunity to question directly the
Management Board and the Supervisory Board. The Management Board also meets both existing
and potential investors outside of the General Meetings including but not limited to meetings on
site, roadshows, by being present in conferences, through webinars and investor calls.
Tallinna Vesi organises quarterly investor webinars, using the Nasdaq webinar service. Webinar
is a virtual conference, in which the Company representatives provide information about the
Company and its performance. Webinar allows interactive communication and the possibility to
ask questions and receive answers directly from the Management Board members of the
Company. The webinar information is announced via the Nasdaq Tallinn Stock Exchange and is
open to all interested parties. All webinar recordings and presentations are disclosed on the
Nasdaq Tallinn Stock Exchange and Tallinna Vesi’s website.
General Meeting of Shareholders
Tallinna Vesi is a public limited company, the management bodies of which are the General
Meeting of Shareholders, the Supervisory Board and the Management Board. The General
Meeting of Shareholders is Tallinna Vesi’s highest management body.
In accordance with the Commercial Code and Corporate Governance Recommendations,
Tallinna Vesi convenes both Annual General Meetings (AGM) and Extraordinary General Meetings
(EGM) by notifying all of its shareholders via Nasdaq Tallinn Stock Exchange and by publishing
information on its website and in one national daily newspaper at least 3 weeks in advance.
Information related to General Meetings is disclosed in Estonian and English on the Company’s
website and in Stock Exchange announcements. The announcement in the daily newspaper is
published only in Estonian.
The agendas of AGMs and EGMs of Tallinna Vesi are pre-approved by the Supervisory Board, who
also put forward proposals that require attention and are subject to voting at the General
Meeting. General Meeting’s agenda items, Supervisory Board’s proposals along with relevant
comments about the agenda items, procedural instructions for participating in a General
Meeting and procedure for proposing additional items to the agenda are disclosed along with the
General Meeting notice.
Specific rights for adding agenda items granted to shareholders, whose shareholding represents
at least 1/20 of the share capital, are described in the General Meeting notice, as well as on
AS Tallinna Vesi Annual Report 2020
57
Tallinna Vesi’s website. Voting rights are explained to the shareholders in the AGM notice on the
Company’s website as well as at the beginning of each General Meeting.
On 28 May 2020, Tallinna Vesi held the Annual General Meeting (AGM) of its shareholders to
approve the 2019 Annual Report, distribution of profit, to extend the authorities of three
Supervisory Board members and elect an auditor. The Management Board made a presentation
on the overall performance of the Company, highlighting the improvements in the occupational
environment and safety area as well as in the financial and operational performance. No
questions regarding the items in the 2020 AGM agenda were asked, nor were any additional
agenda items proposed in 2020.
The Chairman of an AGM is an independent person. In 2020, the AGM was chaired by Mr. Urmas
Volens, who introduced the procedure for conducting the General Meeting, including the
procedure for inquiring about Tallinna Vesi’s activities from the Management Board.
All members of the Management Board participated in the 2020 AGM. When a Supervisory Board
member or a lead auditor stands for election at the General Meeting, the candidate for the
respective position usually participates in the Meeting with exception to extraordinary times like
in 2020. Therefore, in order to avoid any unnecessary health risks to the shareholders, the
Company’s employees, the Management Board as well as to the Supervisory Board members,
the Supervisory Board member candidates as well as a representative of the audit firm did not
participate in the 2020 AGM.
In 2020, AGM Tallinna Vesi allowed its shareholders, who did not want to appear in person due
to COVID-19 extraordinary situation, to vote in the General Meetings using electronic means. For
electronic voting, a shareholder had to fill out the voting ballot and sign it digitally (using ID-card,
digi-ID or Mobiil-ID) and e-mail the digitally signed ballot to Tallinna Vesi before the AGM day.
The shareholders, who voted using electronic means, were deemed as having participated in the
General Meeting and their votes represented by shares were counted in the quorum of the
General Meeting. Electronic voting is allowed under the Articles of Association of the Company.
No shareholders have shares granting them the right for specific control. Tallinna Vesi is
unaware of any shareholders having concluded any voting agreements.
As per the Articles of Association of Tallinna Vesi, Tallinna Vesi has issued one registered
preferred share with a nominal value of €60 (B share). The B share grants the holder the right to
participate in General Meetings, in the distribution of profits and disposal of assets remaining
upon dissolution of Tallinna Vesi and other rights provided by law and by the Articles of
Association of Tallinna Vesi. The B share grants the holder preferential right to receive a dividend
to an agreed sum of €600. The B share grants the shareholder 1 (one) vote at the General Meeting
(restricted right to vote) when deciding on amendments to the Articles of Association of Tallinna
Vesi, on increasing or reducing the share capital of Tallinna Vesi, on issuing convertible bonds,
on acquisition of treasury shares by Tallinna Vesi, upon deciding on a merger, division,
transformation and/or dissolution of Tallinna Vesi and upon deciding issues related to the
activities of Tallinna Vesi that have not been placed under the exclusive competence of the
General Meeting by the law. The Company has 20 million A shares, every A share gives one vote.
AS Tallinna Vesi Annual Report 2020
58
Supervisory Board
The Supervisory Board plans the activities of Tallinna Vesi, organises its management and
supervises the activities of the Management Board. Pursuant to the Articles of Association of
Tallinna Vesi, the Supervisory Board consists of nine members each with a term of two years. In
2020, five regular and one extraordinary Supervisory Board meetings were held. The Supervisory
Board pre-approved the 2019 Annual Report and reviewed the dividend proposal, both of which
were then presented to the Annual General Meeting for approval, and reviewed Tallinna Vesi’s
budget for 2020. Additionally, in its meetings, the Supervisory Board reviewed major risks that
the Company faced, regulatory and legal issues, matters regarding operations, finances,
reporting, investments, human resources, customer service as well as customer and employee
satisfaction, health and safety, market development for non-regulated businesses, COVID-19
situation for the Company and other operational and business matters.
The following points are usually brought up at every Supervisory Board meeting:
• minutes of the previous meeting;
• information on issues dealt with by the Supervisory Board’s committees as appropriate;
• the Management Board report covering the following areas: operational, legal and
regulatory, financial, communication, human resources, health, safety and quality, non-
regulated business;
• major projects and issues;
• financing decisions and policies;
• decisions on special cases.
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At the time of compiling this report, Tallinna Vesi’s Supervisory Board consisted of the following
members:
Tallinna Vesi has not made any transactions with members of the Supervisory Board nor their
related parties.
The Supervisory Board has formed three committees to advise the Supervisory Board on audit,
on nomination and remuneration and on corporate governance matters as described below.
Audit Committee and Internal Audit
The Audit Committee is the subcommittee to the Supervisory Board, which provides an oversight
of the financial reporting process, the audit process, the systems of internal controls, review of
risk management and assessment and compliance with the laws and regulations. The Audit
Committee follows the Auditors Activities Act and the guidelines issued by the Financial
Supervision Authority regarding the composition and working processes of an Audit Committee.
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The main responsibilities of the Audit Committee are:
• to review quarterly and annual financial statements, including reporting to the Supervisory
Board on significant issues considered by the Audit Committee in relation to the financial
statements and how those issues were addressed;
• to monitor and analyse the effectiveness of risk management systems and internal controls;
• to review the annual report and the scope, processes and results of the annual audit and to
report to the Supervisory Board on the effectiveness of the audit process;
• to monitor and analyse the independence and objectivity of external auditors and the legality
of their activity regarding Tallinna Vesi and how the objectivity has been safeguarded;
• to annually evaluate the work of external auditors and report to the Supervisory Board about
the results of such evaluation;
• to make recommendations to the Supervisory Board for the appointment or reappointment of
the external auditor and to be responsible for the tender of the external audit and agree on
the fees paid to the auditor;
• to monitor the independence of the internal auditor;
• to review the scope effectiveness of the internal audit function, including reviewing and
approving the annual audit plan.
At the time of compilation of this report, the Audit Committee consisted of the following members
of the Supervisory Board:
Each Supervisory Board meeting, an internal audit report is presented to the Supervisory Board.
In 2017-2020, the internal audit services were bought from Ernst & Young Baltics AS. The internal
auditor of Tallinna Vesi reports directly to the Audit Committee.
Neither the appointed external financial auditor nor any member of the external audit team can
provide any service outside the scope of annual audits without prior approval from the Audit
Committee. In 2020, the external auditor did not provide any services to the Group outside the
scope of the annual audit for financial accounts, except for external assurance provided on GRI
Standard reporting referred to in GRI index for the period ended 31 December 2019. In 2020, the
corporate social responsibility and sustainability reports will also be externally audited.
Pursuant to the Articles of Association of Tallinna Vesi, an external auditor, whose responsibility
is to conduct the annual audit, is elected by the General Meeting of Shareholders. Tallinna Vesi
chooses its external auditor through a procurement process, ensuring the best match of service
quality and the price offered for the services. Qualification criteria are strict in order to get the
best service in the market. The selected auditors are approved by the Audit Committee and the
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Supervisory Board before being voted by the General Meeting of Shareholders. The procurement
for auditing the year ending 31 December 2021 will be carried out in 2021. In 2020, the Group
paid €23.8 thousand for the annual financial audits against the relevant invoices issued (€17.7
thousand in 2019) and €39.0 thousand for internal audit services against the relevant invoices
issued (€29.0 thousand in 2019). According to the Good Corporate Governance principles of
Tallinna Vesi, the lead auditor needs to be re-appointed at least every 5 years. The Company has
also followed the Financial Supervision Authority guidelines dated 1 November 2013 “Rotation of
the auditors of certain subjects of financial supervision by the state”, which sets forth the
requirement to rotate the lead auditor every 5 years. The lead auditor is currently Eva Jansen-
Diener.
Based on the report of the Audit Committee, the Supervisory Board evaluates the quality of the
work of the external auditor annually in the course of the approval of the Annual Accounts, and
discloses the summary of such evaluation in the AGM notice. The external auditor is present at
the AGM and participates where necessary.
Nomination and Remuneration Committee
In 2020, the Nomination and Remuneration Committee continued to advise the Supervisory
Board on management remuneration issues and Management Board nominations.
At the time of compilation of this report, the Nomination and Remuneration Committee consisted
of the following members of the Supervisory Board:
The Supervisory Board approves the remuneration principles of the issuer’s managers and
appoints the Nomination and Remuneration Committee. The Nomination and Remuneration
Committee recommends the remuneration principles for Tallinna Vesi and exercises due
supervision to ensure that the principles approved by the Supervisory Board and the
requirements of the Securities Market Act are being followed.
The Nomination and Remuneration Committee ensures that the remuneration principles
proposed are based on the short-term and long-term objectives of Tallinna Vesi, taking into
account the financial performance of Tallinna Vesi and the legitimate interests of investors. The
Nomination and Remuneration Committee also ensures that the proportion of remuneration for
the principal job and performance related pay (PRP) are in accordance with the duties of the
Management Board Member and that the remuneration for the principal job forms a sufficient
part of the total remuneration. According to the existing PRP principles, members of the
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Management Board are entitled to a maximum PRP of 25% of their annual gross salary. The PRP
to be paid out for 2020 depends on the annual financial and operational performance of the
Company, 80% of the PRP is related to Group objectives and 20% of PRP is related to specific
individual objectives. If the annual results are worse than expected, a decision may be taken not
to pay out any PRP.
The Nomination and Remuneration Committee ensures also that the selection of the Member of
the Management Board members is appropriate, and that the candidate proposed to the
Supervisory Council has a required background, education and experience.
Corporate Governance Committee
In 2020, the Corporate Governance Committee continued to advise the Supervisory Board on the
improvement of corporate governance of Tallinna Vesi for the benefit of its Supervisory Board
and shareholders.
At the time of compilation of this report, the Corporate Governance Committee consisted of the
following members:
Management Board
The Management Board is a management body that represents and manages the day-to-day
business of Tallinna Vesi in accordance with the law and the Articles of Association of Tallinna
Vesi. The Management Board is obliged to act in the most economically efficient manner. The
Management Board may be composed of two to five members, in line with the Articles of
Association, and is elected for a term of 3 years. The Management Board always prepares
management reports for the Supervisory Board meetings and such reports are distributed to the
Supervisory Board members 1 (one) week in advance of the meeting, as required by the
Commercial Code. The Management Board also reports ad hoc to the Supervisory Board outside
of meetings, when considered necessary, and if so requested by the Chairman of the Supervisory
Board.
Both Management Board and Supervisory Board Members are deemed to be insiders who are
aware of Tallinna Vesi’s insider rules and, along with their related persons, are listed in the
Group’s insider list. Tallinna Vesi has had three Management Board members from 2 June 2014.
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From 1 January 2020, the members are as follows:
The Supervisory Board of Tallinna Vesi has appointed all Management Board members.
The responsibilities of all Management Board members are specified below.
The duties of the Chairman of the Management Board, Mr. Karl Heino Brookes, are to, inter alia,
fulfil the everyday obligations of the Chief Executive Officer (CEO) of Tallinna Vesi by leading and
representing Tallinna Vesi, by ensuring its compliance with contracts and the law, by organizing
the activities of the Management Board and by coordinating the preparation of strategies and
ensuring the implementation thereof.
The duties of the member of the Management Board, Mr. Aleksandr Timofejev, are to, inter alia,
fulfil the everyday obligations of the Chief Operations Officer (COO) of Tallinna Vesi by managing
and being responsible for the operations of the treatment facilities, and the management of
Tallinna Vesi’s water and sewerage networks’ everyday operations, as well as being responsible
for relations established with external partners.
The duties of the member of the Management Board, Ms. Kristi Ojakäär are to, inter alia, fulfil
the everyday obligations of the Chief Financial Officer (CFO) of Tallinna Vesi by managing and
being responsible for the accounting and financial activities of Tallinna Vesi and the planning and
delivery of long-term investments.
Tallinna Vesi has signed service contracts with all members of the Management Board. Tallinna
Vesi has not made any transactions with the members of the Management Board nor with any of
their related parties outside the main services.
According to the Articles of Association of Tallinna Vesi, the Chairman of the Management Board
has the sole representation right of Tallinna Vesi; other Management Board members can
represent Tallinna Vesi only jointly. In order to make daily decisions, the Management Board has
approved the framework of principles, according to which certain Management Team members
are authorized to conclude transactions of low value.
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The Management Board of Tallinna Vesi also acts on behalf of Tallinna Vesi as the sole
shareholder of Watercom.
EQUAL OPPORTUNITIES AND DIVERSITY IN SELECTING MANAGEMENT BOARD AND
SUPERVISORY BOARD MEMBERS
In selecting members to the Management and Supervisory Boards, Tallinna Vesi is committed to
the principles of equality being adhered to. Nobody is discriminated against because of their age,
gender, religion, ethnic origin or other characteristics. In selecting Management Board and
Supervisory Board members, their experience in the business or area of expertise, education
and background are considered to be the most important criteria, in order to provide an effective
and balanced Board. The allocation between men and women in the Management Board is
outlined in the Management Report. There is one woman in the Management Board and one
woman in the Supervisory Board.
CONFORMITY WITH NASDAQ TALLINN STOCK EXCHANGE CORPORATE
GOVERNANCE RECOMMENDATIONS
As of 1 January 2006, the companies whose shares have been admitted for trading on the
regulated market operating in Estonia shall describe, in accordance with the ‘Comply or Explain’
principle, their management practices in a Corporate Governance report and confirm their
compliance or non-compliance with the Corporate Governance Recommendations. If the issuer
fails to comply with the Corporate Governance Recommendations, it shall explain the reasons
for its non-compliance in the report.
DECLARATION OF CONFORMITY BY TALLINNA VESI
In 2020, Tallinna Vesi complied with the vast majority of the Corporate Governance
Recommendations. However, Tallinna Vesi did not comply with certain recommendations, which
are listed below along with the reasons for such non-compliance:
”2.2.3. The basis for Management Board remuneration shall be clear and transparent. The
Supervisory Board shall discuss and review regularly the basis for Management Board
remuneration. Upon determination of the Management Board remuneration, the Supervisory
Board shall be guided by evaluation of the work of the Management Board members. Upon
evaluation of the work the Management Board members, the Supervisory Board shall, above all,
take into consideration the duties of each member of the Management Board, their activities, the
activities of the entire Management Board, the economic condition of the Issuer and the actual
state and future prediction and direction of the business in comparison with the same indicators
of companies in the same economic sector. “
The arrangements undertaken, in connection with the privatisation of Tallinna Vesi in 2001,
provided that, in return for certain fees, United Utilities International Ltd. would provide Tallinna
Vesi with technical and asset management services and make its personnel available to Tallinna
Vesi in connection with its operation and management. The working hours, rates of
compensation, and all other matters relating to the employment of the individual directly
employed by United Utilities International Ltd. are to be determined solely by United Utilities
International Ltd., the Supervisory Board does not discuss or regularly review the principles of
remuneration of the relevant Management Board member.
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”2.2.7. Basic wages, performance pay, severance packages, other payable benefits and bonus
schemes of a Management Board member, as well as their essential features (incl. features
based on comparison, incentives and risk) shall be published in clear and unambiguous form on
the website of the Issuer and in the Corporate Governance Recommendations Report.
Information published shall be deemed clear and unambiguous if it directly expresses the
amount of expense to the Issuer or the amount of foreseeable expense as of the day of
disclosure.”
Tallinna Vesi discloses the overall Management Board remuneration in Note 25 to the
consolidated financial statements, but considers that individual remuneration is private
information and that additional disclosure would bring no benefit to the shareholders.
”3.2.2. At least half of the members of the Supervisory Board of the Issuer shall be independent.
If the Supervisory Board has an odd number of members, then there may be one independent
member less than the number of dependent members.”
Pursuant to the Articles of Association of Tallinna Vesi, the Supervisory Board consists of nine
members. Under the Shareholders Agreement, United Utilities (Tallinn) B.V. (hereinafter UUTBV)
and the City of Tallinn have agreed that the division of seats in the Supervisory Board shall be
such that, UUTBV shall have four seats, the City of Tallinn shall have three seats and two seats
shall be reserved for independent members to be elected to the Supervisory Board as permitted
by the Tallinn Stock Exchange on listing in June 2005.
INFORMATION DISCLOSURE
“2.2.2. The member of the Management Board shall not be at the same time a member of more
than two management boards of an Issuer and shall not be the Chairman of the Supervisory
Board of another Issuer. A member of the Management Board can be the Chairman of the
Supervisory Board in a company belonging to same group as the Issuer.”
The Management Board Members of Tallinna Vesi are not in the Management Boards and
Supervisory Boards of other Issuers.
“2.3.2. The Supervisory Board shall approve the transactions which are significant to the Issuer
and concluded between the Issuer and a member of its Management Board or another person
connected/close to them and shall determine the terms of such transactions.”
The Supervisory Board approves the remuneration principles of the Management Board. In 2020,
the transactions between Tallinna Vesi and any members of the Management Board or any
persons or companies related to them were carried out by the arm’s length principle and are
disclosed in Note 25 to the consolidated financial statements.
“3.2.5. The amount of remuneration of a member of the Supervisory Board shall be published in
the Corporate Governance Recommendations Report, indicating separately, basic and additional
payment (incl. compensation for termination of contract and other payable benefits).”
The Supervisory Board member’s fee was determined by the General Meeting in 2005, at the time
of the listing of the Company’s shares on the Tallinn Stock Exchange. The remuneration of
Supervisory Board members was set at €6,391 per year per person and has remained
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unchanged. The fee has been paid to five members out of nine. The Supervisory Board member’s
fee is not paid to the members representing UUTBV. The fee is subject to deduction and payment
of applicable taxes and is payable on a monthly basis. The Supervisory Board members were not
paid any additional benefits in 2020.
“3.2.6. If a member of the Supervisory Board has attended less than half of the meetings of the
Supervisory Board, this shall be indicated separately in the Corporate Governance
Recommendations Report.”
In 2020, six Supervisory Board meetings were held as follows: 30 January 2020, 26 March 2020,
23
April 2020, 30
July 2020, 29 October 2020 and 9 December 2020.
The 30 January 2020 Supervisory Board meeting was attended by Messrs. Simon Gardiner,
Martin Padley, Brendan Murphy, Keith Haslett, Priit Rohumaa, Toivo Tootsen, Priit Lello and Mrs
Katrin Kendra.
The 26 March 2020 Supervisory Board meeting was attended by Messrs. Simon Gardiner, Martin
Padley, Brendan Murphy, Keith Haslett, Priit Rohumaa, Allar Jõks and Priit Lello.
The 23 April 2020 Supervisory Board meeting was attended by Messrs. Simon Gardiner, Martin
Padley, Brendan Murphy, Keith Haslett, Priit Rohumaa, Toivo Tootsen, Allar Jõks, Priit Lello and
Mrs Katrin Kendra.
The 30 July 2020 Supervisory Board meeting was attended by Messrs. Simon Gardiner, Martin
Padley, Brendan Murphy, Priit Rohumaa, Toivo Tootsen, Allar Jõks, Priit Lello and Mrs Katrin
Kendra.
The 29 October 2020 Supervisory Board meeting was attended by Messrs. Simon Gardiner,
Martin Padley, Brendan Murphy, Thomas Lissett, Toivo Tootsen, Priit Lello and Mrs Katrin
Kendra.
The 9 December 2020 Supervisory Board meeting was attended by Messrs. Simon Gardiner,
Martin Padley, Brendan Murphy, Thomas Lissett, Toivo Tootsen, Allar Jõks, Priit Lello and Mrs
Katrin Kendra.
Considering the above, Messrs. Simon Gardiner, Martin Padley, Brendan Murphy, Keith Haslett
(until 30 August 2020), Thomas Lissett (from 1 September 2020) and Priit Lello attended 100% of
the meetings. Mr Allar Jõks attended 60% of the meetings as he was unable to attend two
meetings due to his other responsibilities. Mr Toivo Tootsen attended 80% of the meetings as he
was unable to attend one meeting due to his other responsibilities. Ms Katrin Kendra attended
80% of the meetings as he was unable to attend one meeting due to his other responsibilities.
All of them familiarised themselves with all the materials for the meetings they were unable to
attend.
“3.3.2. A Supervisory Board member candidate shall inform other members of the Supervisory
Board about the existence of a conflict of interests before their election and immediately upon
arising of it later. Members of the Supervisory Board shall promptly inform the Chairman of the
Supervisory Board and Management Board regarding any business offer related to the business
activity of the Issuer made to him, a person close to him or a person connected with him.”
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All Supervisory Board members are aware of this requirement and at minimum once a year,
Tallinna Vesi requests all Supervisory Board members to update the record of their business
interests. No business transactions outside of the main business took place between Tallinna
Vesi and either any Supervisory Board member or any persons or companies related to them in
2020. Water and wastewater services were sold to the Supervisory Board members at a price
those were sold to all the other customers.
The Management Report consisting of chapters “Chairman's statement”, “Our company”, “Our
performance in 2020”, “Strategy”, “Operational results of 2020”, “Financial results of 2020” and
“Corporate governance”, is an integral part of the annual report of Tallinna Vesi for the financial
year ended 31 December 2020. The Management Report gives a true and fair view of the trends
and results of operations, main risks and doubts of Tallinna Vesi.
BUSINESS ETHICS
As a listed company, it is one of Tallinna Vesi’s priorities to ensure that its
activities and the conduct of its directors, officers, employees or any third
parties acting on its behalf observe the highest standards of integrity.
Tallinna Vesi is committed to be a reliable partner to all stakeholders in its
activities and is committed to contributing to reliable business climate.
Tallinna Vesi does not tolerate corruption in any shape or form. In order to
prevent corruption Tallinna Vesi has worked out several procedures and
rules which require all directors, officers, employees and everyone acting on behalf of the
Company to act with high integrity. It is important that our activities at all levels are transparent,
in accordance with the legal requirements and high business ethics. We introduce those
principles to our employees and carry out a risk assessment about possible corruption and fraud
at least once a year.
In 2017, Tallinna Vesi reviewed its Code of Conduct and introduced the whistleblowing policy
outlining the procedure for raising concerns and reporting incidents that are in conflict with the
law, ethical standards or Tallinna Vesi’s Code of Conduct.
The Code of Conduct sets forth the standards of business behaviour and ethics for all managers
and employees of Tallinna Vesi. It lays the foundation for Tallinna Vesi’s business operations,
environmental issues, human rights and relations with the Company’s personnel and
stakeholders. The Code of Conduct has been introduced to each manager and employee of the
Group, regardless of their term of employment. Regular trainings both in Estonian and Russian
have been carried out to ensure that people are familiar with the Code of Conduct principles and
act accordingly. The Executive Team members of Tallinna Vesi have also participated in fraud
and data protection related trainings.
Furthermore, within its sphere of influence, Tallinna Vesi encourages its contractors and other
partners to adhere to similar high ethical principles as set forth in the Code of Conduct, which is
the foundation of all business relationships, both new and those already in existence. Tallinna
Vesi is not planning any specific trainings for the partners in that regard, but encourages them
to acquaint themselves with the Company’s policies. All related policies are publicly available on
the Company´s website.
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Any situation involving a potential violation of the Code of Conduct must be reported as soon as
possible.
The employees, partners and third parties of Tallinna Vesi have the opportunity to use various
channels to raise concerns or report incidents of unethical behaviour. All such reports will be
analysed by an independent partner of Tallinna Vesi. The system of reporting and processing the
information ensures that the confidentiality and anonymity of the reporting party are retained if
so requested. The incidents can be reported over the internet, by e-mail, using the hotline or by
direct communication.
Tallinna Vesi did not identify any proven corruption or fraud incidents during 2020.
PARTNERS
We strive to do more than we are expected by legislative and contractual requirements. To serve
that purpose, we focus on dialogue and cooperation, both within our team and with partners.
Changes in applicable legislation are constantly monitored and communicated to the managers,
whom those changes concern. On the other hand, we also value preventive cooperation and
actively participate in the development and amending of legal acts primarily via Estonian
Waterworks Association. We also cooperate with several quality-conscious companies that have
high environmental awareness to promote doing business in an ethical and responsible way.
Cooperation with suppliers
Tallinna Vesi is a service provider. Considering the nature of our activity as a water company, our
supply chain includes other service providers and partners, who help us to guarantee the
performance of our main operations and availability of services to the customers.
Unlike many other industries, our supply chain is relatively simple, because the Company
produces and sells the service without having any external links within its supply chain and there
have been no significant changes in the chain. Still, the Company itself is often an integral link
in our customers’ supply chain and therefore, it is very important that our service meets high
quality standards. However, for this short but vital supply chain to work without any interruptions,
we need our suppliers to be reliable. For this purpose, in several links of critical importance in
the chain we have alternative suppliers in place, whom we can turn to should something happen
to our main contract partner. We find our suppliers mostly through tenders, which gives us the
opportunity to set the criteria that we expect our suppliers to meet. We consider the
environmental safety as well as the safety of our suppliers’ employees very important.
Our cooperation partners can be divided into three larger groups: suppliers of goods, services
and construction works.
Our suppliers are mostly based in Estonia, but we also carry out international tenders. We choose
high-quality products and invest in the renovation of systems in order to ensure effective and
sustainable operational activity. We outsource various support services so that our focus can
remain on the main activity. For instance, we are outsourcing advertising, cleaning and security
services and many other specific services.
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Our subsidiary Watercom also ensures that all construction works are completed properly and
on time, by outsourcing some of the works if it is needed and economically justified. We sign
long-term contracts to retain our suppliers and to ensure good and reliable cooperation. We
have, at any time, approximately 1,000 suppliers in our database with whom we have been in
cooperation at least once a year.
Looking for new suppliers as well as monitoring and improving our cooperation with the current
partners are equally important to us. We consistently and systematically assess our cooperation
with suppliers, which allows us to have a two-way interaction with our current partners, create
a reliable base of suppliers and employ suppliers’ competencies in order to create additional
value for the Company. Besides assessing the activity of suppliers, we also ask for feedback on
our own activity in order to further develop our relations and cooperation with the suppliers,
aiming to be a better partner.
OUR PRINCIPLES AND MEMBERSHIP IN ORGANISATIONS
We deem it important to be involved and express our opinion on the issues that are relevant in
society and to contribute to the development of areas related to our activity and drafting of legal
acts. To these purposes, we have joined and become a founder member of various associations.
We are a founder member of Estonian Association of Environmental Management and Corporate
Social Responsibility Forum in Estonia, a collective member of Association for Quality, a member
of Estonian Waterworks Association, a member of Taxpayers Association, a member of Baltic
Institute of Corporate Governance and other organisations.
We are responsible for providing consumers with a reliable supply of drinking water and for
treating wastewater and stormwater, by using safe and environment-friendly technologies. To
us it is key to bear this fact in mind, while acting consistently and systematically in making our
management decisions and performing our daily business activities. Therefore, our management
practices need to consider the impact we have on our surrounding environment and the
expectations of various stakeholders. Our Management Board has approved the following
policies and guiding principles that set the overall framework for acting in various areas.
The following policies are available at least in Estonian and English on our website:
• Environmental Policy;
• Quality Policy;
• Health and Safety Policy;
• Human Resource Policy;
• Principles of Responsible Business.
7.2 Risk management process
RISKS AND UNCERTAINTIES
In everyday operations any company is a subject to a variety of risks and uncertainties. Tallinna
Vesi has defined a risk being anything that could have a material adverse effect on the
achievement of Tallinna Vesi goals and objectives. Risks can be threats, uncertainties or lost
opportunities relating to Tallinna Vesi’s current or future operations or activities.
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Risk management is a central part
of any organisation’s strategic
management. As a precautionary
approach, we constantly assess
and monitor our operational and
financial risks. Although risks
cannot be entirely avoided, we have
worked out an effective system to
manage risks. The objective of our
risk management process is to
understand, assess and control the
risks and uncertainties, to increase
probability of success and mini-
mise the probability of failure as
well as the uncertainty of achieving
the Company’s overall objectives.
Tallinna Vesi has defined the roles
and responsibilities as well as the
components of the risk manage-
ment process, which is also in line
with the Emergency Act.
Risk management process is something that is integrated and embedded in Tallinna Vesi’s
organisational culture and processes and supports the achievement of the Company’s strategic
objectives. Risk management process involves the strategic objectives along with efficient
processes allowing the delivery thereof as well as the structures and recourses necessary for
the achievement of goals and objectives.
CONTINUOUS MONITORING
The objective of the continuous risk management process is that all major risks, which may harm
the achievement of Tallinna Vesi objectives, are regularly assessed, managed and monitored.
Management Board ensures that awareness of risks is established among the employees and
risks are considered in a daily decision-making process. Risk reporting is integrated into the
business planning process and risks are reviewed regularly across the organisation.
The Audit Committee and the Supervisory Board receive and review, on a quarterly basis, the
overview of the significant risks along with details of the current controls and any further actions
that are planned, and potential financial impact when possible.
Tallinna Vesi has divided the risks into the following categories:
Financial risks
Operational
risks
Reputational
risks
Legal and
Regulatory
risks
Health and
Safety risks
Environmental
risks
Personell risks IT risks
Organisational
risks
Reporting risks
Going concern
risks
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MAJOR RISK AREAS
EFFECTIVE LAWS AND REGULATIONS AND CHANGES IN LAWS AND REGULATIONS
The Company’s operations are subject to extensive regulation (price regulations, environmental,
health and safety). Non-compliance with the existing laws and regulations might result in
additional operational expenditures and extra workload. The Company consistently monitors the
changes in laws and the development of draft laws, in order to plan its activities on time, as in
many cases changes in the laws may require extensive capital investments and/or rise the
operating costs significantly. Currently the review of Public Water Supply and Sewerage Act is
ongoing.
POSSIBLE THIRD-PARTY CLAIMS
On 12 December 2017, the Supreme Court made a decision on Tallinna Vesi’s appeal in cassation
with regard to the tariff dispute with the Estonian Competition Authority. The Court stated that
the Competition Authority was not bound by the agreement on the water tariffs contained in the
Services Agreement, which had been executed upon privatisation between the Company and the
City of Tallinn. On 4 December 2018, the Competition Authority decided not to approve the tariff
application the Company had submitted. On 22 October 2019, the Competition Authority approved
the tariff application submitted by the Company, and the new tariffs, which were on average 20%
lower than previous tariffs, became effective on 1 December 2019. The Company does not
consider itself liable towards the consumers, because it has been acting on a legal basis and has
not broken the law. As of 31 December 2020, claims totalling €1.1 million have been filed within
one application. The Company does not admit any liability and fully rejects it.
The potential liability for third-party claims is described in the Note 15 to the consolidated
financial statements.
DISEASE OUTBREAKS
Late in 2019, China was the first to report the cases of the novel coronavirus COVID-19. In 2020,
the virus evolved to a pandemic and its negative impact gained momentum. Among other factors,
the pandemic has also had a negative effect on the Group’s revenues in 2020, due to an increase
in the consumption of water and wastewater services by the private sector and decrease in the
consumption by the commercial sector, along with a reduction in construction revenues.
The Group has assessed and calculated the impact of the pandemic on the results for 2020
where reasonable, please see note 2.
FINANCIAL MARKET CONDITIONS AND INTEREST RATES
Changes in interest rates and EURIBOR might have an adverse impact on the Company’s cash
flows and results of operations. Information on financial risk management is presented in Note
5 to the consolidated financial statements.
THREAT OF CYBERCRIME AND/OR TERRORISM
Our resources, assets and infrastructure are exposed to various threats (malicious or
accidental), cyber-attacks or terrorism that might cause disruption to the operations. Regular
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reviews of the system security are carried out in order to identify risks and weaknesses and to
take corrective measures when justified.
HEALTH AND SAFETY
Serious risks related to occupational health and safety are generally linked to excavation,
construction and maintenance work. Depending on the circumstances, the Group could be fined
for breaches of statutory obligations, be held liable to third parties and sustain reputational
damage. The Group has worked out the full set of procedures and activities, which minimise the
possibility of incidents in relation to health and safety.
INABILITY TO TREAT INCOMING WASTEWATER
In case of very heavy rainfall, there is a risk that the Wastewater Treatment Plant has difficulties
to treat all incoming wastewater for a short period of time, which might result in pollution
incidents. During last years, the risk has been lower. Additional capital investments into
mechanical treatment are in progress to further minimise the risk.
DETERIORATION OF RAW WATER QUALITY
The main source of drinking water is Lake Ülemiste and there are periods, when the raw water
quality is lower than expected. Poorer raw water quality places high pressure on the treatment
process. Besides the continued monitoring and adjustment of treatment process accordingly,
some improvements are planned to maximize the possible use of alternative resources.
LEAK OF SENSITIVE, INSIDER OR PERSONAL INFORMATION
Tallinna Vesi is a listed company and although keeping confidential information protected and
managing it in a responsible way is very important to any company, it is even more important for
a listed company. The Company has mapped all the information it gathers, which qualifies as
personal information under the GDPR, and has also identified insider information. There are
several controls in place to manage sensitive information technologically, furthermore, the
employees are regularly trained in order to make sure that the information is properly handled
and managed.
DRINKING WATER QUALITY
In 2019, a new water quality testing method Colilert-18 was implemented. This method is more
sensitive than the membrane method used before, and in some instances, it may detect coliform
bacteria, where it previously could not. The Company has been in very close communication with
the Health Board and has also taken other measures in order to fully comply with all
requirements. There has been no change in the drinking water quality compared to the previous
years.
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8. MANAGEMENT CONFIRMATION
The Management Board hereby declares its responsibility for the preparation of the consolidated
financial statements of AS Tallinna Vesi (Company) and its subsidiary Watercom OÜ (together
referred to as the Group) for the financial year ended 31 December 2020 on pages 74-119.
The financial statements have been prepared according to International Financial Reporting
Standards as adopted by the European Union, and give a fair presentation of the financial position,
results of operations and cash flows of the Group.
The preparation of the financial statements according to International Financial Reporting
Standards involves estimates made by the Management Board of the Group's assets and
liabilities as of 31 December 2020, and of income and expenses during the financial year. These
estimates are based on current information about the Group and consider all plans and risks as
of 31 December 2020. The actual results of these business transactions recorded may differ from
such estimates.
Any subsequent events that materially affect the valuation of assets and liabilities and have
occurred up to the completion of the financial statements on 15 March 2021 have been
considered in preparing the financial statements.
The Management Board considers AS Tallinna Vesi and its subsidiary to be going concern
entities.
Name
Position Signature
Date
Karl Heino Brookes Chairman of the Management Board
Aleksandr Timofejev
Member of the Management Board
Kristi Ojakäär
Member of the Management Board
15 March 2021
15 March 2021
15 March 2021
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9. CONSOLIDATED STATEMENT OF FINANCIAL POSITION
€ thousand
as of 31 December
ASSETS
Note
2020
2019
CURRENT ASSETS
Cash and cash equivalents
6
Trade receivables, accrued income and prepaid
expenses
7
Inventories
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Property, plant and equipment
9
Intangible assets
10
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Current portion of long-term lease liabilities
11
Current portion of long-term bank loans
11
Trade and other payables
12
Derivatives
8
Prepayments
14
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Deferred income from connection fees
Leases
11
Bank loans
11
Provision for possible third-party claims
15
Deferred tax liability
Other payables
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
EQUITY
Share capital
16
Share premium
Statutory legal reserve
Retained earnings
TOTAL EQUITY
TOTAL LIABILITIES AND EQUITY
Notes to the financial statements on pages 78 to 119 form an integral part of the financial
statements.
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10. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
€ thousand
for the year ended 31 December
Note
2020
2019
Revenue
17
Costs of goods and services sold
19
-29,491
-29,470
GROSS PROFIT
Marketing expenses
19
General administration expenses
19
-4,576
-5,689
Other income (+)/ expenses (-)
20
OPERATING PROFIT
Financial income
21
Financial expenses
21
PROFIT BEFORE TAXES
Income tax
22
-4,610
-3,544
NET PROFIT FOR THE PERIOD
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD
Attributable profit to:
Equity holders of A shares
B share holder
Earnings per A share (in euros)
23
Earnings per B share (in euros)
23
Notes to the financial statements on pages 78 to 119 form an integral part of the financial
statements.
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11. CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December
€ thousand
Note
2020
2019
CASH FLOWS FROM OPERATING ACTIVITIES
Operating profit
Adjustment for depreciation/amortisation
9,10,19,20
Adjustment for revenues from connection fees
20
Other non-cash adjustments
15,20
-4,814
-4,624
Profit (-)/loss (+) from sale of property, plant and
equipment, and intangible assets
Change in current assets involved in operating activities
Change in liabilities involved in operating activities
TOTAL CASH FLOWS FROM OPERATING ACTIVITIES
CASH FLOWS USED IN INVESTING ACTIVITIES
Acquisition of property, plant and equipment, and
intangible assets
-15,682
-10,441
Compensations received for construction of pipelines, incl
connection fees
Proceeds from sale of property, plant and equipment, and
intangible assets
Interest received
TOTAL CASH FLOWS USED IN INVESTING ACTIVITIES
-13,617
-7,371
CASH FLOWS USED IN FINANCING ACTIVITIES
Interest paid and loan financing costs, incl
swap interests
-1,056
Lease payments
Received loans
11
Repayment of loans
11
-3,636
-41,136
Dividends paid
22
-19,888
-14,965
Withheld income tax paid on dividends
22
Income tax on dividends
22
-4,355
-3,544
TOTAL CASH FLOWS USED IN FINANCING ACTIVITIES
-29,266
-23,641
CHANGE IN CASH AND CASH EQUIVALENTS
-20,261
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF
THE PERIOD
6
CASH AND CASH EQUIVALENTS AT THE END OF THE
PERIOD
6
Notes to the financial statements on pages 78 to 119 form an integral part of the financial
statements.
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12. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
€ thousand
Share
capital
Share
premium
Statutory
legal reserve
Retained
earnings
Total
equity
as of 31 December 2018
Dividends (Note 22)
- 15,001
-15,001
Comprehensive income for the
period (Note 23)
as of 31 December 2019
Dividends (Note 22)
- 20,001
-20,001
Comprehensive income for the
period (Note 23)
as of 31 December 2020
Notes to the financial statements on pages 78 to 119 form an integral part of the financial
statements.
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13. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT
NOTE 1. GENERAL INFORMATION
AS Tallinna Vesi is the largest water utility in Estonia providing drinking water and wastewater
disposal services to over 470,000 people in Tallinn and in several neighbouring municipalities of
Tallinn.
The Current Services Agreement is effective until 30 November 2025 as per the exclusive
right to provide water and wastewater services in Tallinn.
Shareholders of AS Tallinna Vesi having a significant influence are United Utilities Tallinn B.V.
with 35.3% and the City of Tallinn with 34.7%, the balance of 30% of shares is free floating on the
Nasdaq Baltic, in which AS Tallinna Vesi was listed on 1 June 2005.
Watercom OÜ (Subsidiary) was founded in 2010 by the Company and its main areas of activity are
services related to water business and owner supervision and construction services. The
Company and the Subsidiary together form a group (Group).
Contacts:
Name
AS Tallinna Vesi
Watercom OÜ
Commercial register number
10257326
11944939
VAT identification number
EE100060979
EE101374619
Address
Ädala 10, 10614 Tallinn
Ädala 10, 10614 Tallinn
Telephone
+372 62 62 200
+372 62 62 620
Fax
+372 62 62 300
+372 62 62 300
E-mail
tvesi@tvesi.ee
watercom@watercom.eu
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NOTE 2. ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these consolidated financial
statements (hereinafter referred to as ‘financial statements’) are set out below. These policies
have been consistently applied to all the years presented, unless otherwise stated.
The financial statements have been prepared in accordance with International Financial
Reporting Standards as adopted by the European Union (EU) (hereinafter IFRS).
The financial statements have been prepared under the historical cost convention, as modified
by the accounting policy for derivatives, measured at fair value through profit and loss, as
disclosed in the accounting policies below.
The Management Board of AS Tallinna Vesi authorised these consolidated financial statements
for issue at 25 March 2021. Pursuant to the Commercial Code of the Republic of Estonia, the
financial statements are subject to approval by the Supervisory Board of AS Tallinna Vesi and the
General Meeting of Shareholders. Shareholders have the right not to approve the annual report
prepared and approved by the Management Board, and request preparation of a new annual
report.
The preparation of financial statements in conformity with IFRS requires the use of certain
critical accounting estimates. It also requires management to exercise its judgement in the
process of applying the Group’s accounting policies. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and estimates are significant to the
consolidated financial statements are disclosed in note 4.
Estimates and judgements are continually evaluated and are based on historical experience and
other factors, including expectations of future events that are believed to be reasonable under
the circumstances.
Adoption of New or Revised Standards and Interpretations
The Group has applied the following new or revised standards or interpretations for the first time
for their annual reporting period beginning on 1 January 2020.
IAS 12, Income Taxes
According to the paragraphs 52A and 57A of IAS 12 (International Accounting Standard 12), no
current or deferred tax liability shall be recognised until a liability to pay dividends is recognised.
The Group has been applying such accounting principle consistently to all undistributed profits
regardless of whether such profits arose in the parent or in a subsidiary.
In June 2020, IFRS Interpretation Committee made an agenda decision where it concluded that
the principle set out in the paragraphs 52A and 57A of the Standard IAS 12 only applies to
undistributed profits accumulated in a parent company and does not apply to undistributed
profits accumulated in the subsidiaries. Instead, the principles described in the paragraphs 39-
40 of the Standard IAS 12 should be followed in respect of undistributed profits in subsidiaries,
explaining that the deferred tax shall be recognized for all taxable differences associated with
investments in subsidiaries unless it is probable that the profits will not be distributed in the
foreseeable future (IAS 12.39-40). The Group has assessed the impact of the IFRS Interpretation
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Committee agenda decision and recognized deferred tax liability in respect of full retained
earnings in subsidiary in the amount of €255 thousand euros. Considering the amount not being
material in the context of these financial statements, therefore no correction into previous
reporting periods is made and the third financial statement is not presented, the total impact of
deferred tax amount is recognized in financial statements for the year 2020. Please see for more
information in note 22.
Amendments to the Conceptual Framework for Financial Reporting (effective for annual periods
beginning on or after 1 January 2020). The revised Conceptual Framework includes a new
chapter on measurement; guidance on reporting financial performance; improved definitions
and guidance - in particular the definition of a liability; and clarifications in important areas, such
as the roles of stewardship, prudence and measurement uncertainty in financial reporting.
Definition of materiality – Amendments to IAS 1 and IAS 8 (effective for annual periods beginning
on or after 1 January 2020). The amendments clarify the definition of material and how it should
be applied by including in the definition guidance that until now has featured elsewhere in IFRS.
In addition, the explanations accompanying the definition have been improved. Finally, the
amendments ensure that the definition of material is consistent across all IFRS Standards.
Information is material if omitting, misstating or obscuring it could reasonably be expected to
influence the decisions that the primary users of general purpose financial statements make on
the basis of those financial statements, which provide financial information about a specific
reporting entity.
There are no other new or revised standards or interpretations that are not yet effective that
would be expected to have a material impact on the Group.
Principles of consolidation and subsidiaries
Subsidiaries are all entities over which the Group has control. The Group controls an entity when
the Group is exposed to, or has rights to, variable returns from its involvement with the entity
and has the ability to affect those returns through its power over the entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the Group and are de-consolidated
from the date that control ceases.
In the consolidated financial statements, the financial statements of the subsidiary are combined
on a line-by-line basis. Intercompany transactions, balances and unrealised gains on
transactions between Group companies are eliminated; unrealised losses are also eliminated
unless the cost cannot be recovered. The Parent Company and its Subsidiary use uniform
accounting policies. Where necessary, the accounting policies of the subsidiary have been
changed to ensure consistency with the policies adopted by the Group.
Investment in Subsidiary is carried at cost (less any impairment losses) in the unconsolidated
primary financial statements of the Company.
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Foreign currency
Functional and presentation currency
Consolidated financial statements for the year ended 31 December 2020 have been presented in
euros.
The financial statements have been presented in thousands of euros, unless stated otherwise.
Foreign currency transactions and balances
All other currencies except for the functional currency (the functional currency of the Parent
Company and Subsidiary located in Estonia is Euro) constitute foreign currencies. Foreign
currency transactions have been translated to functional currencies based on the foreign
currency exchange rates of the European Central Bank prevailing on the transaction date.
Monetary assets and liabilities denominated in a foreign currency (monetary receivables and
loans) have been translated into functional currency based on the foreign currency exchange
rates of the European Central Bank prevailing on the reporting date. Foreign exchange gains and
losses are recognised in the statement of comprehensive income as income or expenses of that
period.
Current and non-current distinction of assets and liabilities
Assets and liabilities are classified in the statement of financial position as current or non-
current. Assets expected to be recovered of in the next financial year or during the normal
operating cycle of the Group are considered as current. Liabilities whose due date is in the next
12 months or that is expected to be settled in the next financial year or during the normal
operating cycle of the Group are considered as current. All other assets and liabilities are
classified as non-current.
Cash and cash equivalents
Cash and cash equivalents in the statement of financial position and the cash flow statement
comprise of cash on hand, cash in bank accounts and short-term, risk free, highly liquid bank
deposits with original maturities of three months or less.
Cash flows from operating activities are reported using the indirect method, whereby profit or
loss is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of
past or future operating cash receipts or payments, and items of income or expense associated
with investing or financing cash flows. Cash flows from investing and financing activities are
reported using the direct method.
Financial assets
Classification
The Group’s financial assets have been classified in the amortised cost measurement category.
The classification depends on the entity’s business model for managing the financial assets and
the contractual terms of the cash flows.
Recognition and derecognition
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Regular way purchases and sales of financial assets are recognised on trade-date, the date on
which the Group commits to purchase or sell the asset.
Financial assets are derecognised when the rights to receive cash flows from the financial assets
have expired or have been transferred and the Group has transferred substantially all the risks
and rewards of ownership.
Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a
financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly
attributable to the acquisition of the financial asset. (Transaction costs of financial assets carried
at FVPL are expensed in profit or loss.)
Debt instruments
Subsequent measurement of debt instruments depends on the Group’s business model for
managing the asset and the cash flow characteristics of the asset.
All Group’s debt instruments are classified in amortised cost measurement category.
Assets that are held for collection of contractual cash flows where those cash flows represent
solely payments of principal and interest are measured at amortised cost. Interest income from
these financial assets is included in profit or loss using the effective interest rate method. Any
gain or loss arising on derecognition is recognised directly in profit or loss and presented in the
statement of comprehensive income on the row ‘Other income (+)/expenses(-)’. Impairment
losses are also presented on the row ‘Other income (+)/expenses(-)’. As at 31 December 2020
and 2019 all the Group’s financial assets were classified in this category.
Equity instruments
The Group has no investments in equity instruments.
Impairment
The Group assesses on a forward-looking basis the expected credit losses (ECL) associated with
its debt instruments carried at amortised cost. The impairment methodology applied depends
on whether there has been a significant increase in credit risk.
The measurement of ECL reflects: (i) an unbiased and probability weighted amount that is
determined by evaluating a range of possible outcomes, (ii) time value of money and (iii) all
reasonable and supportable information that is available without undue cost and effort at the
end of each reporting period about past events, current conditions and forecasts of future
conditions.
For trade receivables and contract assets without a significant financing component the Group
applies a simplified approach permitted by IFRS 9 and measures the allowance for impairment
losses at expected lifetime credit losses from initial recognition of the receivables. The Group
uses a provision matrix in which allowance for impairment losses is calculated for trade
receivables falling into different ageing or overdue periods.
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Inventories
Inventories are initially recorded at cost including purchase costs, non-refundable taxes and
transportation and other costs directly connected with the acquisition, less allowances and
discounts.
The FIFO method has been used to determine the cost of inventories. Inventories are carried in
the statement of financial position at the lower of the cost and net realizable value. Net realizable
value is the net selling price less estimated costs necessary to make the sale.
Non-current assets held for sale
Non-current assets held for sale are the property, plant and equipment items that are most
probably sold within next 12 months and for which the management has begun sales activity and
the assets are offered for sale for a reasonable price compared to their fair value.
Non-current assets held for sale are classified in the statement of financial position as current
assets and depreciation ended at the moment of reclassification. Non-current assets held for
sale are carried in the statement of financial position at the lower of at book value or fair value
less costs to sell.
Property, plant and equipment, and intangible assets
Property, plant and equipment are tangible assets used in operating activities of the Group with
an expected useful life of over one year. Property, plant and equipment are carried in the
statement of financial position at historical cost less accumulated depreciation and any
impairment losses.
Intangible assets are recognised in the statement of financial position only if the following
conditions are met:
• the asset is controlled by the Group;
• it is probable that the future economic benefits that are attributable to the asset will flow to
the Group;
• the cost of the asset can be measured reliably.
Acquired licences
Acquired computer software that is not an integral part of the related hardware is recognised as
an intangible asset. Development costs of computer software are recognised as intangible
assets if these are directly related to the development of such software objects that are
identifiable, controllable by the Group and that are expected to generate economic benefits
beyond one year. Capitalizable development costs of computer software include staff costs and
other expenses directly related to the development. Costs related to the day-to-day maintenance
of computer software are recognised as expenses in the statement of comprehensive income.
Costs of computer software shall be depreciated over the estimated useful lifetime, the duration
of which is up to 10 years.
Other intangible assets
Expenses for acquiring patents, trademarks, licences and certificates are capitalized if it is
possible to estimate the future economic benefits attributable to these assets. Other intangible
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assets are amortised on a straight line basis over the estimated useful lifetime, the duration of
which does not exceed 10 years.
The cost of purchased property, plant and equipment and intangible assets comprises the
purchase price, transportation costs, installation, and other direct expenses (incl. internal labour
costs) related to the acquisition or implementation. Labour costs are capitalised with employee's
hourly index applied to working hours which are needed for taking the asset to the location and
condition necessary for it to be capable of operating in the manner intended by the management.
Hourly rate is calculated individually for each employee and includes other direct expenses
connected with the employee in addition to salary expense.
If an item of property, plant and equipment consists of components with different useful lives,
these components are depreciated as separate items.
Borrowing costs directly attributable to the acquisition, construction or production of a qualifying
asset are capitalised as part of the cost of that asset.
Subsequent expenditures are added to the carrying amount of the item of property, plant and
equipment or are recognised as a separate asset only when it is probable that future economic
benefits related to the assets will flow to the Group and the cost of the asset can be measured
reliably. A replaced component or proportion of the replaced item of property, plant and
equipment is derecognised. Costs related to ongoing maintenance and repairs are charged to
the statement of comprehensive income.
Land is not depreciated. Depreciation of other property, plant and equipment is calculated on a
straight-line basis on cost over the estimated useful life of the asset.
Applicable depreciation/amortisation rates:
• buildings 1.25-2.0% per annum;
• facilities 1.0-8.33% per annum;
• machinery and equipment 3.33-50% per annum;
• instruments and other equipment etc. 10-20% per annum;
• acquired licenses and other intangible assets 10-33% per annum.
In exceptional circumstances rates may differ from the above ranges if it is evident that the
estimated useful life of the asset varies materially from the ranges of rates assigned to the
respective category.
The expected useful lives of items of property, plant and equipment are reviewed during the
annual stocktaking, in recognising subsequent expenditures and in case of significant changes
in development plans. When the estimated useful life of an asset differs significantly from the
previous estimate it is treated as a change in the accounting estimate and the remaining useful
life of the asset is changed as a result of which the depreciation charge of the following periods
also changes. Assets are written down to their recoverable amount when the recoverable amount
is less than the carrying amount. To determine profits and losses from the sale of property, plant
and equipment the book value of the sold assets is subtracted from the proceeds. The respective
profits and losses are reported in the line ‘Other income (+) /expenses (-)’.
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Impairment of assets
Assets that are subject to depreciation/amortisation and property, plant and equipment with
unlimited useful lives (land) are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. The recoverable value
of intangible assets in progress is tested annually, by comparing their recoverable amount with
the carrying amount.
Assets are written down to their recoverable amount in case the latter is lower than the carrying
amount. The recoverable amount of the assets is the higher of the:
• fair value less costs to sell and
• value in use.
In case it is not possible to determine the fair value of assets less costs to sell, the asset's value
in use is considered to be its recoverable value. The value in use is calculated as the present
value of the estimated future cash flows generated by the assets.
The impairment of assets may be assessed either for an individual asset or a group of assets
(cash-generating unit). For the purposes of assessing impairment, the Group is considered to be
a single cash-generating unit as it is the lowest level for which there are separately identifiable
cash flows. The impairment loss is immediately recognised in the statement of comprehensive
income. Non-financial assets that suffered impairment are reviewed for possible reversal of the
impairment at each reporting date.
If based on the results of the assessment it appears that the recoverable amount of an asset or
the cash-generating unit has increased, the earlier impairment is reversed up to the amount that
would for the asset in prior years. The reversal of impairment loss is recorded in the statement
of comprehensive income of the period as a decrease in impairment loss.
Financial liabilities
Financial liabilities have the following measurement categories: (a) recognised at fair value
through profit or loss (derivatives), (b) recognised at amortised cost.
Financial liabilities include trade payables, accrued expenses, loans payable and other short
term and long-term financial liabilities and derivatives. Financial liabilities (except derivatives)
are initially recognised at fair value net of transaction cost. Subsequently financial liabilities are
carried at the amortised cost.
Amortised cost of short-term financial liabilities is usually equal to their nominal value, thus they
are carried on statement of financial position at the amount payable. For calculating the
amortised cost of long-term financial liabilities, these are initially recognized at fair value of
amount received (less transaction costs), interest expense is calculated from the liability using
the effective interest method subsequently.
Liabilities are classified as current liabilities, unless the Group has an unconditional right to
defer the settlement of the liability for at least 12 months after the reporting date.
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Derivatives
With regard to derivatives, the Group uses interest rate swap contracts, in order to mitigate risks
related to fluctuations in interest rates. Such derivatives are initially recognised at their fair value
at the date of entering into the contract and are subsequently carried at fair value with changes
recognised in profit or loss. If fair value is positive, the derivative is recognised as an asset, if
negative, as a liability. Derivatives are classified as a current asset or liability if expected to be
settled within 12 months; otherwise, they are classified as non-current.
Gains and losses attributable to changes in the fair value of derivatives are recognised in the
statement of comprehensive income of the reporting period. Gains and losses from the disposal
of derivatives are also recognised in the statement of comprehensive income.
Income tax on dividends in Estonia
According to the Estonian Income Tax Act the accrued profit of a resident legal entity is not
subject to tax, as tax is charged only on dividend distributions. Pursuant to the Income Tax Act,
resident legal entities are liable to income tax on all dividends paid and other profit distributions
irrespective of the recipient. In 2020, the rate was 20/80 on the amount of the dividends payable
(2019: 20/80). Moreover, from 2019, tax rate of 14/86 can be applied to dividend payments. The
more beneficial tax rate can be used for dividend payments in the amount of up to the average
taxed dividend payment during the three preceding years. When calculating the average dividend
payment of three preceding years, 2018 is will be the first year to be taken into account.
The contingent tax liability that would occur if all distributable retained earnings were paid out
as dividends is not recognized in the statement of financial position. The income tax due on
dividend distribution is recorded as a liability and as a tax expense in the statement of
comprehensive income during the same period as the dividend is declared regardless of the
actual payment date or the period for which dividends are declared. Income tax liability is due on
the 10
th
date of the month following the dividend payment.
Deferred Income Tax
Deferred income tax liability arises for the Group from subsidiaries in Estonia. As there is no
fixed policy relating to dividend payments from subsidiaries, the Group has decided to measure
the deferred tax liability on potential dividends to the extent of accumulated profits of subsidiaries
at the reporting date. The Group measures deferred income tax liability using the tax rates valid
on the reporting date.
Employee benefits
Employee short-term benefits
Employee short-term benefits include wages and salaries as well as social security taxes,
benefits related to the temporary halting of the employment contract (holiday pay or other similar
pay) when it is assumed that the temporary halting of the employment contract will occur during
12 months after the end of the period in which the employee worked, and other benefits payable
within 12 months after the end of the period during which the employee worked. Social security
tax payments include contribution to state pension funds. The Group has no legal or constructive
obligation to make pension or similar payments beyond social security tax.
Termination benefits
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Termination benefits are benefits which are payable after the Group decides to terminate the
employment relationship with the employee before the normal retirement date or when the
employee decides to leave voluntarily or when the employee and employer have an agreement,
in exchange for the benefits outlined. The Group recognises termination benefits as liabilities
and expenses only when the Group is obliged to offer termination benefits in order to encourage
voluntary leaving.
Provisions and contingent liabilities
Provisions are recognized when: the Group has a present legal or constructive obligation as a
result of past events; it is probable that an outflow of resources will be required to settle the
obligation; and the amount can be reliably estimated. Provisions are not recognized for future
operating losses.
The provisions include provision for the possible third-party claims (Note 15) and the guarantee
the Group has given to the construction services provided by the Group itself, which is necessary
to meet the warranty obligation for services sold by the reporting date. The amount of provision
for construction services guarantees is recognised in the statement of financial position as a
current and non-current liability, depending on the length of the guarantee period and possible
time of its realisation. Guarantee provisions have been recognised based on of the best estimates
of the Group's Management Board and the actual costs of these transactions can differ from the
provided estimates.
Commitments and other possible and existing liabilities, the realization of which is unlikely or
the amount of accompanying costs cannot be assessed with sufficient reliability but which can
become liabilities on certain terms in the future, are disclosed as contingent liabilities in the notes
to the financial statements.
Share capital
Shares are recorded within the equity capital. Pursuant to the Group's Articles of Association,
the Group has two classes of shares: the A Shares, with a nominal value of €0.60 each and a single
preference share B share, with a nominal value of €60.
Statutory reserve capital
Pursuant to the requirements of the Commercial Code the statutory reserve capital is set up
comprising of the allocations from net profits. The annual allocation must be at least 5% of the
net profit of the accounting year until the reserve capital is equal to 10% of paid-up share capital.
As the Group’s reserve capital has reached the required level, the reserve capital is no longer
increased from net profit.
At the decision of the General Meeting of the Shareholders the reserve capital can be used for
the covering of loss in case it is not possible to cover it from the Group’s available shareholders’
equity, also for increasing the Group’s share capital. The reserve capital cannot be distributed to
the shareholders.
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Leases
Accounting principles – the Group as the lessee
At inception of a contract, the Group assesses whether the contract is, or contains, a lease. A
contract is, or contains, a lease if the contract conveys the right to control the use of an identified
asset for a period of time in exchange for consideration.
The Group determines the lease term as the non-cancellable period of a lease, together with both
periods covered by an option to extend the lease if the lessee is reasonably certain to exercise
that option; and periods covered by an option to terminate the lease if the lessee is reasonably
certain not to exercise that option. A lessee reassesses whether it is reasonably certain to
exercise an extension option, or not to exercise a termination option, upon the occurrence of either
a significant event or a significant change in circumstances that is within the control of the lessee;
and affects whether the lessee is reasonably certain to exercise an option not previously included
in its determination of the lease term, or not to exercise an option previously included in its
determination of the lease term. The Group revises the lease term if there is a change in the non-
cancellable period of a lease.
Initial measurement
At the commencement date, a lessee shall recognise a right-of-use asset and a lease liability. At
the commencement date, a lessee shall measure the right-of-use asset at cost. The cost of the
right-of-use asset shall comprise:
• the amount of the initial measurement of the lease liability;
• any lease payments made at or before the commencement date, less any lease incentives
received;
• any initial direct costs incurred by the lessee;
• an estimate of costs to be incurred by the lessee in dismantling and removing the underlying
asset, restoring the site on which it is located or restoring the underlying asset to the
condition required by the terms and conditions of the lease.
Right-of-use assets are recorded within the line ‘Property, plant and equipment’ in the statement
of financial position.
At the commencement date, the lessee measures the lease liability at the present value of the
lease payments that are not paid at that date. The lease payments shall be discounted using the
interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be
readily determined, the lessee shall use the lessee's incremental borrowing rate, being the rate
that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of
similar value to the right-of-use asset in a similar economic environment with similar terms,
security and conditions.
To determine the incremental borrowing rate, the Group:
• where possible, uses recent third-party financing received by the individual lessee as a
starting point, adjusted to reflect changes in financing conditions since third party financing
AS Tallinna Vesi Annual Report 2020
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was received;
• uses a build-up approach that starts with the average interest margin of the industry
adjusted with the credit risk of the Group;
• makes adjustments specific to the lease, e.g. lease term, country, currency and security.
At the commencement date, the lease payments included in the measurement of the lease liability
comprise the following payments for the right to use the underlying asset during the lease term
that are not paid at the commencement date:
• fixed payments, less any lease incentives receivable;
• variable lease payments that depend on an index or a rate, initially measured using the index
or rate as at the commencement date. Variable lease payments that depend on an index or
a rate include, for example, payments linked to a consumer price index, payments linked to
a benchmark interest rate (such as EURIBOR) or payments that vary to reflect changes in
market rental rates;
• amounts expected to be payable by the lessee under residual value guarantees;
• the exercise price of a purchase option if the lessee is reasonably certain to exercise that
option; and
• payments of penalties for terminating the lease, if the lease term reflects the lessee
exercising an option to terminate the lease.
A contract may contain a lease component and one or more additional non-lease components.
As a practical expedient, the Group has elected, by class of underlying asset, not to separate
non-lease components from lease components, and instead account for each lease component
and any associated non-lease components as a single lease component.
Subsequent measurement
After the commencement date, a lessee measures the right-of-use asset applying a cost model.
To apply a cost model, a lessee measures the right-of-use asset at cost less any accumulated
depreciation and any accumulated impairment losses and adjusted for any remeasurement of the
lease liability. Right-of-use assets are generally depreciated over the shorter of the asset's useful
life and the lease term on a straight-line basis. If the lease transfers ownership of the underlying
asset to the lessee by the end of the lease term or if the cost of the right-of-use asset reflects
that the lessee will exercise a purchase option, the lessee shall depreciate the right-of-use asset
from the commencement date to the end of the useful life of the underlying asset. Otherwise, the
lessee shall depreciate the right-of-use asset from the commencement date to the earlier of the
end of the useful life of the right-of-use asset or the end of the lease term.
After the commencement date, a lessee shall measure the lease liability by:
• increasing the carrying amount to reflect interest on the lease liability;
• reducing the carrying amount to reflect the lease payments made; and
• remeasuring the carrying amount to reflect any reassessment or lease modifications or
to reflect revised in-substance fixed lease payments.
Interest on the lease liability in each period during the lease term shall be the amount that
produces a constant periodic rate of interest on the remaining balance of the lease liability. After
the commencement date, a lessee recognises in profit or loss interest on the lease liability and
AS Tallinna Vesi Annual Report 2020
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variable lease payments not included in the measurement of the lease liability in the period in
which the event or condition that triggers those payments occurs.
If there are changes in lease payments, there may be need to remeasure the lease liability. A
lessee shall recognise the amount of the remeasurement of the lease liability as an adjustment
to the right-of-use asset. However, if the carrying amount of the right-of-use asset is reduced to
zero and there is a further reduction in the measurement of the lease liability, a lessee shall
recognise any remaining amount of the remeasurement in profit or loss.
A lessee shall remeasure the lease liability by discounting the revised lease payments using a
revised discount rate, if either:
• there is a change in the lease term. A lessee shall determine the revised lease payments
on the basis of the revised lease term; or
• there is a change in the assessment of an option to purchase the underlying asset. A lessee
shall determine the revised lease payments to reflect the change in amounts payable under
the purchase option.
A lessee shall remeasure the lease liability by discounting the revised lease payments, if either:
• there is a change in the amounts expected to be payable under a residual value guarantee.
A lessee shall determine the revised lease payments to reflect the change in amounts
expected to be payable under the residual value guarantee.
• there is a change in future lease payments resulting from a change in an index or a rate
used to determine those payments, including for example a change to reflect changes in
market rental rates following a market rent review. The lessee shall remeasure the lease
liability to reflect those revised lease payments only when there is a change in the cash
flows (i.e. when the adjustment to the lease payments takes effect). A lessee shall
determine the revised lease payments for the remainder of the lease term based on the
revised contractual payments. The lessee shall use an unchanged discount rate, unless the
change in lease payments results from a change in floating interest rates.
A lessee shall account for a lease modification as a separate lease if both:
• the modification increases the scope of the lease by adding the right to use one or more
underlying assets; and
• the consideration for the lease increases by an amount commensurate with the stand-alone
price for the increase in scope and any appropriate adjustments to that stand-alone price
to reflect the circumstances of the particular contract.
The Group has elected not to apply the requirements of IFRS 16 to short-term leases (except for
long-term lease arrangements of vehicles with maturity less than 12 months) and leases for
which the underlying asset is of low value. Payments associated with short-term leases and all
leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss.
Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise
of real estate.
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Revenue from contracts with customers
Revenue is income arising in the course of the Group’s ordinary activities. Revenue is measured
in the amount of transaction price. Transaction price is the amount of consideration to which the
Group expects to be entitled in exchange of transferring control over promised services to a
customer, excluding the amounts collected on behalf of third parties. The Group recognises
revenue when it transfers control of a service to a customer.
The Group provides water, wastewater, stormwater, fire hydrants and other associated services
under fixed-price contracts. Revenue from providing services is recognised in the accounting
period in which the services are rendered based on the units delivered.
When connecting to the water services network, the customers must pay a connection fee based
on the actual costs of infrastructure to be built in order to connect them to the network. The
management has concluded that the connection fees do not represent a separate performance
obligation from providing the ongoing water service, and thus the revenue from connection fees
is deferred and recognised as Other income over the estimated average useful lives of assets
providing the service, being 75 years. Connection fees received from customers are carried in
the statement of financial position as ‘Deferred revenue from connection fees’ within non-
current liabilities.
Revenue from construction services is recognised over time based on the actual service provided
to the end of the reporting period as a proportion of the total services to be provided. The
constructed assets have generally no alternative use for the Group due to contractual
restrictions. Enforceable right to payment arises during the construction before legal title has
passed to the customer.
Estimates of revenues, costs or extent of progress toward completion are revised if
circumstances change. Any resulting increases or decreases in estimated revenues or costs are
reflected in the statement of profit or loss in the period in which the circumstances that give rise
to the revision become known by management.
In case of fixed-price contracts, the customer pays the fixed amount based on a payment
schedule. If the services rendered by the Group exceed the payment, a contract asset is
recognised. If the payments exceed the services rendered, a contract liability is recognised.
If the contract includes an hourly fee, revenue is recognised in the amount to which the Group
has a right to invoice. Customers are invoiced on a monthly basis and consideration is payable
when invoiced.
The contract asset and contract liability arising from the same contract are presented net in the
financial statements.
If the contract includes variable consideration, revenue is recognised only to the extent that it is
highly probable that there will be no significant reversal of such consideration.
Financing component
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92
The Group does not have any contracts where the period between the transfer of the promised
goods or services to the customer and payment by the customer exceeds one year. Consequently,
the Group does not adjust any of the transaction prices for the time value of money.
Earnings per share
Earnings per share are calculated by dividing the net profit of the accounting year with the
weighted average number of issued shares of the period. The Group has no instruments that
would have a diluting effect on the earnings per share.
Segment reporting
An operating segment is a component of the Group that engages in business activities from which
it may earn revenues and incur expenses; whose operating results are regularly reviewed by the
Management Board of the Group to assess its performance and for which discrete financial
information is available. Reportable segments are identified and segment information is
reported on the same principle as the Group’s structural units are grouped for internal
accounting and reporting purposes.
NOTE 3. EFFECTS OF COVID-19
Late in 2019, China was the first to report the cases of the novel coronavirus COVID-19. In 2020,
the virus evolved to a pandemic and its negative impact gained momentum. Among other factors,
the pandemic has also had a negative effect on the Group’s revenues in 2020, due to an increase
in the consumption of water and wastewater services by the private sector and decrease in the
consumption by the commercial sector, along with a reduction in construction revenues.
According to external forecasts, the impact of the pandemic will gradually start to reverse. We
are therefore optimistic that consumption will also revert back to pre-pandemic volumes in the
longer term.
The Group has assessed and calculated the impact of the pandemic on the results for 2020
where reasonable:
- The revenues have decreased in total of €2.53 million due to lower consumption
in commercial sector and therefore higher consumption in private sector.
- Specific expenses incurred to make pandemic-related changes in the workflow
and working environment and to ensure the safety of the employees amounted
to €88 thousand.
- Covid-19 impact on Trade Receivables credit losses is evaluated to €60
thousand.
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93
NOTE 4. CRITICAL ACCOUNTING ESTIMATES
The Group makes estimates and assumptions concerning the future. The resulting accounting
estimates will, by definition, seldom equal the related actual results. The estimates and
assumptions that have a significant risk of material misstatements to the carrying amounts of
assets and liabilities within the next financial year are addressed below:
• Management has made an estimate with regards to possible third-party claims based on
the maximum difference between revenues calculated with tariffs established based on
the Services Agreement and the tariffs based on the Company's estimation, with the
reservation to the possible fluctuation. According to the law, the tariffs established based
on the Services Agreement were in force until the Competition Authority approved the new
tariffs and the Company implemented these tariffs in line with the law. The Company has
acted in good faith and in reliance to the applicable legal acts. Thus the Company does not
consider itself liable to the customers for any claims related to the tariffs applied until the
new tariffs approved by the Competition Authority were duly implemented.
The potential undiscounted payments by the Company in the future, if potential claims
from customers were recognised by the courts, would amount to €24.1 million (as of 31
December 2019: €36.1 million). This estimate marks the maximum difference in between
the tariffs approved based on the Services Agreement and the tariffs based on the
Company's estimation, with the reservation to the possible fluctuation, regarding past 24
months (as of 31 December 2019: 36 months), being the approximate remaining unexpired
term of potential claims. The Management Board of the Company has assessed the
potential liability resulting from such claims, if successful, to be €9.6 million (as of 31
December 2019: €14.4 million). As of 31 December 2020, claims totalling €1.1 million have
been filed within one application. The Company does not admit any liability and fully rejects
it. See also Note 15.
• Management has estimated the useful lifetime of property, plant and equipment and
intangible assets. The results of the estimates are disclosed in the note 2 in section
'Property, plant and equipment, and intangible assets' and the information about the
carrying amounts is disclosed in notes 9 and 10.
As of 31 December 2020, Group owns property, plant and equipment, and intangible assets
with a net book value of €203 million (31 December 2019: €190 million) and annual
depreciation was €6.3 million (2019: €6.1 million). If the depreciation/amortisation rates
decreased/increased by 5%, the depreciation/ amortisation expense would
increase/decrease by €315 thousand respectively (2019: €305 thousand).
AS Tallinna Vesi Annual Report 2020
94
NOTE 5. FINANCIAL RISK MANAGEMENT
FINANCIAL RISK FACTORS
In its business activities the Group is exposed to different financial risks: market risk (including
currency risk, price risk, cash flow interest rate risk and fair value interest rate risk), credit risk
and liquidity risk. The Group’s financial risk management focuses on the unpredictability of
financial markets and seeks to minimise potential adverse effects on the Group’s financial
performance. The Group uses derivative financial instruments to hedge certain risk exposures.
The Group’s financial risks are managed under the control and supervision of the Management
Board by the financial department. Financial department identifies, evaluates and manages
financial risks in co-operation with the Group’s operating units.
Market risk
Foreign exchange risk
Foreign exchange risk arises when future commercial transactions or recognised assets or
liabilities are denominated in a currency that is not the entity’s functional currency. The Group’s
foreign exchange risk is related to purchases done and amounts owned in foreign currencies.
Majority of Group’s purchases are made in euros. The proportion of purchases in other
currencies in 2020 was 0.0% (2019: 0.2%). Because of the small proportion of transactions in
foreign currencies the Group has not taken any special activities to reduce this risk.
On 31 December 2020 the Group’s bank accounts balances (including deposits) totalled €44,514
thousand (31 December 2019: €64,775 thousand) from which no sums were in foreign currencies
(31 December 2019: no foreign currencies). There were no other significant exposures to foreign
currencies arising from Group’s other financial assets and financial liabilities.
Due to the above the Group considers its currency risk level to be low.
Price risk
The Group has no price risk regarding financial instruments because it has no investments into
equity instruments.
Cash flow interest rate risk and fair value interest rate risk
Fair value interest rate risk is the risk that the fair value of financial instruments will fluctuate in
the future due to changes in market interest rates. Cash flows interest rate risk is the risk that
financial expenses arising from financial liabilities with floating interest rate will increase when
interest rates on the market change.
Borrowings issued at variable interest rates (Note 11) expose the Group to cash flow interest rate
risk. In order to mitigate the cash flow interest rate risk, the Group concluded floating-to-fixed
interest rate swap contracts (Note 8). The Group’s interest rate risk arises from long-term
AS Tallinna Vesi Annual Report 2020
95
borrowings and, with EURIBOR being below zero, from the ineffectiveness of swap contracts as
hedging instruments.
At the end of reporting period, the Group had the following variable rate borrowings and interest
rate swap contracts outstanding:
31 December 2020
31 December 2019
Effective interest
rate
Balance
€ thousand
Effective interest
rate
Balance
€ thousand
Long-term borrowings
0.453%
87,727
0.542%
91,221
Interest rate swaps
(notional principal amount)
-
0
0.3%
37,500
Net exposure to cash flow
interest rate risk in case
Euribor>0
50,227
53,721
Net exposure to cash flow
interest rate risk in case
Euribor<0
37,500
37,500
The Group’s profit is sensitive to higher/lower borrowings and interest rate swaps interest
expenses as a result of changes in interest rate.
Impact on profit
€ thousand
2020
2019
Interest rates- Increase by 50 basis points*
-46
-37
Interest rates- Decrease by 50 basis points*
-141
-195
*
Holding all other variables constant
Overnight and fixed term deposits have fixed interest rate and therefore expose the Group to fair
value interest rate risk. As all these instruments are carried at amortised cost, the change in
market interest rates would not have an effect on the financial statements of the Group.
Credit risk
Credit risk expresses potential loss that can arise if counterparty fails to fulfil its contractual
obligations. Cash in bank accounts and deposits, financial assets at fair value through profit and
loss, trade and other receivables are exposed to credit risk.
According to the Group’s risk management policies the Group’s short-term resources can be
deposited only in accounts, overnight deposits and fixed term deposits opened in credit
institutions. For cash in banks and short-term depositing counterparties with at least a long-
term Baa1 rating (by Moody’s) is used. As of 31 December 2020, 100% of Group’s cash in banks
and short-term deposits were deposited with counterparties with rating of A3 (31 December
2019: 100% higher than A3).
The Group is also monitoring European Banking Authority’s recommendations regarding banks’
recapitalization needs and fixed term deposits are opened only in banks with no capitalization
shortfall.
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96
To measure the expected credit losses, trade receivables and contract assets have been grouped
based on shared credit risk characteristics and the days past due. The expected loss rates are
based on the payment profiles of sales over a period of 24 months before 31 December 2019,
respectively, and the corresponding historical credit losses experienced within this period. The
historical loss rates are adjusted to reflect current and forward-looking information on
macroeconomic factors affecting the ability of the customers to settle the receivables. The Group
has identified the GDP and the unemployment rate of Estonia in which it sells its goods and
services to be the most relevant factors, and accordingly adjusts the historical loss rates based
on expected changes in these factors.
On that basis described above, the loss allowance as at 31 December 2020:
not due 0.01%;
61 to 90 days over due date 10%;
91 to 180 days over due date 30%;
181 to 360 days over due date 70%;
over 360 days over due date 100%.
While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the
identified impairment loss was immaterial as at 31 December 2020.
Sales of Group’s products and services is done in compliance with internal procedures. To
reduce credit risk related to accounts receivable the customers’ payment discipline is
consistently observed. In the case of overdue debt, the customers are contacted by billing group.
As of the end of December 2020 there was 1 customer (31 December 2019: 2 customer) with
receivable (Note 7) exceeding 5% of total trade receivables. The receivable has been paid before
the date of completion of these financial statements.
Financial assets
Overdue
€ thousand
Balance
Not due
Up to 60 days
More than 60 days
Impairment
as of 31 December 2020
Cash and cash
equivalents (Note 6)
44,514
44,514
0
0
0
Trade receivables (Note 7)
6,848
5,905
518
896
-471
Commercial customers
3,965
3,090
488
815
-428
Private customers
2,883
2,815
30
81
-43
Accrued income
3
3
0
0
0
Total
51,365
50,422
518
896
-471
as of 31 December 2019
Cash and cash
equivalents (Note 6)
64,775
64,775
0
0
0
Trade receivables (Note 7)
6,820
6,665
118
465
-428
Commercial customers
3,933
3,852
66
415
-400
Private customers
2,887
2,813
52
50
-28
Accrued income
7
7
0
0
0
Total
71,602
71,447
118
465
-428
AS Tallinna Vesi Annual Report 2020
97
The Group’s maximum credit risk is equal to the carrying amount of the financial assets and is
considered to be low.
Liquidity risk
Liquidity risk is the risk that the Group is unable to fulfil its financial obligations due to insufficient
cash funds or inflows. This risk realizes when the Group does not have enough funds to serve its
loans, to fulfil its working capital needs, to invest and/or to make declared dividend payments.
Financial liabilities in terms of payment*
€ thousand
Up to 1
month
1 - 3
months
3 - 12
months
1 - 5
years
Over 5
years
Total
as of 31 December 2020
Trade and other payables (Note 12)
2,321
1,185
0
213
0
3,719
Derivatives (Note 8)
0
0
0
0
0
0
Bank loans
0
0
3,636
55,520
28,571
87,727
Leases
35
76
294
1,409
0
1,814
Total
2,356
1,261
3,930
57,142
28,571
93,260
as of 31 December 2019
Trade and other payables (Note 12)
3,149
168
31
0
0
3,348
Derivatives (Note 8)
221
0
0
0
0
221
Bank loans
0
102
3,979
52,997
36,251
93,329
Finance leases
34
65
265
1,028
0
1,392
Total
3,404
335
4,275
54,025
36,251
98,290
*All amounts above are undiscounted
In liquidity risk management the Group has taken a prudent view, maintaining sufficient cash
balance and short-term deposits to be able to fulfil its financial liabilities at every moment of
time. Continuous cash flow forecasting and control are essential tools in the day-to-day liquidity
risk management of the Group.
Capital management
The Group’s objectives when managing capital is to safeguard the Group’s ability to continue as
a going concern, to be in accordance with Business Plan’s capital structure approved by
Supervisory Board and the long-term borrowing contracts that limit the Group’s equity ratio to a
minimum of 35% of the total assets.
The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt
divided by total capital. Net debt is calculated as total borrowings (Note 11; including ‘current
and non-current borrowings’ as shown in the consolidated Statement of financial position) less
cash and cash equivalents (Note 6). Total capital is calculated as ‘equity’ as shown in the
consolidated Statement of financial position plus net debt.
AS Tallinna Vesi Annual Report 2020
98
as of 31 December
€ thousand
2020
2019
Borrowings
89,402
92,539
Cash
-44,514
-64,775
Net debt
44,888
27,764
Equity
112,256
115,524
Total capital
157,144
143,288
Net debt to total capital ratio
28,5%
19,4%
Total assets
255,665
262,855
Proportion of equity from total assets
43,9%
43,9%
Fair value estimation
Fair values of cash and cash equivalents, trade receivable, other long-term receivables, short-
term borrowings and trade payable do not vary significantly from their carrying amount because
their realization will take place within 12 months or these were recognised close to the reporting
date.
To provide an indication about the reliability of the inputs used in determining fair value, the
group has classified its financial instruments into the three levels prescribed under the
accounting standards.
Level 1: The fair value of financial instruments traded in active markets is based on quoted
market prices at the end of the reporting period. The quoted market price used for financial
assets held by the group is the current bid price. As of 31 December 2020 and 2019, the Group
did not have any financial instruments of level 1.
Level 2: The fair value of financial instruments that are not traded in an active market is
determined using valuation techniques which maximise the use of observable market data and
rely as little as possible on entity-specific estimates. If all significant inputs required to fair value
an instrument are observable, the instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the
instrument is included in level 3.
As of 31 December 2020 all Group’s long-term borrowings had floating interest rates. The fair
values of long-term borrowings are based on discounted cash flows using the borrowing rate of
1.02% (2019: 1.02%) and are within level 3 of the fair value hierarchy. As of 31 December 2020,
the fair value of the Group’s long-term borrowings was €2,994 thousand lower than their carrying
amount (31 December 2019: €2,787 thousand lower).
The financial instruments carried at fair value (interest rate swap contracts, Note 8) are included
in level 2. The fair value of interest rate swap contracts is calculated as the present value of
estimated future cash flows based on observable yield curves.
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99
NOTE 6. CASH AND CASH EQUIVALENTS
as of 31 December
€ thousand
2020
2019
Cash and bank accounts
20,514
43,175
Short-term deposits
24,000
21,600
Total cash and cash equivalents
44,514
64,775
NOTE 7. TRADE RECEIVABLES, ACCRUED INCOME AND PREPAID EXPENSES
as of 31 December
€ thousand
2020
2019
Accounts receivable
6,848
7,248
Allowance for doubtful receivables
-471
-428
Total trade receivables
6,377
6,820
Allowance for doubtful receivables at the beginning of the period
-428
-450
Proceeds from doubtful receivables during the period
22
37
Allowance for doubtful receivables recognised during the period
-65
-15
Allowance for doubtful receivables at the end of the period
-471
-428
Impairment losses recognised during the period are reported in profit or loss as ‘Other income
(+)/expenses (-)’. For further information on ageing of receivables (including overdue
receivables), please see note 5.
as of 31 December
€ thousand
2020
2019
Accrued interest
3
7
Other accrued income
368
107
Prepaid expenses
271
304
Total accrued income and prepaid expenses
642
418
Total trade receivables, accrued income and prepaid expenses 7,019 7,238
The Company's current assets (incl. trade receivables, accruals and inventory) in the amount of
€ 7,240 thousand (31 December 2019: € 6,595 thousand) have been pledged as a security for the
bank loans (Note 11), as a part of commercial pledge.
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100
NOTE 8. DERIVATIVES
as of 31 December
€ thousand
2020
2019
Current liabilities
Interest rate swap contracts
0
221
Contracts start date
June 2015
Contracts maturity date
November 2020
Contracts notional amount
37,500
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101
NOTE 9. PROPERTY, PLANT AND EQUIPMENT
€ thousand
Land
and
buildings
Facilities
Machinery
and
equipment
Const-
ruction in
progress
Right-
of-use
assets
Right-of-
use
assets in
progress
Total
property,
plant and
equipment
as of 31 December 2018
Acquisition cost
26,500
215,059
49,933
3,199
0
0
294,691
Accumulated
depreciation
-7,114
-70,993
-37,399
0
0
0
-115,506
Net book value
19,386
144,066
12,534
3,199
0
0
179,185
Transactions in the period 1 January 2019 - 31 December 2019
Reclassification
01/01/2019 (IFRS 16)
0
0
-823
-26
1,525
26
702
Acquisition in book
value
0
0
0
15,606
0
237
15,843
Write off and sale of
property, plant and
equipment in residual
value
-7
-130
-20
0
-37
0
-194
Reclassification
245
14,829
1,245
-16,323
262
-262
-4
Depreciation
-321
-3,342
-1,870
0
-372
0
-5,905
as of 31 December 2019
Acquisition cost
26,688
229,228
48,552
2,456
2,493
1
309,418
Accumulated
depreciation
-7,385
-73,805
-37,486
0
-1,115
0
-119,791
Net book value
19,303
155,423
11,066
2,456
1,378
1
189,627
Transactions in the period 1 January 2020 - 31 December 2020
Acquisition in book
value
0
0
0
18,336
0
951
19,287
Write off and sale of
property, plant and
equipment in residual
value
0
0
0
0
-23
0
-23
Reclassification
191
10,682
1,418
-11,993
629
-952
-25
Depreciation
-296
-3,536
-2,013
0
-219
0
-6,064
as of 31 December 2020
Acquisition cost
26,875
239,412
49,029
8,799
2,793
0
326,908
Accumulated
depreciation
-7,677
-76,843
-38,558
0
-1,028
0
-124,106
Net book value
19,198
162,569
10,471
8,799
1,765
0
202,802
Property, plant and equipment are written off if the condition of the asset does not enable further
usage for production purposes. In comparison with the previous annual report, the Group has made
a change in presenting information in the Note ’Property, plant and equipment’. The column ’Other
equipment’, which stood as a separate column, is now included in the column ’Machinery and
AS Tallinna Vesi Annual Report 2020
102
equipment’. By nature the right-of-use assets comply with the asset class of machinery and
equipment.
The Group's non-current assets in the book value amount of €10,585 thousand (31 December 2019:
€11,393 thousand) have been pledged as a security for the bank loans (Note 11), as a part of
commercial pledge. A mortgage for the Group's non-current assets (land, buildings and facilities)
in the book value amount of €29,730 thousand (31 December 2019: €30,016 thousand) serves as a
security to the bank loans (Note 11).
During the year, the Group has capitalised borrowing costs amounting to €23 thousand (2019: €21
thousand) on qualifying assets. Borrowing costs were capitalised at the weighted average rate of its
general borrowings of 0.45% (2019: 0.75%).
NOTE 10. INTANGIBLE ASSETS
€ thousand
Acquired licenses
and other
intangible assets
Unfinished
intangible
assets
Total intangible
assets
as of 31 December 2018
Acquisition cost
4,206
50
4,256
Accumulated amortisation
-3,591
0
-3,591
Net book value
615
50
665
Transactions in the period 01 January 2019 - 31 December 2019
Acquisition in book value
0
249
249
Reclassification
288
-288
0
Amortisation
-204
0
-204
as of 31 December 2019
Acquisition cost
4,463
11
4,474
Accumulated amortisation
-3,764
0
-3,764
Net book value
699
11
710
Transactions in the period 01 January 2020 - 31 December 2020
Acquisition in book value
0
138
138
Reclassification
119
-119
0
Amortisation
-219
0
-219
as of 31 December 2020
Acquisition cost
4,582
30
4,612
Accumulated amortisation
-3,983
0
-3,983
Net book value
599
30
629
AS Tallinna Vesi Annual Report 2020
103
NOTE 11. BORROWINGS
€ thousand
as of 31 December
Current liabilities
2020
2019
Current portion of long-term leases
393
352
Current portion of long-term loans
3,630
3,631
Non-current liabilities
Leases
1,400
964
Loans
83,978
87,592
Liabilities at 31 December 2020
€ thousand
Balance
Effective
interest rate
Lease liabilities
1,793
1.08%-1,77%
Bank loans at floating interest rate
(based on 6-month Euribor)
87,608
0.11%-0.95%
Liabilities at 31 December 2019
€ thousand
Balance
Effective
interest rate
Lease liabilities
1,316
0.89%-1,86%
Bank loans at floating interest rate
(based on 6-month Euribor)
91,223
0.30%-1.02%
The Group’s loan agreements, valid as of 31 December 2020, mature as follows. One loan
agreement in the amount of €37.5 million will be repaid in September 2022 (31 December 2019:
September 2022). The second loan agreement in the amount of €20 million continues to be repaid
in eleven equal semi-annual repayments from May 2019 to May 2024 (31 December 2019: May 2019
to May 2024). The third loan agreement in the amount of €37.5 million will be repaid in 21 equal
semi-annual repayments from November 2024 to November 2034.
AS Tallinna Vesi Annual Report 2020
104
Net debt reconciliation
Net debt
as of 31 December
€ thousand
2020
2019
Cash and cash equivalents
44,514
64,775
Borrowings
-87,608
-91,223
Lease liabilities
-1,793
-1,316
Total net debt
-44,888
-27,764
Cash and cash equivalents
44,514
64,775
Gross debt - variable interest rates
-89,401
-92,539
Total net debt
-44,888
-27,764
Liabilities from financing activities
Other assets
€ thousand
Borrowings
Leases
Subtotal
Cash and cash
equivalents
Total
Net debt as at 1 January 2019
-94,927
-1,518
-96,445
61,769
-34,676
Cash flows
3,636
404
4,040
3,006
7,046
Acquisitions - leases
0
-239
-239
0
-239
Other changes
68
37
105
0
105
Net debt as at 31 December
2019
-91,223
-1,316
-92,539
64,775
-27,764
Net debt as at 1 January 2020
-91,223
-1,316
-92,539
64,775
-27,764
Cash flows
3,636
555
4,191
-20,261
-16,070
Acquisitions – leases
0
-1,037
-1,037
0
-1,037
Other changes
-22
5
-17
0
-17
Net debt as at 31 December
2020
-87,609
-1,793
-89,402
44,514
-44,888
Other changes include non-cash movements, including loan financing costs that are recognised as
financial cost over the entire loan period and early termination of lease agreements.
Collateral of loans and pledged assets
Collateral at book value
€ thousand
as of 31 December
Type of collateral
Specification and location of collateral
2020
2019
Commercial
pledge
Movables of the Company (Note 7, 9)
17,825
17,988
Mortgage
Real Estates located at Paljassaare põik 14 and
Järvevana tee 3, Tallinn, Estonia (Note 9)
29,730
30,016
AS Tallinna Vesi Annual Report 2020
105
NOTE 12. TRADE AND OTHER PAYABLES
for the year ended 31 December
€ thousand
2020
2019
Trade payables - operating expenditures
1,666
2,287
Trade payables - capital expenditures
1,502
768
Payables to related parties (Note 25)
185
184
Payables to employees
1,521
1,261
Interest payable
66
78
Other accrued expenses
114
110
Warranty reserve
213
70
Taxes payable incl:
Income tax
206
196
VAT
634
697
Water abstraction charges
318
314
Pollution taxes
202
302
Social security tax
402
394
Other
56
58
Total trade and other payables
7,085
6,718
NOTE 13. OTHER CONTINGENT LIABILITIES
Tax authority have got the right to review to the Group’s tax accounting within 5 years after the term
for the submission of tax declaration and when mistakes are detected to impose an additional
amount of tax, interests and fines. According to the Group’s Management Board there are no
circumstances as a result of which tax authority could impose a significant additional amount of tax
to the Group.
The Group’s distributable retained earnings as at 31 December 2020 amounted to €74,243 thousand
(as at 31 December 2019: €77,512 thousand). Consequently, if retained earnings were fully
distributed as dividends and the lower tax rate that may be applicable from 2020 to dividend
payments was applied, the maximum possible tax liability which would be €17,334 thousand (2019:
€18,733 thousand). See also note 2.
NOTE 14. PREPAYMENTS
as of 31 December
€ thousand
2020
2019
Prepayments for water and sewerage services
91
132
Prepayments for fixed assets
0
4
Prepayments for connection fee
2,354
2,187
Total prepayments
2,445
2,323
AS Tallinna Vesi Annual Report 2020
106
NOTE 15. PROVISION FOR POSSIBLE THIRD-PARTY CLAIMS
On 12 December 2017, the Supreme Court made a decision on AS Tallinna Vesi’s cassation in the
tariff dispute with the Estonian Competition Authority. The court stated that the Competition
Authority is not bound by the agreement on the water tariffs contained in the Services Agreement,
which was executed upon privatisation of the company. From now on, the tariffs will be regulated
by the Competition Authority in line with the methodology.
According to the law the tariffs established based on the Services Agreement were in force until the
Competition Authority approved the new tariffs and the Company implemented these tariffs in line
with the law. The Company has acted in good faith and in reliance to the applicable legal acts. Thus
the Company does not consider itself liable to the customers for any claims related to the tariffs
applied until the new tariffs approved by the Competition Authority were duly implemented.
On 18 October 2019, the Competition Authority approved the tariffs that the Company had applied
for in September of that year. The new tariffs for water services came into force on 1 December
2019. In the Company’s main service area the private customer tariffs reduced by 27% and
commercial customer tariffs dropped by 15%, on average.
The potential undiscounted payments by the Company in the future, if potential claims from
customers were recognised by the courts, would amount to €24.1 million (as of 31 December 2019:
€36.1 million). This estimate marks the maximum difference in between the tariffs approved based
on the Services Agreement and the tariffs based on the Company's estimation, with the reservation
to the possible fluctuation, regarding past 24 months (as of 31 December 2019: 36 months), being
the approximate remaining unexpired term of potential claims.
The Management Board of the Company has assessed the potential liability resulting from such
claims, if successful, to be €9.6 million (as of 31 December 2019: €14.4 million). As of 31 December
2020, claims totalling €1.1 million have been filed within one application. By the date of preparation
of annual report, a claim in amount of €384 thousand has been filed (note 27). The Company does
not admit any liability and fully rejects these claims.
AS Tallinna Vesi Annual Report 2020
107
NOTE 16. SHARE CAPITAL
As at 31 December 2020 the nominal value of the share capital was €12,000,060 (twelve million and
sixty euros), composed of 20,000,000 (twenty million) A shares with the nominal value of €0.60 (sixty
eurocents) per share and 1 (one) preferred B share with a nominal value of €60 (sixty euros).
The B share has been issued with the right of veto to the shareholder when voting on the following
issues: amending the Articles of Association, increase and decrease of share capital, issuance of
convertible bonds, acquisition of own (treasury) shares, deciding on the merger, division,
transformation and/or dissolution of AS Tallinna Vesi and deciding other issues related to the
activities of the AS Tallinna Vesi that have not been placed in the sole competence of the General
Meeting by law that either the Management Board or the Supervisory Board have put to the vote of
the General Meeting. In 2020 and 2019, the B share granted the holder the preferential right to
receive a dividend in an agreed amount of €600 (six hundred euros).
The General Meeting of the Shareholders has the authority to decide the emission and buyback of
the shares, following the principles established in the Articles of Association. The Management
Board does not have any respective authorities.
As of 31 December 2020 and 2019 United Utilities (Tallinn) B.V. owned 7,060,870 (35.3%) A shares,
the City of Tallinn owned 6,939,130 (34.7%) A shares and 1 (one) B share, with 6,000,000 shares in
free float. Other direct shareholders each owned less than 5% of the shares as of 31 December
2020 and 2019.
As of 31 December 2020, the members of the Supervisory Council and the Management Board did
not own any shares in the company (as of 31 December 2019: previous Board Member Riina Käi
owned 100 shares). Dividends declared and paid are disclosed in note 22.
Contingent income tax on the dividend payments from retained earnings is described in note 13.
NOTE 17. SEGMENT REPORTING
According to the principles of the standard IFRS 8 Operating Segments, an entity shall report
separately information about an operating segment if either its reported revenue, profit or loss, or
assets account for 10 per cent or more of the particular combined measure of all operating
segments.
The Group has defined the business segments based on the reports used regularly by the chief
operating decision maker for the purposes of making strategic decisions. The chief operating
decision maker monitors the Group’s operations by activities. Three segments are distinguished:
water services, construction and other services.
Water services: water supply, storm and wastewater disposal and treatment, fire hydrants service,
overpollution charges and discharging.
Construction services: construction services provided by Watercom OÜ. Construction services have
been identified as a reportable segment because its revenues are more than 10% of the combined
revenues of all segments.
AS Tallinna Vesi Annual Report 2020
108
Other services: road maintenance, jet wash and transportation services, project management and
owner's supervision and other activities. Other activities are of less importance to the Group's
financial results and none of them constitutes a separate segment for reporting purposes.
The Group's chief operating decision maker assesses the performance of each operating segment
on the basis of its revenue (external and inter-segment revenue) and gross profit. The inter-
segment transactions are carried out on market terms.
€ thousand
Water
services
Const-
ruction
services
Other
services
Inter-
segment
transactions
Total
segments
1 January 2020 - 31 December 2020
External revenue
45,800
5,222
695
0
51,717
Inter-segment revenue
1
3,481
3,421
-6,903
0
Total segment revenue
45,801
8,703
4,116
-6,903
51,717
Segment's gross profit
19,614
409
2,768
-565
22,226
Unallocated expenses:
Marketing and Administrative expenses
-5,009
Other income/expenses
4,567
Operating profit
21,784
1 January 2019 - 31 December 2019
External revenue
56,866
5,960
597
0
63,423
Inter-segment revenue
1
2,740
3,399
-6,140
0
Total segment revenue
56,867
8,700
3,996
-6,140
63,423
Segment's gross profit
32,982
329
1,253
-611
33,953
Unallocated expenses:
Marketing and Administrative expenses
-6,079
Other income/expenses
4,201
Operating profit
32,075
AS Tallinna Vesi Annual Report 2020
109
Revenue by activities
for the year ended 31 December
€ thousand
2020
2019
Water services
Water supply service
8,106
13,781
Wastewater disposal service
12,048
11,719
Total from private customers
20,154
25,500
Water supply service
7,209
11,482
Wastewater disposal service
7,417
9,317
Total from commercial customers
14,626
20,799
Water supply service
1,593
1,622
Wastewater disposal service
3,298
3,193
Stormwater disposal service
291
426
Total from outside service area customers
5,182
5,241
Stormwater treatment and disposal service and fire hydrants
service
4,588
4,002
Overpollution charges and discharging
1,250
1,324
Total from water services
45,800
56,866
Construction services
5,222
5,960
Other services
695
597
Total revenue
51,717
63,423
100% of the Group’s revenue was generated within the Republic of Estonia.
NOTE 18. STAFF COSTS
for the year ended 31 December
€ thousand
2020
2019
Salaries and wages (Note 19)
-7,417
-6,762
Social security and unemployment insurance taxation (Note 19)
-2,509
-2,286
Total staff costs
-9,926
-9,048
The average number of employees
332
321
AS Tallinna Vesi Annual Report 2020
110
NOTE 19. COST OF GOODS AND SERVICES SOLD, MARKETING AND ADMINISTRATIVE
EXPENSES
for the year ended 31 December
€ thousand
2020
2019
Cost of goods and services sold
Water abstraction charges
-1,237
-1,219
Chemicals
-1,567
-1,664
Electricity
-3,256
-3,566
Pollution tax
-989
-1,089
Staff costs (Note 18)
-7,247
-6,602
Depreciation and amortisation
-5,521
-5,420
Construction service
-4,256
-5,096
Other costs of goods and services sold
-5,418
-4,814
Total cost of goods and services sold
-29,491
-29,470
Marketing expenses
Staff costs (Note 18)
-370
-318
Other marketing expenses
-63
-72
Total marketing expenses
-433
-390
Administrative expenses
Staff costs (Note 18)
-2,309
-2,128
Depreciation and amortisation
-333
-335
Other general administration expenses
-1,934
-3,226
Total administrative expenses
-4,576
-5,689
NOTE 20. OTHER INCOME/EXPENSES
for the year ended 31 December
€ thousand
2020
2019
Connection fees
542
389
Depreciation of single connections
-429
-354
Doubtful receivables expenses (-)/expense reduction (+)
-64
20
Provision for possible third party claims (Note 15)
4,814
4,626
Other income (+)/expenses (-)
-296
-480
Total other income/expenses
4,567
4,201
AS Tallinna Vesi Annual Report 2020
111
NOTE 21. FINANCIAL INCOME AND EXPENSES
for the year ended 31 December
€ thousand
2020
2019
Interest income
31
38
Interest expense, loan and lease
-487
-714
Interest expense, swap
-185
-230
Increase (+)/decrease (-) of fair value of swap
221
159
Other financial income (+)/expenses (-)
-22
-24
Total financial income/expenses
-442
-771
NOTE 22. DIVIDENDS AND INCOME TAX
for the year ended 31 December
€ thousand
2020
2019
Dividends declared during the period
20,001
15,001
Dividends paid during the period
19,888
14,965
Withheld income tax on dividends
113
36
Income tax on dividends paid
-4,355
-3,544
Dividends declared per shares:
Dividends per A share (in euros)
1.00
0.75
Dividends per B share (in euros)
600
600
Dividend income tax rate in 2020 is 20/80 (in 2019: 20/80), but for dividend payments in the amount
of up to the average taxed dividend payment during the three preceding years, the income tax rate
14/86 is applied. When calculating the average dividend payment of the three preceding years, 2018
is the first year to be taken into account. In addition, for dividends payable to natural persons,
income tax at a rate of 7% is withheld on dividends taxed with a lower income tax rate.
Deferred income tax expense and liability for 2020 is €255 thousand and is calculated based on total
distributable profits of the subsidiary as of 31/12/2020.
NOTE 23. EARNINGS PER SHARE
for the year ended 31 December
2020
2019
Net profit minus B share preferred dividend rights
(€ thousand)
16,731
27,759
Weighted average number of ordinary shares for the
purposes of basic earnings per share (in pieces)
20,000,000
20,000,000
Earnings per A share (in euros)
0.84
1.39
Earnings per B share (in euros)
600
600
AS Tallinna Vesi Annual Report 2020
112
Diluted earnings per share for the periods ended 31 December 2020 and 2019 are equal to earnings
per share figures stated above.
NOTE 24. LEASES
The lease agreements, in which the Group is a lessee, are leases of vehicles, property and IT
equipment. The underlying currency of all lease contracts is euro. Leased assets have not been
sublet.
for the year ended 31 December
€ thousand
2020
2019
Interest expense on lease liabilities
24
19
Expense relating to short-term leases
10
15
Expense relating to leases of low-value assets
1
1
The total cash outflow for leases in 2020 was €589 thousand (2019: €438 thousand).
For information about depreciation charge for right-of-use assets, additions to right-of-use assets
and the carrying amount of right-of-use assets, please see note 9. The maturity analysis of lease
liabilities is disclosed in note 5.
As at 31 December 2020 the Group had entered into the lease agreements, which take effect in
2021, in the total amount of €926 thousand (2019: €825 thousand).
The lease agreements, in which the Group is a lessor, are all leases of property. All these are
operating leases. The underlying currency of all lease contracts is euro. The Group’s consolidated
income from operating lease in 2020 was €140 thousand (2019: €73 thousand). The Group considers
the income from leasing and the assets held for leasing in proportion of all assets insignificant.
AS Tallinna Vesi Annual Report 2020
113
NOTE 25. RELATED PARTIES
Transactions with related parties are considered to be transactions with members of the Group’s
Supervisory Board and Management Board, their relatives and the companies in which they have
control or significant influence and transactions with shareholder having the significant influence.
Dividend payments are indicated in the Statement of Changes in Equity.
Shareholders having the significant influence
Balances recorded in on the statement of financial
position of the Group
as of 31 December
€ thousand
2020
2019
Accounts receivable
1,390
531
Trade and other payables (Note 12)
185
184
Transactions
for the year ended 31 December
€ thousand
2020
2019
Revenue (Note 17)
4,588
4,002
Purchase of administrative and consulting services
736
991
Fees to the Group’s Management and
Supervisory Board members
for the year ended 31 December
€ thousand (excluding social tax)
2020
2019
Management Board members
213
213
Supervisory Board members
32
32
The Group’s Management Board and Supervisory Board members are considered as key
management personnel who have received only the contractual salary payments as disclosed
above. In addition to this one Board Member has received direct compensations from the companies
belonging to the group of United Utilities (Tallinn) B.V. as overseas secondees. Such compensations
are recorded as purchase of administrative and consulting services.
The potential salary liability would be up to €90 thousand (excluding social tax) if the Supervisory
Board would want to replace all Management Board members.
The Group’s Management Board or Supervisory Board members do not have more than 5%
shareholding in any of the companies having important business or cooperation relations with the
Group.
The information about AS Tallinna Vesi shares belonging to the related parties is disclosed in notes
16 and 27. Paid-up dividends are described in note 22.
AS Tallinna Vesi Annual Report 2020
114
NOTE 26. SUBSIDIARIES
Holding (%) as of 31 December
2020
2019
Subsidiary
Location
Activity
Watercom OÜ
Tallinn,
Estonia
Provision of construction and other
services related to water business
100
100
AS Tallinna Vesi registered Watercom OÜ on 25 May 2010.
NOTE 27. SUBSEQUENT EVENTS
New subsidiary
On 28 January 2021, AS Tallinna Vesi acquired a full shareholding in the company with the business
name ASTV Green Energy OÜ in the Republic of Estonia. The main business activity of the company
is initially gas production. The company is a start-up and no active economic activity has been
conducted.
In the longer term, the new private limited company intends to supply reusable resources,
generated as a result of providing water services, as products in the green energy market. Entry to
the biomethane production market is one opportunity for the future, but the analysis includes a
wider range of opportunities.
Changes in ownership
On 3 February 2021, the City of Tallinn and United Utilities (Tallinn) B.V. informed AS Tallinna Vesi
that the City of Tallinn, United Utilities (Tallinn) B.V., United Utilities PLC and Osaühing Utilitas are
entering into a share sale and purchase agreement whereby United Utilities (Tallinn) B.V. sells in
total 7,060,870 A-shares in AS Tallinna Vesi to the City of Tallinn and Osaühing Utilitas in equal parts
at a price of 14.20 euros per share (the “Transaction”). As a result of the Transaction, the City of
Tallinn will hold 10,469,565 A-shares in AS Tallinna Vesi and 1 B-share (representing 52.35% of the
share capital of AS Tallinna Vesi) and Osaühing Utilitas will hold 3,530,435 A-shares in AS Tallinna
Vesi (representing 17.65% of the share capital of AS Tallinna Vesi).
At the session of 11/02/2021, Tallinn City Council approved the decision to acquire the shares in AS
Tallinna Vesi, and thereafter the decision to undertake a mandatory tender offer in respect of shares
held by the shareholders of AS Tallinna Vesi. Competition Authority decided on 09/03/2021 to grant
the City of Tallinn and Osaühing Utilitas the permission to exercise joint dominant influence over AS
Tallinna Vesi. The estimated completion of the transaction shall take place on 31 March 2021.
Following the completion of the transaction and the necessary approvals from the Financial
Supervision Authority, the City of Tallinn and Osaühing Utilitas will jointly undertake a mandatory
tender offer in respect of shares held by minority shareholders of AS Tallinna Vesi. Terms of the
tender offer shall be announced once approved by the Financial Supervision Authority.
According to the Management Board of AS Tallinna Vesi the conclusion of the share sale and
purchase agreement does not have a material impact on the business activities nor the economic
results of the Company as the Company will continue carrying out its usual business activities and
the share sale and purchase agreement does not bring about the changes to the provision of its
services.
AS Tallinna Vesi Annual Report 2020
115
The Management Board of AS Tallinna Vesi introduces to the shareholders the draft resolutions for
adoption without convening a meeting in accordance with § 299
1
of the Commercial Code.
The proposals of the Management Board, as approved by the Supervisory Council, for the
resolutions to be adopted on 1 April 2021 are as follows:
To recall Mr Simon Roger Gardiner from the Supervisory Council of the Company. The term of Mr
Simon Roger Gardiner shall expire on 31 March 2021.
To recall Mr Martin Padley from the Supervisory Council of the Company. The term of Mr Martin
Padley shall expire on 31 March 2021.
To elect Mr Mart Mägi as a member of the Supervisory Council of the Company from 1 April 2021
for the term set out in the Articles of Association of the Company.
To elect Mr Robert Kitt as a member of the Supervisory Council of the Company from 1 April 2021
for the term set out in the Articles of Association of the Company.
To amend the Articles of Association of the Company and approve the new wording of the Articles
of Association as presented to the shareholders. The new wording of the Articles of Association is
available on AS Tallinna Vesi’s website “Investor->Adoption of Shareholders’ Resolutions->[…]->
Draft for the Articles of Association”.
To give consent to the Company for the acquisition of one B share with the nominal value of 60 (sixty)
euros from the City of Tallinn and to pay the City of Tallinn 60 (sixty) euros for the B share. The
acquisition shall be completed by 1 May 2021 at the latest.
Third-party claim
After the reporting date, the Company has received a claim with the value of €384 thousand within
one application relating to the tariffs, which had been applied until the new tariffs approved by the
Competition Authority were duly implemented. The Company does not admit any liability and fully
rejects it. See Note 15.
NOTE 28. SUPPLEMENTARY DISCLOSURES ON THE PARENT COMPANY OF THE GROUP
Pursuant to the Accounting Act of the Republic of Estonia, information of the unconsolidated
financial statements (primary statements) of the consolidating entity (Parent Company) shall be
disclosed in the notes to the consolidated financial statements. In preparing the primary financial
statements of the Parent Company the same accounting policies have been used as in preparing
the consolidated financial statements. The accounting policy for reporting subsidiaries has been
amended in the separate primary financial statements disclosed as supplementary information in
the Annual Report in conjunction with IAS 27, Consolidated and Separate Financial Statements.
In the parent separate primary financial statements, disclosed to these consolidated financial
statements (Supplementary disclosures), investments into the shares of subsidiaries are accounted
for at cost less any impairment recognised.
The separate reports on the Parent Company
According to the Estonian Accounting Law, the amount which can be distributed to the shareholders
is calculated as follows: adjusted unconsolidated equity less share capital, share premium and
reserves.
AS Tallinna Vesi Annual Report 2020
116
STATEMENT OF FINANCIAL POSITION
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Current portion of long-term lease liabilities
169
189
Current portion of long-term bank loans
3,630
3,630
Trade and other payables
5,676
4,932
Derivatives
0
221
Payables to subsidiary
1,092
1,052
Prepayments
2,443
2,321
TOTAL CURRENT LIABILITIES
13,010
12,345
NON-CURRENT LIABILITIES
Deferred income from connection fees
34,564
31,070
Leases
301
415
Bank loans
83,978
87,592
Provision for possible third party claims
9,628
14,442
Other payables
14
0
TOTAL NON-CURRENT LIABILITIES
128,485
133,519
TOTAL LIABILITIES
141,495
145,866
EQUITY
Share capital
12,000
12,000
Share premium
24,734
24,734
Statutory legal reserve
1,278
1,278
Retained earnings
79,795
82,735
TOTAL EQUITY
117,807
120,748
TOTAL LIABILITIES AND EQUITY
259,302
266,612
€ thousand
as of 31 December
ASSETS
2020
2019
CURRENT ASSETS
Cash and cash equivalents
42,878
63,711
Trade receivables, accrued income and prepaid expenses
6,195
6,047
Receivables from parent company
316
0
Receivables from subsidiary
49
46
Inventories
680
502
TOTAL CURRENT ASSETS
50,118
70,306
NON-CURRENT ASSETS
Investment in subsidiary
527
527
Property, plant and equipment
208,060
195,071
Intangible assets
597
708
TOTAL NON-CURRENT ASSETS
209,184
196,306
TOTAL ASSETS
259,302
266,612
AS Tallinna Vesi Annual Report 2020
117
STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December
€ thousand
2020
2019
Revenue
46,300
57,288
Cost of goods and services sold
-24,788
-23,955
GROSS PROFIT
21,512
33,333
Marketing expenses
-433
-391
General administration expenses
-4,345
-5,450
Other income (+)/expenses (-)
4,585
4,263
OPERATING PROFIT
21,319
31,755
Financial income
30
38
Financial expenses
-5
-98
PROFIT BEFORE TAXES
21,344
31,695
Income tax on dividends
-4,282
-3,388
NET PROFIT FOR THE PERIOD
17,062
28,307
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD
17,062
28,307
Attributable profit to:
Equity holders of A shares
17,061
28,306
B share holder
0.60
0.60
Earnings per A share (in euros)
0,85
1,42
Earnings per B share (in euros)
600
600
AS Tallinna Vesi Annual Report 2020
118
STATEMENT OF CASH FLOWS
€ thousand
for the year ended 31 December
CASH FLOWS FROM OPERATING ACTIVITIES
2020
2019
Operating profit
21,319
31,755
Adjustment for depreciation/amortisation
6,109
5,972
Adjustment for revenue from connection fees
-542
-389
Other non-cash adjustments
-4,814
-4,624
Profit (-)/loss (+) from sale of property, plant and
equipment, and intangible assets
0
137
Change in current assets involved in operating
activities
-527
506
Change in liabilities involved in operating activities
20
328
TOTAL CASH FLOW FROM OPERATING ACTIVITIES
21,565
33,685
CASH FLOWS USED IN INVESTING ACTIVITIES
Acquisition of property, plant and equipment, and
intangible assets
-16,059
-10,995
Compensations received for construction of pipelines
1,998
3,010
Proceeds from sale of property, plant and equipment,
and intangible assets
0
25
Interest received
35
36
TOTAL CASH USED IN INVESTING ACTIVITIES
-14,026
-7,924
CASH FLOWS USED IN FINANCING ACTIVITIES
Interest paid and loan financing costs, incl swap
interests
-736
-1,045
Lease payments
-167
-209
Received loans
0
37,500
Repayment of loans
-3,636
-41,136
Dividends received
450
700
Dividends paid
-19,888
-14,965
Withheld income tax paid on dividends
-113
-36
Income tax on dividends
-4,282
-3,388
TOTAL CASH USED IN FINANCING ACTIVITIES
-28,372
-22,579
CHANGE IN CASH AND CASH EQUIVALENTS
-20,833
3,182
CASH AND EQUIVALENTS AT THE BEGINNING OF THE
PERIOD
63,711
60,529
CASH AND EQUIVALENTS AT THE END OF THE PERIOD
42,878
63,711
AS Tallinna Vesi Annual Report 2020
119
STATEMENT OF CHANGES IN EQUITY
€ thousand
Share
capital
Share
premium
Statutory
legal
reserve
Retained
earnings
Total
equity
as of 31 December 2018
12,000
24,734
1,278
69,428
107,440
Dividends
0
0
0
-15,001
-15,001
Comprehensive income for the period
0
0
0
28,307
28,307
as of 31 December 2019
12,000
24,734
1,278
82,734
120,746
Carrying amount of investments under
control and significant influence
0
0
0
0
-527
Value of investments under control and
significant influence using the equity
method
0
0
0
0
0
Adjusted unconsolidated equity
as of 31 December 2019
12,000
24,734
1,278
82,734
120,219
as of 31 December 2019
12,000
24,734
1,278
82,734
120,746
Dividends
0
0
0
-20,001
-20,001
Comprehensive income for the period
0
0
0
17,062
17,062
as of 31 December 2020
12,000
24,734
1,278
79,795
117,807
Carrying amount of investments under
control and significant influence
0
0
0
0
-527
Value of investments under control and
significant influence using the equity
method
0
0
0
0
0
Adjusted unconsolidated equity
as of 31 December 2020
12,000
24,734
1,278
79,795
117,280
AS Tallinna Vesi Annual Report 2020
120
14. CONFIRMATION OF THE MANAGEMENT AND SUPERVISORY BOARDS
The Management Board has prepared the management report and the financial statements of
AS Tallinna Vesi on 15 March 2021. The Supervisory Board of AS Tallinna Vesi has reviewed the
annual report, prepared by the Management Board, consisting of Management Report, the
financial statements and the independent auditors' report, and has on 25 March 2021 in its
minuted decision approved the annual report for presentation on the Shareholders' General
Meeting.
Name Position Signature
Karl Heino Brookes Chairman of the Management Board
Aleksandr Timofejev Member of the Management Board
Kristi Ojakäär Member of the Management Board
AS Tallinna Vesi Annual Report 2020
121
15. PRINCIPLES OF SUSTAINABILITY REPORTING
Our Sustainability and social responsibility report has been prepared according to the
Sustainability Reporting Standard of Global Reporting Initiative (GRI Standards). The GRI
Standard provides for a choice between “core” and “comprehensive” levels depending on the
level of details of the report. Considering the Company’s size and scope of operations in a global
context, the most suitable of these two options is “core”, which includes data about the
Company’s profile, stakeholders and principles, management approach and key performance
indicators.
The Company continues to measure the impacts and performance of material topics through
several various indicators. Compared to the 2019 Report, no significant changes have been made
and the indicators introduced in 2019, are still used in the report. No major changes have
occurred among the activities, impacts, practices or focuses of the Company compared to the
previous report.
As in previous years, for some defined material topics disclosures provided by GRI Standard were
insufficient to describe the performance of the Company. Thus, in addition to the GRI disclosures,
few Company-specific indicators have been introduced in this report. In GRI Index those
indicators are described without GRI codes.
Process for defining report content
In defining the report content, the principles of stakeholder inclusiveness, sustainability context,
materiality and completeness were followed. In order to define the report content and identify
material topics, several working groups, involving management team members, were set up in
2017 to discuss the environmental, economic and social topics concerning the Company and to
frame the topics, which are material for the Company in terms of sustainability and potential
impact on stakeholders. This was done by keeping in mind the company values and objectives as
well as external impacts stemming from legislation, market situation and natural environment.
Feedback from small investors was also taken into consideration in defining the report content.
The materiality of the identified topics was assessed from the point of view of both the Company
and its stakeholders, considering the information received from stakeholders, feedback from
Company’s employees and customers and direct communication with shareholders and
partners. Having assessed the materiality, all identified subjects were aligned by the GRI
Standard.
The identified material topics are as follows:
• Economic performance;
• Indirect economic impacts;
• Anti-corruption;
• Water [Tallinna Vesi: Sustainable use of water];
• Effluents and Waste [Tallinna Vesi: Effluent quality];
• Environmental compliance;
• Employment;
• Occupational health and safety;
• Training and education [Tallinna Vesi: Development of staff and succession planning];
• Local communities;
• Marketing and labelling [Tallinna Vesi: Responsible customer service];
AS Tallinna Vesi Annual Report 2020
122
• Socioeconomic compliance [Tallinna Vesi: Ensuring quality of our services]
The impacts that make topics material are present both within the organisation as well as outside
the Company, which is why all material topics simultaneously affect either directly or indirectly
both the organisation and its stakeholders. The impacts and the management approach are
described in more detail under the description of each topic. The effectiveness of the
management approach is assessed against the Company’s strategic and annual objectives.
Moreover, we receive feedback through the employee and customer surveys, which also reflect
the opinion on our management approach.
The report seeks to provide an overview of AS Tallinna Vesi’s and Watercom’s activities and
performance in 2020 from the perspective of sustainable development in economic,
environmental and social areas. In order to place our activities in a more wider context of
sustainability, we will continue to link our activities to the
2030 Agenda for Sustainable
Development and its 17 Sustainable Development Goals (SDG). AS Tallinna Vesi contributes to
the achievement of the following SDGs:
To better illustrate how our activities contribute to the achievement of many of the SDGs, which
are considered relevant in Estonia, we have related the relevant SDGs to our defined material
topics. Each of the material topic in this report, which is accompanied by a SDG label, supports
the accomplishment of the particular SDG. All the SDGs and their more specific targets can be
found on a website
www.un.org/sustainabledevelopment.
Stakeholder engagement
Our activity affects a large number of people. Our aim is to be a trusted partner to our customers,
investors, employees and representatives of the community, therefore our management
practices take into account the impact that we have on surrounding living environment and the
association with the different stakeholder interests.
We understand the impact of our business on the surrounding natural habitat and therefore
deem it important, that our activities engage with the interests of different stakeholders. Keeping
in mind our development perspectives, we have mapped our stakeholders, who are most
impacted by our activity and decisions. Our stakeholders’ satisfaction is important for us and
therefore it is essential to hold frequent contact and dialogue with them. The main stakeholders,
whom we receive feedback from through surveys, direct communication and involvement, are
our employees, customers, cooperation partners, shareholders and investors, but also local
governments and community. Their feedback has had a strong impact on the contents of this
report and our material topics, as well as serves as a basis for setting the objectives of the
Company.
The Company gathers regular feedback from its customers through satisfaction surveys. Those
surveys give us valuable input and knowledge about our customers’ needs. We participate in
community events to gather more useful information about these matters.
AS Tallinna Vesi Annual Report 2020
123
With investors, face-to-face investor presentations are regularly being held. The company
organises quarterly investor webinars to introduce our results and offer the investors a platform
to ask their questions.
Internally, we gather feedback from our employees on a regular basis. This feedback is then
used to make actual changes in the processes to further increase employee satisfaction.
We strive to be a reliable partner to our stakeholders; therefore, we regularly disclose
information on our activity, financial and operational performance and financial position. It is
instrumental for us to provide timely, reliable and clear information about our activities both pro-
actively and when needed. Due to the strong impact of our activity on both the people and
environment, responsible communication is fundamental to our stakeholders and ourselves.
Given that our stakeholders have different expectations, it is vital to address all necessary
aspects and balance those expectations. Reliable and transparent communication plays an
important role in shaping the Company’s reputation.
Cooperation with local municipalities and government
We aim at being good partners with national and municipality government institutions. We hold
regular meetings with the City of Tallinn to discuss the problems and topics on the agenda to
further improve the service provided to our customers and consumers in our main service area,
seeking the most optimal solutions together. Furthermore, we intend to actively participate in
the development of areas related to our activity as well as in the drafting of respective legislation.
Our specialists and experts in their profession are always willing and prepared to consult and
assist with sharing area-specific knowledge.
OPERATIONAL SITES OF TALLINNA VESI
Head office, customer service,
support services and
Watercom
Ädala 10, Tallinn
Ülemiste Water Treatment
Plant, Water and
Microbiological Laboratory
Järvevana tee 3, Tallinn
Paljassaare Wastewater
Treatment Plant, Composting
Fields and Wastewater
Laboratory
Paljassaare põik 14, Tallinn
AS Tallinna Vesi Annual Report 2020
124
Annex 1: GRI Index
Standard
Disclosure
Page number(s)
GENERAL DISCLOSURES
GRI 102:
General Disclosures
2016
Organisational profile
102-1 Name of the organisation
AS Tallinna Vesi
102-2 Activities, brands, products, and
services
p. 7-8
102-3 Location of headquarters
p. 123
102-4 Location of operations
p. 7
102-5 Ownership and legal form
p. 7
102-6 Markets served
p. 7
102-7 Scale of the organization
p. 7, p. 10
102-8 Information on employees and
other workers
p. 34-37 Employees
102-9 Supply chain
p. 68-69 Cooperation with suppliers
102-10 Significant changes to the
organization and its supply chain
p. 7, p. 71, p. 113
102-11 Precautionary Principle or
approach
p. 69-72 Risk management process
102-12 External initiatives
p. 31-33 Community and public
p. 69 Our principles and membership
in organisations
102-13 Membership of associations
p. 69 Our principles and membership
in organisations
Strategy
102-14 Statement from senior decision-
maker
p. 4-6 Chairman's statement
Ethics and integrity
102-16 Values, principles, standards, and
norms of behaviour
p. 13-15 How we deliver value to
different stakeholders
p. 69 Our principles and membership
in organisations
Governance
102-18 Governance structure
p. 62-64 Management Board
Stakeholder engagement
102-40 List of stakeholder groups
p. 13 How we create value to different
stakeholders
102-41 Collective bargaining agreements
p. 35
AS Tallinna Vesi Annual Report 2020
125
102-42 Identifying and selecting
stakeholders
p. 122-123 Stakeholder engagement
102-43 Approach to stakeholder
engagement
p. 122-123 Stakeholder engagement
No separate stakeholder engagement
was undertaken specifically as part of
the report preparation process,
however the interests of different
stakeholders were gathered
throughout the year from different
meetings and surveys.
102-44 Key topics and concerns raised
p. 121-123 Principles of sustainability
reporting
Read more on p. 18-40 Operational
Results
Reporting practice
102-45 Entities included in the
consolidated financial statements
p. 7
102-46 Defining report content and topic
Boundaries
p. 121 -122 Process for defining
report content
102-47 List of material topics
p.121-122 Process for defining report
content
102-48 Restatements of information
p. 121-123 Principles of sustainability
reporting
102-49 Changes in reporting
p. 121-123 Principles of sustainability
reporting
102-50 Reporting period
01/01/2020-31/12/2020
102-51 Date of most recent report
27 March 2020
102-52 Reporting cycle
Annual reporting. We issue the report
according to the GRI guideline
annually since 2012. All reports are
available on the website of Tallinna
Vesi.
102-53 Contact point for questions
regarding the report
tvesi@tvesi.ee
102-54 Claims of reporting in accordance
with the GRI Standards
This report follows the Standard of
the international Global Reporting
Initiative (GRI) and is reported
according to standard’s in
accordance – core option.
102-55 GRI content index
Appendix 1
AS Tallinna Vesi Annual Report 2020
126
102-56 External assurance
See INDEPENDENT AUDITORS’
LIMITED ASSURANCE REPORT ON
THE SUSTAINABILITY REPORT.
External assurance to the report has
been provided by
PricewaterhouseCoopers in
accordance with International
Standard on Assurance Engagement
ISAE 3000 “Assurance Engagements
Other than Audits or Reviews of
Historical Financial Information”. The
Auditing Company has performed a
limited assurance engagement.
MATERIAL TOPICS
Material topic: Economic performance
GRI 103:
Management
Approach 2016
103-1 Explanation of the material topic
and its boundaries
p. 13-17 Strategy
103-2 The management approach and its
components
p. 13-17 Strategy
103-3 Evaluation of the management
approach
p. 13-17 Strategy
GRI 201:
Economic
Performance 2016
201-1 Direct economic value generated
and distributed
Economic value generated:
€
52.0m
Purchases from suppliers
€
44.5m
Environmental taxes
€
2.2m
Investments into environmental
awareness and community
€
0.1m
Taxes paid
€
9.4m
Employee wages and benefits (incl
taxes)
€
10.0m
Dividends paid out
€
20.0m
Payments to providers of capital
€
0.7m
p. 13 Breakdown of the value
generated and distributed by the
company
Material topic: Indirect economic impacts
GRI 103:
Management
Approach 2016
103-1 Explanation of the material topic
and its boundaries
p. 13-17 Strategy
p. 19 Uninterrupted services
103-2 The management approach and its
components
p. 13-17 Strategy
p. 19 Uninterrupted services
103-3 Evaluation of the management
approach
p. 13-17 Strategy
p. 19 Uninterrupted services
AS Tallinna Vesi Annual Report 2020
127
GRI 203:
Indirect economic
impacts 2016
203-1 Infrastructure investments and
services supported
Water treatment:
€
1,430 thousand
Wastewater treatment:
€
7,436
thousand
Networks total:
€
5,353 thousand
Read more on p. 19 Uninterrupted
services
Material topic: Anti-corruption
GRI 103:
Management
Approach 2016
103-1 Explanation of the material topic
and its boundaries
p. 13-17 Strategy
p. 67-68 Business ethics
103-2 The management approach and its
components
p. 13-17 Strategy
p. 67-68 Business ethics
103-3 Evaluation of the management
approach
p. 13-17 Strategy
p. 67-68 Business ethics
GRI 205:
Anti-corruption 2016
205-3 Confirmed incidents of corruption
and actions taken
In 2020, AS Tallinna Vesi did not
identify any proven corruption or
fraud incidents.
p. 67-68 Business ethics
Material topic: Water [ASTV: Sustainable use of water]
SD Goal 6: Ensure access to water and sanitation for all and sustainable
management of water resources
GRI 103:
Management
Approach 2016
103-1 Explanation of the material topic
and its boundaries
p. 22-23 Sustainable use of water
103-2 The management approach and its
components
p. 22-23 Sustainable use of water
103-3 Evaluation of the management
approach
p. 22-23 Sustainable use of water
GRI 303:
Water 2016
303-1 Water withdrawal by source
Surface water: 25,241 th m
3
Ground water: 2,734 th m
3
p. 22-23 Sustainable use of water
not applicable
Water loss in the water networks i.e.
leakages (%)
12.42%
p. 22-23 Sustainable use of water
Material topic: Effluents and Waste [ASTV: Effluent quality]
AS Tallinna Vesi Annual Report 2020
128
SD Goal 13: Take urgent action to combat climate change and its impacts
SD Goal 14: Conserve and sustainably use the oceans, seas and marine
resources
GRI 103:
Management
Approach 2016
103-1 Explanation of the material topic
and its boundaries
p. 24-25 Effluent quality
103-2 The management approach and its
components
p. 24-25 Effluent quality
103-3 Evaluation of the management
approach
p. 24-25 Effluent quality
GRI 306:
Effluents and Waste
2016
306-1 Water discharge by quality and
destination
Destination: Baltic Sea
Treated wastewater: 52.5 mil m
3
Diluted wastewater: 234,124 m
3
Treatment efficiency:
Biological oxygen demand (BOD) 98%,
Chemical oxygen demand (COD) 88%,
Suspended solids 98%,
N
tot
86%,
P
tot
92%,
Oil products 90%
p. 24-25 Effluent quality
not applicable
Using the emergency outlet
6 times
p. 24-25 Effluent quality
Material topic: Environmental Compliance
SD Goal 12: Ensure sustainable consumption and production patterns
GRI 103:
Management
Approach 2016
103-1 Explanation of the material topic
and its boundaries
p. 21-22 Environmental Compliance
103-2 The management approach and its
components
p. 21-22 Environmental Compliance
AS Tallinna Vesi Annual Report 2020
129
103-3 Evaluation of the management
approach
p. 21-22 Environmental Compliance
GRI 307:
Environmental
Compliance 2016
307-1 Non-compliance with
environmental laws and regulations
In 2020, the Company identified 0
non-compliance with environmental
laws or regulations.
p. 21-22 Environmental Compliance
Material topic: Employment
GRI 103:
Management
Approach 2016
103-1 Explanation of the material topic
and its boundaries
p. 34-37 Employees
103-2 The management approach and its
components
p. 34-37 Employees
103-3 Evaluation of the management
approach
p. 34-37 Employees
GRI 401:
Employment 2016
401-1 New employee hires and employee
turnover
Voluntary turnover 5.7%
Total turnover 12.3%
p. 34-37 Employees
not applicable
Employee commitment (TRI*M index),
part of GRI 102-44
In 2020 the company used Pulse
survey instead of TRI * M index. The
Company´s result was 4.06.
p. 35-36 Commitment in the team
Material topic: Occupational health and safety
SD Goal 8: Promote inclusive and sustainable economic growth, employment and
decent work for all
GRI 103:
Management
Approach 2016
103-1 Explanation of the material topic
and its boundaries
p. 37-40 Occupational health and
safety
103-2 The management approach and its
components
p. 37-40 Occupational health and
safety
103-3 Evaluation of the management
approach
p. 37-40 Occupational health and
safety
GRI 403:
Occupational health
and safety 2016
403-2 Types of injury and rates of injury,
occupational diseases, lost days, and
absenteeism, and number of work-
related fatalities
AFR 0.0
Total number of accidents: 0
p. 37-40 Occupational health and
safety
not applicable
Safety audits
In 2020, total of 427 safety audits
were held.
98.08% of audited sites met all the
safety requirements.
p. 37-40 Occupational health and
safety
Material topic: Training and education [ASTV: Development of staff and succession planning]
AS Tallinna Vesi Annual Report 2020
130
GRI 103:
Management
Approach 2016
103-1 Explanation of the material topic
and its boundaries
p. 36-37 Development of staff and
succession planning
103-2 The management approach and its
components
p. 36-37 Development of staff and
succession planning
103-3 Evaluation of the management
approach
p. 36-37 Development of staff and
succession planning
GRI 404:
Training and
education 2016
404-1 Average hours of training per year
per employee
1.48 (8-hour) training days
p. 36-37 Development of staff and
succession planning
404-2 Programs for upgrading employee
skills and transition assistance programs
p. 36-37 Development of staff and
succession planning
404-3 Percentage of employees receiving
regular performance and career
development reviews
100%
p. 36-37 Development of staff and
succession planning
Material topic: Local communities
SD Goal 12: Ensure sustainable consumption and production patterns
GRI 103:
Management
Approach 2016
103-1 Explanation of the material topic
and its boundaries
p. 31-33 Community and public
103-2 The management approach and its
components
p. 31-33 Community and public
103-3 Evaluation of the management
approach
p. 31-33 Community and public
not applicable
Community members who drink tap
water (%)
p. 32 Environmental education (91%)
Number of children participated in water
and environment related classes
p. 32 Environmental education (240
children)
Number of excursions held in WTP and
WWTP (excl. open doors day)
p. 32 Environmental education (1)
Material topic: Marketing and labelling [ASTV: Responsible customer service]
GRI 103:
Management
Approach 2016
103-1 Explanation of the material topic
and its boundaries
p. 27-31 Our customers
103-2 The management approach and its
components
p. 27-31 Our customers
103-3 Evaluation of the management
approach
p. 27-31 Our customers
AS Tallinna Vesi Annual Report 2020
131
GRI 417:
Marketing and
labelling 2016
417-2 Incidents of non-compliance
concerning product and service
information and labelling
2 incidents of non-compliance with
voluntary codes (our promises to
customers)
p. 27 Our customers
not applicable
Written customer complaints
Total number of complaints: 181
p. 28 Our customers
not applicable
Customer satisfaction
TRI*M index and customer monthly
feedback results (5 point scale), part of
GRI 102-44
TRI*M: 54
Monthly feedback result: 4.1
p. 29-30 Customer satisfaction
not applicable
Provision of information about unplanned
water interruptions to the service (% of
all unplanned interruptions)
Information provided in 98.9% of the
occasions
p. 29 Our customers
Material topic: Socioeconomic compliance [Ensuring quality of our services]
SD Goal 3: Ensure healthy lives and promote well-being for all at all ages
GRI 103:
Management
Approach 2016
103-1 Explanation of the material topic
and its boundaries
p. 18-21 Ensuring quality of services
103-2 The management approach and its
components
p. 18-21 Ensuring quality of services
103-3 Evaluation of the management
approach
p. 18-21 Ensuring quality of services
GRI 419:
Socioeconomic
compliance 2016
419-1 Non-compliance with laws and
regulations in the social and economic
area
In 2020 the organization has not
identified any non-compliance with
laws and/or regulations.
p. 18-21 Ensuring quality of services
not applicable
Water quality
(% of samples taken from customers
taps, which meet all drinking water
quality requirements)
99.71%
p. 20-21 Drinking water quality
not applicable
Non-compliances with the Services
Agreement (incl. interruptions to service
lasting longer than 12 hours)
0 non-compliance
p. 19 Uninterrupted services
not applicable
Average duration of an interruption
On average the water interruption
lasted 2.93 hours (2 hours and 56
minutes)
p. 19 Uninterrupted services