AS Tallinna Vesi            FINANCIAL RESULTS            01.08.2005



RESULTS OF OPERATIONS IN THE SIX MONTHS TO 30 JUNE 2005



KEY PERFORMANCE INDICATORS

Amounts in million EEK

                                 6 months  6 months  Change

                                   2005      2004

Sales                             303.3      278.1    9.1%

 Main operating activities        276.6      238.8   15.8%

 Other operating activities        26.7      39.3    -31.9%

Gross profit                      181.2      146.3   23.9%

Gross profit margin %             59.7%      52.6%   13.6%

Operating profit                  139.5      134.9    3.4%

Operating profit margin %         46.0%      48.5%   -5.2%

Profit before taxes               112.4      107.9    4.1%

Profit before taxes margin        37.1%      38.8%   -4.5%

Net profit                         77.0      81.6    -5.7%

ROA %                              3.3%      3.9%    -13.5%

Debt to total capital employed    58.2%      57.1%    2.0%



ROA – Net profit /Total Assets

Debt to Total capital employed – Total Liabilities / Total capital

employed



Income Statement



In  the first half of 2005 sales from the Company’s main operating

activities grew by 37.8 mln EEK, or 15.8% to 276.6 mln  EEK.  This

increase  was  in  accordance  with expectations  and  is  largely

attributable to the increase in water and sewerage tariffs from  1

January   2005  for  the  Company’s  residential  and   commercial

customers.  Sales volumes of water supplied and wastewater treated

in  the residential and commercial sectors grew, year on year,  by

1.4%  and  2% respectively. Sales volumes of wastewater  treatment

services  provided to surrounding municipalities  outside  of  the

services area reached almost 450,000m3 in the first six months  of

2005, an increase of 9% on the corresponding period in 2004.



Profits  from other operating activities the first half  of  2005,

primarily  connections income, were 2.8mln  EEK,  a  1.2  mln  EEK

decrease from 2004 levels.



Cost of goods sold  for the main operating activity were held down

to  98.2 mln EEK in the first half of 2005, an increase of 1.7 mln

EEK  or  1.8% from the equivalent period in 2004. With   inflation

at  3.1% for the twelve month period to June 2005 this is  a  real

decrease and, was achieved by cost savings resulting from improved

procurements and processes in the operations activity.



The  Company’s gross profit for the first six months of  2005  was

181.2  mln EEK, which represents an increase of 34.9 mln  EEK,  or

23.9%, compared to gross profit of 146.3 mln EEK for the first six

months of 2004.



As  a  result the Company achieved an improved gross profit margin

of  59.7%  for the first six months of 2005 compared to 52.6%  for

the  first six months of 2004. This reflects the Company’s ability

to  control  operating  costs and convert the  sales  growth  into

improved profit margins.



Other expenses increased by 30.3 mln EEK, from 11.4 mln EEK in the

first half of 2004 up to 41.7 mln EEK in first half 2005. This was

mainly  attributable  to the one-off IPO  costs  incurred  by  the

Company in order to be listed on the Tallinn Stock Exchange.



IPO  costs in total were 25.6 mln EEK, being made up of  19.5  mln

EEK  for professional services and 6.1 mln EEK for the cost  of  a

staff  bonus (every person working for the Company received 10,000

EEK bonus).



The  Company’s operating profit for the first six months  of  2005

was  139.5 mln EEK, which represented an increase of 4.6 mln  EEK,

or  3.4%, over the operating profit of 134.9 mln EEK for the first

six months of 2004.



Income taxes increased by 9.1 mln EEK, from 26.3 mln EEK in  first

half 2004 up to 35.4 mln EEK in first half 2005 as a result of the

improved dividend.



The Company’s net profit for the first half of 2005, including the

impact  of one-off  IPO costs, was 77 mln EEK, a decrease  of  4.6

mln EEK compared to the corresponding period in 2004.



Balance sheet



The  Company’s  total assets were 2,307.4 mln EEK as  at  30  June

2005,  an  increase of 191.9 mln EEK year-on-year. Current  assets

increased by 88.7 mln EEK



Tangible  and  intangible fixed assets and asset constructions  in

progress totalled 1,943.1 mln EEK at 30 June 2005, an increase  of

67.7  mln EEK of the fixed asset base in the year, reflecting  the

Company’s  investment  in assets in order to  continually  improve

services to customers.



Current  liabilities  increased by 86.0  mln  EEK,  reflecting  an

increase in deferred income (45.6 mln EEK prepayment for the  sale

of fixed assets and a 47.6 mln EEK increase in the current portion

of  long-term loans). Long-term liabilities increased by 49.6  mln

EEK  up  to 1,104.3 mln EEK at the end of June 2005 mainly due  to

the  final drawdown of the EBRD loan in the value of 109.6 mln EEK

in  April,  which was partially offset by the first  repayment  of

principle on the long-term loan in the amount of 43.7 mln  EEK  in

May 2005.



Cash flow



In  the first half of 2005, the Company’s cash flow from operating

activities  was  110.7  mln EEK, a 3.3 mln EEK,  or  3%,  increase

compared  to  the  first  half of 2004  reflecting  the  increased

operating profit in the period.



Total  cash  inflow  in  the first six months  was  35.2  mln  EEK

compared  to a cash outflow of 24 mln EEK in the first six  months

of 2004. Cash and cash equivalents stood at 136.2 mln EEK as at 30

June 2005, an increase of 76.1 mln EEK from 30 June 2004.



Dividends and share performance



In  first half of 2005, the Company paid out a dividend in a value

of 112 mln EEK based on the operational results of 2004



Starting  from  1  June 2005, AS Tallinna Vesi  shares  have  been

listed on the main list of the Tallinn Stock Exchange. At the  end

of the reporting period, 30 June 2005, the closing price of the AS

Tallinna Vesi share was 11.33 EUR, which is a 23% premium  on  the

initial public offering settlement price of 9.25 EUR.





INCOME STATEMENT

(thousand EEK)

                                    6 months    6 months

                                         2005       2004

                                                         

Sales from main operating             276 572    238 786

activities

Revenues from other operating          26 732     39 272

activities

Net sales                             303 304    278 058

                                               

Cost of goods sold main operating     -98 224    -96 529

activities

Cost of goods sold other              -23 888    -35 245

operating activities

                                               

GROSS PROFIT                          181 192    146 284

                                               

Marketing expenses                     -3 329     -3 205

General administration expenses       -41 602    -21 562

Other income/ expenses (-)              3 263     13 405

                                               

OPERATING PROFIT                      139 524    134 922

                                               

Financial income / expenses (-)       -27 145    -27 008

                                               

PROFIT BEFORE TAXES                   112 379    107 914

                                               

Income tax on dividends               -35 368    -26 277

                                               

NET PROFIT FOR THE PERIOD              77 011     81 637

                                               

Attributable to:                               

Equity holders of A-shares             77 001     81 627

B-share holder                             10         10

                                               

Earnings per share in kroons             3,85       4,08





BALANCE SHEET

(thousand EEK)

                                    30 June     30 June

ASSETS                                   2005       2004

                                               

CURRENT ASSETS                                 

Cash at bank and in hand              136 193     60 128

Customer receivables                   53 589     43 840

Other receivables                       3 903          7

Accrued income and prepaid              8 129      6 595

expenses

Inventories                             3 550      5 663

Assets for sale                         1 562      2 043

TOTAL CURRENT ASSETS                  206 926    118 276

                                               

NON-CURRENT ASSETS                             

Shares of associated companies              0      6 145

Long-term deposit                      78 193     31 749

Other long-term investment assets           0      2 552

Tangible assets                     1 822 843  1 768 267

Intangible assets                      28 106     19 175

Construction in progress               92 107     87 937

Unfinished pipelines - new             75 595     77 539

connections

Prepayments for fixed assets            3 648      3 889

TOTAL NON-CURRENT ASSETS            2 100 492  1 997 253

                                               

TOTAL ASSETS                        2 307 418  2 115 529

                                               

LIABILITIES                                    

                                               

CURRENT LIABILITIES                            

Current portion of long-term            1 544      1 935

finance lease

Current portion of long-term bank      89 744     42 126

loans

Trade and other payables, incl.        62 834     46 363

dividends

Taxes payable                          22 660     43 560

Short-term provisions                      88      2 700

Deferred income                        62 130     16 353

TOTAL CURRENT LIABILITIES             239 000    153 037

                                               

NON-CURRENT LIABILITIES                        

Finance lease                           1 000      2 530

Bank loans                          1 103 217  1 052 096

Other payables                            100        100

TOTAL NON-CURRENT LIABILITIES       1 104 317  1 054 726

TOTAL LIABILITIES                   1 343 317  1 207 763

                                               

EQUITY CAPITAL                                 

Share capital                         200 001    200 001

Share premium                         387 000    387 000

Statutory legal reserve                20 000     93 394

Accumulated profit                    280 089    145 734

Net profit for the period              77 011     81 637

Equity attributable to the parent              

company



Minority interest                              



TOTAL EQUITY CAPITAL                  964 101    907 766

                                               

TOTAL LIABILITIES AND EQUITY        2 307 418  2 115 529

CAPITAL







CASH FLOW STATEMENT

(thousand EEK)

                                    6 months    6 months

                                         2005       2004

CASH FLOWS FROM OPERATING                      

ACTIVITIES

Operating profit                      139 524    134 922

Adjustment for depreciation            38 684     38 998

Adjustment for income and              -2 844     -4 027

expenses from constructions

Other finance income and expenses      -1 307     -1 126

Profit from sale of fixed assets      -11 873       -293

Expensed fixed assets                     178         24

Capitalization of operating           -11 750    -18 362

expenses

Movement in current assets            -12 625     -1 283

involved in operating activities

Movement in liabilities involved        2 065    -12 839

in operating activities

Interest paid                         -29 371    -28 616

Total cash flow from operating        110 681    107 398

activities

                                               

CASH FLOWS FROM INVESTING                      

ACTIVITIES

Proceeds from sale of shares of             0          0

associated company

Acquisition of fixed assets           -63 807    -43 306

Payment of pipelines financed by      -19 809    -27 626

construction income

Proceeds from pipelines financed       29 326     31 109

by construction income

Repayments of loans to third                0          0

parties

Proceeds from sale of and              47 100        293

prepayments received for fixed

assets

Proceeds from sale of real estate      11 700      2 250

investments

Interest received                       2 367      1 488

Total cash flow from investing          6 877    -35 792

activities

                                               

CASH FLOWS FROM FINANCING                      

ACTIVITIES

Received long-term loans              109 571          0

Repayment of long-term loans          -43 650    -19 001

Finance lease payments                   -918     -1 630

Dividends paid                       -112 000    -75 000

Income tax on dividends               -35 368          0

Total cash flow from financing        -82 365    -95 631

activities

                                               

Change in cash and bank accounts       35 193    -24 025

                                               

CASH AND EQUIVALENTS AT THE           101 000     84 153

BEGINNING OF THE PERIOD

                                               

CASH AND EQUIVALENTS AT THE END       136 193     60 128

OF THE PERIOD





Eteri Harring

Head of Treasury and IR

Tel. + 372 6262 225

eteri.harring@tvesi.ee