AS Tallinna Vesi ($TVE1T)

Hello, ladies and gentlemen. Thank you for joining. I am Kristiina Tamberg, and I welcome you all to today's Tallinna Vesi's webinar. This webinar will be hosted by Aleksandr Timofejev, Chief Executive Officer; and Taavi Groon, Chief Financial Officer. Firstly, Aleksandr and Taavi will introduce the highlights of the first quarter of 2026. The presenters will also speak about Tallinna Vesi's operational and financial results of the quarter. Aleksandr will give an overview about some of the investments made in the first quarter of 2026. [Operator Instructions] But now I will hand over to Aleksandr and Taavi. Here you go.

Good morning, everybody. Welcome to webinar for the first quarter. As you see, we have fresh wallpapers and that's related to the new [indiscernible] and new customer experience as we offer starting from 24th of April. So new colors and new opportunities for our customers. We'll improve our service, and we will improve also speed, how we share the information with the customers. Starting from 20th of April, we started to use a new CRM system in the company Salesforce. And of course, our customers can also use the new website that consists a lot of information about water and sewage production equipment and there is a lot of beneficial information for consumers about water quality, about location of water taps in the city and so on. So we will update our website over time. And if you follow, then you will get a lot of information from there. There is also an online map from where it's possible to see what kind of emergencies we have in the city and customer can get also information about water interruptions times and so on. If we speak also about the improvement of the customer service, then starting from 24th of April, we use also new self-service. And from the self-service, it's possible to see all information that's connected to the customer. The consumption, bills and so on. So the new self-service gives much more different opportunities and independency for the customer. And in the future, we would like to develop it even more. So if we speak about the first quarter, then the results were really good, the financial results and also the operational ones. Taavi will cover the financial results in detail in a minute. But if we speak in general, then the net profit was EUR 4.3 million. The sales were almost EUR 18 million, and we also invested during the first 3 months of the year, EUR 7.86 million. The quality of the product was very good. If we speak about the tap water, then all the samples we took from the customer taps were according to the [indiscernible]. And if we speak about the wastewater treatment, then it was also on the top level. Customers get day-on-day smart meters. So by today, already over 85% of our customers are equipped with the smart meter. And by the end of this year, all customers will have the smart meter that is more comfortable. It sends information to the water company about water consumption in time. And also if there should be any emergencies in the future, we will get this information and we'll also inform the customers so customers can react quickly on that. At the waste treatment plant, we produced during the first quarter, 2.3 gigawatt hour energy, electrical energy. And we had no working accidents during the first quarter in the company, as well. So as I said, the results are quite good. And if we move on to the investments, then investments are moving also in the right direction and according to the plan. So during the first quarter, we built approximately 5 kilometers of pipes already. And by the end of the year, our plan is to build approximately 40 kilometers of pipes. At the moment, the projects are ongoing, and the biggest sites are in [indiscernible] and also in the [indiscernible], and we completed the development in [indiscernible]. If we speak about treatment plants, then a lot of attention was paid to the waste treatment plant during last 3 years. Step by step, we are moving now to the Ulemiste water treatment plant. And this year, we will start with the automation process reconstruction at Ulemiste. At the moment, the preparation is ongoing for the [indiscernible] construction to the [indiscernible] area to improve the vital services continuity. At the waste treatment plant, there are some works at the main pumping station with the sedimentation tank and also if you speak about the biological treatment, then the secondary sedimentation tanks [indiscernible] are in progress. By the end of next year, all secondary sedimentation tanks, all 12 pieces would be fully reconstructed. The full amount of this investment is over EUR 9 million. During this year, our plan is to invest EUR 60 million into our assets. Approximately, half of that is going to the underground pipes and the rest for the treatment plants and some administrative investments. If we speak about investments, it is really important that we do investments into the areas that bring some benefits to the customer. When I mean about the benefit, I do not mean only about the quality. I mean also about investments that positively impact the price. So a couple of years ago, our investment was related to the CHP engines that today produce energy. For example, if we speak about waste treatment plants, then approximately 60% of the electrical energy and 100% of the heating power we produce through CHP covers the wastewater treatment plant's need. And at the moment, we started also with the second big project that should impact the tariffs positively is the optimization of the wastewater treatment plant process. Due to this optimization due to, i.e., technologies, it would be more accurate to dose chemicals and also to use electrical power by producing the air for the biological treatment. And if we go to the operational update and we speak about the main scores, the leakage rate is on top despite the fact that the winter was really cold and during 2 months, the temperature was below 0. Our leakage rate is still very low for the first quarter of 2026. As I mentioned before, the quality of the product, so the treated water quality and treated wastewater quality is according to all standards and it is 100%. It's important also to mention that we plan our works as good as possible and the length of the interruptions year-on-year going down. This year, our first quarter result was 2.5 hours. That is quite good. And then we speak about the customer satisfaction, then during the first quarter, the score was 4.1 out of 5. Well, one more time, I think that the results are very strong. I think the team is doing a very good work. And I believe that we will do everything to outperform also operational and financial results in the future. I will give over to Taavi, who will cover now financial results in detail. And if you have any questions at the end of the presentation, you can raise that. Thank you.

Thank you, Aleksandr. Welcome, everyone, listening online or later to the recording. I will start my overview with volumes. And the water and wastewater volumes for the first quarter are stable, reflecting the nature of our business. Slight increase in private customer volumes, 0.8%. A little bit higher increase in business customer water and wastewater volumes, 3.6%. This reflects consumption in industrial and construction sectors. And we expect that part of it is time related and it doesn't necessarily expand into next quarters, but it's a positive result in the first quarter. We see that volume development throughout the year and year-by-year is stable. Year-to-date volumes in outside service area where we provide water and wastewater services to neighboring municipalities and water companies decreased, 4.9%. It should be remarked that since Tallinn system and partially -- partially Tallinn system and partially also neighboring municipality systems are joint sewage systems, these volumes are impacted by stormwater. And the first quarter stormwater volumes impacted also the lower volumes in outside service area sales volumes. Next slide describes our revenue performance compared to last year. We see in Private Customer segment, there is a significant uptick in sales revenues. This is primarily driven by price harmonization. It's a process that has most intensively taken place in the last 2 years in '24, '25. Water price harmonization between business and private customers has been taking place, and it will be finalized during this year. This year will be the last step towards price harmonization. But this increases the private customer revenues and it decreases the business customer revenues. It's driven by the regulation to harmonize private and business customer pricing. Future pricing for the water for all customers will be same, but the differentiation will be between pollution loads so that higher pollution loads will be charged a higher price for wastewater. And as already briefly mentioned, Business Customer segment for that reason is slightly lower than compared to last year's first quarter. And sales to customers outside the main service area is pretty much on the same level compared to last year. Price adjustments also very much reflect that. The profitability that we are looking later on reflects our investment activities. And as our assets and regulated asset base increases, it also requires that we have a higher return to maintain and repay the capital that we have invested. On the next slide, before we get to profit figures, let's look at the cost side. The total cost of goods sold increased compared to first quarter last year, primarily -- it increased by EUR 1 million. Primarily, it is connected to construction service costs, but we have a total direct production cost group that we're highlighting here where we have a slight decrease. It's very minimal changes, but it's a positive indicator. It reflects that, for example, our own electricity production has a positive impact that the pollution charges, water abstraction charges and also chemical use are well under control. Chemical use also, of course, is impacted by the pricing and for example, methanol pricing for this cost group has been favorable compared to last year. Some small changes, up to 5.3%, compared to last quarter in staff costs, reflecting very much the changes in base salary conditions of our team. Depreciation changes reflecting the investments that we are doing year-by-year and financial cost -- sorry, financial costs not being reflected yet here. But construction costs, coming to this topic once more, increased by EUR 0.6 million. It's related to project timing, and it correlates specifically with revenues also received from construction services. And on the next slide, we can look at how the service revenue changed. And then we see that the net profit impact comes very much from revenue increases totaled 12.4%. And it's driven by 2 major items. First of our main activity revenue from water services and secondly, construction services that were significantly higher compared to first quarter last year. But it must be stated that this is very much related to project timing. Also the marketing and administration cost changes are reflected here related to services, outsourced services and also staff costs. And here, we can also see the slight increase in net financial expenses, and we come to a net profit of EUR 4.3 million, which is around EUR 0.8 million higher than last year. And again, to state that this is very much related to maintaining our assets and investments and to the regulated profitability that we are receiving from the investments that we are making. Next, a quick look at our cash position and cash flows. In the first quarter, we continued our investment activities. The investments that we made on the balance sheet totaled EUR 7.86 million, but primarily cash flow for our investing activities was received from operating cash flow and the net investing cash flows totaled a negative EUR 3.1 million -- in cash outflows of EUR 3.1 million. And we ended up with a higher cash position towards the end of the quarter, totaling around EUR 15 million. Next, on this slide, we see our investment expectations for this year. We invested close to EUR 56 million last year. Our expectation for this year is EUR 60 million. And as I mentioned, EUR 7.86 million was invested during the first quarter. And the main activities in investment activities are in second, third and fourth quarter as the construction project proceeds. From the total investments, an estimated 86% will have an impact on our regulated asset base and not all investments that we are making are within our regulated asset base because, for example, customer connections and stormwater network investments related to new stormwater infrastructure are financed by different sources. Customer connection fees and city financed is financing the stormwater connections. But as mentioned, 86% of the investments is estimated to have an impact also on the future regulated asset base. The regulated asset base is reviewed during the price application process and approved by the Competition Authority. This is not something that changes automatically as we perform the investments. And also coming up this month is our dividend payment that was approved by the general meeting in April on 23rd of April. And the general meeting approved a dividend of EUR 0.57 per share. It reflects 80% payout ratio from 2025 earnings. And the payment to shareholders will be made on 20th of May. Important date to keep in mind is 11th of May, which is the date for the dividend payment. These figures are all in line with our stated dividend policy, where we aim to distribute 50% to 80% of our annual profit. And we have evaluated our capability to perform dividend payment also the need for taking into consideration the need for investment and our sustainable financial performance. With this, I will conclude my overview. Thank you very much, and back to Kristiina now.

Yes. Thank you both for the presentations. And now we will proceed with questions. [Operator Instructions] So it seems that we don't have any questions right now. But recording of the presentation will be available in the Tallinna Vesi's YouTube channel webinar page shortly. The presentation materials and reports can be found on Tallinna Vesi's web page. Taavi and Aleksandr, thank you once again for the overview, and thank you all for joining. Have a good day.