ANNUAL REPORT 2020
Table of Contents | page 3 Translation of the Estonian original Table of Contents MANAGEMENT REPORT 5 6 BUSINESS REVIEW 41 1 TALLINNA SADAM AT A GLANCE 6 6.1 Key Performance Indicators 41 1.1 Business Model 6 6.2 Economic Environment 42 1.2 Key Performance Indicators for 2021 8 6.3 Impacts of COVID-19 and the Russia-Ukraine Conflict 43 1.3 Significant Events in 2021 9 6.4 Overview of the Market: Passengers 44 1.4 Letter from the Chief Executive 12 6.5 Overview of the Market: Cargo 46 1.5 Vision, Mission, Values 13 6.6 Results of Operations 48 1.6 Strategy 2021–2025 14 6.6.1 Number of Passengers 50 1.7 Tallinna Sadam’s Stakeholder Groups 17 6.6.2 Cargo Volume 51 2 SERVICE RESPONSIBILITY 18 6.6.3 Ferry Service 52 2.1 Safety and Security 18 6.6.4 Multifunctional Icebreaker Botnica 52 2.2 Quality Management and Risks 20 6.7 Revenue and Expenses 53 2.3 Customers and Suppliers 21 6.8 Profit 56 3 ENVIRONMENT 23 6.9 Segment Reporting 57 3.1 Energy Efficiency and Sustainable Consumption 24 6.10 Investments and Development Prospects 59 3.2 A Clean Baltic Sea and Increasing Circular Economy 26 6.11 Dividends 60 3.3 Clean Air 28 6.12 Share and Shareholders 61 4 OUR PEOPLE 31 7 CORPORATE GOVERNANCE 63 4.1 Employees 31 7.1 General Meeting 64 4.2 Human Resource Strategy 33 7.2 Supervisory Board 65 4.3 Occupational Health and Safety 35 7.3 Audit Committee and Internal Audit Unit 67 5 GIVING BACK TO SOCIETY 36 7.4 Remuneration Committee 67 5.1 Participation in Organisations 36 7.5 Nomination Committee 68 5.2 Sustainable Development Cooperation and Volunteer Work 38 7.6 Management Board 68 7.7 Supervisory and Management Boards of Subsidiaries and Associates 69 7.8 Cooperation of the Management and Supervisory Boards 69 7.9 Disclosure of Information and Communication 70 7.10 Financial Reporting 70 7.11 Statement of Compliance with the Corporate Governance Code 70
Table of Contents | page 4 Translation of the Estonian original REMUNERATION REPORT 71 Note 15. Taxes Payable 123 CONSOLIDATED FINANCIAL STATEMENTS 74 Note 16. Loans and Borrowings 124 Consolidated Statement of Financial Position 75 Note 17. Derivative Instruments 128 Consolidated Statement of Profit or Loss and Other Comprehensive Income 76 Note 18. Government Grants 129 Consolidated Statement of Cash Flows 77 Note 19. Equity 133 Consolidated Statement of Changes in Equity 78 Note 20. Revenue 136 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 79 Note 21. Operating Expenses 138 Note 1. Reporting Entity 79 Note 22. Other Income 140 Note 2. Accounting Policies 80 Note 23. Finance Costs 140 Note 3. Operating Segments 99 Note 24. Related Party Transactions 141 Note 4. Financial Risk Management 103 Note 25. Commitments 143 Note 5. Significant Accounting Estimates and Judgements 108 Note 26. Non-Cash Investing Activities 143 Note 6. Financial Instruments 110 Note 27. Contingent Liabilities 144 Note 7. Cash and Cash Equivalents 112 Note 28. Investigations Concerning the Group 145 Note 8. Trade and Other Receivables 113 Note 29. Additional Information on the Parent 146 Note 9. Investments in an Associate 114 Note 30. Events Aſter the Reporting Period 151 Note 10. Property, Plant and Equipment 116 Note 31. Unbundling of Activities Based on the Electricity Market Act 152 Note 11. Intangible Assets 118 Note 12. Leases 119 MANAGEMENT’S CONFIRMATION 156 Note 13. Provisions 121 INDEPENDENT AUDITORS’ REPORT 157 Note 14. Trade and Other Payables 122 STATEMENT OF THE SUPERVISORY BOARD 160
MANAGEMENT REPORT
1. Tallinna Sadam at a Glance | page 6 Translation of the Estonian original TABLE OF CONTENTS m 1 Tallinna Sadam at a Glance 1.1 Business model The business model of AS Tallinna Sadam (Port of Tallinn) and its subsidiaries (together: ‘Tallinna Sadam’ or ‘the Group’) is based on four balanced business lines: passengers, cargo, shipping and real estate. Tallinna Sadam owns the largest cargo and passenger harbour complex in Estonia. Our harbours are navigable and easily accessible throughout the year and deep enough to receive all vessels passing through the Danish Straits. Estonia’s geographical location is favourable for handling both north– south and east–west passenger and cargo flows. 1 In the period before the COVID-19 pandemic. • Annual average figures 1 : 10 million passengers, 1.4 million cars, 6,100 ferry calls • Passenger harbours: Old City Harbour and Saaremaa Harbour. One route, two operators at Muuga Harbour • Reception of ferries and cruise ships, provision and development of port infrastructure, provision of services to passengers and vehicles • Ferry routes: Tallinn–Helsinki, Tallinn–Stockholm, Muuga–Vuosaari, Tallinn–St Petersburg, Cruise ships PASSENGERS • Annual average figures: about 20 million tonnes of cargo, 450,000 freight vehicles, 1,600 cargo ship calls • Cargo harbours: Muuga Harbour, Paldiski South Harbour. Ro-ro cargo at Old City Harbour • Reception of cargo traffic, provision and development of port infrastructure • Liquid bulk, dry bulk, container, ro-ro and general cargo CARGO TS LAEVAD OÜ • Operation of ferries on two domestic routes: Rohuküla–Heltermaa and Virtsu–Kuivastu • Annual average figures: 2.4 million passengers and 1 million vehicles • 5 ferries: Leiger, Tiiu, Tõll, Piret and Regula TS SHIPPING OÜ (MPSV BOTNICA) • Icebreaking in northern Estonian ports and harbours • Off-shore work and international projects during the summer season SHIPPING • Real estate development at Old City Harbour 16 ha • Muuga Industrial Park 76 ha • Paldiski South Harbour Industrial Park 34 ha • Saaremaa Harbour Logistics Park 10 ha • Vacant land and rental premises in the harbours REAL ESTATE
1. Tallinna Sadam at a Glance | page 7 Translation of the Estonian original TABLE OF CONTENTS m Tallinna Sadam owns two passenger harbours (Old City Harbour and Saaremaa Harbour) and two cargo harbours 2 (Muuga Harbour and Paldiski South Harbour). In terms of the number of passengers served, Tallinn Old City Harbour is the third-largest harbour in the northern region of the Baltic Sea (aſter Stockholm and Helsinki). Muuga Harbour is Estonia’s largest cargo harbour. Tallinna Sadam offers port services as a landlord port, i.e. it owns, administers and develops berths, port basins and the surrounding areas, leases land to cargo operators, organises vessel traffic in port basins and ensures safe navigation in port waters. Tallinna Sadam owns passenger terminals and other facilities required for passenger service. Cargo harbour superstructure belongs to cargo operators. Waste management in the harbours is provided by AS Green Marine (Green Marine), an associate of Tallinna Sadam, which offers innovative waste handling solutions. Through its subsidiary OÜ TS Laevad (TS Laevad), Tallinna Sadam operates ferries and offers passenger transport between Estonia’s mainland and two largest islands — Saaremaa and Hiiumaa. The Group has five ferries and the routes served are the busiest domestic ferry routes in Estonia. The other subsidiary, OÜ TS Shipping (TS Shipping), is also involved in shipping. It owns the multifunctional icebreaker Botnica, which provides icebreaking services along the northern Estonian coast during the winter season and icebreaking, ice management and escort services in the Arctic waters of northern Canada during the summer season. The real estate business line is largely in the preparatory phase. Detailed plans for the areas included in the Old City Harbour development plan have been initiated and are being processed by the Tallinn City Planning Department. The Group’s operating segments for financial accounting purposes differ somewhat from its business lines. Operating segments are Passenger harbours, Cargo harbours, Ferry and Other. The Passenger harbours segment comprises the provision of port services at the harbours mainly involved in passenger service — Old City Harbour and Saaremaa Harbour — and real estate development activities in Old City Harbour. The Cargo harbours segment comprises the provision of port services at the harbours mainly involved in cargo handling — Muuga Harbour and Paldiski South Harbour — and activities related to the industrial parks located in those harbours. The Ferry segment comprises the operations of the subsidiary TS Laevad, which provides ferry service between Estonia’s mainland and two biggest islands. The segment Other includes mainly the operations of the subsidiary TS Shipping, which operates the multifunctional icebreaker Botnica, and the Group’s share of the profits and losses of the associate Green Marine, which is accounted for under the equity method. Segment results are presented in section 6.9 of the management report and note 3 to the consolidated financial statements. Structure of Tallinna Sadam Group 2 In addition, Tallinna Sadam provides the services set out in the Port Rules in Paljassaare Harbour. Port services for passengers and cargo Ferry service to Saaremaa and Hiiumaa Tallinna Sadam’s share 100% Icebreaker Botnica charter Tallinna Sadam’s share 100% Waste management Tallinna Sadam’s share 51%
1. Tallinna Sadam at a Glance | page 8 Translation of the Estonian original TABLE OF CONTENTS m 1.2 Key performance indicators for 2021 3 All changes on this page compared with 2020. 4 ESI — Environmental Ship Index. 5 GHG — greenhouse gases CO 2 , N 2 O and CH 4 converted into CO 2 equivalent. Revenue EUR 110.1m (+2.5%) 3 Cargo volume 22.4m tonnes (+5.0%) Utilisation rate for icebreaker Botnica 73% (+5 percentage points) Adjusted EBITDA EUR 54.0m (–7.5%) Number of passengers 3.5m (–18.2%) Traffic between Estonia’s mainland and largest islands 2.2m passengers (+12%) and 1.1m vehicles (+14%) EBITDA margin 49.1%. Profit EUR 25.6m (–10.2%) Number of vessel calls 7,333 (+3.5%) Share of vessel calls with ESI 4 discounts 16% (–2 percentage points) Capital investments EUR 14.7m (–60.4%) Dividends paid EUR 20.251m (EUR 0.077 per share) GHG 5 emissions 23,216 tonnes of CO 2 equivalent (–4%)
1. Tallinna Sadam at a Glance | page 9 Translation of the Estonian original TABLE OF CONTENTS m 1.3 Significant events in 2021 BOTNICA’S 10-YEAR CONTRACT WITH THE TRANSPORT ADMINISTRATION FOR THE DELIVERY OF ICEBREAKING SERVICE IN NORTHERN ESTONIAN PORTS TRANSITION TO RENEWABLE ENERGY — TALLINNA SADAM CONSUMES ONLY GREEN ELECTRICITY PRODUCED IN ESTONIA OPENING OF A PARKING HOUSE IN PASSENGER TERMINAL D RELAUNCH OF THE CRUISE SEASON
1. Tallinna Sadam at a Glance | page 10 Translation of the Estonian original TABLE OF CONTENTS m SHAREHOLDER WEBINAR ON THE GENERAL MEETING TALLINNA SADAM AND TS LAEVAD RECEIVE THE SILVER LABEL OF THE RESPONSIBLE BUSINESS INDEX 6 HHLA’S NEW CONTAINER CRANES ARRIVE AT MUUGA HARBOUR OPENING OF A NEW CRUISE TERMINAL AND PROMENADE. TALLINN DEVELOPMENT PROJECT 2021 AWARD EXPANSION OF KATOEN NATIE’S LOGISTICS CENTRE AT MUUGA HARBOUR 6 The Responsible Business Forum index.
1. Tallinna Sadam at a Glance | page 11 Translation of the Estonian original TABLE OF CONTENTS m REOPENING OF THE TALLINN–STOCKHOLM ROUTE OPENING OF THE ADMIRAL BRIDGE AT OLD CITY HARBOUR. The bridge is named Facility of the Year 2021 at the annual construction conference Construction 2022+: E-horizon NASDAQ BALTIC AWARDS 2021 — BEST INVESTOR RELATIONS SPECIAL AWARD FOR ENVIRONMENTAL MANAGEMENT 7 IN THE ENVIRONMENTALLY FRIENDLY COMPANY OF THE YEAR CATEGORY INVESTOR DAY AT THE CRUISE TERMINAL AUTOMATED MOORING EQUIPMENT BEGINS TO SERVE SHIPS IN OLD CITY HARBOUR 7 The award was presented by the Ministry of the Environment.
1. Tallinna Sadam at a Glance | page 12 Translation of the Estonian original TABLE OF CONTENTS m 1.4 Letter from the Chief Executive A new crisis is unfolding in the world as Russia launched a wide- scale attack on Ukraine on 24 February 2022, unleashing the biggest war in Europe in recent history. Tallinna Sadam fully agrees with the government of Estonia that has clearly and unambiguously denounced Russia’s military invasion of Ukraine. The sanctions imposed on Russia by the West are inevitably going to have an impact on the global economy. There will also be consequences for Tallinna Sadam, our cargo business, our customers and our financial performance. However, in this situation the sanctions are imperative, and I believe that our inves- tors understand and support the decisions of the democratic world. As regards the year 2021, for Tallinna Sadam it was marked by the same events that affected the whole world: coping with the challenges of COVID-19, green transition and, towards the end of the year, an energy crisis. The epidemic continues to influence our business and results, but we have learned to cope with it. Our cargo flows are stable, our shipping business is performing better than ever and, although passenger traffic remains depressed, cruise ships have started calling at our port again and the Tallinn–Stockholm route has been reopened. We believe that passenger flows will recover in the coming years and thus we are investing heavily in upgrading our passenger harbour infrastructure, improving passenger access and developing the harbour area into an attractive urban space. Last year, we opened several important landmarks in Old City Harbour. As the largest tourist gateway to Estonia, we can offer our passengers a first-class visitor experience in a new cruise terminal whose winding rooſtop promenade has made the waterfront into an appealing leisure space. Admiral Bridge shortens the walking distance between our two terminals, inviting people to get acquainted with a special and unique piece of architecture. We are working closely with the City of Tallinn to bring a tram route to Old City Harbour in the next few years and contributing actively to the detailed planning processes initiated for the development of the Old City Harbour to move on with the implementation of Masterplan 2030+. The harbour area, which used to be inaccessible, is transforming into a vibrant and inviting urban space that delights us and our fellow citizens while leaving an incredible first impression on visitors arriving by sea. We are working hard to reduce our ecological footprint: within two years we have reduced our greenhouse gas emissions by 14%, our largest shipping customers have connected their ships to onshore power supply systems and vessels are moored and unmoored automatically. The Smart Port solution guides vehicles at our Old City and Muuga harbours and will soon be implemented at Paldiski South harbour. From 2021 we consume only renewable electricity and we are planning to participate in the development of offshore wind farms and the imple- mentation of hydrogen technology. Despite the crises that are ravaging the world, we remain a strong organisation, with dedicated and committed employees, satisfied customers and the trust of nearly 20,000 shareholders. A balanced business model allows us to deliver on our promises and to pursue our adopted dividend policy. VALDO KALM Chairman of the Management Board of Tallinna Sadam
1. Tallinna Sadam at a Glance | page 13 Translation of the Estonian original TABLE OF CONTENTS m 1.5 Vision, mission, values The vision of Tallinna Sadam is to become the most innovative port on the Baltic Sea by offering its customers a sustainable environment and development opportunities. Tallinna Sadam is a modern gateway to the Baltic Sea. We are a growth-oriented development and service organisation. We create a sustainable environment and development opportunities for our customers and employees by combining services to people and cargo, shipping, and waterfront real estate development into an integrated logistics business. We listen to the communities and protect the environment. We are open, smart and reliable. We represent Estonia’s image as a maritime country and are one of the engines of its economy. The core values of Tallinna Sadam are openness, smartness and reliability. We are open to new ideas and innovation and find opportunities to implement them. We share information about our intentions and activities both internally and externally. We make sensible and smart decisions and do the right things at the right time and in the right way. We seek, seize and offer creative and forward-looking solutions to improve the company’s competitiveness. We are reliable. We keep our promises and deliver quality. We are professional, competent and influential experts in our area and treat ourselves as well as others with respect and consideration.
1. Tallinna Sadam at a Glance | page 14 Translation of the Estonian original TABLE OF CONTENTS m 1.6 Strategy 2021–2025 Business strategy Tallinna Sadam’s strategy is focused on implementing its vision — to become the most innovative port on the Baltic Sea, meeting owners’ expectations, keeping the dividend promise, promoting a strong business culture and ensuring sustainable development. External factors with the strongest impact on the Group are the COVID-19 pandemic and environmental changes that increase competition. The lockdowns of neighbouring countries and changes in travel habits influence both the ferry and cruise ship sectors while changes in global supply chains may unlock opportunities for serving new cargo flows. In striving for climate neutrality and sustainable development, new regulations (particularly the Fit for 55 package) and the imple- mentation of alternative energy sources and green fuels play an important role. By the year 2025, Tallinna Sadam will have moderate growth opportunities in all its business lines: cargo, passengers, real estate, and shipping. In the next four years, we will continue to increase the competitiveness of cargo corridors passing through Estonia together with other members of the logistics chain. We see opportunities in transforming our harbours into regional distribution centres and developing north-south cargo flows, among other things, by opening new ro-ro and container cargo routes. Opportunities can also be found in replacing fossil fuels with renewable and biofuels and alternative energy sources and becoming a base and maintenance harbour for developers of offshore wind farms. In real estate development, the goal is to make wider use of the areas of industrial parks at our Muuga Harbour and Paldiski South Harbour. In the passenger business, which has been hit the hardest by the COVID-19 crisis, we will focus on restoring the traffic on regular routes and the services provided to cruise ships. Investments in the area will be aimed at improving passenger service infrastructure and providing environmen- tally friendly solutions for ships, buildings and passengers. In the real estate business, we will continue to create an attractive urban space by executing the development plan of Old City Harbour: Masterplan 2030+. In shipping, the main focus in 2021–2025 is on ensuring environmentally friendly service on the routes between Estonia’s mainland and two largest islands, renewing the ferry service contract by winning a public tender and securing year-round operation, including summer work, for the icebreaker Botnica.
1. Tallinna Sadam at a Glance | page 15 Translation of the Estonian original TABLE OF CONTENTS m Development opportunities Sustainable development Tallinna Sadam consistently strives to reduce the adverse environmental impacts of its business and development activities. A clear focus on environmental priorities and the pursuit of climate neutrality by 2050 are keys to ensuring the company’s sustainable development. We recognise that the Baltic Sea has one of the most vulnerable marine ecosystems in the world and that clean air is an important indicator of the quality of life as well as a critical factor in ensuring our ability to continue business and development activities in the vicinity of residential areas. Our goals also include supporting growth in the circular economy and improving energy efficiency, while using all natural resources efficiently and promoting more sustainable consumption. In addition to environmental priorities, we monitor the achievement of goals set in our economic and social focus areas. Being an innovative company, we increase our competitiveness by using modern science-based and digital solutions. In selecting partners, we evaluate their approach to sustainability. We ensure the company’s profitability and stable shareholder returns by delivering on our dividend policy and applying contemporary management principles consistent with our core values. As Estonia’s largest gateway to the sea, we are responsible for Estonia’s image as a maritime nation. Therefore, our priority is to create quality public space for both visitors and local people. It is equally important to contribute to regional development by providing first-rate ferry service, which is essential to the residents and visitors of Estonia’s largest islands. Health, safety and security remain among our top priorities. We implement the strategy by setting annual goals, adopting action plans and involving all our employees in their achievement. The key to Tallinna Sadam’s future success lies in the attitude and mindset that our daily business decisions and investments must equally support the company’s profitability, the surrounding environment and the development of society as a whole. Through our activities, we contribute to the achievement of Estonia’s climate neutrality goal as well as the implementation of the European Green Deal and the UN sustainable development goals. PASSENGERS • Restoring passenger traffic on the Helsinki, Stockholm and St Petersburg routes • Increasing the cruise business • Improving accessibility and connectivity CARGO • Becoming a construction and maintenance harbour for wind farm developers • Increasing market share in the region • Becoming a regional cargo logistics hub • Increasing north-south cargo flows (including the opportunities offered by Rail Baltica) • Continuing the development of ro-ro/con-ro routes at Muuga Harbour and Paldiski South Harbour SHIPPING • Winning a public tender and signing a new contract for the provision of ferry service between Estonia’s mainland and two largest islands • Increasing operating efficiency • Electrification of ships • Growth in demand for icebreaking and ice management services in international projects • Providing services to Estonian offshore wind farms REAL ESTATE • Executing Masterplan 2030+ created for the development of Old City Harbour • Developing industrial parks and providing added value • Renting out surplus resources and vacant premises
1. Tallinna Sadam at a Glance | page 16 Translation of the Estonian original TABLE OF CONTENTS m In 2021, our sustainable development working group continued to develop our sustainable development strategy and to plan activities for achieving the goals set in collaboration with our in-house experts and management. We developed key performance indicators and their target levels as well as a web application for monitoring our progress towards the sustainable development goals. The application, developed in collaboration with the Estonian Maritime Academy, can be found at http://www.sea.ee/pem. The Estonian Maritime Academy also helped us develop an application for mapping and measuring our greenhouse gas emissions, which enables us to automatically generate relevant data. We have adopted a Group-wide concept of sustainable development and, additionally, the subsidiary TS Laevad has developed its own sustainable development programme, which is linked to the Group’s goals. Last year we also completed for the first time the CDP (Carbon Disclosure Project) climate change questionnaire to be more open about the impacts of our carbon footprint as well as the goals and activities aimed at their mitigation. • Innovation • Development based on R&D • Sustainable business development and choice of partners • Employer attractiveness ECONOMIC IMPACT SOCIAL IMPACT • High quality public space and regional development • Health, safety, security • Raising awareness on CSR and sustainability ENVIRONMENTAL IMPACT • Energy efficiency, sustainable consumption • Clean Baltic Sea, increasing circular economy • Clean air
1. Tallinna Sadam at a Glance | page 17 Translation of the Estonian original TABLE OF CONTENTS m 1.7 Tallinna Sadam’s stakeholder groups SOCIETY & COMMUNITY • Local municipalities • Local communities • Cooperation organizations and networks • Education and research institutions • Public and media EMPLOYEES • Current and future employees of Tallinna Sadam group • Trade unions CUSTOMERS & PARTNERS • Suppliers • Financiers • Agents, lease holders • Charterers of the icebreaker • Parties in logistics chain • Operators (cargo terminals and passenger ships) • Supervision and other institutions • Passengers (international and local) INVESTORS • Estonian state (controlling shareholder) • International institutional investors • Estonian investment and pension funds • Retail investors • Potential investors
2. Service Responsibility | page 18 Translation of the Estonian original TABLE OF CONTENTS m 2 Service Responsibility 2.1 Safety and security We invest daily in ensuring and promoting safety and security in all our business lines. Our main challenge is to make sure that all employees, passengers, cargo and companies are safe and secure. We do it by implementing innovative security systems. Due to the pandemic, our main focus in 2021 was on preventing the spread of the coronavirus among our employees and in the port community. We analyse the risks arising from the spread of the virus regularly and take various measures to protect our people. At the end of the reporting period, over 90% of them were vaccinated against COVID-19. In addition, we participated in various working groups set up to develop virus containment measures to ensure optimal application of restrictions which take into account the nature of harbour operations and maritime transport. Also, we work closely with the Police and Border Guard Board and Health Board to make sure that our harbours comply with pandemic-related requirements (including the arrangement of health checks and tests) and work with other harbours across the border to harmonise security measures and ensure smooth and swiſt exchange of information. The harbours of Tallinna Sadam have implemented a safety and security assurance system to meet the requirements of the Estonian Ports Act in areas such as marine traffic safety, security, environmental protection, and safe cargo handling. We assess potential safety risks regularly and update our safety measures when necessary. General safety requirements are set out in the Port Rules. Our structural units’ roles in preventing and responding to dangerous situations at the harbours of Tallinna Sadam are described in the procedure for preventing and resolving dangerous situations and each harbour has developed and implemented a plan for responding to safety incidents. To cope with dangerous situations, we carry out regular drills and training exercises and work with supervision authorities, local communities and operators, including handlers of hazardous substances operating on the premises of our harbours. Last year we conducted six fire drills in the passenger terminals of Old City Harbour which were attended by the employees of the security service provider and the harbour staff. All detected incidents are recorded and continuous monitoring provides important input to the planning of additional safety measures. Training and exercises Crisis management Fire drill Pollution control Sequrity training 40 30 20 10 0 2017 2018 2019 2020 2021 24 3 6 2 21 4 2 3 21 4 6 2 25 3 7 4 20 2 3 2
2. Service Responsibility | page 19 Translation of the Estonian original TABLE OF CONTENTS m To ensure fire safety, we have supplied our harbours with basic fire extinguishing equipment (dry powder, gas and water extinguishers, hose systems, fire blankets, etc.), automatic alarm systems (fire alarm, sprinkler, gas extinguishing, water curtain and alarm transmission systems) and external fire extinguishing water systems (fire hydrants, sea water extraction places). We regularly conduct fire drills and check firefighting equipment, systems and installations in cooperation with the Rescue Board. In 2021, we prepared fire safety action plans for our office buildings and passenger terminals. The Rescue Board ensures swiſt response to possible rescue incidents. To increase the capabilities of the Muuga rescue unit, which is based at Muuga Harbour, we have acquired the following equipment for responding to possible incidents at the harbour: foam extinguishers and hose systems that can supply water from sources up to 3 km away and a HydroSub sea water pump with a capacity of 11,000 litres per minute. Also, there is a slip for launching watercraſt in the eastern part of Muuga Harbour, which enables rescue units to respond quickly to incidents at sea. The purpose of implementing security requirements at harbours is to assure the safety and security of ships, passengers, cargo and harbour employees and to prevent wrongdoing. All harbours of Tallinna Sadam apply heightened ISPS 8 security requirements. Old City Harbour, which has been designated as a facility essential for national security, is subject to additional security measures. All our harbours have a security plan, which is based on a risk analysis carried out by the Transport Administration 9 and the Estonian Internal Security Service. According to the plan, each harbour consists of different facilities that are subject to security measures consistent with their inherent risks. The effectiveness of the security plan is tested during drills and exercises carried out every three months. Compliance with security requirements is reviewed by the Transport Administration, which carries out relevant audits on an annual basis. Access to all harbours is restricted: entry is granted on the basis of permits. All harbours have manned guarding and consistently upgraded modern technical surveillance systems, which support security assurance. Thanks to extensive preventive work, Tallinna Sadam has had only a few serious incidents in the past decade. There have been no safety incidents resulting in a large number of fatalities or injuries. TS Shipping has implemented a safety and quality management system for its icebreaker Botnica, which integrates the requirements of the main international maritime conventions (SOLAS, MARPOL, STCW, etc.) and ISO standards (9001:2015, 14001:2015, 45001:2018). International offshore indus- try guidelines and best practices are also followed. TS Shipping is a member of the International Marine Contractors Association (IMCA) and complies with its guidelines, recommendations and practices. Nearly 20 different safety and security drills and exercises are conducted on board the icebreaker in conformity with international conventions and the recommendations and practices of the offshore industry every year. In addition, joint emergency response drills to practice coopera- tion between the crew and the onshore team are carried out twice a year. The ship’s main engines, other mechanisms and systems have been supplied with remote surveillance equipment, which improves safety, allows using the vessel’s engines and systems more efficiently and reduces costs and emissions. TS Laevad applies the safety and security requirements of the ISPS Code. Fire safety is ensured by conducting weekly rescue and firefighting drills on board the vessels as required by SOLAS. As a rule, various on-board emergency response drills are conducted in partnership with the Police and Border Guard Board, the Estonian Internal Security Service and the Rescue Board but in 2021 and 2020 no joint exercises were organised due to the pandemic. In addition, in the summer we organise maritime safety days on board our ferries in partnership with the Police and Border Guard Board and volunteer rescuers where we demonstrate the proper use of life jackets and give other relevant information about maritime safety. Together with Tallinn University of Technology (TalTech) we carried out an assessment of the cyber risks of ferries and ferry service and prepared an action plan to improve process security. In preventing the pollution of marine environment and managing waste, TS Laevad observes the requirements of MARPOL. All vessels of TS Laevad have implemented a comprehensive safety management system and the Transport Administration conducts separate audits of all vessels and the office on an annual basis. 8 International Code for the Security of Ships and Port Facilities. 9 The Transport Administration was established on 1 January 2021 by merging the Civil Aviation, Road, and Maritime Administrations (and it is their legal successor).
2. Service Responsibility | page 20 Translation of the Estonian original TABLE OF CONTENTS m 2.2 Quality management and risks The Group’s parent, AS Tallinna Sadam, has been applying an integrated management system, which complies with the requirements of international quality and environmental management standards ISO 9001 and ISO 14001, since 2003 already. Conformity with international standards assures that the management system of AS Tallinna Sadam ensures the satisfaction of customers and other stakeholder groups, the efficiency of workflows, and effective control of risks and envi- ronmental aspects. The period’s main goals in the development of the quality and environmental management system were to perform customer satisfaction, employer reputation, and employee engagement surveys and to analyse the results. We focused on digitalisation: implementing a digital tool for goal-setting in the performance management process as well as digital solutions for asset management, risk assessment and measuring the GHG emissions of our operations. TS Shipping applies an integrated management system, which complies with the requirements of quality management standard ISO 9001:2015, environmental management standard ISO 14001:2015 and occupational health and safety management standard OHSAS 18001. We review the risks which influence the activities of Tallinna Sadam in accordance with our risk management framework. Relevant risks are classified into three main categories: risks resulting from the external environment (external risks), risks associated with specific business lines and op- erational risks. Each risk is assigned a level of severity (low, moderate, high, extreme) and mitigation measures that depend on the nature of the risk. The Group’s financial risks are managed separately and a comprehensive overview of their hedging and mitigation principles and means is provided in note 4 to the financial statements. External risks which affect the Group’s operations the most include the long-term impacts of the COVID-19 pandemic on passenger and cargo flows, sanctions imposed under the security policy, stricter environmental requirements resulting from climate change and climate policy (including the goal of achieving climate neutrality) and possible unfavourable changes in national tax (including alcohol excise) policies. According to our risk analysis, the most serious environmental risk factor for the Group is climate policy – potential new international and EU requirements (including the Fit for 55 package) which will have a long-term impact on harbour services through changes in demand and the cost base. The potential impact of extreme weather conditions (storms, rising water levels, severe ice conditions, etc.) is likely to be lower than that of climate policy. Other potentially significant risks include the business risks of the Group’s major customers and prospective customers’ unwillingness to invest due to the instability of the global economy. In the passenger business, significant risks include the construction of a competing passenger harbour (in the long-term perspective), travel restrictions between countries due to the COVID-19 pandemic and possible incidents with passengers on harbour premises. The cargo business is exposed to the continuation and expansion of the EU and US economic sanctions against Russia, increasing competition (including domestic) between the Baltic Sea ports and harbours, and Russia’s ongoing restriction of rail transport volumes. In the real estate business, significant risks are related to possible delays in local governments’ planning processes and possible legal disputes. In shipping, ferry operations may be affected in the long-term perspective by the possible construction of the Saaremaa bridge and the operations of the icebreaker Botnica may be affected by our inability to secure regular summer work for the vessel. Significant operational risks include the risks related to occupational health and safety, the planning and execution of business projects and a possible decrease in the market value of significant assets. According to our risk assessment, all other risks, such as environmental risks (such as the risk of pollution of the port basin and harbour premises, noise and odour nuisances), safety and security risks, personnel risks are not as high (taking into account the risk mitigation measures) and, depending on the risk, fall into the low or moderate category. In keeping with our values and ethics and to prevent corruption, we have put in place a Group- wide procedure for avoiding conflicts of interest. The procedure requires, among other things, the members of Group companies’ management and supervisory boards (17 persons in total) and employees who arrange transactions to declare their business interests. We observe the personal data protection requirements (GDPR) and pay increasing attention to ensuring cyber security. We address the topics at regularly organised training events and share relevant information (e.g. on our intranet) with employees and the members of the governing bodies. Our information systems are regularly tested with the assistance of external experts to improve our cyber security and mitigate related risks.
2. Service Responsibility | page 21 Translation of the Estonian original TABLE OF CONTENTS m 2.3 Customers and suppliers We have a broad customer base, which largely consists of big Estonian and international companies, many of which are listed on different stock exchanges. Our largest customers are ferry operators, cargo terminal operators, and the government (the Republic of Estonia) under the contracts for the provision of ferry service and Botnica’s icebreaking service. Our customers also include the end consumers of our services: passengers travelling on our ferries to the islands of Saaremaa and Hiiumaa, passengers travelling on international routes, and cargo carriers and cargo owners. In customer relations, we observe the principles of openness and engagement. Our management and heads of business lines regularly meet our key customers. At least once a year, we organise a Customer Information Day where we present our significant plans, projects and investments. We monitor customer satisfaction for six major customer groups: cargo terminal operators, ferry operators, shipping agents, tenants, passengers, and customers of the marina. In 2021, the custo- mer satisfaction index was 5.22 on a 6-point scale (2020: 5.13). In 2021, we improved accessibility and parking. We continued to develop the Smart Port application at Muuga Harbour, opened a car park near passenger terminal D at Old City Harbour, expanded parking space at Muuga Harbour and renewed directional signs at Old City Harbour and Muuga Harbour. Thinking of pedestrians and cyclists, we built the Admiral Bridge, which connects the passenger terminals of Old City Harbour, and a promenade for the cruise area. The companies that provide services in the passenger terminals of Old City Harbour observe a common approach to service provision: the Service Compass of the Old City Harbour Community. TS Laevad wishes to offer its passengers the best travel experience in Estonia and regularly measures customer satisfaction using the net promoter score (NPS) methodology. In 2021, the NPS was +73 on the scale of –100 to +100 (2020: +73). Last year, the company renewed its ticket sale environment and website. In partnership with our partners, we make every effort to make all visitors and passengers feel welcome and to develop a positive and inviting culture and vibe in our harbours and aboard our ferries.