GROUP ANNUAL REPORT 2023
Table of Contents | page 3 Translation of the Estonian original Table of Contents MANAGEMENT REPORT 5 6 BUSINESS REVIEW 40 1 TALLINNA SADAM AT A GLANCE 6 6.1 Key performance indicators 40 1.1 Business model 6 6.2 Economic environment 41 1.2 Key performance indicators for 2023 8 6.3 Effects of the Russia-Ukraine war and main economic risks 42 1.3 Highlights and awards of the year 2023 9 6.4 Overview of the market: passengers 43 1.4 Letter from the CEO 12 6.5 Overview of the market: cargo 45 1.5 Vision, mission, values 13 6.6 Operating results 47 1.6 Strategy 2023–2027 14 6.6.1 Number of passengers 49 1.7 Tallinna Sadam’s stakeholder groups and value chains 17 6.6.2 Cargo volume 50 2 SERVICE RESPONSIBILITY 19 6.6.3 Ferry service 51 2.1 Safety and security 19 6.6.4 Icebreaker Botnica 51 2.2 Quality management and risks 21 6.7 Income and expenses 52 2.3 Customers and suppliers 22 6.8 Profit 55 3 ENVIRONMENT 24 6.9 Segment reporting 56 3.1 Energy efficiency and sustainable consumption 25 6.10 Investments and development prospects 58 3.2 Clean Baltic Sea and circular economy 26 6.11 Dividends 59 3.3 Clean air 28 6.12 Share and shareholders 60 4 OUR PEOPLE 31 7 CORPORATE GOVERNANCE 62 4.1 Employees 31 7.1 General meeting 63 4.2 Human resource strategy 33 7.2 Supervisory board 64 4.3 Occupational safety 35 7.3 Audit committee and internal audit department 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 37 7.6 Management board 68 7.7 Supervisory and management boards of subsidiaries and associates 70 7.8 Cooperation of the management and supervisory boards 70 7.9 Disclosure of information and communication 70 7.10 Financial reporting 71 7.11 Statement of compliance with the CGR 71
Table of Contents | page 4 Translation of the Estonian original REMUNERATION REPORT 72 Note 14. Provisions 116 Note 15. Trade and other payables 117 CONSOLIDATED FINANCIAL STATEMENTS 76 Note 16. Taxes payable 118 Consolidated statement of financial position 77 Note 17. Loans and borrowings 119 Consolidated statement of comprehensive income 78 Note 18. Government grants 123 Consolidated statement of cash flows 79 Note 19. Equity 130 Consolidated statement of changes in equity 80 Note 20. Revenue 134 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 81 Note 21. Operating expenses 136 Note 1. Reporting entity 81 Note 22. Other income 138 Note 2. Material accounting policies 82 Note 23. Finance costs 138 Note 3. Operating segments 92 Note 24. Related party transactions 139 Note 4. Financial risk management 96 Note 25. Commitments 141 Note 5. Significant accounting estimates and judgements 102 Note 26. Investing activities in the statement of cash flows 141 Note 6. Financial instruments 104 Note 27. Contingent liabilities 142 Note 7. Cash and cash equivalents 105 Note 28. Investigations concerning the group 143 Note 8. Trade and other receivables 106 Note 29. Additional information on the parent 144 Note 9. Investments in an associate 107 Note 30. Events aſter the reporting period 149 Note 10. Investment properties 109 Note 11. Property, plant and equipment 110 MANAGEMENT’S CONFIRMATION 150 Note 12. Intangible assets 112 INDEPENDENT AUDITOR’S REPORT 151 Note 13. Leases 113 STATEMENT OF THE SUPERVISORY BOARD 156 PROFIT ALLOCATION PROPOSAL 157
MANAGEMENT REPORT
TABLE OF CONTENTS m 1. Tallinna Sadam at a Glance | page 6 Translation of the Estonian original 1 Tallinna Sadam at a Glance 1.1 Business model The business model of AS Tallinna Sadam and its subsidiaries (together: ‘Tallinna Sadam’ or ‘the Group’) is based on four well-balanced business lines: passengers, cargo, shipping and real estate, which ensure the Group’s profitability even in the most challenging times. 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. Tallinna Sadam owns two passenger harbours (Old City Harbour and Saaremaa Harbour) and two cargo harbours (Muuga Harbour and Paldiski South Harbour). • TOP 2 Baltic Sea passenger port in 2023: 8 million passengers, 5,646 ferry calls • Passenger harbours: Old City Harbour and Saaremaa Harbour. One route at Muuga Harbour • Reception of ferries and cruise ships, provision and development of port infrastructure, provision of services for passengers and vehicles • Ferry routes: Tallinn–Helsinki, Tallinn–Stockholm, Muuga–Vuosaari, cruise ships PASSENGERS • 2023: 13 million tonnes of cargo, 1,380 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 for cargo handling and transport • Cargo types: dry bulk, container, ro-ro, liquid bulk, general cargo CARGO TS LAEVAD OÜ • Operation of ferries on two domestic routes: Rohuküla–Heltermaa and Virtsu–Kuivastu • 2023: 2.4 million passengers and 1.1 million vehicles carried, 23,000 trips • 5 ferries: Leiger, Tiiu, Tõll, Piret and Regula TS SHIPPING OÜ (MPSV BOTNICA) • Icebreaking in northern Estonian harbours • Offshore work and international projects in the summer and autumn SHIPPING • Old City Harbour property development 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
TABLE OF CONTENTS m 1. Tallinna Sadam at a Glance | page 7 Translation of the Estonian original Tallinn Old City Harbour is the second largest passenger harbour in the northern Baltic Sea region (aſter Helsinki). Muuga Harbour is the largest cargo harbour in Estonia. Tallinna Sadam provides port services as a landlord port, i.e. it owns, manages and develops quays, port basins and the surrounding areas, leases land to cargo operators, organises vessel traffic in the port basins and ensures safe navigation in the port waters. Tallinna Sadam owns passenger terminals and other facilities necessary for passenger services. The superstructure of the cargo harbours belongs to cargo operators. Waste management in the harbours is provided by AS Green Marine (Green Marine), an associate of Tallinna Sadam that offers innovative waste management solutions. Through its subsidiary OÜ TS Laevad (TS Laevad), Tallinna Sadam operates ferries and provides passenger transport service 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 in the northern Estonian coastal waters during the winter season and icebreaking, ice management and escort services in offshore projects in the Arctic waters of northern Canada and elsewhere during the summer season. The real estate business is largely in the preparation phase. Detailed plans for the real estate development areas of Old City Harbour have been initiated and submitted to the Tallinn City Planning Department. In order to increase the overall attractiveness and value of the area, several new passenger-related developments were completed in 2020–2023: Terminal D with a multi-storey car park and a square in front of the terminal building, the pedestrian Admiral Bridge connecting the passenger terminals, and an environmentally friendly modern cruise terminal with a promenade. In 2023, we also organised an architectural design competition for the development of the area around the new Terminal A. The Group’s operating segments for financial accounting purposes differ slightly from its business lines. The 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 services between the Estonian mainland and the two largest 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 using 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 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%
TABLE OF CONTENTS m 1. Tallinna Sadam at a Glance | page 8 Translation of the Estonian original 1.2 Key performance indicators for 2023 1 All changes on this page compared with 2022 3 ESI — Environmental Ship Index 4 GHG — greenhouse gases CO 2 , N 2 O and CH 4 converted into CO 2 equivalent Revenue EUR 116.5m (–4.2%) 1 Cargo volume 12.6m tonnes (–29.1%) Utilisation rate for icebreaker Botnica 63% (–4.9 percentage points) Adjusted EBITDA EUR 49.2m (–11.9%) Number of passengers 7.9m (+13%) Traffic between Estonia’s mainland and two largest islands: 22,972 trips (+0.6%), 2.4m passengers (+4.9%) and 1.1m vehicles (+3.3%) EBITDA margin 42.2%, profit EUR 15.9m (–37.9%) Number of vessel calls 7,026 (–1.5%) Share of vessel calls with ESI 2 discounts 35% (+17 percentage points) Capital investments EUR 20.7m (+49.6%) Dividends paid EUR 19.199m (EUR 0.077 per share) GHG 3 emissions 23,874 tonnes of CO 2 equivalent (+10%)
TABLE OF CONTENTS m 1. Tallinna Sadam at a Glance | page 9 Translation of the Estonian original 1.3 Highlights and awards of the year 2023 START OF CONSTRUCTION OF OFFSHORE WIND FARM QUAY AT PALDISKI SOUTH HARBOUR CONTRACT SIGNED TO OPERATE THE LNG QUAY AT PAKRINEEME HARBOUR NUMBER OF PASSENGERS CARRIED ON THE GROUP’S FERRIES OVER THE YEARS REACHES 15 MILLION NUMBER OF PASSENGERS SERVED RECOVERS TO 8 MILLION ATTENDING THE NASDAQ STOCK EXCHANGE CLOSING BELL CEREMONY IN NEW YORK
TABLE OF CONTENTS m 1. Tallinna Sadam at a Glance | page 10 Translation of the Estonian original COMPLETION OF DOUBLE RAMP FOR RO-RO VESSELS AT MUUGA HARBOUR TALLINNA SADAM — TOP 3 TOURISM PROMOTER OF THE YEAR GREEN KEY ECO-LABEL AWARDED TO OLD CITY HARBOUR CRUISE TERMINAL ARCHITECTURAL DESIGN COMPETITION FOR TERMINAL A Author: Molumba OÜ
TABLE OF CONTENTS m 1. Tallinna Sadam at a Glance | page 11 Translation of the Estonian original CREATION OF A GREEN SHIPPING CORRIDOR BETWEEN ESTONIA AND FINLAND (FIN-EST GREEN CORRIDOR) GOLD LABEL OF THE RESPONSIBLE BUSINESS INDEX TRANSPORT SECTOR GREEN FORUM MAJOR CREVEX EXERCISE HELD AT MUUGA HARBOUR INVESTOR TOOMAS VISITS TALLINNA SADAM
TABLE OF CONTENTS m 1. Tallinna Sadam at a Glance | page 12 Translation of the Estonian original 1.4 Letter from the CEO Last year was challenging for Tallinna Sadam as we continued to focus on reorientation and new projects in a turbulent business environment. However, our balanced business model and strong customer base are helping us to successfully navigate through various crises and maintain our ability to generate profit and pay dividends. Our liquid bulk and fertilizer volumes have fallen sharply as a result of the sanctions imposed on Russia, but we do not expect transit volumes to return to the levels seen before the war in Ukraine. Instead, we are actively seeking oppor- tunities to attract new cargo volumes and develop new lines of business with our customers and partners in order to restore and enhance the value of Tallinna Sadam. An important new project with growth potential is the construction of a quay for offshore wind farms at Paldiski South Harbour, which started in summer 2023 and will be completed by spring 2026. We also see other opportunities in renewable energy and are considering providing a maintenance vessel service for offshore wind farms. Passenger traffic has recovered moderately to 8 million passengers and I am confident that the growth will continue in the coming years. We also hope to welcome more cruise tourists to Tallinn, which has been a popular cruise destination for the past decade due to its exceptional combination of an extraordinary medieval Old Town and innovative, world-class services and solutions. As we focus on growth, we must also make our services smarter and more efficient, and consider our impact on the environment. To this end, we have signed a memorandum of understanding with the cities of Tallinn and Helsinki and ferry operators to jointly develop a green shipping corridor — a climate-neutral ferry route for passengers travelling between Estonia and Finland. We are also contributing to a greener future by developing an attractive urban space by the sea. In 2023, we held an architectural design competition for Terminal A and will continue to implement the vision for the development of Old City Harbour in order to create a new, people-friendly urban environment with a convenient and sustainable tram link to the city centre. We must make our services smarter and more efficient, and consider our impact on the environment. To be competitive, we also need teamwork, know-how and people with invaluable long-term experience who can help us overcome crises and implement new growth projects. I would like to thank everyone who is working with us towards a better future, because without cooperation and a long-term vision, we cannot sail far. VALDO KALM Chairman of the Management Board of Tallinna Sadam
TABLE OF CONTENTS m 1. Tallinna Sadam at a Glance | page 13 Translation of the Estonian original 1.5 Vision, mission, values The vision of Tallinna Sadam is to become the most innovative port on the Baltic Sea, because innovation and sustainability provide a competitive advantage. Tallinna Sadam is a modern gateway to the Baltic Sea. We are a growth-oriented development and service company. We create a sustainable environment and development opportunities for our customers and employees by combining services for people and cargo, shipping, and waterfront property 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 maritime image and are one of the engines of its economy. Tallinna Sadam’s core values are openness, smartness and reliability. We are open to new ideas and innovations and find ways to implement them. We share information about our intentions and activities both internally and externally. We make sensible and smart decisions, doing the right things at the right time and in the right way. We seek, seize and deliver 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 field, treating ourselves and others with respect and consideration. In 2023, we combined our values and ethical principles into a single Code of Ethics, which also sets out clearly defined ethical expectations for our partners. In addition, we have set up a whistleblowing hotline for reporting concerns about possible misconduct and have provided guidelines for submitting and handling such reports. Reports can be made confidentially and anonymously, if desired, by both our employees and external parties. Author: Molumba OÜ
TABLE OF CONTENTS m 1. Tallinna Sadam at a Glance | page 14 Translation of the Estonian original 1.6 Strategy 2023–2027 Tallinna Sadam’s strategy is focused on implementing its vision — to be the most innovative port on the Baltic Sea, meet owners’ expectations, deliver on the dividend promise, promote a strong business culture and ensure sustainable development. Business strategy We will work to restore our business volumes and have moderate growth opportunities in all our business lines: cargo, passengers, real estate, and shipping. In the passenger business, which has been severely affected by the COVID crisis and, particularly in the cruise segment, by the Russia-Ukraine war, we will focus on restoring our operating volumes in terms of services provided to both regular routes and cruise ships. We will invest in improving passenger service infrastructure and providing sustainable port service solutions for ferries, ships, buildings and passengers. The aim is to develop an environmentally friendly customer journey by creating green corridors on the Tallinn–Helsinki and Tallinn–Stockholm routes. In the cargo business, we will look for ways to restore cargo volumes that have declined due to the economic situation and sanctions, and we will continue to increase the competitiveness of cargo corridors that pass through Estonia together with other members of the logistics chain. The development of offshore wind farms in the region will provide a good opportunity to start offering construction and maintenance port services, while the replacement of fossil fuels with renewable and biofuels and alternative energy sources will open up opportunities to handle new cargo groups. Changes in supply chains will further increase the importance of the port as an intermodal hub and the significance of the north–south corridor. Therefore, our objective is to start using additional space in the industrial parks at Muuga Harbour and Paldiski South Harbour. In the real estate business, we will continue to create attractive urban space by implementing the Old City Harbour development plan, i.e. Masterplan 2030+. The goal for the strategy period is to begin real estate development and create a high-quality public urban space in the northern area. In shipping, the main focus will be on winning the tender for the provision of ferry service between Estonia’s mainland and two largest islands, strengthening the core business and ensuring year-round work for the multifunctional icebreaker Botnica. We will also explore the viability of a new business line: providing a maintenance fleet for offshore wind farms. The main factors that will affect our operations and the implementation of our business strategy are the generally unstable economic situation in Europe, the Russia-Ukraine war and the tightening of environmental requirements and regulations. On the positive side, the changes in global supply chains may open up development opportunities for serving new cargo flows. In addition, the volatility of energy prices and climate regulations are accelerating the search for new solutions to implement alternative energy sources and green fuels, which is creating conditions for the development of energy-related projects in harbours. To implement the strategy, we will set annual targets and all employees will contribute to achieving them. 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 development of the company, the surrounding environment and society as a whole.
TABLE OF CONTENTS m 1. Tallinna Sadam at a Glance | page 15 Translation of the Estonian original Development opportunities Sustainable development Tallinna Sadam is committed to reducing the negative impact of its operating and development activities on the environment. A clear focus on environmental priorities and the pursuit of climate neutrality by 2050 are key to ensuring the company’s sustainable development. We recognise that the Baltic Sea is one of the most vulnerable marine ecosystems in the world and that clean air is an important indicator of quality of life, which helps ensure that we can continue to operate close to residential areas. Our goals also include expanding the circular economy and improving energy efficiency. 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 a quality public space for both visitors and local people. We contribute to regional development by providing a first-rate ferry service, which is essential for the residents and visitors of Estonia’s largest islands. Health, safety and security remain among our top priorities. Through our activities, we contribute to the achievement of Estonia’s climate neutrality target, as well as to the implementation of the European Green Deal and the UN Sustainable Development Goals. We have developed our key performance indicators and their target levels, as well as a web application for monitoring our progress towards the Sustainable Development Goals. An analysis and a roadmap for mapping and preparing for the implementation of the CSRD 4 requirements at Tallinna Sadam were completed in 2023. As a result of our consistent work over the years, we were awarded the Gold Label of the Responsible Business Index. In our 2023 customer satisfaction survey, we asked our customers to rate how important our sustainable development focus areas are to them. The responses showed that the most important priorities for our customers are safety, security and a clean Baltic Sea. 4 Corporate Sustainability Reporting Directive PASSENGERS • Restoring passenger traffic volumes on the Helsinki and Stockholm routes • Restoring the volume of cruise ship calls and the number of cruise passengers • Improving mobility in the harbour area and ferry connections (including traffic management, green corridors, new routes) CARGO • Building a harbour for the construction and maintenance of offshore wind farms • Becoming a regional cargo and logistics hub and 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 • Producing alternative fuels at harbours SHIPPING • Winning the public tender and signing a new contract to provide ferry service between Estonia’s mainland and two largest islands • Providing a maintenance fleet for offshore wind farms • Increasing operating efficiency, electrifying vessels and implementing alternative fuels • Increasing the volume of icebreaking and offshore services in international projects REAL ESTATE • Implementing Masterplan 2030+ for the development of Old City Harbour • Developing industrial parks and providing added value • Renting out surplus resources and vacant space
TABLE OF CONTENTS m 1. Tallinna Sadam at a Glance | page 16 Translation of the Estonian original • 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
TABLE OF CONTENTS m 1. Tallinna Sadam at a Glance | page 17 Translation of the Estonian original 1.7 Tallinna Sadam’s stakeholder groups and value chains 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 • Operators (cargo terminals and passenger ships) • Passengers (international and local) • Charterers of the icebreaker • Agents, lease holders • Suppliers • Financiers • Parties in logistics chain • Supervision and other institutions INVESTORS • Estonian state (controlling shareholder) • International institutional investors • Estonian investment and pension funds • Retail investors • Potential investors
TABLE OF CONTENTS m 1. Tallinna Sadam at a Glance | page 18 Translation of the Estonian original • Offshore work projects abroad in the summer • Icebreaking operations on the northern coast of Estonia in the winter • Technical readiness of the icebreaker • Safe manning OFFSHORE WORK ICEBREAKING IN ESTONIA ICEBREAKER SEGMENT OTHER (ICEBREAKER BOTNICA) • Operation of ferries • Onboard services • Technical readiness of the ferries • Safe manning MARITIME TRANSPORT TRAFFIC MANAGEMENT IN HARBOUR AREA TICKET SALES FERRIES FERRY SEGMENT • Agents • Carriers • Freight forwarders Including: • Vessel traffic management, waste management, pollution abatement, utility services • Tugging and piloting, bunkering Activities of cargo operators: • Superstructure construction and management • Loading, unloading, storage and warehousing • Processing and adding value to cargo Including: • Land, quays, ramps, utility networks, etc. • Development, construction, maintenance, management • Granting of rights of superficies • Rail transport • Road transport MARITIME TRANSPORT PORT SERVICES CARGO TERMINALS PORT INFRASTRUCTURE ROAD TRANSPORT CARGO HARBOURS SEGMENT Ferry and ship operators: • Tallink • Viking Line • Eckerö Line • Cruise operators Including: • Vessel traffic management, waste management, onshore electricity supply, pollution abatement, utility services • Tugging and piloting, bunkering • Traffic management in onshore harbour area (incl. Smart Port system) • Services at terminals Including: • Land, quays, ramps, connecting walkways, utility networks, etc. • Development, construction, maintenance, management • Letting of vacant premises • User-friendly port area • Attractive place to spend time MARITIME TRANSPORT PORT SERVICES PASSENGER TERMINALS PORT INFRASTRUCTURE PUBLIC SPACE PASSENGER HARBOURS SEGMENT Services provided by the Tallinna Sadam Group Services provided by partners FACTORS: • Geopolitics, incl. the environment • Economic environment • Supply chains • Competition • Safety and security • Information technology • Workforce • Regulations • Epidemics • Weather
TABLE OF CONTENTS m 2. Service Responsibility | page 19 Translation of the Estonian original 2 Service Responsibility 2.1 Safety and security We invest daily in ensuring and promoting safety and security in all our business lines. Thanks to extensive preventive work, Tallinna Sadam has had very few serious incidents in the past decade and no safety incidents resulting in a large number of fatalities or injuries. 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. To be prepared for dangerous situations, we carry out regular training exercises and work with supervision authorities, local communities and operators, including handlers of hazardous substances operating on port premises. To ensure business continuity, blackout simulation drills were conducted in all harbours in 2023. Based on the results, the management of electricity-dependent processes was improved. Estonia’s largest crisis and evacuation exercise to date, CREVEX 2023, was carried out at the end of September. According to the scenario of the main exercise, there was a train collision at Muuga Harbour, which escalated into a major fire at the fuel terminal and into an explosion at the fertilizer terminal. During the exercise, the harbour, government agencies, the private sector, local authorities and 1,100 volunteer role-players practised managing a large-scale evacuation, resolving a major rescue incident, and cooperation and communication between the parties involved. The exercise lasted for 31 hours. In October, external experts from WHO assessed the compliance of the Estonian health system with the WHO International Health Regulations. Using our harbours as an example, they assessed the general operating procedures of Estonian ports, including the organisation of crisis management and its compliance with the regulations. No deficiencies were found in our harbours. Training and exercises Crisis management Fire drill Pollution control Security 40 30 20 10 0 2019 2020 2021 2022 2023 24 3 6 2 21 4 2 3 20 2 3 2 20 1 10 3 22 10 3 1
TABLE OF CONTENTS m 2. Service Responsibility | page 20 Translation of the Estonian original We regularly conduct fire drills and check firefighting equipment, systems and installations in cooperation with the Rescue Board. In 2023, we conducted ten fire drills for the employees of the security service provider and the port personnel. There were a total of three fire incidents at Muuga Harbour and Old City Harbour last year, but the consequences were insignificant. No people were injured and no significant damage was caused to the property of Tallinna Sadam. The purpose of implementing security requirements at harbours is to ensure the safety and security of ships, passengers, cargo and people (including employees) on the port premises and to prevent wrongdoing. All harbours of Tallinna Sadam apply enhanced ISPS 5 security requirements, which are based on a security plan prepared as a result of a risk analysis conducted by the Estonian Transport Administration and the Estonian Internal Security Service. The effectiveness of the security measures is tested during regular drills and exercises. Old City Harbour, which has been designated as a facility essential for national security, is subject to additional security measures. Access to all our harbours is restricted and entry is by permit. All harbours are manned by security guards and have modern technical surveillance systems that are constantly upgraded to support security. In accordance with the State Borders Act, all our harbours are border crossing points open to international ferry traffic, where border controls are carried out by the Police and Border Guard Board. In October, the UN Counter-Terrorism Committee and the International Maritime Organisation conducted an assessment visit to Estonia. The purpose was to evaluate the progress made by Estonia in implementing counter-terrorism measures in accordance with UN resolutions. The assessment covered the activities of the Police and Border Guard Board and the Tax and Customs Board at the border, using Old City Harbour as an example, and the general security situation in Estonian ports. The ten-member expert group also inspected the security procedures at Old City Harbour and found no significant irregularities. In December, the European Commission carried out a regular evaluation of the external borders of the Schengen visa area. The compliance of Estonian sea border crossing points with the Schengen acquis was assessed using the examples of Old City Harbour and Paldiski South Harbour, and no shortcomings were detected. TS Shipping has implemented a safety and quality management system for the 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 industry guidelines and best practices are also followed. TS Shipping is a member of the International Marine Contractors Association (IMCA) and adheres to its guidelines, recommendations and practices. In accordance with the above requirements and guidelines, nearly 20 different safety and security drills and exercises are conducted on board the icebreaker every year. In addition, joint emergency response drills are conducted regularly to practice cooperation between the crew and the shore team. 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. Various on-board emergency response drills are conducted in partnership with the Police and Border Guard Board, the Internal Security Service and the Rescue Board. In addition, during the summer we organise maritime safety days on board our ferries in cooperation with the Police and Border Guard Board and volunteer rescuers, during which we demonstrate the correct use of life jackets and give other relevant information about maritime safety. In the prevention of pollution of the marine environment and waste management, TS Laevad follows the requirements of MARPOL. All vessels of TS Laevad have implemented a comprehensive safety management system, which is audited annually by the Transport Administration. 5 International Code for the Security of Ships and Port Facilities.
TABLE OF CONTENTS m 2. Service Responsibility | page 21 Translation of the Estonian original 2.2 Quality management and risks The Group’s parent company has applied an integrated management system that complies with the requirements of international quality and environmental management standards ISO 9001 and ISO 14001, since 2003. Conformity with international standards ensures that the management system of Tallinna Sadam guarantees the satisfaction of customers and other stakeholder groups, the efficiency of workflows, and adequate control of risks and environmental aspects. Continuous improvement of the quality and environmental management system is supported by measuring and analysing customer satisfaction, employer reputation and employee engagement. Priorities for 2023 included projects related to the environment and digitalisation. In accordance with the risk management framework, we regularly monitor and assess the risks affecting the operations of Tallinna Sadam. The risks are divided into three main categories: external risks, business risks and operational risks. Each risk is assigned a level of severity (low, moderate, high, extreme) and mitigation measures that depend on the nature of the risk. An overview of the Group’s financial risk management and mitigation policies is provided in note 4 to the financial statements. External risks with the strongest effect on the Group’s operations are global economic instability and the impact of sanctions against Russia and Belarus on trade and customers’ business activity (the risk has materialised). Other potentially significant risks include the business risks of major customers and the reluctance of potential customers to invest, as well as restrictive international and European environmental requirements and regulations (the European Union’s Green Deal, including the FIT for 55 climate package, maritime decarbonisation, etc.), which will affect port services in the long term through possible changes in demand and the cost base. High risk events (although rare) also include potential energy supply disruptions due to technical failures and/or energy shortages. We invest increasingly in managing information security risks and ensuring cyber security. For example, in recent years there has been a significant increase in the number of distributed denial-of-service (DDoS) attacks against Estonian transport and infrastructure companies, including Tallinna Sadam. In 2023, we were hit by a record number of DDoS attacks, but thanks to the protection measures in place, our operations were not affected. The passenger business is most exposed to changes in people’s travel habits and preferences, which may reduce passenger numbers, and the implementation of the European climate regulations, which increase the additional costs of maritime transport. The latter in turn increase the price of the service and reduce demand (especially in the cruise business) in the Baltic Sea region. In the cargo business, the main risk is the reorganisation of supply chains and logistics as a result of the loss of the Eastern market and general economic policies, which means that certain types of goods will no longer pass through our harbours. In the real estate business, significant risks include potential delays in local government planning processes and potential legal disputes. In the shipping business, the main risk is that the ferries will not be able to operate on a regular basis aſter the long-term contract with the Estonian state expires and that the icebreaker Botnica will not be able to operate outside the icebreaking season. Significant operational risks relate to the planning and execution of business projects and a potential decline in the market value of major assets. The level of other risks associated with our operations, including environmental, safety and security, compliance and personnel risks, is either moderate or low (taking into account the mitigation measures).
TABLE OF CONTENTS m 2. Service Responsibility | page 22 Translation of the Estonian original 2.3 Customers and suppliers Our largest customers are ferry operators, cargo terminal operators, and the Republic of Estonia under the contracts for the provision of ferry service and Botnica’s icebreaking service. Our customers also include the end users of our services: passengers travelling on our ferries to the islands of Saaremaa and Hiiumaa, passengers travelling on international routes, cargo carriers and cargo owners. Our customer relationships are based on the principles of openness and inclusion. Meetings with key customers are held on a regular basis and Tallinna Sadam’s major plans, projects and investments are presented at least once a year. In 2023, as part of the Code of Ethics, we developed a set of ethical principles for our partners, which we expect both sides to follow in our cooperation. 81% of our largest customers and suppliers (samples of 30 and 29, respectively) apply the principles of sustainable development in their operations (2022: 74%). The aim is to reach 100% by 2030. When procuring products and services, we ensure that sustainability criteria are included in the qualification requirements and exclude bids with solutions that are harmful to the environment. In 2023, we applied sustainable procurement criteria to 83% of our procurements and 78% of the financial volume of contracts awarded included sustainability criteria. We encourage all our partners to join us in contributing to society and the environment. In addition to the ethical principles, we have adopted the Port Community’s Internal Regulations for organisations providing services on port premises, which include expectations for sustainability, safety and hospitality. We monitor customer satisfaction for six major customer groups: cargo terminal operators, ferry operators, shipping agents, tenants, passengers, and customers of the marina. In 2023, the customer satisfaction index was 5.42 on a 6-point scale (2022: 5.34). Together with our partners, we strive to make all visitors and passengers feel welcome and to develop a welcoming culture and atmosphere in our harbours and on board our ferries. In 2023, we continued to improve the customer journey at the passenger terminals in Old City Harbour (including the children’s area, bicycle hire and parking facilities). At the same time, the construction of a tramway to Old City Harbour presented a number of challenges in terms of passenger information and guidance from the harbour to the city and vice versa. We organised an architectural design competition for the area around Terminal A of Old City Harbour, involving the ferry operators Eckerö Line and Viking Line, the Estonian Association of Architects and other key members of the community in developing the best solution.
TABLE OF CONTENTS m 2. Service Responsibility | page 23 Translation of the Estonian original Our subsidiary 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 2023, the NPS was +78 on a scale of –100 to +100 (2022: +74.3). Several events and conferences were organised in 2023 in collaboration with customers and other stakeholders. We led the Transport Sector Green Forum, which focused on sustainable construction and development. The Paldiski Association of Entrepreneurs held the Different Paldiski Conference at Paldiski South Harbour, where we laid the cornerstone for a new quay and celebrated the harbour’s 30 th anniversary. We participated as a cooperation partner in the 19 th International Maritime Conference. For the first time, September was celebrated as the Month of the Maritime Economy and together with our customers, we organised visits for maritime enthusiasts to Muuga Harbour, Old City Harbour and Paldiski South Harbour. SATISFIED FERRY PASSENGERS INVESTMENT CONFERENCE "DIFFERENT PALDISKI"
TABLE OF CONTENTS m 3. Environment | page 24 Translation of the Estonian original 3 Environment Tallinna Sadam’s strategic environmental priorities for sustainable development are: • Energy efficiency and sustainable consumption • A clean Baltic Sea and increasing circular economy • Clean air Tallinna Sadam strives to continuously reduce the adverse environmental impact of its business and development activities. We take responsibility for the natural and marine environment, listen to local communities and work with local authorities and research organisations, as well as other major Baltic Sea ports, to ensure the sustainable development and operation of the company. We have an environmental management system through which we identify the significant environmental aspects and impacts of our operations and set environmental goals and targets to improve the effectiveness of our environmental activities.
TABLE OF CONTENTS m 3. Environment | page 25 Translation of the Estonian original 3.1 Energy efficiency and sustainable consumption We have set ourselves the goals of improving energy efficiency, covering 90% of our energy needs with renewable energy and consuming natural resources sustainably. Our long-term goal is to achieve the climate neutrality of our operations by 2050. We monitor our progress towards these goals using the energy efficiency and sustainable consumption indicators presented below. We have only purchased renewable electricity for our own use since 2021. In 2023, our renewable electricity purchases totalled 12 GWh. In addition, we covered 3% of our electricity consumption with self-produced solar power. During the year, an additional 250 kW of solar panels were installed at Muuga Harbour and Paldiski South Harbour. The cruise terminal building in Old City Harbour has seawater heating and cooling systems and last year 63% of its electricity consumption was covered by its solar panels. The total energy consumption (heat and electricity) was 17 GWh, of which 74% came from renewable sources. In 2023, the cruise terminal of Old City Harbour was awarded the international Green Key eco-label, which shows our visitors and partners that we operate in an environmentally sustainable manner. The navigation management system of the icebreaker Botnica includes solutions for monitoring weather changes and ship movements, which help select optimal routes and speeds to avoid strong headwinds and waves (weather routing). This has resulted in significant fuel savings and safer ocean passage. In 2023, ice conditions in northern Canada were worse than normal for the Baffinland charter, increasing fuel consumption. During the summer, Botnica was used for offshore projects, where the vessel was stationary next to a wind turbine or platform, resulting in fuel consumption without nautical miles. In 2022, Botnica had no such projects. The ferries Piret, Tõll, Leiger and Tiiu, owned by TS Laevad, are equipped with Blueflow Energy Management, an innovative system that monitors fuel consumption, improves navigation in real time, optimises the ferry’s speed based on the navigation area and helps plan the maintenance of the underwater hull, which in turn reduces the ferry’s fuel consumption and reduces the negative environmental impact of marine fuel. In 2023 the ferries’ average fuel consumption per trip was 15% (2022: 13%) lower than in the baseline year 2019, when the monitoring system was not yet implemented. In 2023, fuel consumption per passenger decreased for all ferries compared to the previous year, mainly due to favourable weather conditions in the winter. Energy efficiency and sustainable consumption indicators Indicator Target level for 2030 Baseline year 2019 2022 2023 MPSV Botnica Energy Efficiency Operational Index (EEOI) 6 In the range of 0.3–0.4 0.4 0.3 0.5 Outdoor lighting upgrade rate 100% 31% 47% 54% Energy efficiency of buildings (kWh/m 2 per year) 130 197 195 183 Share of renewable energy in total energy consumption * 90% 0.4% 75% 74% * Including electricity and heat. 6 EEOI = FC * CF / D * m, where FC is fuel consumption in tonnes, CF is the conversion factor for diesel fuel used, D is the distance travelled in miles, m is the quantity of cargo (m=1)
TABLE OF CONTENTS m 3. Environment | page 26 Translation of the Estonian original 3.2 Clean Baltic Sea and circular economy Our long-term goals in this priority area are to recycle 70% of waste in the circular economy, to minimise the risks and hazards of marine pollution and to conserve biodiversity in the coastal areas where the Group operates. We monitor our progress towards these goals using the indicators presented below. Tallinna Sadam works hard to minimise the ecological footprint of its activities. Our harbours have sufficient capacity to receive bilge water, oily sludge, sewage, garbage and scrubber waste from all ships calling at them. In 2023, the number of port calls by cruise ships and ferries was similar to 2022 and therefore the quantities of ship-generated waste received were also similar to 2022. According to unaudited data, 49% of the ship-generated waste received in 2023 was handed over for recycling (2022: 48%). The amount of waste recycled depends on the type of waste received and the recycling capacity of the final waste handlers. The share of waste sent to landfill is minimal: based on unaudited data, 98% of waste received in 2023 was recycled (incinerated) or recovered (2022: 98%). Tallinna Sadam contributes to ensuring the purity of the Baltic Sea by helping prevent the discharge of ship sewage into the sea. To that end, we have provided Old City Harbour with a sewage pipeline for cruise quays and frequently used ferry quays and a micro-tunnel with a sewage reception capacity of 1,200 m3 per hour. In 2023, three quays in Muuga Harbour were supplied with a sewage pipeline with a capacity of up to 40 m3/h to receive sewage from ro-pax vessels. Thanks to these investments, ferries and cruise ships calling at Old City Harbour and ro-pax vessels calling at Muuga Harbour are able to dispose of unlimited amounts of sewage at no extra charge. Reception of ship-generated waste Scrubber waste Sewage Hazardouse waste Bilge water and oily sludge Garbage Ecological footprint indicators Indicator Target level for 2030 Baseline year 2019 2022 2023 Share of ship-generated waste recycled in the circular economy 70% 54% 48% 49% Share of port calls by cruise ships that disposed of sewage at Old City Harbour 100% 81% 80% 84% Number of pollution incidents in harbour basins 0 9 13 5 Benthic biodiversity indicator for Muuga Bay (compared with the reference site) 100% 100% 100% 100% Benthic biodiversity indicator for Tallinn Bay (compared with the reference site) 100% 100% 100% 100% 250 200 150 100 50 0 2019 2020 2021 2022 2023 thousand m 3 12 18 63 22 48 79 87 17 14 175 15 24 130 24 11
TABLE OF CONTENTS m 3. Environment | page 27 Translation of the Estonian original In 2023, ferries and cruise ships discharged approximately 121 thousand m3 of sewage into the Old City Harbour reception facilities (2022: 165 thousand m 3 ). Although the volume of sewage discharged by cruise ships decreased almost two times due to a fall in the number of calls, the share of cruise ships discharging sewage increased to 84% in 2023 (2022: 80%). The share for ferries is not relevant due to their frequent timetables and generally short call times. In 2023, we continued to contribute to the circular economy through the separate collection of waste in our offices and passenger terminals as well as on board the ferries of TS Laevad. Because of the potential impact of port operations, we monitor marine biodiversity. The long- term goal is that the number of benthic community species near Old City Harbour (Tallinn Bay) and Muuga Harbour should not differ from the average values for the reference site (Kakumäe Bay). This is a good indicator of the impact of port operations on marine ecosystems because the number of benthic community species directly reflects changes in water transparency, eutrophication intensity, dredging volume and pollutant load. We use the benthic biodiversity data for Muuga and Tallinn Bays obtained from the national environmental monitoring programme (conducted annually by the Estonian Marine Institute and the Environment Agency of the Ministry of the Environment). According to the 2023 data, the state of the sea around Muuga Harbour and Old City Harbour continues to be the same as at the reference station (indicator 100%). Recycling of ship-generated waste Volume of sewage received from cruise ships and ferries at Old City Harbour Recycling Incineration Land filling 2019 2020 2021 2022 2023 113 81 77 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 tonnes 721 1,226 1,755 1,976 4,345 1,681 1,381 2,020 1,939 1,882 1,882 360 Sewage from cruise ships Sewage from international route ferries Sewage from inter- national route ferries 200 180 160 140 120 100 80 60 40 20 0 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0 thousand m 3 2019 2020 2021 2022 2023 81% 73 83% 47 10 94% 39 38 67 98 67 98 80% 84%
TABLE OF CONTENTS m 3. Environment | page 28 Translation of the Estonian original 3.3 Clean air Our long-term goals in this priority area are to achieve climate neutrality and zero emissions from ships staying in our harbours by 2050. We monitor our progress towards these goals using the indicators presented below. In addressing potential air pollution from our operations, we focus on monitoring the CO 2 emissions from GHG emission sources, odour problems resulting from cargo handled at oil terminals, air pollution from ships, and differentiating port dues based on ships’ investments in reducing air pollution. To achieve better air quality, we have launched numerous projects and implemented innovative solutions in several areas. GHG emissions of Tallinna Sadam Indicators of ambient air quality Indicator Target level for 2030 Baseline year 2019 2022 2023 GHG 7 emissions (tonnes of CO 2 equivalent) 2050=0; (–55% 2030) 33,086 21,633 23,874 CO 2 emissions of TS Laevad per trip (%; 2019=100%) 26% 100% 84% 76% Share of vessel calls with ESI discounts (%) 50% 18% 18% 35% Time during which ferries and cruise ships use onshore power supply as a percentage of total call time at Old City Harbour (%) 50% 0% 15% 52% Share of cargo harbours’ ro-ro units (%) 50% 29% 30% 34% 7 GHG — greenhouse gases CO 2 , N 2 O and CH 4 converted into CO 2 equivalent 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Heat consumption Movable equipment Vessels owned by Tallinna Sadam Electricity consumption 2019 2020 2021 2022 2023 tonnes CO 2 ekv 33,086 27,819 18,783 7,519 20,562 11,080 20,713 23,847 18,877 21,633 21,090 23,874
TABLE OF CONTENTS m 3. Environment | page 29 Translation of the Estonian original 2022 total GHG emission (incl. operators, tenants, marine traffic) The factors with the strongest direct impact on Tallinna Sadam’s GHG emissions (scopes 1–2) are fuel (for ferries), electricity and heat consumption and the choice of means of transport. Therefore, energy efficiency and a wider use of renewable energy sources are key to reducing our GHG emissions. More than half of the total GHG emissions (scopes 1–3) are from ships calling at our harbours, which we can only indirectly influence by providing and promoting sustainable port services. In 2022, all GHG emissions from Tallinna Sadam’s operations, including emissions from operators, tenants and port calls (scopes 1–3) were 82,829 tonnes of CO 2 equivalent, a 33% decrease compared to the baseline year 2019 (2021: 122,299 tonnes of CO 2 equivalent), mainly due to the cessation of operations at Paljassaare Harbour in 2022. Emissions from port calls also decreased due to a decline in the number of tanker calls and the end of the year-round berthing of a cruise ship. Tallinna Sadam’s own direct and indirect GHG emissions (scopes 1 and 2) totalled 23,874 tonnes of CO 2 equivalent in 2023 (2022: 21,633 8 tonnes of CO 2 equivalent), 65% of which was attributable to the operation of ferry traffic between Estonia’s mainland and two largest islands. In 2023, the Group’s CO 2 emissions increased by around 10% year on year (–28% compared to the baseline year 2019). The increase was mainly due to the higher fuel consumption of the icebreaker Botnica, which operated in more difficult ice conditions and was used for the first time as a maintenance vessel for offshore wind farms. Factors reducing emissions included the parent company's switch to renewable electricity and the lower fuel consumption of the ferries, achieved by the energy efficiency measures taken by TS Laevad. Although the number of trips made by the ferries of TS Laevad increased by 1% compared to 2022, CO 2 emissions per trip were 2% lower than in 2022 and 16% lower than in 2019. For the third time, we completed the annual climate change questionnaire of the Carbon Disclosure Project (CDP) to be more open about the impact of our carbon footprint and the targets and activities to reduce it. Our CDP score for the questionnaire completed in 2023 was C (2022: C (average)). We have been measuring the GHG emissions associated with our activities since 2019. The emissions are divided into the following scopes based on the ownership or control of the emission source: • Scope 1 — Direct emissions from sources owned or controlled by Tallinna Sadam (ships, motor vehicles, other equipment and boiler plants owned by Tallinna Sadam). • Scope 2 — Indirect emissions from energy purchased and used by Tallinna Sadam (electricity and heat purchased for the buildings and infrastructure owned by Tallinna Sadam). • Scope 3 — All other indirect emissions (from tenants, operators, ships calling at the harbours, traffic and ro-ro cargo passing through the harbours, cargo handling equipment, rail traffic). For further information on the GHG accounting methodology and related reduction measures, please visit the Environment section of our website. 8 The values for 2022 have been updated to account for the change made to the emission factor in summer 2023. Each summer, the Stockholm Environmental Institute publishes the actual emission factors for the previous year. 24% Electricity consumption 56% Marine traffic 13% Movable equipment 7% Heat consumption 82,829 tonnes CO 2 equivalent
TABLE OF CONTENTS m 3. Environment | page 30 Translation of the Estonian original What have we done for cleaner air? In 2023, a memorandum of understanding was signed for the creation of a green corridor between Estonia and Finland (FIN-EST Green Corridor). The project partners are the cities of Tallinn and Helsinki, the Estonian Ministry of Climate, Tallinna Sadam, the Port of Helsinki, and the ferry operators Tallink, Viking Line and Eckerö Line. The aim of the project is to ensure that passenger and freight transport on the sea routes between Estonia and Finland, as well as port connections and services in the cities of Tallinn and Helsinki, will be environmentally sustainable and climate neutral in the future. The memorandum of understanding is a significant step, which shows that the green corridor is considered important by ports, ferry operators, cities and countries alike, and that the parties are willing to invest and work together towards the common goal of reducing the environmental footprint of one of Europe’s busiest sea routes. Diversion of heavy-duty and other vehicles from the city centre. To reduce the traffic load on the premises of Old City Harbour and to lower the noise level and improve the air quality in the area, more and more heavy and other vehicles are being diverted from Old City Harbour to Muuga Harbour and Paldiski South Harbour. On both the Paldiski–Kapellskär and the Muuga– Vuosaari routes, vehicles are served by ro-pax vessels. In 2023, a new double ramp was put in operation in Muuga Harbour, which significantly increased the speed of loading and unloading vehicles, resulting in three port calls per day on the Muuga-Vuosaari route instead of two. Faster loading and unloading also reduces emissions (including CO 2 ) from road traffic. Paldiski South Harbour and Muuga Harbour account for 34% (2022: 30%) of the total number of ro-ro units handled by the harbours of Tallinna Sadam. Odour problems caused by the cargo handled at the oil terminals are mitigated by air quality monitoring stations and a network of electronic noses (e-Noses) installed in the area of Muuga Harbour. The system enables us to promptly identify the location and source of odour nuisance and to start solving the issue without delay. In 2023, the Environmental Board received 110 complaints (2022: 110) about odours in the area (related to oil, gas and chemicals), of which only 1 (2022: 4) was directly or indirectly attributable to the operations at Muuga Harbour. The analysis of the complaints shows that there is no clear link between the complaints and the loading activities at the harbour, and that the odour nuisance in the area is mainly caused by other businesses located outside the harbour area. This is also supported by the fact that 80% of the complaints received by the Environmental Board were related to time periods when the wind was not blowing from the direction of Muuga Harbour. Air quality monitoring results by year are available on Tallinna Sadam’s website at www.ts.ee/en/air-monitoring. In connection with the sanctions imposed on Russian and Belarusian goods and the significant decrease in the transit of liquid fuels and petroleum products through Muuga Harbour, air monitoring at the stationary monitoring stations has been suspended from 2024. We grant a discount on port dues to environmentally friendly ships based on the Environmental Ship Index (ESI) 9 . In 2023, we granted ESI-based discounts on a total of 2,427 port calls, representing 35% (2022: 18%) of all port calls. We also provide shore power and auto mooring for ferries at Old City Harbour. At Muuga Harbour and Old City Harbour, we have developed the Smart Port traffic management system, which simplifies and speeds up the movement of vehicles to the vessel. We use the Blueflow energy management system to optimise the fuel consumption of ferries, and the ferry Tõll runs partly on electricity due to the use of hybrid technology. For further information on our environmental solutions, please visit the Tallinna Sadam website. 9 ESI is based on the emissions of nitrogen compounds (NOx), sulphur compounds (SOx), particulate matter (PM) and carbon dioxide. It also takes into account whether the ship is connected to the onshore electricity network and uses onshore electricity while in port. See https://www.environmentalshipindex.org.
TABLE OF CONTENTS m 4. Our People | page 31 Translation of the Estonian original 4 Our People 4.1 Employees Tallinna Sadam has almost 500 employees. The Group’s average number of employees in 2023 was 461 (2022: 468). The company’s sustainable development is underpinned by its diverse, experienced and competent workforce. Average employee remuneration increased by 8.6% in 2023, mainly because of a change in the remuneration system, which reduced the share of performance- related remuneration in total remuneration and increased basic remuneration. Average employee remuneration was also affected by one-off redundancy payments made due to organisational streamlining. Number of employees and personnel expenses Weighted average number of employees 600 500 400 300 200 100 0 60,000 50,000 40,000 30,000 20,000 10,000 0 2019 2020 2021 2022 2023 Personnel expenses number of employees thousand EUR 492 465 469 23,165 468 461 25,147 19,867 19,491 20,920
TABLE OF CONTENTS m 4. Our People | page 32 Translation of the Estonian original The average length of employee service at Tallinna Sadam is 9 years. It is longest in port operations (15.3 years) and shortest at our more recently established subsidiary TS Laevad (5.1 years). The gender imbalance is attributable to the nature of our main business lines: port operations and shipping. The jobs of crew members, dockers and repairers attract more men than women. Of the 15 members of Tallinna Sadam’s extended management team and the managers of its subsidiaries, 5 are women, i.e. 33% of senior management positions are held by women (2022: 27%). The target is to increase the proportion of women in senior management to 45% by 2030. The gender pay gap 10 , i.e. the ratio of women’s average hourly salary to men’s average hourly salary, was 83% in 2023 (2022: 78%). The proportion of female staff in the company is low, but most of them work as senior professionals or managers in higher-paid positions. At the end of 2023, 16.5% of our employees were up to 35 years old (2022: 16%). Our long- term sustainable development goal is to raise this indicator to 25% by 2030 in order to improve our competitiveness and innovative thinking. We help ensure the availability of future talent by collaborating with the Estonian Maritime Academy in the area of internships and research under a cooperation agreement signed in 2019. In 2023, we offered internships to 17 students from the Estonian Maritime Academy. Workforce by age at 31 December 2023 Workforce by gender at 31 December 2023 10 Disclosure under GRI (Global Reporting Initiative) Sustainability Reporting Standard GRI 405: Diversity and Equal Opportunity. 24% Women 76% Men 461 employees 150 125 100 75 50 25 0 < 30 30–39 40–49 50–59 60–69 ≥ 70 Women Men 27 12 52 31 65 97 34 19 81 12 11
TABLE OF CONTENTS m 4. Our People | page 33 Translation of the Estonian original 4.2 Human resource strategy The current focus areas of our human resource strategy are team spirit and cooperation, employee development and health, smart work processes and effective work arrangements, and innovation. The goal of our human resource strategy is to have highly engaged people in the right roles. The key performance indicators for the human resource strategy are the employee engagement index and voluntary employee turnover. We also monitor our reputation as an employer and participate in the employer reputation survey conducted by the market research company Kantar Emor. We measure employee engagement with annual engagement surveys. In 2023, the survey methodology was changed and the questionnaires of all group companies were combined into one that can be easily analysed and compared. Our employee engagement index is measured on a 7-point scale. In 2023, 74% of employees responded to the survey and the engagement index was 6.0 (2022: 6.1). Voluntary employee turnover in 2023 was 6.1% (2022: 7.9%). The target is to keep it below or at 9%. According to Kantar Emor’s annual employer reputation survey, Tallinna Sadam was the 8th (2022: 6th) most preferred employer in the salaried employees target group. We recognise the efforts and strong performance of our people with the Star of the Quarter title, which is awarded quarterly by management to employees who have stood out for their hard work, representing our values or showing initiative. In addition, at the end of the year the whole team can vote for Employees of the Year, i.e. the people who have best represented the values of Tallinna Sadam. Tallinna Sadam supports the professional development and physical and mental health of its employees. In recent years, we have prioritised the development of digital skills and the improvement of management and leadership quality in line with our management principles. Eleven managers completed our management development programme in spring 2023 and 32 managers have completed it to date. Since 2022, we have organised a series of quarterly Port Academy seminars where leading experts speak about the trends and developments in business, information technology, energy and other relevant areas. We organise an orientation day for new employees 3–4 times a year to make sure that our new colleagues know our goals, business lines and management structure.
TABLE OF CONTENTS m 4. Our People | page 34 Translation of the Estonian original We help our team stay healthy by covering employees’ sports and fitness expenses up to an agreed limit and giving them an extra week off in the winter. Every year we hold a health month, where we invite interesting speakers to talk about health, and organise other activities to raise health awareness or introduce new ways to stay healthy. We offer mental health counselling to employees in cooperation with specialists from our medical partner Meliva Qvalitas AS. In order to foster team spirit and promote healthy lifestyles, a number of smaller events and team activities were held in 2023. We maintain a common information space by organising regular staff days, which in 2023 took place both on site and online. At these events, we provide an overview of the company’s performance and major projects, and discuss developments in the business environment. Our managers and specialists also meet at our annual strategy day. During the discussions and workshops at the strategy day in August 2023, we reviewed Tallinna Sadam’s long-term goals and generated ideas for goal- setting for 2024. To achieve our common goals, we have implemented a performance management system, which ensures that the company’s strategic goals are communicated to each team and team member. According to our goal-setting approach, expected results have to be measurable and clearly agreed. We have implemented the PlanPro planning and risk management soſtware, which helps improve goal-setting quality: employee goals are visible to everyone and directly linked to those of the company. Our employees are eligible for annual or quarterly performance-related bonuses based on the achievement of the agreed results. When recruiting or promoting employees, we consider their values, experience and competence and avoid discrimination on the basis of gender, age, ethnicity or other factors. There were no reported incidents of discrimination at Tallinna Sadam in 2023 or in the previous year. KOSE YOUTH ORCHESTRA IN THE PASSENGER TERMINAL MARINE TRAFFIC CONTROL CENTER AT MUUGA
TABLE OF CONTENTS m 4. Our People | page 35 Translation of the Estonian original 4.3 Occupational safety Occupational safety is one of our top priorities. Of all our employees, 40% are office staff whose work environment risk factors include lack of movement (static posture) and work with a computer. 60% have high-risk jobs because they have to work at night or at height. Risks are also higher for those who work with fire, use dangerous equipment (landing bridges, ramps), or work on ferries or quays, operate equipment or work in passenger terminals. We analyse workplace risks and continuously improve our work environment, taking into account employees’ suggestions for improv- ing their working conditions. We send employees to regular health checks, make sure that they are aware of work environment risks and protective measures, provide personal protective and special equipment, and promote healthy lifestyles. Any damage to an employee’s health that occurs during the performance of work-related duties is considered to be an occupational accident. In 2023, there was one occupational accident: an employee tripped and fell while installing road signs and suffered minor injuries. In 2022, there was also one occupational accident (an employee broke an arm due to a slippery surface). We provide regular safety training for new and existing employees in various safety risk areas, taking into account the nature of their work. For example, in 2023, we organised fall prevention and protection training for employees working at height, first aid training, mental health lectures and fire safety training. We have set up an e-learning portal on occupational safety for new employees working in offices, passenger terminals and vessel traffic control centres. All employees can use the portal to study safety instructions, videos, policies and manuals at their own pace. The e-learning course ends with a test to ensure that employees understand occupational health, fire and safety topics.
TABLE OF CONTENTS m 5. Giving Back to Society | page 36 Translation of the Estonian original 5 Giving Back to Society 5.1 Participation in organisations Key organisations related to our core business include: Cruise Baltic European Maritime Information Sharing and Analysis Centre EM-ISAC, cyber security Cruise Europe EcoPorts An environmental initiative of the European port sector Estonian Logistics and Freight Forwarding Association Estonian Ports Association Estonian Employers' Confederation European Sea Ports Organisation (ESPO) Baltic Ports Organization (BPO) Paldiski Association of Entrepreneurs Rail Baltica Business Network Estonia Green Tiger Other organisations in which we participate can be found on our website. Hydrogen Valley Estonia
TABLE OF CONTENTS m 5. Giving Back to Society | page 37 Translation of the Estonian original 5.2 Sustainable development cooperation and volunteer work In conducting our business activities and making plans for the future, we prioritise raising awareness of sustainable development principles, sharing our knowledge and insights, and engaging with stakeholders on issues related to the impact of our operations on society. As a port authority operating in six municipalities, we have a responsibility to local communities. We also work with stakeholders in international organisations. In addition, we participate in several working groups aimed at improving the competitiveness of the maritime and logistics industries in our region. In the Green Tiger project, we are working with various Estonian companies to raise awareness of green changes and move towards a balanced economic model. In 2023, we led the development of the Green Tiger Transport Roadmap, a process that involved over 60 different organisations and experts. The roadmap will provide guidance to both the government and the transport sector on viable ways to implement the green transition in the transport sector, covering both passenger and cargo transport in all four modes: road, rail, sea and air. The roadmap will be published in early 2024. At Cruise Baltic, an organisation that connects cruise ports and destinations in the Baltic Sea, we developed a new marketing strategy in 2023 to create opportunities for sustainable travel, serve cruise ships and cruise passengers, and restore travel volumes to pre-crisis levels.
TABLE OF CONTENTS m 5. Giving Back to Society | page 38 Translation of the Estonian original In 2023, the work of Cruise Europe, the organisation that brings together Europe’s cruise ports, focused on the Baltic Sea region as the cruise region most affected by the crisis. A representative of Tallinna Sadam (Sirle Arro, Head of the Marketing and Communication Department) was elected as a member of the Cruise Europe Council and Chair of the Baltic Region. We actively contribute to national defence by participating in various civil protection projects, crisis committees and organising crisis management exercises. Our harbours are used by NATO vessels during joint exercises and missions. We are continuously working on the implementation of Masterplan 2030+, the development plan for Old City Harbour, to transform the harbour area into a modern, attractive and vibrant urban centre with high quality public spaces. A good example of developing an attractive urban space and contributing to community cohesion is our Old City Harbour’s modern and multifunctional cruise terminal with a promenade, which opens up the seafront to local people and creates new leisure, tourism and business opportunities. In 2023, the cruise terminal hosted 86 different events. In 2023, we continued our cooperation project ‘Port cities: values and sustainable development’ with the Estonian Academy of Arts. We completed an interim report on the attractions of Paldiski as a tourist destination. As Tallinna Sadam’s main focus and major investments in the coming years will be related to the development of Paldiski South Harbour, the living environment and the reputation of the area are important aspects in attracting foreign investment to the area.
TABLE OF CONTENTS m 5. Giving Back to Society | page 39 Translation of the Estonian original In partnership with the Estonian Maritime Academy we contribute to the education of seafarers and ensuring the availability of future talent, as well as projects addressing the cyber security needs of ships and the digitalisation of the logistics chain. We also collaborate with other research institutions in Estonia and abroad to develop digital solutions and analyse innovative engineering options. We introduce our organisation to students, offer internship opportunities, and our employees volunteer as lecturers in their areas of expertise. In 2023, Tallinna Sadam helped organise several major events at Old City Harbour, such as the Tallinn Maritime Days, the ICESWIM 2023 winter swimming festival and the urban space projects of the Jazzkaar festival. We also have a tradition of organising blood donation days in cooperation with the Blood Centre of the North Estonia Medical Centre where our employees and those of our business partners as well as other volunteers can donate blood. The Rescue Board awarded TS Laevad the title of Cooperation Partner of the Year for its professional contribution to the creation of a smoke diving training environment and the organisation of joint exercises. We work together with tourism associations, local authorities and businesses on the islands of Hiiumaa and Saaremaa to support local life. In 2023, 14 children from large families received a nice Christmas present thanks to the help f our employees. The travel library in Terminal A received book donations not only from the Estonian Repository Library and the Re-Use Centre, but also from our employees and the members of the Old City Harbour community.
TABLE OF CONTENTS m 6. Business Review | page 40 Translation of the Estonian original 6 Business Review 6.1 Key performance indicators 11 Figure Unit 2023 2022 Change % Revenue EUR ‘000 116,646 121,703 –5,057 –4.2% Operating profit EUR ‘000 24,630 30,787 –6,157 –20.0% Adjusted EBITDA 12 EUR ‘000 49,170 55,817 –6,647 –11.9% Depreciation, amortisation and impairment EUR ‘000 –25,389 –25,312 –77 0.3% Income tax EUR ‘000 –2,985 –4,193 1,208 –28.8% Profit for the period EUR ‘000 15,882 25,592 –9,710 –37.9% Investment EUR ‘000 20,727 13,856 6,871 49.6% Number of employees (average) 461 468 –7 –1.5% Cargo volume t ‘000 12,586 17,761 –5,175 –29.1% Number of passengers ‘000 7,918 7,027 891 12.7% Number of vessel calls 7,026 7,130 –104 –1.5% Total assets at period-end EUR ‘000 606,164 621,229 –15,065 –2.4% Net debt at period-end EUR ‘000 141,749 143,011 –1,262 –0.9% Equity at period-end EUR ‘000 377,659 380,976 –3,317 –0.9% Number of shares at period-end ‘000 263,000 263,000 0 0.0% Operating profit/revenue 21.1% 25.3% Adjusted EBITDA/revenue 42.2% 45.9% Profit for the period/revenue 13.6% 21.0% 11 The indicators presented in the table may include rounding differences. 12 Adjusted EBITDA = profit before finance income and costs, income tax expense and depreciation, amortisation and impairment, adjusted for amortisation of government grants related to assets. EPS: Profit for the period/weighted average number of shares EUR 0.06 0.10 –0.04 –37.9% Equity/number of shares EUR 1.44 1.45 –0.01 –0.9% Profit for the period/total assets 2.6% 4.1% –1.5 - Profit for the period/equity 4.2% 6.7% –2.5 - Share price at period-end 1.128 1.424 -0.296 –20.8% P/E: Share price/earnings per share 18.7 14.6 4.1 28.1%
TABLE OF CONTENTS m 6. Business Review | page 41 Translation of the Estonian original 6.2 Economic environment According to the IMF forecast 13 , global economic growth slowed from 3.5% in 2022 to 3.1% in 2023. Global inflation is projected to have declined from 8.7% in 2022 to 6.8% in 2023. Three years aſter the COVID-19 crisis, the economy has still not fully recovered from the shock. Aſter the first signs of a rebound, the pace of recovery slowed down. The economic upturn is held back by a number of factors: the Russia-Ukraine war, the tightening of monetary policy to curb inflation, and high debt burdens. The recovery has been strongest in the US, where GDP is estimated to have exceeded pre-pandemic levels in 2023, while the recovery in the euro area has been weaker. Euro area output is 2.2% lower than predicted in forecasts before the pandemic, reflecting the fact that the war between Ukraine and Russia has led to more unfavourable terms of trade and a higher rise in the prices of imported energy than expected. Private consumption has also recovered faster in advanced economies, mainly due to the better availability of vaccines, stronger safety nets and greater policy incentives that helped societies return to normality more quickly. These factors supported households during the pandemic and consumption has now largely returned to pre- pandemic levels. Investment, on the other hand, has generally lagged behind pre-pandemic trends worldwide. Companies are showing less enthusiasm for expansion and risk-taking. Higher interest rates, the unwinding of fiscal support, falling demand for products and tighter credit conditions are playing a major role in investment decisions. According to the forecast of the central bank of Estonia, the Estonian economy contracted by 3.5% in 2023. The decline is expected to continue in 2024, amounting to 0.4%. In 2025 and 2026, the economy will grow by almost 3% and pre-recession GDP levels will be reached in 2026. Average inflation in 2023 was 9.2%, in line with the forecasts made by the central bank of Estonia in 2022, and is expected to fall to 3.2% in 2024. The main contributors to the increase in the consumer price index were expenses on food and non-alcoholic beverages (+15.8%), leisure activities (+10.9%) and household equipment and operation (+10.6%). Prices did not change significantly in the second half of 2023, but there will be considerable changes in 2024 due to hikes in the value added tax rate and excise duties. Energy prices stabilised at high levels in 2023, but as compensation for energy price increases has ended and the universal service in electricity is likely to be discontinued, electricity prices will become more volatile. Consumption has decreased as people are uncertain about the future, spending less and saving more. According to the central bank of Estonia, average wage growth will be 6.6% in 2024, falling to close to 5% in the following years. At the same time, people’s purchasing power continues to improve – more than half of the purchasing power of the average wage has recovered in just over a year. However, with wage growth still below the rate of inflation, it will take time for the other half to recover. The impact of the economic downturn has also weighed on the labour market and the more pessimistic outlook is that unemployment will rise. While the unemployment rate was 7.3% at the end of the third quarter of 2023, it is expected to increase to around 9% in 2024. The main reason for unemployment is that there has been a significant fall in productivity per employee, as companies simply do not have enough work to provide. 14 Tallinna Sadam’s financial performance has been positively influenced by the recovery from the pandemic, especially in the passenger business, where the largest increase was in the number of visitors travelling on the ferries operating between Tallinn and Helsinki. The Russia-Ukraine war and the general economic downturn have had a negative impact on our financial performance. The sanctions imposed against Russia and Belarus have had a strong impact on cargo volumes, especially on the volumes of liquid bulk cargo (petrol, fuel oil), and the war has also affected cruise ship calls. The rise in interest rates has increased interest expenses. 13 IMF World Economic Outlook Update, October 2023, IMF World Economic Outlook Update, January 2024. 14 Statistics Estonia, the central bank of Estonia, Estonian Financial Supervision and Resolution Authority, the media.
TABLE OF CONTENTS m 6. Business Review | page 42 Translation of the Estonian original 6.3 Effects of the Russia-Ukraine war and main economic risks In the Passenger harbours segment, passenger numbers have been recovering since autumn 2021 from the negative impact of the protection measures introduced in connection with the COVID-19 pandemic. By the end of 2023, the number of passengers reached 74% of the pre-pandemic level. The general economic downturn and a prolonged stagnation in the Nordic countries and Estonia may affect travelling activity and slow the recovery. The Russia-Ukraine war, which started on 24 February 2022, and the consequent sanctions imposed against Russia by the West have affected the Group’s performance mainly through its cargo business. Cargo of Russian origin (liquid bulk and fertilizers) for which Russia was the country of departure or destination used to account for around a third of the Group’s total cargo throughput on average and consisted predominantly of Russian exports. In addition to the sanctions packages of the European Union, on 27 October 2022 the government of Estonia decided to ban the import and transit of Russian oil products, effective from 5 December 2022. Estonia had imposed full sanctions on Belarusian cargo from 1 March 2022 already. Cargo of Belarusian origin (liquid bulk) accounted for 9% of the Group’s total cargo throughput in 2021. The total negative impact of the sanctions against Russia and Belarus (both the ban on the import and transit of oil products and the suspension of the economic activities of undertakings related to sanctioned persons) on the Group’s financial results compared with 2021 has been EUR 6.9 million. As the sanctions have been imposed gradually since the beginning of the war, EUR 3.5 million of the impact is reflected in the results for 2022 and an additional impact of EUR 3.4 million in the results for 2023. A significant part of the impact of the Russia-Ukraine war and the related sanctions had manifested by the end of 2023. The import ban on liquefied petroleum gas (LPG), introduced in December 2023, may have some effect, but as the ban will be implemented over a 12-month transition period, the impact is likely to be spread over a longer period. The presented monetary impact has been calculated based on the results for 2021, 2022 and 2023 and the situation at the date the financial statements were authorised for issue and is not to be regarded as a forecast for future periods. The changes in the volumes of other categories of cargo (i.e. excluding liquid bulk) correlate more closely with the overall economic situation in Estonia and the countries which are its main trading partners, and in an environment of slowing economic activity the throughput of other categories of cargo may decrease as well. The operators of liquid bulk cargo are working to replace sanctioned cargoes with alternative ones. All of the Group’s customers that are cargo operators are companies registered in the European Union and accounts with them are settled in euros. Tallinna Sadam cooperates fully with its partners, the Financial Intelligence Unit and other government agencies to comply with the sanctions imposed by the European Union and to apply the sanctions to both cargo and customers responsibly. Russia’s military action in Ukraine has affected not only the cargo business but also cruise ship calls, particularly due to the disappearance of St Petersburg, previously a major destination, from the map of the Baltic Sea cruise ports. The interest of cruise passengers from more distant markets in the Baltic Sea as a region bordering Russia has decreased. In 2023, the passenger load factor of cruise ships improved compared to 2022 and efforts have been made to market the Baltic Sea region in co- operation with the other Baltic Sea ports. However, the deterioration of the economic environment and the proximity of Russia may limit the recovery in cruise ship calls.
TABLE OF CONTENTS m 6. Business Review | page 43 Translation of the Estonian original 6.4 Overview of the market: passengers In terms of ship traffic, the Baltic Sea is one of the busiest inland seas in the world. Almost 85 million people live in its catchment area and shipping is one of the main means of transport for tourists in the region. It is estimated that 30–40 million passengers a year use ships to travel across the eastern part of the Baltic Sea, making the international ferry traffic in the area is the busiest in the Baltic Sea region. In terms of passenger numbers, Tallinn is the second largest passenger port in the area aſter Helsinki, with Stockholm ranking third. The largest ferries in the Baltic Sea, mostly designed for passenger transport, also operate between these ports. Compared to other areas around the Baltic Sea, busy traffic between Estonia, Finland and Sweden is supported by the factors that the distance between the destination ports is optimal for ferry traffic and that most of the traffic is between the countries’ capitals, which are all located on the coast. Number of passengers in the eastern ports of the Baltic Sea * * Excluding ports where most of the number of passengers results from short trips (lasting around 1 hour) Other Mariehamn Turku Tallinn Stockholm Helsinki Tallinna Sadam market share 2019 2020 2021 2022 2023 50 40 30 20 10 0 50% 40% 30% 20% 10% 0 millions of passangers 44.1 15.7 15.3 4.8 12.2 2.4 3.6 28% 23% 3.6 12.1 4.3 10.6 3.1 24% 3.5 4.7 3.7 28.7 29.6 8.1 9.1 7.9 7.4 7.0 7.9 24% 27%
TABLE OF CONTENTS m 6. Business Review | page 44 Translation of the Estonian original In 2023, passenger traffic continued to recover from the post-pandemic period and passenger numbers on the Baltic Sea grew slightly. However, passenger numbers at ports still remained at 65–75% of the pre-pandemic ones. The total number of passengers passing through the largest ports in the eastern part of the Baltic Sea grew by 0.9 million in 2023 (+3%), rising to 29.6 million passengers. The fastest recovery was in Helsinki and Tallinn, the largest ports of the Baltic Sea. In Stockholm, however, the number of passengers decreased. Cruise tourism has made a strong recovery in the world aſter the COVID-19 crisis and the passenger load factor of the cruise ships visiting the Baltic Sea also improved in 2023. However, cruise lines remain cautious about booking port calls in advance, as the Baltic Sea region is still affected by Russia’s military action in Ukraine, which has resulted in St Petersburg disappearing from the map of the Baltic Sea cruise ports. As a result, the interest of cruise passengers from more distant markets in the Baltic Sea as a region bordering Russia is still low. In Europe, the recovery of cruise tourism is also affected by the deepening economic downturn and strict environmental requirements imposed by the European Union, which make cruising in the Baltic Sea more expensive than in other cruise regions. Largest cruise ports on the Baltic Sea 2019 2020 2022 2021 2023 1,200 1,000 800 600 400 200 0 thousands of cruise passengers KIEL COPENHAGEN ROSTOCK STOCKHOLM VISBY TALLINN HELSINKI ST. PETERSBURG
TABLE OF CONTENTS m 6. Business Review | page 45 Translation of the Estonian original 6.5 Overview of the market: cargo Although our previous cargo market overviews included Russian ports on the Baltic Sea, we have decided to exclude them because the Russia-Ukraine war has led to a situation where European trade with Russia and the transit of Russian cargo through the Baltic Sea ports have virtually ceased. From now on, the cargo market overview of the eastern coast of the Baltic Sea includes the largest ports of Poland, Lithuania, Latvia and Estonia, as well as the major Finnish ports on the Gulf of Finland, which we consider to be the market players in the region and our main competitors. In 2021–2023, the average annual volume of cargo handled by the Russian ports on the eastern Baltic Sea coast was 250 million tonnes, consisting mainly of liquid and dry bulk cargo. In 2023, the total cargo turnover of ports in the region was 273.3 million tonnes, a decrease of 14.4 million tonnes (–5.0%) compared to the prior year. Volumes decreased for all cargo types. The most significant decreases were recorded for ro-ro (–4.6 million tonnes, –11.6%) and container cargo (–2.6 million tonnes, –4.7%), which fell at almost all ports. Dry bulk was down by 3.7 million tonnes (–4.7%), mainly due to lower volumes of Russian and Belarusian fertilizers (–3.5 million tonnes, –38%) and coal (–5 million tonnes, –19%) in the ports of the Baltic countries as a result of the sanctions imposed in December 2022. A sharper decline was offset by growth in the volume of grain (+4.9 million tonnes, +25.9%). Liquid bulk decreased by 2.5 million tonnes (–2.6%), but the decline was caused by other liquid bulk cargo as the volume of oil and oil products decreased by only 0.1 million tonnes (–0.1%). Owing to the geopolitical situation, the largest growth in cargo throughput was recorded by the Polish ports of Gdansk (+12.7 million tonnes, +18.7%) and Gdynia (+1.2 million tonnes, +4.3%). Their growth was mainly due to the transhipment of crude oil for domestic use (imports) and transit to a German refinery. Growth in the volume of grain handled by Polish ports was driven by the export of Ukrainian grain. The decreases in cargo throughput were the largest at the ports of Tallinn (–5.1 million tonnes, –29.0%) and Riga (–4.7 million tonnes, –20.1%), mainly due to the application of economic sanctions against Russia and Belarus. Cargo volume of the largest ports on the eastern coast of the Baltic Sea * * Excluding Russian ports from 2021 General cargo Ro-ro Containers Dry bulk Liquid bulk 600 500 400 300 200 100 0 million tonnes 2019 2020 2021 2022 2023 519 221 148 79 40 31 562 250 153 83 41 35 85 79 53 41 17 274 40 19 56 79 94 288 35 18 53 75 92 273
TABLE OF CONTENTS m 6. Business Review | page 46 Translation of the Estonian original The largest cargo ports on the eastern coast of the Baltic Sea were Gdansk (81.0 million tonnes, a 29.6% market share), Klaipėda (41.7 million tonnes, a 15.3% market share) and Gdynia (29.4 million tonnes, a 10.8% market share). Tallinna Sadam (the port of Tallinn) was in the eighth place, with a 4.6% market share (2022: 6 th place with a 6.2% market share). The volume of cargo handled by Estonian ports decreased by 10.7 million tonnes (–31.4%) to 23.4 million tonnes. The market share of the harbours of Tallinna Sadam (the port of Tallinn) was 53.7% (2022: 51.9%). Market share of the largest ports in the eastern part of the Baltic Sea Market share of the Estonian ports 54% Tallinn 17% Sillamäe 9% Pärnu 8% Kunda 12% Other 30% Gdansk 5% Hamina Kotka 15% Klaipeda Butinge 5% Helsinki 11% Gdynia 4% Tallinn 8% Sköldvik 4% Ventspils 7% Riga 3% Liepaja 8% Other
TABLE OF CONTENTS m 6. Business Review | page 47 Translation of the Estonian original 6.6 Operating results Tallinna Sadam’s operating results for 2023 were affected by the continued decline in cargo volumes due to both the Russia-Ukraine war and the general economic recession. The number of regular route passengers increased, but the number of cruise ship calls decreased, as the attractiveness of the region has declined due to geopolitical risk and growth in costs resulting from environmental requirements. As revenue decreased and personnel expenses and other expenses increased, both operating profit and adjusted EBITDA declined. Higher interest rates increased interest expense despite the decrease in the debt burden. As a result, net profit decreased more than operating profit and EBITDA. Revenue decreased by EUR 5.1 million (–4%) to EUR 116.6 million. Revenue from vessel dues, electricity sales and cargo charges declined the most, while revenue from ferry service, charter fees (the icebreaker Botnica) and passenger fees grew. Vessel dues revenue decreased mainly due to a smaller number of tanker and cruise ship calls. In addition, the average GT (gross tonnage) of tankers, used for calculating the main vessel dues, was lower. Revenue from the sale of electricity declined due to a decrease in both the price of electricity (the market price of electricity was extremely high in 2022) and the consumption of electricity in the Cargo harbours segment, which is attributable to a decrease in cargo throughput. Due to smaller cargo throughput, cargo charges revenue also decreased. Cargo throughput fell by 29% to 12.6 million tonnes but revenue from cargo charges decreased by only 13%.
TABLE OF CONTENTS m 6. Business Review | page 48 Translation of the Estonian original Passenger fees revenue grew by 12% through growth in passenger numbers (+13%), although the number of cruise passengers fell by more than 4%. In the provision of ferry service between Estonia’s mainland and two largest islands, the number of trips remained at the level of the previous year (+0.6%). A slightly larger number of trips and an increase in some contractually agreed fee rates due to the rise in the Estonian wage and fuel price indices increased revenue. As the growth in personnel expenses, non-current asset repair costs and expenses on services purchased exceeded the decrease in fuel costs, operating profit and adjusted EBITDA did not increase as much as revenue. The multifunctional icebreaker Botnica had more summer charters than usual (three different projects instead of one), but the total number of charter days decreased by 18. Despite a lower utilisation rate, revenue grew because charter fees increased both for the icebreaking season and the summer charters. However, expenses grew more than revenue, driven by scheduled maintenance and repairs as well as additional expenses related to preparations for the summer charters. Fuel costs, non-current asset repair costs, lease expenses and personnel expenses increased the most. As expenses grew more than revenue, operating profit, adjusted EBITDA and net profit decreased. In segment terms, revenue decreased in the Cargo harbours and the Passenger harbours segments and increased in the Ferry segment and the segment Other (the icebreaker Botnica). In terms of revenue streams, revenue from vessel dues, electricity sales and cargo charges decreased, while revenue from passenger fees, ferry service, lease income and charter fees revenue grew. Expenses related to operating activities increased by EUR 1.3 million (+1%), operating profit decreased by EUR 6.2 million (–20%) and profit for the period dropped by EUR 9.7 million (–38%). Added value created by the Group 15 , i.e. the Group’s contribution to the Estonian economy, was EUR 75.2 million in 2023 (2022: EUR 79.3 million). The figure decreased due to the decline in operating profit. 15 Added value = operating profit + personnel expenses + depreciation, amortisation and impairment
TABLE OF CONTENTS m 6. Business Review | page 49 Translation of the Estonian original 6.6.1 Number of passengers In 2023, passenger numbers continued to recover, supported by the liſting of the pandemic related restrictions. The number of passengers grew by 13%, rising to more than 7.9 million, which is around 74% of the level before the COVID-19 pandemic. Growth came from the main routes of Tallinn–Helsinki (+14%) and Tallinn–Stockholm (+18%). The number of cruise passengers decreased (–4%). Despite fewer cruise ship calls, the passenger load factor of cruise ships was higher and thus, on average, there were more passengers per call. Passengers travelling on the Tallinn–Helsinki route accounted for 88% of the total number of passengers last year (2022: 88%) and the number of passengers on this route increased by more than 0.8 million. Ferry operators kept relatively busy schedules and the number of trips on the Tallinn–Helsinki route increased by slightly more than 5%. The number of passengers travelling on the Tallinn–Stockholm route grew by 83 thousand and the number of trips increased by 8%. While the passenger load factor of the ferries on the Tallinn–Helsinki route remained below the pre-pandemic level, the same indicator for the Tallinn–Stockholm route recovered to its pre- pandemic level; however, before the pandemic the route was served by two ferries (2023: one ferry). The number of traditional cruise passengers decreased by 7 thousand to 165 thousand. Old City Harbour had 90 (2022: 170) and Saaremaa Harbour 8 (2022: 9) cruise ship calls. The passenger load factor of cruise ships has improved. It was around 90–95% before the pandemic and less than 50% in the years thereaſter, but last year it increased to 88% at Old City Harbour and to 69% at Saaremaa. Cruise tourism has been significantly affected by the war in Ukraine. St Petersburg used to be an important cruise port on the Baltic Sea that also attracted cruise ships to other ports in the region but due to the war in Ukraine cruise ships do not visit St Petersburg and the region bordering with Russia has lost some of its appeal as a tourist destination. The number of passengers travelling on the Muuga–Vuosaari route (the Cargo harbours segment) grew less (8%), but it is the only route where passenger numbers have been growing for five years in a row. Number of passengers by route 12 10 8 6 4 2 0 12,000 10,000 8,000 6,000 4,000 2,000 0 2019 2020 2021 2022 2023 millions of passangers vessel calls Other Cruise Muuga-Vuosaari Tallinn-Stockholm Tallinn-Helsinki Ferry and cruise ship calls 7.0 6.2 10.6 0.7 0.9 8.8 4.3 4.0 3.5 3.0 5,672 7.9 7.0 5,727 5,679 5,451 6,111
TABLE OF CONTENTS m 6. Business Review | page 50 Translation of the Estonian original 6.6.2 Cargo volume In 2023, cargo throughput at our harbours dropped by 5.2 million tonnes (–29%) to 12.6 million tonnes — the lowest level in recent decades due to the sanctions against Russia and the general economic downturn. The sharpest decreases were in liquid bulk (–3.5 million tonnes, –67%), dry bulk (–0.8 million tonnes, –27%) and ro-ro (–0.5 million tonnes, –7%). The volumes of other cargo types contracted as well: container cargo by 242 thousand tonnes (–11%) and general cargo by 193 thousand tonnes (–31%). Aſter nine years of growth, the volume of ro-ro cargo decreased in 2023, but still remained the largest cargo type. In 2023, ro-ro cargo accounted for nearly 51% of total cargo throughput, 12 percentage points up on a year earlier. In the period 2017–2021, the annual share of liquid bulk cargo ranged from 38% to 43%, but in 2022 it dropped to 29% and in 2023 to 13%. Ro-ro cargo is mainly transported on the routes between Estonia and Finland (Tallinn–Helsinki, Muuga–Vuosaari) and most of it by passenger ferries on the Helsinki route, which is why most of the ro-ro growth is reflected in the revenue of the Passenger harbours segment. Liquid bulk volumes slumped by 67% due to a decrease in crude oil and petrol of Russian origin, which were subject to sanctions. The volume of dry bulk cargo fell mainly due to lower volumes of crushed stone (–44%). The volumes of barley (–66%) and urea (–97%) also plummeted. On the positive side, the supply of soybean residues and soybean meal started in 2023. The volume of wheat transported increased by 10%. The volume of container cargo decreased by around 0.2 million tonnes (–11%) (in TEUs 16 –17% to 221 thousand TEUs). General cargo decreased by 0.2 million tonnes (–31%), driven by a decline in the volumes of pulpwood and steel products. In terms of transport directions, the biggest change was in transit, which fell by 4.0 million tonnes (–78%), while Estonia’s export cargo decreased by 0.7 million tonnes (–12%) and import cargo decreased by 0.4 million tonnes (–7%). Imports accounted for 46%, exports for 45% and transit for 9% of our total cargo volume (2022: 35%, 36% and 29%, respectively). The share of transit fell by nearly 20 percentage points year on year due to the sanctions. Cargo throughput at our harbours is not seasonal by nature. Typically, fluctuations in cargo volumes result from changes in market conditions (including changes in the world market prices of the cargo) and/or volatility in the volumes of project cargo. Last year, cargo transport was affected the most by the general economic recession and the Russia-Ukraine war, which had a significant impact on the transit of cargo to and from Russia. Cargo volume by cargo type 16 TEU (Twenty-foot Equivalent Unit) — standard unit for counting containers and describing the capacities of container ships or terminals. One 20-foot container equals one TEU. 25 20 15 10 5 0 2019 2020 2021 2022 2023 million tonnes 2,500 2,000 1,500 1,000 500 0 vessel calls Ro-ro Containers General cargo Dry bulk Liquid bulk Cargo vessel calls 1,743 1,637 1,654 1,458 19.9 21.3 22.4 17.8 5.4 5.6 6.5 6.9 1.8 1.8 1.9 2.1 4.5 4.4 4.7 2.9 7.6 9.1 8.8 5.2 1,380 12.6 6.4 1.9 2.2 1.7
TABLE OF CONTENTS m 6. Business Review | page 51 Translation of the Estonian original 6.6.3 Ferry service 6.6.4 Multifunctional icebreaker Botnica TS Laevad provides domestic ferry service between Estonia’s mainland and largest islands (Saaremaa and Hiiumaa) under a public transport contract with the state (expiry date of the contract: 30 September 2026). The service must be provided according to the schedule approved by the state with up to four ferries (during the summer peak periods with up to five ferries) at a time. Most of contract revenue is fixed but some fixed revenue components are adjusted for movements in certain price indices to reflect the changes in the cost of living. A minor part of contract revenue is variable, depending on the number of trips made. Variable revenue is also adjusted for movements in the price indices. Contract revenue comprises ticket sale revenue and public transport support received from the state to cover the difference between ticket sale revenue and the service revenue agreed in the contract. Thus, a potential ticket price adjustment by the state would not affect the revenue and profit of TS Laevad. In 2023, the ferries of TS Laevad made 22,972 trips, which is 0.6% more than a year earlier, serving 2.4 million passengers (+5%) and 1.1 million vehicles (+3%). Based on an agreement with the state (the customer of the ferry service), 484 additional trips (2022: 436) were made by a stand-by vessel from June to October to increase service capacity during the summer. We provide Estonian ports on the Gulf of Finland with icebreaker Botnica icebreaking service from December to April under a contract with the state (expiry date of the contract: 20 April 2032). The contract pays a fixed fee for a season of 120 days, which is adjusted for changes in the consumer price index. Outside the icebreaking season, we charter the icebreaker Botnica out for different maritime support operations. The availability and profitability of such operations depends on the situation in the charter market for offshore support vessels. Outside the icebreaking season, Botnica participates in various charter projects. TS Shipping has had a charter contract with the Canadian company Baffinland Iron Mines from 2018 to escort Panamax- type cargo vessels in Baffin Bay from an iron ore mine to Baffin Bay. In 2023, the charter period under the Baffinland charter was shorter than usual. Therefore, in addition to the Baffinland charter, Botnica had two other brief summer charter projects, serving Equinor in June and British Petroleum in August. In early September, Botnica resumed its traditional Baffinland charter in northern Canada. Ferry segment's operating volumes MPSV Botnica charter 300 240 180 120 60 0 100% 80% 60% 40% 20% 0 days 2019 2020 2021 2022 2023 Charter days Utilisation rate 261 249 267 249 72% 68% 73% 68% 240 66% Passangers Vehicles millions of passangers/vehicles 3.0 2.5 2.0 1.5 1.0 0.5 0 Trips 2019 2020 2021 2022 2023 ferry trips 30,000 25,000 20,000 15,000 10,000 5,000 0 2.4 1.0 2.0 1.0 2.2 1.1 2.3 1.1 1.1 2.4 21,010 20,118 21,518 22,842 22,972
TABLE OF CONTENTS m 6. Business Review | page 52 Translation of the Estonian original 6.7 Income and expenses Revenue and EBITDA Revenue by revenue stream Tallinna Sadam ended 2023 with consolidated revenue of EUR 116.6 million, EUR 5.1 million (–4.2%) less than a year earlier. Adjusted EBITDA decreased by EUR 6.6 million (–12%) to EUR 49.2 million. As adjusted EBITDA decreased more than revenue, the adjusted EBITDA margin declined from 46% to 42%. Revenue Adjusted EBITDA Adjusted EBITDA margin 2019 2020 2021 2022 2023 150 120 90 60 30 0 EUR million 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0 130.5 74.3 107.4 58.4 110.1 54.0 121.7 55.8 116.6 49.2 57% 54% 49% 46% 42% Ferry service Charter fees (Botnica) Sales of other services Sales of electricity Operating lease income Passenger fees Cargo charges Vessel dues 150 120 90 60 30 0 2019 2020 2021 2022 2023 EUR million 46.7 30.2 17.1 7.1 12.0 5.4 9.7 130.5 37.6 6.8 7.0 11.6 9.1 29.0 107.4 4,5 110.1 29.8 9.8 6.2 12.0 5.7 7.2 37.4 4.5 33.6 10.2 7.1 13.4 10.3 7.5 37.2 121.7 35.4 11.5 4.5 13.7 11.5 6.5 31.4 116.6
TABLE OF CONTENTS m 6. Business Review | page 53 Translation of the Estonian original The revenue decline is mainly attributable to lower revenue from vessel dues, electricity sales and cargo charges. In terms of revenue streams, the largest increase was in ferry service revenue, charter fees revenue (the icebreaker Botnica) and passenger fees revenue. Vessel dues revenue decreased by EUR 5.8 million (–16%) to EUR 31.4 million. This was due to fewer calls by tankers and cruise ships. On average, the tankers calling at our cargo harbours had a smaller gross tonnage than a year earlier, so the average port dues per tanker also fell. A decrease in the electricity price compared to the extremely high price level a year earlier and lower consumption in the Cargo harbours segment (due to the decline in cargo throughput) reduced electricity sales revenue by EUR 2.6 million (–37%) to EUR 4.5 million. Cargo charges revenue dropped by EUR 1.0 million (–13%) as cargo throughput declined by 29%. Cargo charges revenue decreased less than cargo throughput, mainly because the decline was stronger for cargo with lower charge rates, while income from contractual penalties grew. Revenue from other services decreased by EUR 0.3 million (–12%), mainly through lower revenue from the sales of water supply and sewerage services to both cruise ships (fewer calls) and other vessels, which could not be offset by higher revenue from the sale of advertising space in Old City Harbour. Ferry service revenue grew by EUR 1.8 million (+5%) to EUR 35.4 million, supported by the indexation of trip fees and the variable part of fixed fees. The number of trips between Estonia’s mainland and two largest islands did not change significantly compared to the previous year (+0.6%). Charter fee revenue from the icebreaker Botnica grew by EUR 1.3 million (+13%) to EUR 11.5 million despite fewer charter days. The charter fees of Botnica increased due to a new charter fee rate for the icebreaking season and higher fee rates for various summer charters. The number of Botnica’s charter days was lower as the Baffinland charter project was shorter. Altogether, Botnica had three short summer charter projects in 2023. Passenger fees revenue grew by EUR 1.2 million (+12%) to EUR 11.5 million, supported by growth in passenger numbers on the main routes (Tallinn–Helsinki, Tallinn– Stockholm). Lease income grew by EUR 0.3 million (+3%) to EUR 13.7 million through higher revenue in the Passenger harbours segment (from lease of premises in the cruise terminal and growth in parking charges) and the Ferry segment (growth in passenger numbers and an increase in the fee rates for retail premises). Indexation of the fee rates also contributed to the growth in lease income. Other income grew by EUR 0.8 million (+53%) to EUR 2.2 million in 2023 as income from government grants increased in connection with foreign aid granted for investments in Old City Harbour and Muuga Harbour. Income from fines and late payment interest increased as well, mainly due to the initiation of bankruptcy proceedings against MPG AgroProduction OÜ in November 2023. Expenses related to operating activities (operating expenses, personnel expenses, impairment of financial assets, and depreciation, amortisation and impairment) totalled EUR 93.2 million, EUR 1.3 million up on 2022 (+1.4%). Operating expenses decreased by EUR 1.5 million (–3%), driven by a decrease in fuel and energy costs, which exceeded growth in the maintenance and repair costs of non-current assets and other operating expenses. The decrease was largest in electricity costs (–EUR 3.7 million, –43%) due to the decline in both energy prices, which soared in 2022, and electricity consumption in the Cargo harbours segment. However, this also translated into lower revenue from electricity sales. Fuel costs dropped by EUR 1.1 million (–14%), mainly through lower fuel consumption in the Ferry and the Cargo harbours segments. Only the fuel costs of the icebreaker Botnica grew due to the summer charter where Botnica provided support vessel services to offshore wind farms. The fuel costs of the Ferry segment decreased due to a lower fuel price and lower consumption per trip, which was due to a mild winter. In the Cargo harbours segment, both the price and volume of purchased natural gas declined. Non-current asset maintenance and repair costs grew by EUR 1.2 million (+17%). Repair costs in the segment Other grew due to the regular dry dock maintenance and repairs of Botnica and the preparations made for the icebreaker’s summer charter. Repair costs in the Ferry segment also grew, partly due to the lower cost base a year earlier (an insurance indemnity of EUR 0.3 million received in 2022). In addition, critical spare parts were acquired for the ferries in the second half of 2023. Repair costs in the Passenger harbours and the Cargo harbours segments decreased. Lease expenses increased (+EUR 0.9 million, +156%) due to additional costs incurred in connection with the icebreaker Botnica’s new summer charter projects. Expenses on services purchased for infrastructure grew (+EUR 0.6 million, +18%) due to a rise in the prices of cleaning and upkeep services in the Passenger harbours, the Cargo harbours and the Ferry segments. Expenses on services purchased increased by EUR 0.5 million (+8%), driven by an increase in port dues expenses in the Ferry segment, which was slightly offset by lower expenses from the acceptance of ship- generated waste (fewer cruise ship calls). Other operating expenses increased (+EUR 0.5 million, +18%) due to additional expenses related to the summer charters of the icebreaker Botnica. Other operating expense items decreased by EUR 0.4 million (–6%) due to a decline in expenses on the acquisition of assets of insignificant value and water and sewerage costs. Expenses from impairment of financial assets increased by EUR 0.6 million (+106%) due to the payment difficulties of MPG AgroProduction OÜ.
TABLE OF CONTENTS m 6. Business Review | page 54 Translation of the Estonian original Personnel expenses grew by EUR 2.0 million (9%) primarily due to an increase in salaries. At the end of 2022, the performance management system was changed and the maximum possible rate of the performance-related bonus was reduced. The savings achieved were used to carry out a one-off pay rise. The Group’s average number of employees decreased from 468 to 461 (–1.5%) in 2023. Depreciation, amortisation and impairment grew by EUR 0.1 million (+0.3%) year on year. Growth was attributable to a one-off write-off of non-current assets in the first quarter due to the raising of the threshold for recognising assets as non-current from 1 January 2023 in line with the amendments to the public sector financial accounting and reporting regulation applicable to the company. Other expenses increased by EUR 0.6 million (+132%), because expected credit losses on other receivables grew. Operating profit for 2023 was EUR 24.6 million (–EUR 6.2 million, –20%) as revenue decreased and expenses increased. Operating margin, which reflects the Group’s operating efficiency, dropped from 25.3% to 21.1% as the decrease in operating profit was sharper than the decrease in revenue. Operating profit increased in the Passenger harbours and the Ferry segments, but decreased in the Cargo harbours segment and the segment Other. Adjusted EBITDA 17 decreased by EUR 6.6 million (–12%) to EUR 49.2 million due to a decrease in the Cargo harbours segment and the segment Other (the icebreaker Botnica). The adjusted EBITDA margin declined from 45.9% to 42.2%. Expenses related to operating assets 17 Adjusted EBITDA = profit before finance income and costs, income tax expense and depreciation, amortisation and impairment, adjusted for amortisation of government grants related to assets Operating expenses Impairment of financial assets Personnel expenses Depreciation, amortisation and impairment losses 2019 2020 2021 2022 2023 100 80 60 40 20 0 EUR million 91.9 42.9 23.2 25.3 93.2 25.4 41.4 25.2 81.6 36.3 20.9 24.8 74.4 29.9 19.5 24.1 79.6 36.4 19.9 23.0
TABLE OF CONTENTS m 6. Business Review | page 55 Translation of the Estonian original 6.8 Profit Besides the above factors, profit development was influenced by finance income and costs and income tax on dividends. Finance income and costs were influenced by a general rise in interest rates in 2023. Finance costs grew by EUR 5.4 million (+269%) although loans and borrowings decreased. The rise in interest rates supported growth in finance income, which increased by EUR 1.0 million. The Group’s share of the profit of the equity-accounted associate Green Marine was EUR 0.4 million (2022: EUR 0.8 million). Profit before tax was EUR 18.9 million, EUR 10.9 million lower than a year earlier (–37%). The Group’s net profit for 2023 amounted to EUR 15.9 million (–EUR 9.7 million, –38%). Net profit decreased less than profit before tax because dividend tax expense decreased. In 2023, we paid a dividend of EUR 19.2 million (2022: EUR 25.5 million). Profit Profit 25.6 25.6 15.9 44.4 28.5 70 60 50 40 30 20 10 0 EUR million 2019 2020 2021 2022 2023
TABLE OF CONTENTS m 6. Business Review | page 56 Translation of the Estonian original 6.9 Segment reporting The Group’s segments are Passenger harbours, Cargo harbours, Ferry and Other. Further information about segments is provided in note 3 to the financial statements. In segment terms, revenue grew in 2023 in the Ferry segment and the segment Other, but the growth could not offset the decline in the Passenger harbours and the Cargo harbours segments. The revenue of the Passenger harbours segment decreased by EUR 0.3 million (–1%) and the revenue of the Cargo harbours segment by EUR 8.0 million (–21%). Revenue grew in the Ferry segment by EUR 1.9 million (+5%) and in the segment Other by EUR 1.4 million (+14%). Adjusted EBITDA decreased in the Cargo harbours segment and the segment Other, but increased in the Passenger harbours and the Ferry segments. The revenue of the Passenger harbours segment decreased because revenue from vessel dues, other services, cargo charges and electricity sales declined. Vessel dues decreased due to fewer cruise ship calls. This in combination with the leaving of the vessel which used to accommodate Ukrainian war refugees in the previous summer reduced revenue from other services. Cargo charges declined due to the overall economic slowdown. Growth in passenger numbers increased passenger fees revenue. Lease income also grew, supported by higher income from leasing out premises in the cruise terminal and growth in parking charges. Electricity sales revenue declined as the market prices of electricity fell compared with the extremely high price level in 2022. More than a half of the revenue decrease in the Cargo harbours segment was related to lower revenue from vessel dues. There were fewer cargo vessel calls and the vessels that called were smaller on average. Although total vessel calls decreased, on certain routes the number of vessel calls increased, which meant higher discounts and lower vessel dues per call. The decline in cargo throughput reduced cargo charges revenue. Cargo charges revenue decreased less than cargo throughput, because the decline was sharper for cargo with lower charge rates and revenue from contractual penalties increased. The decrease in electricity sales revenue was attributable to a lower electricity price and smaller consumption. The revenue of the Ferry segment grew due to the indexation of the contractual fee rates and a higher number of trips made (+0.6%). The revenue of the segment Other increased, although the summer charter of the icebreaker Botnica was shorter than a year earlier. The charter fee for the icebreaking season increased and three summer charter projects increased the summer charter revenue despite the decrease in charter days. Segment revenue and EBITDA Other Ferry Cargo harbours Passanger harbours 150 120 90 60 30 0 EUR million 9.9 30.7 40.7 28.8 54.0 110.1 121.7 116.6 37.9 38.8 34.8 10.3 55.8 49.2 5.7 14.6 16.8 18.6 3.0 15.3 11.3 19.6 13.7 12.5 22.3 5.6 37.5 30.8 36.6 11.7 Revenue Adjusted EBITDA 2021 2022 2023 2021 2022 2023
TABLE OF CONTENTS m 6. Business Review | page 57 Translation of the Estonian original Adjusted EBITDA decreased by EUR 6.6 million (–12%) in 2023. The largest decline was in the Cargo harbours segment (–EUR 5.6 million, –33%). The adjusted EBITDA of the segment Other fell almost by a half (–EUR 2.7 million, –47%). In other segments, adjusted EBITDA grew: by EUR 1.0 million (+5%) in the Passenger harbours segment and by EUR 0.7 million (+5%) in the Ferry segment. The overall decrease in adjusted EBITDA resulted from revenue decline in the Cargo harbours segment, which exceeded the combined revenue growth in other segments, while in the segment Other expenses grew more than revenue. The adjusted EBITDA of the Passenger harbours segment increased as growth in other income exceeded the revenue decline and expenses decreased. In the Cargo harbours segment, the decrease in revenue exceeded the decrease in expenses. In the Ferry segment, both revenue and expenses grew. In the segment Other, revenue grew but expenses grew faster due to additional expenses related to the summer charter, while profit from the equity-accounted associate Green Marine decreased. Adjusted EBITDA margin decreased from 45.9% to 42.2%, mainly due to a decline in the Cargo harbours segment and the segment Other. Results by segment 2023 2022 In thousands of euros Passenger harbours Cargo harbours Ferry Other Total Passenger harbours Cargo harbours Ferry Other Total Revenue 37,533 30,751 36,633 11,729 116,646 37,862 38,781 34,757 10,303 121,703 Adjusted EBITDA 19,590 11,257 15,304 3,019 49,170 18,618 16,836 14,629 5,734 55,817 Operating profit/loss 11,749 3,219 9,726 –64 24,630 10,854 8,431 8,926 2,576 30,787 Adjusted EBITDA margin 52.2% 36.6% 41.8% 25.7% 42.2% 49.2% 43.4% 42.1% 55.7% 45.9% Change 2023 vs 2022 In thousands of euros Passenger harbours Cargo harbours Ferry Other Total Revenue –329 –8,030 1,876 1,426 –5,057 Adjusted EBITDA 972 –5,579 675 –2,715 –6,647 Operating profit/loss 895 –5,212 800 –2,640 –6,157 Adjusted EBITDA margin 3.0% –6.8% –0.3% –30.0% –3.7%
TABLE OF CONTENTS m 6. Business Review | page 58 Translation of the Estonian original 6.10 Investments and development prospects In 2023, the Group invested EUR 20.7 million, EUR 6.9 million (+50%) more than a year earlier. Investments in port infrastructure assets, acquisition of non-current assets and improvements to existing infrastructure totalled EUR 16.6 million. Investments in the icebreaker Botnica amounted to EUR 3.0 million and investments in ferries to EUR 1.1 million. The largest investment in 2023 was the start of construction of a new quay to serve offshore wind farms in Paldiski South Harbour. At Muuga Harbour, the largest investments were related to improving the conditions for ro-ro traffic, the design and construction of a new workshop and the construction of a sewerage system for quays. At Old City Harbour, investments were made in the marina quay next to the new tramway and the improvement of ferry traffic (the ramp of quay 5). Major work on the icebreaker Botnica included dry docking and ice class upgrade. Significant investments in ferries included the replacement of main engine cooling systems and the purchase of critical equipment to ensure the smooth operation of ferry traffic. Capital investments planned for 2024. The largest investments will be made in the ongoing construction of a new quay and 10 hectares of hinterland at Paldiski South Harbour. The project is expected to be completed by the end of 2025, with final completion in February 2026. The new quay will enable us to provide services for the construction and maintenance of offshore wind farms. It will also be used for military transport, which in turn will increase our overall capacity for the maritime transport of cargo and vehicles. In Old City Harbour, the largest investment will be the design of a new Terminal A, including the area around Terminal A, the main building and a multi-storey car park. Investments in ferry traffic improvements and the marina quay will also continue. At Muuga Harbour, investments will be made in the renovation of a quay to ensure smooth reception of large container ships and in the replacement of the building automation system to improve energy efficiency and prevent emergencies. Investments in the icebreaker Botnica will include technical improvements. Investments in the Ferry segment will include the replacement of the two main engines of the ferry Piret, regular dry dock maintenance, improvements to the technical equipment and computer systems of the ferries, and further development of the ticket sales system. In addition to making capital investments, we incur significant annual research and development expenditures, which amounted to EUR 0.37 million in 2023 (2022: EUR 0.33 million). The research and development expenditure of the period was mainly related to the architectural design Investments competition for a new Terminal A in Old City Harbour, technical studies of the quays in Old City Harbour, surveys of the condition of the buildings and structures in the cargo harbours and the preparation of the assessments required for development plans. We expect the recovery in passenger traffic to continue in 2024. The decline in cargo throughput caused by the impacts of the Russia-Ukraine war has largely materialised and the year 2024 will mainly be influenced by the development of the overall economic situation in Estonia and the countries that are its main trading partners. We see opportunities for revenue growth and have taken steps to achieve savings in operating expenses. Finance costs will increase due to growing financing needs. We therefore expect the Group’s operating profit to grow faster than net profit. Prepayments Investments EUR million 2019 2020 2021 2022 2023 50 40 30 20 10 0 –10 13.9 20.7 -5.5 42.6 37.1 5.5 24.0 29.5 14.7 14.7 12.8 19.2
TABLE OF CONTENTS m 6. Business Review | page 59 Translation of the Estonian original 6.11 Dividends The dividend policy of Tallinna Sadam sets the target to pay a net dividend that amounts to at least 70% of profit for the previous year, subject to market conditions, the company’s growth and development plans, while taking into account the need to maintain a reasonable level of liquidity and excluding the impact of non-recurring transactions. In 2023, we paid the shareholders a dividend of EUR per share and EUR 19.199 million in total, i.e. 75% of profit for the previous year. The list of shareholders entitled to receive the dividend was determined on 10 May 2023 (the ex-dividend date: 9 May 2023) and the dividend was paid out to the shareholders on 12 May 2023 (through Nasdaq CSD). In 2022, we distributed shareholders a dividend of EUR 0.097 per share and EUR 25.5 million in total (100% of profit). For further information, see note 19 to the financial statements. Dividends paid EUR million % of prior year profit Dividends 50 40 30 20 10
150% 120% 90% 60% 30% 144% 68% 71% 100% 75% 26 19 20 30 35
| 0 | 0 | |||||
| 2019 | 2020 | 2021 | 2022 | 2023 |
TABLE OF CONTENTS m 6. Business Review | page 60 Translation of the Estonian original 6.12 Share and shareholders Tallinna Sadam was listed in the Baltic Main List of the Nasdaq Tallinn Stock Exchange on 13 June 2018. The ticker symbol of the share is TSM1T and the ISIN code is EE3100021635. The company has 263,000,000 ordinary shares of which 176,295,032 (67.03%) are held by the Republic of Estonia. The par value of a share is EUR 1. Each share carries one vote at the general meeting of the shareholders. The opening price of the share at the beginning of 2023 was EUR 1.424. The closing price of the share at 31 December 2023 was EUR 1.128. The company’s market capitalisation at 31 December 2023 was EUR 296.7 million (31 December 2022: EUR 374.5 million). Dynamics of the closing price of the Tallinna Sadam share and daily turnover of shares traded since listing on the Nasdaq Tallinn Stock Exchange, i.e. from 13 June 2018 to 31 December 2023 Dynamics of the price of the Tallinna Sadam share compared to the OMX Baltic Benchmark GI index in the period 13 June 2018 – 31 December 2023 Source:: nasdaqbaltic.com OMX Baltic Benchmark GI TSM1T — Tallinna Sadam 200% 180% 160% 140% 120% 100% 80% 60% 06.2018 09.2018 12.2018 03.2019 06.2019 09.2019 12.2019 03.2020 06.2020 09.2020 12.2020 03.2021 06.2021 09.2021 12.2021 03.2022 06.2022 09.2022 12.2022 03.2023 06.2023 09.2023 12.2023 7 6 5 4 3 2 1 0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0 turnover (EUR million) Share price (EUR) Daily durnover Share price 06.2018 09.2018 12.2018 03.2019 06.2019 09.2019 12.2019 03.2020 06.2020 09.2020 12.2020 03.2021 06.2021 09.2021 12.2021 03.2022 06.2022 09.2022 12.2022 03.2023 06.2023 09.2023 12.2023
TABLE OF CONTENTS m 6. Business Review | page 61 Translation of the Estonian original Shareholder structure at 31 December 2023 The shareholder structure has changed somewhat compared to the end of 2022. The share of international investors has decreased from 8% to 6% (–3.5 million shares), the share of Estonian retail investors has increased from 15% to 17% (+3.7 million shares), and the share of Latvian and Lithuanian investment and pension funds has grown slightly at the expense of international investors. In 2023, there were a total of 64,198 transactions with the Tallinna Sadam share (2022: 73,060 transactions) in which 14.3 million shares (2022: 17.8 million shares) changed hands. The total turnover of the transactions was EUR 19.2 million (2022: EUR 28.1 million). At 31 December 2023, the company had 24,174 shareholders (31 December 2022: 22,866) but only the Republic of Estonia had an ownership interest exceeding 5% (through the Ministry of Climate
TABLE OF CONTENTS m 7. Corporate Governance | page 62 Translation of the Estonian original 7 Corporate Governance The governing bodies of Tallinna Sadam are the general meeting, the supervisory board and the management board. The supervisory board and the management board of Tallinna Sadam are guided by the company’s strategy, values, applicable legislation and the principles of the Corporate Governance Recommendations (CGR) promulgated by the Nasdaq Tallinn Stock Exchange. Any instances of non-compliance with the CGR are explained in section 7.11 of the management report. The main goals of the controlling shareholder, the Republic of Estonia, in relation to its share- holding in Tallinna Sadam are: • to earn optimal and stable shareholder returns through the company’s profitable and efficient operation in each of its chosen business lines; • to involve the company in achieving national strategic objectives (this includes reducing the negative environmental impacts of the company’s activities and striving for climate neutrality by 2050 in ensuring the company’s sustainable development), taking into account the company’s field of activity and business interests, as well as applicable laws and regulations; • to apply and promote good corporate governance, corporate social responsibility and business culture.
TABLE OF CONTENTS m 7. Corporate Governance | page 63 Translation of the Estonian original 7.1 General meeting The general meeting is the highest governing body of Tallinna Sadam whose primary responsibilities include changing the articles of association, increasing and reducing share capital, appointing and removing the members of the supervisory board and determining the remuneration policy for the supervisory board (based on the proposal of the nomination committee), approving the annual report and allocating the company’s profit, approving a share option programme, appointing and removing the auditor(s), establishing the rules of procedure for the supervisory board, deciding the acquisition or disposal of a significant interest in another company, establishing the management and reporting principles of the subsidiaries and adopting other decisions that are within its power in accordance with the law and the company’s articles of association. The annual general meeting is held once a year, within six months aſter the end of the financial year. The agenda of the general meeting, the proposals of the management and supervisory boards, any draſt resolutions and other relevant materials are made available to shareholders at least three weeks before the general meeting on the company’s website and through a stock exchange announcement. Shareholders entitled to participate in a general meeting are determined based on the share register seven days before the meeting. Each share carries one vote at a general meeting. No shares with special controlling or voting rights have been issued. In 2023, there was an annual general meeting and no extraordinary general meetings. The annual general meeting, held on 25 April 2023, approved Tallinna Sadam’s annual report for 2022 and the profit distribution proposal (including the distribution of dividends in the total amount of EUR 19.199 million), the appointment of PriceWaterhouseCoopers as the auditor for the financial years 2023 and 2024, and amendments to the articles of association. 71 shareholders voted on the resolutions of the general meeting (including the shareholders who voted in writing before the general meeting), their shares representing a total of 192,191,464 votes, i.e. 73.08% of all the votes determined by shares. The materials and resolutions of the general meeting are available on Tallinna Sadam’s website at www.ts.ee/en. The Republic of Estonia (from 1 July 2023 through the Ministry of Climate and previously through the Ministry of Economic Affairs and Communications) holds a 67.03% ownership interest in Tallinna Sadam. 32.97% of the shares are held by Estonian and international investment funds, banks, pension funds and Estonian retail investors. An overview of the shareholder structure and the largest shareholders as at 31 December 2023 is provided in section 6.12 of the management report.
TABLE OF CONTENTS m 7. Corporate Governance | page 64 Translation of the Estonian original 7.2 Supervisory board The supervisory board is responsible for planning the company’s activities, organising the company’s management and supervising the activities of the management board. The supervisory board is accountable to the general meeting. The supervisory board of Tallinna Sadam has six to eight members, who are appointed for a term of up to five years. At least half of the members of the supervisory board (31 December 2023: five out of seven, including the chairman of the supervisory board) are independent as required by the CGR. The work of the supervisory board is managed by the chairman of the supervisory board. The members of the supervisory board are appointed by the general meeting based on the proposal of the nomination committee of Tallinna Sadam, which also makes proposals regarding the number of the members of the supervisory board and their remuneration. Further information on the nomina- tion committee is provided in section 7.5 of the management report. The supervisory board has the power to approve the Group’s annual budget and annual report, as well as the Group’s strategy, goals and development directions. At its meetings, the supervisory board also discusses the risks associated with the Group’s operations, the main issues arising from various regulations, investments, major financing projects and other significant matters relating to the Group’s business. At 31 December 2023, the composition of the supervisory board was as follows: Riho Unt (chairman), Marek Helm, Maarika Honkonen, Kaur Kajak, Risto Mäeots, Veiko Sepp and Ain Tatter. The members that meet the definition of independence as provided in the annex to the CGR are Riho Unt, Marek Helm, Maarika Honkonen, Risto Mäeots and Veiko Sepp. The term of office of all members of the supervisory board lasts until 30 June 2025. The members of the supervisory board do not include former members of the management board of Tallinna Sadam or its subsidiaries. The work of the supervisory board is organised in accordance with the rules of procedure of the supervisory board approved by the general meeting. Meetings of the supervisory board take place as needed. In 2023, there were nine meetings (2022: 13 meetings). The rules of procedure of the supervisory board and the supervisory board’s reports to the general meeting (on the group annual report of Tallinna Sadam and the activities of the supervisory board) have been made available on the website of Tallinna Sadam. The appointment and remuneration of a member of the supervisory board are regulated by section 85 of the State Assets Act. The amount of the remuneration of a member of the supervisory board is determined by the general meeting based on the proposal of the nomination committee and the remuneration principles of the supervisory board and the management board approved by the general meeting in 2022. The remuneration determined for a member of the supervisory board is EUR 1,000 per month and the remuneration determined for the chairman of the supervisory board is EUR 2,000 per month. A member of the supervisory board is not remunerated for the month in which a meeting of the supervisory board was held but the member did not participate in adopting resolutions. Additional remuneration is paid to the members of the supervisory board who are also the members of the audit committee or the remuneration committee, which are bodies set up by the supervisory board. In 2023, the total remuneration of the members of the supervisory board amounted to EUR 103.4 thousand (2022: EUR 105.6 thousand), of which EUR 93.5 thousand (2022: EUR 97.5 thousand) was paid for the performance of their duties as members of the supervisory board. The amount of remuneration has decreased because the supervisory board had one more member until 30 June 2022. The members of the supervisory board do not receive any termination benefits or other additional remuneration (other than remuneration for participation in the activities of the above committees). Tallinna Sadam has conducted a limited number of minor transactions with parties related to the members of the supervisory board, which are disclosed in note 24 to the financial statements. All transactions have been ordinary business transactions conducted on an arm’s length basis. At the date of release of this annual report, supervisory board members have not notified Tallinna Sadam of any conflicts of interest during the financial year. Where there has been risk of a conflict of interest, the exposed supervisory board member has refrained from discussing, and adopting resolutions on, the relevant agenda item. The members of the supervisory board are subject to the Group’s procedure for preventing conflicts of interest (including the obligation to declare their business interests) and the prohibition on competition set forth in the Commercial Code.
TABLE OF CONTENTS m 7. Corporate Governance | page 65 Translation of the Estonian original Members of the supervisory board 31.12.2023: RIHO UNT Chairman of the Supervisory Board, fund management and financial advice MAREK HELM Member of the Supervisory Board, implementing digital technologies KAUR KAJAK Member of the Supervisory Board, Undersecretary of State for Administrative Policy VEIKO SEPP Member of the Supervisory Board, telecommunication RISTO MÄEOTS Member of the Supervisory Board, aviation MAARIKA HONKONEN Member of the Supervisory Board, tourism, HoReCa sector AIN TATTER Member of the Supervisory Board, Director of Road and Railways Department in the Ministry of Climate
TABLE OF CONTENTS m 7. Corporate Governance | page 66 Translation of the Estonian original Participation in meetings in 2023 Remuneration in euros in 2023 Member of the supervisory board Term of office Supervisory board Audit committee Remuneration committee Supervisory board Audit committee Remuneration committee Riho Unt 1 Jul 2020 – 30 Jun 2025 9/9 5/5 5/5 24,000 1,250 1,000 Maarika Honkonen 17 Apr 2018 – 30 Jun 2025 8/9 5/5 – 11,500 1,250 0 Veiko Sepp 1 Jul 2020 – 30 Jun 2025 9/9 – 5/5 12,000 0 1,500 Kaur Kajak 26 Apr 2022 – 30 Jun 2025 9/9 5/5 – 12,000 1,250 0 Ain Tatter 1 Jul 2022 – 30 Jun 2025 9/9 – 4/5 12,000 0 750 Marek Helm 1 Jul 2022 – 30 Jun 2025 8/9 5/5 – 11,000 1,875 0 Risto Mäeots 1 Jul 2022 – 30 Jun 2025 8/9 – 5/5 11,000 0 1,000 93,500 5,625 4,250 Overview of shares held in Tallinna Sadam by the members of the supervisory board and persons closely associated with them 18 at 31 December 2023: Member of the supervisory board Number of shares held in Tallinna Sadam at 31 December 2023 Personally Through closely associated persons Riho Unt 0 0 Risto Mäeots 0 0 Marek Helm 0 0 Maarika Honkonen 0 0 Kaur Kajak 0 0 Ain Tatter 0 0 Veiko Sepp 7,526 2,500 TOTAL 7,526 2,500 18 As defined in the Market Abuse Regulation ((EU) No 596/2014 Chapter 1 Article 3 1. (25))
TABLE OF CONTENTS m 7. Corporate Governance | page 67 Translation of the Estonian original 7.3 Audit committee and internal audit department 7.4 Remuneration committee In accordance with the requirements of the Auditors Activities Act, the company has set up an audit committee, which is a body that advises the supervisory board and is responsible for monitoring and analysing the processing of financial information, the effectiveness of the development and operation of the risk management and internal control system, the process of the audit of the consolidated financial statements, and the independence of the audit firm and the certified public accountant representing the audit firm as well as their compliance with the requirements related to auditors’ activities. The audit committee makes proposals and recommendations to the supervisory board on matters within its remit. The committee has four members that are appointed by the supervisory board. At 31 December 2023, the members of the audit committee were: Marek Helm (chairman), Maarika Honkonen, Kaur Kajak and Riho Unt. The audit committee conducts its activities in accordance with the requirements of the Auditors Activities Act and the rules of procedure approved by the supervisory board. The audit committee carries out its work in meetings. In 2023, five meetings were held (2022: five meetings). All members of the audit committee attended all meetings. The rates of the remuneration of the members of the audit committee are set out in the remunera- tion policy approved by the general meeting on 25 April 2022. The rate of the remuneration of a member of the audit committee is 25% of the remuneration of a member of the supervisory board and the rate of the remuneration of the chairman of the audit committee is 1.5 times the rate of a member of the audit committee (EUR 250 for a member and EUR 375 for the chairman). When a member of the audit committee does not participate in a meeting, the member is not remunerated for the month in which the meeting was held. Tallinna Sadam has set up a Group-wide internal audit department. Functionally, the internal audit department reports to the company’s supervisory board, which, among other things, approves the composition and appoints the head of department. The department also includes the information security function. In conducting internal audit activities, the internal audit department observes the requirements of the Auditors Activities Act, Standards for the Professional Practice of Internal Auditing and the department’s rules of procedure which have been approved by the supervisory board. The activities of the department are based on a risk-based work plan approved by the supervisory board. The department engages external experts where necessary and takes into account the results of external audits and control procedures. The internal audit department briefs the audit committee and the supervisory board on its activities (including the findings and recommendations) at meetings of the audit committee and the supervisory board. According to the assessment of an independent external assessor, the activities of the internal audit department comply with Standards for the Professional Practice of Internal Auditing. In autumn 2021, the supervisory board of Tallinna Sadam set up a remuneration committee, which has the following main responsibilities: • determining the competency profile of the management board based on the company’s strategy; • developing and updating the remuneration policy for the members of the management board and monitoring compliance with the policy; • submitting proposals to the supervisory board for the election and remuneration of the members of the management board. The committee consists of at least three members who are appointed from among the members of the supervisory board for a term of up to three years. One of the members is the chairman of the supervisory board. As of 31 December 2023, the members of the remuneration committee were Veiko Sepp (chairman), Risto Mäeots, Ain Tatter and Riho Unt. During the reporting period, the remuneration committee held five meetings (2022: four meetings), to discuss the implementation of the management board's performance plan for 2022, the goals for 2024, and the appointment and contract terms of the chairman of the management board. The remuneration committee proposed to the supervisory board, and the supervisory board approved, a three-year extension of the contract of the chairman of the management board, Valdo Kalm, until 28 February 2027. The members of the remuneration committee are remunerated on the same basis as the members of the audit committee.
TABLE OF CONTENTS m 7. Corporate Governance | page 68 Translation of the Estonian original 7.5 Nomination committee 7.6 Management board The responsibilities of the committee for nominating the members of the supervisory board of Tallinna Sadam, which was formed in 2019, include assessing the suitability of candidates for the supervisory board and making proposals to the general meeting regarding the election and removal of the members of the supervisory board, the size of the supervisory board, and the duration of the term of office and remuneration of the members of the supervisory board. The members of the nomination committee are the secretary general of the Ministry of Finance, the secretary general of the ministry in charge of the state’s shareholding and the chairman of the nomination committee formed by the government of Estonia for companies in which the state has an ownership interest, who represent the controlling shareholder by virtue of the office they hold, and two representatives of small shareholders, whose term of office is five years. At 31 December 2023, the members of the nomination committee were Keit Kasemets (secretary general of the Ministry of Climate), Merike Saks (secretary general of the Ministry of Finance), Annika Uudelepp (chairman of the nomination committee formed by the government), Tomas Kairys (EBRD Head of the Baltic Countries) and Gert Vilms (member of the management board of AS SEB Varahaldus). Ahti Kuningas (the Ministry of Economic Affairs and Communications) also participated in the work of the committee as a shareholder representative during the year. The members of the nomination committee are not remunerated for their work. In 2023, the nomination committee held one meeting (2022: two meetings) to revise the rules of procedure of the nomination committee, to appoint a new chairman and to coordinate the annual self-assessment of the supervisory board in office. The management board is a governing body that represents and manages the day-to-day operations of Tallinna Sadam in accordance with the law and the articles of association of Tallinna Sadam. The management board must act in the most commercially reasonable manner and make sure that risk management and internal controls function effectively. In carrying out its activities, the manage- ment board is guided by the long-term strategy and annual operational targets approved by the supervisory board. In accordance with the articles of association, the management board has two to five members, who are appointed by the supervisory board for up to five years. The company may be represented by the chairman of the management board and a member of the management board acting together. Service contracts have been signed with all members of the management board. No member of the management board is a member of the management board or the chairman of the supervisory board of another listed company. Information about the appointment of the members of the management board to the supervisory boards of the subsidiaries and associates of Tallinna Sadam is provided in section 7.7 of the management report. The remuneration and other benefits provided to the management board for 2023 are disclosed in the remuneration report section of this annual report. In the reporting period, Tallinna Sadam conducted a limited number of minor transactions with parties related to the members of the management board, which are disclosed in note 24 to the financial statements. All transactions were ordinary business transactions conducted on an arm’s length basis. At the date of release of this annual report, management board members have not notified Tallinna Sadam of any conflicts of interest during the financial year. At 31 December 2023, the members of the management board Valdo Kalm, Andrus Ait and Margus Vihman held shares in Tallinna Sadam (41,828 shares, 1,513 shares and 22,486 shares, respectively). Persons closely associated with the members of the management board did not hold any shares in Tallinna Sadam. During the reporting period, the supervisory board extended the term of office of chairman of the management board Valdo Kalm by three years until 28 February 2027.
TABLE OF CONTENTS m 7. Corporate Governance | page 69 Translation of the Estonian original
At 31 December 2023, the composition of the management board VALDO KALM chairman of the management board, appointed to the board until 28 February 2027 Valdo Kalm has been the chairman of the manage- ment board of Tallinna Sadam since March 2016. Previously, he was chief executive at several telecommunication companies for over 20 years: Eesti Telefon, EMT, Eesti Telekom (currently Telia Eesti). He has a master’s degree in automation and telemechanics from Tallinn University of Technology (TalTech). MARGUS VIHMAN member of the management board, chief commercial officer, appointed to the board until 31 October 2024 Margus Vihman has been on the management board of Tallinna Sadam since 2016. He is responsible for the company’s commercial activities, i.e. customer relations and sales. Previously, he was sales director at Krimelte, regional sales director at the construction company Ruukki and regional chief executive at the construction chemicals company Henkel Makroflex. He has a master’s degree in international business administration (MBA) from the Estonian Business School. ANDRUS AIT member of the management board, chief financial officer appointed to the board until 20 February 2027 Andrus Ait has been on the management board of Tallinna Sadam since February 2022. Previously, he has worked at Riigi Kinnisvara AS in various positions in the financial area, including as chief financial officer and a member of the management board. He has a master’s degree in economics from Tallinn University of Technology (TalTech).
TABLE OF CONTENTS m 7. Corporate Governance | page 70 Translation of the Estonian original 7.7 Supervisory and management boards of subsidiaries and associates As a rule, the supervisory boards of Tallinna Sadam’s wholly-held subsidiaries have three members. At the end of 2023, the members of the supervisory board of TS Shipping were Valdo Kalm (chairman), Andrus Ait and Rene Pärt. The management board of TS Shipping has two members and at the reporting date the members were Vahur Ausmees (chairman) and Damir Utorov. At 31 December 2023, the members of the supervisory board of TS Laevad were Valdo Kalm (chairman), Andrus Ait and Rene Pärt. The management board of TS Laevad has three members and at the reporting date the members were Indrek Randveer (chairman), Guldar Kivro and Katrin Aron. At 31 December 2023, the members of the supervisory board of Green Marine, an associate of Tallinna Sadam, were Valdo Kalm (chairman), Andrus Ait, Margus Vihman, Carl-Jüri Piht and Innar Susi. The management board of the associate has two members and at the reporting date they were Indrek Kajakas (chairman) and Aivar Sülla. 7.8 Cooperation of the management and supervisory boards The management and supervisory boards work closely together in developing and implementing the goals and strategy of Tallinna Sadam. The two boards mainly exchange information at the meetings of the supervisory board and the audit committee. The management board follows the strategic instructions of the supervisory board and informs the supervisory board of any significant risks and other matters arising in the course of business that may affect the financial performance and the achievement of the goals of Tallinna Sadam. At its meetings, the supervisory board is regularly informed about the Group’s operating and financial results. 7.9 Disclosure of information and communication Since the listing of the Tallinna Sadam shares on the Nasdaq Tallinn Stock Exchange on 13 June 2018, Tallinna Sadam observes the rules of the stock exchange and the requirements of the EU Market Abuse Regulation and discloses information in accordance with the principle of fair and equal treatment of all investors and the rules for handling and disclosing inside information. The main information channels of Tallinna Sadam are stock exchange announcements, press releases, newsletters and the corporate website www.ts.ee/en. The website includes, among other things, general information on the company’s governance, strategy, dividend policy, the current year’s financial calendar with the dates on which the operating results and financial statements are released, quarterly operational statistics, and interim and annual reports. The management board of Tallinna Sadam presents the company’s results on a quarterly basis at interactive webinars (on the disclosure of an interim report). The recordings and presentations of the webinars are available on the website. We organised five webinars for investors in 2023, focusing on our interim reports, and from this year we started to offer webinars in Estonian as well as English. For the first time in several years, the annual general meeting was held in person, and for the first time the shareholders could vote in advance in writing. The resolutions of the general meeting and the reports of the supervisory board are available on the website of Tallinna Sadam at www.ts.ee/en. We organise investor meetings as required and requested by investors. When communicating with investors and analysts, we only use previously disclosed information. In 2023, investor meetings were held in Tallinn and New York, as well as through online channels. The annual investor day for local investors was held at the cruise terminal. In order to increase our visibility among Nordic investors, we commissioned Nordea Bank (Finland) to carry out equity research to provide investors with an analysis of our share and to develop investor relations, particularly among Scandinavian institutional investors. As the winner of the ‘Best Investor Relations in the Baltics’ award at the Nasdaq Baltic Awards 2021, we attended the Closing Bell ceremony in New York in November. We also gave a presentation at the Investor Toomas conference and the Investor Toomas Club organised a visit to Tallinna Sadam at the end of the year. Our marketing and communication activities focus not only on investor relations, but also on direct communication with various target and stakeholder groups, multidirectional information exchange and building a brand image, which is a key factor in implementing our business strategy. As a responsible company, we adhere to the principles of openness, integrity and ethical conduct in our messages as well as our marketing and communication activities.
TABLE OF CONTENTS m 7. Corporate Governance | page 71 Translation of the Estonian original 7.10 Financial reporting 7.11 Statement of compliance with the CGR The preparation of financial statements is the responsibility of the company’s management board. The consolidated financial statements are prepared in accordance with the Estonian Accounting Act and International Financial Reporting Standards as adopted by the European Union (IFRS EU). The auditor of Tallinna Sadam is AS PricewaterhouseCoopers (PwC) and the signatory of the independent auditors’ report is Lauri Past. The contract with the auditor was signed in 2023 for a period of two years (for the audit of the annual reports of the financial years 2023 and 2024) and can be extended for the audit of the annual report of the financial year 2025. The audit firm has not provided any services to the company that could compromise the auditor’s independence. In 2023, the fees paid or payable for services provided by all audit firms totalled EUR 102 thousand (2022: EUR 57 thousand). In 2023, the fees paid or payable for audit services provided
by the appointed auditor totalled EUR 76 thousand (2022: EUR 35 thousand). In addition, the Group paid EUR 14 thousand to PwC for other services (CSRD readiness analysis and financial training). Another audit firm provided the Group with translation services (the translation of financial reports).
REMUNERATION REPORT
TABLE OF CONTENTS m Remuneration Report | page 73 Translation of the Estonian original Under section 135 3 of the Securities Market Act, listed companies are required to publish a report on the remuneration paid to the members of the management board during the reporting period and on the compliance of the remuneration with the remuneration policy. In 2021, the supervisory board of Tallinna Sadam set up a four-member remuneration committee (see section 7.4 of the management report), which has the following main responsibilities: • determining the competence profile of the management board based on the company’s strategy; • developing and updating the remuneration policy for the members of the management board and monitoring compliance with the policy; • submitting proposals to the supervisory board for the election and remuneration of the members of the management board. The remuneration committee has developed the remuneration policy for the supervisory board and the management board, which was approved by a resolution of the annual general meeting of 2022. Performance-related remuneration: • Variable remuneration for the achievement of the company’s annual goals, which are set in accordance with the principles of the performance management system. The remuneration committee assesses the achievement of the goals of the members of the management board and makes a proposal to the supervisory board once a year, before the approval of the annual report, regarding the payment of performance-related remuneration (a bonus). Other benefits: • Training • Business travel related benefits • Technical support (a phone, a car, other work equipment) • Directors and officers liability insurance • Termination benefits • Compensation for non-compete obligations The short-term bonus programme is based on the performance management system for the mem- bers of the management board and employees to monitor the achievement of strategic goals. In accordance with the performance management system, the Group’s three to six primary goals (revenue, EBITDA and the implementation of key projects, including sustainable development projects) and some individual secondary goals (operating volumes, business projects, changes in processes, etc.) are set on an annual basis and the achievement of the goals determines the rate of a person’s performance-related remuneration (the bonus). As a rule, 60% of a management board member’s (or an employee’s) performance-related bonus depends on the achievement of the Group’s goals (the primary goals) and 40% depends on the achievement of individual goals (the secondary goals). Until 2022, the primary goals accounted for 40% and the individual goals for 60% of the potential performance-related bonus. The supervisory board sets the goals for the manage- ment board and assesses the achievement of these goals once a year, during the approval of the annual report for the financial year, based on the proposals of the remuneration committee. Due to the restrictions set out in the State Assets Act, Tallinna Sadam has no long-term bonus programmes and the short-term bonus programme is not linked to Tallinna Sadam’s shares. Remuneration of the management board The remuneration of a member of the management board is determined on the basis of the board member’s level of responsibility, duties, professional skills, experience and education which are relevant to the operations and the achievement of the goals of Tallinna Sadam. The remuneration of the members of the management board is reviewed in the light of developments in the salary market and the company’s performance. Fixed basic remuneration: • Monthly remuneration in accordance with the contract signed with the member of the management board • Holiday pay in accordance with the contract signed with the member of the management board: annual leave of 28 days and winter leave of 7 days • Sickness benefits in accordance with health insurance laws
TABLE OF CONTENTS m Remuneration Report | page 74 Translation of the Estonian original Remuneration provided to the members of the management board for 2023 In thousands of euros Term of office Basic remuneration Performance-related bonus Other benefits TOTAL Share of fixed remuneration Valdo Kalm, chairman of the management board 1 Mar 2016 – 28 Feb 2027 157 34 25 216 73% Margus Vihman, member of the management board, chief commercial officer 1 Nov 2016 – 31 Oct 2024 123 26 23 172 71% Andrus Ait, member of the management board, chief financial officer 21 Feb 2022 – 20 Feb 2027 111 23 16 150 74% TOTAL 391 83 64 538 73% The limits on additional remuneration and termination benefits for the members of the management board are set out in section 86 (clauses 2 and 3) of the State Assets Act. Accordingly, the total addi- tional remuneration paid to a member of the management board of Tallinna Sadam may not exceed four times the average monthly remuneration paid to the member of the management board in the previous financial year and the termination benefits paid to a member of the management board may not exceed the management board member’s three months’ remuneration at the time the contract is terminated. The basis and amount of the additional remuneration must be objective and justified, taking into account the achievement of the goals for the period, the value added to the company and the market position. Based on the service contracts in force, at 31 December 2023 Tallinna Sadam was obligated to pay the members of the management board termination benefits equal to three months’ remuneration if the members of the management board were removed from office without due cause. A member of the management board is only entitled to termination benefits if Tallinna Sadam terminates the service contract without due cause, which means that no termination benefits will be paid if the member of the management board breaches the contract. The company has to pay a member of the management board monthly compensation equal to 50% of the board member’s monthly remuneration for a period of 12 months aſter the expiry of the contract for compliance with the non-compete obligations. The members of the management board are not remunerated for participation in the work of the supervisory boards of the Group’s subsidiaries and associates. According to the decision of the supervisory board of Tallinna Sadam of 8 February 2024, the members of the management board will receive performance-related bonuses for the achievement of the goals set for 2023 in the amount of 2.52 times the monthly remuneration of the members of the management board. As a result of the sanctions and the general economic recession, only 23% (maximum 60%) of the Group’s primary goals (revenue, adjusted EBITDA, winning the ferry service tender for TS Laevad, digitalisation-related development projects, maintaining the Group’s reputation index at least at the level of 2022) were achieved, but 40% (maximum 40%) of the individual secondary goals of the management board (implementing the strategy, initiating growth projects and maintaining the level of the employee engagement index) were achieved. This means that 63% of the goals were met. Performance-related bonuses will be paid to the members of the management board aſter the supervisory board has approved the Group’s annual report for 2023. In 2023, no variable remuneration was reclaimed from the members of the management board and the remuneration was paid in accordance with the remuneration policy in force without exception.
TABLE OF CONTENTS m Remuneration Report | page 75 Translation of the Estonian original Comparison of annual remuneration * and performance * The remuneration presented in the chart comprises accrual-based basic remuneration and performance-related bonuses. The average remuneration of full-time employees has been calculated based on the remuneration of the parent company’s employees. CCO (Margus Vihman) CFO (Andrus Ait) from 02.2022 CFO (Marko Raid) until 10.2021 Average remuneration of full-time employee Adjusted EBITDA (mEUR) CEO (Valdo Kalm) 300 250 200 150 100 50 0 100 75 60 45 30 15 0 remuneration, EUR thousand 2019 2020 2021 2022 2023 EBITDA, EUR million 172 141 135 23 174 122 137 24 74 58 54 142 116 23 111 149 134 191 33 150 190 27 120 56 49
CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS m Consolidated Financial Statements | page 77 Translation of the Estonian original Consolidated Financial Statements Consolidated statement of financial position In thousands of euros Note 31.12.2023 Restated * 31.12.2022 Restated * 01.01.2022 ASSETS Current assets Cash and cash equivalents 7 29,733 44,387 34,840 Trade and other receivables 8 12,118 7,477 14,151 Inventories 550 749 399 Non-current assets held for sale 0 100 0 Total current assets 42,401 52,713 49,390 Non-current assets Investments in an associate 9 2,177 2,099 1,559 Other long-term receivables 8 163 303 896 Investment properties 10 14,069 14,069 14,069 Property, plant and equipment 11 545,271 550,310 561,494 Intangible assets 12 2,083 1,735 2,130 Total non-current assets 563,763 568,516 580,148 Total assets 606,164 621,229 629,538 * For further information, see note 2. In thousands of euros Note 31.12.2023 Restated * 31.12.2022 Restated * 01.01.2022 LIABILITIES Current liabilities Loans and borrowings 17 15,831 16,928 16,215 Provisions 14 1,311 2,013 1,572 Government grants 18 7,344 8,578 1,223 Taxes payable 16 876 1,060 890 Trade and other payables 15 9,492 8,820 10,049 Total current liabilities 34,854 37,399 29,949 Non-current liabilities Loans and borrowings 17 157,566 171,482 187,398 Government grants 18 33,075 30,156 29,835 Other payables 15 3,010 1,216 1,461 Total non-current liabilities 193,651 202,854 218,694 Total liabilities 228,505 240,253 248,643 EQUITY Share capital 263,000 263,000 263,000 Share premium 44,478 44,478 44,478 Statutory capital reserve 22,858 22,115 21,271 Retained earnings 47,323 51,383 52,146 Total equity 19 377,659 380,976 380,895 Total liabilities and equity 606,164 621,229 629,538
TABLE OF CONTENTS m Consolidated Financial Statements | page 78 Translation of the Estonian original Consolidated statement of comprehensive income In thousands of euros Note 2023 Restated * 2022 Revenue 3, 20 116,646 121,703 Other income 22 2,208 1,441 Operating expenses 21 –41,403 –42,862 Impairment of financial assets –1,145 –556 Personnel expenses 21 –25,214 –23,165 Depreciation, amortisation and impairment 11, 12 –25,389 –25,312 Other expenses –1,073 –462 Operating profit 24,630 30,787 FINANCE INCOME AND COSTS Finance income 1,237 216 Finance costs 23 –7,435 –2,013 Finance costs – net –6,198 –1,797 Share of profit of an associate accounted for under the equity method 9 435 795 Profit before income tax 18,867 29,785 Income tax expense 19 –2,985 –4,193 Profit for the period 15,882 25,592 Basic and diluted earnings per share (in euros) 19 0.06 0.10 * For further information, see note 2.
TABLE OF CONTENTS m Consolidated Financial Statements | page 79 Translation of the Estonian original Consolidated statement of cash flows In thousands of euros Note 2023 2022 Cash receipts from sale of goods and services 124,344 130,099 Cash receipts related to other income 272 188 Payments to suppliers –52,911 –53,548 Payments to and on behalf of employees –24,165 –19,899 Payments for other expenses –317 –368 Income tax paid on dividends 19 –3,264 –4,335 Cash from operating activities 43,959 52,137 Purchases of property, plant and equipment 26 –17,946 –15,189 Purchases of intangible assets 26 –799 –455 Proceeds from sale of property, plant and equipment 28 191 Government grants received 18 0 15,001 Dividends received 9 357 255 Interest received 1,179 83 Cash used in investing activities –17,181 –114 Redemption of debt securities 17 –7,650 –7,650 Repayments of loans received 17 –8,266 –8,266 Dividends paid 19 –19,012 –25,287 Interest paid 17 –6,494 –1,264 Other payments related to financing activities –10 –9 Cash used in financing activities –41,432 –42,476 NET CASH FLOW –14,654 9,547 Cash and cash equivalents at beginning of period 7 44,387 34,840 Change in cash and cash equivalents –14,654 9,547 Cash and cash equivalents at end of period 7 29,733 44,387
TABLE OF CONTENTS m Consolidated Financial Statements | page 80 Translation of the Estonian original Consolidated statement of changes in equity In thousands of euros Note Share capital Share premium Statutory capital reserve Retained earnings Total equity attribut- able to owners of the Parent Equity at 31 December 2021 263,000 44,478 21,271 52,146 380,895 Profit for the period 0 0 0 25,592 25,592 Total comprehensive income for the period 0 0 0 25,592 25,592 Dividend declared 19 0 0 0 –25,511 –25,511 Total transactions with owners 0 0 0 –25,511 –25,511 Increase of capital reserve 0 0 844 –844 0 Equity at 31 December 2022 263,000 44,478 22,115 51,383 380,976 Profit for the period 0 0 0 15,882 15,882 Total comprehensive income for the period 0 0 0 15,882 15,882 Dividend declared 19 0 0 0 –19,199 –19,199 Total transactions with owners 0 0 0 –19,199 –19,199 Increase of capital reserve 0 0 743 –743 0 Equity at 31 December 2023 263,000 44,478 22,858 47,323 377,659
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 1 | page 81 Translation of the Estonian original Notes to the Consolidated Financial Statements
Note 1. Reporting entity AS Tallinna Sadam (also referred to as the ‘Parent’ or the ‘Company’) is a company incorporated and registered in the Republic of Estonia on 5 November 1996. The consolidated financial statements of AS Tallinna Sadam as at and for the year ended 31 December 2023 comprise the Parent and its subsidiaries (together referred to as the ‘Group’). The Group’s core business lines are rendering port Sadama 25, Tallinn 15051, the Republic of Estonia. The ultimate controlling party of AS Tallinna Sadam is the Republic of Estonia (ownership interest of 67.03% through the Ministry of Climate).
services in the capacity of a landlord port, organising ferry service between Estonia’s mainland and biggest islands and operating the multifunctional icebreaker Botnica.
In addition, the Group has a 51% interest in the associate AS Green Marine but it does not have control of the entity’s decision-making. In the Group’s financial statements, the interest in the associate is accounted for using the equity method.
The management board authorised these consolidated financial statements for issue on 18 March 2024. Under the Estonian Commercial Code, the annual report must also be approved by the supervisory board and the shareholders. The shareholders may decide not to approve the annual report prepared by the management board and approved by the supervisory board and may demand the preparation of a new annual report.
The Group’s subsidiaries as at 31 December 2023 and 31 December 2022: Subsidiary Domicile Ownership interest (%) 2023 Ownership interest (%) 2022 Core business line OÜ TS Shipping Republic of Estonia 100 100 Rendering icebreaking and other offshore support services with the multi-functional icebreaker Botnica OÜ TS Laevad Republic of Estonia 100 100 Rendering domestic ferry service between Estonia’s mainland and two largest islands
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 2 | page 82 Translation of the Estonian original
Note 2. Material accounting policies
Basis of preparation
The Group’s consolidated financial statements as at and for the year ended 31 December 2023 have been prepared in accordance with the Estonian Accounting Act and International Financial Reporting Standards as adopted by the European Union (IFRS).
The consolidated financial statements have been prepared on the historical cost basis except for certain financial assets and financial liabilities, which are carried at fair value.
Correction of errors and presentation of information
Reclassification of investment properties Based on the results of an additional analysis conducted in 2023, the Group concluded that some properties not in use, which previously were classified as items of property plant and equipment, met the definition of investment property and ought to have been classified as such in previous periods. Therefore, the Group corrected the accounting for those properties in 2023 and reclassified them retrospectively as investment properties. The correction had no impact on the Group’s consolidated statement of comprehensive income, consolidated statement of cash flows and consolidated statement of changes in equity. The Parent company’s statement of financial position was corrected to the same extent. The correction had no impact on the Parent company’s statement of comprehensive income, statement of cash flows and statement of changes in equity. In thousands of euros Original balance 01.01.2022 Restatement Restated 01.01.2022 Investment properties 0 14,069 14,069 Property, plant and equipment 575,563 –14,069 561,494 Total 575,563 0 575,563 In thousands of euros Original balance 31.12.2022 Restatement Restated 31.12.2022 Investment properties 0 14,069 14,069 Property, plant and equipment 564,379 –14,069 550,310 Total 564,379 0 564,379
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 2 | page 83 Translation of the Estonian original
Reclassification of interest liabilities To meet the requirements of IAS 9 according to which borrowings have to be presented at amortised cost, the Group corrected its financial statements for 2023 by reclassifying interest liabilities from Trade and other payables to short-term Loans and borrowings. The correction had no impact on the Group’s consolidated statement of comprehensive income, consolidated statement of cash flows and consolidated statement of changes in equity. The Parent company’s statement of financial position was corrected to the same extent. The correction had no impact on the Parent company’s statement of comprehensive income, statement of cash flows and statement of changes in equity.
In thousands of euros Original balance 01.01.2022 Restatement Restated 01.01.2022 Trade and other payables 10,348 –299 10,049 Loans and borrowings 15,916 299 16,215 Total 26,264 0 26,264 In thousands of euros Original balance 31.12.2022 Restatement Restated 31.12.2022 Trade and other payables 9,832 –1,012 8,820 Loans and borrowings 15,916 1,012 16,928 Total 25,748 0 25,748
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 2 | page 84 Translation of the Estonian original
Application of new or amended standards and interpretations The following new or amended standards and interpretations became mandatory for the Group on 1 January 2023. Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting Policies (effective for annual reporting periods beginning on or aſter 1 January 2023). IAS 1 was amended to require companies to disclose their material accounting policy information rather than their significant accounting policies. The amendment provided the definition of material accounting policy information. The amendment also clarified that accounting policy information is expected to be material if, without it, the users of the financial statements would be unable to understand other material information in the financial statements. The amendment provided illustrative examples of accounting policy information that is likely to be considered material to the entity’s financial statements. Further, the amendment to IAS 1 clarified that immaterial accounting policy information need not be disclosed. However, if it is disclosed, it should not obscure material accounting policy information. To support this amendment, IFRS Practice Statement 2, Making Materiality Judgements, was also amended to provide guidance on how to apply the concept of materiality to accounting policy disclosures. The amendments, which have been applied in the preparation of these financial statements, affected the disclosure of the Group’s accounting policies. Amendments to IAS 8: Definition of Accounting Estimates (effective for annual reporting periods beginning on or aſter 1 January 2023). The amendments to IAS 8 clarified how companies should distinguish changes in accounting policies from changes in accounting estimates. The amendments, which have been applied in the preparation of these financial statements, affected the disclosure of the Group’s accounting policies.
New standards, amendments to standards and interpretations issued New standards, amendments to standards and interpretations have been issued, which will become mandatory for the Group on or aſter 1 January 2024 and which the Group has not adopted early. Amendments to IAS 1: Classification of Liabilities as Current or Non-current – Deferral of Effective Date (effective for annual reporting periods beginning on or aſter 1 January 2024; not yet adopted by the EU). These amendments clarify that liabilities are classified as either current or non-current, depending on the rights that exist at the end of the reporting period. Liabilities are non-current if the entity has a substantive right, at the end of the reporting period, to defer settlement for at least twelve months. The guidance no longer requires such a right to be unconditional. The October 2022 amendment established that loan covenants to be complied with aſter the reporting date do not affect the classification of debt as current or non-current at the reporting date. Management’s expectations whether they will subsequently exercise the right to defer settlement do not affect the classification of liabilities. A liability is classified as current if a condition is breached at or before the reporting date even if a waiver of that condition is obtained from the lender aſter the end of the reporting period. Conversely, a loan is classified as non-current if a loan covenant is breached only aſter the reporting date. In addition, the amendments include clarifying the classification requirements for debt a company might settle by converting it into equity. ‘Settlement’ is defined as the extinguish- ment of a liability with cash, other resources embodying economic benefits or an entity’s own equity instruments. There is an exception for convertible instruments that might be converted into equity, but only for those instruments where the conversion option is classified as an equity instrument as a separate component of a compound financial instrument. According to the Group’s assessment, the amendments may affect its financial statements, when initially applied, because the Group has borrowings and compliance with the terms and conditions, including the covenants, of those borrowings is checked twice a year.
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 2 | page 85 Translation of the Estonian original
Amendments to IAS 7 and IFRS 7: Supplier Finance Arrangements (effective for annual reporting periods beginning on or aſter 1 January 2024; not yet adopted by the EU). In response to financial statement users’ concerns about insufficient or misleading disclosure of financing arrangements, the IASB issued amendments to IAS 7 and IFRS 7 in May 2023 to require disclosure of supplier finance arrangements. These changes require disclosure of financial arrangements with corporate suppliers that would allow users of financial statements to assess the impact of those arrangements on the company's liabilities and cash flows and the company's liquidity risk. The purpose of the additional disclosure requirements is to increase the transparency of suppliers' financial arrangements. The changes do not affect the recognition or measurement principles, only the disclosure requirements. According to the Group’s assessment, the amendments may affect the disclosures made in its financial statements, when initially applied. Other new standards, amendments to standards and interpretations not yet effective are not expected to have a material impact on the Group’s financial statements.
The consolidated financial statements comprise the financial statements of AS Tallinna Sadam and its subsidiaries, consolidated line by line.
In the consolidated financial statements, investments in associates are accounted for using the equity method.
Revenue The Group recognises revenue when (or as) a performance obligation is satisfied, i.e. when ‘control’ of the goods or services underlying the particular performance obligation is trans- ferred to the customer. The Group does not have contracts with customers where the expected length of time between when the Group transfers the promised services and the customer pays for those services exceeds one year. Accordingly, the Group does not adjust the transaction price for the time value of money. The Group recognises the following major types of revenue from contracts with customers: • Vessel dues • Cargo charges • Passenger fees • Sale of electricity • Sale of ferry services • Sale of other services Revenue is measured based on the consideration specified in a contract with a customer and it excludes amounts collected on behalf of third parties.
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 2 | page 86 Translation of the Estonian original
Vessel dues Vessel dues are calculated and collected either aſter each port call or twice a month and consist of the following: • tonnage charge (on the basis of the gross tonnage of the vessel for each port call of the vessel); • waste fee (on the basis of the gross tonnage of the vessel for each port call of the vessel; in the case of ferries, for one port call per day); • mooring charge (for each mooring operation based on the gross tonnage of the vessel). An entrance of a vessel into any of the Group’s harbours is considered a port call. Vessel dues are charged for each port call. Tonnage charges are fees charged from customers, i.e. shipping companies, in exchange for a vessel’s entry into any of the Group’s harbours and the use of a quay (tonnage service). Waste reception and mooring services are rendered in exchange for waste fees and mooring charges. A contract with a customer can either include a vessel schedule in which a number of port calls is determined in advance or it may be a contract for a non-recurring tramp vessel call. Tonnage service, and waste reception and mooring services, when elected, form separate performance obligations. Additionally, the Group grants volume discounts on tonnage service to certain types of vessels based on the accumulated number of port calls by the vessel during the calendar year. Such volume discounts represent options to purchase additional tonnage service in the future (but only up to the end of the calendar year) at a discount, thus granting a material right to the customer. Therefore, each port call that contributes to the cumulative number of port calls, and hence to probable future discounts on tonnage service, consists of two to four performance obligations – (1) tonnage service, (2) grant of an option to the customer to acquire discounted tonnage service in the future, (3) waste reception (if elected), and (4) mooring service (if elected). For tramp vessels and vessels visiting the port based on a pre-agreed schedule but without the right to receive prospective volume discounts, the transaction price is based on public or agreed prices and conditions and is allocated entirely to the tonnage service based on its stand-alone selling price. For vessels visiting the port based on a pre-agreed schedule and having the right to receive a prospective volume discount, the transaction price is allocated between the tonnage service and the option to purchase discounted tonnage service based on the estimated total number of port calls by that vessel during the calendar year. The estimates for the number of total port calls for each vessel are reassessed at each reporting date. Revenue from tonnage service is recognised over time, as the vessels use the quay during each port call, using a time-based measure of progress because the customer receives the benefit of the tonnage service equally throughout the port call. Similarly, revenue from waste reception and mooring services is recognised over time, as those services are performed. Revenue from options to acquire future discounted tonnage service is recognised over time, as the options are exercised and the discounted tonnage service is used by the customers. Cargo charges Cargo charges are levied for using the general harbour infrastructure. Contracts with customers, i.e. cargo operators, are normally signed for 20 to 50 years but sometimes for a longer period. Cargo charges are normally calculated and collected monthly based on the cargo volumes handled by the cargo operator during the period. The Group’s performance obligation is to provide the cargo operator with access to the harbour infrastructure throughout the duration of the contract. The performance obligation is made up of a series of distinct services that are considered a single performance obligation over the duration of the contract. Revenue from cargo charges charged from a customer is based on the cargo handling tariff(s) stipulated in the contract, which generally decrease based on the cargo volume handled by the cargo operator within a calendar year. The agreements signed with cargo operators generally set out a minimum annual cargo volume. If the cargo operator handles less than the minimum, the Group is entitled to charge the customer at the end of the calendar year based on the minimum cargo volume. To estimate the amount of variable consideration for cargo charges, the Group uses the most likely amount method. The most likely amount is measured by reference to minimum contractual cargo volumes as well as actual and expected cargo volumes, which requires estimates and judgments by management. These estimates are complex because cargo volumes fluctuate. The estimates of variable consideration are revised at each reporting date.
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 2 | page 87 Translation of the Estonian original
As cargo operators simultaneously receive and consume access to infrastructure, revenue from cargo charges is recognised over time using a time-based measure of progress because customers derive the benefits of their access equally throughout the duration of the contract. Passenger fees Passenger fees are charged in exchange for services provided to passengers embarking and disembarking at the harbour, such as the use of passenger terminals, connecting walkways, traffic areas, etc. The fees are paid by the customer, i.e. the ferry operator, based on the actual number of passengers (no fee is charged for passengers under 12 years). Passenger fees are based on a public price list, which sets out the rates, and fees are collected aſter each port call or twice a month. Revenue from passenger fees is recognised over time, as the service is delivered to the customer (as the passengers arrive at or depart from the harbour), which typically happens in a single day. Sale of electricity The Group derives revenue from the sale of electricity and network services. Fees from the sale of electricity and network services are collected monthly, in the month following the month of consumption. Prices are fixed per unit of electricity consumed. As the customers simultaneously receive and consume the benefits provided, the delivery of these services takes place over a period of time. The Group is responsible for maintaining the electricity network required to deliver electricity to customers and has full discretion to establish network prices. Thus, it acts as a principal in providing this service. When connecting to the electricity network, customers pay a connection fee based on the expenses incurred in enabling connection to the network. The connection service does not represent a separate performance obligation as the customer does not benefit from this service separately from the consumption of electricity. Therefore, connection fees form part of the consideration for electricity and are recognised as revenue over the estimated period during which customers consume electricity. Amounts received for connection fees not yet included in revenue are recognised in the statement of financial position as contract liabilities. Sale of ferry services — revenue from ticket sales The Group earns revenue from the sale of tickets to domestic ferry routes operated by it. Consideration is received when a ticket is sold (for customers who do not buy tickets against their credit limit or prepayment), when a prepayment is received or once a month (based on the ticket, in the month following the month in which the ferry service was used). Ticket prices are fixed and set by the state. No volume or other discounts are granted. Revenue from ticket sales is recognised over time, as the ferry transfers the passengers and/or vehicles, which happens in a single day, or at the time when the ticket expires. Consideration for tickets sold to trips not yet performed is deferred and recognised as a contract liability within current liabilities. Income from additional services (ticket information sent by SMS, return of tickets and similar services) is recognised when the service has been rendered. Revenue from other sources
Lease income Lease income is earned from operating leases and recognised on a straight-line basis over the lease term. Lease income includes consideration for the rights of superficies (building rights) and the lease of non-residential space.
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 2 | page 88 Translation of the Estonian original
Sale of ferry services — government support Government grants received by the Group include public transport support received for operating ferries at the fee rates stated in the public service contract for passenger transport (PSCPT) minus revenue from ticket sales (the item Sale of ferry services — revenue from ticket sales). Government support for PSCPT comprises fixed fee components and a trip (voyage) component, which make up the total PSCPT fee. The fixed components are recognised on a straight-line basis over the term of the PSCPT and the trip component is recognised based on the number of trips made during the period. Revenue recognised from the sale of passenger and/or vehicle tickets during a reporting period is deducted from the total PSCPT fee and the difference is recognised and paid out as government support for public transport (a government grant).
Financial instruments Financial assets and financial liabilities are recognised when a Group entity becomes a party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to the fair value of the financial assets and deducted from the fair value of the financial liabilities on initial recognition. Transaction costs directly attributable to the acquisition of financial assets and financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.
Financial assets Impairment of financial assets
The Group recognises a loss allowance for expected credit losses on investments in debt instruments that are measured at amortised cost or at fair value through other comprehensive income and lease receivables. The amount of expected credit losses (ECLs) is updated at each reporting date to reflect changes in credit risk since the initial recognition of the financial instrument.
The Group applies the simplified approach provided in IFRS 9 for recognising lifetime ECLs for trade receivables and lease receivables (see note 4).
Write-off policy The Group writes off a financial asset when there is information indicating that the counterparty is in severe financial difficulty and there is no realistic prospect of recovery, e.g. when the counterparty has been put into liquidation or declared to be bankrupt and the Group’s management estimates that collection is improbable.
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 2 | page 89 Translation of the Estonian original
Financial assets written off may still be subject to enforcement activities under the Group’s recovery procedures, with the assistance of legal advice where appropriate. Any recoveries of amounts previously written off are recognised in profit or loss.
Financial liabilities
All financial liabilities are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method (trade and other payables and loans and borrowings) or at fair value through profit or loss (negative value of interest rate swaps).
Inventories Inventories are measured at the lower of cost and net realisable value. Cost is determined using the first in, first out (FIFO) method.
Investment properties Investment properties are accounted for using the cost model, i.e. they are measured at cost less any accumulated depreciation and any impairment losses. Plots of land classified as investment properties are not depreciated .
Property, plant and equipment
Cost The Group’s items of property, plant and equipment include vessels (an icebreaker and ferries), which are subject to periodic major overhauls (dry-dockings) during their useful lives (normally at intervals of 2.5–5 years). Vessels are accounted for using the component approach, whereby at initial recognition and subsequently (a) the non-physical component that represents a major overhaul is identified, (b) the cost of the non-physical component is estimated (if possible, by reference to current market prices), (c) the non-physical component is depreciated separately over its useful life (i.e. the dry-docking component separately from the vessel), and (d) the remaining carrying amount of a non-physical item is derecognised when the next overhaul (dry-docking) is performed and the new non-physical component is recognised.
Depreciation Depreciation of an item of property, plant and equipment is calculated on the difference between cost and residual value over the estimated useful life of the asset using the straight-line method. The value of vessels at the end of their period of use (residual value) is equal to the value of scrap metal. Based on management’s estimates and standard practice in the shipping sector, a vessel’s two significant parts — the vessel itself and dry docking expenses — that have different useful lives are depreciated separately. The estimated useful lives of items of property, plant and equipment are as follows: • Quays 10–50 years • Dredging areas in port basins 20 years • Buildings, structures and facilities 5–50 years • Plant and equipment 3.3–10 years • Vessels 10–25 years • Capitalised dry docking costs 2.5–5 years • Other items of property, plant and equipment 2–10 years Land is not depreciated.
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Intangible assets The expected useful life of intangible assets (computer soſtware) used by the Group is 5 years.
Impairment of non-financial assets At each reporting date, the Group assesses whether there is any indication that its non-financial assets may be impaired. The Group assesses impairment indicators from both external and internal sources, including significant changes in the global market, specifically as they relate to the political environments of neighbouring countries such as Russia and Finland, significant changes in global trade in oil and other liquid bulk cargo as well as dry bulk cargo, significant changes in the travel industry, and significant changes in weather patterns that could impact the use of the Group’s multifunctional icebreaker. Non-financial assets include property, plant and equipment and intangible assets. Impairment losses can be estimated for an individual asset or a group of assets (a cash- generating unit). A cash-generating unit is defined as the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. If there is indication of impairment, the recoverable amount of the asset is assessed and compared to its carrying amount in the statement of financial position. An impairment loss is recognised in the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use. Value in use is determined using discounted cash flow projections that are based on financial estimates reviewed by management and made for a period corresponding to the expected lifespan of the asset, but normally not more than 50 years. The amount of the impairment loss of a cash generating unit is allocated to more significant non-current assets of the unit on a pro rata basis so that their value does not fall below their fair value less cost of disposal. Impairment losses are recognised as an expense in the period in which they are incurred. Assets that have been previously written down to their recoverable amount are reviewed at each reporting date to assess whether there is any indication that an impairment loss recognised in a prior period may no longer exist or may have decreased. A reversal of an impairment losses is recognised in the statement of comprehensive income as a reduction of impairment losses on non-current assets.
Corporate income tax Deferred tax is recognised for temporary differences that arise between the carrying amounts of assets and liabilities and their tax bases (the tax base is the amount attributed to an asset or liability for tax purposes). Under Estonian laws, corporate profit for the year is not subject to taxation. The obligation to pay income tax arises on the distribution of profit and is recognised as an expense (in profit or loss for the period) when the dividend is declared. Due to the nature of the taxation system, companies registered in Estonia generally have no deferred tax assets or liabilities.
The Group incurs deferred tax liabilities on investments in subsidiaries and associates domiciled in Estonia except to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Examples of the reversal of taxable temporary differences include the distribution of a dividend, the disposal of an investment, and similar transactions. Since the Group is able to control its subsidiaries’ dividend policy and to block, where necessary, the profit distribution decisions of the associate AS Green Marine, it is able to control the timing of the reversal of the temporary differences associated with those investments. If the Parent has decided not to distribute the profit of the subsidiaries and the associate in the foreseeable future, it will not recognise any deferred tax liability. If the Parent assesses that a dividend will be distributed in the foreseeable future, a deferred tax liability will be recognised for the planned profit distribution, assuming that at the reporting date there are sufficient funds and equity from which profit can be distributed in the foreseeable future.
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Government grants Government grants related to assets
Government grants related to the acquisition of assets are presented in the statement of financial position by setting up the grant as non-current deferred income (a non-current liability), which is recognised in profit or loss on a systematic basis over the useful life of the asset. Assets acquired through government grants are initially recognised at full cost (i.e. using the gross method). An acquired asset is depreciated and the liability arising from the government grant is recognised in other income over the estimated useful life of the acquired asset.
Cash and cash equivalents Cash and cash equivalents recognised in the statements of financial position and cash flows comprise cash on hand, current account balances, funds that have not yet been transferred to the current account by cash-in-transit service providers or other payment intermediaries, and term deposits with original maturities of up to three months from the date of acquisition.
Statement of cash flows The statement of cash flows has been prepared using the direct method.
Related party transactions For the purposes of these consolidated financial statements, related parties include the members of the supervisory and management boards of Group companies and their close family members, companies under the control or significant influence of the above persons, associates, government agencies, and companies under the control or significant or indirect influence of the Republic of Estonia.
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Note 3. Operating segments
Services from which segment revenue is derived The Group’s business activities are organised and managed based on its core business lines. The information used by the chief operating decision maker to make decisions about resources to be allocated and assess segment performance focuses on the Group’s core business lines. The Group’s chief operating decision maker is the management board. No operating segments have been aggregated in presenting reportable segments. The Group’s reportable segments under IFRS 8 are: • Passenger harbours • Cargo harbours • Ferry • Other Passenger harbours segment comprises the rendering of port services in the capacity of a landlord port in the harbours belonging to the Group that are focused on providing services to passengers — Old City Harbour and Saaremaa Harbour. The segment’s revenue includes all revenues of these harbours, consisting primarily of vessel dues collected from ferries and cruise ships, and passenger fees charged for using the buildings and structures designed for providing services to passengers and their vehicles. It also includes other revenue generated by harbours mainly involved in providing services to passengers and ferries such as lease income for leasing out premises (office and commercial premises), cargo charges, sale of electricity and various other services. Expenses related to this segment are primarily the costs incurred in these harbours in connection with the revenue generating activities outlined above. Expenses also include corporate expenses, which are allocated based on the ratio of revenue from this segment to total revenue from harbour operations (the Passenger harbours and Cargo harbours segments combined). All corporate operating expenses are fully allocated to the Passenger harbours and Cargo harbours segments as the provision of landlord port operations is the main activity of the corporate head office (the port authority). Cargo harbours segment comprises the rendering of port services in the capacity of a landlord port in the harbours belonging to the Group that are focused on cargo handling — Muuga Harbour and Paldiski South Harbour. The segment’s revenue includes all revenues of these harbours, consisting primarily of revenue from vessel dues for cargo vessels, revenue from cargo charges paid by cargo operators for using the harbour infrastructure, and lease income from the use of premises by cargo operators and other customers under contracts on the right of superficies and lease contracts. It also includes passenger fees and revenue from the sale of electricity and other services. Expenses related to this segment are primarily the costs incurred in these harbours in connection with the revenue generating activities outlined above. Expenses also include corporate expenses, which are allocated based on the ratio of revenue from this segment to total revenue from harbour operations (the Passenger harbours and Cargo harbours segments combined). All corporate operating expenses are fully allocated to the Passenger harbours and Cargo harbours segments as the provision of landlord port services is the main activity of the corporate head office (the port authority).
Ferry segment comprises the rendering of ferry service by the subsidiary OÜ TS Laevad between Estonia´s mainland and two largest islands, Saaremaa and Hiiumaa, under a public service contract for passenger transport signed with the state (two routes are operated). Revenue includes revenues from ticket sales to the end-users of ferry service and government support to the extent that revenue from ticket sales does not cover the contract revenue agreed for rendering the ferry service. It also includes lease income and revenue from the provision of other services collected from tenants providing commercial services to passengers on board the ferries. The segment’s expenses include all costs related to owning and operating the ferries required for the two routes. The segment’s revenue and results comprise the revenues and results of the subsidiary OÜ TS Laevad that provides the service. No corporate expenses are allocated to the Ferry segment.
The segment Other comprises the business of the subsidiary OÜ TS Shipping that owns and operates the multifunctional icebreaker Botnica and the profit or loss on investments in an associate accounted for under the equity method. The segment’s revenues and expenses comprise the revenues and expenses of OÜ TS Shipping. No corporate expenses are allocated to the segment Other.
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Segment revenues and results
Reportable segments apply the same accounting policies as the Group. Segment revenue comprises only revenue. Segment performance indicators reported to the chief operating decision maker comprise segment operating profit and adjusted segment EBITDA. Segment operating profit represents profit before finance income and costs (net), profit from investments in an associate accounted for under the equity method, and income tax expense. Adjusted segment EBITDA represents segment operating profit before depreciation and amortisation, impairment losses, amortisation of government grants received, and profit from investments in an associate accounted for under the equity method. Compared to profit for the period, adjusted segment EBITDA represents profit for the period before depreciation and amortisation, impairment losses, amortisation of government grants received, finance income and costs (net), and income tax expense.
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Segment revenues and results In thousands of euros 2023 Passenger harbours Cargo harbours Ferry Other Total Vessel dues 19,072 12,353 0 0 31,425 Cargo charges 1,568 4,889 0 0 6,457 Passenger fees 11,284 200 0 0 11,484 Sale of electricity 1,370 3,137 0 0 4,507 Sale of ferry services — revenue from ticket sales 0 0 14,729 0 14,729 Sale of other services 1,315 547 86 185 2,133 Operating lease income 2,924 9,625 1,178 0 13,727 Charter fees 0 0 0 11,544 11,544 Sale of ferry services — government support 0 0 20,640 0 20,640 Total segment revenue * (note 20) 37,533 30,751 36,633 11,729 116,646 Adjusted segment EBITDA 19,590 11,257 15,304 3,019 49,170 Depreciation and amortisation (notes 11 and 12) –7,819 –8,505 –5,504 –2,634 –24,462 Impairment losses (notes 11 and 12) –596 –243 –74 –14 –927 Amortisation of government grants received (note 18) 574 710 0 0 1,284 Share of profit of an associate accounted for under the equity method 0 0 0 –435 –435 Segment operating profit 11,749 3,219 9,726 –64 24,630 Finance income and costs, net –6,198 Share of profit of an associate accounted for under the equity method 435 Income tax expense –2,985 Profit for the period 15,882 * Total segment revenue represents revenue from external customers and excludes inter-segment revenue of EUR 257 thousand and EUR 8 thousand for the Passenger harbours and the Cargo harbours segments, respectively, which was eliminated during consolidation.
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Segment revenues and results In thousands of euros 2022 Passenger harbours Cargo harbours Ferry Other Total Vessel dues 20,457 16,776 0 0 37,233 Cargo charges 1,708 5,749 0 0 7,457 Passenger fees 10,064 184 0 0 10,248 Sale of electricity 1,488 5,653 0 0 7,141 Sale of ferry services — revenue from ticket sales 0 0 14,199 0 14,199 Sale of other services 1,498 751 77 97 2,423 Operating lease income 2,647 9,668 1,075 0 13,390 Charter fees 0 0 0 10,206 10,206 Sale of ferry services — government support 0 0 19,406 0 19,406 Total segment revenue * (note 20) 37,862 38,781 34,757 10,303 121,703 Adjusted segment EBITDA 18,618 16,836 14,629 5,734 55,817 Depreciation and amortisation (notes 11 and 12) –7,982 –8,696 –5,703 –2,363 –24,744 Impairment losses (notes 11 and 12) –252 –316 0 0 –568 Amortisation of government grants received (note 18) 470 607 0 0 1,077 Share of profit of an associate accounted for under the equity method 0 0 0 –795 –795 Segment operating profit 10,854 8,431 8,926 2,576 30,787 Finance income and costs, net –1,797 Share of profit of an associate accounted for under the equity method 795 Income tax expense –4,193 Profit for the period 25,592 * Total segment revenue represents revenue from external customers and excludes inter-segment revenue of EUR 329 thousand and EUR 12 thousand for the Passenger harbours and the Cargo harbours segments, respectively, which was eliminated during consolidation.
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 4 | page 96 Translation of the Estonian original
Note 4. Financial risk management The Group’s operations are exposed to several financial risks: market risk (incl. cash flow interest rate risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. Risk management is performed by the Group’s risk management professionals in accordance with the policies approved by the management board. The management board establishes general risk management policies and the procedures for specific risk areas in writing.
Market risk Currency risk Currency risk is exposure to any future fluctuation in the fair value of the Group’s financial instruments or cash flows arising from movements in foreign exchange rates. The Group has no material liabilities or receivables denominated in any currency other than its functional currency (the euro). All outstanding long-term loans and borrowings are also denominated in euros. In 2023, 95.8% of receipts (2022: 96.6%) and 98.1% of payments (operating expenses, investments, finance costs, etc.) (2022: 99.4%) were denominated in euros. Since nearly all receipts, payments, loans and borrowings are denominated in euros, the Group is not exposed to any significant currency risk. Price risk At 31 December 2023 and the previous financial year-end, the Group’s statement of financial position did not include any investments in equity instruments exposing the Group to price risks resulting from financial instruments. Interest rate risk The Group’s interest rate risk arises from its long-term floating-rate loans and borrowings. At 31 December 2023 and at the end of the comparative period, the interest rates of loans and borrowings were not fixed using derivative instruments. Thus, 100% of loans and borrowings are exposed to interest rate risk. According to the assessment of the Group’s management, the Group’s cash flow can survive exceptional fluctuations in interest rates and the Group can bear interest rate risk without hedging it with derivative financial instruments. The Group’s exposure to interest rate risk is assessed using a sensitivity analysis which describes the impact of the interest rate risk exposure on the Group’s profit through an estimated fluctuation in the market interest rate. If the market interest rate as at 31 December 2023 had been higher/ lower by 100 basis points, i.e. 1 percentage point, the Group’s profit for the financial year and equity would have increased/decreased by EUR 1,715 thousand (31 December 2022: EUR 1,874 thousand), assuming all other variables remained constant.
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Credit risk Credit risk exposure mostly results from trade receivables, cash and cash equivalents and derivative transactions. At 31 December 2023, the Group’s maximum exposure to credit risk was EUR 36,920 thousand (31 December 2022: EUR 50,843 thousand). In thousands of euros At 31 December 2023 2022 Current accounts and term deposits at banks with original maturities of less than 3 months (note 7) 29,653 44,343 Receivables from customers * (note 8) 6,975 6,050 Other receivables (note 8) ** 292 450 Total 36,920 50,843 * Impairment allowances have been deducted from receivables from customers. ** Including receivables with settlement schedules of EUR 163 thousand (2022: EUR 303 thousand). Cash and cash equivalents were regarded as financial assets with low credit risk at the reporting date, because they were held at reputable international banks. Customer-related credit risk exposure is reduced by requesting advance payments or bank guarantees from customers whose solvency is doubtful. Credit risk is also mitigated by performing due diligence on the customer prior to entering into any major contracts. Other methods for managing customer-related credit risk exposures include day-to-day monitoring of customers’ payment behaviour and prompt application of appropriate measures. Based on the Group’s analysis, a loss allowance for credit-impaired receivables has been recognised. Further information on the credit quality of financial assets is disclosed in note 6. Credit risk exposure from financial transactions is mitigated by using financial institutions with high credit ratings in performing investment transactions. Credit quality of financial assets The credit quality of financial assets which are neither past due nor impaired is assessed by reference to ratings provided to creditors by independent rating agencies (if available for the counterparty). Cash in current accounts and deposits by rating * In thousands of euros At 31 December 2023 2022 Aa3 29,653 44,343 Total amount reported in cash and cash equivalents 29,653 44,343 * The remaining portion of the balance of Cash and cash equivalents (EUR 80 thousand at 31 December 2023 and EUR 44 thousand at 31 December 2022) not included in the table above consists of cash on hand and in transit, i.e. funds that cash-in-transit service providers and other payment intermediaries have not yet transferred to the Group’s current accounts. At 31 December 2023, the Group’s cash and cash equivalents were held at two banks with Aa3 ratings and 99.6% of the cash and cash equivalents was held at one bank. At 31 December 2022, cash and cash equivalents were held at three banks with the same credit rating (Aa3) and the proportions of the risk exposures were 83%, 11% and 6%.
Receivables not past due as at the reporting date accounted for 57.1% (2022: 88.9%) of total trade receivables. Further information on trade receivables is disclosed in note 8.
For all trade receivables, the Group recognises expected credit losses (ECL) using the simplified approach provided in IFRS 9, which permits recognising an allowance for lifetime expected credit losses. The measurement principles are described in the Impairment of financial assets section of accounting policies (note 2).
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Trade receivables — expected credit loss matrix In thousands of euros Not past due Days past due 0–30 31–60 61–90 >90 Total At 31 December 2023 Expected credit loss rate 2.6% 1.5% 3.0% 99.8% 100.0% Total trade receivables 5,942 1,146 58 1,238 2,031 10,415 Lifetime expected credit loss (ECL) –154 –17 –2 –1,236 –2,031 –3,440 6,975 At 31 December 2022 Expected credit loss rate 10.0% 1.5% 3.0% 80.0% 100.0% Total trade receivables 6,553 135 19 18 648 7,373 Lifetime expected credit loss (ECL) –657 –2 –1 –15 –648 –1,323 6,050
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The following table shows movements in the lifetime expected credit loss recognised for trade receivables. Trade receivables — lifetime expected credit loss * In thousands of euros Collectively assessed receivables not credit-impaired Credit-impaired receivables * Total At 31 December 2021 413 32 445 Transfer to credit impaired 0 805 805 Amounts recovered (previously written down or off) 0 –169 –169 Reversals of prior write-downs and write-offs 0 –20 –20 Change in loss allowance due to new trade receivables 262 0 262 At 31 December 2022 675 648 1,323 Transfer to credit impaired 0 1,811 1,811 Amounts written off as uncollectible 0 –6 –6 Amounts recovered (previously written down or off) 0 –81 –81 Reversals of prior write-downs and write-offs 0 –216 –216 Change in loss allowance due to new trade receivables 609 0 609 At 31 December 2023 1,284 2,156 3,440 * Including a write-down of EUR 1,281 thousand (note 30) recognised in 2023 due to the counterparty’s settlement difficulties (2022: EUR 586 thousand). Other receivables (note 8) are assessed using the 12-month expected credit loss method. At 31 December 2023, the credit risk of those financial assets had not increased significantly and, therefore, no additional loss allowance was needed. At 31 December 2023, a major share of other receivables was made up of instalment plan receivables.
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Liquidity risk The Group manages its liquidity risk using a combination of the following solutions: available funds in current accounts, term deposits, overdraſts and other investment and working capital management solutions offered by banks, regular monitoring of cash flows and matching the maturities of financial assets and liabilities. The liquidity buffer, which is maintained and available upon short notice to be able to settle quickly the liabilities arising in the ordinary course of the Group’s business, amounts to at least EUR 5 million. The liquidity reserve comprises of cash and cash equivalents, term deposits with original maturities of less than 3 months, and overdraſts where necessary. Management uses cash flow forecasts to monitor changes in the Group’s liquidity reserve on an ongoing basis and if the reserve falls below the required level, short-term external financing in the form of various debt instruments is used. The level of the minimum liquidity reserve must be at least EUR 2 million at any time. At 31 December 2023, current assets exceeded current liabilities by EUR 7.5 million (31 December 2022: by EUR 15.3 million). The Group is generating positive net cash flow. Thus, it does not need additional financing for its daily operations. In the following liquidity analysis, the Group’s financial liabilities are grouped by contractual maturity. The balances shown in the table are contractual undiscounted cash flows, which comprise the principal and the accrued interest of interest-bearing loans and borrowings. On calculating interest accrued on interest-bearing loans and borrowings (bank loans and issued debt securities), the forward- looking yield curves of interest rate swap transactions from market information providers have been used as the basis for the Euribor forecast as follows: as at 11 January 2024 for year-end 2023 and as at 13 February 2023 for year-end 2022.
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Liquidity analysis In thousands of euros Loans outstanding * Debt securities issued ** Trade and other payables Total At 31 December 2022 < 6 months 3,541 1,331 8,961 13,833 6–12 months 6,453 10,631 0 17,084 1–5 years 33,893 150,784 0 184,677 > 5 years 7,592 0 0 7,592 Total 51,479 162,746 8,961 223,186 Of which the principal amount 45,798 141,600 0 187,398 Of which future interest payments 5,681 21,146 0 26,827 At 31 December 2023 < 6 months 3,629 2,068 9,874 15,571 6–12 months 4,841 10,515 0 15,357 1–5 years 27,082 136,249 0 163,330 > 5 years 5,847 0 0 5,847 Total 41,400 148,832 9,874 200,106 Of which the principal amount 37,532 133,950 0 171,482 Of which future interest payments 3,868 14,882 0 18,750 * Comprises principal outstanding of EUR 37,532 thousand (2022: EUR 45,798 thousand) and estimated total future interest payments of EUR 3,868 thousand (2022: EUR 5,681 thousand). ** Comprises principal outstanding of EUR 133,950 thousand (2022: EUR 141,600 thousand) and estimated total future interest payments of EUR 14,882 thousand (2022: EUR 21,146 thousand). For intra-Group management of subsidiaries’ liquidity, internal credit limits are used, if necessary.
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Note 5. Significant accounting estimates and judgements The preparation of financial statements requires the use of accounting estimates which, by definition, seldom equal actual results. Management also needs to exercise judgement in applying accounting policies. This note provides an overview of areas that involve a higher degree of judgement or complexity, and items which are more likely to be materially adjusted due to estimates and assumptions proving inaccurate. Classification of assets leased out The Group owns land and buildings in its harbours, which it leases out to third parties under operating leases. Management has assessed whether the leased-out land and buildings should be classified as property, plant and equipment or investment property. The Group has classified all assets held to generate operating income from harbour activities by increasing cargo or passenger flows and assets related to contracts for services whereby the Group purchases intermediation of services associated with its operating activities and bears revenue risk as items of property, plant and equipment. According to the assessment of the Group’s management, the main objective of holding such assets is not to earn lease income; they are primarily held to increase revenue from operating activities. Accordingly, the main revenue related to those assets does not result from lease income. A property (an item of real estate) not in use but held for future development and not directly attributable to the Group’s operating activities, which are aimed at increasing cargo and passenger flows, or activities supporting the operating activities is recognised as an investment property. At 31 December 2023, the total carrying amount of such assets was EUR 14,069 thousand. Useful lives of items of property, plant and equipment The Group owns a large amount of high-value infrastructure assets classified as items of property, plant and equipment that have very long estimated useful lives (up to 50 years). The useful lives of such items of property, plant and equipment are based on management’s best estimate of the period over which an asset is expected to be available for use. These estimates are based on historical experience with similar assets, because even though construction technologies evolve, the impact of new solutions on the physical and useful lives of such items of property, plant and equipment may not yet have been proved in practice. At 31 December 2023, the carrying amount of the Group’s property, plant and equipment was EUR 545,271 thousand and depreciation for the year amounted to EUR 23,922 thousand. The respective figures for 2022 were EUR 550,310 thousand and EUR 24,104 thousand (note 11). If depreciation rates were reduced by 10%, the annual depreciation charge would decrease and profit would increase by EUR 2,392 thousand (2022: EUR 2,410 thousand). The useful lives of property, plant and equipment are reviewed at each reporting date. If new estimates differ significantly from the previous ones, the changes are accounted for as changes in accounting estimates and applied prospectively.
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Impairment of property, plant and equipment The Group assesses whether there is any indication that an item of property, plant and equipment may be impaired. If such indications exist, the recoverable amount of the asset is estimated and compared to its carrying amount in the statement of financial position. The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use. Fair value can be derived from recent transactions conducted by the Group with similar assets or measured with the assistance of professional valuators using the market information available to them. If the fair value of an asset cannot be determined reliably or is likely to be lower, a future cash flow model is developed to calculate its value in use. Value in use calculations require estimates which are based on projections of general economic conditions, actual market trends, project-based cargo and/or passenger flows and the price level of services sold, which are used as inputs to estimate future cash flows expected to arise from the asset or cash-generating unit and to choose a suitable discount rate and growth rate to calculate present value. If circumstances change in the future, either an additional impairment loss is recognised or the previously recognised impairment loss is reversed either in part or in full. Assets are tested for impairment at the end of each reporting period when circumstances indicate that assets might be impaired or events that led to a previous write-down may have ceased to exist. Information about impairment losses is disclosed in note 11. Revenue recognition To recognise monthly and/or quarterly revenue, the Group needs to make significant estimates about the expected annual vessel calls and/or cargo volumes. Such estimates are made based on the latest information available from customers and the latest market information available to the Group. See note 2, the section Revenue for further details. Classification of the contract for public transport service The Group owns four ferries, which it uses to provide domestic ferry service to the state (Republic of Estonia) under a public transport service contract secured through a public tender. According to the contract, the state has control of the volume and price of the ferry service the Group has to provide with its ferries. The state had the contractual option to purchase one to four of the ferries used to provide the ferry service, but on 29 September 2022 the Ministry of Economic Affairs and Communications announced that the Republic of Estonia as the customer of the ferry service did not wish to exercise the purchase option. Due to the nature of the contract terms and conditions, the government grant received may be considered part of the ticket sales revenue, which is why the Group has classified the consideration received from the state as revenue from government grants.
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Note 6. Financial instruments Financial instruments by category Financial assets In thousands of euros At 31 December 2023 2022 Financial assets carried at amortised cost 39,883 50,931 Cash and cash equivalents (note 7) 29,733 44,387 Trade receivables (note 8) 6,975 6,050 Other receivables (note 8) 3,175 494 Total financial assets 39,883 50,931
Financial liabilities In thousands of euros Restated * 2022 At 31 December 2023 Financial liabilities carried at amortised cost 179,970 194,238 Trade and other payables — financial liabilities (note 15) 6,573 5,828 Loans and borrowings (note 17) 173,397 188,410 Total financial liabilities 179,970 194,238
Fair value According to the Group’s estimates, the fair values of assets and liabilities measured at amortised cost do not differ significantly from their carrying amounts in the Group’s consolidated statement of financial position as at 31 December 2023, except for loans and borrowings. For the purposes of disclosure, the fair value of loans and borrowings is found by discounting future contractual cash flows at current market interest rates that would be available to the Group for similar financial instruments. The fair value of loans and borrowings was found by discounting future contractual cash flows at current market interest rates for similar financial instruments as at 31 December 2023 and 31 December 2022 available to companies with an S&P BBB rating (the rating indicated by the banks as the internal shadow rating for the Group). A more detailed comparison of the carrying amounts and fair values of loans and borrowings is disclosed in note 17. The carrying amounts of trade receivables and trade payables, less any write-downs, are estimated to be equal to their fair values.
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Note 7. Cash and cash equivalents In thousands of euros At 31 December 2023 2022 Cash on hand 16 18 Cash at banks 132 2,465 Short-term deposits 29,521 41,878 Cash in transit 64 26 Total cash and cash equivalents (notes 4 and 6) 29,733 44,387 All items of cash and cash equivalents at 31 December 2023 and 31 December 2022 are denominated in euros. At 31 December 2023 and 31 December 2022, there were no restrictions
on the use of the Group’s cash and cash equivalents.
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Note 8. Trade and other receivables In thousands of euros At 31 December 2023 2022 FINANCIAL ASSETS Trade receivables (note 4) 10,415 7,373 Incl. from contracts with customers 6,143 5,462 Allowance for credit losses (note 4) –3,440 –1,323 Incl. for contracts with customers –323 –126 Government grants receivable (note 18) 2,885 38 Receivables from an associate (note 24) 9 17 Other receivables (note 4) 281 439 Total financial assets (note 6) 10,150 6,544 Of which current financial assets 9,987 6,241 Of which non-current financial assets * 163 303 Of which write-down for items with settlement plans 0 –303 NON-FINANCIAL ASSETS Prepaid taxes (note 16) 1,599 481 Other prepayments 521 744 Other receivables 11 11 Total non-financial assets 2,131 1,236 Of which current non-financial assets 2,131 1,236 Total trade and other receivables 12,281 7,780 Of which current receivables 12,118 7,477 non-current receivables 163 303
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 9 | page 107 Translation of the Estonian original
Note 9. Investments in an associate AS Green Marine The associate is a waste management company established in 2003. Its principal place of business and country of incorporation is Estonia. The associate prepares its financial statements in accordance with the Estonian Financial Reporting Standard. AS Tallinna Sadam holds 51% (both as at 31 December 2023 and 31 December 2022) of the ownership interest and voting rights in AS Green Marine and two other shareholders hold the remaining interest. However, to have control of AS Green Marine, the Group’s voting or contractual rights should be substantive and provide the Group with the ability to direct AS Green Marine’s activities. The articles of association of AS Green Marine specify that at least 75% of voting rights are required to make decisions about the entity’s activities. Even though AS Tallinna Sadam can block any decision, it does not have control of AS Green Marine because it needs the consent of the other shareholders for the adoption of a decision. Thus, the Group does not have control of the entity. AS Green Marine is involved in the management of port waste, the management, administration and operation of treatment facilities for hazardous ship-generated waste and wastewater, and the cleaning and maintenance of port basins and port areas. The Group’s investments in the associate are accounted for using the equity method in these consolidated financial statements. Changes in investments in an associate In thousands of euros At 31 December 2023 2022 Carrying amount at beginning of period 2,099 1,559 Share of profit under the equity method 435 795 Dividends paid –357 –255 Carrying amount at end of period 2,177 2,099
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 9 | page 108 Translation of the Estonian original
Associate AS Green Marine In thousands of euros At 31 December 2023 2022 Current assets 691 2,148 Non-current assets 9,042 4,729 Current liabilities 1,907 1,245 Non-current liabilities 3,558 1,519 The above amounts of assets and liabilities include the following: Cash and cash equivalents * 0 1,387 Current loans and borrowings 1,125 598 Non-current loans and borrowings 3,446 1,519 * At 31 December 2023, the company had an overdraſt liability of EUR 472 thousand, which is presented within current loans and borrowings.
In thousands of euros 2023 2022 Revenue 7,401 7,734 Profit for the period from continuing operations 853 1,536 Profit for the period 853 1,536 Total comprehensive income for the period 853 1,536 The above profit for the period includes the following: Depreciation, amortisation and impairment 534 406 Interest expense 144 41 Income tax expense 160 113
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 10 | page 109 Translation of the Estonian original
Note 10. Investment properties In thousands of euros 31.12.2023 31.12.2022 Land measured at cost 14,069 14,069 Direct property management expenses 186 187 Of which expenses on investment property generating lease income 1 0
Investment properties leased out In thousands of euros 31.12.2023 31.12.2022 Land measured at cost 396 0 In thousands of euros 31.12.2023 31.12.2022 Lease income on investment properties (note 20) 1 0 Rental income receivable in future periods < 1 years 6 0 2–3 years 13 0 Total future lease income 19 0
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 11 | page 110 Translation of the Estonian original
Note 11. Property, plant and equipment In thousands of euros Land and buildings (restated *** ) Plant and equipment Other items of property, plant and equipment Assets under construction * Pre-payments Total At 31 December 2021 Cost 634,804 254,742 8,634 3,790 16 901,986 Accumulated depreciation and impairment losses –237,547 –96,898 –6,047 0 0 –340,492 Carrying amount at 31 December 2021 397,257 157,844 2,587 3,790 16 561,494 Movements in 2022 Purchases and reconstruction (note 26) 384 943 406 10,685 1,023 13,441 Sales at carrying amount ** 0 –16 0 –7 0 –23 Depreciation charge –12,115 –11,238 –751 0 0 –24,104 Impairment losses –313 –9 0 –76 0 –398 Transferred to non-current assets held for sale at carrying amount –100 0 0 0 0 –100 Reclassified at carrying amount 1,900 1,744 0 –3,644 0 0 At 31 December 2022 Cost 635,061 254,747 8,835 10,748 1,039 910,430 Accumulated depreciation and impairment losses –248,048 –105,479 –6,593 0 0 –360,120 Carrying amount at 31 December 2022 387,013 149,268 2,242 10,748 1,039 550,310 Movements in 2023 Purchases and reconstruction (note 26) 243 1,752 323 14,762 2,757 19,837 Sales at carrying amount ** 0 –28 0 0 0 –28 Depreciation charge –12,071 –11,199 –652 0 0 –23,922 Impairment losses –19 –569 –338 0 0 –926 Reclassified at carrying amount 7,646 8,259 307 –15,014 –1,198 0 At 31 December 2023 Cost 642,767 261,522 8,416 10,496 2,598 925,799 Accumulated depreciation and impairment losses –259,955 –114,039 –6,534 0 0 –380,528 Carrying amount at 31 December 2023 382,812 147,483 1,882 10,496 2,598 545,271
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 11 | page 111 Translation of the Estonian original *
At 31 December 2023, assets under construction of EUR 10,496 thousand included the following major items: • the construction of quay 6A at Paldiski South Harbour of EUR 7,303 thousand; • the reconstruction of quay 21 in Old City Harbour of EUR 1,249 thousand; • the design and construction of a new workshop at Lasti tee 6 at Muuga Harbour of EUR 1,247 thousand. * At 31 December 2022, assets under construction of EUR 10,748 thousand included the following major items: • a traffic solution for the area in front of Passenger Terminal D in Old City Harbour of EUR 6,714 thousand; • the reconstruction of the ramp of quay 13 at Muuga Harbour of EUR 3,203 thousand. ** At 31 December 2023, the cost and accumulated depreciation of property, plant and equipment that was sold were EUR 857 thousand (2022: EUR 235 thousand) and EUR 829 thousand (2022: EUR 212 thousand), respectively. *** For further information, see note 2. The Group’s assets have not been pledged. At 31 December 2023, the carrying amount of fully depreciated items still in use was EUR 45,427 thousand (31 December 2022: EUR 40,366 thousand). Commitments related to property, plant and equipment are disclosed in note 25.
In 2023, the Group recognised the following impairment losses consisting of write-offs and write- downs of EUR 926 thousand within Depreciation, amortisation and impairment in the statement of comprehensive income: • the write-down of a floating ramp of EUR 47 thousand; • reclassifications resulting from the change in the threshold for recognising assets as non-current of EUR 879 thousand, comprising: • Mitems of plant and equipment of EUR 521 thousand; • other equipment and fixtures of EUR 339 thousand; • connection fees of EUR 19 thousand. In 2022, the Group recognised the following impairment losses consisting of write-offs and write- downs of EUR 398 thousand within Depreciation, amortisation and impairment in the statement of comprehensive income: • the write-down of buildings (incl. a fire station building) of EUR 51 thousand; • the write-down of facilities (incl. railway branch lines) of EUR 177 thousand; • the write-off of facilities (incl. parking lots, storm water pipelines and oil traps) of EUR 85 thousand; • the write-off of plant and equipment (incl. electrical equipment) of EUR 9 thousand; • the write-off of an asset under construction of EUR 76 thousand. The Group performed impairment tests as at 31 December 2023 on assets for which there was indication of potential impairment due to a decline in operating volumes. No impairment was identified as a result of impairment testing and therefore the assets were not written down.
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 12 | page 112 Translation of the Estonian original
Note 12. Intangible assets In thousands of euros Computer soſtware Soſtware under construction Total At 31 December 2021 Cost 5,767 317 6,084 Accumulated amortisation and impairment losses –3,954 0 –3,954 Carrying amount at 31 December 2021 1,813 317 2,130 Movements in 2022 Purchases and upgrades (note 26) 42 373 415 Amortisation charge –640 0 –640 Impairment losses –170 0 –170 At 31 December 2022 Cost 5,086 690 5,776 Accumulated amortisation and impairment losses –4,041 0 –4,041 Carrying amount at 31 December 2022 1,045 690 1,735 Movements in 2023 Purchases and upgrades (note 26) 111 778 889 Amortisation charge –540 0 –540 Impairment losses –1 0 –1 Reclassification from assets under construction 1,188 –1,188 0 At 31 December 2023 Cost 6,369 280 6,649 Accumulated amortisation and impairment losses –4,566 0 –4,566 Carrying amount at 31 December 2023 1,803 280 2,083
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 13 | page 113 Translation of the Estonian original
Note 13. Leases Items of property, plant and equipment (PPE) leased out under operating leases In thousands of euros Land Incl. with the right of superficies Buildings Plant and equipment Other items of PPE Total Property, plant and equipment at 31 December 2021 Cost 43,227 36,680 20,315 74 1,941 65,557 Depreciation 0 0 –11,035 –59 –1,584 –12,678 Carrying amount at 31 December 2021 43,227 36,680 9,280 15 357 52,879 Additions 2,070 527 337 104 35 2,546 Expiry and cancellation –587 –6 –246 0 –8 –841 Depreciation 0 0 –525 –9 –117 –651 Property, plant and equipment at 31 December 2022 Cost 44,710 37,201 20,133 214 1,966 67,023 Depreciation 0 0 –11,287 –104 –1,699 –13,090 Carrying amount at 31 December 2022 44,710 37,201 8,846 110 267 53,933 Additions 5,158 13 126 0 0 5,284 Expiry and cancellation –1,352 0 –369 –6 –90 –1,817 Depreciation 0 0 –493 –9 –57 –559 Property, plant and equipment at 31 December 2023 Cost 48,516 37,214 19,660 190 1,801 70,167 Depreciation 0 0 –11,550 –95 –1,681 –13,326 Carrying amount at 31 December 2023 48,516 37,214 8,110 95 120 56,841
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 13 | page 114 Translation of the Estonian original
Lease income from property, plant and equipment (PPE) leased out under operating leases In thousands of euros 2023 2022 Land 8,323 8,257 Buildings 4,118 3,866 Plant and equipment 1,261 1,159 Other items of PPE 24 108 Total lease income from property, plant and equipment leased out under operating leases (note 20) 13,726 13,390 Of which fixed lease income 188 169 Undiscounted future lease payments receivable In thousands of euros At 31 December 2023 2022 < 1 year 10,861 10,323 1–2 years 10,084 9,598 2–3 years 9,904 9,435 3–4 years 9,852 9,053 4–5 years 9,798 9,048 > 5 years 319,870 310,270 Total undiscounted future lease payments receivable under existing contracts 370,369 357,727
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 13 | page 115 Translation of the Estonian original
Operating leases are agreements whereby the lessor transfers to the lessee the right to use an asset on the agreed terms for an agreed period in return for a payment or series of payments. Operating lease contracts are entered into for periods ranging from 2 years to 26 years. Operating lease rentals can generally be increased once a year based on changes in the consumer price index for the previous year (depending on the contract, either based on the relevant index for Estonia, the euro area, or Germany). Improvements made to a leased asset by the lessee are normally not compensated by the lessor at the end of the lease term. Under the right of superficies contracts, many significant risks and rewards from the possession of the asset (land) are transferred to the lessees. However, as land has an unlimited economic life, there are significant risks and rewards associated with the land at the end of the lease term, which do not pass to the lessee. Therefore, the right of superficies contracts are accounted for as operating leases. The right of superficies contracts entered into by the Group and its customers set out payments for the right of superficies and the duration of the contract (mostly in the range of 36 years to 99 years). Payments for the right of superficies are generally subject to an increase aſter a certain period has passed, based mostly either on changes in the tax assessed value of land (for older contracts) or changes in the consumer price index (for more recent contracts). Contractual payments for rights of superficies are generally not covered by guarantees. At the expiry of a contract the lessee generally has the right to remove the facilities erected on the land under the right of superficies; to apply for an extension of the term of the right of superficies contract up until the end of the remaining economic life of the facilities; or to receive compensation from the lessor for the usual value of the facilities (see also note 27).
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 14 | page 116 Translation of the Estonian original
Note 14. Provisions In thousands of euros 2023 2022 Provision for performance-related remuneration (bonuses) The provision for performance-related remuneration (bonuses) is accrued for estimated performance-related bonuses payable to Group companies’ management board members and employees for the results of the reporting period. The provision also includes associated social security charges and unemployment insurance contributions. The payment of performance-related bonuses is decided aſter the annual reports of relevant companies for the year ended 31 December 2023 have been approved.
Other provisions Other provisions at 31 December 2023 comprise: • a provision for ongoing court cases of EUR 61 thousand (31 December 2022: EUR 61 thousand); • a provision for compliance with the non-compete clauses of the service contracts of the members of the management board of AS Tallinna Sadam of EUR 264 thousand (31 December 2022: EUR 264 thousand).
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 15 | page 117 Translation of the Estonian original ** For further information, see note 2 .
Note 15. Trade and other payables In thousands of euros Restated ** 2022 At 31 December 2023 Financial liabilities Trade payables 6,154 5,344 Payables to an associate (note 24) 193 182 Other payables 226 302 Total financial liabilities (note 6) 6,573 5,828 Of which current financial liabilities 6,500 5,762 Of which non-current financial liabilities 73 66 Of which payables for property, plant and equipment (note 26) 2,358 470 Of which payables for intangible assets (note 26) 91 0 Non-financial liabilities Payables to employees 1,624 1,421 Accrued taxes payable on remuneration 874 719 Payables related to contracts with customers * 2,818 829 Advances for goods and services 431 857 Other payables 182 382 Total non-financial liabilities 5,929 4,208 Of which current non-financial liabilities 2,992 3,058 Of which non-current non-financial liabilities 2,937 1,150 Total trade and other payables 12,502 10,036 Of which total current liabilities 9,492 8,820 Of which total non-current liabilities 3,010 1,216 * In 2023, the Group received deferred connection fee income (advances) of EUR 2,040 thousand. Connection fees recognised as revenue in 2023 amounted to EUR 52 thousand (2022: EUR 42 thousand).
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 16 | page 118 Translation of the Estonian original
Note 16. Taxes payable In thousands of euros At 31 December 2023 2022 Personal income tax 295 319 Corporate income tax * 11 108 Pollution charge 3 2 Social security tax 513 578 Unemployment insurance contributions 32 32 Funded pension contributions 17 17 Excise duties 5 4 Total taxes payable 876 1,060 * The Group did not have any deferred tax liabilities at 31 December 2023 (31 December 2022: EUR 82 thousand). At 31 December 2023, the Group’s prepaid taxes amounted to EUR 1,599 thousand (31 December 2022: EUR 481 thousand). Prepaid taxes are disclosed in note 8.
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 17 | page 119 Translation of the Estonian original
Note 17. Loans and borrowings In thousands of euros Restated * 2022 At 31 December 2023 Current portion Loan liabilities 6,266 8,266 Debt securities 7,650 7,650 Interest liabilities 1,915 1,012 Total current portion 15,831 16,928 Non-current portion Loan liabilities 31,266 37,532 Debt securities 126,300 133,950 Total non-current portion 157,566 171,482 Total loans and borrowings (note 6) 173,397 188,410 * For further information, see note 2. Issue and redemption of debt securities At 31 December 2023, AS Tallinna Sadam had two debt security (bond) issues with final maturities in 2026 and 2027. The debt securities have been issued in euros and have floating interest rates (the base interest rate of 3-month or 6-month Euribor plus a fixed risk margin). None of the debt security issues is listed on the stock exchange. No debt securities were issued in 2023 or the comparative period. The Group has met all obligations set out in the terms of the debt securities, including those which relate to complying with covenants, providing information and meeting the minimum requirements set for financial ratios. Consistent with the redemption schedules, the Group redeemed debt securities of EUR 7,650 thousand in 2023 (2022: EUR 7,650 thousand). At 31 December 2023, the weighted average interest rate of the debt securities was 4.84% (31 December 2022: 2.68%). The average interest rate has increased due to the increase in the base interest rate (Euribor). The risk margins have not changed. The interest rate risk of the debt securities has not been hedged with interest rate swaps.
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 17 | page 120 Translation of the Estonian original
Loans All loan agreements are denominated in euros and have floating interest rates (the base rate is 6-month Euribor). At 31 December 2023, the weighted average interest rate of drawn loans was 4.90% (31 December 2022: 1.94%). The interest rate risk of the loans has not been hedged with interest rate swaps. The Group did not enter into any new loan agreements in 2023 and did not have any undrawn loans or credit limits at 31 December 2023. The loan agreements are unsecured liabilities, i.e. no assets have been pledged to cover the loans. The Group has performed all its obligations under the loan agreements, including those which relate to complying with covenants, providing information and meeting the minimum requirements set for financial ratios. Principal loan repayments made in 2023 amounted to EUR 8,266 thousand (2022: EUR 8,266 thousand). The final maturities of outstanding loan liabilities fall in the period 2024–2030. Contractual maturities of loans and borrowings In thousands of euros Restated * 2022 At 31 December 2023 < 6 months 5,298 4,395 6–12 months 10,533 12,533 1–5 years 152,066 164,482 > 5 years 5,500 7,000 Total loans and borrowings (note 4) 173,397 188,410 * For further information, see note 2.
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 17 | page 121 Translation of the Estonian original
Carrying amounts and fair values of loans and borrowings * In thousands of euros At 31 December 2023 2022 Carrying amount Debt securities 133,950 141,600 Loan liabilities 37,532 45,798 Total carrying amount 171,482 187,398 Fair value Debt securities 134,251 146,482 Loan liabilities 37,632 46,841 Total fair value 171,883 193,323 * Due to inputs used, all measurements of fair value qualify as level 2 measurements in the fair value hierarchy. The fair value of loans and borrowings was calculated using the discounted cash flow method. Future cash flows were estimated based on forward interest rates (extrapolated from observable corporate yield curves and 3-month and 6-month Euribor swap rates at the end of the reporting period) and contractual interest rates, discounted at a rate that reflected the credit risk of the Group. At 31 December 2023, the fair value of financial liabilities calculated using the discounted cash flow method was 0.23% higher than their carrying amount (31 December 2022: 3.2% higher). The terms and conditions of the Group’s loans and bonds set certain limits to the Group’s consolidated financial indicators. At 31 December 2023 and 31 December 2022, the Group was in compliance with all financial covenants.
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 17 | page 122 Translation of the Estonian original
Change in liabilities arising from financing activities In thousands of euros 01.01.2023 Cash flows from financing activities Accrued interest (note 23) 31.12.2023 Loan liabilities 45,798 –8,266 0 37,532 Debt securities 141,600 –7,650 0 133,950 Interest liabilities 1,012 –6,494 7,397 1,915 Total 188,410 –22,410 7,397 173,397 In thousands of euros 01.01.2022 Cash flows from financing activities Accrued interest (note 23) 31.12.2022 Loan liabilities 54,064 –8,266 0 45,798 Debt securities 149,250 –7,650 0 141,600 Interest liabilities 299 –1,264 1,977 1,012 Total 203,613 –17,180 1,977 188,410
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 18 | page 123 Translation of the Estonian original
Note 18. Government grants Non-current government grant liabilities In thousands of euros At 31 December 2023 2022 Cohesion Fund 19,370 19,803 TEN-T 5,520 5,889 CEF-T 8,065 4,332 State budget of the Republic of Estonia 41 51 INTERREG 79 81 Total non-current government grant liabilities 33,075 30,156 Incl. non-depreciable assets 13,902 13,902 Recognised as income In thousands of euros 2023 2022 Grants related to assets 1,284 1,077 Grants related to income 20,648 19,440 Total recognised as income 21,932 20,517 Incl. revenue from other sources (note 20) 20,640 19,406 other income (note 22) 1,292 1,111
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 18 | page 124 Translation of the Estonian original
Short-term deferred government grant income In thousands of euros At 31 December 2023 2022 CEF-T 7,260 8,578 State budget of the Republic of Estonia 84 0 Total short-term deferred government grant income 7,344 8,578 Short-term government grants receivable In thousands of euros At 31 December 2023 2022 CEF-T 2,885 0 State budget of the Republic of Estonia 0 38 Total short-term government grants receivable (note 8) 2,885 38
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 18 | page 125 Translation of the Estonian original
Cohesion Fund Extension of the Eastern part of Muuga Harbour (2007–2011) In the framework of the project, phase I of the extension of Muuga Harbour was supported, including the filling of the sea bottom and the coastal region. Non-current government grant liabilities related to the project amount to EUR 15,769 thousand (31 December 2022: EUR 15,982 thousand), including EUR 13,902 thousand (31 December 2022: EUR 13,902 thousand) related to non-depreciable assets. Creating connections between the Eastern part and the industrial park of Muuga Harbour (2010–2014) In the framework of the project, a viaduct was constructed in Muuga Harbour to connect the Industrial Park with the harbour, the free zone of Muuga Harbour was extended and the railways of Muuga Industrial Park were finished. Non-current government grant liabilities related to the project amount to EUR 3,601 thousand (31 December 2022: EUR 3,821 thousand). TEN-T Motorways of the Seas programme TWIN-PORT (2012–2015) In the framework of the project, the infrastructure of Old City Harbour in Tallinn and West Harbour in Helsinki was improved as part of the development of the north-south transport corridor of the European Union (TEN-T North Sea — Baltic). The investments at Old City Harbour were related to improving the traffic scheme in the harbour area and developing the roads connecting the harbour to the city. Non-current government grant liabilities related to the project amount to EUR 769 thousand (31 December 2022: EUR 830 thousand). Dredging of the Paldiski South Harbour fairway and harbour basin (2019–2020) The purpose of the project was to dredge the Paldiski South Harbour fairway and basin by 1 metre, from the depth of 14.5 metres to 15.5 metres. As a result of the project, the harbour can receive large cargo vessels and tankers (60–70 thousand GT). Using larger vessels, which can transport the same amount of cargo with fewer port calls, allows reducing emissions per unit of cargo. A deeper fairway makes navigation to the harbour safer. Non-current government grant liabilities related to the project amount to EUR 163 thousand (31 December 2022: EUR 303 thousand). TWIN-PORT 2 (2014–2020) TWIN-PORT 2 was a follow-up project to TWIN-PORT. In the framework of the project, the Port of Helsinki built a new West Terminal, AS Tallink Grupp brought a new LNG vessel Megastar to the Tallinn–Helsinki route, and AS Tallinna Sadam invested in the development of various infrastructure assets at Old City Harbour. No support was received in 2023. Support received in 2022 amounted to EUR 4,924 thousand. Non-current government grant liabilities related to the project amount to EUR 4,587 thousand (31 December 2022: EUR 4,755 thousand). The Baltic Sea hub and spokes project (2010–2013) In the framework of the project, AS Tallinna Sadam received support for making investments and developing cooperation in areas related to safety and security. Non-current government grant liabilities related to the project amount to EUR 1 thousand (31 December 2022: EUR 1 thousand).
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 18 | page 126 Translation of the Estonian original
Connecting Europe Facility for Transport (CEF-T) programme TWIN-PORT 3 (2018–2023) TWIN-PORT 3 was a follow-up project to TWIN-PORT and TWIN-PORT 2. The project began in 2018 and was scheduled to be completed on 31 December 2023. The participants in the project were AS Tallinna Sadam, the Port of Helsinki, the City of Helsinki and three ferry operators (Tallink, Viking Line and Eckerö Line). The coordinating partner of the project was AS Tallinna Sadam. The purpose of the project was to build onshore power supply systems (OPS) in both ports and on the ferries travelling between Tallinn and Helsinki to enable the ferries (while at the quay) to use electricity from the mainland electricity network and switch off their diesel engines. In addition, an auto-mooring system was built in both harbours, which offers faster and safer mooring for ferries. In Tallinn, the security systems in Old City Harbour were upgraded. In Helsinki, new street lanes were built, the throughput capacity of intersections was improved, a tramway leading to the harbour was relocated and a new bridge was built in the harbour area. In 2023, no investments were made and no expenses were incurred (2022: investments made amounted to EUR 4 thousand and expenses incurred amounted to EUR 7 thousand). No support was received in 2023. Support of EUR 4,097 thousand was received in 2022. At 31 December 2023, the balance of deferred grant income was EUR 2,260 thousand (31 December 2022: EUR 2,260 thousand. Non-current government grant liabilities related to the project amount to EUR 3,126 thousand (31 December 2022: EUR 3,304 thousand). TWIN-PORT 4 (2020–2023) TWIN-PORT 4 was the fourth follow-up project in the series. The purpose of the project was to improve the convenience of the maritime connection between Tallinn and Helsinki by developing the infrastructure of the ports on both shores of the Gulf of Finland. The participants in the project are AS Tallinna Sadam and the Port of Helsinki. Compared to the previous ones, the project included a new feature: investments in the development of the Muuga-Vuosaari shipping route in order to divert a significant share of the heavy goods vehicles traffic between Estonia and Finland from the city centres of the two capitals to the Muuga and Vuosaari harbours, respectively. One quay in both harbours was supplied with a second level ramp for more efficient servicing of ro-ro traffic and at Muuga the first level ramp of the same quay was fully reconstructed. In addition, at Old City Harbour in Tallinn one of the connecting walkways from the terminal to the ferry and the area in front of Passenger Terminal D along with all underground utility networks were reconstructed. The Port of Helsinki supplied one quay in its city-centre harbours with onshore power supply systems. The planned installation of automated mooring systems was not carried out because the development plans of the Port of Helsinki changed. The coordinating partner of this project was also AS Tallinna Sadam. Investments made in 2023 amounted to EUR 652 thousand (2022: EUR 8,419 thousand). In 2023 and 2022, no support was received. At 31 December 2022, the balance of deferred grant income was EUR 338 thousand. At 31 December 2023, the balance of the government grant receivable was EUR 2,721 thousand. Non-current government grant liabilities related to the project amount to EUR 3,858 thousand (31 December 2022: EUR 1,028 thousand).
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 18 | page 127 Translation of the Estonian original
TWIN-PORT 5 (2021–2025) The project continues the activities started with TWIN-PORT 4 to improve the convenience of the maritime connection between Tallinn and Helsinki by developing the infrastructure of the ports on both shores of the Gulf of Finland on the Muuga–Vuosaari route. The participants in the project are AS Tallinna Sadam and the Port of Helsinki. In the framework of the project, quays 13, 14 and 15 at Muuga Harbour have been supplied with systems allowing to receive sewage from ships. In addition, there is a plan to reconstruct the ramp of quay 15. To improve travel experience and raise service quality, an architectural design competition has been organised for the complex of Terminal A and the surrounding outdoor space at Old City Harbour and the designs for the terminal, a multi-storey car park and a new main building have been commissioned. To continue to offer excellent high-quality customer service, AS Tallinna Sadam has upgraded the soſtware and hardware of its Smart Port traffic management system (automated vehicle check- in and direction to the waiting area and boarding) and created new capabilities at both Old City Harbour and Muuga Harbour. The Port of Helsinki is focusing on the planning, surveying and design activities necessary for creating the infrastructure (a tunnel, four new quays along with filling the sea, and a new terminal) required to implement the strategic goal. The coordinating partner of the TWIN-PORT 5 project is the Port of Helsinki. In 2023, investments amounted to EUR 2,288 thousand and expenses incurred amounted to EUR 123 thousand. In 2022, no investments were made and no expenses were incurred. No support was received in 2023. Support received in 2022 amounted to EUR 980 thousand. At 31 December 2023, the amount of grant receivable was EUR 164 thousand. At 31 December 2022, the balance of deferred grant income was EUR 980 thousand. Non-current government grant liabilities related to the project amount to EUR 1,081 thousand (31 December 2022: EUR 0). Connecting Europe Facility (CEF) — EstMilMob project EstMilMob is a project funded by the European Union from the CEF-2021 Military Mobility envelope. The participants in the project are AS Tallinna Sadam, the Estonian Transport Administration, the railway infrastructure company AS Eesti Raudtee and the Estonian Centre for Defence Investment. The purpose of the project is to enhance the TEN-T Comprehensive Network and Core Network and their civilian and military dual use at Paldiski South Harbour, at the Kanama intersection and on the Palupera–Puka–Keeni railway section. In the framework of the EstMilMob project, Tallinna Sadam will build a new quay (quay 6a) with a hinterland at Paldiski South Harbour that can be used for both civilian and military purposes. The quay will be equipped with a ramp for loading and unloading ro-ro cargo. Along with the quay, a hinterland of up to 10 ha will be built to handle and store cargo and military equipment. As regards civilian use, it will be possible to handle dry and dry bulk, oversized and ro-ro cargo. The project creates good prospects for becoming a base port for the construction of offshore wind farms and supporting the transport of relevant goods (masts, generators, blades). The harbour will also have the capabilities required to serve as a maintenance port for offshore wind farms. The Transport Administration will reconstruct the Kanama overpass and the intersection of the E265 Tallinn ring road and the E67 Tallinn–Pärnu–Ikla road with the aim of bringing the intersection into conformity with the requirements of the EU TEN-T Core Network for road safety, the environment and military transport. AS Eesti Raudtee will carry out major track repairs on the Palupera–Puka and Puka–Keeni sections of the internationally important railway route between Valga and Tartu. The total length of the works is around 21 km, which accounts for approximately 25% of the total length of the route. The coordinating partner of the EstMilMob project is the Estonian Centre for Defence Investment. Investments made in 2023 amounted to EUR 7,090 thousand. No expenses were incurred in 2023. In 2022, no investments were made and no expenses were incurred. No support was received in 2023. Support received in 2022 amounted to EUR 5,000 thousand. At 31 December 2023, the balance of deferred grant income was EUR 5,000 thousand (31 December 2022: EUR 5,000 thousand).
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 18 | page 128 Translation of the Estonian original
State budget of the Republic of Estonia Public transport support (2016–2026) In December 2014, a public transport service contract was signed with the Ministry of Economic Affairs and Communications (the contract is currently administered by the Transport Administration) for the provision of ferry service on the Kuivastu–Virtsu and Rohuküla–Heltermaa ferry routes in the period 1 October 2016–30 September 2026. The final amount of contractual support depends on the difference between the revenue base calculated annually on the basis of the tariff rates fixed in the contract and the ticket sales revenue recognised in the same period. In 2023, support was calculated in the amount of EUR 20,640 thousand (2022: EUR 19,406 thousand) and received in the amount of EUR 20,759 thousand (2022: EUR 19,191 thousand). The public transport support is treated as part of the Group’s ordinary activity and recognised as revenue (sale of ferry services — government support) (note 20). At 31 December 2023, the Group had short-term deferred income of EUR 80 thousand related to public transport support provided from the state budget. At 31 December 2022, the Group had a short-term grant receivable of EUR 38 thousand. Grant for purchase of zero-emission vehicles (2023–2027) In 2023, a vehicle was acquired using an operating lease. The acquisition of the vehicle was supported by the Environmental Investment Centre with EUR 4 thousand. At 31 December 2023, the Group had short-term deferred income of EUR 4 thousand. Small Ports Programme (2010) The grant received was used to finance the expenditure of the construction of the Old City Marina. Non-current government grant liabilities related to the project amount to EUR 37 thousand (31 December 2022: EUR 42 thousand). Atmospheric Air Protection Programme (2011–2013) In the framework of the project Extension of the Outdoor Air Monitoring System at Muuga Harbour, the outdoor air monitoring and management system at Muuga Harbour was extended by installing one outdoor air monitoring station. Non-current government grant liabilities related to the project amount to EUR 4 thousand (31 December 2022: EUR 9 thousand).
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 18 | page 129 Translation of the Estonian original
European Regional Development Fund (ERDF) Digital Construction Cluster Project The purpose of the project is to undertake joint activities in the Digital Construction Cluster to promote co-operation between the Estonian construction sector and research institutions and to increase the international competitiveness of companies belonging to the Digital Construction Cluster. AS Tallinna Sadam is a real estate owner, developer and manager and thus its interest in participating in the project is mainly related to new digital opportunities that could be seized in the development and management of its buildings and real estate by using Building Information Modelling (BIM) throughout the life cycle of a building. Support received in 2023 amounted to EUR 8 thousand (2022: EUR 4 thousand). Expenses incurred for the project in 2023 amounted to EUR 13 thousand (2022: EUR 6 thousand). Other foreign aid — INTERREG Baltic Sea Region Programme Green Cruise Port — Sustainable Development of Cruise Port Locations Project (2016–2019) The project was aimed at enhancing the cooperation of cruise ports in the Baltic Sea region in the development of port facilities and services, with a focus on environmental sustainability and economic benefit. In the framework of the project, the principal design documentation and technical solutions for the Old City Harbour Cruise Terminal were prepared and surveys for developing ecological terminal solutions feasible in a northern climate were carried out. The surveys provided valuable inputs for the design of the new Cruise Terminal and the solutions for its technological systems. Non-current government grant liabilities related to the project amount to EUR 79 thousand (31 December 2022: EUR 81 thousand).
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 19 | page 130 Translation of the Estonian original
Note 19. Equity or differences in shareholder rights related to profit distributions .
Share capital At 31 December 2023 and 31 December 2022, AS Tallinna Sadam had 263,000,000 registered ordinary shares, of which 67.03% were held by the Republic of Estonia (through the Ministry of Climate) and 32.97% were held by Estonian and international investment funds, banks, pension funds and retail investors. The par value of a share is EUR 1. The maximum number of ordinary shares stipulated in the articles of association of AS Tallinna Sadam is 664,000,000 (2022: 664,000,000). At 31 December 2023 and 31 December 2022, all issued shares had been fully paid for. AS Tallinna Sadam does not have shares of different classes
Earnings per share 2023 2022 Weighted average number of shares 263,000,000 263,000,000 Consolidated profit for the period (in thousands of euros) 15,882 25,592 Basic and diluted earnings per share (in euros) * 0.06 0.10 * In the years ended 31 December 2023 and 31 December 2022, there were no dilutive instruments outstanding.
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 19 | page 131 Translation of the Estonian original
Capital management The purpose of the Group’s capital management is to ensure that Group entities will be able to continue as going concerns and the Group can generate maximum long-term return through an optimal balance between debt and equity capital. The Group’s capital management strategy has not changed significantly compared to 2022. The Group’s capital structure consists of net debt (loans and borrowings as detailed in note 17 less cash and cash equivalents) and equity (comprising share capital, reserves and retained earnings). The Group is not subject to any externally imposed capital requirements. The Group’s CFO reviews the capital structure of the Group at least twice a year. As part of this review, the CFO assesses the cost of capital and the risks associated with each class of capital. The Group’s long-term target is to ensure that its equity to assets ratio (calculated as the ratio of total equity to total assets) is 60%. Capital management In thousands of euros At 31 December 2023 2022 Loans and borrowings 173,397 188,410 Cash and cash equivalents (note 7) –29,733 –44,387 Net debt 143,664 144,023
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 19 | page 132 Translation of the Estonian original
Unrestricted equity At 31 December 2023, the Group’s unrestricted equity was EUR 46,877 thousand (31 December 2022: EUR 50,640 thousand). According to the Estonian Commercial Code, shareholders will not be paid dividends if the company’s net assets which have been recognised in the annual report approved at the end of the previous financial year are or would be less than total share capital and reserves which under the law or the articles of association are not to be paid out to shareholders. At 31 December 2023 and 31 December 2022, the Parent could have distributed all of its unrestricted equity without contravening the law.
Statutory capital reserve The statutory capital reserve was in compliance with the requirements of the Estonian Commercial Code at 31 December 2017. As a result of an increase of share capital by EUR 77,796 thousand in 2018, the Parent’s capital reserve does not comply with the amount required by the articles of association. According to the Estonian Commercial Code, each financial year 1/20 of profit is to be transferred to the capital reserve until the reserve reaches the amount required by the articles of association. Aſter that, profit transfers to the capital reserve will be discontinued. The capital reserve was increased by EUR 743 thousand in 2023 (2022: EUR 844 thousand).
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 19 | page 133 Translation of the Estonian original
Dividendid Based on the resolution of the general meeting that convened on 25 April 2023, the Group paid a dividend of EUR 0.073 per share, i.e. EUR thousand in total, for 2022. The list of shareholders entitled to receive the dividend was determined on 10 May 2023 (the ex-dividend date: 9 May 2023) and the dividend was paid out to the shareholders on 12 May 2023 (through Nasdaq CSD). Dividends In thousands of euros 2023 2022 Dividend declared in the reporting period 19,199 25,511 Dividend distributed in the reporting period 19,012 25,287 Income tax withheld on dividends in the reporting period 187 224 Dividend per share (in euros) 0.073 0.097
Income tax on dividends In thousands of euros 2023 2022 Income tax calculated on dividends in Estonia 3,067 4,111 Deferred income tax expense on dividends –82 82 Income tax paid on dividends in Estonia –3,264 –4,335 Incl. income tax withheld on dividends –187 –224 refund of income tax withheld on dividends for 2019 –10 0
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 20 | page 134 Translation of the Estonian original
Note 20. Revenue In thousands of euros 2023 2022 Revenue from contracts with customers Vessel dues 31,425 37,233 Cargo charges 6,457 7,457 Passenger fees 11,484 10,248 Sale of electricity 4,507 7,141 Sale of ferry services — ticket sales 14,729 14,199 Sale of other services 2,133 2,423 Total revenue from contracts with customers 70,735 78,701 Revenue from other sources Lease income from operating leases (notes 10 and 13) 13,727 13,390 Charter fees 11,544 10,206 Sale of ferry services — government support (notes 18 and 24) 20,640 19,406 Total revenue from other sources 45,911 43,002 Total revenue (note 3) 116,646 121,703
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 20 | page 135 Translation of the Estonian original
Disaggregation of revenue Transaction price allocated to the remaining performance obligations At the end of the reporting period, performance obligations related to cargo charges, the sale of electricity and the sale of other services were partially unsatisfied. The Group applies the practical expedient in paragraph 121(b) of IFRS 15 to those revenue streams (a single performance obligation that is made up of a series of distinct services) and does not disclose the transaction price allocated to the remaining performance obligation as the Group has a right to consideration from customers in an amount that corresponds directly to the value that the Group’s performance obligations completed to date have for the customer and the Group has recognised revenue in the amount in which it has the right to invoice the customers. Partially unsatisfied performance obligation related to connection fees as at 31 December 2023 amounted to EUR 2,755 thousand (31 December 2022: EUR 767 thousand). Management expects that the transaction price allocated to unsatisfied performance obligations will be recognised as revenue over the next 3–25 years (the average remaining useful life of the investments made to enable connection) on a straight-line basis. Revenue by country In thousands of euros 2023 2022 Canada 3,332 5,257 Great Britain 2,929 0 Estonia 110,385 116,446 Total revenue 116,646 121,703 Of which charter fees: Canada 3,281 5,161 Great Britain 2,798 0 Estonia 5,465 5,045 Total charter fees 11,544 10,206
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 21 | page 136 Translation of the Estonian original
Note 21. Operating expenses
In thousands of euros 2023 Restated* 2022 Fuel costs 6,886 7,985 Electricity costs 4,918 8,641 Heat, water and sewerage costs 783 892 Technical maintenance and repair of non-current assets 8,312 7,127 Services purchased for infrastructure 4,035 3,408 Tax expenses 2,661 2,674 Incl. land tax 2,607 2,619 Consultation and development expenses 669 707 Incl. research and development expenses 367 334 Services purchased 6,015 5,551 Incl. mooring service 778 730 reception of ship-generated waste 1,966 2,064 port dues 3,223 2,713 Purchase and maintenance of insignificant assets 949 1,139 Advertising expenses 244 289 Lease expenses 1,376 583 Expenses on short-term leases 174 23 Insurance expenses 804 801 Other operating expenses 3,577 3,042 Total operating expenses 41,403 42,862
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 21 | page 137 Translation of the Estonian original
Personnel expenses In thousands of euros 2023 2022 Wages and salaries 19,006 17,457 Social security charges 6,208 5,708 Total personnel expenses 25,214 23,165
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTES 22, 23 | page 138 Translation of the Estonian original
Note 22. Other income In thousands of euros 2023 2022 Gain on sale of non-current assets 0 68 Penalties, interest on arrears 893 171 Income from government grants (note 18) 1,292 1,111 Other income 23 91 Total other income 2,208 1,441
Note 23. Finance costs In thousands of euros 2023 2022 Interest expense on loans and borrowings: Interest expense on loans 1,707 547 Interest expense on debt securities 5,690 1,430 Total interest expense on loans and borrowings (note 17) 7,397 1,977 Foreign exchange loss 28 27 Other finance costs 10 9 Total finance costs 7,435 2,013
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 24 | page 139 Translation of the Estonian original
Note 24. Related party transactions 67.03% of the shares in AS Tallinna Sadam are held by the Republic of Estonia (through the Ministry of Climate). In thousands of euros 2023 2022 Transactions with an associate Revenue 78 75 Operating expenses 1,990 2,102 Transactions with companies over which members of supervisory and management boards of Group companies have significant influence Revenue 1 1 Operating expenses 30 9 Other expenses 20 20 Transactions with government agencies and companies over which the state has control or indirect influence Revenue 26,886 26,011 Of which public transport support (note 20) 20,640 19,406 Of which charter fees 5,466 5,020 Other income 100 0 Operating expenses 6,041 12,797 Of which electricity and network charges 2,059 8,850 Of which port dues 3,218 2,835 Other expenses 22 72 Purchase of property, plant and equipment 0 346 Transactions with the members of the Group’s supervisory board and management board Short-term benefits 1,075 1,046 Social security charges 355 346
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 24 | page 140 Translation of the Estonian original
In thousands of euros At 31 December 2023 2022 Trade receivables from and payables to an associate Receivables (note 8) 9 17 Payables (note 15) 193 182 Trade receivables from and payables to companies over which members of supervisory and management boards of Group companies have significant influence Payables 0 1 Trade receivables from and payables to government agencies and companies over which the state has control or indirect influence Receivables * 2,201 174 Payables 7,601 2,755 Short-term benefits payable to the members of the Group’s supervisory board and management board Payables 287 326 * No receivables from related parties were written down in 2023 or 2022. All purchases and sales of services were transactions conducted in the ordinary course of business on an arm’s length basis. Revenue and operating expenses from transactions with related parties comprise only revenue and expenses from sales and purchases of business-related services. Information presented on companies over which members of the supervisory and management boards of Group companies have significant influence is based on the declarations presented in respect of the related parties. Based on the service contracts in force, at 31 December 2023 AS Tallinna Sadam had the obligation to pay its members of the management board (who are regarded as the key management personnel) benefits equal to their three months’ remuneration (EUR 99.0 thousand in 2023 and EUR 99.0 thousand in 2022) if the members of the management board were removed from office. In addition, AS Tallinna Sadam has the obligation to pay the members of the management board monthly compensation equal to 50% of their monthly remuneration for a period of 12 months aſter the expiry of their contracts for compliance with the non-compete obligations (EUR 197.9 thousand in 2023 and EUR 197.9 thousand in 2022). Based on the service contracts in force, at 31 December 2023 the subsidiaries of AS Tallinna Sadam had the obligation to pay their members of the management board benefits equal to their three months’ remuneration if the members of the management board were removed from office (EUR 135.4 thousand in 2023 and EUR 75.0 thousand in 2022).
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTES 25, 26 | page 141 Translation of the Estonian original
Note 25. Commitments At 31 December 2023, the Group’s contractual commitments related to purchases of property, plant and equipment, repairs, and research and development expenditures totalled EUR 68,051 thousand, including a commitment of EUR 54,102 thousand under the contract for the construction of quay 6A at Paldiski South Harbour. At 31 December 2022, the Group’s contractual commitments amounted to EUR 5,945 thousand.
Note 26. Investing activities in the statement of cash flows Purchases of property, plant and equipment In thousands of euros 2023 2022 Purchases of property, plant and equipment –17,946 –15,189 Paid for previous period 470 2,218 Trade payables at end of period (note 15) –2,358 –470 Other adjustments –3 0 Total adjustments –1,891 1,748 Purchases and reconstruction (note 11) 19,837 13,441 Purchases of intangible assets In thousands of euros 2023 2022 Purchases of intangible assets –799 –455 Paid for previous period 0 39 Trade payables at end of period (note 15) –91 0 Other adjustments 1 1 Total adjustments –90 40 Purchases and upgrades (note 12) 889 415
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 27 | page 142 Translation of the Estonian original
Note 27. Contingent liabilities Under several lease and right of superficies contracts, upon the expiry of the contract AS Tallinna Sadam has to compensate the cost of the facilities built or the improvements made to the assets of AS Tallinna Sadam by the lessee at the usual value of the facility or the improvement. Considering the long terms of the contracts (especially the right of superficies contracts) and the fact that the facilities are mostly special-purpose assets (port terminals), there is no valid experience in measuring their usual value upon the expiry of the contracts. Based on the above, the value of the obligations could not be estimated reliably at the reporting date. In June 2019, the court accepted a statement of claim for damages of EUR 23.8 million in total filed against group companies OÜ TS Laevad and OÜ TS Shipping in relation to alleged use of confidential information in a public procurement tender to provide public passenger transport service on the Saaremaa and Hiiumaa routes. By the ruling of the Harju County Court of 31 March 2023, the statement of claim filed by the trustee of the estate of AS Saaremaa Laevakompanii (bankrupt) and Väinamere Liinid OÜ against OÜ TS Laevad and OÜ TS Shipping was denied. On 8 May 2023, the court allowed the appeal filed by the trustee of the estate of AS Saaremaa Laevakompanii (bankrupt) and OÜ Väinamere Liinid for annulment of the ruling of the Harju County Court. The management board believes that the claim is not substantiated and legal advice indicates that it is not probable that a liability will arise. Thus, the management board has not considered it necessary to recognise a provision for the claim. The Group has entered into a guarantee agreement with a bank, under which the bank has issued a guarantee of EUR 5 million to guarantee the obligations of TS Laevad OÜ under the public service contract for passenger transport. According to the assessment of the management board, it is not likely that the guarantee will be called.
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 28 | page 143 Translation of the Estonian original Note 28. Investigations concerning the group On 26 August 2015, the Estonian Internal Security Service detained Ain Kaljurand and Allan Kiil, long-term members of the management board of the Group’s Parent, AS Tallinna Sadam, in connection with suspected large-scale bribery during several prior years. Aſter long-term investigation, on 31 July 2017 the Group filed a civil action lawsuit against Ain Kaljurand, Allan Kiil and other private and legal persons involved in the episodes under investigation. By the order of Harju County Court dated 19 November 2018, the civil action was included in the criminal proceedings against the above persons. On 28 October 2020, Harju County Court issued an order terminating criminal proceedings concerning Allan Kiil in connection with his terminal illness. At the same time, Tallinn Circuit Court issued an order requiring Allan Kiil to be involved in criminal proceedings as a civil defendant. Allan Kiil passed away on 15 June 2021 and on 23 September 2021 Marika Kiil was involved in the proceedings as a civil defendant and a third party in place of Allan Kiil. At the date of release of these financial statements, court hearings in the criminal matter are under way and proceedings against other persons that have been charged continue, except for Keskkonnahoolduse OÜ and its member of the management board against whom only the civil action proceedings continue. Based on information available at the reporting date, the management board believes that the above events will not have a material adverse impact on the Group’s financial performance or financial position. However, they may continue to cause significant damage to the Group’s reputation.
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 29 | page 144 Translation of the Estonian original
Note 29. Additional information on the parent The financial information on the Parent comprises the primary financial statements of the Parent, which are required to be disclosed in accordance with the Estonian Accounting Act, but which are not separate financial statements as defined in IAS 27. The primary financial statements of the Parent have been prepared using the same accounting policies as were applied in the preparation of the consolidated financial statements, except that investments in subsidiaries and associates are measured at cost. Statement of financial position Restated* 31.12.2022 Restated* 01.01.2022 In thousands of euros 31.12.2023 ASSETS Current assets Cash and cash equivalents 16,804 26,043 21,900 Trade and other receivables 17,004 13,793 20,599 Inventories 4 0 0 Non-current assets held for sale 0 100 0 Total current assets 33,812 39,936 42,499 Non-current assets Investments in subsidiaries 5,774 5,774 5,774 Investments in an associate 132 132 132 Other long-term receivables 57,634 73,331 84,480 Investment properties 14,069 14,069 14,069 Property, plant and equipment 432,224 433,310 438,466 Intangible assets 1,940 1,408 1,540 Total non-current assets 511,773 528,024 544,461 Total assets 545,585 567,960 586,960 Continues on page 145
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 29 | page 145 Translation of the Estonian original Restated* 31.12.2022 Restated* 01.01.2022
In thousands of euros 31.12.2023 LIABILITIES Current liabilities Loans and borrowings 15,832 16,928 16,215 Provisions 1,004 1,752 1,343 Government grants 7,260 8,578 1,047 Taxes payable 477 560 445 Trade and other payables 6,594 6,244 7,519 Total current liabilities 31,167 34,062 26,569 Non-current liabilities Loans and borrowings 157,566 171,482 187,398 Government grants 33,075 30,156 29,835 Other payables 3,010 1,216 1,461 Total non-current liabilities 193,651 202,854 218,694 Total liabilities 224,818 236,916 245,263 EQUITY Share capital 263,000 263,000 263,000 Share premium 44,478 44,478 44,478 Statutory capital reserve 22,858 22,115 21,271 Accumulated losses/retained earnings –9,569 1,451 12,948 Total equity 320,767 331,044 341,697 Total liabilities and equity 545,585 567,960 586,960 * For further information, see note 2.
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 29 | page 146 Translation of the Estonian original
Statement of comprehensive income 2023 Restated* 2022 In thousands of euros Revenue 69,205 77,408 Other income 2,185 1,348 Operating expenses –23,919 –28,609 Impairment of financial assets –1,117 –556 Personnel expenses –13,271 –12,762 Depreciation, amortisation and impairment –17,163 –17,245 Other expenses –952 –319 Operating profit 14,968 19,265 FINANCE INCOME AND COSTS Finance income 4,419 1,681 Finance costs –7,398 –1,978 Finance costs — net –2,979 –297 Profit before income tax 11,989 18,968 Income tax expense –3,067 –4,111 Profit for the period 8,922 14,857 * For further information, see note 2.
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 29 | page 147 Translation of the Estonian original
Statement of cash flows In thousands of euros 2023 2022 Cash receipts from sale of goods and services 74,818 83,142 Cash receipts related to other income 272 188 Payments to suppliers –32,533 –35,803 Payments to and on behalf of employees –12,722 –10,162 Payments for other expenses –199 –205 Income tax paid on dividends –3,264 –4,335 Cash from operating activities 26,372 32,825 Purchases of property, plant and equipment –13,988 –13,456 Purchases of intangible assets –782 –398 Proceeds from sale of property, plant and equipment 28 190 Government grants received 0 15,001 Repayments of loans provided 16,428 10,863 Dividends received 357 255 Interest received 3,769 1,330 Cash from investing activities 5,812 13,785 Redemption of debt securities –7,650 –7,650 Repayments of loans received –8,266 –8,266 Dividends paid –19,012 –25,287 Interest paid –6,494 –1,264 Other payments related to financing activities –1 0 Cash used in financing activities –41,423 –42,467 Net cash flow –9,239 4,143 Cash and cash equivalents at beginning of period 26,043 21,900 Change in cash and cash equivalents –9,239 4,143 Cash and cash equivalents at end of period 16,804 26,043
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 29 | page 148 Translation of the Estonian original
Statement of changes in equity In thousands of euros Share capital Share premium Statutory capital reserve Retained earnings/ accumulated losses Total equity Equity at 31 December 2022 263,000 44,478 22,115 1,451 331,044 Profit for the period 0 0 0 8,922 8,922 Total comprehensive income for the period 0 0 0 8,922 8,922 Dividend declared 0 0 0 –19,199 –19,199 Total transactions with owners 0 0 0 –19,199 –19,199 Increase of capital reserve 0 0 743 –743 0 Equity at 31 December 2023 263,000 44,478 22,858 –9,569 320,767 Carrying amount of interests under control and significant influence 0 0 0 –5,774 –5,744 Value of interests under control and significant influence under the equity method 0 0 0 62,666 62,666 Adjusted unconsolidated equity at 31 December 2023 263,000 44,478 22,858 47,323 377,659 In thousands of euros Share capital Share premium Statutory capital reserve Retained earnings/ accumulated losses Total equity Equity at 31 December 2021 263,000 44,478 21,271 12,948 341,697 Profit for the period 0 0 0 14,857 14,857 Total comprehensive income for the period 0 0 0 14,857 14,857 Dividend declared 0 0 0 –25,511 –25,511 Total transactions with owners 0 0 0 –25,511 –25,511 Increase of capital reserve 0 0 844 –844 0 Other adjustments 0 0 0 1 1 Equity at 31 December 2022 263,000 44,478 22,115 1,451 331,044 Carrying amount of interests under control and significant influence 0 0 0 –5,774 –5,774 Value of interests under control and significant influence under the equity method 0 0 0 55,706 55,706 Adjusted unconsolidated equity at 31 December 2022 263,000 44,478 22,115 51,383 380,976 In accordance with the Estonian Accounting Act, adjusted unconsolidated retained earnings represent the amount that is available for distribution to shareholders.
TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 30 | page 149 Translation of the Estonian original
Note 30. Events aſter the reporting period On 19 January 2024, the Harju County Court initiated reorganisation proceedings for MPG AgroProduction OÜ and appointed a reorganisation advisor based on the reorganisation application submitted by MPG AgroProduction OÜ. The court merged the reorganisation proceedings with the bankruptcy proceedings initiated by AS Tallinna Sadam against MPG AgroProduction OÜ, combining the two cases into one. The reorganisation advisor must submit the reorganisation plan to the court on 19 March 2024 at the latest. The bankruptcy proceedings remain suspended until the reorganisation plan is approved or the reorganisation proceedings are completed. The bankruptcy proceedings were initiated on 28 November 2023 based on the bankruptcy petition submitted by AS Tallinna Sadam as MPG AgroProduction OÜ had not fulfilled its contractual obligations for a long time. The claims of AS Tallinna Sadam total EUR 3.0 million and consist mainly of overdue payments for the rights of superficies, which had been written down as at the end of the reporting period. In addition, AS Tallinn Sadam has requested that the right of superficies be registered in its name. On 9 February 2024, the Tallinn Circuit Court decided to dismiss the appeal of the bankruptcy trustee of AS Saaremaa Laevakompanii (bankrupt) and Väinamere Liinid OÜ and not to overturn the decision of the Harju County Court of 31 March 2023, i.e. the statement of claim submitted on 28 March 2019 by AS Saaremaa Laevakompanii (bankrupt) and Väinamere Liinid OÜ against OÜ TS Laevad and OÜ TS Shipping, subsidiaries of AS Tallinna Sadam, was dismissed.
TABLE OF CONTENTS m Management’s Confirmation | page 150 Translation of the Estonian original Management’s Confirmation The management board has prepared the management report, the remuneration report and the consolidated financial statements of AS Tallinna Sadam as at and for the year ended 31 December 2023. The management board confirms that the Group’s management report and the Parent company’s remuneration report set out on pages 5 to 75 provide a true and fair view of the Group’s business operations, performance and significant events in the reporting period. 18 March 2024 The management board confirms that the Group’s consolidated financial statements set out on pages 76 to 149 are correct and complete and that: 1. the consolidated financial statements have been prepared in accordance with the Estonian Accounting Act and International Financial Reporting Standards as adopted by the European Union (IFRS EU); 2. the consolidated financial statements give a true and fair view of the financial position, cash flows and financial performance of the Group; 3. all significant events that occurred until the date on which the financial statements were approved and signed by the management board (18 March 2024) have been properly recognised and disclosed in the consolidated financial statements; and
4. AS Tallinna Sadam and its subsidiaries are going concerns.
Independent Auditor’s Report | lk 151 TABLE OF CONTENTS m Independent Auditor’s Report AS PricewaterhouseCoopers Tatari 1, 10116 Tallinn, Estonia; License No. 6; Registry code: 10142876 T: +372 614 1800, www.pwc.ee Translation note: This version of our report is a translation from the original, which was prepared in Estonian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation. This independent auditor’s report (translation of the Estonian original) should only be used with the original document submitted in machine-readable .xhtml format that is submitted to the Tallinn Stock Exchange (Link: https://nasdaqbaltic.com/statistics/et/instrument/EE3100021635/reports?date=2024-03-21). Independent auditor’s report To the Shareholders of aktsiaselts TALLINNA SADAM Report on the audit of the consolidated financial statements Our opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of aktsiaselts TALLINNA SADAM (the “Company”) and its subsidiaries (together – the “Group”) as at 31 December 2023, and the Group´s consolidated financial performance and consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union. Our opinion is consistent with our additional report to the Audit Committee dated 18 March 2024. What we have audited The Group’s consolidated financial statements comprise: ● the consolidated statement of financial position as at 31 December 2023; ● the consolidated statement of comprehensive income for the year then ended; ● the consolidated statement of cash flows for the year then ended; ● the consolidated statement of changes in equity for the year then ended; and ● the notes to the consolidated financial statements, comprising material accounting policy information and other explanatory information. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group in accordance with the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code). We have fulfilled our other ethical responsibilities in accordance with the IESBA Code.
Independent Auditor’s Report | lk 152 TABLE OF CONTENTS m Translation note: This version of our report is a translation from the original, which was prepared in Estonian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation. This independent auditor’s report (translation of the Estonian original) should only be used with the original document submitted in machine-readable .xhtml format that is submitted to the Tallinn Stock Exchange (Link: https://nasdaqbaltic.com/statistics/et/instrument/EE3100021635/reports?date=2024-03-21). 3 Overall Group audit materiality EUR 943 thousand How we determined it 5% of Group’s consolidated profit before tax Rationale for the materiality benchmark applied We have applied this benchmark, as we consider profit before tax to be a key performance indicator that determines the Group’s value and is monitored by the Group’s management, investors, analysts and creditors. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matter How our audit addressed the key audit matter Determining the use of properties owned by the Group and their classification under property, plant and equipment or investment property The Group owns the largest cargo and passenger port complexes in Estonia. Property, plant and equipment in its carrying amount of EUR 545, 271 thousand represents 90% of the Group’s assets as at 31 December 2023. The accounting policies applied for property, plant and equipment and investment property are described in note 2 of the financial statements. The significant judgements used by the management in determining the classification between property, plant and equipment or investment property are described in note 5. The Group holds large volume of various types of properties for a multitude of different purposes. Correctly evaluating the use of specific properties and assessing the classification between property, plant and equipment or investment property is a complex We have evaluated the appropriateness of classification of properties into property, plant and equipment and investment property, taking into account specifics of each property as identified by the management by performing the following audit procedures: ● Performing inquiries to gain an overview of the various properties the Group holds, and their current and intended future use as well as commercial conditions for premises rented out. ● For properties held partially for own use and to earn rentals or for capital appreciation analysing the commercial conditions and other available relevant information about the property: • Where properties were rented out, examining the terms and conditions of entire commercial agreements with the tenants and considering significance of services provided within its core business activities by the Group to the tenants. • Where properties were not directly in use by the Group in its core activities or as infrastructure objects, evaluating the analysis performed by the management Translation note: This version of our report is a translation from the original, which was prepared in Estonian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation. This independent auditor’s report (translation of the Estonian original) should only be used with the original document submitted in machine-readable .xhtml format that is submitted to the Tallinn Stock Exchange (Link: https://nasdaqbaltic.com/statistics/et/instrument/EE3100021635/reports?date=2024-03-21). 2 To the best of our knowledge and belief, we declare that non-audit services that we have provided to the Company and its subsidiaries are in accordance with the applicable law and regulations in the Republic of Estonia and that we have not provided non-audit services that are prohibited under § 59 1 of the Auditors Activities Act of the Republic of Estonia. The non-audit services that we have provided to the Company and its subsidiaries in the period from 1 January 2023 to 31 December 2023 are disclosed in the Management report. Our audit approach Overview ● Overall Group audit materiality is EUR 943 thousand, which represents 5% of Group’s consolidated profit before tax. ● A full scope audit was carried out by PwC of both the Company and its subsidiaries. ● Determining the use of properties owned by the Group and their classification under property, plant and equipment or investment property. As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the consolidated financial statements. In particular, we considered where the Management Board made subjective judgments; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud. Materiality The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements. Based on our professional judgment, we determined certain quantitative thresholds for materiality, including the overall Group materiality for the consolidated financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate on the consolidated financial statements as a whole. Materiality Group scoping Key audit matters
Independent Auditor’s Report | lk 153 TABLE OF CONTENTS m Translation note: This version of our report is a translation from the original, which was prepared in Estonian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation. This independent auditor’s report (translation of the Estonian original) should only be used with the original document submitted in machine-readable .xhtml format that is submitted to the Tallinn Stock Exchange (Link: https://nasdaqbaltic.com/statistics/et/instrument/EE3100021635/reports?date=2024-03-21). 5 Based on the work undertaken in the course of our audit, in our opinion: ● the information given in the Management report for the financial year for which the consolidated financial statements are prepared is consistent, in all material respects, with the consolidated financial statements; ● the Management report has been prepared in accordance with the requirements of the Accounting Act of the Republic of Estonia; and ● the Remuneration Report has been prepared in accordance with Article 135 3 (3) of the Securities Market Act of the Republic of Estonia. In addition, in light of the knowledge and understanding of the Group and its environment obtained in the course of the audit, we are required to report if we have identified material misstatements in the Management report and other information that we obtained prior to the date of this auditor’s report. We have nothing to report in this regard. Responsibilities of the Management Board and those charged with governance for the consolidated financial statements The Management Board is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the European Union, and for such internal control as the Management Board determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, the Management Board is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Management Board either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Group’s financial reporting process. Auditor’s responsibilities for the audit of the consolidated financial statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. Translation note: This version of our report is a translation from the original, which was prepared in Estonian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation. This independent auditor’s report (translation of the Estonian original) should only be used with the original document submitted in machine-readable .xhtml format that is submitted to the Tallinn Stock Exchange (Link: https://nasdaqbaltic.com/statistics/et/instrument/EE3100021635/reports?date=2024-03-21). 4 task, and after thorough analysis the management of the Group has made a restatement reclassifying some properties into investment property. As a result, this area has been considered as a key audit matter. to identify if the specific properties meet the definition of investment property. We have reconciled the restatement made to the results of the above procedures and evaluated related disclosures included by the Group for properties identified as investment property in the comparative period. We evaluated the disclosures related to the significant judgement in classification of property, plant and equipment and investment property. How we tailored our Group audit scope We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the Group operates. The Group has two subsidiaries, which are disclosed in note 1 to the financial statements. A full scope audit of the Company and both subsidiaries was performed by us. Reporting on other information including the Management report The Management Board is responsible for the other information. The other information comprises, Management report, the Corporate governance report 2023, the Remuneration report and Supplementary annexes (but does not include the consolidated financial statements and our auditor’s report thereon). Our opinion on the consolidated financial statements does not cover the other information, including the Management report. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. With respect to the Management report, we also performed the procedures required by the Auditors Activities Act of the Republic of Estonia. Those procedures include considering whether the Management report is consistent, in all material respects, with the consolidated financial statements and is prepared in accordance with the requirements of the Accounting Act of the Republic of Estonia. In accordance with the Securities Market Act of the Republic of Estonia with respect to the Remuneration Report, our responsibility is to consider whether the Remuneration Report includes the information in accordance with the requirements of Article 135 3 (3) of the Securities Market Act of the Republic of Estonia.
Independent Auditor’s Report | lk 154 TABLE OF CONTENTS m Translation note: This version of our report is a translation from the original, which was prepared in Estonian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation. This independent auditor’s report (translation of the Estonian original) should only be used with the original document submitted in machine-readable .xhtml format that is submitted to the Tallinn Stock Exchange (Link: https://nasdaqbaltic.com/statistics/et/instrument/EE3100021635/reports?date=2024-03-21). 7 Report on other legal and regulatory requirements Report on the compliance of the presentation of consolidated financial statements with the requirements of the European Single Electronic Format (“ESEF”) We have been engaged based our agreement by the Management Board of the Company to conduct a reasonable assurance engagement for the verification of compliance with the applicable requirements of the presentation of the consolidated financial statements of aktsiaselts TALLINNA SADAM for the year ended 31 December 2023 (the “Presentation of the Consolidated Financial Statements”). Description of a subject matter and applicable criteria The Presentation of the Consolidated Financial Statements has been applied by the Management Board of the Company to comply with the requirements of art. 3 and 4 of the Commission Delegated Regulation (EU) 2019/815 of 17 December 2018 supplementing Directive 2004/109/EC of the European Parliament and of the Council with regard to regulatory technical standards on the specification of a single electronic reporting format (the “ESEF Regulation”). The applicable requirements regarding the Presentation of the Consolidated Financial Statements are contained in the ESEF Regulation. The requirements described in the preceding sentence determine the basis for application of the Presentation of the Consolidated Financial Statements and, in our view, constitute appropriate criteria to form a reasonable assurance conclusion. Responsibility of the Management Board and those charged with governance The Management Board of the Company is responsible for the Presentation of the Consolidated Financial Statements that complies with the requirements of the ESEF Regulation. This responsibility includes the selection and application of appropriate markups in iXBRL using ESEF taxonomy and designing, implementing and maintaining internal controls relevant for the preparation of the Presentation of the Consolidated Financial Statements which is free from material non- compliance with the requirements of the ESEF Regulation. Those charged with governance are responsible for overseeing the financial reporting process, which should also be understood as the preparation of consolidated financial statements in accordance with the format resulting from the ESEF Regulation. Our responsibility Our responsibility was to express a reasonable assurance conclusion whether the Presentation of the Consolidated Financial Statements complies, in all material respects, with the ESEF Regulation. Translation note: This version of our report is a translation from the original, which was prepared in Estonian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation. This independent auditor’s report (translation of the Estonian original) should only be used with the original document submitted in machine-readable .xhtml format that is submitted to the Tallinn Stock Exchange (Link: https://nasdaqbaltic.com/statistics/et/instrument/EE3100021635/reports?date=2024-03-21). 6 As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: ● Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. ● Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. ● Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Management Board. ● Conclude on the appropriateness of the Management Board’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. ● Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. ● Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Independent Auditor’s Report | lk 155 TABLE OF CONTENTS m Translation note: This version of our report is a translation from the original, which was prepared in Estonian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation. This independent auditor’s report (translation of the Estonian original) should only be used with the original document submitted in machine-readable .xhtml format that is submitted to the Tallinn Stock Exchange (Link: https://nasdaqbaltic.com/statistics/et/instrument/EE3100021635/reports?date=2024-03-21). 9 Appointment and period of our audit engagement We were first appointed as auditors of aktsiaselts TALLINNA SADAM, as a public interest entity, on 25 April 2023 for the financial year ended 31 December 2023. In accordance with the Auditors Activities Act of the Republic of Estonia and the Regulation (EU) No 537/2014, our appointment as the auditor of aktsiaselts TALLINNA SADAM can be extended for up to the financial year ending 31 December 2042. AS PricewaterhouseCoopers Lauri Past Kristiina Veermäe Certified auditor in charge, auditor’s certificate no. 567 Auditor’s certificate no. 596 18 March 2024 Tallinn, Estonia Translation note: This version of our report is a translation from the original, which was prepared in Estonian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation. This independent auditor’s report (translation of the Estonian original) should only be used with the original document submitted in machine-readable .xhtml format that is submitted to the Tallinn Stock Exchange (Link: https://nasdaqbaltic.com/statistics/et/instrument/EE3100021635/reports?date=2024-03-21). 8 We conducted our engagement in accordance with the International Standard on Assurance Engagements (Estonia) 3000 (revised) “Assurance Engagements other than Audits and Reviews of Historical Financial Information" (ISAE (EE) 3000 (revised)). This standard requires that we comply with ethical requirements, plan and perform procedures to obtain reasonable assurance whether the Presentation of the Consolidated Financial Statements complies, in all material aspects, with the applicable requirements. Reasonable assurance is a high level of assurance, but it does not guarantee that the service performed in accordance with ISAE (EE) 3000 (revised) will always detect the existing material misstatement (significant non-compliance with the requirements). Quality management requirements and professional ethics We apply International Standard on Quality Management (Estonia) 1 (revised) which requires the firm to design, implement and operate a system of quality management including policies or procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. We comply with the independence and other ethical requirements of the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour. Summary of the work performed Our planned and performed procedures were aimed at obtaining reasonable assurance that the Presentation of the Consolidated Financial Statements complies, in all material aspects, with the applicable requirements and such compliance is free from material errors or omissions. Our procedures included in particular: ● obtaining an understanding of the internal control system and processes relevant to the application of the Electronic Reporting Format of the Consolidated Financial Statements, including the preparation of the XHTML format and marking up the consolidated financial statements; ● verification whether the XHTML format was applied properly; ● evaluating the completeness of marking up the consolidated financial statements using the iXBRL markup language according to the requirements of the implementation of electronic format as described in the ESEF Regulation; ● evaluating the appropriateness of the Group’s' use of XBRL markups selected from the ESEF taxonomy and the creation of extension markups where no suitable element in the ESEF taxonomy has been identified; and ● evaluating the appropriateness of anchoring of the extension elements to the ESEF taxonomy. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our conclusion. Conclusion In our opinion, based on the procedures performed, the Presentation of the Consolidated Financial Statements complies, in all material respects, with the ESEF Regulation.
TABLE OF CONTENTS m Statement of the Supervisory Board | page 156 Translation of the Estonian original Statement of the Supervisory Board The supervisory board of AS Tallinna Sadam has approved the group annual report of AS Tallinna Sadam as at and for the year ended 31 December 2023, which consists of the management report, remuneration report, the financial statements and the accompanying independent auditor’s report. 27 March 2024 / Signed digitally/ / Signed digitally/ / Signed digitally/ / Signed digitally/ RIHO UNT MAREK HELM MAARIKA HONKONEN KAUR KAJAK / Signed digitally/ / Signed digitally/ / Signed digitally/ RISTO MÄEOTS AIN TATTER VEIKO SEPP
TABLE OF CONTENTS m Profit Allocation Proposal | page 157 Translation of the Estonian original / Signed digitally/ / Signed digitally/ / Signed digitally/ VALDO KALM Chairman of the Management Board ANDRUS AIT Member of the Management Board MARGUS VIHMAN Member of the Management Board Profit Allocation Proposal At 31 December 2023, the Group’s retained earnings amounted to EUR 47,323,521, including profit for the period of EUR 15,882,328. Based on the above and the dividend policy approved by the general meeting, the management board proposes that the Group distribute a dividend of EUR 0.073 per share, i.e. EUR in total. Based on section 332 of the Commercial Code of Estonia, the management board proposes that the retained earnings for the year ended 31 December 2023 be allocated as follows: Dividend distribution EUR 19,199,000 Transfer to statutory capital reserve EUR 446,084 Retained earnings aſter allocations EUR 27,678,437