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).