Tallinna Sadam

25490093MDYISEP1Y539 2022-12-31 25490093MDYISEP1Y539 2021-12-31 25490093MDYISEP1Y539 2022-01-01 2022-12-31 25490093MDYISEP1Y539 2021-01-01 2021-12-31 25490093MDYISEP1Y539 2020-12-31 25490093MDYISEP1Y539 2020-12-31 ifrs-full:ClassesOfShareCapitalMember 25490093MDYISEP1Y539 2020-12-31 ifrs-full:SharePremiumMember 25490093MDYISEP1Y539 2020-12-31 ifrs-full:StatutoryReserveMember 25490093MDYISEP1Y539 2020-12-31 ifrs-full:ReserveOfCashFlowHedgesMember 25490093MDYISEP1Y539 2020-12-31 ifrs-full:RetainedEarningsMember 25490093MDYISEP1Y539 2020-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 25490093MDYISEP1Y539 2021-01-01 2021-12-31 ifrs-full:ClassesOfShareCapitalMember 25490093MDYISEP1Y539 2021-01-01 2021-12-31 ifrs-full:SharePremiumMember 25490093MDYISEP1Y539 2021-01-01 2021-12-31 ifrs-full:StatutoryReserveMember 25490093MDYISEP1Y539 2021-01-01 2021-12-31 ifrs-full:ReserveOfCashFlowHedgesMember 25490093MDYISEP1Y539 2021-01-01 2021-12-31 ifrs-full:RetainedEarningsMember 25490093MDYISEP1Y539 2021-01-01 2021-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 25490093MDYISEP1Y539 2021-12-31 ifrs-full:ClassesOfShareCapitalMember 25490093MDYISEP1Y539 2021-12-31 ifrs-full:SharePremiumMember 25490093MDYISEP1Y539 2021-12-31 ifrs-full:StatutoryReserveMember 25490093MDYISEP1Y539 2021-12-31 ifrs-full:ReserveOfCashFlowHedgesMember 25490093MDYISEP1Y539 2021-12-31 ifrs-full:RetainedEarningsMember 25490093MDYISEP1Y539 2021-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 25490093MDYISEP1Y539 2022-01-01 2022-12-31 ifrs-full:ClassesOfShareCapitalMember 25490093MDYISEP1Y539 2022-01-01 2022-12-31 ifrs-full:SharePremiumMember 25490093MDYISEP1Y539 2022-01-01 2022-12-31 ifrs-full:StatutoryReserveMember 25490093MDYISEP1Y539 2022-01-01 2022-12-31 ifrs-full:ReserveOfCashFlowHedgesMember 25490093MDYISEP1Y539 2022-01-01 2022-12-31 ifrs-full:RetainedEarningsMember 25490093MDYISEP1Y539 2022-01-01 2022-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 25490093MDYISEP1Y539 2022-12-31 ifrs-full:ClassesOfShareCapitalMember 25490093MDYISEP1Y539 2022-12-31 ifrs-full:SharePremiumMember 25490093MDYISEP1Y539 2022-12-31 ifrs-full:StatutoryReserveMember 25490093MDYISEP1Y539 2022-12-31 ifrs-full:ReserveOfCashFlowHedgesMember 25490093MDYISEP1Y539 2022-12-31 ifrs-full:RetainedEarningsMember 25490093MDYISEP1Y539 2022-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember iso4217:EUR iso4217:EUR xbrli:shares GROUP ANNUAL REPORT 2022 AS Tallinna Sadam Group Annual Report 2022 Commercial Registry no. 10137319 VAT registration no. EE100068489 Registered oﬃce Sadama 25, 15051 Tallinn, Estonia Country of incorporation Republic of Estonia Phone +372 631 8555 E-mail [email protected] Corporate website www.ts.ee Beginning of ﬁnancial year 1 January End of ﬁnancial year 31 December Legal form Limited company (AS) Auditor KPMG Baltics OÜ Table of Contents | page 3 Translation of the Estonian original Table of Contents MANAGEMENT REPORT 5 6 BUSINESS REVIEW 41 1 TALLINNA SADAM AT A GLANCE 6 6.1 Key performance indicators 41 1.1 Business model 6 6.2 Economic environment 42 1.2 Key performance indicators for 2022 8 6.3 Impacts of COVID-19 and the Russia-Ukraine war 43 1.3 Signiﬁcant events in 2022 9 6.4 Overview of the market: passengers 44 1.4 Letter from the CEO 12 6.5 Overview of the market: cargo 46 1.5 Vision, mission, values 13 6.6 Operating results 48 1.6 Strategy 2023-2027 14 6.6.1 Number of passengers 50 1.7 Tallinna Sadam’s stakeholder groups and value chains 17 6.6.2 Cargo volume 51 2 SERVICE RESPONSIBILITY 19 6.6.3 Ferry service 52 2.1 Safety and security 19 6.6.4 Multifunctional icebreaker Botnica 52 2.2 Quality management and risks 21 6.7 Revenue and expenses 53 2.3 Customers and suppliers 22 6.8 Proﬁt 56 3 ENVIRONMENT 24 6.9 Segment reporting 57 3.1 Energy eﬃciency and sustainable consumption 25 6.10 Investments and development prospects 59 3.2 Clean Baltic Sea and circular economy 26 6.11 Dividends 60 3.3 Clean air 28 6.12 Share and shareholders 61 4 OUR PEOPLE 31 7 CORPORATE GOVERNANCE 63 4.1 Employees 31 7.1 General meeting 64 4.2 Human resource strategy 33 7.2 Supervisory board 65 4.3 Occupational safety 35 7.3 Audit committee and internal audit department 68 5 GIVING BACK TO SOCIETY 36 7.4 Remuneration committee 68 5.1 Participation in organisations 36 7.5 Nomination committee 69 5.2 Sustainable development cooperation and volunteer work 38 7.6 Management board 69 7.7 Supervisory and management boards of subsidiaries and associates 71 7.8 Cooperation of the management and supervisory boards 71 7.9 Disclosure of information and communication 71 7.10 Financial reporting 72 7.11 Statement of compliance with the CGR 72 Table of Contents | page 4 Translation of the Estonian original REMUNERATION REPORT 73 Note 14. Trade and other payables 123 CONSOLIDATED FINANCIAL STATEMENTS 77 Note 15. Taxes payable 124 Consolidated statement of ﬁnancial position 78 Note 16. Loans and borrowings 125 Consolidated statement of proﬁt or loss and other comprehensive income 79 Note 17. Government grants 129 Consolidated statement of cash ﬂows 80 Note 18. Equity 133 Consolidated statement of changes in equity 81 Note 19. Revenue 137 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 82 Note 20. Operating expenses 139 Note 1. Reporting entity 82 Note 21. Other income 141 Note 2. Accounting policies used in the preparation of the ﬁnancial statements 83 Note 22. Finance costs 141 Note 3. Operating segments 100 Note 23. Related party transactions 142 Note 4. Financial risk management 104 Note 24. Commitments 144 Note 5. Signiﬁcant accounting estimates and judgements 109 Note 25. Non-cash investing activities 144 Note 6. Financial instruments 111 Note 26. Contingent liabilities 145 Note 7. Cash and cash equivalents 113 Note 27. Investigations concerning the group 146 Note 8. Trade and other receivables 114 Note 28. Additional information on the parent 147 Note 9. Investments in an associate 115 Note 29. Events aﬅer the reporting period 152 Note 10. Property, plant and equipment 117 MANAGEMENT’S CONFIRMATION 153 Note 11. Intangible assets 119 INDEPENDENT AUDITORS’ REPORT 154 Note 12. Leases 120 STATEMENT OF THE SUPERVISORY BOARD 157 Note 13. Provisions 122 PROFIT ALLOCATION PROPOSAL 158 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 (Port of Tallinn) and its subsidiaries (together: ‘Tallinna Sadam’ or ‘the Group’) is based on four balanced business lines: passengers, cargo, shipping and real estate. Tallinna Sadam owns the largest cargo and passenger harbour complex in Estonia. Our harbours are navigable and easily accessible throughout the year and deep enough to receive all vessels passing through the Danish Straits. Estonia’s geographical location provides good conditions for handling both north–south and east–west passenger and cargo ﬂows. 1 In the period before the COVID-19 pandemic • Annual average ﬁgures 1 : 10 million passengers, 1.4 million cars, 6,100 ferry calls • Passenger harbours: Old City Harbour and Saaremaa Harbour. One route, two operators at Muuga Harbour • Receiving ferries and cruise ships, provision and development of port infrastructure, provision of services to passengers and vehicles • Ferry routes: Tallinn–Helsinki, Tallinn–Stockholm, Muuga–Vuosaari. Cruise ships PASSENGERS • Annual average ﬁgures: about 18 million tonnes of cargo, 1,500 cargo ship calls • Cargo harbours: Muuga Harbour, Paldiski South Harbour. Ro-ro cargo at Old City Harbour • Receiving cargo traﬃc, provision and development of port infrastructure • Liquid bulk, dry bulk, container, ro-ro and general cargo CARGO TS LAEVAD OÜ • Operating ferries on two domestic routes: Rohuküla–Heltermaa and Virtsu–Kuivastu • Annual average ﬁgures: 2 million passengers and 1 million vehicles • 5 ferries: Leiger, Tiiu, Tõll, Piret and Regula TS SHIPPING OÜ (MPSV BOTNICA): • Icebreaking in northern Estonian ports and harbours • Oﬀshore work and international projects during the summer season SHIPPING • Developing real estate at Old City Harbour 16 ha • Muuga Industrial Park 76 ha • Paldiski South Harbour Industrial Park 34 ha • Saaremaa Harbour Logistics Park 10 ha • Vacant land and rental premises in the harbours REAL ESTATE TABLE OF CONTENTS m 1. Tallinna Sadam at a Glance | page 7 Translation of the Estonian original Tallinna Sadam owns two passenger harbours (Old City Harbour and Saaremaa Harbour) and two cargo harbours (Muuga Harbour and Paldiski South Harbour). In terms of the number of passengers served, Tallinn Old City Harbour is the third-largest harbour in the northern region of the Baltic Sea (aﬅer Stockholm and Helsinki). Muuga Harbour is Estonia’s largest cargo harbour. Tallinna Sadam oﬀers port services as a landlord port, i.e. it owns, manages and develops berths, port basins and the surrounding areas, leases land to cargo operators, organises vessel traﬃc in port basins and ensures safe navigation in port waters. Tallinna Sadam owns passenger terminals and other facilities required for passenger service. Cargo harbour superstructure belongs to cargo operators. Waste management in the harbours is provided by AS Green Marine (Green Marine), an associate of Tallinna Sadam that oﬀers innovative waste handling solutions. Through its subsidiary OÜ TS Laevad (TS Laevad), Tallinna Sadam operates ferries and oﬀers passenger transport between Estonia’s mainland and two largest islands — Saaremaa and Hiiumaa. The Group has ﬁve ferries and the routes served are the busiest domestic ferry routes in Estonia. The other subsidiary, OÜ TS Shipping (TS Shipping), is also involved in shipping. It owns the multi- functional icebreaker Botnica, which provides icebreaking services along the northern Estonian coast during the winter season and icebreaking, ice management and escort services in the Arctic waters of northern Canada during the summer season. The real estate business line is largely in the preparatory phase. Detailed plans for the areas included in the Old City Harbour development plan have been initiated and are being processed by the Tallinn City Planning Department. The Group’s operating segments for ﬁnancial accounting purposes diﬀer somewhat from its business lines. Operating segments are Passenger harbours, Cargo harbours, Ferry, and Other. The Passenger harbours segment comprises the provision of port services at the harbours mainly involved in passenger service — Old City Harbour and Saaremaa Harbour — and real estate development activities in Old City Harbour. The Cargo harbours segment comprises the provision of port services at the harbours mainly involved in cargo handling — Muuga Harbour and Paldiski South Harbour — and activities related to the industrial parks located in those harbours. The Ferry segment comprises the operations of the subsidiary TS Laevad, which provides ferry service between Estonia’s mainland and two biggest islands. The segment Other includes mainly the operations of the subsidiary TS Shipping, which operates the multifunctional icebreaker Botnica, and the Group’s share of the proﬁts and losses of the associate Green Marine, which is accounted for under the equity method. Segment results are presented in section 6.9 of the management report and note 3 to the consolidated ﬁnancial statements. Structure of Tallinna Sadam Group 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 2022 2 MAll changes on this page compared with 2021 3 ESI — Environmental Ship Index 4 GHG — greenhouse gases CO 2 , N 2 O and CH 4 converted into CO 2 equivalent Revenue EUR 121.7m (+10.6%) 2 Cargo volume 17.8m tonnes (–20.7%) Utilisation rate for icebreaker Botnica 68% (–6.7 percentage points) Adjusted EBITDA EUR 55.8m (+3.3%) Number of passengers 7.0m (+98%) Traﬃc between Estonia’s mainland and largest islands 2.3m passengers (+4.3%) and 1.1m vehicles (–0.2%) EBITDA margin 45.9%, proﬁt EUR 25.6m (–0.1%) Number of vessel calls 7,130 (–2.8%) Share of vessel calls with ESI 3 discounts 18% (+2 percentage points) Capital investments EUR 13.9m (–5.9%) Dividends paid EUR 25.511m (EUR 0.097 per share) GHG 4 emissions 21,623 tonnes of CO 2 equivalent (–9%) TABLE OF CONTENTS m 1. Tallinna Sadam at a Glance | page 9 Translation of the Estonian original 1.3 Signiﬁcant events in 2022 AN INVESTMENT DECISION ON BUILDING A QUAY AND HINTERLAND IN PALDISKI SOUTH HARBOUR TO SERVICE OFFSHORE WIND FARMS WAS ADOPTED THE ICEBREAKER BOTNICA’S SUMMER CHARTER CONTRACT WITH BAFFINLAND WAS EXTENDED THE NUMBER OF PASSENGERS RECOVERED TO 7 MILLION PEOPLE A NEW COMPOSITION OF THE SUPERVISORY BOARD AND A NEW CFO TOOK OFFICE TALLINNA SADAM BECAME A CO-FOUNDER OF HYDROGEN VALLEY ESTONIA TABLE OF CONTENTS m 1. Tallinna Sadam at a Glance | page 10 Translation of the Estonian original A LAWSUIT WITH WCE AND PROCEEDINGS BY THE COMPETITION AUTHORITY WERE TERMINATED A COMPROMISE AGREEMENT WAS REACHED IN A COURT DISPUTE WITH THE SHIPPING COMPANY TALLINK THE STATE ANNOUNCED THAT IT WOULD NOT EXERCISE THE OPTION TO BUY OUT THE FERRIES AN INVESTOR DAY TITLED “IN THE WINDS OF THE FUTURE” WAS ORGANISED THE 30 TH ANNIVERSARY OF TALLINNA SADAM WAS CELEBRATED WITH THE SEMINAR “PORT 3.0” THE NEW CRUISE TERMINAL WAS AWARDED THE MAIN PRIZE IN THE CATEGORY OF “NEW SPACE” BY THE CULTURAL ENDOWMENT OF ESTONIA AND THE CONCRETE BUILDING OF THE YEAR AWARD BY THE ESTONIAN CONCRETE ASSOCIATION AND WAS NOMINATED FOR THE ESPO AWARD FOR CREATING ADDED VALUE TO THE LOCAL COMMUNITY TABLE OF CONTENTS m 1. Tallinna Sadam at a Glance | page 11 Translation of the Estonian original A NEW FERRY, MS MYSTAR, BEGAN TO SERVE THE TALLINN–HELSINKI ROUTE DRAFT DETAILED PLANS FOR OLD CITY HARBOUR WERE PUT ON PUBLIC DISPLAY THE SQUARE IN FRONT OF PASSENGER TERMINAL D WAS COMPLETED 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’s greatest successes for the Port of Tallinn, and thus Tallinna Sadam, were related to the recovery of the passenger business, which was more rapid than expected, largely due to our neighbours’ interest to travel on the Tallinn–Helsinki route. We are also pleased about cruise ships returning to our harbours in Tallinn and the island of Saaremaa as well as the strong results of our ferry service operations. For our real estate development operations, 2022 was a milestone year because the City of Tallinn put the draﬅ detailed plans of Old City Harbour on public display. This was a major step towards achieving the goals of our real estate business and executing Masterplan 2030+ in the development of Old City Harbour. Furthermore, our icebreaker Botnica continued to deliver good results. While the cargo business was overshadowed by Russia’s aggression against Ukraine and the consequent trade sanctions, we made an important forward-looking decision to invest in a new quay for Paldiski South Harbour. Besides supporting the military objectives of the Estonian state, this will enable us to become an important partner in the construction and maintenance of oﬀshore wind farms in the Baltic Sea. Tallinna Sadam’s balanced business model and strong customer base have helped us successfully cope with various crises, earn a proﬁt and deliver on the dividend promise made to investors. The maritime industry is going through exciting times where the role of technology is more important than ever. Innovative technological solutions, digitalisation and automation are unlocking new opportunities in shipbuilding, energy supply, alternative fuels and shipping management as well as the provision of traﬃc solutions for harbour premises and ticketing systems for end consumers. All this, and everything in between, is very exciting and so is the green transition that supports it all. I dare say that the Port of Tallinn continues to be a trailblazer in the maritime sector in both digitalisation and reducing the environmental footprint of its operations and we increasingly expect the same from our partners and customers. I sincerely hope this year will bring us peace in Europe. This human and perhaps somewhat cliché desire is currently my greatest wish both as a person and a CEO. 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 by oﬀering its customers a sustainable environment and development opportunities. Tallinna Sadam is a modern gateway to the Baltic Sea. We are a growth-oriented development and service organisation. We create a sustainable environment and development opportunities for our customers and employees by combining the provision of services to people and cargo, shipping, and the development of waterfront real estate into an integrated logistics business. We listen to the communities and protect the environment. We are open, smart and reliable. We represent Estonia’s image as a maritime country and are one of the engines of its economy. The core values of Tallinna Sadam are openness, smartness and reliability. We are open to new ideas and innovation and ﬁnd opportunities to implement them. We share information about our intentions and activities both internally and externally. We make sensible and smart decisions and do the right things at the right time and in the right way. We seek, seize and oﬀer creative and forward-looking solutions to improve the company’s competitiveness. We are reliable. We keep our promises and deliver quality. We are professional, competent and inﬂuential experts in our area and treat ourselves as well as others with respect and consideration. 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 become the most innovative port on the Baltic Sea, meeting owners’ expectations, keeping the dividend promise, promoting a strong business culture and ensuring sustainable development. Business strategy Tallinna Sadam will have moderate growth opportunities in all its business lines: cargo, passengers, real estate, and shipping. In the passenger business, which was hit the hardest by the COVID-19 crisis, 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 creating sustainable port service solutions for ferries, ships, buildings and passengers. The goals include creating green corridors on the Tallinn–Helsinki and Tallinn–Stockholm routes. In the cargo business, we will continue to increase the competitiveness of cargo corridors passing through Estonia together with other members of the logistics chain. The development of oﬀshore wind farms will provide a good opportunity to start oﬀering the services of a construction and maintenance harbour, while the replacement of fossil fuels with renewable and biofuels and alternative energy sources will open up possibilities for handling new cargo groups. Due to changes in the supply chains, the importance of the port as an intermodal hub will continue to grow and the signiﬁcance of the north-south corridor will increase. As companies are reshoring their production and manufacturing operations, we intend to implement additional areas in the industrial parks at our Muuga Harbour and Paldiski South Harbour. In the real estate business, we will continue to create attractive urban space by executing the development plan of Old City Harbour, i.e. Masterplan 2030+. The goal for the strategy period is to begin real estate development and create high-quality public urban space in the northern area. In shipping, the main focus in 2023–2027 will be on winning the tender for the provision of ferry service between Estonia’s mainland and two largest islands in order to ensure the core business, securing year-round work for the icebreaker Botnica and adopting sustainable digital solutions. We are also considering the viability of a new business line: oﬀering a maintenance ﬂeet in the oﬀshore wind value chain. The main factors, which will aﬀect our operations and the implementation of our business strategy are the general unstable economic situation in Europe, the Russia-Ukraine war, the sustainability of rail freight transport, 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. Additionally, the energy crisis and climate regulations are accelerating the search for new solutions for the implementation of alternative energy sources and green fuels, which is creating conditions for the development of energy-related projects in harbours. TABLE OF CONTENTS m 1. Tallinna Sadam at a Glance | page 15 Translation of the Estonian original Development opportunities Sustainable development Tallinna Sadam consistently strives to reduce the adverse environmental impacts of its business and development activities. A clear focus on environmental priorities and the pursuit of climate neutrality by 2050 are keys to ensuring the company’s sustainable development. We recognise that the Baltic Sea has one of the most vulnerable marine ecosystems in the world and that clean air is an important indicator of the quality of life as well as a critical factor in ensuring our ability to continue business and development activities in the vicinity of residential areas. Our goals also include expanding the circular economy and improving energy eﬃciency, while using all natural resources economically and promoting more sustainable consumption. In addition to environmental priorities, we monitor the achievement of goals set in our economic and social focus areas. Being an innovative company, we increase our competitiveness by using modern science-based and digital solutions. In selecting partners, we evaluate their approach to sustainability. We ensure the company’s proﬁtability and stable shareholder returns by delivering on our dividend policy and applying contemporary management principles which are consistent with our core values. As Estonia’s largest gateway to the sea, we are responsible for Estonia’s image as a maritime nation. Therefore, our priority is to create quality public space for both visitors and local people. It is equally important to contribute to regional development by providing ﬁrst-rate ferry service, which is essential to the residents and visitors of Estonia’s largest islands. Health, safety and security remain among our top priorities. We implement the strategy by setting annual goals and action plans and involving all our employees in their achievement. The key to Tallinna Sadam’s future success lies in the attitude and mindset that our daily business decisions and investments must equally support the company’s proﬁtability, the surrounding environment and the development of society as a whole. Through our activities, we contribute to the achievement of Estonia’s climate neutrality goal as well as the implementation of the European Green Deal and the UN sustainable development goals. PASSENGERS • Restoring passenger traﬃc volumes on the Helsinki and Stockholm routes • Restoring the volume of cruise ship calls and the number of cruise passengers • Improving accessibility and connectivity CARGO • Building a harbour for the construction and maintenance of oﬀshore wind farms • Becoming a regional cargo and logistics hub • Increasing north-south cargo ﬂows (including the opportunities oﬀered by Rail Baltica) • Continuing the development of ro-ro/con-ro routes at Muuga Harbour and Paldiski South Harbour SHIPPING • Winning the public tender and signing a new contract for the provision of ferry service between Estonia’s mainland and two largest islands • Increasing operating eﬃciency • Electriﬁcation of ships and implementation of alternative fuels • Growth in the demand for icebreaking and oﬀshore services in international projects • Providing services to Estonian oﬀshore wind farms REAL ESTATE • Executing Masterplan 2030+ created for the development of Old City Harbour • Developing industrial parks and providing added value • Renting out surplus resources and vacant premises TABLE OF CONTENTS m 1. Tallinna Sadam at a Glance | page 16 Translation of the Estonian original In 2022, we continued to develop our sustainable development strategy and to plan activities for achieving the goals together with our in-house experts and management. We updated the sustainable development topics on our corporate website and commissioned a gap analysis from an audit ﬁrm to map the requirements of the Corporate Sustainability Reporting Directive and prepare for its implementation at Tallinna Sadam. The analysis will be completed in 2023. We have developed key performance indicators and their target levels as well as a web application for monitoring our progress towards the sustainable development goals. The application, developed in collaboration with the Estonian Maritime Academy, can be found at http://www.sea.ee/pem. We also completed the climate change questionnaire of the Carbon Disclosure Project (CDP) to be more open about the impacts of our carbon footprint as well as the goals and activities for their mitigation. Our CDP score for the questionnaire completed in 2022 was C (average). • 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 • Suppliers • Financiers • Agents, lease holders • Charterers of the icebreaker • Parties in logistics chain • Operators (cargo terminals and passenger ships) • Supervision and other institutions • Passengers (international and local) INVESTORS • Estonian state (controlling shareholder) • International institutional investors • Estonian investment and pension funds • Retail investors • Potential investors 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. Our main challenge is to make sure that all employees, passengers, cargo and companies are safe and secure. We do it by implementing innovative security systems. The harbours of Tallinna Sadam have implemented a safety and security assurance system to meet the requirements of the Estonian Ports Act in areas such as marine traﬃc safety, security, environmental protection, and safe cargo handling. We assess potential safety risks regularly and update our safety measures when necessary. General safety requirements are set out in the Port Rules. Our structural units’ roles in preventing and responding to dangerous situations at the harbours of Tallinna Sadam are described in the procedure for preventing and resolving dangerous situations and each harbour has developed and implemented a plan for responding to safety incidents. To cope with dangerous situations, we carry out regular drills and training exercises and work with supervision authorities, local communities and operators, including handlers of hazardous substances operating on the premises of our harbours. Last year we conducted ten ﬁre drills which were attended by the employees of the security service provider and the harbour staﬀ. All detected incidents are recorded and continuous monitoring provides important input to the planning of additional safety measures. To ensure ﬁre safety, we have supplied our harbours with basic ﬁre extinguishing equipment (dry powder, gas and water extinguishers, hose systems, ﬁre blankets, etc.), automatic alarm systems (ﬁre alarm, sprinkler, gas extinguishing, water curtain and alarm transmission systems) and external ﬁre extinguishing water systems (ﬁre hydrants, sea water extraction places). We regularly conduct ﬁre drills and check ﬁreﬁghting equipment, systems and installations in cooperation with the Rescue Board. There were three ﬁre incidents at Muuga Harbour in 2022: the ﬁrst in the canteen of an oﬃce building belonging to Tallinna Sadam, the second on a cargo ship moored at the quay and the third in a warehouse belonging to a cargo operator (at Hoidla tee 2). No people were injured and no signiﬁcant damage was caused to the property of Tallinna Sadam in any of the incidents. Training and exercises Crisis management Fire drill Pollution control Security 40 30 20 10 0 2018 2019 2020 2021 2022 24 3 6 2 21 4 2 3 21 4 6 2 20 2 3 2 20 1 10 3 TABLE OF CONTENTS m 2. Service Responsibility | page 20 Translation of the Estonian original The Rescue Board ensures swiﬅ response to possible rescue incidents. To increase the capabilities of the Muuga rescue station, which is based at Muuga Harbour, we have acquired the following equipment for responding to possible incidents at the harbour: foam extinguishers and hose systems that can supply water from sources up to 3 km away and a HydroSub sea water pump with a capacity of 11,000 litres per minute. Also, there is a slip for launching watercraﬅ in the eastern part of Muuga Harbour, which enables rescue units to respond quickly to incidents at sea. In connection with the opening of the cruise terminal in 2021, we took preventive action and introduced the building to the rescue units of the Rescue Board — 80 rescuers participated in the event. The purpose of implementing security requirements at harbours is to assure the safety and security of ships, passengers, cargo, and harbour employees and to prevent wrongdoing. All harbours of Tallinna Sadam apply heightened ISPS 5 security requirements. Old City Harbour, which has been designated as a facility essential for national security, is subject to additional security measures. All our harbours have a security plan, which is based on a risk analysis carried out by the Transport Administration and the Estonian Internal Security Service. According to the plan, each harbour consists of diﬀerent facilities that are subject to security measures consistent with their inherent risks. The eﬀectiveness of the security plan is tested during drills and exercises carried out every three months. Compliance with security requirements is reviewed by the Transport Administration, which carries out relevant audits on an regular basis. Access to all harbours is restricted: entry is granted on the basis of permits. All harbours have manned guarding and consistently upgraded modern technical surveillance systems, which support security assurance. Thanks to extensive preventive work, Tallinna Sadam has had very few serious incidents in the past decade. There have been no safety incidents resulting in a large number of fatalities or injuries. TS Shipping has implemented a safety and quality management system for its icebreaker Botnica, which integrates the requirements of the main international maritime conventions (SOLAS, MARPOL, STCW, etc.) and ISO standards (9001:2015, 14001:2015, 45001:2018). International oﬀshore industry guidelines and best practices are also followed. TS Shipping is a member of the International Marine Contractors Association (IMCA) and complies with its guidelines, recommendations and practices. Nearly 20 diﬀerent safety and security drills and exercises are conducted on board the icebreaker in conformity with international conventions and the recommendations and practices of the oﬀshore industry every year. In addition, joint emergency response drills to practice cooperation between the crew and the onshore team are carried out twice a year. The ship’s main engines, other mechanisms and systems have been supplied with remote surveillance equipment, which improves safety, allows using the vessel’s engines and systems more eﬃciently and reduces costs and emissions. TS Laevad applies the safety and security requirements of the ISPS Code. Fire safety is ensured by conducting weekly rescue and ﬁreﬁghting drills on board the vessels as required by SOLAS. Various on-board emergency response drills are conducted in partnership with the Police and Border Guard Board, the Estonian Internal Security Service and the Rescue Board. In addition, in the summer we organise maritime safety days on board our ferries in partnership with the Police and Border Guard Board and volunteer rescuers where we demonstrate the proper use of life jackets and give other relevant information about maritime safety. Together with Tallinn University of Technology (TalTech) we carried out an assessment of the cyber risks of ferries and ferry service and prepared an action plan to improve process security. In preventing the pollution of marine environment and managing waste, TS Laevad observes the requirements of MARPOL. All vessels of TS Laevad have implemented a comprehensive safety management system and the Transport Administration conducts separate audits of all vessels and the oﬃce on an annual basis. 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 has been applying an integrated management system, which complies with the requirements of international quality and environmental management standards ISO 9001 and ISO 14001, since 2003 already. Conformity with international standards assures that the management system of Tallinna Sadam ensures the satisfaction of customers and other stakeholder groups, the eﬃciency of workﬂows, and eﬀective control of risks and environmental aspects. The period’s main goals in the development of the quality and environmental management system were to perform customer satisfaction, employer reputation, and employee engagement surveys and to analyse the results. Priority was given to environmental and digitalisation projects such as reducing GHG emissions, increasing the share of procurements with sustainability criteria, mapping vessel traﬃc processes and developing a digital port strategy. TS Shipping applies an integrated management system, which complies with the requirements of quality management standard ISO 9001:2015, environmental management standard ISO 14001:2015 and occupational health and safety management standard OHSAS 18001. We review the risks which inﬂuence the activities of Tallinna Sadam in accordance with our risk management framework. Relevant risks are classiﬁed into three main categories: risks resulting from the external environment (external risks), risks associated with speciﬁc business lines and 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. The Group’s ﬁnancial risks are managed separately and a comprehensive overview of their hedging and mitigation principles and means is provided in note 4 to the ﬁnancial statements. External risks which aﬀect the Group’s operations the most include the global economic instability and the impacts of the sanctions against Russia and Belarus on the trade in goods and customers’ business activity (e.g. oil operators). Risks that have been assessed to have a high impact include energy supply interruptions, the loss of key customers, the spread of a pandemic, restrictive international and Europe-wide regulations, introduction of stricter environmental requirements due to climate change and climate policy (including the goals of achieving climate neutrality, maritime decarbonisation, etc.) and possible unfavourable changes in national tax policies. According to our risk analysis, another signiﬁcant risk factor for the operations of Tallinna Sadam is climate policy — potential new international and EU requirements (including the Fit for 55 package), which will aﬀect harbour services in the long term through possible changes in demand and the cost base. The potential impact of extreme weather conditions (storms, rising water levels, severe ice conditions, etc.) is likely to be lower than that of climate policy. Other potentially signiﬁcant risks include the business risks of major customers and prospective customers’ unwillingness to invest due to the instability of the global economy. The passenger business is aﬀected the most by the rise in risk aversion and the changes in travel habits which have been brought about by the pandemic and the Russia-Ukraine war. Other signiﬁcant risks are the construction of a competing passenger harbour (in the long-term perspective) and possible incidents with passengers on harbour premises. In the cargo business, risks with a high impact include increasing competition (including domestic) between the Baltic Sea ports and harbours and the restrictions imposed by Russia on the volumes of cargo transported by road and rail as well as through border crossing points. In the real estate business, signiﬁcant risks are possible delays in local governments’ planning processes and possible legal disputes. In shipping, ferry operations may be aﬀected in the long- term perspective by the possible construction of the Saaremaa bridge and the operations of the icebreaker Botnica may be aﬀected by failure to secure regular work for periods outside the icebreaking season. Signiﬁcant operational risks are related to occupational health and safety, the planning and execution of business projects and a possible decrease in the market value of signiﬁcant assets. All other risks, including environmental risks (such as the risk of pollution of the port basin and harbour premises, noise and odour nuisances), safety and security risks, and personnel risks, are not as high (taking into account the risk mitigation measures) and, depending on the risk, fall into the low or moderate category. In keeping with our values and ethics and to prevent corruption, we have put in place a Group- wide procedure for avoiding conﬂicts of interest. The procedure requires, among other things, the members of group companies’ management and supervisory boards (16 persons in total) and employees who arrange transactions to declare their business interests. We observe the personal data protection requirements (GDPR) and pay increasing attention to ensuring cyber security. We address the topics at regularly organised training events and share relevant information (e.g. on our intranet) with employees and the members of the governing bodies. Our information systems are regularly tested with the assistance of external experts to improve our cyber security and mitigate related risks. TABLE OF CONTENTS m 2. Service Responsibility | page 22 Translation of the Estonian original 2.3 Customers and suppliers We have a broad customer base, which largely consists of the Estonian state as well as big inter- national companies, many of which are listed on diﬀerent stock exchanges. Our largest customers are ferry operators, cargo terminal operators, and the government (the Republic of Estonia) under the contracts for the provision of ferry service and Botnica’s icebreaking service. Our customers also include the end consumers of our services: passengers travelling on our ferries to the islands of Saaremaa and Hiiumaa, passengers travelling on international routes, and cargo carriers and cargo owners. In customer relations, we observe the principles of openness and engagement. Our management and heads of business lines regularly meet our key customers. At least once a year, we organise a Customer Information Day where we present our signiﬁcant plans, projects and investments. We monitor customer satisfaction for six major customer groups: cargo terminal operators, ferry operators, shipping agents, tenants, passengers, and customers of the marina. In 2022, the customer satisfaction index was 5.34 on a 6-point scale (2021: 5.22). We continued to participate in various working groups. As a result, a decision was made to maintain in 2022 vessels’ 50% exemption from fairway dues payable to the state. In the Rail Baltica working group, we continued to collaborate with stakeholder groups on the construction of the Muuga freight station. In 2022, we began to measure whether our largest customers and suppliers apply the principles of sustainable development in their operations. We drew a sample based on our purchases and sales over the past three years and added some accounts to ensure the representation of diﬀerent areas. The sample consisted of 30 customers and 28 suppliers. Altogether, 74% of the customers and suppliers in the sample addressed sustainable development topics. The goal is to rise the outcome to 100% by 2030. We invested in making the customer journey in Old City Harbour more pleasant in 2022. Passenger terminal A was supplied with a travel library as well as drinking water taps and coﬀee machines for the waiting areas. We built a new public square in front of passenger terminal D, which oﬀers ferry passengers a convenient connection to the city centre via the Admiral Bridge and visitors an attractive place to spend time before and aﬅer their voyage. We have agreed a common approach to service provision with all companies that provide services in the passenger terminals of Old City Harbour: The Service Compass of the Old City Harbour Community. TABLE OF CONTENTS m 2. Service Responsibility | page 23 Translation of the Estonian original Our subsidiary TS Laevad that provides ferry service between Estonia’s mainland and the biggest islands wishes to oﬀer its passengers the best travel experience in Estonia and regularly measures customer satisfaction using the net promoter score (NPS) methodology. In 2022, the NPS was +74.3 on the scale of –100 to +100 (2021: +72.5). During the year, self-service terminals were installed in the harbours of the Hiiumaa route for passengers travelling on foot and by bike and the emergency notiﬁcation system for passengers was upgraded. Together with our partners, we make every eﬀort to make all visitors and passengers feel welcome and to develop a positive and inviting culture and vibe in our harbours and aboard our ferries. In procuring products and services, we prefer, where possible, sustainable solutions, which are aligned with the values of Tallinna Sadam. We observe the sustainability criteria already in preparing the qualiﬁcation requirements and exclude bids with solutions that burden the environment. In 2022, we applied sustainable procurement criteria to 95% of our procurements (on the basis of contract costs). We wish that in the future all our partners would contribute to society and the environment. We have adopted the Port Community’s Internal Regulations, which set out what we expect of organisations providing services on harbour premises in terms of sustainability, safety and hospitality. Several events and conferences were arranged in 2022 in cooperation with customers and other stakeholder groups: the seminar “Port 3.0” to celebrate the 30th anniversary of Tallinna Sadam, the Estonian Wind Energy Conference and the Wind Day in Paldiski, the Paldiski Association of Entrepreneurs’ conference “Diﬀerent Paldiski”, the XVIII International Maritime Conference, the Cruise Baltic Conference “Sustainable management of cruise destinations” and others. Our harbours were visited by numerous business delegations and student groups to whom we presented the cargo handling, passenger service and environmental protection capabilities of Estonian logistics companies and harbours. ALL PASSENGERS ARE WELCOME WITH US — WHETHER BY CAR, BIKE OR ON FOOT AT THE SEMINAR DEDICATED TO THE 30TH ANNIVERSARY OF TALLINNA SADAM WE LOOKED BACK AND FORWARD 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 consistently strives to reduce the adverse environmental impacts 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 ports on the Baltic Sea to ensure the company’s sustainable development and operation. We have an environmental management system by which we identify the signiﬁcant environmental aspects and impacts of our operations and determine our environmental goals and tasks in order 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 goals in this priority area are achieving climate neutrality by 2050 and maximising the use of renewable energy. We measure our progress towards the goals using the energy eﬃciency and sustainable consumption indicators presented below. We have been buying only renewable (wind and solar) electricity for our own use since 2021. Our renewable electricity purchases in 2022 totalled 13.1 GWh. In addition, we covered 2.7% of our electricity consumption with self-produced solar power. Last year, additional solar panels of 80 kW were installed at Muuga Harbour. The cruise terminal building in Old City Harbour uses seawater- powered heating and cooling systems and 53% of the cruise terminal’s electricity consumption was covered by the output of solar panels. Our total energy consumption was 18.2 GWh, of which the share of renewable energy was 75%. We use digital building information modelling (BIM) in building and infrastructure planning and management. BIM is a solution designed to manage, organise and control business and construction processes at all stages of a building’s life cycle. It helps ensure design and construction quality and provides information that enables us to optimise building management costs. BIM was used in the design and construction of passenger terminal D with a multi-storey car park and the square in front of the building, Admiral Bridge, the cruise terminal with a roof promenade and a ramp for berth 13 in Muuga Harbour. TS Shipping implemented the Shipboard Energy Eﬃciency Management Plan (SEEMP) for its icebreaker Botnica in 2013 already. SEEMP is an element of the integrated management system that describes procedures and measures for optimising energy consumption. Additionally, Botnica’s navigation management system incorporates a service which allows monitoring vessel movement in real time and programs which enable onshore staﬀ to analyse changes in weather systems and vessel movement and thus to suggest optimum routes and speeds, helping captains avoid strong headwinds and weather routing. This has created considerable fuel savings and helped ensure safer ocean passage for the icebreaker. The ferries Piret, Tõll, Leiger and Tiiu of TS Laevad are equipped with Blueﬂow Energy Management, an innovative system that monitors fuel consumption and helps improve deck oﬃcers’ navigation practice in real time, optimise vessel speed based on the navigation area and plan maintenance of the underwater hull, which in turn lowers the vessel’s fuel consumption and reduces the negative environmental impacts of marine fuel. Compared with the baseline year 2019 when the monitoring system was not yet implemented, the ferries’ average fuel consumption per trip in 2022 was 13% lower (2021: 7%). The fuel consumption and CO 2 emissions of TS Laevad were aﬀected by a system failure on the ferry Tõll in July 2021 as a result of which the ferry used only diesel fuel during the incident investigation period, which lasted until the end of April 2022. However, on all other ferries fuel consumption per trip decreased compared with a year earlier. Energy eﬃciency and sustainable consumption indicators Indicator Target level for 2030 Baseline year 2019 2021 2022 MPSV Botnica Energy Eﬃciency Operational Index (EEOI) 6 In the range of 0.3–0.4 0.4 0.4 0.3 Outdoor lighting upgrade rate 100% 31% 47% 47% Energy eﬃciency of buildings (kWh/m 2 per year) 130 197 186 195 Share of renewable energy in total energy consumption * 90% 0.4% 67% 75% * 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 have 70% of waste recycled in the circular economy, to minimise the risks and hazards of marine pollution and to maintain biodiversity in coastal areas in the places where the Group operates. We monitor our progress using the indicators presented below. Tallinna Sadam works hard to ensure that the ecological footprint of its activities is kept to a minimum. The harbours of Tallinna Sadam have adequate capacity to receive bilge water, oily sludge, sewage, garbage and scrubber waste from all ships calling at them. In 2022, the number of port calls by cruise ships and ferries increased compared with 2021 (the ﬁgures for 2021 were lower than usual due to the COVID-19 pandemic) and therefore the quantities of ship-generated waste received were also higher than in 2021. According to unaudited data, 48% of ship-generated waste received was handed over for recycling in 2022 (2021: 43%). The volume of recycled waste is aﬀected by the type of waste received and the recycling capacity of the ﬁnal waste handlers. The share of landﬁlled waste is minimal: based on unaudited data 98% of waste received in 2022 was recycled or recovered (incinerated) (2021: 97%). Tallinna Sadam contributes to ensuring the purity of the Baltic Sea by helping prevent the dis- charge of ship sewage into the sea. To that end, we have provided Old City Harbour with a sewage pipeline for cruise berths and all frequently used ferry quays and a micro-tunnel with a sewage reception capacity of 1,200 m 3 per hour. Thanks to the onshore sewer system, cruise ships and ferries calling at Old City Harbour can dispose of unlimited amounts of sewage without any additional charge. Reception of ship-generated waste Scrubber waste Sewage Hazardouse waste Bilge water and oily sludge Garbage 250 200 150 100 50 0 2018 2019 2020 2021 2022 thousand m 3 Ecological footprint indicators Indicator Target level for 2030 Baseline year 2019 2021 2022 Share of ship-generated waste recycled in the circular economy 70% 54% 43% 48% Share of port calls by cruise ships that disposed of sewage at Old City Harbour 100% 81% 94% 80% Number of pollution incidents in harbour basins 0 9 6 13 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% 12 18 63 23 43 66 22 48 79 87 17 14 175 15 24 TABLE OF CONTENTS m 3. Environment | page 27 Translation of the Estonian original Ferries and cruise ships discharged approximately 165 thousand m 3 of sewage to reception facilities at Old City Harbour in 2022 (2021: 76 thousand m 3 ). Although the volume of sewage received from cruise ships nearly doubled, the share of cruise ships that discharged sewage was 80% in 2022 (2021: 94%). This may be attributable to the optimisation of sewage disposal by cruise ships, i.e. sewage is discharged only when sewage tanks are ﬁlled to a certain level. In addition, cruise ships no longer call at the Port of St Petersburg, where sewage disposal was expensive and for an additional charge. The share for ferries is not relevant due to their frequent timetables and generally short call times. In 2022, we continued to contribute to the circular economy through separate collection of waste in our oﬃces and passenger terminals as well as on board the ferries of TS Laevad. Because of the potential impacts of harbour 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 eﬀect of harbour operations on marine ecosystems because the number of benthic community species directly reﬂects changes in water transparency, the intensity of eutrophication, the volume of dredging 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 Estonian Environment Agency of the Ministry of the Environment). According to the 2022 data, the condition of the sea near 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 Sewage from cruise ships Sewage from international route ferries Sewage from international 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 2018 2019 2020 2021 2022 Recycling Incineration Landﬁlling 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2018 2019 2020 2021 2022 tonnes 73% 62 81% 73 83% 47 10 94% 39 38 67 98 80% 3,873 2,474 1,181 721 1,226 1,755 1,976 4,345 1,681 1,381 2,020 1,939 360 113 81 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 achieving climate neutrality and zero emissions from ships staying in our harbours by 2050. We monitor our progress towards the goals using the indicators presented below. Our objective is to make sure that outdoor air in our locations of operation is clean and of high quality. To achieve this, we employ innovative solutions and work closely with our customers and partners. In addressing possible air pollution from our operations, our focus areas include monitoring the CO 2 emissions of GHG emission sources, odour issues 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 various areas. GHG emissions of Tallinna Sadam 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 tonnes CO 2 ekv Indicators of ambient air quality Mõõdik Target level for 2030 Baseline year 2019 2021 2022 KHG 7 emissions (tonnes of CO 2 equivalent) 8 2050=0; (–55% 2030) 33,086 23,847 21,623 CO 2 emissions of TS Laevad per trip (%; 2019=100%) 26% 100% 93% 84% Share of vessel calls with ESI discounts (%) 50% 18% 16% 18% Time during which ferries and cruise ships use onshore power supply as a percentage of total call time at Old City Harbour (%) 50% 0% 30% 15% Share of cargo harbours’ ro-ro units (%) 50% 29% 34% 30% 7 GHG — greenhouse gases CO 2 , N 2 O and CH 4 converted into CO 2 equivalent 8 The values for 2019 and 2021 have been updated using the speciﬁc emission factors for the years and therefore diﬀer from the ﬁgures presented in the report for 2021. 20,562 18,783 20,713 18,847 11,080 33,086 27,819 23,847 21,623 7,519 TABLE OF CONTENTS m 3. Environment | page 29 Translation of the Estonian original 2021 total GHG emission (incl. operators, tenants, marine traﬃc) calculation methodology, restatement of the ﬁgures for previous years and improvement of data quality. The calculations based on the new residual electricity mix methodology show that emissions from electricity consumption have increased in 2019–2021. In 2021, all direct and indirect GHG emissions from Tallinna Sadam’s operations, including emissions from operators, tenants and port calls (scopes 1–3) were 128,914 tonnes of CO 2 equivalent, a 14% increase compared with 2020 (2020: 112,809 tonnes of CO 2 equivalent). Emissions grew mainly because in 2020 the number of port calls was lower due to COVID-19 and in 2021 two cruise ships berthed in the harbour for the full year. The GHG emissions ﬁgure disclosed in the annual report for 2020 has changed due to the revision of the calculation methodology and an increase in the berthing and manoeuvring times of ships calling at the harbour as well as a signiﬁcant reﬁnement of the source data on emissions. Two cruise ships berthing in Old City Harbour for a whole year had the biggest impact, accounting for 95% of total emissions from all cruise ships calling at the harbour and 58% of total emissions from all ships and ferries calling at the harbour. In 2021, 55% of GHG emissions were from vessels calling at harbours, which is 5% more than in 2020. Nearly 28% of GHG emissions resulted from electricity consumption, of which only 2% was attributable to Tallinna Sadam due to our transition to renewable electricity. The total GHG ﬁgure for 2022 (scopes 1–3) will be available in the ﬁrst half of 2023 because the parties involved need to update large volumes of data. Tallinna Sadam’s own direct and indirect GHG emissions (scopes 1 and 2) totalled 21,623 tonnes of CO 2 equivalent in 2022 (2021: 23,847 tonnes of CO 2 equivalent) of which 72% was attributable to the operation of ferry traﬃc between Estonia’s mainland and largest islands. In 2022, the Group’s CO 2 emissions decreased by around 9% year on year (–35% compared with the baseline year 2019). This was mainly due to the parent company’s transition to renewable electricity (wind and solar) and the energy eﬃciency measures implemented by TS Laevad, which have lowered the fuel consumption of its ferries. The use of more sustainable vehicles by the parent company also contributed. In 2022, the CO 2 emissions of TS Laevad per trip were 8% lower than in 2021 (–16% compared with 2019) and the emissions of the parent company’s mobile equipment decreased by 11% compared with 2021. In summer 2022, i.e. during a period of frequent ship calls, the Estonian Environmental Research Centre carried out continuous measuring of air quality at Old City Harbour at the request of Tallinna Sadam and assessed the changes in air quality when ships entered, exited or berthed in the harbour and the impact of motor vehicles moving onto the ships. The concentrations of nitrogen dioxide, sulphur dioxide, ﬁne particles and black carbon were measured. During the period, 278 ships called at Old City Harbour. The results of the measuring of ambient air quality conﬁrm that Tallinna Sadam has eﬀectively mitigated the risks of air pollution related to ships and motor vehicles visiting the harbour as none of the measured pollutants exceeded the limit values. We have been measuring the GHG emissions associated with our activities since 2019. The emissions are categorised based on the ownership or control of the emission source into the following scopes: • 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 harbours, traﬃc and ro-ro cargo passing through the harbours, cargo handling equipment, rail traﬃc). The factors with the strongest direct impact on Tallinna Sadam’s GHG emissions (scope 1–2) are fuel (for ferries), power and heat consumption and the choice of means of transport. Therefore, energy eﬃciency and a wider use of renewable energy sources are the keys to reducing our GHG emissions. In addition to digitalisation, we have improved the methodology for calculating GHG emissions and adopted new guidelines developed by the Stockholm Environment Institute (SEI), which take into account assumptions and conditions speciﬁcally determined for Estonia. Thus, compared with the GHG emissions data disclosed in previous years, we have made retrospective adjustments and changes in the GHG emissions results for 2019–2021 due to the revision of the CO 2 emission 28% Electricity consumption 55% Marine traﬃc 10% Movable equipment 7% Heat consumption 128,914 tonnes CO 2 equivalent TABLE OF CONTENTS m 3. Environment | page 30 Translation of the Estonian original What have we done to achieve cleaner air? Smart Port traﬃc management system (automated vehicle check-in and direction to the waiting area and boarding), which has been implemented at Old City Harbour, Muuga Harbour and Paldiski South Harbour simpliﬁes and speeds up the check-in of passengers with vehicles and their movement in the harbour area, which in turn reduces emissions on the harbour premises. Redirection of heavy-duty and other vehicles from the city centre. To reduce 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-duty 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 route, vehicles are served by two ro-pax vessels 9 . The ro-ro traﬃc of Paldiski South and Muuga harbours accounted for 30% (2021: 34%) of the total number of the ro-ro units handled by Tallinna Sadam in 2022. Odour issues caused by the cargo handled by 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 the odour nuisance, so we can start resolving the issue without delay. In 2022, the Environmental Board received 110 complaints (2021: 233) about odour issues in the area (related to oil, gas and chemicals), of which only 4 (2021: 9) were directly or indirectly attributable to Muuga Harbour. The analysis of the complaints reﬂects that a signiﬁcant share of odour issues is caused by other companies operating in the area. This is also supported by the fact that 90% of the complaints were received by the Environmental Board at the time when the wind was not blowing from Muuga Harbour. Air quality monitoring results by year are available on our website. Old City Harbour has an onshore power supply system which has been available for ferries since 2021. In 2022, Megastar, Baltic Queen, Finlandia and Viking XPRS, which serve the Tallinn–Helsinki and Tallinn–Stockholm routes, connected to the onshore power supply system while staying at Old City Harbour. Ferries that use onshore power can switch oﬀ their engines, which reduces ship- generated emissions and particulate matter. This helps improve air quality and reduce noise and vibration both in the harbour and the city. According to estimates, the carbon emissions of a ferry which uses onshore power decrease by around 100 tonnes per month. The project was funded from TWIN-PORT III, a project co-ﬁnanced by the European Union, and the total investment was EUR 3.5 million. Since 2021, ferries arriving at and departing from Old City Harbour on the Tallinn–Helsinki route have been served by auto-mooring systems, which have been installed on the three busiest quays to reduce mooring time, make mooring safer and save the environment. The systems reduce air pollution from vessels by shortening manoeuvring and mooring time. The project was funded from TWIN-PORT III, a project co-ﬁnanced by the European Union, and the total investment exceeded EUR 8 million. We grant eco-friendly vessels a discount on port dues based on the Environmental Ship Index (ESI) 10 . In 2022, we granted ESI-based discounts on a total of 1,288 port calls, which accounted for 18% (2021: 16%) of all port calls. TS Laevad, a subsidiary of Tallinna Sadam, contributes to reducing GHG emissions by using the Blueﬂow Energy Management System to monitor the fuel consumption of its ferries and environmentally friendly hybrid technology on the ferry Tõll. 9 Ro-pax vessel (roll-on/roll-oﬀ passenger vessel) is a ro-ro ship that is permitted to carry more than 12 passengers. The ship may have amenities and services similar to a ferry but its main purpose is to carry wheeled cargo. 10 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 electricity while in port. 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 employs nearly 500 people. The Group’s average number of employees in 2022 was 468 (2021: 469 people). The company’s sustainable development is underpinned by its diverse and highly competent workforce. Average employee remuneration grew by 11% in 2022, mainly because we adjusted salaries in the lower pay grades, increased bonuses and beneﬁts and made one-oﬀ redundancy payments due to organisational streamlining. Number of employees and personnel expenses Weighted average number of employees 600 500 400 300 200 100 0 30,000 25,000 20,000 15,000 10,000 5,000 0 2018 2019 2020 2021 2022 Personnel expenses number of employees thousand EUR 19,420 19,867 19,491 20,920 496 492 465 469 23,165 468 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. The ﬁgure is the highest for employees involved in the harbour business (15.7 years) and the lowest at our more recently established subsidiary TS Laevad (4.3 years). The gender imbalance is attributable to the nature of our main business lines: harbour operations and shipping. The jobs of crew members, dockers and repairmen attract more men than women. Out of the 15 members of Tallinna Sadam’s extended management team and subsidiaries’ managers, 4 are women, i.e. 26.6% of senior management positions are held by women (2021: 36%). The goal is to increase the share of women among senior managers to 45% by 2030. The gender pay gap , i.e. the ratio of women’s average hourly salary to men’s average hourly salary, was 78% in 2022 (2021: 80%). The proportion of female staﬀ in the company is low, but most of them work as senior professionals or managers in higher-paying positions. At the end of 2022, 16% of our employees were up to 35 years old (2021: 15%). Our long- term sustainable development goal is to raise the 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 ﬁeld of internship and research under a cooperation agreement signed in 2019. In 2022, we oﬀered internships to 16 students from the Estonian Maritime Academy and the Estonian Nautical School. Workforce by age at 31 December 2022 Workforce by gender at 31 December 2022 11 Disclosure under GRI (Global Reporting Initiative) Sustainability Reporting Standard GRI 405: Diversity and Equal Opportunity. 24% Women 76% Men 468 employees 150 125 100 75 50 25 0 < 30 30–39 40–49 50–59 60–69 ≥ 70 Women Men 3 11 92 102 65 57 31 18 32 34 12 12 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 arrangement, 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 2022, 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 2022, 70% of employees responded to the survey and the engagement index was 6.1 (2021: 5.9 points). Voluntary employee turnover was 7.9% in 2022 (2021: 6.8%). The target is to keep the ﬁgure below or at 10%. According to Kantar Emor’s annual employer reputation survey, Tallinna Sadam has been the 6th most preferred employer in the wage-earners target group in the last two years. We recognise the eﬀorts and strong performance of our people with the Star of the Quarter title that is awarded by management on a quarterly basis to employees who have stood out for working hard, representing our values or showing initiative. In addition, at the end of the year the entire team can elect Employees of the Year, i.e. the people who have best represented the values of Tallinna Sadam. Tallinna Sadam supports employees’ professional development and physical and mental health. In recent years, we have prioritised the development of digital skills and the improvement of management and leadership quality consistent with our management principles. Nine managers completed our management development programme in spring 2022 and 11 new managers started it in autumn. In 2022, we launched the Port Academy — a series of quarterly seminars where leading experts spoke about the relations between business and information technology, energy, ﬁnancial literacy and the Internet of Things. We also organised mini-seminars where our own and external experts shared good tips on how to use common digital tools more smartly. We organise an employee orientation day for new employees on a quarterly basis to make sure that new hires 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 within an agreed limit and giving them an extra week oﬀ in the winter. Every year we arrange a health month, where we invite interesting speakers to talk about health, and organise other activities which raise health awareness or introduce new ways to stay healthy. We oﬀer employees mental health counselling in cooperation with the psychologists of our medical partner Qvalitas Arstikeskus AS. To foster the team spirit and promote healthy lifestyles, numerous smaller events and team activities were held during the year. We maintain a common information space by organising regular staﬀ days, which in 2022 took place both on site and online. At the event, we provide an overview of the company’s performance and major projects and discuss developments in the business environment. The same topics are covered in our internal newsletter Sadama Sõnumid (Port News). Our leaders and specialists also meet at our annual strategy day. In the course of discussions and workshops held during the strategy day in autumn 2022, we reviewed Tallinna Sadam’s strategy for 2022–2026 and gathered ideas for setting the company’s goals for 2023 and subsequent periods and for improving our performance management system. To achieve our common goals, we have implemented a performance management system which ensures that the company’s strategic objectives are communicated to each team and team member. According to our goal-setting approach, expected results have to be measurable and clearly agreed. In 2021, we implemented planning and risk management soﬅware PlanPro, which helps improve goal-setting quality: employees' goals are visible to everyone and directly related to those of the company. Our employees are eligible to annual or quarterly performance-related bonuses which are provided 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 2022 or the previous year. BICYCLE TOUR IN HIIUMAA SHORE PERSONNEL OF TS LAEVAD TABLE OF CONTENTS m 4. Our People | page 35 Translation of the Estonian original 4.3 Occupational safety Occupational safety is one of our main priorities. Out of all our employees, 40% are oﬃce staﬀ whose work environment risk factors include lack of exercise (forced position) and work with a computer. 60% have high risk jobs because they have to work at night or in high places. 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 work environment risks and improve our work environment continuously, taking into account employee proposals for improving their work 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 support healthy lifestyles. Due to a legislative amendment introduced in 2022, a distinction is no longer made between serious and minor accidents at work. Instead, any damage to the health of an employee that occurs in the performance of work-related duties is considered to be an occupational accident. There was one occupational accident in both 2022 (a broken arm due to a slippery surface) and 2021 (the hand contusion of a sailor while mooring a ship). The last occupational accident before that was in 2015. We have created an occupational safety e-learning portal for new staﬀ who work in oﬃces, passenger terminals and vessel traﬃc control centres. All employees can use the portal to study safety instructions, video materials, guidelines and manuals at their own pace. The e-learning course ends with a test to make sure that employees understand occupational health, ﬁre and safety topics. We are going to use the e-learning environment in our new employee onboarding process to provide introductory training in occupational safety. RESCUE TRAINING AT THE CRUISE TERMINAL WITH RESCUERS 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 Tallinna Sadam works with the following organisations: AmCham (American Chamber of Commerce in Estonia) British–Estonian Chamber of Commerce Cruise Baltic Cruise Europe Estonian Digital Construction Cluster EcoPorts (an environmental initiative of the European port sector) Estonian Power Plants and District Heating Association Estonian Chamber of Commerce and Industry Estonian Association for Environmental Management Estonian Convention Bureau Estonian Logistics and Freight Forwarding Association Estonian Taxpayers Association TABLE OF CONTENTS m 5. Giving Back to Society | page 37 Translation of the Estonian original Estonian Ports Association Institute of Internal Auditors Estonia Estonian Employers' Confederation European Sea Ports Organisation (ESPO) Baltic Ports Organization (BPO) Paldiski Association of Entrepreneurs Estonian Human Resource Management Association PARE PIANC Estonia International Harbour Masters Association (IHMA) Rail Baltica Business Network Green Tiger German–Baltic Chamber of Commerce Urban Land Institute Estonian Responsible Business Forum Estonian Hydrogen Association TABLE OF CONTENTS m 5. Giving Back to Society | page 38 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 topics related to the impacts of our operations in society. Operating as a port authority in six municipalities, we have a responsibility to local communities. We also collaborate with stakeholder groups in international organisations. In order to turn Estonia into a hub for green infrastructure in the Baltic Sea region, we began to work with the ports of Rotterdam, Hamburg, Rönne and Gdynia in the framework of the Green Fuels Corridor project last year. In addition, we signed a letter of intent with the Port of Gdynia regarding cooperation in launching projects that create added value in logistics supply chains related to the production, storage and handling of green hydrogen. The letter of intent signed with the Port of Klaipėda provides a basis for cooperating in sharing knowledge and experience in matters related to the environment, energy eﬃciency and sustainable development. We are working closely with the City of Tallinn in executing Masterplan 2030+ and transforming the area of Old City Harbour into a modern, vibrant and attractive city centre featuring high-quality public space. As a result of the cooperation, draﬅ detailed plans for the Old City Harbour area were put on public display in December. A good example of developing attractive urban space and contributing to community cohesion is our Old City Harbour’s multifunctional state-of-the-art cruise terminal with its 850-metre promenade, which opens up the seafront to local people and creates new leisure, tourism and business opportunities. The terminal is the most modern one in the region, designed to meet the highest environmental and sustainability requirements. Besides being a passenger service hub, the building that can accommodate nearly 2,000 people can be used as a venue for various events. In 2022, 100 diﬀerent events were held there. THE CRUISE TERMINAL PROMENADE IS A POPULAR PLACE TO SPEND TIME TABLE OF CONTENTS m 5. Giving Back to Society | page 39 Translation of the Estonian original Tallinna Sadam, the Estonian Academy of Arts and the City of Tallinn carried out a joint research project “Tallinn Old Town: Sustainable Management and Presentation” 12 in the period 2019–2022. The purpose was to obtain academic input on how to manage and present Tallinn Old Town, which is a UNESCO World Heritage Site, in a digniﬁed and sustainable manner and how to improve tourist transport connections between the harbour and the Old Town in a way that would support the sustainability of Tallinna Sadam’s passenger business and help increase the number of passengers. The support granted to the project amounted to EUR 231 thousand, including taxes. Thanks to cooperation with Tallinna Sadam, the Estonian Academy of Arts was awarded very high international accreditation for the UNESCO Chair on Heritage Studies. In partnership with the Estonian Maritime Academy we contribute to the education of seafarers and the availability of future talent as well as projects addressing vessels’ cyber security needs and digitalisation of the logistics chain. We are also working with other research institutions in Estonia and abroad to develop digital solutions and analyse innovative engineering options. We introduce our organisation to students and oﬀer internship opportunities, and our people volunteer as lecturers in their areas of expertise. In 2022, Tallinna Sadam helped organise several large-scale events at Old City Harbour such as Tallinn Maritime Days, Red Bull Flugtag and winter swimming festival ICESWIM 2022. We organise blood donation days in collaboration 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. In 2022, blood donation days were held in both Old City Harbour and Muuga Harbour. TALLINN MEDIEVAL OLD TOWN AS A TOURIST MAGNET WINTER SWIMMING FESTIVAL ICESWIM 2022 12 The interim reports of the project are available on the website of Tallinna Sadam at www.ts.ee/toetused. TABLE OF CONTENTS m 5. Giving Back to Society | page 40 Translation of the Estonian original TS Laevad has a tradition of organising maritime safety days on board its ferries in partnership with the Police and Border Guard Board and volunteer rescuers where instructors demonstrate the proper use of life jackets and talk about other important maritime safety matters. Tallinna Sadam is a member of the charity initiative Let’s Donate Time. Our people contribute by doing volunteer work in the ﬁeld of nature conservation, education and healthcare. Our employees collected sweets, colouring books and pencils for the children of Ukrainian war refugees, which we oﬀered in passenger terminals to refugees heading to Finland as well as the children of refugee families that were given temporary accommodation on the ferry Isabelle. In addition to donations made by the Estonian Repository Library, our employees as well as the members of the Old City Harbour Community donated books to the travel library set up in passenger terminal A. A clean Baltic Sea is one of our sustainable development priorities. In order to combat cigarette butt pollution, we have set up special Ballot Bins for cigarette butts on the premises of our harbours. During the World Cleanup Day, our employees collected nearly 400 litres of garbage (mostly cigarette butts) from the premises of Old City Harbour and nearby areas. We have also joined the Green Tiger project where we are working with various Estonian companies to increase the role of the circular economy in waste management and to move towards a more balanced economic model. OPENING OF TRAVEL LIBRARY IN PASSENGER TERMINAL A WE COLLECTED NEARLY 400 LITRES OF GARBAGE TABLE OF CONTENTS m 6. Business Review | page 41 Translation of the Estonian original 6 Business Review 6.1 Key performance indicators 13 Figure Unit 2022 2021 Change % Revenue EUR ‘000 121,703 110,051 11,652 10.6% Operating proﬁt EUR ‘000 30,787 29,758 1,029 3.5% Adjusted EBITDA 14 EUR ‘000 55,817 54,046 1,771 3.3% Depreciation, amortisation and impairment EUR ‘000 –25,312 –24,761 –551 2.2% Income tax EUR ‘000 –4,193 –3,275 –918 28.0% Proﬁt for the period EUR ‘000 25,592 25,612 –20 –0.1% Investment EUR ‘000 13,856 14,718 –862 –5.9% Number of employees (average) 468 469 –1 –0.2% Cargo volume t ‘000 17,761 22,397 –4,636 –20.7% Number of passengers ‘000 7,027 3,542 3,485 98.4% Number of vessel calls 7,130 7,333 –203 –2.8% Total assets at period-end EUR ‘000 621,229 629,538 –8,309 –1.3% Net debt at period-end EUR ‘000 143,011 168,474 –25,463 –15.1% Equity at period-end EUR ‘000 380,976 380,895 81 0.0% Number of shares at period-end ‘000 263,000 263,000 0 0.0% Operating proﬁt/revenue 25.3% 27.0% Adjusted EBITDA/revenue 45.9% 49.1% Proﬁt for the period/revenue 21.0% 23.3% EPS: Proﬁt for the period/ weighted average number of shares EUR 0.10 0.10 0.00 –0.1% 13 Because of rounding, the ratios presented in the table may include certain diﬀerences. 14 Adjusted EBITDA = proﬁt before depreciation, amortisation and impairment losses, ﬁnance income and costs (net), and income tax expense, adjusted for amortisation of government grants. Equity/number of shares EUR 1.45 1.45 0.00 0.0% Proﬁt for the period/total assets 4.1% 4.1% 0.1 – Proﬁt for the period/equity 6.7% 6.7% 0.0 – Share price at period-end 1.42 1.86 –0.44 –23.7% P/E: Share price/earnings per share 14.6 19.1 –4.5 –23.6% TABLE OF CONTENTS m 6. Business Review | page 42 Translation of the Estonian original 6.2 Economic environment According to the IMF forecast 15 , the global economy grew by 3.4% in 2022, which is less than forecast a year ago (+4.4%). Growth was driven by an increase in domestic demand (households spent savings accumulated during COVID-19 restrictions) and business investments made to meet the stronger demand. On the supply side, bottlenecks eased and transportation costs declined. Economic growth was dampened by high inﬂation and the war in Ukraine, which are weighing on economic activity. Central banks have started to ﬁght high inﬂation by raising interest rates. Growth was also slowed down by the rapid spread of COVID-19 in China, but the recent reopening has paved the way for a fast recovery. Economic growth is projected to be 2.9% in 2023 and 3.1% in 2024, remaining below the historical (2000–2019) average of 3.8%, according to IMF. The risks to the economy remain tilted to the downside. On the upside, it is plausible that demand in numerous economies will recover or inﬂation will decline rapidly. On the downside, the recovery could be held back by severe health outcomes in China and the war in Ukraine. Furthermore, tighter ﬁnancing conditions could trigger a debt crisis, meaning that highly indebted economies may be unable to service their debt. Most countries are facing the problem of reducing inﬂation, which has driven up the cost of living. Although interest rate hikes can help to curb it, they may also aﬀect ﬁnancial and debt stability. Fiscal support should be better targeted, particularly at those most aﬀected by elevated energy and food prices. Broad-based ﬁscal relief measures should be withdrawn to bring inﬂation under control more quickly. At the same time, energy prices, which have driven inﬂation, have fallen faster than expected, despite the shock from Russia’s invasion of Ukraine. According to Statistics Estonia’sinitial estimate, Estonia’s economy contracted by 1.3% in 2022 (–4.1% in the fourth quarter). The central bank of Estonia has forecast that growth will remain at a modest 0.4% in 2023 and increase at a faster pace aﬅer that (+3.1% in 2024 and +4.4% in 2025). Inﬂation was 19.4% in 2022, the highest level seen in 23 years, with a previous peak of 10.4% in 2008. Increased costs of housing (+50.8%), transport (+22.8%) and food (+19.9%), in particular, contributed to the rise in consumer prices. The increase was driven by rising energy prices (liquid fuels, gas and electricity). While energy prices have declined, inﬂation will remain elevated at around 9% in 2023. In 2024, prices are expected to rise by less than 3%. Despite rising prices and interest rates, consumption in Estonia has remained strong. Consumption was supported by savings accumulated during the pandemic and withdrawals from the second pillar of the pension system. It should be noted, however, that most of these savings have already been spent and, consequently, consumption will have to decrease at some point. According to the Estonian Financial Supervision and Resolution Authority, deposits grew by only 1% in 2022. Private deposits grew by 7%, but the increase was driven by larger deposits – two-thirds of private savings are by 10% of depositors. Deposits below EUR 20,000 decreased as high energy prices, rising interest rates and soaring food prices prevented savings from growing. In 2023, wage growth (+8.7%) is expected to be slower than price increases, with no expectations for savings growth. The general economic slowdown has also triggered a rise in unemployment. According to the central bank of Estonia, unemployment is expected to rise from 5.7% in 2022 to 8.5% in 2023, with no improvement in 2024 (8.7%). Ukrainian war refugees that are included in labour market statistics also contribute to the growth in unemployment. 16 Tallinna Sadam’s ﬁnancial performance has been positively inﬂuenced by the easing of the COVID-19 crisis and the liﬅing of travel restrictions while the war in Ukraine, growing energy and other prices, rising interest rates and wage pressure have had an adverse eﬀect. The war in Ukraine and the resulting sanctions against Russia and Belarus have reduced cargo volumes and aﬀected cruise ship calls. The rise in energy prices has driven up electricity and fuel costs and the prices of outsourced goods and services have also risen. Despite the reduction of the debt burden, the rise in Euribor has increased debt servicing costs. Higher energy and consumer prices have increased both the ferry service revenue and the operating costs of TS Laevad. 15 IMF World Economic Outlook Update, January 2023. 16 Statistics Estonia, the central bank of Estonia, Estonian Financial Supervision and Resolution Authority, the media. TABLE OF CONTENTS m 6. Business Review | page 43 Translation of the Estonian original 6.3 Impacts of COVID-19 and the Russia-Ukraine war The protective measures imposed by countries due to the COVID-19 pandemic began to aﬀect the Group from the second half of March 2020. The restrictions had a strong impact on the tourism sector and passenger traﬃc, which in turn aﬀected the performance of the Group’s Passenger harbours segment. The results of the Passenger harbours segment have been recovering since autumn 2021. By the end of 2022, the number of passengers was at 72% of the pre-pandemic level. The impacts of the pandemic on the Group’s other operating segments were not signiﬁcant. The Russia-Ukraine war which started on 24 February 2022 and the consequent sanctions imposed against Russia by the West aﬀect 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. The sanctions were imposed and extended progressively in 2022. In addition to the EU eighth package of sanctions adopted on 6 October 2022, which included an import ban on oil products supplied on the basis of earlier agreements, eﬀective from December 2022 or February 2023 depending on the product group, the government of Estonia decided on 27 October 2022 to ban the import and transit of Russian oil products, eﬀective from 5 December 2022. In addition, Estonia imposed full sanctions on Belarusian cargo from 1 March 2022. Cargo of Belarusian origin (liquid bulk) accounted for 9% of the Group’s total cargo throughput in 2021. The estimated 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 is around EUR 7 million per year. In 2022, the impact was EUR 3.5 million, which is lower than expected because the sanctions were imposed progressively over the year. As a result, the share of Russian and Belarusian cargo declined but still accounted for 21% (EUR 3.7 million) of the Group’s total cargo throughput. The sanctions are expected to have a full impact in 2023. At the same time, the operators of liquid bulk cargo are working to replace sanctioned cargoes with alternative ones. The volume of non-Russian and non-Belarusian goods in liquid bulk cargo increased somewhat already in 2022. The presented monetary impact has been estimated based on the results for 2021 and 2022 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. 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. To enable Ukrainian war refugees to reach their destination as conveniently as possible, our passenger terminals at Old City Harbour have oﬀered them service in the Ukrainian language and have provided them separate resting areas. We have also been working with ferry operators to oﬀer war refugees discounts on passenger fees. TABLE OF CONTENTS m 6. Business Review | page 44 Translation of the Estonian original 6.4 Overview of the market: passengers In terms of vessel traﬃc, the Baltic Sea is one of the busiest inland seas in the world. Almost 85 million people live in the catchment area and vessels are one of the main means of transport for internal tourists in the region. It is estimated that usually over 40 million passengers a year use vessels to travel across the eastern part of the Baltic Sea, which is why international ferry traﬃc in the area is the busiest in the Baltic Sea region. Tallinn is the third-largest passenger port in the area aﬅer Helsinki and Stockholm. The largest ferries of the Baltic Sea, mostly designed for passenger traﬃc, also travel between those ports. Compared with other areas around the Baltic Sea, busy vessel 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 2018 2019 2020 2021 2022 50 40 30 20 10 0 50% 40% 30% 20% 10% 0 millions of passangers 44.1 44.1 15.7 15.3 4.8 12.2 2.4 3.6 3.6 2.5 12.1 28% 23% 3.6 12.1 12.1 4.3 10.6 10.6 3.1 3.3 24% 24% 3.5 4.7 3.7 28.7 8.1 7.9 7.0 24% TABLE OF CONTENTS m 6. Business Review | page 45 Translation of the Estonian original Aﬅer the pandemic, people have started travelling again and passenger traﬃc on the Baltic Sea recovered vigorously in 2022 even though passenger numbers at ports remained at just 65–75% of the pre-pandemic ones. Still, the total number of passengers passing through the largest ports in the eastern part of the Baltic Sea nearly doubled in 2022 (+87.2%), rising from 15.3 million to 28.7 million passengers. The revival was the fastest in the ports of Helsinki and Tallinn. While the COVID-19 pandemic no longer signiﬁcantly aﬀected cruise tourism in 2022, the war that broke out in Ukraine had a major negative impact. Before the war in Ukraine, the Baltic Sea region was one of the fastest growing cruise tourism destinations and St Petersburg was one of the main cruise attractions on the Baltic Sea. Due to the war, however, cruise passengers’ interest in the region next to Russia has plummeted and St Petersburg has disappeared from the map of the Baltic Sea cruise ports. Cruise companies are redesigning their routes and looking for alternative places to visit. The recovery that was expected to follow the liﬅing of the COVID-19 restrictions has been delayed due to the war in Ukraine and the general economic downturn. Largest cruise ports of the Baltic Sea 2018 2019 2021 2020 2022 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 46 Translation of the Estonian original 6.5 Overview of the market: cargo The cargo market overview covers major ports of the countries situated on the eastern coast of the Baltic Sea (Poland, Lithuania, Latvia, Estonia and Russia) and large Finnish ports on the Gulf of Finland, many of which are also involved in handling east-west transit cargo ﬂows. The war in Ukraine and the resulting sanctions against Russia and Belarus have changed cargo routes in the Baltic Sea for all cargo types. In 2022, the total cargo turnover of ports in the region was 532.6 million tonnes, over 5 million tonnes (+1%) up on the prior year. In terms of cargo types, only liquid bulk cargo grew (+24.7 million tonnes, +11%) due to the increase in the volumes of crude oil and oil products at the ports of Ust-Luga, Gdansk, Primorsk and Sköldvik. The volume of general cargo decreased by around 19 million tonnes (–19%), primarily due to a decrease in the volumes of container cargo and metal at Russian ports. Dry bulk cargo decreased by only 0.7 million tonnes (–0.5%). Within dry bulk, the decline was the sharpest for fertilizers (–11 million tonnes, –31%), but the fall in fertilizers was oﬀset by growth in the volumes of coal and other types of dry bulk cargo. The ports which delivered the largest growth in cargo throughput were Gdansk (+15.0 million tonnes, +28%), Ust-Luga (+14.7 million tonnes, +14%) and Sköldvik (+4.7 million tonnes, +25%). Their growth was mainly attributable to a rise in the volumes of liquid bulk cargo and at Gdansk also an increase in the volume of coal. Decreases in cargo throughput were the largest at the ports of St Petersburg (–23.3 million tonnes, –38%), Klaipėda (–9.4 million tonnes, –18%) and Tallinn (–4.7 million tonnes, –21%), primarily due the application of economic sanctions against Russia and Belarus. Because of the above changes, the market shares of Russian and Latvian ports increased while the market shares of Estonian and Lithuanian ports decreased in the comparison of Russian and Baltic ports. The market shares were as follows: Russian ports 66.4%, Estonian ports 9.2%, Latvian ports 12.4% and Lithuanian ports 12.0% (the corresponding ﬁgures for 2021: 65.4%, 10.5%, 10.3% and 13.9%). Cargo volume of the largest ports on the eastern coast of the Baltic Sea * * The chart also includes the cargo volumes of other Estonian ports, which in previous reports were presented separately. General cargo Ro-ro Containers Dry bulk Liquid bulk 600 500 400 300 200 100 0 million tonnes 2018 2019 2020 2021 2022 547 562 519 527 533 42 34 65 148 244 219 149 82 45 33 221 148 79 40 31 250 153 83 41 35 237 153 80 42 36 TABLE OF CONTENTS m 6. Business Review | page 47 Translation of the Estonian original The largest cargo ports on the eastern coast of the Baltic Sea were Ust-Luga (124.1 million tonnes, market share 23%), Gdansk (68.2 million tonnes, market share 13%) and Primorsk (57.1 million tonnes, market share 11%). Tallinna Sadam dropped to the 9th place with a 3.3% market share (2021: 7th place with a 4.2% market share). The volume of cargo handled by Estonian ports decreased by 6.5 million tonnes (–16%) to 33.9 million tonnes. The market share Tallinna Sadam as the largest cargo handler among Estonian ports was 52% (2021: 56%). Market share of the largest ports on the eastern part of the Baltic Sea Market share of the Estonian ports 23% Ust-Luga 5% Riga 11% Primorsk 5% Sköldvik 7% St. Petersburg 5% Gdynia 8% Klaipeda Butinge 3% Ventspils 13% Gdansk 3% Tallinn 17% Other 52% Tallinn 24% Sillamäe 4% Paldiski North 5% Pärnu 6% Kunda 9% Other TABLE OF CONTENTS m 6. Business Review | page 48 Translation of the Estonian original 6.6 Operating results In 2022, the operating results of Tallinna Sadam were aﬀected by the liﬅing of the COVID-19 related restrictions and the beginning of Russia’s war against Ukraine. The removal of pandemic- related restrictions boosted the operations of the Passenger harbours segment: the number of passengers travelling on regular routes as well as the number of cruise ship calls and the passenger load factor of cruise ships increased. However, the start of the war and the sanctions imposed lowered the volumes of the Cargo harbours segment. High energy prices, rising service charges and wage pressures increased operating expenses. Revenue grew by EUR 11.7 million (+10.6%) to EUR 121.7 million. Revenue growth was driven by the Passenger harbours segment while the revenue generated by the Cargo harbours segment decreased. The number of passengers served surged by 98% to more than 7.0 million passengers. Passenger fee revenue grew by 80.6%, supported by a rapid rise in in passenger numbers. The performance of the Passenger harbours segment was aﬀected by the lowering of port dues for all ferry operators in spring 2022 in connection with a compromise reached with Tallink. Cargo throughput shrank by more than a ﬁﬅh (–20.7%). Cargo charge revenue decreased less because of changes in the cargo mix (the volume of cargo with higher charge rates increased). Due to the sanctions, the volume of cargo handled decreased by 4.6 million tonnes to 17.8 million tonnes. Although the growth rate of expenses was faster than that of revenues, operating proﬁt improved by 3.5% year on year. Adjusted EBITDA grew by 3.3% but proﬁt for the year decreased by 0.1%. The decline in net proﬁt was attributable to a higher dividend distribution, which also increased the associated income tax expense. Proﬁt for the year was also reduced by growth in ﬁnance costs, which resulted from the uptrend in interest rates even though the debt burden was reduced. By the end of 2022, 6 month Euribor was close to 2.7% compared with –0.55% at the end of 2021. TABLE OF CONTENTS m 6. Business Review | page 49 Translation of the Estonian original In the provision of ferry service between Estonia’s mainland and two largest islands, the number of trips grew (+6.2%). The number of trips increased both on the Virtsu–Kuivastu and the Rohuküla– Heltermaa route. A larger number of trips and an increase in some contractual fee rates in connection with a rise in the Estonian wage and fuel price indices increased the revenue of the Ferry segment. In addition to revenue growth, there was also growth in expenses, especially fuel costs and personnel expenses. As the volume of scheduled maintenance and repair works was larger in 2021, maintenance and repair costs decreased in the reporting period. Since revenue growth outpaced growth in expenses, the operating proﬁt and adjusted EBITDA of the Ferry segment increased. The period of the summer charter of the multifunctional icebreaker Botnica was again usual (in 2021 it was 18 days longer at the request of the Canadian customer). Despite a lower utilisation rate, revenue grew because charter fees increased. However, expenses grew more than revenue. Fuel costs, non-current asset repair costs and other expenses (foreign exchange loss) increased the most, causing a decline in operating proﬁt. In segment terms, the Passenger harbours segment and the Ferry segment showed strong growth while the performance of the Cargo harbours segment weakened. The Group’s revenue grew by EUR 11.7 million (+10.6%) to EUR 121.7 million. In terms of revenue streams, passenger fees, ferry service revenue, and lease income showed the strongest growth. Vessel dues revenue decreased because the decline in cargo transport reduced the number of vessel calls. Expenses related to operating activities grew by EUR 10.3 million (+12.6%), operating proﬁt grew by EUR 1.0 million (+3.5%) and proﬁt for the period decreased by EUR 20 thousand (–0.1%). Added value created by the Group 17 , i.e. the Group’s contribution to the Estonian economy, was EUR 79.3 million in 2022 (2021: EUR 75.4 million). The ﬁgure increased, primarily through growth in both personnel expenses and operating proﬁt. 17 Added value = operating proﬁt + personnel expenses + depreciation, amortisation and impairment losses TABLE OF CONTENTS m 6. Business Review | page 50 Translation of the Estonian original 6.6.1 Number of passengers The removal of pandemic-related restrictions boosted the operations of the Passenger harbours segment. The number of passengers grew by 98%, rising to 7.0 million. Due to the strong recovery, the year-end number of passengers reached nearly two-thirds of the pre-pandemic level. The main routes of Tallinn–Helsinki (+104%) and Tallinn–Stockholm (+118%) showed rapid growth. The number of cruise passengers (+173%) also continued to recover, supported by growth in both the number of cruise ship calls and the passenger load factor. However, the number of cruise ship calls remained almost half lower than in the pre-pandemic time. Passengers travelling on the Tallinn–Helsinki route accounted for 88% of the total number of passengers last year (2021: 85%) and the number of passengers on this route increased by more than 3.1 million. Ferry operators kept relatively busy schedules on the Tallinn–Helsinki route even during the crisis and the number of trips increased by slightly less than 1% last year. The number of passengers travelling on the Tallinn–Stockholm route grew by 246 thousand and the number of trips increased by 85%. While the passenger load factor of the ferries on the Tallinn–Helsinki route remained below the pre-pandemic level, the same indictor for the Tallinn–Stockholm ferries regained its pre-pandemic level. The number of traditional cruise passengers increased by 109 thousand compared with a year earlier, rising to 172 thousand. Cruise ship calls at Old City Harbour totalled 170 (2021: 45) and, aﬅer a two- year break, 9 cruise ships visited Saaremaa. The passenger load factor of cruise ships is still low. It used to be around 90–95% before the pandemic, but in the last two years it has been below 50%. In the near term, cruise tourism will be 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 (+22%), but it is the only route where passenger numbers have been growing for four years in a row. Number of passengers by routes 12 10 8 6 4 2 0 12,000 10,000 8,000 6,000 4,000 2,000 0 2018 2019 2020 2021 2022 millions of passengers vessel calls Other Cruise Muuga-Vuosaari Tallinn-Stockholm Tallinn-Helsinki Ferry and cruise ship calls 5,679 5,451 6,111 5,898 7.5 3.5 4.3 10.6 10.6 6.2 8.8 1.0 0.7 0.7 0.9 8.8 4.0 3.0 5,672 TABLE OF CONTENTS m 6. Business Review | page 51 Translation of the Estonian original 6.6.2 Cargo volume In 2022, cargo throughput at our harbours dropped by 4.6 million tonnes (–20.7%) to 17.8 million tonnes, which is the lowest level in recent decades and attributable to the sanctions against Russia. The sharpest decrease was in liquid bulk (–3.7 million tonnes, –42%) and dry bulk cargo (–1.7 million tonnes, –37%), which were strongly aﬀected by the sanctions. The volumes of other types of cargo grew: ro-ro cargo by 402 thousand tonnes (+6%), container cargo by 228 thousand tonnes (+12%), general cargo by 127 thousand tonnes (+26%) and non-marine cargo by 31 thousand tonnes (from less than 1 tonne a year earlier). The volume of ro-ro cargo has been increasing for nine years in a row and as the volumes of liquid bulk cargo have dropped, ro-ro became our largest cargo type in terms of volume last year. In 2022, ro-ro accounted for around 39% of total cargo throughput at Tallinna Sadam, an increase of 10 percentage points year on year. In the period 2017–2021, the share of liquid bulk cargo ranged from 38% to 43%. Last year, however, it fell to 29%. Ro-ro cargo is mainly transported on the routes between Estonia and Finland (Tallinn–Helsinki and Muuga–Vuosaari) and most of it by ferries serving the Helsinki route, which is why most of the ro-ro growth is reﬂected in the revenue of the Passenger harbours segment. The volumes of liquid bulk cargo plummeted by 73% due to a slump in the volumes of Russian fuel oil, which was under sanctions. The volumes of dry bulk cargo also decreased, mainly because the volume of fertilizers tumbled (nearly –90%) due to the sanctions against Russia. Within dry bulk, the volume of wood pellets decreased as well (–40%), while the volumes of crushed stone (+39%) and grain (wheat +36% and barley +33%) increased. The volume of container cargo grew by roughly 0.2 million tonnes, i.e. 12% (in TEUs 18 by 18% to 268 thousand TEUs). In December, Muuga Harbour was visited by the longest container ship to date (258 m). Two large container cranes implemented by the operator HHLA TK Estonia last year allow receiving container ships which are four times larger than earlier. General cargo grew by 0.13 million tonnes (+26%), driven by growth in pulpwood and steel products. In terms of transport directions, the biggest change occurred in transit cargo, which dropped by 5.7 million tonnes (–53%), while import cargo grew by 0.7 million tonnes (+14%) and Estonia’s export cargo increased by 0.4 million tonnes (+6%). Exports accounted for 36%, imports for 35% and transit for 29% of our total cargo volume (2021: 27%, 24% and 48%, 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 Russia- Ukraine war, which changed the supply chains, energy prices and logistics across the region. Cargo volume by cargo types 18 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 2018 2019 2020 2021 2022 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 1,754 1,743 1,637 1,654 1,458 20.6 19.9 21.3 22.4 17.8 5.3 5.4 5.6 6.5 6.9 1.9 1.8 1.8 1.9 2.1 3.6 4.5 4.4 4.7 2.9 8.8 7.6 9.1 8.8 5.2 TABLE OF CONTENTS m 6. Business Review | page 52 Translation of the Estonian original 6.6.3 Ferry service 6.6.4 Multifunctional icebreaker Botnica TS Laevad has been providing domestic ferry service between Estonia’s mainland and biggest islands (Saaremaa and Hiiumaa) under a public transport contract with the state (expiry date of the contract: 30 September 2026) since 2016. 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 2022, the ferries of TS Laevad made 22,842 trips in 2022, which is 6% more than a year earlier, serving 2.3 million passengers (+4%) and 1.1 million vehicles (+0%). Based on an agreement with the state (the customer of the ferry service), 436 additional trips (2021: 327) were made by a stand-by vessel to increase service capacity during the summer (June-August). We have been providing Estonian ports on the Gulf of Finland with icebreaking service during the icebreaking period, which lasts from December to April, under a contract with the state since the beginning of 2013 (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 the summer work depends on the situation in the charter market for oﬀshore support vessels. The price and demand levels are strongly inﬂuenced by oil producers, which have been the main buyers of relevant services. To secure work for Botnica outside the icebreaking season, in June 2018 TS Shipping signed a ﬁve- year frame agreement with the Canadian company Baﬃnland Iron Mines. The customer conﬁrms its needs at the beginning of each year and, where necessary, commissions additional days during the season. In 2022, the charter period was 18 days shorter (–7%) than in 2021 due to the impact of the summer season. The charter fee is adjusted for changes in the inﬂation index. Ferry segment volumes MPSV Botnica charter 2018 2019 2020 2021 2022 Passengers Vehicles million passengers/vehicles 3.0 2.5 2.0 1.5 1.0 0.5 0 2.3 2.4 2.0 2.2 2.3 1.0 1.0 1.0 1.1 1.1 300 240 180 120 60 0 100% 80% 60% 40% 20% 0 days 2018 2019 2020 2021 2022 Charter days Utilisation rate 242 261 249 267 249 66% 72% 68% 73% 68% TABLE OF CONTENTS m 6. Business Review | page 53 Translation of the Estonian original 6.7 Revenue and expenses Revenue and EBITDA Revenue by revenue stream Tallinna Sadam ended 2022 with consolidated revenue of EUR 121.7 million, EUR 11.7 million (+10.6%) up on a year earlier. Adjusted EBITDA grew by EUR 1.8 million (+3.3%) to EUR 55.8 million. As adjusted EBITDA grew more slowly than revenue, the adjusted EBITDA margin decreased from 49% to 46%. Ferry services Charter fees (Botnica) Sales of other services Sales of electricity Operating lease income Passenger fees Cargo fees Vessel dues 150 120 90 60 30 0 2018 2019 2020 2021 2022 EUR million 48.5 29.5 8.9 5.8 11.4 17.1 7.2 130.6 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 29.0 107.4 110.1 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 37.2 121.7 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0 Revenue Adjusted EBITDA Adjusted EBITDA margin 2018 2019 2020 2021 2022 150 120 90 60 30 0 EUR million 130.6 74.4 130.5 74.3 107.4 58.4 57% 57% 54% 110.1 54.0 121.7 55.8 49% 46% TABLE OF CONTENTS m 6. Business Review | page 54 Translation of the Estonian original All revenue streams grew with the exception of vessel dues. Growth was the fastest in passenger fee revenue, which grew by EUR 4.6 million (+81%) to EUR 10.2 million. Rapid growth in passenger fees was supported by a surge in passenger numbers (+98%) aﬅer the liﬅing of travel restrictions. Ferry service revenue grew by EUR 3.8 million (+13%), rising to EUR 33.6 million, mainly due to the indexation of passenger fees and the variable part of ﬁxed fees, a 6% increase in the number of trips and a rise in diesel fuel prices. Lease income grew by EUR 1.4 million (+12%) to EUR 13.4 million, mainly because we earned more income at Old City Harbour from the implementation of the cruise terminal as well as from parking service and the termination of rent concessions. In the Ferry segment, lease income from retail premises on board ferries increased. Electricity sales revenue grew by EUR 0.9 million (+14%) to EUR 7.1 million due to the surge in electricity prices. The growth was smaller in the Cargo harbours segment because the electricity distribution network at Paljassaare Harbour was sold (relevant income ceased from December 2021). Revenue from other services grew by EUR 0.5 million (+24%), supported by higher sales of advertising space in Old City Harbour and sales of water to cruise ships. Charter fee revenue from the icebreaker Botnica grew by EUR 0.4 million (+4%) to EUR 10.2 million despite the decrease in charter days. Cargo charge revenue grew by EUR 0.3 million (+4%) although cargo volumes decreased by more than a ﬁﬅh. The growth in cargo charge revenue was supported by changes in the cargo mix where cargoes with lower charge rates have been replaced by cargoes with higher charge rates. The only revenue stream that decreased was revenue from vessel dues, which declined by EUR 0.2 million (–0.5%) to EUR 37.2 million due to a smaller number of vessel calls and the reduction of the tonnage charge rates for ferries visiting Old City Harbour. Other income decreased by EUR 0.3 million to EUR 1.4 million in 2022 because other income for 2021 included gain on the sale of the assets of Paljassaare Harbour. Expenses related to operating activities (operating expenses, personnel expenses, and depreciation, amortisation and impairment losses) totalled EUR 91.9 million, EUR 10.3 million up on 2021 (+12.6%). Within expenses, operating expenses increased the most, rising by EUR 7.4 million (+21%) due to growth in various expense items. Fuel and energy costs showed the fastest growth (EUR +5.9 million, +51%), primarily because of soaring energy prices which increased the costs of harbour and ferry operations as well as the cost of electricity purchased for sale, which concurrently increased revenue. A rise in the price of ferry fuel also increased the trip fee component of contract revenue for the provision of ferry service through the relevant price index. Expenses related to operating activities 100 80 60 40 20 0 EUR million Operating expenses Personnel expenses Depreciation, amortisation and impairment losses 2018 2019 2020 2021 2022 79.1 79.6 74.4 81.6 91.9 43.4 23.2 25.3 36.0 20.9 24.8 30.9 19.5 24.1 36.7 19.9 23.0 37.4 19.4 22.3 TABLE OF CONTENTS m 6. Business Review | page 55 Translation of the Estonian original Expenses on expected credit losses grew signiﬁcantly (EUR +0.9 million) because in the comparative period the amount recorded was negative due to the agreement of settlement schedules and the collection of some previously expensed receivables. Non-current asset repair costs grew by EUR 0.1 million (+2%) to EUR 7.1 million, remaining at the same level as in the previous year. Expenses on services purchased for ships grew by 0.5% to EUR 5.6 million. Total expenses did not change signiﬁcantly but the cost structure changed — automated mooring systems lowered expenses on purchased mooring services while higher passenger numbers and service charges increased expenses on the reception of ship-generated waste (+48%). Expenses on assets of insigniﬁcant value decreased (EUR –0.2 million, –15%) because in 2021 there were one-oﬀ expenses related to the furnishing of the cruise terminal. Personnel expenses grew by EUR 2.2 million (+10.7%), primarily through growth in salaries and bonuses/beneﬁts. Depreciation, amortisation and impairment expenses grew by EUR 0.6 million (+2.2%), mainly due to asset write-oﬀs and write-downs. Other expenses did not change signiﬁcantly (EUR +0.03 million). Operating proﬁt for 2022 was EUR 30.8 million. The ﬁgure grew by EUR 1.0 million (+3.5%), because revenue growth exceeded growth in expenses. As operating proﬁt did not grow as rapidly as revenue, the operating margin, which reﬂects the Group’s operating eﬃciency, dropped from 27.0% to 25.3%. Operating proﬁt increased in the Passenger harbours segment and the Ferry segment, but decreased in the Cargo harbours segment and the segment Other. Adjusted EBITDA 19 grew by EUR 1.8 million (+3.3%) to EUR 55.8 million due to adjusted EBITDA growth in the Passenger harbours segment and the Ferry segment. The adjusted EBITDA margin decreased from 49.1% to 45.9%. 19 Adjusted EBITDA — earnings before ﬁnance income and costs, income tax expense, and depreciation, amortisation and impairment losses, adjusted for the amortisation of government grants related to assets. TABLE OF CONTENTS m 6. Business Review | page 56 Translation of the Estonian original 6.8 Proﬁt Besides the above factors, proﬁt development was inﬂuenced by ﬁnance income and costs, income tax on dividends and the recognition of deferred tax expense. Finance income and costs were inﬂuenced by a general rise in interest rates in 2022. Finance costs grew by EUR 0.6 million (+46%) although loans and borrowings decreased. Finance income grew by EUR 0.1 million. The Group’s share of the proﬁt of the equity-accounted associate Green Marine was EUR 0.79 million (2021: EUR 0.41 million). Proﬁt before tax and deferred tax (EUR 82 thousand) was EUR 29.8 million, EUR 0.9 million higher than a year earlier (+3%). The Group’s net proﬁt for 2022 amounted to EUR 25.6 million, which is EUR 20 thousand (–0.1%) less than a year earlier. Net proﬁt decreased more than proﬁt before tax because dividend tax expense increased by EUR 0.1 million due to a larger dividend distribution as well as the recognition of deferred tax expense. In 2022, we paid a dividend of EUR 25.5 million (2021: EUR 20.3 million). Proﬁt Proﬁt 2018 2019 2020 2021 2022 25.6 25.6 24.4 44.4 28.5 60 50 40 30 20 10 0 EUR million TABLE OF CONTENTS m 6. Business Review | page 57 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. Revenue grew in all segments except Cargo harbours. Revenue growth was EUR 9.1 million (+31%) in the Passenger harbours segment, EUR 4.1 million (+13.3%) in the Ferry segment and EUR 0.4 million (+4.1%) in the segment Other. The revenue of the Cargo harbours segment decreased by EUR 1.9 million (–4.7%). Adjusted EBITDA also grew in all segments except Cargo harbours. The revenue of the Passenger harbours segment increased through higher passenger numbers. Passenger fee revenue grew by EUR 4.6 million due to the liﬅing of the COVID-19 restrictions. Passenger traﬃc increased both on regular routes and in cruise travel. A higher number of cruise ship calls contributed to growth in vessel dues (EUR +2.3 million). Revenue from the sale of electricity grew due to a sharp rise in electricity prices and higher consumption. Lease income increased through the letting of premises in the cruise terminal, higher parking charge income and the termination of rent concessions. Revenue from other services grew due to larger sales of water supply and sewerage services as well as higher revenue on the sale of advertising space. The revenue of the Cargo harbours segment dropped mainly due to the impact of vessel dues revenue, which declined because sanctions reduced the number of vessel calls. Fewer vessel calls also lowered revenue from other services. Despite smaller cargo volumes, cargo charge revenue grew slightly because cargo with lower charge rates was replaced by cargo with higher charge rates. Rising electricity prices supported growth in revenue from electricity sales. In addition to sanctions, the performance of the Cargo harbours segment was aﬀected by the sale of the electricity distribution network at Paljassaare Harbour at the end of 2021. The revenue of the Ferry segment grew mostly due to the indexation of the contractual fee rates and a higher number of trips made. The revenue of the segment Other grew, although the summer charter of the icebreaker Botnica was shorter than a year earlier when the Canadian customer extended the charter period. Revenue growth was supported by the indexation of the icebreaking and summer charter fee rates to the inﬂation index. Revenue by EBITDA and segments Other Ferry Cargo harbours Passenger harbours 150 120 90 60 30 0 28.8 29.7 9.2 39.7 EUR million 9.9 30.7 40.7 28.8 54.0 58.4 110.1 107.5 121.7 37.9 38.8 34.8 10.3 55.8 5.7 14.6 16.8 18.6 13.7 12.5 22.3 5.6 15.1 14.1 25.4 3.8 Revenue Adjusted EBITDA 2020 2021 2022 2020 2021 2022 TABLE OF CONTENTS m 6. Business Review | page 58 Translation of the Estonian original Adjusted EBITDA for 2022 grew in all segments except Cargo harbours (EUR –5.5 million, –24%), rising by EUR 5.0 million (+36%) in the Passenger harbours segment, EUR 2.1 million (+17%) in the Ferry segment and EUR 0.2 million (+3%) in the segment Other. Overall, adjusted EBITDA grew by EUR 1.8 million (+3%), supported by higher revenue, especially a rapid rise in passenger fee revenue and revenue growth in the Ferry segment. Revenue growth in euro terms outpaced the spike in expenses, which was caused by the rise in energy and service prices as well as personnel expenses. Adjusted EBITDA growth in the segment Other was supported by the proﬁt received from the equity-accounted associate Green Marine. Adjusted EBITDA margin declined from 49.1% to 45.9%, mainly due to a decrease in the Cargo harbours segment. Results by segments 2022 2021 In thousands of euros Passenger harbours Cargo harbours Ferry Other Total Passenger harbours Cargo harbours Ferry Other Total Revenue 37,862 38,781 34,757 10,303 121,703 28,800 40,678 30,676 9,897 110,051 Adjusted EBITDA 18,618 16,836 14,629 5,734 55,817 13,665 22,294 12,523 5,564 54,046 Operating proﬁt 10,854 8,431 8,926 2,576 30,787 6,725 13,575 6,555 2,903 29,758 Adjusted EBITDA margin 49.2% 43.4% 42.1% 55.7% 45.9% 47.4% 54.8% 40.8% 56.2% 49.1% Changes 2022/2021 In thousands of euros Passenger harbours Cargo harbours Ferry Other Total Revenue 9,062 –1,897 4,081 406 11,652 Adjusted EBITDA 4,953 –5,458 2,106 170 1,771 Operating proﬁt 4,129 –5,144 2,371 –327 1,029 Adjusted EBITDA margin 1.8% –11.4% 1.3% –0.5% –3.2% TABLE OF CONTENTS m 6. Business Review | page 59 Translation of the Estonian original 6.10 Investments and development prospects The Group’s capital investments totalled EUR 13.9 million in 2022, which is EUR 0.9 million (–6%) less than in the prior year and the past six years’ lowest level. Investments in harbour infrastructure assets, acquisition of non-current assets and improvements to existing infrastructure totalled EUR 12.1 million. Investments in the icebreaker Botnica amounted to EUR 1.1 million and invest- ments related to ferries (the Ferry segment) totalled EUR 0.7 million. The main capital investments of the period were again made at Old City Harbour, where the largest completed project (the last works were ﬁnished in early 2023) was the reconstruction of the outdoor area around passenger terminal D, which began in 2020. The largest investments at Muuga Harbour were related to developing the conditions for ro-ro traﬃc and improving traﬃc conditions in the harbour area. No major works were carried out on the icebreaker Botnica. In the Ferry segment, the largest works included scheduled dry-dock maintenance of the ferries and upgrades to the customer service and ticket sale systems. The largest capital investment planned for 2023 is the investment in a new quay and a 10 hectare hinterland at Paldiski South Harbour, for which geological investigations began already in 2022. The quay and the hinterland will be completed in summer 2025. The new quay will enable us to oﬀer services related to 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 maritime transport of cargo and vehicles. At Muuga Harbour, we will continue to invest in vessel servicing equipment to increase the harbour’s capacity to serve ro-ro traﬃc. Investments will also be made in a new workshop and the construction of sewage system. The biggest investments at Old City Harbour are related to the renovation of the marina quay in connection with the construction of a tramway to Old City Harbour. The icebreaker Botnica will undergo dry dock maintenance. Investments in ferries include regular dry dock maintenance and further improvements to the customer service and ticket sale systems. In addition to capital investments, we incur substantial annual research and development expenditures, which in 2022 amounted to EUR 0.33 million (2021: EUR 0.30 million). Research and development expenditures of the period were mainly related to preparing detailed plans for Old City Harbour, reviewing the state of buildings and structures in cargo harbours, assessing and monitoring the impacts of harbour operations, and preparing the assessments as well as draﬅ and detailed plans required for our development plans. Investments We expect that in 2023 the number of passengers will continue to grow but cargo ﬂows will decrease compared with 2022. We expect revenue to grow, but operating expenses will also increase as will ﬁnance costs in an environment of rapidly rising interest rates. Therefore, it is likely that both the Group’s operating proﬁt and net proﬁt may decrease. We forecast that our investments in harbour operations will increase substantially in 2023, primarily in connection with the construction of a new quay in Paldiski South Harbour for the servicing f oﬀshore wind farms. Prepayments Investments 50 40 30 20 10 0 –10 EUR million 2018 2019 2020 2021 2022 13.9 12.8 -5.5 42.6 37.1 5.5 24.0 29.5 14.3 14.3 14.7 14.7 TABLE OF CONTENTS m 6. Business Review | page 60 Translation of the Estonian original 6.11 Dividends The dividend policy of AS Tallinna Sadam sets the target to pay the shareholders regular post- tax dividends, which from 2021 should amount to at least 70% of proﬁt for the preceding year, subject to market conditions, the company’s growth and development plans, taking into account the need to maintain a reasonable level of liquidity and excluding the impact of non-recurring transactions. The target for the period 2019–2020 was to distribute a net dividend of at least EUR 30 million per year, which was met. In 2022, we paid the shareholders a dividend of EUR 0.097 per share and EUR 25.5 million in total, i.e. 100% of proﬁt for the previous year. The list of shareholders entitled to receive the dividend was determined on 5 May 2022 (the ex-dividend date: 4 May 2022) and the dividend was paid out to the shareholders on 12 May 2022 (through Nasdaq CSD). In 2021, we distributed shareholders a dividend of EUR 0.077 per share and EUR 20.3 million in total. For further information, see note 19 to the ﬁnancial statements. Dividends paid % of prior year proﬃt Dividends 150 120 90 60 30 0 400% 320% 240% 160% 80% 0 EUR million 2018 2019 2020 2021 2022 397% 144% 68% 71% 100% 25.5 20.3 30.2 35.2 105.0 TABLE OF CONTENTS m 6. Business Review | page 61 Translation of the Estonian original 6.12 Share and shareholders AS 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 2022 was EUR 1.858. The closing price of the share at 31 December 2022 was EUR 1.424. The company’s market capitalisation at 31 December 2022 was EUR 374.5 million (31 December 2021: EUR 488.7 million). The dynamics of the closing price of the AS Tallinna Sadam share and the daily turnover of shares traded since listing on the Nasdaq Tallinn Stock Exchange, i.e. from 13 June 2018 to 31 December 2022 The 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 2022 Source: nasdaqbaltic.com OMX Baltic Benchmark GI TSM1T — Tallinna Sadam Daly turnover Share price 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 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 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 200% 180% 160% 140% 120% 100% 80% 60% TABLE OF CONTENTS m 6. Business Review | page 62 Translation of the Estonian original In 2022, there were a total of 73,060 transactions with the AS Tallinna Sadam share (2021: 60,889 transactions) in which 17.8 million shares (2021: 19.3 million shares) changed hands. The total turnover of the transactions was EUR 28.1 million (2021: EUR 36.7 million). At 31 December 2022, the company had 22,866 shareholders (31 December 2021: 19,946) but only the Republic of Estonia had an ownership interest exceeding 5% (through the Ministry of Economic Aﬀairs and Communications). Shareholder structure as at 31 December 2022 The ﬁve largest shareholders at 31 December 2022 Name of shareholder Number of shares Interest, % Ministry of Economic Aﬀairs and Communications 176,295,032 67.0% European Bank for Reconstruction and Development (EBRD) 9,350,000 3.6% The shareholder structure has changed somewhat compared with the end of 2021. The share of international investors has decreased from 10% to 8% (–5.8 million shares), the share of Estonian retail investors has increased from 13% to 15% (+5.0 million shares), and the share of Estonian and other Baltic investment and pension funds has grown slightly at the expense of international investors. SEB Progressiivne Pensionifond 6,484,365 2.5% LHV Pensionifond L 5,536,570 2.1% State Street Bank and Trust Omnibus (USA) 2,215,156 0.8% 67% Republic of Estonia 8% International investors 15% Estonian retail 7% EST investment and pension funds 3% Batic funds (LT, LV) TABLE OF CONTENTS m 7. Corporate Governance | page 63 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 CGR are explained in section 7.11 of the management report. The main goals of the controlling shareholder, the Republic of Estonia, regarding its interest in Tallinna Sadam are to:: • earn optimal and stable shareholder return through the company’s proﬁtable and eﬃcient operation in each of its chosen business lines; • 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; • apply and promote good corporate governance, corporate social responsibility and business culture. TABLE OF CONTENTS m 7. Corporate Governance | page 64 Translation of the Estonian original 7.1 General meeting The general meeting is the highest governing body of Tallinna Sadam whose primary responsi- bilities 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 bord (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 2022, the company had an annual general meeting, which was conducted without physical attendance, and no extraordinary general meetings. The general meeting was held without physical attendance due to responsible behaviour with regard to the risks associated with COVID-19. On 25 April 2022, the shareholders of Tallinna Sadam passed resolutions on approving the annual report for 2021, allocating the proﬁt and distributing a dividend of EUR 25.511 million, amending the articles of association, approving the remuneration policy for the members of the supervisory board and the management board, and electing the members of the supervisory board. Shareholders could vote remotely from 5 April to 25 April, either by e-mail or regular mail. Shareholders who did not vote were deemed to have voted against the resolutions. Votes on the resolutions were cast by 82 shareholders whose shares represented 205,326,998 votes, i.e. 78.07% of the company’s total share capital. Tallinna Sadam arranged a public webinar on 6 April 2022 to discuss the agenda of the general meeting, present the shareholders’ draﬅ resolutions, explain the voting procedure and provide management’s answers to questions received. Tallinna Sadam has made available on its website at www.ts.ee/en the resolutions adopted by general meetings since July 2017 and the invitations, materials and minutes of general meetings since the general meeting of 14 May 2019. The Republic of Estonia (through the Ministry of Economic Aﬀairs and Communications) holds a 67.03% 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 2022 is provided in section 6.12 of the management report. TABLE OF CONTENTS m 7. Corporate Governance | page 65 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 2022: six 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 nomination 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. In addition, the supervisory board discusses in its meetings the risks associated with the Group’s operating activities, legal and regulatory topics, investments, large-scale ﬁnancing projects and other signiﬁcant matters related to the Group’s business. At 31 December 2022, 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 2022, there were 13 meetings (2021: 8 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 since 2017 (the materials of general meetings since 2019). 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. 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 2022, the general meeting approved the remuneration policy for the supervisory board and the management board, which included increasing the remuneration for serving on the committees set up by the supervisory board (see section 7.3). In 2022, the remuneration of the members of the supervisory board totalled EUR 105.6 thousand (2021: EUR 111.6 thousand), including remuneration for fulﬁlling the responsibilities of a member of the supervisory board of EUR 97.5 thousand (2021: EUR 108 thousand). The members of the supervisory board of Tallinna Sadam are not entitled to termination beneﬁts or additional remuneration (except remuneration for participating 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 23 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 66 Translation of the Estonian original Members of the supervisory board at 31 December 2022: 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 economic aﬀairs and communications TABLE OF CONTENTS m 7. Corporate Governance | page 67 Translation of the Estonian original Member of the supervisory board Term of oﬃce Participation in meetings in 2022 Remuneration in euros in 2022 Supervisory board Audit committee Remuneration committee Supervisory board Audit committee Remuneration committee Riho Unt 1 Jul 2020 – 30 Jun 2025 13/13 5/5 2/2 18,000 1,089 500 Maarika Honkonen 17 Apr 2018 – 30 Jun 2025 13/13 5/5 – 12,000 1,089 0 Veiko Sepp 1 Jul 2020 – 30 Jun 2025 13/13 – 4/4 12,000 0 1,089 Kaur Kajak 26 Apr 2022 – 30 Jun 2025 5/6 3/3 – 7,200 750 0 Ain Tatter 1 Jul 2022 – 30 Jun 2025 4/4 – 2/2 6,000 0 500 Marek Helm 1 Jul 2022 – 30 Jun 2025 4/4 3/3 – 6,000 1,125 0 Risto Mäeots 1 Jul 2022 – 30 Jun 2025 4/4 – 1/2 6,000 0 250 Aare Tark 3 Oct 2015 – 30 Jun 2022 9/9 – 2/2 12,000 0 508 Urmas Kaarlep 3 Oct 2015 – 30 Jun 2022 8/9 2/2 – 5,750 508 0 Üllar Jaaksoo 3 Oct 2015 – 30 Jun 2022 8/9 – 2/2 5,000 0 339 Ahti Kuningas 8 Sep 2017 – 30 Jun 2022 7/9 – 2/2 4,750 0 339 Raigo Uukkivi 8 Sep 2017 – 25 Apr 2022 5/7 2/2 – 2,750 339 0 97,450 4,899 3,524 20 As deﬁned in the Market Abuse Regulation ((EU) No 596/2014 Chapter 1 Article 3 1. (25)). Overview of shares held in Tallinna Sadam by the members of the supervisory board and persons closely associated with them 20 at 31 December 2022: Member of the supervisory board Number of shares held in Tallinna Sadam at 31 December 2022 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 TABLE OF CONTENTS m 7. Corporate Governance | page 68 Translation of the Estonian original 7.3 Audit committee and internal audit department 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 audit ﬁndings and recommendations) at meetings of the audit committee and the supervisory board. The head of the internal audit department is invited to all meetings of the supervisory board and the audit committee of Tallinna Sadam. In 2021, Ernst & Young Baltic AS was engaged by Tallinna Sadam to conduct an independent external assessment of the company’s internal audit function. The external assessment concluded that the activity of the internal audit function of Tallinna Sadam conforms to International Standards for the Professional Practice of Internal Auditing. Consistent with the standards, external assessments are conducted at least once every ﬁve years. Consistent 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. The following members of the supervisory board were on the audit committee from 3 July 2020: Urmas Kaarlep (chairman), Maarika Honkonen, Riho Unt and Raigo Uukkivi. On 5 July 2022, the supervisory board approved a new composition for the audit committee: 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 2022, 5 meetings were held (2021: 7 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). Until the above general meeting, the rates established by the previous sole shareholder on 24 November 2011 applied (EUR 89 per month for a member and EUR 133 per month 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. The composition of the department is approved and the head of the department is appointed and removed by the supervisory board, which also decides matters related to the remuneration of the head of the unit. The department also includes an IT security unit (responsible for the supervision of compliance with information security requirements). In conducting internal audit activities, the internal audit department observes the requirements of the Auditors Activities Act, International Standards for the Professional Practice of Internal Auditing and the department’s rules of procedure which have been approved by the supervisory board. 7.4 Remuneration committee 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. In 2022, the members of the remuneration committee were Aare Tark (chairman), Üllar Jaaksoo, Ahti Kuningas and Veiko Sepp. On 5 July 2022, the supervisory board approved a new composition of the remuneration committee: Veiko Sepp (chairman), Risto Mäeots, Ain Tatter and Riho Unt. In the reporting period, the remuneration committee had 4 meetings where the main topics were the election of a member of the management board/CFO, the development of the remuneration policy for the members of the supervisory board and the management board and changes to the performance-related remuneration system of the members of the management board. The committee members attended all meetings except Risto Mäeots, who was absent from one meeting. 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 69 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 AS Tallinna Sadam, which was formed in 2019, include evaluating the suitability of candidates to 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 of Economic Aﬀairs and Communications 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 based on the oﬃce they hold and two representatives of small shareholders whose term of oﬃce is ﬁve years. At 31 December 2022, the members of the nomination committee were Ahti Kuningas (secretary general of the Ministry of Economic Aﬀairs and Communications), Merike Saks (secretary general of the Ministry of Finance), Kaido Padar (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). In the ﬁrst half of the year, Ando Leppiman (the Ministry of Economic Aﬀairs and Communications) and Ian Brown (EBRD) also participated in the work of the committee as shareholder representatives. The members of the nomination committee are not remunerated for serving on the committee. In 2022, the nomination committee had 2 meetings (2021: 4 meetings) in order to make proposals to the annual general meeting of 2022 regarding the election of the members of the supervisory board. During the meetings, the nomination committee revised the principles for the selection of candidates to the supervisory board, prepared a proposal to the general meeting for appointing the members of the supervisory board and establishing their remuneration policy, and coordinated 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 a manner that is most reasonable from the economic point of view and make sure that risk management and internal controls function eﬀectively. In conducting its activities, the management board observes 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 2022 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 23 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. Among the members of the management board, Valdo Kalm, Andrus Ait and Margus Vihman hold shares in Tallinna Sadam (2,828 shares, 1,513 shares and 15,486 shares, respectively). Persons closely associated with the members of the management board do not hold any shares in Tallinna Sadam. TABLE OF CONTENTS m 7. Corporate Governance | page 70 Translation of the Estonian original Members of the management board at 31 December 2022: VALDO KALM Chairman of the management board, appointed to the board until 28 February 2024 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 was appointed as the chairman of the management board of Tallinna Sadam in February 2016. 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 OÜ, 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 71 Translation of the Estonian original 7.7 Supervisory and management boards of subsidiaries and associates 7.9 Disclosure of information and communication As a rule, the supervisory boards of Tallinna Sadam’s 100% subsidiaries have three members: two are the members of the management board of Tallinna Sadam and one is a civil servant from the Ministry of Economic Aﬀairs and Communications that represents and administers the shareholding of the controlling shareholder, the Republic of Estonia. At the end of 2022, the members of the supervisory board of TS Shipping were Valdo Kalm (chairman), Andrus Ait and Rene Pärt. The management board of TS Shipping had one member who was Ülo Eero. At 31 December 2022, the members of the supervisory board of TS Laevad were Valdo Kalm (chairman), Andrus Ait, Rene Pärt and Johann Peetre (an expert from the transport development and investments department of the Ministry of Economic Aﬀairs and Communications). The management board of TS Laevad has three members and at 31 December 2022 the members were Indrek Randveer (chairman) and Guldar Kivro. At the end of 2022, a competition was being held to ﬁll the position of the third member of the management board. At 31 December 2022, the members of the supervisory board of Green Marine, an associate of Tallinna Sadam, were Valdo Kalm (chairman), Andrus Ait, Carl-Jüri Piht, Innar Susi and Margus Vihman. The management board of the associate has two members and at the reporting date they were Ain Kuusik (chairman) and Aivar Sülla. 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. On the website, we have made available information about the company and the governing bodies, the articles of association and the strategy, the dividend policy, the IPO documents, the contacts of analysts and the auditor, the current year’s ﬁnancial calendar with the dates on which our 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 interim reports). The recordings and presentations of the webinars are available on the website. We organise investor meetings and teleconferences according to need and the requests of investors. In communicating with investors and analysts, we use only previously disclosed information. In 2022, we organised investor meetings in Tallinn and ﬁve investor webinars. We also participated in the international investor conference organised by Erste Group Bank in Vienna (online) and held our annual investor day for local investors in our cruise terminal. 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. In our marketing and communication activities, we prioritise not only investor relations but also direct communication with diﬀerent 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 observe the principles of openness, integrity and ethical conduct in our messages and marketing and communication activities. 7.8 Cooperation of the management and supervisory boards The management and supervisory boards collaborate closely in developing and executing the goals and strategy of Tallinna Sadam. The two bodies mainly exchange information at meetings of the supervisory board and the audit committee. The management board observes the strategic instructions of the supervisory board and notiﬁes 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 the meetings, the supervisory board is provided with regular overviews of the Group’s operating and ﬁnancial results. TABLE OF CONTENTS m 7. Corporate Governance | page 72 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 KPMG Baltics OÜ and the signatory of the independent auditors’ report is Indrek Alliksaar. The contract with the auditor was made for three years (for the audit of the ﬁnancial statements for the period 2018–2020) and the company exercised the option of extending the contract for two more years (for the audit of the ﬁnancial statements for 2021 and 2022). The audit ﬁrm has not provided the company with any services that could jeopardise the auditor’s independence. In 2022, the fees paid or payable for services provided by audit ﬁrms totalled EUR 57 thousand (2021: EUR 69 thousand). The ﬁgure comprises the fees for the ﬁnancial audit of EUR 35 thousand (2021: EUR 30 thousand), the translation of the ﬁnancial statements, the audits of projects funded with foreign grants conducted by Grant Thornton Baltic OÜ, and the training provided by AS PricewaterhouseCoopers. Tallinna Sadam complies with the Corporate Governance Recommendations (CGR) except for section 6.2.2: CGR section 6.2.2 – Before entering a contract for auditing services with an auditor, the manage- ment board shall present the supervisory board with the draﬅ contract for approval. /…/ The management board of Tallinna Sadam does not consider it necessary to have the draﬅ contract for audit services to be approved by the supervisory board because the auditor is chosen through public procurement proceedings. The contract is signed based on the result of the procurement tender and all signiﬁcant terms and conditions of the contract (including the terms for the qualiﬁcation of the bidders and the evaluation of the bids, the term of the contract and the scope of the work) are agreed with the audit committee, which advises the supervisory board, before a procurement tender is announced. In accordance with the guidelines of the Estonian Financial Supervision and Resolution Authority regarding the rotation of auditors of certain entities subject to public ﬁnancial supervision, we organise the rotation of auditors and thus ensure the inde- pendence of the auditor. REMUNERATION REPORT TABLE OF CONTENTS m Remuneration Report | page 74 Translation of the Estonian original Under section 1353 of the Securities Market Act, from 2021 listed companies are required to disclose a report on the remuneration paid to their 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 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 remuneration committee 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 set consistent 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 regarding the payment of performance-related remuneration once a year before the approval of the annual report. 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 compliance with the non-compete clause The short-term bonus programme is based on the performance management system adopted in 2017 for the members of the management board and employees to monitor the achievement of strategic goals. According to the performance management system, the Group’s three main goals (revenue, EBITDA and the execution of the most important projects) and some individual subsidiary 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, 40% of a management board member’s (or an employee’s) performance-related bonus depends on the achievement of the Group’s goals (the main goals) and 60% depends on the achievement of individual goals (the subsidiary goals). The supervisory board sets the goals for the management board and assesses the achievement of the goals on the basis of the proposals made by the remuneration committee once a year at the approval of the annual report for the ﬁnancial year. 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 based on 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 by reference to developments in the salary market and the company’s performance. Fixed basic remuneration: • Monthly remuneration according to the contract signed with the member of the management board • Holiday pay according to 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 75 Translation of the Estonian original Remuneration provided to the members of the management board for 2022 In thousands of euros Term of oﬃce Basic remuneration 21 Performance-related bonus Other beneﬁts TOTAL Share of ﬁxed remuneration Valdo Kalm, chairman of the management board 1 Mar 2016 – 28 Feb 2024 145 0 20 165 88% Margus Vihman, member of the management board/CCO 1 Nov 2016 – 31 Oct 2024 114 0 15 129 88% Andrus Ait, member of the management board/CFO 21 Feb 2022 – 20 Feb 2027 91 0 13 104 88% Marko Raid, member of the management board/CFO 18 Apr 2015 – 15 Oct 2021 0 0 47 47 0% 21 Basic remuneration is the gross remuneration, calculated on an accrual basis The limits to additional remuneration and termination beneﬁts payable to the members of the management board are provided in section 86 (subsections 2 and 3) of the State Assets Act. Accordingly, the total additional remuneration paid to a member of the management board of Tallinna Sadam may not exceed fourfold 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. Based on the service contracts in force, at 31 December 2022 Tallinna Sadam had the obligation to pay the members of the management board termination beneﬁts in an amount equal to their three months’ remuneration if the members of the management board were removed from oﬃce without due cause. A member of the manage- ment board is eligible to termination beneﬁts only when Tallinna Sadam terminates the service contract without due cause, which means that if the member of the management board breaches the contract, no termination beneﬁts will be paid. For complying with the non-compete clause, 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. 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. The table does not include performance-related bonuses for 2022 because the decision to pay the bonuses will be made by the supervisory board on the basis of the proposal of the remuneration committee aﬅer the approval of the annual report for 2022. The remuneration committee has made a proposal to the supervisory board that the members of the management board should be paid performance-related bonuses for the achievement of the goals set for 2022. The supervisory board will discuss the proposal of the remuneration committee at its meeting at the end of March. The provision recognised for the performance-related bonuses at 31 December 2022 amounts to 3.8 times the aggregate monthly remuneration of the members of the management board. TABLE OF CONTENTS m Remuneration Report | page 76 Translation of the Estonian original The Group’s main goals for 2022 were to achieve pre-determined levels of revenue and adjusted EBITDA, to win the public ferry service contract for the new period for TS Laevad, to launch a growth project consisting of building a quay for servicing oﬀshore wind farms at Paldiski South Harbour and to reduce CO 2 emissions (total share 40%). The individual subsidiary goals of the management board were to implement the strategy, to initiate growth projects and to maintain the level of the employee engagement index (total share 60%). Other beneﬁts disclosed in the table also include the compensation for compliance with the non- compete clause paid to Marko Raid, the former CFO, for a period of 12 months aﬅer his resignation from the position of a member of the management board on 15 October 2021. In 2022, no variable remuneration was reclaimed from the members of the management board and the remuneration was paid based on the remuneration policy in force without exception. As the remuneration policy was approved for the ﬁrst time at the general meeting of 2022, the shareholders insisted on not voting on whether the actual remuneration of the management team in 2021 was in compliance with the remuneration policy. 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. 200 150 100 50 0 80 60 40 20 0 thousand EUR 2018 2019 2020 2021 2022 million EUR CFO (Andrus Ait) CCO (Margus Vihman) CCO (Marko Raid) Average remuneration of full-time employee Adjusted EBITDA (mln EUR) CEO (Valdo Kalm) 150 126 21 118 172 141 135 23 142 116 111 23 174 122 137 24 114 91 145 74 74 58 54 56 27 CONSOLIDATED FINANCIAL STATEMENTS TABLE OF CONTENTS m Consolidated Financial Statement | page 78 Translation of the Estonian original Consolidated Financial Statement Consolidated statement of ﬁnancial position In thousands of euros Note 31.12.2022 31.12.2021 ASSETS Current assets Cash and cash equivalents 7 44,387 34,840 Trade and other receivables 8 7,477 14,151 Inventories 749 399 Total other current assets 52,613 49,390 Non-current assets held for sale 10 100 0 Total current assets 52,713 49,390 Non-current assets Investments in an associate 9 2,099 1,559 Other long-term receivables 8 303 896 Property, plant and equipment 10 564,379 575,563 Intangible assets 11 1,735 2,130 Total non-current assets 568,516 580,148 Total assets 621,229 629,538 In thousands of euros Note 31.12.2022 31.12.2021 LIABILITIES Current liabilities Loans and borrowings 16 15,916 15,916 Provisions 13 2,013 1,572 Government grants 17 8,578 1,223 Taxes payable 15 1,060 890 Trade and other payables 14 9,832 10,348 Total current liabilities 37,399 29,949 Non-current liabilities Loans and borrowings 16 171,482 187,398 Government grants 17 30,156 29,835 Other payables 14 1,216 1,461 Total non-current liabilities 202,854 218,694 Total liabilities 240,253 248,643 EQUITY Share capital 263,000 263,000 Share premium 44,478 44,478 Statutory capital reserve 22,115 21,271 Retained earnings (prior periods) 25,791 26,534 Proﬁt for the period 25,592 25,612 Total equity 18 380,976 380,895 Total liabilities and equity 621,229 629,538 TABLE OF CONTENTS m Consolidated Financial Statement | page 79 Translation of the Estonian original Consolidated statement of proﬁt or loss and other comprehensive income Consolidated statement of proﬁt or loss Consolidated statement of other comprehensive income In thousands of euros Note 2022 2021 In thousands of euros Note 2022 2021 Revenue 3, 19 121,703 110,051 Proﬁt for the period 25,592 25,612 Other income 21 1,441 1,779 Operating expenses 20 –43,418 –35,962 OTHER COMPREHENSIVE INCOME Personnel expenses 20 –23,165 –20,920 Items that may be reclassiﬁed subsequently to proﬁt or loss: Depreciation, amortisation and impairment 10, 11 –25,312 –24,761 Net fair value gain on hedging instruments in cash ﬂow hedges 0 102 Other expenses –462 –429 Operating proﬁt 30,787 29,758 Total other comprehensive income 0 102 Total comprehensive income for the period 25,592 25,714 FINANCE INCOME AND COSTS Attributable to: Owners of the Parent 25,592 25,714 Finance income 216 95 Finance costs 22 –2,013 –1,378 Finance costs — net –1,797 –1,283 Share of proﬁt of an associate accounted for under the equity method 9 795 412 Proﬁt before income tax 29,785 28,887 Income tax expense 18 –4,193 –3,275 Proﬁt for the period 25,592 25,612 Attributable to: Owners of the Parent 25,592 25,612 Basic earnings and diluted net earnings per share (in euros) 18 0.10 0.10 Basic earnings and diluted net earnings per share — continuing operations (in euros) 0.10 0.10 TABLE OF CONTENTS m Consolidated Financial Statement | page 80 Translation of the Estonian original Consolidated statement of cash ﬂows In thousands of euros Note 2022 2021 Cash receipts from sale of goods and services 130,099 117,001 Cash receipts related to other income 188 144 Payments to suppliers –53,548 –44,427 Payments to and on behalf of employees –19,899 –18,665 Payments for other expenses –368 –451 Income tax paid on dividends 18 –4,335 –3,440 Cash from operating activities 52,137 50,162 Purchases of property, plant and equipment 25 –15,189 –14,535 Purchases of intangible assets 25 –455 –641 Proceeds from sale of property, plant and equipment 191 2,573 Government grants received 15,001 409 Dividends received 9 255 0 Interest received 83 3 Cash used in investing activities –114 –12,191 Redemption of debt securities 16 –7,650 0 Repayments of loans received 16 –8,266 –8,266 Dividends paid 18 –25,287 –20,085 Interest paid 16 –1,264 –1,458 Other payments related to ﬁnancing activities –9 –1 Cash used in ﬁnancing activities –42,476 –29,810 Net cash ﬂow 9,547 8,161 Cash and cash equivalents at beginning of period 7 34,840 26,679 Change in cash and cash equivalents 9,547 8,161 Cash and cash equivalents at end of period 7 44,387 34,840 TABLE OF CONTENTS m Consolidated Financial Statement | page 81 Translation of the Estonian original Consolidated statement of changes in equity In thousands of euros Note Share capital Share premium Statutory capital reserve Hedge reserve Retained earnings Total equity attributable to owners of the Parent Equity at 31 December 2020 263,000 44,478 20,262 –102 47,794 375,432 Proﬁt for the period 0 0 0 0 25,612 25,612 Other comprehensive income for the period 0 0 0 102 0 102 Total comprehensive income for the period 0 0 0 102 25,612 25,714 Dividend declared 18 0 0 0 0 –20,251 –20,251 Total transactions with owners 0 0 0 0 –20,251 –20,251 Increase of capital reserve 0 0 1,009 0 –1,009 0 Equity at 31 December 2021 263,000 44,478 21,271 0 52,146 380,895 Proﬁt for the period 0 0 0 0 25,592 25,592 Total comprehensive income for the period 0 0 0 0 25,592 25,592 Dividend declared 18 0 0 0 0 –25,511 –25,511 Total transactions with owners 0 0 0 0 –25,511 –25,511 Increase of capital reserve 0 0 844 0 –844 0 Equity at 31 December 2022 263,000 44,478 22,115 0 51,383 380,976 TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 1 | page 82 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 2022 comprise the Parent and its subsidiaries (together referred to as the ‘Group’). The Group’s core business lines are rendering port services in the capacity of a landlord port, organising ferry service between Estonia’s mainland and biggest islands and operating the multifunctional icebreaker Botnica. The Group owns four harbours: Old City, Saaremaa, Muuga, and Paldiski South. Old City Harbour in the centre of Tallinn and Saaremaa Harbour that is designed for receiving cruise ships provide mainly passenger harbour services. Muuga Harbour, which is Estonia’s largest cargo harbour, and Paldiski South Harbour provide mainly cargo harbour services. 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 address of the Parent’s registered oﬃce is 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 Economic Aﬀairs and Communications). The management board authorised these consolidated ﬁnancial statements for issue on 17 March 2023. 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 2022 and 31 December 2021 Subsidiary Domicile Ownership interest (%) 2022 Ownership interest (%) 2021 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 biggest islands TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 2 | page 83 Translation of the Estonian original Note 2. Accounting policies used in the preparation of the ﬁnancial statements Basis of preparation The Group’s consolidated ﬁnancial statements as at and for the year ended 31 December 2022 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 (incl. derivatives), which are carried at fair value. The preparation of the consolidated ﬁnancial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that aﬀect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other relevant factors which are used to make judgements about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results may diﬀer from these estimates. The management board reviews the estimates regularly and any change in an estimate is recognised prospectively or in the period the change in an estimate relates to. The most signiﬁcant estimates made by management are disclosed in note 5 to these consolidated ﬁnancial statements. Changes in accounting policies Amendments to IAS 16 Property, Plant and Equipment Eﬀective for annual periods beginning on or aﬅer 1 January 2022; to be applied retrospectively. Early application is permitted. The amendments to IAS 16 require that the proceeds from selling items produced while bringing an item of property, plant and equipment to the location and condition necessary for it to be capable of operating in the manner intended must be recognised, together with the cost of those items, in proﬁt or loss and that the entity must measure the cost of those items applying the measurement requirements of IAS 2. The amendments must be applied retrospectively, but only to items of property, plant and equipment that are brought to the location and condition necessary for them to be capable of operating in the manner intended on or aﬅer the beginning of the earliest period presented in the ﬁnancial statements in which the entity ﬁrst applies the amendments. The cumulative eﬀect of initially applying the amendments will be recognised as an adjustment to the opening balance of retained earnings (or other component of equity, as appropriate) at the beginning of that earliest period presented (if necessary). The application of the amendments did not have any eﬀect on the Group’s ﬁnancial statements. Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets Eﬀective for annual periods beginning on or aﬅer 1 January 2022; to be applied retrospectively. Early application is permitted. In determining the costs of fulﬁlling a contract, the amendments require an entity to include all costs that relate directly to a contract. The amendments clarify that the cost of fulﬁlling a contract comprises both the incremental costs of fulﬁlling that contract and an allocation of other costs that relate directly to fulﬁlling contracts. An entity must apply those amendments to contracts for which it has not yet fulﬁlled all its obligations at the beginning of the annual reporting period in which it ﬁrst applies the amendments (the date of initial application). The entity will not restate comparative information. Instead, the entity will recognise the cumulative eﬀect of initially applying the amendments as an adjustment to the opening balance of retained earnings or other component of equity, as appropriate, at the date of initial application. The application of the amendments did not have any eﬀect on the Group’s ﬁnancial statements. TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 2 | page 84 Translation of the Estonian original Annual improvements to IFRS standards 2018–2020 Eﬀective for annual periods beginning on or aﬅer 1 January 2022. Early application is permitted. Improvements to IFRS (2018–2020) include two amendments to the standards: • the amendments to IFRS 9 Financial instruments clarify that, when assessing whether an exchange of debt instruments between an existing borrower and lender is on terms that are substantially diﬀerent, the fees to include together with the discounted present value of the cash ﬂows under the new terms include only fees paid or received between the borrower and the lender, including fees paid or received by either the borrower or lender on the other's behalf; • the amendments to IFRS 16 Leases remove illustrative example 13 accompanying IFRS 16, which in practice creates confusion in accounting for leasehold improvements for both the lessee and the lessor. The purpose of the amendment is to remove the illustrative example that creates confusion. The application of the amendments did not have any eﬀect on the Group’s ﬁnancial statements. Standards and amendments taking eﬀect in the future Standards, interpretations and amendments to published standards that are not yet eﬀective The following new standards, interpretations and amendments were not yet eﬀective for the annual reporting period ended 31 December 2022 and have therefore not been applied in preparing these consolidated ﬁnancial statements. The Group plans to adopt them when they become eﬀective. Amendments to IAS 1 Presentation of Financial Statements Eﬀective for annual periods beginning on or aﬅer 1 January 2023; to be applied retrospectively. Early application is permitted. The amendments clarify that the classiﬁcation of liabilities as current or non-current is based solely on the entity’s right to defer settlement at the end of the reporting period. The entity’s right to defer settlement for at least 12 months from the reporting date need not be unconditional but must have substance. The classiﬁcation is not aﬀected by management’s intentions or expectations about whether and when the entity will exercise its right. The amendments also clarify the situations that are considered settlement of a liability. The Group expects that the amendments, when initially applied, could have an impact on its ﬁnancial statements because it has loan liabilities under agreements that are subject to compliance, including covenant compliance, testing twice a year. Under the existing standard, the liabilities have to be classiﬁed as current as the right to roll over the loan is not unconditional. Under the amendments, the loan balance may be eligible to be reclassiﬁed to non-current, depending on the assessment of compliance with contractual terms at the reporting date. TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 2 | page 85 Translation of the Estonian original Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements Eﬀective for annual periods beginning on or aﬅer 1 January 2023. Early application is permitted. The Board also amended IFRS Practice Statement 2 to include guidance and two additional examples on the application of materiality to accounting policy disclosures. The amendments are consistent with the reﬁned deﬁnition of material: “Accounting policy information is material if, when considered together with other information included in an entity’s ﬁnancial statements, it can reasonably be expected to inﬂuence decisions that the primary users of general purpose ﬁnancial statements make on the basis of those ﬁnancial statements”. The amendments may aﬀect the Group’s accounting policy disclosures. Determining whether accounting policies are material or not requires judgement. Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors — eﬀective for annual periods beginning on or aﬅer 1 January 2023; to be applied prospectively. Early application is permitted. The amendments introduce a new deﬁnition for accounting estimates: clarifying that they are monetary amounts in the ﬁnancial statements that are subject to measurement uncertainty. The amendments also clarify the relationship between accounting policies and accounting estimates. The amendments will not have a material impact on the Group as they simply specify the deﬁnition of accounting estimates and clarify the diﬀerences between accounting estimates and accounting policies. The amendments to IAS 1 aim to help entities provide accounting policy disclosures that are more useful by: • requiring companies to disclose their material accounting policies rather than their signiﬁcant accounting policies; • clarifying that accounting policies related to immaterial transactions, other events or conditions are themselves immaterial and as such need not be disclosed; and • clarifying that not all accounting policies that relate to material transactions, other events or conditions are themselves material to a company’s ﬁnancial statements. Amendments to IAS 12 Income Taxes Eﬀective for annual periods beginning on or aﬅer 1 January 2023. Early application is permitted. The amendments clarify the accounting for deferred tax on transactions that involve recognising both an asset and a liability with a single tax treatment related to both. The amendments narrow the scope of the initial recognition exemption (IRE) so that it does not apply to transactions that give rise to equal and oﬀsetting temporary diﬀerences. As a result, companies will need to recognise a deferred tax asset and a deferred tax liability for temporary diﬀerences arising on initial recognition of a lease and a decommissioning provision. The Group does not expect the amendments to have a material impact on its ﬁnancial statements when initially applied. Classiﬁcation of Liabilities as Current or Non-current — Deferral of Eﬀective Date — amendments to IAS 1 Eﬀective for annual periods beginning on or aﬅer 1 January 2023. These amendments are not yet endorsed by the EU. The amendments to IAS 1 on the classiﬁcation of liabilities as current or non-current were issued in January 2020 with an original eﬀective date of 1 January 2022. However, in response to the COVID-19 pandemic, the eﬀective date was deferred by one year to provide companies with more time to implement the classiﬁcation changes resulting from the amended guidance. The Group expects that the amendments may aﬀect its ﬁnancial statements when initially applied because the Group has various loans and borrowings and compliance with their terms and conditions, including ﬁnancial covenants, is checked twice a year. TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 2 | page 86 Translation of the Estonian original Basis of consolidation The consolidated ﬁnancial statements comprise the ﬁnancial statements of AS Tallinna Sadam and its subsidiaries, consolidated line by line. Subsidiaries A subsidiary is any entity controlled by the Group. The Group controls an entity when it: • has power over the entity; • has exposure, or rights, to variable returns from its involvement with the entity; and • has the ability to use its power over the entity to aﬀect the amount of the returns. The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. Consolidation of a subsidiary begins when the Parent gains control of the subsidiary and ceases when the Parent loses control of the subsidiary. The income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of proﬁt or loss and other comprehensive income from the date the Parent gains control until the date the Parent loses control of the subsidiary. Proﬁt or loss and each component of other comprehensive income are attributed to the owners of the Parent and to the non-controlling interests. The total comprehensive income of subsidiaries is attributed to the owners of the Parent and the non-controlling interests even if this results in the non-controlling interests having a deﬁcit balance. The Group owns 100% of each of its subsidiaries. Therefore, no non-controlling interest has been recognised for the period ended 31 December 2022. Where necessary, the ﬁnancial information of subsidiaries is adjusted to ensure conformity with the Group’s accounting policies. All intragroup assets, liabilities, equity, income, expenses and cash ﬂows relating to transactions between Group entities are eliminated in full in consolidation. Associates An associate is an entity over which the Group has signiﬁcant inﬂuence but not control. Signiﬁcant inﬂuence is presumed to exist when the Group holds 20–50% of the voting power of another entity. In the consolidated ﬁnancial statements, investments in associates are accounted for using the equity method. Under the equity method, the initial investment is subsequently adjusted for the proﬁts/ losses and dividend distributions received from the investee. Unrealised gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. When the Group’s share of losses equals or exceeds its interest in an equity-accounted associate, the carrying amount of the investment is reduced to zero and further losses are accounted for oﬀ the statement of ﬁnancial position. When the Group has incurred legal or constructive obligations or made payments on behalf of the associate, both the liability and loss under the equity method are recognised in the statement of ﬁnancial position. Where necessary, associates’ accounting policies are adjusted so that they comply with the Group’s accounting policies. Any reversal of an impairment loss is recognised in accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently increases. TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 2 | page 87 Translation of the Estonian original Foreign currency Functional and presentation currency Items included in the ﬁnancial statements of Group entities are measured in the currency of the primary economic environment in which the entities operate — the euro (the functional currency of all Group entities). The consolidated ﬁnancial statements are also presented in euros (the presentation currency). All amounts in the consolidated ﬁnancial statements are presented in thousands of euros, unless stated otherwise. Foreign currency transactions and ﬁnancial assets and ﬁnancial liabilities denominated in foreign currencies In preparing the ﬁnancial statements of the Group, transactions in currencies other than the functional currency (foreign currencies) are recognised at exchange rates at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are translated at the rates at that date. Non-monetary items carried at fair value in a foreign currency are translated at the exchange rate at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not re-translated at the end of the reporting period. Exchange diﬀerences on monetary items are recognised in proﬁt or loss in the period which they arise. Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented as ﬁnance income and ﬁnance costs; other foreign exchange gains and losses are presented as other income and other expenses. Non-monetary items measured in terms of historical cost in a foreign currency are not re-translated at the end of the reporting period. 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 transferred to the customer. 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. 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. TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 2 | page 88 Translation of the Estonian original 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. 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. TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 2 | page 89 Translation of the Estonian original 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. Compensation of network charges Support was provided by reducing the network charges listed in clauses 3, 4 and 6 of subsection 1 of section 71 of the Electricity Market Act (consumption of active power and reactive power and ﬁxed network charges) and the associated VAT by half for the end-consumer of electricity in the period October 2021 – March 2022. The measure was designed to support all electricity consumers equally and without preference. The measure was implemented by the Environmental Investment Centre. Compensation of network charges is recognised as revenue because the amount not received from end-consumers is covered by the Environmental Investment Centre. 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. TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 2 | page 90 Translation of the Estonian original Revenue from other sources Rental income Rental income is earned from operating leases and recognised on a straight-line basis over the lease term. Charter fees Charter revenue is derived under time charter agreements which specify the charter period (the period for which the vessel is rented out) and the consideration receivable (normally a ﬁxed rate per day). Charter income is recognised on a straight-line basis over the term of the charter period. 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 passenger transport public service contract (PTPSC) minus revenue from ticket sales (the item Sale of ferry services — revenue from ticket sales). Government support for PTPSC comprises ﬁxed fee components and a trip (voyage) component, which make up the total PTPSC fee. The ﬁxed components are recognised on a straight-line basis over the term of the PTPSC 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 PTPSC 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 All regular way purchases or sales of ﬁnancial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of ﬁnancial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace. All recognised ﬁnancial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on the classiﬁcation of the ﬁnancial asset. TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 2 | page 91 Translation of the Estonian original Classiﬁcation The classiﬁcation and subsequent measurement depend on the business model for managing the ﬁnancial assets and the contractual cash ﬂow characteristics. Management determines the classiﬁcation of ﬁnancial assets at initial recognition. Financial assets measured at amortised cost Debt instruments are subsequently measured at amortised cost using the eﬀective interest rate method only if both of the following criteria are met: • the asset is held within a business model with the objective of collecting the contractual cash ﬂows; and • the contractual terms give rise on speciﬁed dates to cash ﬂows that are solely payments of principal and interest on the principal outstanding. The Group classiﬁes cash and cash equivalents, and trade and other receivables as ﬁnancial assets measured at amortised cost. The eﬀective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The eﬀective interest rate is the rate that exactly discounts estimated future cash receipts (incl. all fees and points paid or received that form an integral part of the eﬀective interest rate, transaction costs and other premiums or discounts but excluding expected credit losses) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the gross carrying amount of the debt instrument on initial recognition. Interest income is recognised in proﬁt or loss in Finance income. Financial assets measured at fair value through other comprehensive income (FVTOCI) Debt instruments that meet the following conditions are subsequently measured at FVTOCI: • the ﬁnancial asset is held within a business model whose objective is achieved by both collecting contractual cash ﬂows and selling the ﬁnancial assets; and • the contractual terms of the ﬁnancial asset give rise on speciﬁed dates to cash ﬂows that are solely payments of principal and interest on the principal amount outstanding. The Group does not have any ﬁnancial assets at fair value through other comprehensive income. Financial assets measured at fair value through proﬁt or loss (FVTPL) Financial assets that do not meet the criteria for being measured at amortised cost or FVTOCI are measured at FVTPL. Speciﬁcally: • investments in equity instruments are classiﬁed as at FVTPL, unless the Group designates an equity investment that is neither held for trading nor contingent consideration arising from a business combination as at FVTOCI on initial recognition; • debt instruments that do not meet the amortised cost or the FVTOCI criteria are classiﬁed as at FVTPL. In addition, debt instruments that meet either the amortised cost or the FVTOCI criteria may be designated as at FVTPL upon initial recognition if such designation eliminates or signiﬁcantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities or recognising the gains and losses on them on diﬀerent bases. The Group has not designated any debt instruments as at FVTPL. TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 2 | page 92 Translation of the Estonian original The Group measures derivative ﬁnancial assets at fair value through proﬁt or loss unless they are designated as eﬀective hedging instruments. Gains and losses on changes in the fair value of ﬁnancial assets at fair value through proﬁt or loss are recognised in proﬁt or loss in Finance income and Finance costs, respectively, in the period in which they arise. The allocation of ﬁnancial assets and ﬁnancial liabilities to categories is presented in note 6. 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 FVTOCI 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). The Group always recognises lifetime ECLs for trade receivables and lease receivables. Expected credit losses on these assets are estimated using a provision matrix, which is based on the Group’s historical credit loss experience, adjusted for factors that are speciﬁc to the debtors, general economic conditions and an assessment of both the current as well as the forecast conditions and trends at the reporting date, including the time value of money where appropriate. A lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a ﬁnancial instrument. For all other ﬁnancial instruments whose credit risk has increased signiﬁcantly since initial recognition the Group recognises a lifetime ECL. If, on the other hand, the credit risk of the ﬁnancial instrument has not increased signiﬁcantly since initial recognition, the Group measures the loss allowance for that ﬁnancial instrument at an amount equal to 12-month ECL. A ﬁnancial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash ﬂows of that ﬁnancial asset have occurred. Evidence that a ﬁnancial asset is credit-impaired includes observable data about the following events: • signiﬁcant ﬁnancial diﬃculty of the issuer or the borrower; • a breach of contract, such as a default or past due event; • a lender of the borrower, for economic or contractual reasons relating to the borrower’s ﬁnancial diﬃculty, has granted to the borrower a concession that the lender would not otherwise consider; • it is becoming probable that the borrower will enter bankruptcy or other ﬁnancial reorganisation; or • the disappearance of an active market for that ﬁnancial asset because of ﬁnancial diﬃculties. Irrespective of the above, the Group considers that a default has occurred when a ﬁnancial asset is more than 90 days past due unless the Group has reasonable and supportable information to demonstrate that a more lagging default criterion is more appropriate. 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. 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. TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 2 | page 93 Translation of the Estonian original 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 FVTPL (negative value of interest rate swaps). Financial liabilities are classiﬁed as current when they are due to be settled within 12 months aﬅer the reporting date or if the Group does not have an unconditional right to defer settlement for more than 12 months aﬅer the reporting date. Loans and borrowings that the lender has the right to recall at the reporting date due to a breach of contract terms are also classiﬁed as current. Oﬀsetting of ﬁnancial instruments Financial assets and ﬁnancial liabilities are oﬀset and the net amount is reported in the statement of ﬁnancial position when there is a legally enforceable right to oﬀset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the company or the counterparty. 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. Inventories Inventories are measured at the lower of cost and net realisable value. Cost is determined using the ﬁrst in, ﬁrst out (FIFO) method. The cost of inventories does not include borrowing costs as inventories of the Group do not represent qualifying assets. The cost of raw and other materials comprises the purchase price, transport costs and other costs directly attributable to the acquisition of the inventories. The Group recognises fuel, lubricants and food products purchased for its ferries and icebreaker as inventories. Non-current assets held for sale An item of property, plant and equipment or an intangible asset is classiﬁed as held for sale if the sale of the asset is highly probable within the next 12 months and it is being actively marketed for sale at a sales price reasonable in relation to its fair value. Non-current assets held for sale are not depreciated. They are presented separately in the statement of ﬁnancial position within Non-current assets held for sale and measured at the lower of their carrying amount and fair value less costs to sell. Property, plant and equipment Property, plant and equipment are tangible items that are held for use in the Group’s operations, are expected to be used for more than one year and have a cost exceeding EUR 5 thousand. Items of property, plant and equipment are measured at cost less any accumulated depreciation and any accumulated impairment losses. TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 2 | page 94 Translation of the Estonian original Cost An item of property, plant and equipment is initially recognised at cost, which comprises the purchase price and any directly attributable acquisition costs which are necessary for bringing the asset to its operating condition and location. Expenditures on subsequent improvements are added to the carrying amount of the asset if they meet the deﬁnition of property, plant and equipment and recognition criteria. If a part of an item of property, plant and equipment is replaced, the cost of the new part is added to the carrying amount of the item and the replaced part is written oﬀ the statement of ﬁnancial position. Current repair and maintenance expenditures are expensed as incurred. The Group’s items of property, plant and equipment also include several 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). Using the component approach, the Group at initial recognition and subsequently (a) identiﬁes the non-physical component that represents a major overhaul, (b) estimates the cost of the non-physical component (if possible, with reference to current market prices), (c) depreciates the non-physical component separately over its useful life (i.e. the dry-docking component separately from the vessel), and (d) derecognises the remaining carrying amount of a non-physical item when the next overhaul (dry-docking) is performed and recognised as a new non-physical component. Borrowing costs Borrowing costs are expensed as incurred, except for the costs that are directly attributable to the acquisition, construction or production of assets whose preparation for intended use or disposal lasts for an extended period (e.g. vessels under construction). Borrowing costs attributable to the acquisition, construction or production of such assets are capitalised as part of the cost of the asset until the date when the assets are ready for their intended use. Depreciation Depreciation of property, plant and equipment is calculated on the diﬀerence between cost and residual value using the straight-line method over the estimated useful life of the asset. The value of vessels at the end of their period of use (residual value) is equal to the value of scrap metal. If an item of property, plant and equipment consists of signiﬁcant parts that have diﬀerent useful lives, the parts are accounted for separately and assigned depreciation rates that correspond to their useful lives. 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 and residual values of items of property, plant and equipment are reviewed at each reporting date, on recognising subsequent improvements, and when signiﬁcant changes are made to the Group’s development plans. If the estimated useful life of an asset diﬀers signiﬁcantly from the previous estimate, the remaining useful life of the asset is adjusted prospectively, resulting in a change in the asset’s depreciation charge for subsequent periods. 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. Depreciation of an asset commences when the item is in the location and condition necessary for it to be capable of operating in the manner intended by management. Depreciation of an asset ceases when its carrying amount equals its residual value, or the asset is fully depreciated or reclassiﬁed to Non-current assets held for sale. The appropriateness of the useful life and residual value of an asset is assessed at each reporting date. TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 2 | page 95 Translation of the Estonian original Intangible assets Intangible assets with ﬁnite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful lives which do not exceed 5 years. Estimated useful lives and amortisation methods are reviewed at the end of each reporting period and any changes in estimates are recognised prospectively. Intangible assets with indeﬁnite useful lives that are acquired separately are carried at cost less accumulated impairment losses. Internally generated intangible assets such as assets arising from soﬅware development expenditures are recognised when the Group can demonstrate the following: • the technical feasibility of completing the intangible asset so that it will be available for use or sale; • its intention to complete the intangible asset and use or sell it; • its ability to use or sell the intangible asset; • how the intangible asset will generate probable future economic beneﬁts; • the availability of adequate technical, ﬁnancial and other resources to complete development and use or sell the asset; • its ability to measure reliably the expenditure incurred during development. Other research and development expenditures that do not meet the criteria for classiﬁcation as intangible assets are recognised as an expense as incurred. 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 proﬁt or loss as a reduction of impairment losses on non-current assets. TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 2 | page 96 Translation of the Estonian original 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 only in connection with investments in entities domiciled in countries where proﬁt for the year is subject to income tax and 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. The corporate income tax rate in Estonia is 20% (the amount of tax payable is calculated as 20/80 of the net distribution). From 2019, regular dividend distributions are subject to a lower, 14% tax rate (the amount of tax payable is calculated as 14/86 of the net distribution). Every calendar year, the lower tax rate may be applied to dividend and other proﬁt distributions to an extent that does not exceed the three prior calendar years’ average amount of dividend and other proﬁt and equity distributions on which tax has been paid. The maximum income tax liability which would arise if all of the unrestricted equity were distributed as dividends is disclosed in note 18 to the ﬁnancial statements. Employee beneﬁts Short-term employee beneﬁts Short-term employee beneﬁts are employee beneﬁts (other than termination beneﬁts) that are due to be settled within 12 months aﬅer the end of the period in which the employees render the related service. Short-term employee beneﬁts include wages, salaries, bonuses and social security contributions; short-term compensated absences (such as paid annual leave) where the absence is expected to occur within 12 months aﬅer an employee has rendered the related service; and incentive payments that are due to be settled within 12 months aﬅer the end of the period in which an employee renders the related services. When an employee has rendered services during the accounting period in exchange for which a beneﬁt may be expected to be paid (within next 12 months), the Group recognises a liability in the undiscounted amount of the beneﬁt expected to be paid (accrued expense), less any amount already paid. Termination beneﬁts Termination beneﬁts are employee beneﬁts payable as a result of either the Group’s decision to terminate an employee’s employment before the normal retirement date or an employee’s decision to accept voluntary redundancy in exchange for those beneﬁts. The Group recognises termination beneﬁts as a liability and an expense when, and only when, the Group is clearly committed to either terminate the employment of an employee or group of employees before the normal retirement date, or provide termination beneﬁts as a result of an oﬀer made in order to encourage voluntary redundancy. TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 2 | page 97 Translation of the Estonian original Provisions and contingent liabilities A provision is recognised only if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably and it is probable that an outﬂow of economic beneﬁts will be required to settle the obligation. Provisions are not recognised for future operating losses. A provision is recognised based on management’s estimates of the timing and amount of the expenditure required to settle the obligation. A provision is recognised in the amount that is management’s best estimate of the expenditure required to settle the obligation at the reporting date or to transfer it to a third party at that time. If an obligation has to be settled later than 12 months aﬅer the reporting date, the provision is recognised at the present value of the expected future cash ﬂows. A provision is used only for expenditures for which it was originally recognised. A contingent liability is a possible obligation that arises from a past event and whose existence will be conﬁrmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group or a present obligation that has arisen from a past event but is not recognised because it is either not probable that an outﬂow of resources embodying economic beneﬁts will be required to settle the obligation or the amount of the obligation cannot be measured with suﬃcient reliability. Statutory capital reserve The statutory capital reserve has been recognised to meet the requirements of the Estonian Commercial Code. Each ﬁnancial year, 1/20 (5%) of proﬁt is transferred to the statutory capital reserve until the reserve amounts to 1/10 (10%) of share capital. The statutory capital reserve may be used for covering accumulated losses or for increasing share capital. No distributions may be made from the statutory capital reserve. Earnings per share Basic earnings per share are calculated by dividing proﬁt for the year attributable to the equity holders of the Parent by the average number of ordinary shares issued during the period. Diluted earnings per share are calculated by adjusting proﬁt attributable to holders of ordinary shares and the weighted average number of ordinary shares outstanding for the eﬀects of all dilutive potential ordinary shares. Leases At inception of a contract, the Group assesses whether the contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control and use an identiﬁed asset for a period of time in exchange for consideration. In assessing whether a contract conveys the right to control and use an identiﬁed asset, the Group applies the deﬁnition of a lease as set out in IFRS 16. The Group as a lessee When entering into or modifying a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of their stand-alone price. The Group recognises a right-of-use asset and a lease liability at the commencement date of the lease. The right-of-use asset is initially measured at cost, which comprises the amount of the initial measurement of the lease liability. The amount of the initial measurement of the lease liability is adjusted for any advance lease payments, any direct costs incurred and any restoration costs to be incurred (in dismantling the asset and restoring the site or the asset). Any lease incentives received are deducted from this amount. Right-of-use assets are depreciated on a straight-line basis from the commencement date of the lease to the expiry of the lease term unless the ownership of the underlying asset transfers to the Group at the end of the lease term or the carrying amount of the right-of-use asset indicates that the Group plans to exercise the purchase option. In that case, the underlying asset is depreciat- ed over its entire estimated useful life, which is determined using the same approach that is used for similar items of property, plant and equipment that are owned. Right-of-use assets are also adjusted for impairment losses, if any. In addition, right-of-use assets are adjusted to reﬂect certain remeasurements of the lease liabilities. The lease liability is initially measured at the present value of the lease payments not paid by the commencement date of the lease, using the interest rate implicit in the lease or, if that rate cannot be readily determined, the incremental borrowing rate. The Group generally applies the incremental borrowing rate as the discount rate. The incremental borrowing rate is determined by reference to diﬀerent sources of ﬁnancing. The inputs received are adjusted to reﬂect the terms of the lease and the type of underlying asset, to ﬁnd the incremental borrowing rate appropriate for the asset. TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 2 | page 98 Translation of the Estonian original Lease payments included in the measurement of the lease liability comprise the following: • ﬁxed payments (incl. in-substance ﬁxed payments); • penalties for terminating the lease (if termination is reasonably certain); • the exercise price of a purchase option (if the lessee is reasonably certain to exercise the option); • amounts expected to be payable by the lessee under residual value guarantees; • lease payments that depend on an index or rate. The lease liability is measured at amortised cost. It is remeasured if there is a change in future lease payments reﬂecting a change in the index or rate used to determine the payments, if the amounts expected to be payable under a residual value guarantee are reassessed or if the Group changes its assessment of whether it intends to exercise the option to purchase the underlying asset or the option to extend or terminate the lease. The lease liability is also remeasured to reﬂect changes in ﬁxed payments (incl. in-substance ﬁxed payments). If the lease liability is remeasured due to the above reasons, a corresponding adjustment is made to the carrying amount of the right-of-use asset. The eﬀect of the change in the lease liability is recognised in proﬁt or loss if the carrying amount of the right-of-use asset has been reduced to zero. The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases and leases for which the underlying asset is of low value. The Group recognises these lease payments as an expense on a straight-line basis over the lease term. The Group as a lessor When entering into a contract that contains a lease component or modiﬁes a lease, the Group allocates the consideration in the contract to each lease component on the basis of their stand-alone price. For contracts under which the Group is the lessor, the Group determines at the commencement date whether the lease is an operating lease or a ﬁnance lease. The Group assesses in each case whether the lease transfers substantially all the risks and rewards incidental to ownership of the underlying asset. If yes, the lease is classiﬁed as a ﬁnance lease. If not, the lease is classiﬁed as an operating lease. As part of this assessment, the Group also considers certain other indicators (e.g. whether the lease term is for the major part of the economic life of the underlying asset). If the contract contains both lease and non-lease components, the Group applies the accounting policies of IFRS 15 to allocate the consideration in the contract to the components. The Group applies the derecognition and impairment requirements of IFRS 9 to the lessor’s net investment in the lease. The Group reviews regularly estimated unguaranteed residual values used in computing the lessor’s gross investment in the lease. For operating leases, the Group recognises lease payments as income in proﬁt or loss on a straight- line basis over the lease term. TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 2 | page 99 Translation of the Estonian original Government grants Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions associated with the grant and the grant will be received. Government grants are recognised in proﬁt or loss on a systematic basis over the periods in which the Group recognises as expenses the related costs for which the grants are intended to compensate. A government grant that becomes repayable is accounted for as a change in an accounting estimate. 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 deferred income (a 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. Liabilities arising from grants related to non-depreciable assets (e.g. land) are recognised as income when the asset is ultimately retired or sold. Repayment of a grant related to an asset is recognised by reducing the deferred income balance by the amount repayable. The cumulative additional depreciation that would have been recognised in the statement of proﬁt or loss to date in the absence of the grant is recognised immediately in the statement of proﬁt or loss. Government grants related to income Government grants related to income are recognised in the statement of proﬁt or loss over the periods in which the Group recognises as expenses the related costs for which the grant is intended to compensate. In the statement of proﬁt or loss, the costs to be compensated and income from the grant are recognised separately. Amounts received for which additional conditions are required to be met prior to recognition as other income are presented in the statement of ﬁnancial position as deferred income (a liability). Repayment of a grant related to income is applied ﬁrst against any unamortised deferred credit recognised in respect of the grant. To the extent that the repayment exceeds any such deferred credit, or when no deferred credit exists, the repayment is recognised immediately in the statement of proﬁt or loss. Government grants related to domestic ferry service Government grants received in support of providing domestic ferry service are presented in the state- ment of proﬁt or loss in Revenue. According to the passenger transport public service contract, the Group is paid the diﬀerence between the revenue calculated on the basis of the contract and revenue from ticket sales. As there are no other conditions besides the provision of ferry service, the grants are recognised as revenue as received. The policies for the recognition of income from government grants related to domestic ferry service are described in this note in the section Sale of ferry services — government support. 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 inﬂuence of the Republic of Estonia. TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 3 | page 100 Translation of the Estonian original Note 3. Operating segments Services whose revenues make up segment revenues 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 its 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 as follows: • 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 rental 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, Paldiski South Harbour and Paljassaare 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 rental 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 operations 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 passenger transport public service contract 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 rental 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. TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 3 | page 101 Translation of the Estonian original Segment revenues and results Reportable segments apply the same accounting policies as the Group. Segment revenue comprises only revenue (does not contain Other income). Segment performance indicators reported to the chief operating decision maker comprise segment operating proﬁt and segment adjusted 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. Segment adjusted 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, segment adjusted 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. Segment results are reported to the chief operating decision maker for making decisions about allocating resources to the segment and assessing its performance on a monthly basis. Geographical information In 2022, the Group generated EUR 5,257 thousand, i.e. 4% of its revenue (2021: EUR 4,993 thousand, i.e. 5%) outside Estonia (in Canada) and 96% (2021: 95%) of its revenue in Estonia. Revenue generated outside Estonia consisted of services provided with the icebreaker Botnica (the segment Other) in Canada during the period June to November. All of the Group’s non-current assets with the above exception were located in Estonia. Information about major customers The Group’s total revenue of EUR 121,703 thousand (2021: EUR 110,051 thousand) includes revenue of EUR 24,426 thousand (2021: EUR 22,703 thousand) attributable to its largest customer, which is reported in the Ferry segment and the segment Other. In 2022, the Group’s second-largest customer also contributed 10% or more to the Group’s total revenue. Revenue attributable to the customer of EUR 17,172 thousand (2021: EUR 15,550 thousand) is reported in the Passenger harbours segment and the Cargo harbours segment. No other customer contributed 10% or more to the Group’s total revenue for 2022 or 2021. TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 3 | page 102 Translation of the Estonian original 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 19) 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 –7,982 –8,696 –5,703 –2,363 –24,744 Impairment losses (notes 10 and 11) –252 –316 0 0 –568 Amortisation of government grants received (note 17) 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 3 | page 103 Translation of the Estonian original Segment revenues and results In thousands of euros 2021 Passenger harbours Cargo harbours Ferry Other Total Vessel dues 18,134 19,275 0 0 37,409 Cargo charges 1,497 5,701 0 0 7,198 Passenger fees 5,472 201 0 0 5,673 Sale of electricity 1,111 5,126 0 0 6,237 Sale of ferry services — revenue from ticket sales 0 0 11,963 0 11,963 Sale of other services 769 1,007 91 93 1,960 Operating lease income 1,817 9,368 823 0 12,008 Charter fees 0 0 0 9,804 9,804 Sale of ferry services — government support 0 0 17,799 0 17,799 Total segment revenue* (note 19) 28,800 40,678 30,676 9,897 110,051 Adjusted segment EBITDA 13,665 22,294 12,523 5,564 54,046 Depreciation and amortisation –7,209 –9,098 –5,968 –2,249 –24,524 Impairment losses (note 10) –5 –232 0 0 –237 Amortisation of government grants received (note 17) 274 611 0 0 885 Share of proﬁt of an associate accounted for under the equity method 0 0 0 –412 –412 Segment operating proﬁt 6,725 13,575 6,555 2,903 29,758 Finance income and costs, net –1,283 Share of proﬁt of an associate accounted for under the equity method 412 Income tax expense –3,275 Proﬁt for the period 25,612 * Total segment revenue represents revenue from external customers and excludes inter-segment revenue of EUR 176 thousand and EUR 11 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 104 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 as well as 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 2022, 96.6% of receipts (2021: 95.5%) and 99.4% of payments (operating expenses, investments, ﬁnance costs, etc.) (2021: 99.3%) were denominated in euros. Since nearly all receipts and payments as well as loans and borrowings are denominated in euros, the Group is not exposed to any signiﬁcant currency risk. Price risk At 31 December 2022 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 results from long-term loans and borrowings. Term deposit contracts are concluded at ﬁxed interest rates and do not expose the Group to any cash ﬂow interest rate risk. Floating rate loans and borrowings expose the Group to interest rate risk. At 31 December 2022 and at the end of the comparative period, the interest rates of loans and borrowings were not ﬁxed using derivative transactions. Thus, 100% of loans and borrowings are exposed to interest rate risk. The Group’s exposure to interest rate risk is assessed using a sensitivity analysis which describes the impact of 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 2022 had been higher/lower by 100 basis points, i.e. 1 percentage point, the Group’s proﬁt for the ﬁnancial year would have increased/decreased by EUR 1,874 thousand (31 December 2021: EUR 2,033 thousand), assuming all other variables remained constant. TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 4 | page 105 Translation of the Estonian original Credit risk Credit risk exposure mostly results from trade receivables, cash and cash equivalents and derivative transactions. At 31 December 2022, the Group’s maximum exposure to credit risk was EUR 50,843 thousand (31 December 2021: EUR 42,092 thousand). In thousands of euros At 31 December 2022 2021 Current accounts and term deposits at banks with original maturities of less than 3 months (note 7) 44,343 34,814 Receivables from customers * (note 8) 6,050 6,099 Other receivables (note 8) ** 450 1,358 Total 50,843 42,271 * Impairment allowances have been deducted from receivables from customers. ** Including receivables with settlement schedules of EUR 303 thousand (2021: EUR 896 thousand) and in 2021 receivables for compensation of network charges of EUR 179 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 or derivative transactions. Receivables not past due as at the reporting date accounted for 88.9% (2021: 95.3%) 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). TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 4 | page 106 Translation of the Estonian original 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 2022 Expected credit loss rate 10.03% 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 At 31 December 2021 Expected credit loss rate 6.4% 1.5% 3.0% 80.0% 100.0% Total trade receivables 6,238 164 99 10 33 6,544 Lifetime expected credit loss (ECL) * –399 –2 –3 –8 –33 –445 6,099 * Due to counterparties’ settlement diﬃculties, the Group recognised a partial loss allowance of EUR 605 thousand for a receivable with a settlement schedule which was not past due (2021: EUR 349 thousand). The two amounts are presented in the following table in the column of credit-impaired receivables. TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 4 | page 107 Translation of the Estonian original The following table shows movements in the lifetime ECL recognised for trade receivables. Trade receivables — lifetime expected credit loss (ECL) * In thousands of euros Collectively assessed receivables not credit-impaired Credit-impaired receivables Total At 31 December 2020 58 1,635 1,693 Transfer to credit impaired 0 249 249 Amounts written oﬀ as uncollectible 0 –281 –281 Amounts recovered (previously written down or oﬀ) 0 –526 –526 Reversals of prior write-downs and write-oﬀs 0 –1,045 –1,045 Change in loss allowance due to new trade receivables 355 0 355 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 * In 2022 and 2021, there were no individually assessed not-credit impaired trade receivables for which a lifetime ECL was recognised. Other receivables are assessed using the 12-month ECL method. At 31 December 2022, the credit risk of those ﬁnancial assets had not increased signiﬁcantly and, therefore, no additional loss allowance was needed. At 31 December 2022, a major share of other receivables was made up of instalment plan receivables. TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 4 | page 108 Translation of the Estonian original 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 2022, current assets exceeded current liabilities by EUR 15.3 million (31 December 2021: by EUR 19.4 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 13 February 2023 for year-end 2022 and as at 27 January 2022 for year-end 2021. For intra-Group management of subsidiaries’ liquidity, internal credit limits are used, if necessary. 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 48 4,920 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 48 214,273 At 31 December 2021 < 6 months 3,494 227 10,237 13,958 6–12 months 5,109 8,010 0 13,119 1–5 years 37,760 82,254 0 120,014 > 5 years 9,787 63,570 0 73,357 Total 56,150 154,061 10,237 220,448 * Comprises principal outstanding of EUR 45,798 thousand (2021: EUR 54,064 thousand) and estimated total future interest payments of EUR 5,681 thousand (2021: EUR 2,086 thousand). ** Comprises principal outstanding of EUR 141,600 thousand (2021: EUR 149,250 thousand) and estimated total future interest payments of EUR 21,146 thousand (2021: EUR 4,811 thousand). TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 5 | page 109 Translation of the Estonian original 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 such assets as property, plant and equipment since the assets are held to earn revenue from its core harbour operations or activities supporting the core operations by increasing cargo or passenger ﬂows. Therefore, according to the assessment of the Group’s management, the main objective of holding such assets is not to earn rentals; they are primarily held to help increase revenue from the core operating activities. Accordingly, the main revenue related to those assets does not result from rentals. Property that is not directly attributable to the Group’s core operations, which are aimed at increas- ing cargo or passenger ﬂows, or activities supporting the core operations and that cannot be sold or leased out under a ﬁnance lease, is recognised as investment property only if an insigniﬁcant part (less than 10%) of it is used to provide services or for administrative purposes. At 31 December 2022, the Group did not have such assets. 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 2022, the carrying amount of the Group’s property, plant and equipment was EUR 564,379 thousand and depreciation for the year amounted to EUR 24,104 thousand. The respective ﬁgures for 2021 were EUR 575,563 thousand and EUR 23,903 thousand (note 10). If depreciation rates were reduced by 10%, the annual depreciation charge would decrease and proﬁt would increase by EUR 2,410 thousand (2021: EUR 2,390 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. TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 5 | page 110 Translation of the Estonian original 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 10. 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. However, as the majority interest in the Parent belongs to the state, in management’s judgement the criteria for a public-to-private service arrangement are not satisﬁed and the Group has not applied the accounting treatment for service concessions provided in IFRIC 12. Instead, the Group has recognised the ferries belonging to it as items of property, plant and equipment and has classiﬁed the revenue received from the state as revenue from government grants. TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 6 | page 111 Translation of the Estonian original Note 6. Financial instruments Financial instruments by category Financial assets In thousands of euros At 31 December 2022 2021 Financial assets carried at amortised cost 50,931 48,295 Cash and cash equivalents (note 7) 44,387 34,840 Trade and other receivables — ﬁnancial assets (note 8) 6,544 13,455 Total ﬁnancial assets 50,931 48,295 Financial liabilities In thousands of euros At 31 December 2022 2021 Financial liabilities carried at amortised cost 194,238 211,038 Trade and other payables — ﬁnancial liabilities (note 14) 6,840 7,724 Loans and borrowings (note 16) 187,398 203,314 Total ﬁnancial liabilities 194,238 211,038 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 2022, 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 2022 and 31 December 2021 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 16. The carrying amounts of trade receivables and trade payables, less any write-downs, are estimated to be equal to their fair values. TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 6 | page 112 Translation of the Estonian original 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 2022 2021 Aa2 0 30,306 Aa3 44,343 0 Baa1 0 4,508 Total amount reported in cash and cash equivalents 44,343 34,814 * The remaining portion of the balance of Cash and cash equivalents (EUR 44 thousand at 31 December 2022 and EUR 26 thousand at 31 December 2021) 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. TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 7 | page 113 Translation of the Estonian original Note 7. Cash and cash equivalents In thousands of euros At 31 December 2022 2021 Cash on hand 18 15 Cash at banks 2,465 34,814 Short-term deposits 41,878 0 Cash in transit 26 11 Total cash and cash equivalents (notes 4 and 6) 44,387 34,840 All balances included in cash and cash equivalents are denominated in euros (both at 31 December 2022 and 31 December 2021). The interest accrued as at the reporting date is recognised in Trade and other receivables. TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 8 | page 114 Translation of the Estonian original Note 8. Trade and other receivables In thousands of euros At 31 December 2022 2021 FINANCIAL ASSETS Trade receivables (note 4) 7,373 6,544 Incl. from contracts with customers 5,462 5,701 Allowance for credit losses (note 4) –1,323 –445 Incl. for contracts with customers –126 0 Government grants receivable (note 17) 38 6,017 Receivables from an associate (note 23) 17 8 Other receivables (note 4) 439 1,331 Total ﬁnancial assets (note 6) 6,544 13,455 NON-FINANCIAL ASSETS Prepaid taxes (note 15) 481 1,013 Other prepayments 744 552 Other receivables (note 4) 11 27 Total non-ﬁnancial assets 1,236 1,592 Total trade and other receivables 7,780 15,047 Of which current receivables 7,477 14,151 non-current receivables * 303 896 * Includes receivables with settlement schedules of EUR 303 thousand (2021: EUR 896 thousand). TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 9 | page 115 Translation of the Estonian original Note 9. Investments in an associate AS Green Marine he company is a waste management entity established at the end of 2003. Its principal place of business and country of incorporation is Estonia. AS Tallinna Sadam holds 51% (both as at 31 December 2022 and 31 December 2021) 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 managing harbour waste; managing, administering and operating treatment plants for hazardous ship-generated waste and wastewater; and cleaning, servicing and maintaining port basins and harbour premises. The Group’s investments in the associate are accounted for using the equity method in these consolidated ﬁnancial statements. Muutused investeeringutes sidusettevõttesse In thousands of euros At 31 December 2022 2021 Carrying amount at beginning of period 1,559 1,147 Share of proﬁt under the equity method 795 412 Dividends paid –255 0 Carrying amount at end of period 2,099 1,559 TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 9 | page 116 Translation of the Estonian original Associate AS Green Marine In thousands of euros At 31 December 2022 2021 Current assets 2,148 1,377 Non-current assets 4,729 3,763 Current liabilities 1,245 897 Non-current liabilities 1,519 1,186 The above amounts of assets and liabilities include the following: Cash and cash equivalents 1,387 715 Current loans and borrowings 598 414 Non-current loans and borrowings 1,519 1,186 In thousands of euros 2022 2021 Revenue 7,734 5,315 Proﬁt for the period from continuing operations 1,536 835 Proﬁt for the period 1,536 835 Total comprehensive income for the period 1,536 835 The above proﬁt for the period includes the following: Depreciation, amortisation and impairment 406 544 Interest expense 41 37 Income tax expense 113 0 AS Tallinna Sadam has no obligation to provide additional ﬁnancial or other support to AS Green Marine. TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 10 | page 117 Translation of the Estonian original Note 10. Property, plant and equipment In thousands of euros Land and buildings Plant and equipment Other items of property, plant and equipment Assets under construction * Prepayments Total At 31 December 2020 Cost 627,291 246,929 8,614 25,554 0 908,388 Accumulated depreciation and impairment losses –227,225 –88,092 –5,565 0 0 –320,882 Carrying amount at 31 December 2020 400,066 158,837 3,049 25,554 0 587,506 Movement in 2021 Purchases and reconstruction (note 25) 99 657 211 13,089 16 14,072 Sales at carrying amount ** –643 –1,232 0 0 0 –1,875 Depreciation charge –12,005 –11,117 –781 0 0 –23,903 Impairment losses –236 0 –1 0 0 –237 Reclassiﬁed at carrying amount 24,045 10,699 109 –34,853 0 0 At 31 December 2021 Cost 648,873 254,742 8,634 3,790 16 916,055 Accumulated depreciation and impairment losses –237,547 –96,898 –6,047 0 0 –340,492 Carrying amount at 31 December 2021 411,326 157,844 2,587 3,790 16 575,563 Movement in 2022 Purchases and reconstruction (note 25) 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 649,130 254,747 8,835 10,748 1,039 924,499 Accumulated depreciation and impairment losses –248,048 –105,479 –6,593 0 0 –360,120 Carrying amount at 31 December 2022 401,082 149,268 2,242 10,748 1,039 564,379 TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 10 | page 118 Translation of the Estonian original * 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 of EUR 6,714 thousand; • the reconstruction of the ramp of berth 13 of EUR 3,203 thousand. * At 31 December 2021, assets under construction of EUR 3,790 thousand included the following major items: • the design of a traﬃc solution for the area in front of passenger terminal D of EUR 1,940 thousand; • the construction of quay 5 landing bridge of EUR 672 thousand; • the construction of quay 5 connecting walkway of EUR 666 thousand. ** At 31 December 2022, the cost and accumulated depreciation of property, plant and equipment that was sold were EUR 235 thousand (2021: EUR 4,488 thousand) and EUR 212 thousand (2021: EUR: 2,613 thousand), respectively. The Group’s assets have not been pledged. At 31 December 2022, the carrying amount of fully depreciated items still in use was EUR 40,366 thousand (31 December 2021: EUR 32,934 thousand). Commitments related to property, plant and equipment are disclosed in note 24. 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 proﬁt or loss: • 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. In 2021, the Group recognised the following impairment losses consisting of write-oﬀs of EUR 237 thousand within Depreciation, amortisation and impairment in the statement of proﬁt or loss: • the write-oﬀ of facilities (incl. railway branch lines and outdoor lighting) of EUR 236 thousand; • the write-oﬀ of other ﬁxtures and ﬁttings of EUR 1 thousand. TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 11 | page 119 Translation of the Estonian original Note 11. Intangible assets In thousands of euros Computer soﬅware Soﬅware under ruction Total At 31 December 2020 Cost 5,296 141 5,437 Accumulated amortisation and impairment losses –3,333 0 –3,333 Carrying amount at 31 December 2020 1,963 141 2,104 Movement in 2021 Purchases and upgrades (note 25) 40 607 647 Amortisation charge –621 0 –621 Reclassiﬁcation from assets under construction 431 -431 0 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 Movement in 2022 Purchases and upgrades (note 25) 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 TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 12 | page 120 Translation of the Estonian original Note 12. Leases Carrying amount of property, plant and equipment leased out under operating leases In thousands of euros At 31 December 2022 2021 Land 44,710 43,227 incl. with the right of superﬁcies 37,201 36,680 Buildings 8,846 9,280 Plant and equipment 110 15 Other items of property, plant and equipment 267 357 Total carrying amount of property, plant and equipment leased out under operating leases 53,933 52,879 Depreciation charge on property, plant and equipment leased out under operating leases In thousands of euros 2022 2021 Buildings 523 525 Plant and equipment 3 3 Other items of property, plant and equipment 118 141 Total depreciation charge on property, plant and equipment leased out under operating leases 644 669 Rental income from property, plant and equipment leased out under operating leases In thousands of euros 2022 2021 Land 8,257 7,943 Buildings 3,866 3,052 Plant and equipment 1,159 907 Other items of property, plant and equipment 108 106 Total rental income from property, plant and equipment leased out under operating leases (note 19) 13,390 12,008 TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 12 | page 121 Translation of the Estonian original Rental income in subsequent periods under non-cancellable operating lease contracts 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; 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 26). In thousands of euros At 31 December 2022 2021 < 1 years 10,323 10,615 1–2 years 9,598 9,771 2–3 years 9,435 9,603 3–4 years 9,053 9,404 4–5 years 9,048 8,984 > 5 years 310,270 316,616 Total rental income in subsequent periods under non-cancellable operating lease contracts 357,727 364,993 TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 13 | page 122 Translation of the Estonian original Note 13. Provisions In thousands of euros 2022 2021 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 2022 have been approved. Other provisions Other provisions at 31 December 2022 comprise: • a provision for ongoing court cases of EUR 61 thousand (31 December 2021: 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 2021: EUR 234 thousand). Provision for performance-related remuneration At beginning of year 1,216 1,000 Recognised 1,688 1,216 Reversed –148 –134 Used –1,068 –866 At end of year 1,688 1,216 Other provisions At beginning of year 356 289 Recognised 91 83 Reversed –50 0 Used –72 –16 At end of year 325 356 Total provisions 2,013 1,572 TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 14 | page 123 Translation of the Estonian original Note 14. Trade and other payables In thousands of euros At 31 December 2022 2021 Financial liabilities Trade payables 5,344 6,739 Interest payable (note 16) 1,012 299 Payables to an associate (note 23) 182 153 Other payables 302 533 Total ﬁnancial liabilities (note 6) 6,840 7,724 Incl. liabilities for property, plant and equipment (note 25) 470 2,218 liabilities for intangible assets (note 25) 0 39 Non-ﬁnancial liabilities Payables to employees 1,421 1,337 Accrued taxes payable on remuneration 719 654 Payables related to contracts with customers 829 866 Advances for goods and services 857 645 Other payables 382 583 Total non-ﬁnancial liabilities 4,208 4,085 Total trade and other payables 11,048 11,809 Of which current liabilities 9,832 10,348 non-current liabilities 1,216 1,461 TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 15 | page 124 Translation of the Estonian original Note 15. Taxes payable In thousands of euros At 31 December 2022 2021 Personal income tax 319 265 Corporate income tax * 108 13 Pollution charge 2 5 Social security tax 578 477 Unemployment insurance contributions 32 28 Funded pension contributions 17 15 Excise duties 4 6 Other tax liabilities to other countries 0 81 Total taxes payable 1,060 890 * Including a deferred tax liability of EUR 82 thousand at 31 December 2022 (31 December 2021: EUR nil). For further information about deferred tax, see the section Corporate income tax in note 2. At 31 December 2022, the Group’s prepaid taxes amounted to EUR 481 thousand (31 December 2021: EUR 1,013 thousand). Prepaid taxes are disclosed in note 8. TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 16 | page 125 Translation of the Estonian original Note 16. Loans and borrowings In thousands of euros At 31 December 2022 2021 Current portion Loan liabilities 8,266 8,266 Debt securities 7,650 7,650 Total current portion 15,916 15,916 Non-current portion Loan liabilities 37,532 45,798 Debt securities 133,950 141,600 Total non-current portion 171,482 187,398 Total loans and borrowings (note 6) 187,398 203,314 Issue and redemption of debt securities At 31 December 2022, 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 2022. 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 2022. Consistent with the agreement on the amendment of the terms and conditions of the debt securities, no debt securities were redeemed in 2021. At 31 December 2022, the weighted average interest rate of the debt securities was 2.68% (31 December 2021: 0.49%). 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 16 | page 126 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 2022, the weighted average interest rate of drawn loans was 1.94% (31 December 2021: 0.77%). 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 2022 and did not have any undrawn loans or credit limits at 31 December 2022. 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 2022 amounted to EUR 8,266 thousand (2021: 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 At 31 December 2022 2021 < 6 months 3,383 3,383 6–12 months 12,533 12,533 1–5 years 164,482 114,898 > 5 years 7,000 72,500 Total loans and borrowings (note 4) 187,398 203,314 TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 16 | page 127 Translation of the Estonian original Carrying amounts and fair values of loans and borrowings * In thousands of euros At 31 December 2022 2021 Carrying amount Debt securities 141,600 149,250 Loan liabilities 45,798 54,064 Total carrying amount 187,398 203,314 Fair value Debt securities 146,482 150,151 Loan liabilities 46,841 54,583 Total fair value 193,323 204,734 * 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 2022, the fair value of ﬁnancial liabilities calculated using the discounted cash ﬂow method was 3.2% higher than their carrying amount (31 December 2021: 0.7% 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 2022 and 31 December 2021, the Group was in compliance with all ﬁnancial covenants. TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 16 | page 128 Translation of the Estonian original In thousands of euros 1 January 2021 Cash ﬂows from ﬁnancing activities Non-cash changes 31 December 2021 Interest expense (note 22) Fair value adjustments Loan liabilities 62,330 –8,266 0 0 54,064 Debt securities 149,250 0 0 0 149,250 Derivatives 102 0 0 –102 0 Interest payable (note 14) 388 –1,458 1,369 0 299 Total 212,070 –9,724 1,369 –102 203,613 Reconciliation of liabilities arising from ﬁnancing activities In thousands of euros 1 January 2022 Cash ﬂows from ﬁnancing activities Non-cash changes 31 December 2022 Interest expense (note 22) Loan liabilities 54,064 –8,266 0 45,798 Debt securities 149,250 –7,650 0 141,600 Interest payable (note 14) 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 17 | page 129 Translation of the Estonian original Note 17. Government grants Non-current government grant liabilities In thousands of euros At 31 December 2022 2021 Cohesion Fund 19,803 20,235 TEN-T 5,889 5,552 CEF-T 4,332 3,902 State budget of the Republic of Estonia 51 63 INTERREG 81 83 Total non-current government grant liabilities 30,156 29,835 Incl. non-depreciable assets 13,902 13,902 Recognised as income In thousands of euros 2022 2021 Grants related to assets 1,077 885 Grants related to income 19,440 17,842 Total recognised as income 20,517 18,727 Incl. revenue from other sources (note 19) 19,406 17,799 other income (note 21) 1,111 928 Short-term deferred government grant income In thousands of euros At 31 December 2022 2021 CEF-T 8,578 1,047 State budget of the Republic of Estonia 0 176 Total short-term deferred government grant income 8,578 1,223 TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 17 | page 130 Translation of the Estonian original TEN-T programme Motorways of the Seas 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 Western 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 in Old City Harbour. In 2018, a request was submitted to the European Commission for extending the project by two years. The new end date of the project was 31 December 2020. The project was extended because in the preparatory phase there arose unforeseeable circumstances that deferred several activities both in Old City Harbour in Tallinn and the Helsinki West Harbour. The last project activities at Old City Harbour were completed in summer 2021 and in the same year the ﬁnal report was submitted to the European Commission. The ﬁnal payment of the project of EUR 4,954 thousand was received in 2022. Connecting Europe Facility for Transport (CEF-T) programme TWIN-PORT 3 (2018–2023) TWIN-PORT 3 is a follow-up project to TWIN-PORT and TWIN-PORT 2. The project began in 2018 and is scheduled to be completed on 31 December 2023. The participants in the project are AS Tallinna Sadam, the Port of Helsinki, the City of Helsinki and three ferry operators (Tallink, Viking Line and Eckerö Line). AS Tallinna Sadam is the coordinating partner of the project. The purpose of the project is 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 will be built in both harbours, which oﬀers faster and safer mooring for ferries. In Tallinn, the security systems in Old City Harbour will be upgraded. In Helsinki, new street lanes will be built, the throughput capacity of intersections will be improved, a tramway leading to the harbour will be relocated and a new bridge will be built in the harbour area. In 2022, investments made amounted to EUR 4 thousand and expenses incurred amounted to EUR 7 thousand (2021: investments amounted to EUR 398 thousand and no expenses were incurred). Support of EUR 4,097 thousand was received in 2022. No support was received in 2021. At 31 December 2022, the balance of deferred grant income was EUR 2,260 thousand. At 31 December 2021, the balance of short-term receivables was EUR 1,836 thousand. TWIN-PORT 4 (2020–2023) TWIN-PORT 4 is the fourth follow-up project in the series. The purpose of the project is 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 previous ones, the project includes 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 berth in both harbours will be supplied with a second level ramp for more eﬃcient servicing of ro-ro traﬃc and at Muuga the ﬁrst level ramp of the same berth will be 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 will be reconstructed. The Port of Helsinki will supply one berth in its city-centre harbours with onshore power supply systems and one berth with automated mooring systems. The coordinating partner of this project is also AS Tallinna Sadam. In 2022, investments made amounted to EUR 8,419 thousand (2021: EUR 3,307 thousand). In 2021 and 2022, no support was received. At 31 December 2022, the balance of deferred grant income was EUR 338 thousand (31 December 2021: EUR 1,047 thousand). TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 17 | page 131 Translation of the Estonian original TWIN-PORT 5 (2021–2025) This project continues the activities started in the project 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. The project includes the following activities. At Muuga Harbour, the ramp of berth 15 will be reconstructed and berths 13, 14 and 15 will be supplied with the capacity to receive sewage from ships. To improve travel experience and raise service quality, an architecture competition will be 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 will be commissioned. To continue to oﬀer excellent high-quality customer service, AS Tallinna Sadam is going to upgrade the soﬅware and hardware of its Smart Port traﬃc management system (automated vehicle check- in and direction to the waiting area and boarding) and create new capabilities at both Old City Harbour and Muuga Harbour. The Port of Helsinki will focus 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 2022, no investments were made and no expenses were incurred. In 2022, support of EUR 980 thousand was received and the year-end balance of deferred grant income was EUR 980 thousand. The Connecting Europe Facility (CEF) project EstMilMob 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. In 2022, no investments were made and no expenses were incurred. In 2022, support of EUR 5,000 thousand was received and the year-end balance of deferred grant income was EUR 5,000 thousand. TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 17 | page 132 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 2022, support was calculated in the amount of EUR 19,406 thousand (2021: EUR 17,799 thousand) and received in the amount of EUR 19,191 thousand (2021: EUR 17,739 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 19). At 31 December 2022, the Group had a short-term receivable of EUR 38 thousand related to public transport support provided from the state budget (31 December 2021, the Group had short-term deferred income of EUR 176 thousand related to public transport support provided from the state budget). 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. In 2022, support of EUR 4 thousand was received (2021: EUR 2 thousand). Expenses incurred for the project in 2022 amounted to EUR 6 thousand (2021: EUR 1 thousand). TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 18 | page 133 Translation of the Estonian original Note 18. Equity Share capital At 31 December 2022 and 31 December 2021, 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 Economic Aﬀairs and Communications) 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 (2021: 664,000,000). At 31 December 2022 and 31 December 2021, all issued shares had been fully paid for. Earnings per share 2022 2021 Weighted average number of shares 263,000,000 263,000,000 Consolidated proﬁt for the period (in thousands of euros) 25,592 25,612 Basic and diluted earnings per share (in euros) * 0.10 0.10 Weighted average number of ordinary shares at 31 December 263,000,000 263,000,000 * In the years ended 31 December 2022 and 31 December 2021, there were no dilutive instruments outstanding. TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 18 | page 134 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 2021. The Group’s capital structure consists of net debt (loans and borrowings as detailed in note 16 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%. Equity to assets ratio In thousands of euros At 31 December 2022 2021 Loans and borrowings 187,398 203,314 Cash and cash equivalents –44,387 –34,840 Net debt 143,011 168,474 TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 18 | page 135 Translation of the Estonian original Unrestricted equity At 31 December 2022, the Group’s unrestricted equity was EUR 50,640 thousand (31 December 2021: EUR 51,302 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 2022 and 31 December 2021, 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 (5%) 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 844 thousand in 2022 (2021: EUR 1,009 thousand). Equity to assets ratio At 31 December 2022 and 31 December 2021, the Group’s equity to assets ratio, i.e. the ratio of total equity to total assets was 61%. The ratio did not change compared to 2021. The ratio increased by 1 percentage point compared to 2020, as total equity grew by 1.5% and total assets by 0.2%. Equity to assets ratio In thousands of euros At 31 December 2022 2021 Total equity 380,976 380,895 Total assets 621,229 629,538 Equity to assets ratio 61% 61% TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 18 | page 136 Translation of the Estonian original Dividends Based on the resolution of the general meeting that convened on 25 April 2022, the Group paid a dividend of EUR 0.097 per share, i.e. EUR 25,511 thousand in total, for 2021. The list of shareholders entitled to receive the dividend was determined on 5 May 2022 (the ex-dividend date: 4 May 2022) and the dividend was paid out to the shareholders on 12 May 2022 (through Nasdaq CSD). Dividends In thousands of euros 2022 2021 Dividend declared in the reporting period 25,511 20,251 Dividend distributed in the reporting period 25,287 20,085 Income tax withheld on dividends in the reporting period 224 166 Dividend per share (in euros) 0.097 0.077 Income tax on dividends In thousands of euros 2022 2021 Income tax calculated on dividends in Estonia 4,111 3,275 Income tax paid on dividends in Estonia –4,335 –3,440 Incl. income tax withheld on dividends –224 –166 At 31 December 2022, deferred income tax on dividends amounted to EUR 82 thousand (31 December 2021: EUR nil). The Group’s unrestricted equity as at 31 December 2022 amounted to EUR 50,640 thousand (31 December 2021: EUR 51,302 thousand). The maximum possible income tax liability which would arise if all of the unrestricted equity were distributed as dividends is EUR 8,617 thousand (2021: EUR 8,550 thousand). At 31 December 2022, the tax rates used to calculate the maximum possible tax liability for 2023 were 14/86 and 20/80 of the net distributions (was applied to the maximum possible dividend to the extent of one third of the proﬁt distributed and taxed in 2020, 2021 and 2022). TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 19 | page 137 Translation of the Estonian original Note 19. Revenue In thousands of euros 2022 2021 Revenue from contracts with customers Vessel dues 37,233 37,409 Cargo charges 7,457 7,198 Passenger fees 10,248 5,673 Sale of electricity 7,141 6,237 Sale of ferry services — ticket sales 14,199 11,963 Sale of other services 2,423 1,960 Total revenue from contracts with customers 78,701 70,440 Revenue from other sources Rental income from operating leases (note 12) 13,390 12,008 Charter fees 10,206 9,804 Sale of ferry services — government support (note 17) 19,406 17,799 Total revenue from other sources 43,002 39,611 Total revenue (note 3) 121,703 110,051 In 2022, revenue from services provided in Estonia and Canada amounted to EUR 116,446 thousand and EUR 5,257 thousand (incl. charter fees of EUR 5,161 thousand), respectively. In 2021, revenue from services provided in Estonia and Canada amounted to EUR 105,058 thousand and EUR 4,993 thousand (incl. charter fees of EUR 4,900 thousand), respectively. TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 19 | page 138 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 2022 amounted to EUR 767 thousand (31 December 2021: EUR 809 thousand). Revenue for 2022 includes connection fees of EUR 42 thousand (2021: EUR 83 thousand). Management expects that the transaction price allocated to unsatisﬁed performance obligations will be recognised as revenue over the next 5–26 years (the average remaining useful life of the investments made to enable connection) on a straight-line basis. TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 20 | page 139 Translation of the Estonian original Note 20. Operating expenses In thousands of euros 2022 2021 Fuel, oil and energy costs 17,518 11,590 Technical maintenance and repair of non-current assets 7,127 6,995 Services purchased for infrastructure 3,408 3,015 Tax expenses 2,674 2,671 Incl. land tax 2,619 2,615 Consultation and development expenses 707 711 Incl. research and development expenses 334 299 Services purchased 5,551 5,521 Incl. mooring service 730 1,315 reception of ship-generated waste 2,064 1,398 port dues 2,713 2,732 Purchase and maintenance of insigniﬁcant assets 1,139 1,352 Advertising expenses 289 250 Lease expenses 583 674 Expenses on short-term leases 23 13 Insurance expenses 801 781 Other operating expenses 3,598 2,389 Incl. expenses on credit-impaired ﬁnancial assets 556 –385 Total operating expenses 43,418 35,962 TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 20 | page 140 Translation of the Estonian original Personnel expenses In thousands of euros 2022 2021 Wages and salaries 17,457 15,761 Social security charges 5,708 5,159 Total personnel expenses 23,165 20,920 Incl. short-term beneﬁts of members of the management and supervisory boards of Group companies 1,046 996 social security charges of the members of the management and supervisory boards of Group companies 346 329 Total expenses on members of the management and supervisory boards of Group companies 1,392 1,325 Under contracts in force at 31 December 2022, AS Tallinna Sadam has to pay the members of its management board (key management personnel) compensation in the event of their removal from oﬃce in an amount equal to their three months’ remuneration (EUR 99.0 thousand in 2022 and EUR 64.7 thousand in 2021). Also, in return for observing the non-compete clause, AS Tallinna Sadam has to pay management board members monthly compensation in an amount equal to 50% of their remuneration (EUR 197.9 thousand in 2022 and EUR 176.3 thousand in 2021) during 12 months aﬅer the expiry of the contract. Under contracts in force at 31 December 2022, the subsidiaries of AS Tallinna Sadam have to pay their management board members compensation in the event of their removal from oﬃce in an amount equal to their three months’ remuneration (EUR 75.0 thousand in 2022 and EUR 80.5 thousand in 2021). Number of employees 2022 2021 People working under employment contracts 468 469 People working under contracts for services excluding self-employed people 9 9 Members of legal person’s management or control bodies 7 7 Total 484 485 TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTES 21, 22 | page 141 Translation of the Estonian original Note 21. Other income In thousands of euros 2022 2021 Gain on sale of non-current assets * 68 634 Penalties, interest on arrears 171 141 Income from government grants (note 17) 1,111 928 Other income 91 76 Total other income 1,441 1,779 * Gain on sale of non-current assets in 2021 includes gain on the sale of assets classiﬁed as held for sale of EUR 141 thousand. Note 22. Finance costs In thousands of euros 2022 2021 Interest expense on loans and borrowings: Interest expense on loans (note 16) 547 474 Interest expense on debt securities (note 16) 1,430 793 Interest expense on derivatives (note 16) 0 102 Total interest expense on loans and borrowings 1,977 1,369 Foreign exchange loss 27 7 Other ﬁnance costs 9 2 Total ﬁnance costs 2,013 1,378 TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 23 | page 142 Translation of the Estonian original Note 23. Related party transactions 67.03% of the shares in AS Tallinna Sadam are held by the Republic of Estonia (through the Ministry of Economic Aﬀairs and Communications). In thousands of euros 2022 2021 Transactions with an associate Revenue 75 169 Operating expenses 2,102 1,479 Transactions with companies over which members of supervisory and management boards of Group companies have signiﬁcant inﬂuence Revenue 1 1 Operating expenses 9 10 Other expenses 20 18 Transactions with government agencies and companies of which the state has control Revenue 26,011 23,822 Other income 0 30 Operating expenses 12,797 9,666 Other expenses 72 57 Purchase of property, plant and equipment 346 8 TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 23 | page 143 Translation of the Estonian original In thousands of euros At 31 December 2022 2021 Trade receivables from and payables to an associate Receivables (note 8) 17 8 Payables (note 14) 182 153 Trade receivables from and payables to companies over which members of supervisory and management boards of Group companies have signiﬁcant inﬂuence Payables 1 1 Trade receivables from and payables to government agencies and companies of which the state has control Receivables 174 352 Payables 2,755 2,446 All purchases and sales of services were transactions conducted in the ordinary course of business on an arm’s length basis. Beneﬁts payable to the members of the management and supervisory boards are disclosed in note 20. 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. TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTES 24, 25 | page 144 Translation of the Estonian original Note 24. Commitments At 31 December 2022, the Group’s contractual commitments related to purchases of property, plant and equipment, repairs, and research and development expenditures totalled EUR 5,945 thousand (31 December 2021: EUR 11,058 thousand). Note 25. Non-cash investing activities Purchases of property, plant and equipment In thousands of euros 2022 2021 Purchases of property, plant and equipment –15,189 –14,535 Oﬀsetting 0 -70 Paid for previous period 2,218 2,758 Trade payables outstanding at end of period (note 14) –470 –2,218 Other adjustments 0 –7 Total adjustments 1,748 463 Purchases and reconstruction (note 10) 13,441 14,072 Purchases of intangible assets In thousands of euros 2022 2021 Purchases of intangible assets –455 –641 Paid for previous period 39 33 Trade payables outstanding at end of period (note 14) 0 –39 Other adjustments 1 0 Total adjustments 40 –6 Purchases and upgrades (note 11) 415 647 TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 26 | page 145 Translation of the Estonian original Note 26. 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 unjustiﬁed use of conﬁdential information in a public tender to provide public ferry service on the Saaremaa and Hiiumaa routes. The statement of claim is identical to the one ﬁled by the same plaintiﬀs in a previous civil case which was dismissed by Harju County Court on 8 March 2019 because the plaintiﬀs did not provide security of EUR 14,000 in total ordered by the court for covering the estimated costs of the proceedings. The Group has challenged the claim and defends itself in the action. The management board believes that the claim is not substantiated and according to the assessment of legal advisers 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. TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 27 | page 146 Translation of the Estonian original Note 27. 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 28 | page 147 Translation of the Estonian original Note 28. 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 preparing the consolidated ﬁnancial statements, except that investments in subsidiaries and associates are measured at cost. Statement of ﬁnancial position In thousands of euros 31.12.2022 31.12.2021 ASSETS Current assets Cash and cash equivalents 26,043 21,900 Trade and other receivables 13,793 20,599 Total other current assets 39,836 42,499 Non-current assets held for sale 100 0 Total current assets 39,936 42,499 Non-current assets Investments in subsidiaries 5,774 5,774 Investments in an associate 132 132 Other long-term receivables 73,331 84,480 Property, plant and equipment 447,379 452,535 Intangible assets 1,408 1,540 Total non-current assets 528,024 544,461 Total assets 567,960 586,960 Continues on page 148 TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 28 | page 148 Translation of the Estonian original In thousands of euros 31.12.2022 31.12.2021 LIABILITIES Current liabilities Loans and borrowings 15,916 15,916 Provisions 1,752 1,343 Government grants 8,578 1,047 Taxes payable 560 445 Trade and other payables 7,256 7,818 Total current liabilities 34,062 26,569 Non-current liabilities Loans and borrowings 171,482 187,398 Government grants 30,156 29,835 Other payables 1,216 1,461 Total non-current liabilities 202,854 218,694 Total liabilities 236,916 245,263 EQUITY Share capital 263,000 263,000 Share premium 44,478 44,478 Statutory capital reserve 22,115 21,271 Accumulated losses (prior periods) –13,406 –3,929 Proﬁt for the period 14,857 16,877 Total equity 331,044 341,697 Total liabilities and equity 567,960 586,960 TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 28 | page 149 Translation of the Estonian original Statement of proﬁt or loss and other comprehensive income Statement of proﬁt or loss In thousands of euros 2022 2021 Revenue 77,408 70,017 Other income 1,348 1,695 Operating expenses –29,165 –23,383 Personnel expenses –12,762 –11,185 Depreciation, amortisation and impairment –17,245 –16,543 Other expenses –319 –303 Operating proﬁt 19,265 20,298 FINANCE INCOME AND COSTS Finance income 1,681 1,225 Finance costs –1,978 –1,371 Finance costs — net –297 –146 Proﬁt before income tax 18,968 20,152 Income tax expense –4,111 –3,275 Proﬁt for the period 14,857 16,877 Statement of other comprehensive income In thousands of euros 2022 2021 Proﬁt for the period 14,857 16,877 OTHER COMPREHENSIVE INCOME Items that may be reclassiﬁed subsequently to proﬁt or loss: Net fair value gain on hedging instruments in cash ﬂow hedges 0 102 Total other comprehensive income 0 102 Total comprehensive income for the period 14,857 16,979 TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 28 | page 150 Translation of the Estonian original Statement of cash ﬂows In thousands of euros 2022 2021 Cash receipts from sale of goods and services 83,142 74,373 Cash receipts related to other income 188 144 Payments to suppliers –35,803 –29,186 Payments to and on behalf of employees –10,162 –9,358 Payments for other expenses –205 –210 Income tax paid on dividends –4,335 –3,440 Cash from operating activities 32,825 32,323 Purchases of property, plant and equipment –13,456 –13,392 Purchases of intangible assets –398 –493 Proceeds from sale of property, plant and equipment 190 2,565 Government grants received 15,001 409 Increase of share capital of subsidiaries 0 3,000 Repayments of loans provided 10,863 13,171 Dividends received 255 0 Interest received 1,330 1,157 Cash from investing activities 13,785 6,417 Redemption of debt securities –7,650 0 Repayments of loans received –8,266 –8,266 Dividends paid –25,287 –20,085 Interest paid –1,264 –1,458 Other payments related to ﬁnancing activities 0 –1 Cash used in ﬁnancing activities –42,467 –29,810 Net cash ﬂow 4,143 8,930 Cash and cash equivalents at beginning of period 21,900 12,970 Change in cash and cash equivalents 4,143 8,930 Cash and cash equivalents at end of period 26,043 21,900 TABLE OF CONTENTS m Notes to the Consolidated Financial Statements: NOTE 28 | page 151 Translation of the Estonian original Statement of changes in equity In thousands of euros Share capital Share premium Statutory capital reserve Retained earnings 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 –2,003 –2,003 Value of interests under control and signiﬁcant inﬂuence under the equity method 0 0 0 51,935 51,935 Adjusted unconsolidated equity at 31 December 2022 263,000 44,478 22,115 51,383 380,976 In thousands of euros Share capital Share premium Statutory capital reserve Hedge reserve Retained earnings Total equity Equity at 31 December 2020 263,000 44,478 20,262 -102 17,331 344,969 Proﬁt for the period 0 0 0 0 16,877 16,877 Other comprehensive income for the period 0 0 0 102 0 102 Total comprehensive income for the period 0 0 0 102 16,877 16,979 Dividend declared 0 0 0 0 –20,251 –20,251 Total transactions with owners 0 0 0 0 –20,251 –20,251 Increase of capital reserve 0 0 1,009 0 –1,009 0 Equity at 31 December 2021 263,000 44,478 21,271 0 12,948 341,697 Carrying amount of interests under control and signiﬁcant inﬂuence 0 0 0 0 –2,003 –2,003 Value of interests under control and signiﬁcant inﬂuence under the equity method 0 0 0 0 41,201 41,201 Adjusted unconsolidated equity at 31 December 2021 263,000 44,478 21,271 0 52,146 380,895 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 29 | page 152 Translation of the Estonian original Note 29. Events aﬅer the reporting period Baﬃnland Iron Mines Corporation has announced that it will use the contractual option to charter the multifunctional icebreaker Botnica in 2023 for a shorter period of at least 60 days during the period from September to November. The exact number of charter days will depend on the weather and other conditions. The daily charter rate for the period will be higher than in the previous summers when the period was longer (June to November). According to manage- ment’s estimates, the shorter charter period may have a negative impact on the Group’s ﬁnancial performance to the extent of EUR 2.5 million. In order to maintain a high utilisation rate of the vessel, TS Shipping is currently actively negotiating to secure work for the vessel in other oﬀshore projects during summer months. Demand and prices in the oﬀshore market have increased signiﬁcantly in the last six months and, therefore, management believes that it is probable that the company will be able to secure other summer work for Botnica. TABLE OF CONTENTS m Management’s Conﬁrmation | page 153 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 2022. The management board conﬁrms that the Group’s management report and the Parent company’s remuneration report set out on pages 5 to 76 provide a true and fair view of the Group’s business operations, performance and signiﬁcant events in the reporting period. The management board conﬁrms that the Group’s consolidated ﬁnancial statements set out on pages 77 to 152 are correct and complete and that: 17 March 2023 1. the consolidated ﬁnancial statements have been prepared in accordance with the Estonian Accounting Act and with 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 (17 March 2023) have been properly recognised and disclosed in the consolidated ﬁnancial statements; and 4. AS Tallinna Sadam and its subsidiaries are going concerns. /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 SISUKORD m Independent Auditors’ Report | lk 154 Independent Auditors’ Report Independent auditors’ report (Translation of the Estonian original) To the Shareholders of AS Tallinna Sadam Report on the Audit of the Consolidated Financial Statements Opinion We have audited the consolidated financial statements of AS Tallinna Sadam and its subsidiaries (the Group), which comprise the consolidated statement of financial position as at 31 December 2022, the consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising significant accounting policies and other explanatory information. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as 31 December 2022, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (Estonia). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the International Code of Ethics for Professional Accountants (Estonia) (including International Independence Standards), and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 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. Accurate recognition and value of property, plant and equipment Additional information is provided in notes 2 Accounting policies used in the preparation of the financial statements, 5 Significant accounting estimates and judgments and 10 Property, plant and equipment to the consolidated financial statements. The key audit matter How the matter was addressed in our audit AS Tallinna Sadam owns the largest cargo and passenger port complex in Estonia, passenger ferries and a multifunctional icebreaker. As a result, property, plant and equipment with the carrying amount of EUR 564.4 million account for the largest share of the Group’s assets as at 31 December 2022. Our audit procedures in this area included, but were not limited to, the following: * We assessed whether the Group's accounting policies for property, plant and equipment are in accordance with IFRS. SISUKORD m Independent Auditors’ Report | lk 155 Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements Management 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 management 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, management 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 management 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. Auditors’ 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 auditors’ 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 International Standards on Auditing (Estonia) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and 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 these consolidated financial statements. As part of an audit in accordance with International Standards on Auditing (Estonia), 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 management. - Conclude on the appropriateness of management’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, then we are required to draw attention in our auditors’ 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 auditors’ 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. The Group is exposed to significant risks, the realization of which might significantly reduce the value of its assets. Identifying indications of impairment and impairment testing are complex procedures that involve use of significant estimates and assumptions. Given the amount of the Group's property, plant and equipment, impairment losses might have a material effect on the financial statements. The useful lives of items of property, plant and equipment are also based on management's estimates of the time during which items of property plant and equipment or their significant parts will be employed to generate economic benefits. The estimates are based on historical experience and take into account the physical condition of the assets. Because of the size of the balance of property, plant and equipment, the large volume of transactions and the uncertainty associated with management's estimates, auditing property, plant and equipment requires a significant amount of audit time and resources. Due to the above circumstances, we identified accurate recognition and value of property, plant and equipment as key audit matters. * Based on the additions to property, plant and equipment during the year, we selected a sample and tested the correctness of the recognition of acquisitions of property, plant and equipment, reconciling the additions recorded on the statement of financial position with the underlying contracts and invoices. * For property, plant and equipment under construction, we verified the planned completion date and implementation date and checked whether or not assets under construction include items already in use. * We checked whether depreciation of items of property, plant and equipment has commenced on time. * We analysed whether the useful lives assigned to property, plant and equipment are in line with the Group's historical experience and general industry practice. * We clarified whether significant parts of items of property, plant and equipment which have been assigned different useful lives are accounted for separately. * In order to clarify indications of impairment of assets, we made inquiries of the management board to determine whether any indications of impairment of the recoverable amount of the assets have been identified. In addition, we compared budgets with actual financial results and analysed whether there are business lines where the Group's profits are lower than budgeted. Other Information Management is responsible for the other information. The other information comprises the information included in the management report, the remuneration report, but does not include the consolidated financial statements and our auditors’ report thereon. Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information 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. In addition, our responsibility is to state whether the information presented in the management report has been prepared in accordance with the applicable legal and regulatory requirements. With respect to the remuneration report, our responsibility also includes considering whether the remuneration report has been prepared in accordance with section 135 3 of the Securities Market Act. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard and we state that the information presented in the management report is materially consistent with the consolidated financial statements and in accordance with the applicable legal and regulatory requirements. In our opinion, the remuneration report has been prepared in accordance with section 135 3 of the Securities Market Act. SISUKORD m Independent Auditors’ Report | lk 156 – reconciling the tagged data with the audited consolidated financial statements of the Group dated 31 December 2022; – evaluating the completeness of the tagging of the consolidated financial statements; – evaluating the appropriateness of the Group’s use of iXBRL elements selected from the ESEF taxonomy and the creation of extension elements where no suitable element in the ESEF taxonomy has been identified; – evaluating the use of anchoring in relation to the extension elements. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. In our opinion, the consolidated financial statements included in the annual report of AS Tallinna Sadam identified as 25490093MDYISEP1Y539-2022-12-31-en.zip for the year ended 31 December 2022 are tagged, in all material respects, in compliance with the ESEF RTS. Other Requirements of the Auditors' Report in Accordance with Regulation (EU) No 537/2014 of the European Parliament and of the Council We were appointed by those charged with governance on 25 April 2018 to audit the consolidated financial statements of AS Tallinna Sadam for the years ended 31 December 2018 until 31 December 2022. Our total uninterrupted period of engagement is five years, covering the periods ending 31 December 2018 to 31 December 2022. We confirm that: – our audit opinion is consistent with the additional report presented to the Audit Committee of the Group; – we have not provided to the Group the prohibited non-audit services (NASs) referred to in Article 5(1) of EU Regulation (EU) No 537/2014. We also remained independent of the audited entity in conducting the audit. Tallinn, 20 March 2023 /digitally signed/ Indrek Alliksaar Certified Public Accountant, Licence No 446 /digitally signed/ Mari-Leen Sandre Certified Public Accountant, Licence No 701 KPMG Baltics OÜ Licence no 17 KPMG Baltics OÜ Narva mnt 5 Tallinn 10117 Estonia Tel +372 626 8700 www.kpmg.ee 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 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 auditors’ 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. Report on Other Legal and Regulatory Requirements Report on Compliance with the Requirements for iXBRL tagging of Consolidated Financial Statements included within the European Single Electronic Format Regulatory Technical Standard (ESEF RTS) We have undertaken a reasonable assurance engagement on the iXBRL tagging of the consolidated financial statements included in the digital files 25490093MDYISEP1Y539-2022-12-31-en.zip prepared by AS Tallinna Sadam. Responsibilities of Management for the Digital Files Prepared in Compliance with the ESEF RTS Management is responsible for preparing digital files that comply with the ESEF RTS. This responsibility includes: – the selection and application of appropriate iXBRL tags using judgement where necessary; – ensuring consistency between digitised information and the consolidated financial statements presented in human-readable format; and – the design, implementation and maintenance of internal control relevant to the application of the ESEF RTS. Auditors' Responsibilities Our responsibility is to express an opinion on whether the electronic tagging of the consolidated financial statements complies in all material respects with the ESEF RTS based on the evidence we have obtained. We apply the provisions of the International Standard on Quality Control (Estonia) 1 and accordingly maintain a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. We are independent of the Group in accordance with the International Code of Ethics for Professional Accountants (Estonia) (including International Independence Standards), and we have fulfilled our other ethical responsibilities in accordance with these requirements. We conducted our reasonable assurance engagement in accordance with International Standard on Assurance Engagements 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information (ISAE 3000) issued by the International Auditing and Assurance Standards Board. A reasonable assurance engagement in accordance with ISAE 3000 involves performing procedures to obtain evidence about compliance with the ESEF RTS. The nature, timing and extent of procedures selected depend on the practitioner’s judgment, including the assessment of the risks of material departures from the requirements set out in the ESEF RTS, whether due to fraud or error. A reasonable assurance engagement includes: – obtaining an understanding of the tagging and the ESEF RTS, including of internal control over the tagging process relevant to the engagement; TABLE OF CONTENTS m Statement of the Supervisory Board | page 157 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 2022, which consists of the management report, remuneration report, the ﬁnancial statements and the accompanying independent auditors’ report. 29 March 2023 /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 158 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 2022, the Group’s retained earnings amounted to EUR 51,383,040, including proﬁt for the period of EUR 25,591,833. Based on the dividend policy approved by the general meeting according to which from 2021 dividend distributions have to amount to at least 70% of proﬁt, the management board proposes that the Group distribute a dividend of EUR 0.073 per share, i.e. EUR 19,199,000 in total. Based on section 332 of the Commercial Code of Estonia, the management board proposes that the total retained earnings for the year ended 31 December 2022 be allocated as follows: Dividend distribution EUR 19,199,000 Transfer to statutory capital reserve EUR 742,837 Transfer to retained earnings (prior periods) EUR 5,649,996

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