Sewerage and stormwater construction agreement amendments

On 30 November 2007 AS Tallinna Vesi announced the details of a contract it had
signed with the City of Tallinn to construct and finance the sewerage extension
programme. When this contract was signed in November 2007 the construction
prices were significantly higher than today. These higher costs were reflected
in the compensation payable by the City of Tallinn, and consequently led to a
compensation period that was longer, with the City of Tallinn having the
obligation to compensate the Company until 2017 for the sewerage system that
had to be built by 2011.
Today the Company has concluded an amendment to one part of this agreement with
the City of Tallinn. This amendment reflects the reduction in construction
prices, the current macroeconomic situation and the good cooperation between
the parties. As a result of the reduction in construction prices incurred by
the Company the compensation payable by the City of Tallinn for sewerage
extensions will reduce, the City will now pay a development component of 0 EEK
per m3 in November and December 2009 and 8.75 EEK per m3 thereafter instead of
current 9 EEK per m3. As a consequence of this reduction the parties have
agreed to shorten the compensation period by 3,5 years to June 2014. AS
Tallinna Vesi has also agreed a change in the payment profile for stormwater
initially the City paid 53 million kroons each year based on the construction
costs of the program during 2008-2011, whereas now they will pay based on a
four year payment plan until the end of 2012. Compared to the original contract
signed in November 2007 the impact of all these changes is not material on the
financial results of the Company. None of this will affect the construction of
the sewerage system, which is still planned to be completed by 2011.