Consolidated Annual Report for the Financial Year Ended on 31 December 2015
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Consolidated annual report for the financial year ended on 31 December 2015 AS TALLINNA SADAM AS Tallinna Sadam Consolidated annual report 2015 (Translation of the Estonian original) AS TALLINNA SADAM CONSOLIDATED ANNUAL REPORT 2015 Registry number 10137319 VAT registration number EE100068489 Postal address Sadama 25 15051 Tallinn Registered office Sadama 25 15051 Tallinn Domicile The Republic of Estonia Telephone +372 631 8555 Fax +372 631 8166 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 AS Deloitte Audit Eesti 2 AS Tallinna Sadam Consolidated annual report 2015 (Translation of the Estonian original) CONTENTS MANAGEMENT REPORT .......................................................................................................................... 4 MANAGEMENT'S CONFIRMATION AND SIGNATURES ........................................................................... 22 CONSOLIDATED FINANCIAL STATEMENTS ............................................................................................. 23 CONSOLIDATED STATEMENT OF FINANCIAL POSITION .................................................................... 23 CONSOLIDATED INCOME STATEMENT AND CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME ............................................................................................................................................ 24 CONSOLIDATED STATEMENT OF CASH FLOWS (DIRECT METHOD) .................................................. 25 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ..................................................................... 26 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ............................................................... 27 1. REPORTING ENTITY .................................................................................................................. 27 2. ACCOUNTING POLICIES ........................................................................................................... 27 3. FINANCIAL RISK MANAGEMENT .............................................................................................. 40 4. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS ................................................... 43 5. FINANCIAL INSTRUMENTS ....................................................................................................... 44 6. CASH AND CASH EQUIVALENTS AND DEPOSITS ...................................................................... 46 7. TRADE AND OTHER RECEIVABLES ............................................................................................ 47 8. INVESTMENTS IN JOINT VENTURE ........................................................................................... 48 9. PROPERTY, PLANT AND EQUIPMENT ...................................................................................... 50 10. INTANGIBLE ASSETS ................................................................................................................. 53 11. OPERATING LEASES ................................................................................................................. 54 12. SHORT-TERM PROVISIONS ...................................................................................................... 55 13. TRADE AND OTHER PAYABLES ................................................................................................. 56 14. TAXES PAYABLE ....................................................................................................................... 56 15. LOANS AND DEBT SECURITIES ................................................................................................. 57 16. DERIVATIVE INSTRUMENTS ..................................................................................................... 59 17. GOVERNMENT GRANTS ........................................................................................................... 60 18. EQUITY ..................................................................................................................................... 62 19. REVENUE ................................................................................................................................. 64 20. OPERATING EXPENSES ............................................................................................................. 64 21. OTHER INCOME AND EXPENSES .............................................................................................. 65 22. FINANCE COSTS ....................................................................................................................... 65 23. RELATED PARTY TRANSACTIONS ............................................................................................. 66 24. COMMITMENTS ....................................................................................................................... 66 25. EXPLANATIONS TO THE CASH FLOW STATEMENT .................................................................. 67 26. CONTINGENT LIABILITIES ......................................................................................................... 67 27. INVESTIGATIONS RELATED TO THE GROUP ............................................................................. 68 28. ADDITIONAL INFORMATION ON THE PARENT ........................................................................ 69 INDEPENDENT AUDITORS' REPORT ....................................................................................................... 73 STATEMENT OF THE SUPERVISORY BOARD ........................................................................................... 75 PROFIT ALLOCATION PROPOSAL ........................................................................................................... 76 3 AS Tallinna Sadam Consolidated annual report 2015 (Translation of the Estonian original) MANAGEMENT REPORT The management report of AS Tallinna Sadam (Port of Tallinn) has been prepared based on consolidated financial data. 1. ABOUT THE COMPANY Through ages, Estonia has been closely connected with seafaring and maritime trade and the development of the city of Tallinn has depended on the development of its ports and harbours, and vice versa. Although the history of the ports and harbours of Tallinn dates back thousands of years, the company AS Tallinna Sadam is a young entity. The state-owned enterprise Tallinna Sadam (Port of Tallinn) was founded in April 1992; in 1996 it was reorganised into a limited company defined as aktsiaselts (AS) under Estonian law. AS Tallinna Sadam is the largest complex of cargo and passenger ports and harbours in Estonia. Its ports are navigable and easily accessible throughout the year and deep enough to receive all vessels passing through the Danish Straits. Thanks to Estonia’s geographical position which provides favourable conditions for servicing cargo flows between the East and the West, transit cargo flows of Russia and other CIS countries account for a large part of the cargo flows of AS Tallinna Sadam. Thus, AS Tallinna Sadam's key competitors are other Baltic Sea ports servicing east–west transit cargo flows. In addition to the competition between ports, various transit corridors also compete with each other (e.g. the Baltic Sea corridor competes with the Caspian–Black Sea corridor, etc.). The faster, the more effective and the more customer-friendly the operation of the whole logistics chain, the more successful the corridor. However, in servicing Estonia's own imports and exports, AS Tallinna Sadam has been outperformed by other Estonian ports in a number of cargo groups. In addition to transit flows, the volume and role in adding value to the cargo flows passing through the ports is increasing from year to year. To foster the above tendencies, AS Tallinna Sadam has created necessary infrastructure for the areas adjacent to its main cargo ports – developed industrial park areas in Muuga and Paldiski South Harbours. The Tallinn-Helsinki route is one of the busiest passenger ship routes in the world. In addition to the passenger ship route to Finland, AS Tallinna Sadam also renders regular passenger ship services on the routes to Sweden and Russia (St. Petersburg). The number of cruise liners calling at AS Tallinna Sadam is growing year by year. More than 300 calls per cruise season is a remarkable achievement for any cruise port in Europe. In addition, the passenger walking areas in the centre of Tallinn which are owned by AS Tallinna Sadam (i.e. a harbour-city combination) provide a unique possibility for real estate development. At the end of 2012, AS Tallinna Sadam entered a new business sector – a multi-functional ice-breaking vessel was purchased at a secondary market. Since the beginning of 2013 ice-breaker Botnica has been used under a 10-year contract for rendering ice- breaking services to the state of Estonia for Estonian ports in the Gulf of Finland. Off ice-breaking season the multi-functional ice-breaker is leased out for various maritime support operations. As a result of winning a tender, AS Tallinna Sadam signed a contract with the state of Estonia at the end of 2014 for rendering a ferry connection service between the mainland and major islands. The contract was concluded for a period of ten years from 1 October 2016 to 30 September 2026. At the end of 2014 contracts were also signed with Remontowa shipbuilding yard in Poland and Sefine shipbuilding yard in Turkey for construction of total of four new passenger