AS Eesti Teed
Information memorandum
06.03.2020
Tallinn, Estonia Table of contents
Table of contents 2 Definitions 4 Disclaimer 5 1 Executive summary 7 1.1 Transaction overview 7 1.2 Transaction process, indicative timeline 7 1.3 Key investment highlights 8 1.4 Financial performance 10 2 Market overview 12 2.1 Macroeconomic environment in Estonia 12 2.2 Road construction in Estonia 14 2.3 Road maintenance financing 15 2.4 Procurement process 16 2.5 Market volume and trends 17 2.6 Overview of long-term maintenance contracts in Estonia 19 2.7 Competition 22 3 Overview of the Company 28 3.1 Eesti Teed in brief 28 3.2 History of AS Eesti Teed 28 3.3 Strategy of Eesti Teed AS 29 3.4 Location overview 29 3.5 Road maintenance and repair 30 3.6 Road construction 31 3.7 Quarries 31 4 Organisation 35 4.1 Organisational structure 35 4.2 Trade union & collective bargaining agreement 36 4.3 Key personnel 37 4.4 IT management capabilities 39 5 Overview of machinery and vehicles 43 6 National road maintenance contracts 45 6.1 Condition levels 45 6.2 Regional maintenance contracts 45
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7 Financial information 49 7.1 Historical financial statements 49 7.2 Income statement analysis 52 7.3 Balance sheet analysis 58 7.4 Cash flow statement 62 8 Further steps 64
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Definitions
Definition Explanation bn € billion euros
Eesti Teed AS Eesti Teed
ERA Estonian Road Administration, a government agency operating within the administrative area of the Ministry of Economic Affairs and Communications, which performs the implementation of state policy and development programmes, management functions, state supervision, and applies the enforcement powers of the state in the field of road management, traffic safety, public transport and the environmental safety of vehicles. m € million euros
Management Management Board of Eesti Teed AS (Mr. Andres Agukas, Mr. Tarmo Lood)
Road maintenance services Road maintenance services are offered by providers based on long-term contracts and include all maintenance and administration services of all roads in the contract area.
Summer road maintenance The summer road maintenance includes planning, profiling, constructing and repairing gravel roads, patch surface dressing, repairing potholes in the coating, dust control, profiling shoulders, mowing and brushing grass from road areas, cleaning road ditches and digging new ones, maintaining bridges and overpasses, constructing and cleaning road culverts, maintaining bus shelters, platforms and parking lots, maintaining and installing traffic control devices. th € thousand euros
The Company AS Eesti Teed
Winter road maintenance Winter maintenance includes snow control and de-icing according to the road condition levels implemented for state highways; cleaning parking lots, bus shelters and bridges from snow and ice, and cleaning traffic control devices.
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Disclaimer
The contents of this document are only for information purposes and should not be construed as legal, tax or investment advice. The recipient should consult his own counsel, accountant and other professional advisors as to legal, tax, accounting and related matters concerning this document.
The statements of fact, information, opinions and estimates contained in this document have been obtained, compiled or arrived at from the management of the Company, publicly available information and other sources believed to be reliable and in good faith, but no representation or warranty expressed or implied is made as to their accuracy, completeness or correctness. This document is not a due diligence review or an audit and should not in any circumstances be interpreted as such.
All statements of opinion and all projections, forecasts, or statements relating to expectations regarding future events or the possible future performance represent Redgate Capital’s own assessment and interpretation of information available to them currently. No representation or warranty, expressed or implied, is made as to the achievement of, nor should any reliance be placed on, any projections, forecasts, targets, estimates or statements of the future.
The information contained in this document is published for the assistance of recipients but is not to be relied upon as authoritative or taken in substitution for the exercise of judgment by any recipient and the Company, Redgate Capital nor any of its directors, officers, or employees or advisors nor any other person accepts any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this document or its contents or otherwise arising in connection therewith. Expressions of opinion herein are subject to change without notice.
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1. Executive summary
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1 Executive summary
1.1 Transaction overview
The Ministry of Economic Affairs and Communications is organising a public written auction for the transfer of 100,000 shares of Aktsiaselts Eesti Teed (registry code 12249762) (the “Company”) with a nominal value of EUR 100, held by the state, on the basis of the State Assets Act, order No. 127 of the Government of the Republic dated 23 May 2019 and the decree No. 44 of the Minster of Economic Affairs and Infrastructure dated 9 March 2020.
Established in 2012 through a merger of five separate state-owned companies, AS Eesti Teed is one of the leading road maintenance and surfacing companies in Estonia, controlling roughly one third of the road maintenance market. The Company was founded by the Government of Estonia to stimulate competition in the road maintenance and construction sector. Since then, the market has developed considerably, and it is now well functioning, efficient and competitive. In a functioning market, the state does not need to be a market participant any longer. Consequently, the state decided to privatise AS Eesti Teed. Since 2016, Eesti Teed has been prepared for the privatization by transitioning the Company to a free market and terminating all internal transactions and agreements between Eesti Teed and the state.
Eesti Teed is a strong and well-balanced company that operates profitably and efficiently. It is run by a team of experienced professionals using world-class equipment and machinery to provide high quality road maintenance and construction services. The Company has good future growth prospects, including further increase of its road maintenance market share, potential market consolidation and utilisation of its organisation and assets to focus more to the road construction market.
1.2 Transaction process, indicative timeline
9 March 2020 announcement of the auction
13 March 2020 virtual data room opened for the participants of the auction
13 March – 1 October 2020 due diligence, Q&A, meetings with the management, transaction documents
1 October 2020 submission of final binding offers and announcement of results
End of 2020 closing of transaction (estimated)
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1.3 Key investment highlights
Well-balanced business model
Eesti Teed combines long-term road maintenance, peaking during winter with snow control and de-icing, with seasonal road construction, carried out mostly from May to October. The business model allows the Company to utilise its vehicles and machinery throughout the year.
Long-term road maintenance contracts
Eesti Teed is contracted to maintain 5 regions of national roads (5,513 km), amounting to 23% of the national roads in Estonia. The contracts are valid until 2022 and 2023. Annual revenue from these agreements amounted to €9.3m in 2019. Requirements to the organisation, vehicles, machinery, bases and quarries form significant entry barriers supporting the Company at the future tenders for the same regions.
Well-known brand
Eesti Teed is a well-known brand name among road construction and maintenance companies as well as to the general public, supporting the sales as well as recruiting efforts of the Company.
Strong organization
Eesti Teed is led by an experienced and competent management team, with a solid track record from Eesti Teed and other organisations. The organisation of the Company is located at five locations covering the whole country, positioning the Company strongly in all procurement tenders it participates, especially in the local road maintenance projects.
Profitable and efficient processes
Eesti Teed is an efficient organization, operating at open market with healthy profit margins. The Company is the third largest road construction company in Estonia in terms of revenue and the second largest in terms of kilometres maintained. The management is also confident that efficiency could potentially be further improved further.
Own quarries
Eesti Teed operates 19 gravel, construction sand and fill sand quarries. This makes the Company self-sufficient in terms of materials and less vulnerable to input price fluctuations. Part of the quarry resources are also sold also to external customers.
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Well-invested machinery
Eesti Teed operates its own well-invested and efficient machinery and equipment. The total residual value of its fixed assets stood at €13.9 m and the median age at 9 years on 31.12.2019.
Collective bargaining agreement
Eesti Teed has signed a collective agreement with its workers through which all employment related matters, such as working hours, wages, paid vacation periods, trainings etc., are regulated. The agreement simplifies management of the relationships with employees and has contributed to low staff turnover.
Excellent base for future growth
State-ownership has constrained the growth of the Company as the current shareholder has pursued other goals. The Management has mapped several growth opportunities going forward, including further increase of the road maintenance market share leveraging its strong expertise in that area, potential market consolidation or stronger focus to the road construction market.
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1.4 Financial performance
Table 1.4:1 Key financial indicators
2019 after th € 2017 2018 2019 dividend1 Net sales 30,035 28,527 26,457 26,457 Gross profit 12,855 8,666 9,810 9,810 EBITDA 4,381 1,883 2,922 2,922 EBITDA margin, % 14.59% 6.60% 11.04% 11.04% Net profit 1,880 -641 1,199 1,199 Cash and bank accounts 477 1,500 4,373 181 Financial investments 6,705 3,377 2,300 2,300 Property, plant & equipment 13,189 13,860 13,892 13,892 Intangible assets 3 0 0 0 Net working capital 1,262 1,449 1,616 1,616 Net debt 3,010 2,182 -5,055 -864 Provisions -715 -777 950 950 Total equity 23,454 20,091 21,289 17,097 Capital expenditure -1,623 739 740 740
Source: Company information
1 The Company plans to distribute €4.2 m gross dividend to the current shareholder before the sale of the shares. For more information please refer to section 7.4 Cash Flow statement – Dividends.
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2. Market overview
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2 Market overview
2.1 Macroeconomic environment in Estonia
Graph 2.1:1 GDP and GDP growth
bn € GDP (left axis) % 40 GDP growth (right axis) 12 9,6 9,5 10 30 7,5 8 5,6 20 4,4 4,7 4,5 6 2,9 3,0 4 10 2 20,2 20,8 21,7 23,8 26,0 28,0 29,5 30,9 32,3 0 0 2014 2015 2016 2017 2018 2019E 2020F 2021F 2022F
Source: CreditInfo, Eurostat
Graph 2.1:2 Unemployment (% from the labor force)
% Unemployment rate 8 7,4 6,8 6,2 6,2 6,4 5,8 5,7 6 5,4 4,7
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0 2014 2015 2016 2017 2018 2019E 2020F 2021F 2022F Source: CreditInfo, Ministry of Finance long-term economic forecast
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Graph 2.1:3 Average salary
€ % Average monthly gross salary (left axis) 7,6 7,6 2 000 7,2 Salary growth (right axis) 8 6,5 6,3 6,0 1 600 5,7 5,5 5,4 6 1 200 4 800 2 400 1 005 1 065 1 146 1 221 1 309 1 408 1 497 1 579 1 665 0 0 2014 2015 2016 2017 2018 2019E 2020F 2021F 2022F Source: Eurostat
Graph 2.1:4 Inflation
% Growth of harmonized CPI 3,7 4 3,4
3 2,5 2,4 2,3 2,2 2
0,8 1 0,5 0,1 0 2014 2015 2016 2017 2018 2019E 2020F 2021F 2022F
Source: Ministry of Finance long-term economic forecast
Graph 2.1:5 Foreign exchange
bn € Unemployment rate,… 15 10 4,1 3,5 4,3 3,2 3,3 5 1,8 3,2 3,0 7,4 6,2 6,8 6,2 6,4 -0,6 5,8 5,4 4,7 5,7 0 -5 -10 -15 -20 2014 2015 2016 2017 2018 2019E 2020F 2021F 2022F Source: CreditInfo, Ministry of Finance long-term economic forecast
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International ratings
1st OECD Tax Competitiveness Index 2019
1st Entrepreneurial Activity, World Economic Forum 2017
1st Internet Freedom, Freedom House 2016 (sharing 1st place with Iceland)
7th Index of Economic Freedom 2018, The Heritage Foundation
9th Digital Economy and Society Index 2017, European Commission
12th Ease of Doing Business 2016 (18th in 2018), The World Bank
18th Corruption Perceptions Index 2019, Transparency International
29th Human Capital Index 2018, The World Bank
2.2 Road construction in Estonia
Road construction and maintenance sector overview
There are a total of 59 thousand kilometres of roads in Estonia, which are divided into national, local, private and forest roads. National roads are administered by the Estonian Road Administration (ERA). A local road refers to a road within the territory of a municipality and which is included in the list of local roads and its maintenance is an autonomous function of a local authority. Private and forest roads are administered by the owner of the road.
Table 2.2:1 Breakdown of roads in Estonia
National roads 16,608 km Main roads 1,609 km Basic roads 2,405 km Secondary roads and other national roads 12,480 km Connecting roads 114 km Local roads 24,002 km Highways 18,237 km Streets 5,209 km Walkways and cycle tracks 556 km Private and forest roads 18,398 km Total 59,008 km
Source: Estonian Road Administration
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Graph 2.2:1 Breakdown of Estonian road network
Private and forest roads Main roads 31% 3% Basic roads Walkways and cycle 4% tracks 1% Secondary roads and other national roads 21% Streets 9%
Connecting roads Highways 0% 31%
Source: Estonian Road Administration
Car traffic has been on a steady rise with a 2.9% average annual growth during the period 2011-2016. In 2017, the volume of traffic on national roads increased by 3.6% compared to 2016, 4.6% on main roads, 1.8% on basic roads and 2.5% on secondary roads.
2.3 Road maintenance financing
National road maintenance is financed from state revenue. The annual volume of funding for national road maintenance and the amount of local road maintenance subsidies is set out in the State Budget Strategy. The support from EU during 2014-2020 to develop national and international road connection was €350 m, of which €200 m was planned for national roads and €53 m for local government roads.
The primary source of financing for local roads is the local government budget. However, the state provides some additional support for the maintenance of these roads.
The largest owner of private and forest roads is the State Forest Management Centre.
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Table 2.3:1 National roads financing requirements
m € 2020 2021 2022 2023 Road maintenance costs 44.2 46.4 48.7 51.1 Gravel road repair (<400 km annually) 8.6 8.7 8.9 8.9 Maintenance of paved roads (900-1200 km annually) 20.5 21.5 21.9 21.9 Restorative repairs of paved roads (150-200 km 21.2 25.3 25.8 25.8 annually) Restorative repairs of bridges (<30 bridges annually) 6.0 6.5 8.0 8.0 Reconstruction 43.7 37.1 29.3 35.9 Total maintenance of road network 144.2 145.5 142.6 151.6 Project preparation 10.4 6.6 6.4 4.0 Noise barriers 0.5 0.5 0.5 0.5 Reconstruction of traffic hazardous locations 6.0 6.2 6.4 6.6 Project “Gravel roads dust free” on national roads 15.5 5.7 5.9 4.5 Construction 70.0 79.8 63.4 10.0 Total development of road network 102.4 98.8 82.6 25.6 Total administrative expenses 33.1 33.4 32.1 32.1 Total road maintenance expenses 279.7 277.7 257.3 209.3
Source: National Road Maintenance Plan 2020 - 2030, Estonian Road Administration
2.4 Procurement process
All national and local road construction and maintenance works in Estonia are organized through a public procurement process. There are 3 types of procurements:
1) Road maintenance contracts – long contract period (usually 5 years), defined work volumes (usually €1.5 m per year) and fixed regions. The national road network is divided into 17 large regions, each covered by one contract. The maintenance of local roads is organized similarly, but the contract size and regions are more fragmented.
2) Road construction agreements – new roads, complete overhauls.
3) Restorative repair agreements – surfacing, top layer replacement. etc.
AS Eesti Teed focuses primarily on the road maintenance and restorative repair segments.
By general definition, public procurement is the purchase of goods or services, the ordering for services or construction works and the organization of idea contests by a contracting authority within the meaning of the Public Procurement Act and the EU Public Procurement Directives.
A formalized public procurement procedure ensures that public procurement is conducted in accordance with sound principles, transparency and control of activities and decisions.
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Main steps in the national road maintenance tender process include:
1) Announcement – generally tenders are announced electronically (in Public Procurement Register). Tenderers usually have 2 months to submit their offers.
2) Evaluation – tenders will be evaluated based on the award criteria set out in the basic procurement documents. The contracting authority must award the most economically advantageous tender in accordance with the criteria laid out. Consideration shall be given to the best value for money, as well as qualitative, environmental or social criteria. This is usually done in 1-2 months.
3) Contract – The contracting authority shall award the contract to the successful tenderer.
Road maintenance tender evaluation criteria
The winner of a tender is determined based on 4 factors:
• Price offered (80%)
• Age of required vehicles and machinery (10%)
• Vehicles and machinery that the tenderer has in addition to the minimum requirement (5%)
• Previous experience of 2 foremen (road construction experts) (5%)
2.5 Market volume and trends
The market consists of companies that have earned revenue in the field of road works. The field covers the following activities: construction work for roads and motorways, construction, maintenance and repair of railways and subways, construction of bridges and tunnels.
The Estonian road construction market reached a total value of €561 m in 2018. Total of 292 companies operated in the industry, 207 of whom considered road construction as their main activity.
The main driver of the market is the road construction and maintenance spending of the Estonian Road Administration (ERA) and local governments. Also, major projects can result in short-term fluctuations in market size.
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Table 2.5:1 Estonian road construction market
2014 2015 2016 2017 2018 Market volume, m € 416.2 406.7 451.4 598.7 560.5 Change in market volume, % -17.9 -2.3 11.0 32.6 -6.4 Total turnover of all Estonian companies, m € 53,467 52,967 55,158 61,340 61,295 Market share of total turnover of enterprises, % 0.78 0.77 0.82 0.98 0.91 GDP growth, % 2.9 1.9 3.5 4.9 3.9
Source: CreditInfo
Market volume is the proportion of sales revenue of the companies active in the market that originates from road works. There are some significant market participants who have not submitted their 2018 financial report yet, resulting in decline of the overall market volume. Disregarding the effect of missing data, the market volume is estimated to have been stable in 2018.
Graph 2.5:1 Overview of the road construction sector
m € no. Market volume (left axis) Number of companies (right axis) 600 345
560 330
520 315
480 300
440 285
400 270 2014 2015 2016 2017 2018
Source: CreditInfo
Table 2.5:2 Activity trends of companies in the sector
2014 2015 2016 2017 2018 Number of companies 285 294 317 344 292 Change in the number of market participants, % -4 3.2 7.8 8.5 -15.1 Road construction as a main activity 211 210 228 251 207 Percentage, % 74 71.4 71.9 73 70.9 Road construction as a secondary activity 74 84 89 93 85 Percentage, % 26 28.6 28.1 27 29.1
Source: CreditInfo
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Graph 2.5:2 Market overview
Eesti Teed AS volume (left axis) Upper quartile (right axis) m € th € 30 Median (right axis) Lower quartile (right axis) 900 30 30 30 772 800
29 636 700 616 599 29 28 600 28 500 28 400 27 27 300 168 27 156 141 163 200
26 42 35 42 49 100 26 0 2015 2016 2017 2018 Source: CreditInfo
The average market volume is calculated by dividing the turnover of the whole industry by the number of all market participants. The upper quartile is the median of the upper half of a data set. The median is the value of the trait, with the larger and smaller traits being approximately equal in the variation row. The lower quartile is the value below which lies the 25 percent of the bottom data.
The sample consists of the 20 largest companies, whose main activity is road construction.
2.6 Overview of long-term maintenance contracts in Estonia
Maintenance of national roads is provided by companies based on 17 maintenance contracts. The total annual cost of these contracts is €25.1 m and they are usually signed for 5 years. The aim of maintenance works is to ensure that the required condition levels of national roads are met.
The performance of contracts is supervised by the head specialists of the maintenance department at the Estonian Road Administration. Monitoring involves the utilizing road weather information systems, cameras and GPS monitoring systems that are attached to the maintenance equipment.
The principles of road maintenance have been established by the regulation of condition requirements. According to the regulation, a condition level has been set out for both paved roads and gravel roads. Higher condition requirements apply to roads with higher traffic volumes, maintenance works are carried out more frequently and more thoroughly on such roads. Maintenance works are carried out less frequently and to a lesser extent on roads that have less traffic. Compliance to condition requirements is mandatory to the owners of all publicly used roads.
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Illustration 2.6:1 Breakdown of maintenance work by performer
Source: Estonian Road Association
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Table 2.6:1 Activity trends of companies in the sector
Contract Effective date End date Maintenance provider Km maintained Järva county 01.01.2016 30.09.2020 AS Tariston 924 Leonard Weiss Viater Ehitus AS Rapla county 01.06.2018 30.09.2023 1,014 Warren Safety OÜ Harju county Kuusalu region 01.01.2018 30.09.2021 Üle OÜ 442 Harju county Kose region 01.02.2016 30.09.2021 AS Tariston 450 Harju county Keila region 01.02.2010 30.09.2022 Eesti Teed AS 714 Põlva county 01.10.2017 30.09.2022 Teede REV-2 AS 1,165 Valga county 01.10.2015 30.09.2020 Teede REV-2 AS 1,116 Võru county 01.11.2017 30.09.2022 Eesti Teed AS 1,251 Warren Safety OÜ Lääne county 01.02.2016 30.09.2021 771 Leonard Weiss Viater Ehitus AS Viljandi county 01.01.2016 30.09.2020 Keskkonnateenused AS 1,243 Sakala Teed OÜ Pärnu county 01.11.2017 30.09.2023 1,439 Lääne Teed OÜ Hiiu county 01.12.2015 01.10.2020 AS Tariston 472 Saare county 01.11.2017 30.09.2022 Eesti Teed AS 1,092 Sakala Teed OÜ Tartu county 01.11.2017 30.09.2023 1,253 Eesti Teed AS Jõgeva county 01.10.2019 30.09.2024 Teede REV-2 AS 1,122 Ida-Viru county 01.04.2016 30.09.2021 Teede REV-2 AS 934 Lääne Viru county 01.11.2017 30.09.2023 Eesti Teed AS 1,203
Source: Estonian Road Administration
Eesti Teed AS implements long-term contracts with the Estonian Road Administration by providing maintenance work in Võru County, Lääne-Viru County, Saaremaa, Keila and with Sakala Teed OÜ under a subcontract agreement in Tartu County.
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2.7 Competition
Graph 2.7:1 Sales revenue of market participants (2018)
m € 100 95,2
80
60
40 32,1 28,5 25,3 20,3 18,1 20 15,8 9,6 8,9 7,1 7,0 6,9 5,8 5,6 5,3 5,1 3,6 2,5
0
Üle OÜ Üle
Tref AS Tref
Tavt OÜ Tavt
Moreen OÜ Moreen
Tariston AS Tariston
Tref Nord AS Nord Tref
Eesti Teed AS Teed Eesti
Roadwest OÜ Roadwest
Altos Teed OÜ Teed Altos
Tee Ja Tee OÜ Tee Ja Tee
Lääne Teed OÜ Teed Lääne
Sakala Teed OÜ Teed Sakala
Trev-2 Grupp AS Grupp Trev-2
Warren Teed OÜ Teed Warren
ViASton Infra OÜ Infra ViASton
Viamer Grupp OÜ Grupp Viamer Tallinna Teede AS Teede Tallinna Verston Ehitus OÜ Ehitus Verston Source: CreditInfo
Graph 2.7:2 EBITDA and EBITDA margin (2018)
m € EBITDA (left axis) % 6 EBITDA margin (right axis) 25% 5,3 22% 5 4,3 20% 4 13% 15% 3 11% 11% 11% 9% 1,9 8% 10% 2 7% 1,6 7% 6% 1,45% 5% 1,0 5% 3% 4% 0,7 0,6 5% 1 0,4 0,4 2% 0,4 0,4 0,4 0,21% 0,21% 0,1 0,3 0,3
0 0%
Üle OÜ Üle
Tref AS Tref
Tavt OÜ Tavt
Moreen OÜ Moreen
Tariston AS Tariston
Tref Nord AS Nord Tref
Eesti Teed AS Teed Eesti
Roadwest OÜ Roadwest
Altos Teed OÜ Teed Altos
Tee Ja Tee OÜ Tee Ja Tee
Lääne Teed OÜ Teed Lääne
Sakala Teed OÜ Teed Sakala
Trev-2 Grupp AS Grupp Trev-2
Warren Teed OÜ Teed Warren
ViASton Infra OÜ Infra ViASton
Viamer Grupp OÜ Grupp Viamer
Tallinna Teede AS Teede Tallinna Verston Ehitus OÜ Ehitus Verston
Source: CreditInfo
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Graph 2.7:3 Kilometers maintained
Teede REV-2 AS 4 337 Eesti Teed AS 4 260 AS Tariston 1 846 Sakala Teed OÜ/ Lääne Teed OÜ 1 439 Sakala Teed OÜ/ Eesti Teed AS 1 253 Keskkonnateenused AS 1 243 Leonard Weiss Viater Ehitus AS/Warren Safety OÜ 1 014 Warren Safety OÜ/Leonard Weiss Viater Ehitus AS 771 Üle OÜ 442
0 1 000 2 000 3 000 4 000 5 000 Source: Estonian Road Administration
Main competitors of Eesti Teed
OÜ Üle
OÜ Üle was founded in 1990 as one of the first private companies to begin operating in the field of road maintenance in Estonia. Its principal activities are surface treatment and road maintenance. OÜ Üle also owns Lääne Teed OÜ and some other road construction companies.
Table 2.7:1 Key financials of OÜ Üle
th € 2016 2017 2018 Net revenue 18,271 25,670 26,778 EBITDA 2,015 2,695 2,653 EBITDA margin, % 11.0 10.5 9.9 Net profit 1,066 1,739 1,395 Net profit margin, % 5.8 6.8 5.2 Fixed assets 8,175 8,793 8,429 Net debt -4,456 -4,276 -5,504 Net equity 16,754 17,865 18,550 Market share, % 4.0 4.3 4.8
Source: Annual reports of OÜ Üle
AS Trev-2 Grupp
AS Trev-2 Grupp’s predecessor was founded in 1961 (Teedeehituse valitsus nr 2 (TEV)) as a state-owned company. Through various acquisitions and privatisation processes, the group was reorganised into AS Trev-2 Grupp in 2007.
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The group is focused on the construction and maintenance of infrastructure objects, structures and civil engineering works. In 2018 Trev-2 Grupp was bought by Eurovia, a subsidiary of VINCI.
Table 2.7:2 Key financials of AS Trev-2 Grupp
th € 2016 2017 2018 Net revenue 53,930 70,902 95,225 EBITDA 2,722 5,374 5,320 EBITDA margin, % 5.1 7.6 5.6 Net profit 516 3,380 3,274 Net profit margin, % 1.0 4.8 3.4 Fixed assets 17,860 18,484 19,988 Net debt -837 -3,512 176 Net equity 17,684 20,474 23,748 Market share, % 11.9 11.8 16.9
Source: Annual reports of AS Trev-2 Grupp
OÜ Tariston
Since 2002 Tariston AS has been engaged in the construction of infrastructure objects and facilities and in the year-round maintenance of national roads. Tariston is owned by Nordecon AS.
Table 2.7:3 Key financials of OÜ Tariston
th € 2016 2017 2018 Net revenue 8,245 19,698 20,343 EBITDA 93 1,522 717 EBITDA margin, % 1.12% 7.72% 3.53% Net profit -377 1,076 262 Net profit margin, % -0.0 5.5 1.3 Fixed assets 2,437 6,062 6,420 Net debt 528 1,821 2,022 Net equity 6,221 7,297 7,260 Market share, % 1.8 3.3 3.6
Source: Annual reports of OÜ Tariston
AS Eesti Keskkonnateenused
AS Eesti Keskkonnateenused was founded in 1990. The company is focused on ensuring that traffic conditions are safe irrespective of weather conditions, as well as, maintaining roads clean and dust free.
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Table 2.7:4 Key financials of AS Keskkonnateenused
th € 2016 2017 2018 Net revenue 30,618 40,786 46,572 EBITDA 4,416 7,362 6,127 EBITDA margin, % 13.6 18.1 13.2 Net profit 2,083 2,121 2,516 Net profit margin, % 6.8 5.2 5.4 Fixed assets 28,605 28,664 30,407 Net debt 20,814 22,268 17,721 Net equity 4,492 6,613 15,908 Market share, % 6.8 6.8 8.3
Source: Annual reports of AS Eesti Keskkonnateenused
OÜ Sakala Teed
OÜ Sakala Teed was founded in 2002. The principal activity of Sakala Teed OÜ is maintenance and repairment of main roads. On top of that, they also manufacture traffic control equipment and excavate mineral materials (gravel, crushed stone and sand).
Table 2.7:5 Key financials of OÜ Sakala Teed
th € 2016 2017 2018 Net revenue 3,020 3,792 5,343 EBITDA 362 538 406 EBITDA margin, % 12.0 14.2 7.6 Net profit -5 318 126 Net profit margin, % -0.2 8.4 2.4 Fixed assets 1,358 1,357 1,282 Net debt -318 -346 -812 Net equity 2,278 2,596 2,482 Market share, % 0.7 0.6 1.0
Source: Annual reports of OÜ Sakala Teed
OÜ Warren Safety
The company was formed in 1998 and initially started with the sale of traffic control equipment. The following year, Warren Safety OÜ added traffic management services to its firm’s activities.
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Table 2.7:6 Key financials of OÜ Warren Safety
th € 2016 2017 2018 Net revenue 4,164 4,114 4,046 EBITDA 472 417 346 EBITDA margin, % 11.3 10.1 8.6 Net profit 341 246 208 Net profit margin, % 8.2 6.0 5.1 Fixed assets 537 430 446 Net debt -625 -899 -539 Net equity 1,174 1,010 1,108 Market share, % 0.9 0.7 0.7
Source: Annual reports of OÜ Warren Safety
OÜ Leonhard Weiss Viater
This German company has operated for over 115 years and has therefore established a level of trust in terms of construction and maintenance of rail tracks and roads, and design, building, maintenance of integrated networks. The company entered the Estonian market in 2011.
Table 2.7:7 Key financials of OÜ Leonhard Weiss Viater
th € 2016 2017 2018 Net revenue 4,725 4,111 3,703 EBITDA 356 396 322 EBITDA margin, % 7.52% 9.64% 8.7% Net profit 115 146 34 Net profit margin, % 2.44% 3.56% 0.93% Fixed assets 1,422 1,524 1,756 Net debt 852 398 863 Net equity 1,322 1,469 1,503 Market share, % 1% 0.7% 0.7%
Source: Annual reports of OÜ Leonhard Weiss Viater
Other companies
The rest of the companies operate locally and participate in smaller procurements. Some construction companies, such as AS Nordecon, AS Merko Ehitus Eesti and AS YIT Ehitus also operate in the road maintenance and construction sector directly (in addition to their road related subsidiaries, e.g. Tariston OÜ), but accurate data about their volumes is not publicly available.
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3. Overview of the Company
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3 Overview of the Company
3.1 Eesti Teed in brief
AS Eesti Teed performs road maintenance, repairing and constructing in Estonia. The owner of the shares is the Republic of Estonia through the Ministry of Economic Affairs and Communications. The main customers of the Company are the Estonian Road Administration and local municipalities in different regions of Estonia.
The Company was registered on 15 March 2012.
Road maintenance services
The Company offers road maintenance services on national and local roads based on long-term service contracts. Road maintenance services can be categorised into summer and winter road maintenance. Summer maintenance includes construction and repair of asphalt and gravel roads. Winter maintenance includes snow control and de- icing of roads.
Other services
The primary services offered without a road maintenance agreement are constructing and repairing roads and lots, surface dressing (single, double and patch surface dressing; pre-chipping double surface dressing and coarse gravel surface dressing; petroleum bitumen emulsion C67B4, C60B4/V600 and oil shale bitumen PB-5 are used as binding agents), drilling and filling work, dust controlling, and constructing road culverts.
The company also produces and installs traffic control devices and rents them for temporary use.
Vehicles & equipment
The vehicle fleet of Eesti Teed AS includes more than 400 units of vehicles, machinery and additional equipment. The core of the fleet is comprised of more than 70 road maintenance trucks that are equipped with various types of ploughs and chutes with different properties.
The Company also has graders, tractors, loaders, excavator-loaders and various pothole fixing equipment. The most frequently used additional equipment includes mowers, washers, gravel distributors, road cleaning brushes and snow blowers. The company has 20 units of different types of rollers for various purposes. Jaw crushers, cone crushers and vibrating screens are used for improving quarry materials.
3.2 History of AS Eesti Teed
In 2008 five national companies were established to provide road construction and maintenance services in the respective regions: AS Pärnumaa Teed, AS Tartumaa Teed, AS Võrumaa Teed, AS Virumaa Teed and AS Saaremaa Teed. The establishment of the companies was driven by the need to stimulate the market, as limited competition
28 caused inefficiencies and abnormal pricing policies. At that time, the Company provided national road maintenance and construction works based on internal contract with the state.
AS Eesti Teed was registered on 15 March 2012, when these five state-owned road construction companies were merged into one company. Consolidation into one legal entity and integration of the team allowed to achieve further efficiency of operations. This was a preliminary step for a transition to the open market, where AS Eesti Teed would participate in the road maintenance tenders alongside other market participants
By 2017 the transition to open market had been fully completed and there was no longer need for the state to own Eesti Teed. Privatization of the Company became an active plan of the state, culminating with the contemplated transaction.
Transition to the open market also implied that the Company might not be able to win all of the tenders it participated in. Such, in 2017 it lost the procurement in Pärnu county, triggering a certain restructuring, with partial re-location of the team and layoffs of the remaining employees. Some of the employees also left voluntarily. It also lost a procurement in Tartu region, but secured a subcontractor position, working for the company who won the tender. In addition, Eesti Teed won a tender for a new region, Keila region in Harju County, offsetting the effect of losing Pärnu region.
3.3 Strategy of Eesti Teed AS
The long-term strategic goal of the Company is to be the market leader in road maintenance and surfacing. Its strategic goals also include:
1. Becoming the largest company in terms of service volume and the best in terms of quality of maintenance of national roads
2. Combining resource usage based on the seasonality of maintenance and construction
3. Increasing the share of local governments among clients to be at least 30% of the service portfolio
3.4 Location overview
Since 2018 the Company carries out long-term road maintenance of national roads in 5 regions: Saare, Tartu, Võru, Lääne-Viru county and Keila region. The Company has quarries in Lääne-Viru, Tartu, Võru and Saare counties and maintenance depots in all the regions it currently operates in. Operations centres and offices are in Saare, Lääne- Viru, Võru and Pärnu counties and offices in Tallinn and Saue.
In 2018, AS Eesti Teed won coating tenders in 9 counties, the largest of which was a project in Harju and Raplamaa. In 2018, the company carried out 6.5 million square meters of coating works and was a clear market leader with this volume.
In addition to national highways, the local municipal road maintenance is an important market for the Company in 2019. The biggest customers were Tori, Saaremaa and Elva rural municipalities.
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Illustration 3.4:1 Locations
Source: Company information
3.5 Road maintenance and repair
The Company provides road maintenance and repair services for national roads and bridges, local roads and ice roads. Its strategic goal is to be the largest in the field of national roads maintenance and repair in Estonia. Long- term road maintenance accounted for 35% of the total sales revenue in 2019.
Total maintenance department (includes short-term maintenance and other sales) revenue accounted for 45% in 2019. Maintenance department carries out summer (dust suppression, maintenance of gravel roads, dust-free roads, green areas etc.) and winter (snow ploughing, anti-skid measures, snow removal, asphalt hole filling etc.) road maintenance.
Summer road maintenance
The summer road maintenance includes planning, profiling, constructing and repairing gravel roads, patch surface dressing, repairing potholes in the coating, dust control, profiling shoulders, mowing and brushing grass from road areas, cleaning road ditches and digging new ones, maintaining bridges and overpasses, constructing and cleaning road culverts, maintaining bus shelters, platforms and parking lots, maintaining and installing traffic control devices.
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Winter road maintenance
Winter maintenance includes snow control and de-icing according to the road condition levels implemented for state highways; cleaning parking lots, bus shelters and bridges from snow and ice, and cleaning traffic control devices.
3.6 Road construction
In road construction segment, the Company focuses on road surfacing, building roads (dust free and gravel) and streets and repairing bridges. Construction and short-term maintenance accounted for 35% of total sales in 2019.
In road construction segment, the Company has set the strategic goal to be the market leader in road surfacing in Estonia. Also, the target is to maximize the use of its own resources before using contractors and to implement dust-free construction technology.
3.7 Quarries
AS Eesti Teed is operating 19 quarries, located in four counties, where the Company currently offers long-term road maintenance: Lääne-Viru, Võru, Saare and Tartu.
The Company is quarrying three types of products: gravel, construction sand and fill sand. Between period 2014- 2018, the Company has quarried an average of 124 th m³ of products annually, out of which 74% has been gravel, 25% construction sand and 1% fill sand. Production levels have been relatively stable throughout the years, minimum 93 th m³ in 2015 and maximum 144 th m³ in 2018.
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Illustration 3.7:1 Geography of the quarries
Source: Company information
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Table 3.7:1 Quarries
Quarrying volume Active supplies as at County Quarry Products from quarrying 1.2019-10.2019 (th m3) 01.11.2019 (th m3) Tammiku quarry construction sand, gravel 0 518 Lääne- Veltsi quarry construction sand 13 13 Virumaa Pikametsa quarry fill sand 54 315 Lagenõmme (I) quarry construction sand, gravel, fill sand 0 220 Pamma quarry construction sand 7 9 Saaremaa Varkja (II) quarry construction sand, gravel, fill sand 20 269 Viieristi quarry construction sand, gravel 9 63 Mõntu quarry gravel 0 76 Järvepera quarry construction sand 0 61 Järvepera (II) quarry gravel, fill sand 6 143 Vitipalu quarry construction sand 15 1,282 Välgi quarry construction sand 0 126 Põrgumäe quarry gravel, fill sand 3 917 Tartu Selgise quarry gravel 0 74 Selgise (II) quarry2 construction sand 0 49 Kahna quarry fill sand 0 486 Paluküla quarry fill sand 0 406 Kobratu quarry fill sand 35 50 Tilsipalu quarry construction sand, fill sand 23 294 Nogopalu quarry construction sand, gravel 157 510 Võrumaa Nogopalu (III) quarry gravel 18 342 Nogopalu (VI) quarry gravel, fill sand 0 120 Nogopalu (VIII) quarry gravel 23 921
Source: Company information
2 The extraction permit has ended in Selgise (II) quarry, however the Company will apply for an extension of the permit during the first quarter of 2020.
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4. Organisation
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4 Organisation
4.1 Organisational structure
Illustration 4.1:1 Organisational structure as at 1.03.2020
Source: Company information
Table 4.1:1 Personnel breakdown by department
No. 31.12.2017 31.12.2018 31.12.2019
Maintenance department 168 145 138 Construction department 16 44 44 Technical department 22 22 20 Administrative 18 16 12 Management and managers 7 5 8
Total personnel by department 231 232 222
Source: Company information
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Table 4.1:2 Personnel breakdown by region
No. 31.12.2017 31.12.2018 31.12.2019
Lääne-Virumaa 43 41 39 Võru 44 45 41 Tartu 43 43 41 Pärnu 37 32 33 Saare 39 37 37 Keila - 11 9 Not allocated to specific region 25 23 22
Total personnel by region 231 232 222
Source: Company information
4.2 Trade union & collective bargaining agreement
The Company has an effective agreement with the Transport Union (“Transpordi Ametiühing”), through which all employment details, such as working hours, wages, vacation days, trainings etc., are regulated for most employees. The agreement is usually signed for 1 year.
The Transport Union is a non-profit organization governed by private law which mainly involves workers in the field of transport or related activities.
The collective agreement is stored in the database of collective agreements maintained by the Ministry of Social Affairs.
This agreement simplifies management of work relationships. It has also facilitated a peaceful working environment with very few disputes and no strikes. So far, the agreement has also ensured a low staff turnover.
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4.3 Key personnel
Andres Agukas – CEO, Chairman of the Board
Education: Tallinn University of Technology – Road Construction (1990)
Tartu University – Strategic Management (MBA) (2014)
Professional experience: AS Merko Ehitus – Member of the Board (2005-2011)
AS Merko Ehitus Eesti – Member of the Board (2012-2014)
AS Eesti Teed – Chairman of the Board (2014 - …)
Authorized Road Engineer – Level 8 (2017)
Tarmo Lood – Director of road maintenance department, Member of the Board
Education: Tallinn University of Technology – Road Construction (1984)
Professional experience: Estonian Road Administration – multiple positions (1984 – 2008)
AS Virumaa Teed – Member of the Board (2008 – 2012)
AS Eesti Teed – Regional Manager (2012 – 2014)
AS Eesti Teed – Member of the Board (2014 - …)
Authorized Road Engineer – Level 7 (2018)
Andres Plaat – Director of construction department
Education: TTK University of Applied Sciences – Road Construction (2010)
Professional experience: AS Nordecon – site manager(2005-2008)
Estonian Road Administration – regional
maintenance head of department (2008-2014)
AS Eesti Teed – multiple positions (2014 - …)
Authorized Road Engineer – Level 6 (2016)
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Katrin Vellema – Director of finance and personnel
Education: Tallinn University – Psychology (2008)
Tartu University – Strategic Management (MBA) (current)
Professional experience: Trendsetter Home Furnishings – Chief Accountant (2002-2006)
Flexenclosure – Chief Accountant (2006-2008)
AS Virumaa Teed – Chief Accountant (2008-2012)
AS Eesti Teed – multiple positions (2012 -…)
International financial management certificate – Level 8 (2009)
Agnes Hansen – Director of development
Education: Tallinn University of Technology – Economics (1992)
Professional experience: Elcoteq (today Ericsson) – HR Manager (1999-2007
AS Merko Ehitus – Director of development (2007-2008)
ABB – multiple positions (2008-2017)
Itella Estonia OÜ – HR&Talent Manager (2018)
AS Eesti Teed – Director of development (2019 - …)
Lennar Bergmann – Technical manager
Education: Türi Technical and Agricultural School – Cars and machinery repair entrepreneurship (2000)
TTK University of Applied Sciences – Automotive Engineering (current)
Professional experience: OÜ Agriland – Technical manager (2014-2017)
AS Eesti Teed – Technical manager (2017 - …)
Monika Kangur – Purchasing and sales manager
Education: University of Tartu, Viljandi Culture Academy – Information and document management (cum laude) (2010)
Professional experience: AS Eesti Teed – Purchasing and sales manager (2013 - …)
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4.4 IT management capabilities
The Company utilizes multiple IT systems in its operations.
Enterprise resource management (ERM) software
The Company uses NAVision as an ERM software. Previously it used Eeva, which only provided bookkeeping capabilities. Financial accounting and salary inputs have been fully integrated with the NAVision software. Personnel management will be integrated next.
Illustration 4.4:1 NAVision software
Project management software
The Company uses two of its own developed project management software, “Projektijuht” and “Terje”.
Illustration 4.4:2 “Terje”
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Illustration 4.4:3 “Projektijuht”
Document management software
The Company uses Webware DHS to manage documents.
Illustration 4.4:4 Webware DHS
Management reporting software
The Company has developed its own platform, utilizing Microsoft SharePoint to facilitate management reporting.
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Illustration 4.4:5 Microsoft SharePoint
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5. Assets’ overview
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5 Overview of machinery and vehicles
The Company owns most of the machinery and vehicles that are used in its operating activities. Own assets are summarised in the table below.
Table 4.4:1 Machinery and vehicles (31.12.2019)
Asset type Amount Residual value (th €) Median age
Cars and vans 67 123 8 Road construction machinery 38 826 11 Tractors 65 1,248 10 Trucks 103 4,103 13 Trailers 44 325 7
Total 317 6,625 11
Source: Company information
The Company also has an operating lease for 31 vehicles.
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6. National road maintenance contracts
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6 National road maintenance contracts
6.1 Condition levels
Road maintenance contracts are distributed based on the road condition levels.
The highest possible condition levels of national roads are “3” (1,649 km) and “3+” (1,638 km). These are the major national motorways: Tallinn-Narva, Tallinn-Tartu-Võru-Luhamaa, Tallinn-Pärnu-Ikla, support roads and a few secondary roads that have more traffic.
The medium condition level or condition level “2” is applied on 4,490 km of national roads. Most support roads and some secondary roads that get a lot of traffic are maintained at this condition level.
There are 8,828 km of roads (most national roads) that are maintained at the lowest, condition level “1”.
6.2 Regional maintenance contracts
Table 6.2:1 Lääne-Viru region (31.10.2017-30.09.2023)
Maintenance type Unit Annual volume Summer maintenance Paved road maintenance Condition level 1 km 834 Condition level 2 km 255 Condition level 3 km 128 Parking lots m2 8,003 Gravel road maintenance Condition level 1 km 1 Winter maintenance Condition level 1 km 721 Condition level 2 km 336 Condition level 3 km 100 Condition level 3+ km 61 Parking lots m2 8,003
Source: Road maintenance contract
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Table 6.2:2 Tartu region (31.10.2017 – 30.09.2023)
Maintenance type Unit Annual volume Summer maintenance Paved road maintenance Condition level 1 km 566 Condition level 2 km 197 Condition level 3 km 208 Parking lots m2 21,500 Gravel road maintenance Condition level 1 km 328 Winter maintenance Condition level 1 km 598 Condition level 2 km 388 Condition level 3 km 101 Condition level 3+ km 213 Parking lots m2 21,500
Source: Road maintenance contract
Table 6.2:3 Võru region (31.10.2017-30.09.2022)
Maintenance type Unit Annual volume Summer maintenance Paved road maintenance Condition level 1 km 446 Condition level 2 km 152 Condition level 3 km 85 Parking lots m2 14,918 Gravel road maintenance Condition level 1 km 574 Winter maintenance Condition level 1 km 978 Condition level 2 km 213 Condition level 3 km 44 Condition level 3+ km 21 Parking lots m2 14,918
Source: Road maintenance contract
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Table 6.2:4 Saare region (31.10.2017-30.09.2022)
Maintenance type Unit Annual volume Summer maintenance Paved road maintenance Condition level 1 km 623 Condition level 2 km 186 Condition level 3 km 73 Parking lots m2 17,467 Gravel road maintenance Condition level 1 km 224 Bridges and overpasses maintenance Bridges pcs 38 Winter maintenance Condition level 1 km 790 Condition level 2 km 243 Condition level 3 km 73 Parking lots m2 17,467
Source: Road maintenance contract
Table 6.2:5 Keila region (01.02.2010-30.09.2022)
Maintenance type Unit Annual volume Summer maintenance Paved road maintenance Condition level 1 km 297 Condition level 2 km 141 Condition level 3 km 231 Parking lots m2 8,100 Gravel road maintenance Condition level 1 km 48 Winter maintenance Condition level 1 km 245 Condition level 2 km 241 Condition level 3 km 132 Condition level 3+ km 99 Parking lots m2 8,100
Source: Road maintenance contract
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7. Financial information
48
7 Financial information
All financial information that is presented below is based on the Company information.
The data, including 2019 financial data, has been audited by KPMG Baltics OÜ. Financial reports have been compiled according Estonian GAAP.
7.1 Historical financial statements
Table 7.1:1 Income statement
th € 2017 2018 2019 Long-term road maintenance 11,195 8,132 9,332 Construction & other short-term maintenance 10,075 14,688 9,312 Other sales 8,765 5,773 7,813 Net sales 30,035 28,594 26,457 Other revenue 165 307 349 Total revenue 30,200 28,901 26,806 Cost of goods sold 17,345 20,246 16,996 Gross profit 12,855 8,655 9,810 Operating expenses 424 513 420 Personnel expenses 8,024 6,244 6,446 Other expenses 26 26 22 EBITDA 4,381 1,872 2,922 Depreciation & amortisation 1,655 1,843 1,718 EBIT 2,726 29 1,204 Financial income/expense 3 1 -5 Profit before taxes 2,729 30 1,199 Corporate income tax 849 682 0 Net profit 1,880 -651 1,199
KPI’s Net sales y-o-y growth, % n/a -5 -7 Gross profit as % of net sales, % 43 30 37 EBITDA as % of net sales, % 15 7 11 EBIT as % of net sales, % 9 0 5 Net profit as % of net sales, % 6 -2 5
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Table 7.1:2 Balance sheet
31.12.2019 th € 31.12.2017 31.12.2018 31.12.2019 (ex-dividend)3 Cash and bank accounts 477 1,500 4,373 181 Deposits 2,533 682 125 125 Trade receivables 1,970 1,675 1,971 1,971 Other receivables 270 176 296 296 Inventory 1,923 1,736 1,946 1,946 Raw materials 1,227 1,045 1,148 1,148 Finished products 696 690 798 798 Total current assets 7,173 5,768 8,711 4,519 Financial investments 6,705 3,377 2,300 2,300 Other fixed assets 0 0 751 751 Tangible fixed assets 27,018 28,516 30,226 30,226 Depreciation -13,979 -15,130 -16,334 -16,334 Unfinished projects 150 474 0 0 Intangible assets 16 16 16 16 Amortization -12 -16 -16 -16 Total non-current assets 19,898 17,236 16,943 16,943 TOTAL ASSETS 27,071 23,005 25,653 25,653 Loans and capital lease 0 0 122 122 Trade payables 834 933 1,035 1,035 Personnel payables 1,688 715 1,046 1,046 Tax payables 334 398 425 425 Other payables 45 92 91 91 Received prepayments 0 0 0 0 Provisions 320 422 274 274 Current liabilities 3,220 2,560 2,993 2,993 Loans and capital lease 0 0 696 696 Provisions 395 355 676 676 Non-current liabilities 395 355 1,372 1,372 Total liabilities 3,615 2,915 4,365 4,365 Share capital 10,000 10,000 10,000 10,000 Share premium 3,105 3,105 3,105 3,105 Mandatory reserve 1,000 1,000 1,000 1,000
3 The Company plans to distribute €4.2m of gross dividend to the current owner before privatisation process will be carried out. For more information please see part 7.4 Cash Flow statement – Dividends.
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31.12.2019 th € 31.12.2017 31.12.2018 31.12.2019 (ex-dividend)3 Retained earnings 7,471 6,625 5,984 1,792 Net profit for the year 1,880 -641 1,199 1,199 Total equity 23,456 20,089 21,289 17,097 TOTAL LIABILITIES & EQUITY 27,071 23,005 25,653 21,461
Table 7.1:3 Cash flows
th € 2017 2018 2019 Cash flows from operating activities Operating profit 2,726 40 1,204 D&A 1,655 1,843 1,718 Profit/loss from sale of non-current assets -54 -154 -137 Adjusted operating profit 4,327 1,729 2,785 Change in current assets related to operating activities -943 791 -500 Change in liabilities related to operating activities -81 -681 631 Cash flows from operating activities 3,303 1,839 2,917 Cash flows from investment activities Purchase of PPE and intangible assets -714 -2,841 -1,140 Cash flow from sale of PPE and intangible assets 169 466 400 Purchase of financial investments -1,083 3,112 200 Interest received 5 2 1 Cash flow from investment activities -1,623 739 -539 Cash flows from financing activities Finance lease principal payments -2 0 -55 Interest paid 0 0 -6 Dividends paid -3,396 -2,726 0 Corporate income tax paid -849 -681 0 Cash flows from financing activities -4,247 -3,407 -62 Net cash flow -2,567 -829 2,316 Cash and cash equivalents at the beginning of the period 5,578 3,011 2,182 Cash and cash equivalents at the end of the period 3,011 2,182 4,498
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7.2 Income statement analysis
Income
Table 7.2:1 Net sales by type
th € % of total 2017 2018 2019 2017 2018 2019 Long-term road maintenance 11,195 8,133 9,332 37.3% 28.5% 35.3% Construction and short-term 10,075 14,688 9,312 33.5% 51.5% 35.2% maintenance Other sales 8,765 5,706 7,813 29.2% 20.0% 29.5%
Sales to rural municipalities 5,720 4,154 5,143 19.0% 14.6% 19.4% Sales of services 2,547 1,325 1,930 8.5% 4.6% 7.3% Sales of material 452 167 694 1.5% 0.6% 2.6% Rental fees 14 60 46 0.0% 0.2% 0.2% Other revenue 32 0 1 0.1% 0.0% 0.0%
Total 30,035 28,527 26,457 100.0% 100.0% 100.0%
Net sales is divided into three major categories:
Long-term road maintenance includes revenues from contracts with ERA for road maintenance on national roads. In 2017, the Company won procurements for long-term road maintenance in 4 regions: Saare county, Võru county, Lääne-Viru county starting from Nov 2017 and Keila region starting from Feb 2018. The procurement in Tartu was won by Sakala Teed OÜ who engaged the Company as a subcontractor. Thus, since 2018 the Company carried out road maintenance works in a total of 5 regions: Saare, Tartu, Võru and Lääne-Viru county and Keila region.
Construction and short-term maintenance include revenues from short-term maintenance and construction and preservation repair works for ERA carried out on national roads across Estonia.
Other sales include:
a) Sales to rural municipalities. according to the management, rural municipalities will be the Company’s target customers in coming years, as their roads are in a worse condition than national roads. The Company is actively marketing its services to rural municipalities.
b) Sales of services includes revenue from projects where the Company has been engaged as a subcontractor (excl. subcontracting services provided to Sakala Teed OÜ).
c) Sales of materials include sales of various road maintenance products produced or extracted from quarries such as salt and salt-sand mixes, gravel, chippings and sand.
d) Rental fees include rental of commercial premises and other rental fees.
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Top 10 clients of Eesti Teed
1) Estonian Road Administration
2) Sakala Teed OÜ
3) Tori rural municipality
4) Saaremaa rural municipality
5) Võru rural municipality
6) Tref AS
7) Pärnu municipality
8) RIAB Teedeehitus OÜ
9) Tapa rural municipality
10) Haljala rural municipality
In 2017 the Company lost the procurement of road maintenance works on national roads in Pärnu county where the Company had previously provided road maintenance services. The machinery and resources were transferred to construction and short-term maintenance operations in the region by undertaking several projects in rural municipalities in Pärnu county. Some machinery has been re-deployed in other regions.
In 2017 the Company became a subcontractor of Sakala Teed OÜ in Tarty county, where it was previously had the contract for road maintenance works on national roads.
The Company was also engaged as a subcontractor by the general contractors Tref AS and RIAB Teedeehitus OÜ for surfacing works.
Expenses
Table 7.2:2 Cost of goods sold
th € % of net sales 2017 2018 2019 2017 2018 2019 Subcontractor expenses -3,708 -4,715 -2,909 -12.3% -16.5% -11.0% Road repair and maintenance -9,758 -11,347 -9,973 -32.5% -39.8% -37.7% expenses Vehicle related expenses -220 -150 -132 -0.7% -0.5% -0.5% Machinery and equipment related -3,181 -3,490 -3,561 -10.6% -12.2% -13.5% expenses Small assets related expenses 0 -12 -28 0.0% 0.0% -0.1% Utility, maintenance and rental -439 -448 -366 -1.5% -1.6% -1.4% expenses Other variable expenses -39 -84 -26 -0.1% -0.3% -0.1% Cost of goods sold total -17,345 -20,246 -16,996 -57.7% -71.0% -64.2%
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Subcontractor expenses include the expenses related to subcontractors, which depend on contracts secured from the market. Subcontractors are used depending on the nature of the work and the availability of the Company’s resources. It is expected that subcontracting expenses will increase in the future.
Road repair and maintenance expenses include the expenses of the main materials used in road repair and maintenance such as bitumen, gravel, chippings and other materials.
Vehicle related expenses include fuel, rental, repair and maintenance, and insurance expenses of vehicles, which are used for the supervision of roads and vehicles that are used to perform functional duties and also permitted to be used for personal purposes.
Machine and equipment related expenses relate to vehicles and equipment used in the Company’s operating activities and include fuel, repair and maintenance, and other expenses. Other expenses consist of 1) operating lease expenses 2) insurance charges 3) road use charges for heavy vehicles and other expenses. The road use charge was imposed from 1 Jan 2018.
Small assets related expenses relate to smaller equipment used in the Company’s operating activities and include fuel, repair and maintenance, and other expenses.
Utility, maintenance and rental expenses include rent for the premises that the Company uses, utility payments, cleaning expenses, insurance expenses and repairs.
Other production expenses include the expenses of raw material and fuel, other quarry related expenses, subcontracting expenses related to the production process, other production expenses, quarry preservation fees and laboratory examination expenses.
Other variable expenses include working clothes purchased for employees.
Table 7.2:3 Top 10 suppliers
Supplier Country Type of product/service 1) Nynas AB Sweden Bituminous emulsions 2) Olerex AS Estonia Fuel 3) Graniidikeskus OÜ Estonia Chippings 4) TREF Nord AS Estonia Asphaltic concrete and road construction works 5) Pigipada OÜ Estonia Bituminous emulsions 6) YIT Eesti AS Estonia Asphaltic concrete and road construction works 7) Taproban AS Estonia Chemical products 8) Kivikild OÜ Estonia Gravel 9) Eesti Keskkonnateenused AS Estonia Road maintenance works 10) Rudus AS Estonia Concrete
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Table 7.2:4 Operating expenses
th € % of net sales 2017 2018 2019 2017 2018 2019 Administrative expenses -137 -129 -139 -0.5% -0.5% -0.5% IT and electronic devices expenses -94 -112 -104 -0.3% -0.4% -0.4% Staff training and mission expenses -88 -85 -60 -0.3% -0.3% -0.2% Premises -36 -60 -30 -0.1% -0.2% -0.1% Management’s vehicle expenses -29 -28 -23 -0.1% -0.1% -0.1% Other operating expenses -41 -98 -64 -0.1% -0.3% -0.2%
Operating expenses total -425 -513 -420 -1.4% -1.8% -1.6%
Administrative expenses include mainly audit and legal services, communication expenses and R&D expenses related to a development program for managers.
IT and electronic devices expenses include mainly IT and electronic hardware and software purchase, development, maintenance and other expenses.
Staff training and business travel expenses include staff training expenses, including the trainings required by law (such as heavy-duty vehicle driver and engineer training).
Premises include the administration, maintenance and utility expenses of offices located in Rakvere, Tallinn, Pärnu, Tartu, Kuressaare and Võru.
Management’s vehicle expenses include the expenses of the vehicles of three management board members of the Company.
Other operating expenses include various expenses, such as professional membership fees, maintenance and equipment expenses not related to specific cost item and other. 2018 expenses have increased because the Company outsourced the valuation of properties to be sold.
Table 7.2:5 Personnel expenses
% of net sales % of net sales
2017 2018 2019 2017 2018 2019 Wages -4,743 -4,033 -4,177 -15.8% -14.1% -15.8% Additional payments -686 -75 -49 -2.3% -0.3% -0.2% Total wages -5,428 -4,108 -4,226 -18.1% -14.4% -16.0% Vacation reserve -438 -405 -419 -1.5% -1.4% -1.6% Total salaries -5,867 -4,513 -4,645 -19.5% -15.8% -17.6% Social security -2,062 -1,622 -1,676 -6.9% -5.7% -6.3%
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% of net sales % of net sales
2017 2018 2019 2017 2018 2019 Fringe benefits -95 -109 -125 -0.3% -0.4% -0.5%
Personnel expenses total -8,024 -6,244 -6,446 -26.7% -21.9% -24.4%
Social security, % of salaries 35,15% 35.95% 36.09% Average FTE 303 236 228 Average gross monthly salary 1,597 1,594 1,698 Change n/a -12.32% 6.54%
Wages include base level wages and bonuses. Base level wages are determined for every position of people paid by hour, and a range of wages are determined for every position of employees paid by month. Bonuses are determined based on the annual operating results of the Company.
Additional payments are amounts paid for additional tasks or for higher than required performance. Each case of additional work and additional payments must be pre-approved by the respective department manager and confirmed by the CEO of the Company.
Vacation reserve relates to the vacation pay that is provisioned for to be paid to employees on vacation.
Social security relates to the social tax that the Company pays, required for pension insurance and state health insurance and which is subject to performance pursuant to the procedure, in the amount and during the terms prescribed by the Social Tax Act.
Fringe benefits include canteen expenses and food reimbursements and other fringe benefits.
The average gross monthly salary in 2017 has been adjusted to exclude redundancy related expenses, such as severance payments.
Table 7.2:6 Other expenses
th € 2017 2018 2019 Other expenses -26 -26 -22 Depreciation & amortisation -1,655 -1,843 -1,718 Financial income/expense 3 1 -5 Corporate income tax -849 -682 0
Other expenses include tax expenses, state fees, late payment interest and other expenses.
D&A includes the annual depreciation and amortisation of fixed assets. D&A increased by ca €0.2m in 2018 (€1.9m) compared to 2017 (€1.7m) mainly because the building of the Tartu operations centre, which was written off and demolished and was replaced by a new building.
Financial income/(expense) includes interest income on deposits and interest expense on capital lease.
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Corporate income tax includes the tax paid on a dividend pay-out, since in Estonia only distributed dividends are subject to tax. The tax rate is 20/80 on the actual distribution.
Seasonality
Due to the nature of road construction and maintenance works the revenues and earnings from services offered fluctuate greatly within the year. Summer months are much busier in terms of services offered by the Company and as such the revenues and earnings of Eesti Teed are also higher, when compared to the rest of the year.
Graph 7.2:1 Net sales & EBITDA
Th € % 6 000 Net sales (left axis) EBITDA margin (right axis) Annual EBITDA (left axis) 60%
5 000 40% 20% 4 000 0% 3 000 -20% 2 000 -40%
1 000 -60%
0 -80%
Graph 7.2:2 Net sales
Th € FY17 FY18 FY19 6 000 5 000 4 000 3 000 2 000 1 000 0 january february march april may june july august september october november december
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Graph 7.2:3 EBITDA
Th € FY17 FY18 FY19 2 000
1 500
1 000
500
0 january february march april may june july august september october november december -500
-1 000
7.3 Balance sheet analysis
Table 7.3:1 Property, plant and equipment
Purchase cost, th € NBV, th € NBV as % of purchase cost 2017 2018 2019 2017 2018 2019 2017 2018 2019 Heavy duty vehicles 13,638 14,098 15,067 5,704 5,584 5,802 41.8% 39.6% 38.5% Trucks 7,749 8,213 8,971 3,380 3,524 3,840 43.6% 42.9% 42.8% Loaders 1,772 1,730 1,766 821 679 587 46.3% 39.2% 33.3% Tractors 1,528 1,528 1,636 742 644 669 48.6% 42.1% 40.9% Graders 1,721 1,763 1,816 437 434 443 25.4% 24.6% 24.4% Trucks for special purposes 473 431 432 265 231 197 56.0% 53.6% 45.6% Excavators 395 433 445 59 72 65 14.9% 16.6% 14.6% Machinery and equipment 6,969 7,716 8,029 3,247 3,422 3259 46.6% 44.3% 40.6% Buildings 4,533 3,012 5,102 2,927 3,012 3535 64.6% 100.0% 69.3% Land 739 697 633 739 697 633 100.0% 100.0% 100.0% Other facilities 417 287 558 229 287 332 54.9% 100.0% 59.4% Other machinery and equipment 234 250 404 92 250 222 39.3% 100.0% 55.1% Passanger cars & vans 487 134 433 99 134 109 20.3% 100.0% 25.1% Unfinished projects 150 474 0 150 0 0 100.0% 0.0% n/a
Total PPE 27,167 26,668 30,226 13,187 13,386 13,892 48.5% 50.2% 46.0%
The depreciation rates are individually determined for each property, plant & equipment:
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a) Buildings: 20 to 50 years (2-5%);
b) Facilities: 10 to 40 years (2.5-10%);
c) Vehicles, machinery and equipment: 5 to 10 years (10-20%);
d) Other tangible assets: 2 to 10 years (10-50%);
e) Land is not depreciated.
The Company leases out several facilities, which are not used for operating activities, and vehicles to various private persons and businesses (the revenue is insignificant).
Intangible assets include accounting software, which has fully amortized as at 31 Dec 2019.
Table 7.3:2 Historical and budgeted capital expenditures
th € 2017 2018 2019 2020F
Heavy duty vehicles 10 174 969 251 Machinery and equipment 312 996 313 310 Buildings 151 889 2,090 200 Other facilities - 363 -64 0 Land 210 0 271 0 Other machinery and equipment - 325 154 440 Passanger cars & vans 26 75 299 218
Total capital expenditures 709 2,822 4,032 1,419
The largest capital expenditures during the 2019 include:
a) operations centre in Tartu €687 th (€686 th reclassified from unfinished projects),
b) heavy duty machines include €819 th Volvo trucks acquired (total 4 trucks),
c) machinery and equipment include machines for road construction works and maintenance works (e.g. 3 gritters €86 th, 3 salt slingers €80 th and 3 trailers €70 th)
Capex related to intangible assets was insignificant during the period under analysis amounting to €6k. The Company has taken into use a new enterprise resource management software Navision, replacing Eeva, from 1st October 2018. All the expenses were recognised in the income statement.
Comments with regards to the historical capital expenditures:
a) The largest purchased assets include asphalt ceiling vehicle for €133k in 2018.
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b) Related to new base station and salt production facility in Tartu, Tähtvere Previous station was depreciated, and maintenance was costly due to which the old facility was demolished in 2017 and rebuilt.
c) Since the Company’s won a procurement for road maintenance in Keila region, it was decided to purchase a land property in Saue, Paju tn 16 for total amount of €210k in 2018, to set up a base station in the region.
The Company assumes that in order to continue operating with the same capacities as it has been so far, no significant investments into fixed assets are required in the closest years and a maintenance capital expenditures CAPEX that matches annual depreciation will be sufficient.
Net working capital
Net working capital fluctuates heavily within the year due to seasonality of road construction works, as the volume of on-going engagements is significantly larger during summer time than winter time.
The main components of net working capital are inventories, trade receivables and trade payables.
Inventories of €1.9m as at 31 Dec 2019 include mainly materials of €1.1m.
Accounts receivable as at 31 Dec 2019 is €1.2m.
Accounts payable as at 31 Dec 2019 is €1.0m.
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Graph 7.3:1 Net working capital
Th € Trade receivables Other receivables Inventory 15 000 Trade payables Personnel payables Tax payables Other payables Received prepayments NWC
10 000
5 000
0
-5 000
-10 000
Interest-bearing liabilities
In 2019 the Company concluded several capital lease agreements to co-finance investments into machinery, no additional loans have been taken. The total outstanding balance of capital leases as at 31.12.2019 is €818k, with maturities ranging from January 2024 to September 2024. The average weighted interest rate of these obligations is 6-month EURIBOR + 1,39%.
Provisions
Provisions are mainly formed in purpose of carrying out construction warranty works, but also for future liabilities of mining right fees. The amount of provision is calculated based on project manager’s assessment on probability for warranty realization – provision will be made if probability exceeds 50%.
Table 7.3:3 Provisions
th € 31.12.2017 +31.12.2018 31.12.2019
Short-term guarantee provisions -211 -305 -80 Short-term quarry provisions -4 -13 -43 Other short-term provisions -104 -104 -150
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th € 31.12.2017 +31.12.2018 31.12.2019
Long-term guarantee provisions -395 -355 -676
Total short-term provisions -319 -777 -274 Total long-term provisions -395 -355 -676
Total guarantee provisions -606 -661 -757
Total provisions -714 -777 -950
7.4 Cash flow statement
Table 7.4:1 Summarised cash flows
th € 2017 2018 2019 Cash flows from operating activities 3,303 1,839 2,917 Cash flow from investment activities -1,623 739 -539 Cash flows from financing activities -4,247 -3,407 -62 Net cash flow -2,567 -829 2,316
The Company prepares cash flow statements on a quarterly basis.
Large amounts of cash flow from investment in activities in 2018 represent the release of voluntary deposit account in Q2 2018, which was used to distribute dividends and pay related corporate income tax.
Dividends
Dividends are usually distributed in Q2 (net dividend of €3.4 m in 2017 and €2.7 m in 2018). Corporate income tax is paid in correspondence with dividends payments.
The Company plans to distribute €4.2 m of gross dividend (€3.4 m net dividend and € 0.8 m corporate income tax) to the current owner before the Company’s privatisation process will be carried out, reducing the cash balance of the Company. The transaction will have an impact also on the 2020 income statement, as the corporate income tax will be paid in this year.
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8. Further steps
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8 Further steps
Interested parties are invited to participate in the auction process. All information presented below, has been translated from source material that was written in Estonian. In the case of discrepancies between Estonian and English language texts, the Estonian language text shall prevail.
Object of the auction: 100,000 shares of AS Eesti Teed (registry code 12249762) with a nominal value € 100
Type of auction: public written auction
Starting price: € 16,900,000
Participation fee: € 20,000
Cash deposit: € 500,000
Time for submission of the bid: by 12:00 at the latest on 1 October 2020
The right to participate in the auction
To participate in the auction, the participant shall submit a signed application, specifying the following:
• a request to participate in the public written auction of the shares of AS Eesti Teed;
• name of the participant;
• personal or registry code of the participant;
• contact address, contact phone and e-mail address, which the auctioneer will use for the auction-related communication;
• name of the representative of the participant and their legal basis for the right of representation
The application shall be accompanied by a duly filled-in AML form (available on the website of AS Eesti Teed at https://www.eestiteed.eu/ and on the website of the Ministry of Economic Affairs and Communications at https://www.mkm.ee/et), signed by the participant, and a copy of the payment order on the payment of the participation fee.
The application together with the aforementioned annexes shall be submitted or sent by post to the Ministry of Economic Affairs and Communications in the name of Regina Raukas at the address of the Ministry of Economic Affairs and Communications, Suur-Ameerika 1, Tallinn 10122, with a note “Confidential”. If the application and the enclosed documents are digitally signed, these must be forwarded by e-mail at [email protected], the Ministry of Economic Affairs and Communications.
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Data room and due diligence
The auctioneer shall make electronically available the conditions of the auction, the draft sales contract of shares and other documentation pertaining to the assets for sale to the participants, allowing the participant to conduct a proper due diligence review. The access to data room shall be provided upon signing the confidentiality agreement. The documents in the data room shall mainly be in Estonian.
The participants of the auction, who are current or potential competitors of the Company, shall not be granted access to the documentation or information that is deemed sensitive from the perspective of competition law. If such participant will win the auction, it will receive access to the sensitive information following the conclusion of the share purchase agreement. The agreement envisages a possibility to withdraw from the transaction should the review of sensitive information result in findings affecting the value of the Company by more than 10%.
Questions and answers
The questions to the seller and/or the Company shall be asked and answered only via the virtual data room. The Company cannot be contacted in any other way than by asking questions via the data room. The questions can be submitted in English and/or Estonian.
Meeting with the management
The participants will have an opportunity to meet the Company’s management for the management presentation. There will also be a possibility to ask questions during the meeting.
Share purchase contract
The draft share purchase contract shall be made available to the participants in the data room.
Submitting the bid
By submitting the bid, the participant of the auction shall assume an irrevocable binding obligation to conclude, upon winning the auction, the sales contract on the conditions specified in the draft contract and pay the purchase price offered by it in conformity with the requirements.
The bid may be submitted for the shares only in their entirety, that is, the bid of the bidder must be submitted for the acquisition of all 100,000 shares with a nominal value of € 100 each at least at the starting price. Joint bidders have a right to acquire all 100,000 shares, being the object to the auction, in their entirety only together.
The bid must be in Estonian or in English and signed by the bidder. The bid must contain the following:
• name of the bidder;
• personal or registry code of the bidder;
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• name of the contact person, contact address, contact phone and e-mail address, which the auctioneer will use for the auction-related communication;
• name of the representative of the bidder and the legal basis for their right of representation;
• the amount of bid written in numbers and words, i.e. the purchase price payable by the bidder as the buyer to the state as the seller under the sales contract of the shares, as a whole number in euros (without cents). The purchase price contained in the bid may not be less than the starting price. If the amounts written in numbers and words differ, the amount written in words shall be deemed valid. The purchase price shall be submitted as a whole number in euros. Together with the purchase price, also the assumptions and bases underlying the calculation of the offered purchase price shall be submitted. The auctioneer shall use these assumptions and bases, if necessary, only to assess the existence of the right of withdrawal in clause 14 of the conditions and these serve no other purpose, incl. these assumptions and bases do not have a meaning from the viewpoint of assessing the bid and conclusion and performance of the sales contract;
• acceptance of all the conditions and requirements of the legislation, notice, conditions and of the latest draft contract made available in the data room before submission of the bid;
• confirmation that the bidder has all the necessary internal consents for the conclusion and performance of the sales contract and that there are no restrictions or prohibitions arising from the law or court decision or contract, or other restrictions and prohibitions for participating in the auction, submission of the bid and conclusion and performance of the sales contract;
• confirmation that the bid is binding on the bidder and valid at least until 31.03.2021, considering the provisions of the State Assets Act;
• confirmation that the bidder has the necessary funds and/or financing for the payment of the offered purchase price, detailed description of the sources of financing the purchase price and documents that confirm the existence of or accessibility to the funds and/or financing required for the payment of the purchase price;
• confirmation, that the participant, its member of the directing body, procurator, beneficial owner or owner (i) has not been punished for an offence against state power or a money laundering offence or for any other intentionally committed criminal offence, (ii) has not used and does not use funds obtained from criminal activity, and, (iii) has not committed a money laundering offence or an offence targeted to terrorist financing or any offence or attempt related thereto;
• confirmation that the bidder is not otherwise subject to any restrictions for participating in the auction;
• confirmation that the bidder has conducted all the audits necessary for the bidder and that the result of audits is acceptable to the bidder;
• the date of submitting the bid.
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A bid may not be conditional. A cash deposit in amount of EUR 500,000 (five hundred thousand) shall be paid prior to the bid submission time for the bid to be valid. The auctioneer shall return the cash deposit to the bidders, who did not prove to be the winner, within ten working days as of the announcement of the results of the auction.
The bid together with the annexes must be submitted or sent by post in a manner that would ensure that it is received at the auctioneer’s postal address at the latest by 12.00 on 1 October 2020 in the name of Regina Raukas at the address of the Ministry of Economic Affairs and Communications, Suur-Ameerika 1, Tallinn 10122, and has been registered as incoming documents at the office of the Ministry of Economic Affairs and Communications. A bid received by the auctioneer after this time shall be returned unopened.
The bid and the annexes thereof must be submitted in one sealed envelope, marked with the following:
• auction of the shares of AS Eesti Teed;
• warning notes “Confidential” and “Not to open before the auction on 1 October 2020”;
• contact details of the bidder.
If the bid and its annexes have been digitally signed, the bid together with the annexes and the confirmation sheet of digital signature must be printed and placed in a sealed envelope pursuant to the above requirements, which must be submitted or sent by post in a manner that would ensure that it is received at the auctioneer’s postal address in the name of Regina Raukas at the address of the Ministry of Economic Affairs and Communications, Suur-Ameerika 1, Tallinn 10122, by the deadline for submission of bids, i.e. by 12:00 on 1 October 2020.
Results of the auction
The bids will be opened at 15:00 on 1 October 2020 at the Ministry of Economic Affairs and Communications, Suur- Ameerika 1, Tallinn 10122. The opening of the bids shall be public.
After the opening of the bids, the auctioneer shall verify the conformity of the bids that were submitted in time to the requirements and shall draw up minutes of the opening and the results of verification of the bids, documenting also the offered purchase price . The auctioneer may reject a bid and not take it into consideration, if the bid fails to correspond to all the requirements. The rejection as well as the reason thereof shall be entered into the minutes.
The bids eligible for consideration shall be ranked according to the purchase price offered in the bid and the winner of the auction shall be the bidder who offered the highest price. If two or more bidders have submitted bids with the equally highest purchase price, such bidders will be provided an opportunity to increase the purchase price in their bids within three working days. If also in the received amended bids, the bidders have submitted bids with equally highest purchase price, the aforementioned procedure shall be repeated until the bidder with the highest purchase price is established.
The auctioneer will announce the name of the winner of the auction and of the second-best bidder and their offered purchase price in writing to all bidders within five working days after the opening of the bids.
Please refer to the notice of public auction (available on https://www.ametlikudteadaanded.ee/ as well as the website of AS Eesti Teed at https://www.eestiteed.eu/ and on the website of the Ministry of Economic
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Affairs and Communications at https://www.mkm.ee/et) and to the terms and conditions, available for auction participants in the virtual data room, for more detail on the process.
Information on the auction can be inquired on working days: Valeria Kiisk phone +372 666 8200 ¦ mobile +372 55 60 3332 ¦ e-mail: [email protected]. Written questions to be asked about the conduct of the auction must be presented at the latest five days before the date for the submission of bids, at the latest, at the e- mail address [email protected].
In no circumstances may any of the participants or bidders or their advisers turn directly to the management or any employee or contractual partner of the Company in the context of this sales process in order to obtain information on the activity of the Company, sale of shares or other circumstances relating to the Company or the shares.
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