INTRODUCTION WHY TO JOIN ABOUT VVS BONDS FAQ BROCHURE NOTICES
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GUARANTEED BOND YIELD
PROGRAMME™

Get up to 16 times more revenue for your city or municipality every year

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Your municipality can also benefit from the Bond Programme, which includes the first-ever bond issue of Východoslovenská vodárenská spoločnost (VVS) called Voda spieva I. The program is intended exclusively for towns and municipalities that are VVS shareholders and is a fulfilment of their requirement for an annual guaranteed yield.

Don't put your local government at a financial loss

Don't put your local government at a financial loss

Local governments that choose to join the program will receive nearly 16 times more revenue each year than before, without the need to invest new money from the town or municipality's budget.

Guaranteed income to your budget

The yield with a fixed interest rate of 6 % p.a. paid once a year, is guaranteed, so you can count on it every year and use it for the needs of your city or municipality and your residents.

Buyback guarantee

Shareholders will be able to use the proceeds from the sale of VVS shares to purchase the Bonds Voda spieva I. However, if the mayor/burgomaster and council’s opinion changes, the bonds can be exchanged back for shares.

Retaining shareholder influence

Local governments that choose to purchase the Bonds Voda spieva I, while temporarily transferring their shares to VVS, must retain at least 1 share. They will thus retain their shareholder influence.

How much will my municipality get from the programme?

Thanks to the Bonds Voda spieva I from VVS, every year the municipality/town can receive a guaranteed yield of maximum:

Example

For an average shareholder holding 5,200 shares, its return to date was in average EUR 260 per year. If the same shareholder enters the Guaranteed Bond Yield Programme, its annual bond yield will be EUR 4,142.

ARE YOU A LOCAL GOVERNMENT REPRESENTATIVE AND HAVE QUESTIONS/INTEREST IN JOINING?

Contact our expert team. They will prepare all the documents for you.


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    WHAT DO YOU NEED TO KNOW ABOUT VVS BONDS?

    Bond Voda spieva I. are a security that can be obtained only by towns and municipalities that are shareholders of Východoslovenská vodárenská spoločnost', a.s.

    VVS use the proceeds from the sale of the bonds to purchase its own shares from towns and municipalities interested in joining the Guaranteed Bond Yield Programme.

    Shareholders may to use the proceeds from the sale of VVS shares to purchase the Bonds Voda spieva I, but it is not a requirement. The shareholder can also use money from the municipal/town budget.

    The maturity of the bonds is 20 years with the right of VVS to early redemption starting from 2034, and the right of VVS to redeem the bonds at any time by agreement with their bond holders.

    The nominal value of 1 VVS bond is EUR 13.28 and the interest rate is 6 % p.a. Within the framework of this issue, we will allow the subscription of bonds exclusively for the shareholders of the company, who have in aggregate a share in the registered capital of VVS of maximum 30 %. We are sorry if we will not be able to satisfy everyone within this issue.

    The financial advisor and the administrator of the issue of the Bonds “Voda spieva I” is Slovenská sporiteľňa, a.s.

    ANSWERS TO FREQUENTLY ASKED QUESTIONS

    Why should we join the Guaranteed Bond Yield Programme TM and purchase the Bonds Voda spieva I?
    Because by doing so, your municipality will not lose the opportunity to receive 16 times more each year from the water company than it has been receiving, and municipal/town’s officials will not be confronted with the question of why they have caused a financial loss to the municipality.
    Do we have to sell the VVS shares when we join the VVS bond programme?
    No. Neither joining the bond programme nor the sale of shares is mandatory. Similarly, a shareholder need not acquire the bonds in exchange for the sale of shares, but may use money from the municipal budget to purchase the bonds.
    What will happen to the shares that VVS will buy?
    The acquirer of the shares from the shareholder is solely VVS and they must remain under its control at all times. Since the process of de facto exchange of the VVS shares for the bonds must be reversible, VVS must be able to transfer the shares back to the shareholder at any point in time.
    If the VVS shares are acquired by the company itself, will this mean that the management will vote with them at the General Meeting and thus control the company?
    No. Shares held by VVS may not be used for voting. It's set by law.
    What about voting at the General Meetings of VVS when we exchange the shares for the bonds?
    Each shareholder shall retain at least one share. It therefore remains a shareholder in VVS. The average/typical shareholder’s interest in VVS is 0.07% and no shareholder has a majority or controlling position in VVS. The exchange of the shares for the bonds will thus leave the influence of the overwhelming majority of the shareholders on the management of the Company virtually unchanged./typického akcionára na VVS je 0,07 % a žiadny z akcionárov nemá vo VVS majoritnú či kontrolnú pozíciu. Výmenou akcií za Dlhopisy sa tak vplyv drvivej väčšiny akcionárov na riadenie spoločnosti prakticky nezmení.

    Conversely, each holder of the VVS bonds, in addition to the existing right to participate in the General Meetings, will acquire the right to participate in the Bond holders’ Meeting.
    How is it possible that VVS does not have the funds to pay dividends but will have the funds to pay the bonds?
    The payment of dividends is subject to a number of conditions, including the generation of profits. Dividends are therefore only distributed after approval by the General Meeting of VVS, if the company makes a profit and the shareholders decide that the profit will actually be paid to them. However, the possibility of making a profit in the case of VVS, as mentioned above, is strongly determined by the Utilities Regulatory Authority, which determines the prices for the water companies for their services.
    In contrast, the company must pay the yields from the bonds irrespective of the profit or loss. For the company, this is the same cost item as, for example, interest on bank loans.
    Could the exchange of the vast majority of shares for the VVS Bonds lead to a loss of the shareholders’ position in the Management Board or the Supervisory Board over time?
    There was and is no key in VVS that would guarantee any shareholder a seat in the VVS bodies. There is no causal relationship between holding the shares or the amount of the shares and a mandate in the VVS bodies.
    Why haven't we, as the shareholders, received regular returns from VVS in the form of dividends until now?
    Dividends are earnings distributed pro rata to the shareholders. Their amount depends primarily on two factors – the number of shares a shareholder holds and the amount of the company’s profits that are distributed to the shareholders. Over the 20-year existence of VVS, dividends have been paid to the shareholders 5 times in total. And it averaged less than €0.05 per share per year.
    Several conditions set by law must be met for dividends to be paid, the key of which is making a profit. Water supply is a regulated area of business where prices for services are set by the Utilities Regulatory Authority. It is based, for example, on justified costs and allows for a specific maximum rate of profit.
    What has changed in VVS that the Guaranteed Bond Yield Programme is being launched in 2023?
    In 2022, the management of the company accepted the request of the shareholders calling for a regular guaranteed payment of earnings, and so they began to look for ways to fulfil it. The analysis (feasibility study) prepared for VVS by a consortium of consultants stated that under the current legislative conditions (e.g. regulation by ÚRSO), the company’s management does not have the possibility to guarantee to the shareholders the annual payment of income in the form of dividends.
    It has therefore concluded that only the bonds can provide the shareholders with an annual guaranteed yield. In the case of the bonds, the company has to pay the yield (interest/coupon) irrespective of the economic result. The easiest way for towns and municipalities to acquiring the VVS Bonds without needing new funds from their budgets is through a temporary sale/transfer of the shares, i.e., basically an exchange of the VVS shares for the VVS Bonds. Therefore, the company prepared for its shareholders the Guaranteed Bond Yield Programme™ and the first issue of the bonds Voda spieva I.
    Will the periodic bond yields for towns and municipalities mean higher price of water for citizens?
    The annual sales of VVS typically exceed EUR 100 million. The amount paid to Bond holders as interest (coupon) will be several percentage points above 1% of sales per annum. Such a change in costs at the level of statistical error will have no material impact on the level of the price of water.
    Won’t VVS lack the money intended for the payment of vouchers for the construction of water supply and sewerage systems or for their reconstruction?
    On the contrary. By paying regular and higher annual yields we will provide income for the Bond holders, even those who do not have a water supply system or sewerage system at all. It is up to the town/municipality to decide what to do with this money – for example, they can save the money and then use it to develop various projects for the construction of water supply and sewerage systems or their reconstruction. In addition, the management of VVS decided to create an Investment Fund whose activities will include assistance to the shareholders in co-financing investment activities in the field of water and sewerage infrastructure development./obci, ako s týmito peniazmi naloží – môže si napríklad peniaze ušetriť a následne použiť na vypracovanie rôznych projektov budovania vodovodov a kanalizácií, či na ich rekonštrukciu. Navyše, vedenie VVS rozhodlo o vytvorení Investičného fondu, medzi ktorého aktivity bude patriť aj pomoc akcionárom pri spolufinancovaní investičných aktivít v oblasti rozvoja vodárenskej a kanalizačnej infraštruktúry.
    Will I be able to exchange my bonds for the shares again? For example, if the opinion of the mayor and councillors changes?
    Yes, the bonds will be exchangeable back for the shares.
    What is the difference between a share and a bond?
    Both a bond and a share are securities. A share entitles the shareholder to exercise shareholder rights and to receive dividends if the company has made and redistributes profits. A bond entitles its holder to exercise the rights attached to its ownership at a bond holders’ Meeting and to receive a regular annual guaranteed interest (coupon) irrespective of the amount of profit or loss of the Company.

    Brochure in English Available for Download

    Presentation of the Voda Spieva I. bond programme in English
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    Notices and documents for Bondholders

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