Cohesion Fund Monitoring Committee Development of District Heating System in Ventspils, Latvia Aivars Jurjāns Director, Project Implementation Department, Ministry of Environment

2 Project costs, EUR Costs (EUR)Planned in 2005 (project application, EC Decision) Total costs (VAT included) Total eligible costs

3 Procurement  CHP designing and construction tender deadline had to be extended 3 times upon the request of potential bidders, and was set for 5 August (total delay of 3 months)  CHP construction proposals are significantly over the estimated budget (see next slide)  Engineering services – no bids filed, negotiations underway  The tender deadline for designing and construction of connections is 9 October

4 Results of CHP tender ( ) ProcurementBid 1, EUR (VAT excluded) Bid 2, EUR (VAT excluded) Results Part 1 (CHP) (irrelevant price estimation) Procedure stopped, new tender to be announced by 1 October Part 2 (electrical cable) Evaluation Part 3 (backup boiler house) Procedure stopped, new tender to be announced in October

5 Amendments to CHP Tender Documents  Term of Contract reduced from 38 to 32 months  Improved terms of payment, pre-financing of equipment included  Quicker payments  Different qualification requirements towards bidders  Different technical requirements

6 Updated implementation timeframe repeated call for proposals for construction of the CHP and backup boiler house evaluation of connection construction proposals, negotiations on engineering services evaluation of CHP proposals signing of agreements IVQ 2009planned date for connections (according to EC Decision – ) IIQ 2010planned date for backup boiler house IIIQ 2011planned date for CHP (works implementation timeframe to be clarified upon the end of successful procurement procedures; one of evaluation criteria – contract delivery term) (according to EC Decision – )

7 Timeframe Project application ( ) EC Decision ( ) Contract with Enprima/Lakalme ( ) PPP Association Agreement ( ) Call from PPMB – CHP ( ) Call from PPMB – connections (07.08.) Repeated CHP tender (09.08) Contracting (01.09) +32 months Eligibility period deadline Final Report ( ) ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12

8 Project objectives  Overall objective: Reduction of SO 2 emissions – partially in 2010 (closing of boiler house on Brīvības Street), fully in  Specific goals:  Shutdown of boiler house in the residential area (on Brīvības Street) substituted by the new backup boiler house, partial SO 2 reduction in 2010;  Electricity and heat production by means of cogeneration facilities fully attained in 2011.

9 Eligible costs  All costs will be declared as eligible in the early stages of project to fully absorb the necessary funds (at least EUR) by the end of 2010

10 Project implementation risks and challenges (1)  Absence of bidders (Engineering tender had no bidders and call for CHP proposals, CHP designing and construction had only one bid). Publicity campaigns, information dissemination through foreign embassies and LIDA representation and other sources.

11 Project implementation risks and challenges (2)  Lack of energy equipment (producers/suppliers) market capacity, continued overheating of the economy.  Changes in the timeframe (consequent problems on the side of equipment suppliers)  According to plans CHP will be finished in September of 2011 which is way beyond implementation frame fixed in the EC Decision ( ) and exceeds general works implementation deadline for planning period (i.e. December of 2009).  Problems with return of VAT prior to construction works