Modernisation of signalling system (2001/LV/16/P/PT/006) Stage 1 Intermediate Body: Ministry of Transport Employer: Latvian Railway - LDZ Contractor: Consortium Thales Rail Signalling Solution Gmbh and Thales Rail Signalling Solution Baltics Engineer: Systra

1. General information of contract: Type of project: Plant and Design-Build (FIDIC) Commencement date: Contract price: EURO Scope of works (7 stages): –interlocking systems: 32 stations –Lineblock system, including cable laying: 350 km –Level Crossing systems: 83 –Reconstruction of 10 kV power supply line: 182 km –2 CTC central offices –Point heating system: 21 stations –Refurbishment or installation of buildings (depends on situation): 32 stations Time for completion: –Initial: –Adjusted in Addendum No.3:

2. Payments Basis for payment: –FIDIC Sub-Clauses 14.2, 14.4, Particular Conditions: BPQPW –Performance of a milestone (FAT, Delivery, Installation, Testing, Commissioning) for any of 12 types of equipment –Invoice reaching 1% of contract Price. Payments made: –Advance payment: ,7 EUR ( ) –Interim payments: 1-st: ,29 EUR (Cable FAT) ( / ) 2-nd: ,41 EUR (Cable FAT and delivery) ( ) 3-d: ,21 EUR (Cable FAT and delivery) ( ) 4-th: ,5 EUR (FAT of interlocking, CTC hardware, UPS; cable delivery) ( ) –Totally paid: ,11 EUR (23,3 %) Next payments: –Probably for equipment/cable delivery –No more reasons: no further FAT performed, no completed installation, no test is foreseen, no commissioning planning soon

3. Cumulative Contractor “Completed Task" Performance

4. On-going Contractor Task Performance

5. Delays in project implementation* Submission of FRS documents for approval: up to 180 days Submission of Subsystem Technical Specifications for approval: up to 200 days Submission of detailed design for approval: –Construction part: Stage 1: up to 170 days Stage 2: up to 170 days Stage 3: up to 45 days –Technological part: Stage 1: up to 160 days Stage 2: up to 170 days Stage 3: up to 45 days Construction activity: –Stage 1: up to 180 days –Stage 2: to be started April, 2008, not ready. * Based on the Detailed Work Programme, document 3CR UHAFA, Edition 05, dated

6. Reason for delays Insufficiency of Contractor’s human resources (quality and quantity) 7. Consequences of current delays Probable delay of project completion Application of conditional Delay Damages (currently about EUR) Probable delay of project Stage 2 (Contractor: Consortium Bombardier/Belam Riga): CTC Jelgava, CTC Daugavpils

8. Measures already taken Contract execution extended for 1 year (Addendum No.3) Discussions during monthly progress meetings High level management meeting with involvement of president of Thales Rail Signalling Solutions, held on “Hot” management meetings with LDZ Technical Management Director and Contractor – weekly.

9. Measures to be taken (Contractor) Involve more appropriate experienced experts for respective design areas Complete remaining technical solutions (CTC, Buildings/containers, Level Crossings, Diesel generators, 10 kV line, etc.) Issue documentation for approval without further delays Hire many more subcontractors, especially for performance of cable laying activities in parallel