Development of Ventspils District Heating System in Latvia

2005/LV/16/C/PE/001

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Background Information

08/2005 Submission of the project application to the European Commission

08/2006 Decision of the European Commission on approval of support from the Cohesion Fund

02/2007 Signed participant agreement by and between the municipal company SIA "Ventspils TERMO" and Stadtwerke Flensburg GmbH (SWF)

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Project Costs(as planned in 2005)

Total costs EUR 81,268,462.00

Total eligible expenditure EUR 47,952,345.00

Share of support as % 72%

Support from the CF EUR 34,605,360.00

Two project components are implemented within the project framework with the following support ratio: Component A - 64 % and Component B - 74 %.

Project-related costs are eligible until 30/11/2010.

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Construction of a CHP Station

• Main purpose – reduction of SO2 emissions – reached partially in the end of 2009 (by closing down the heating plant on Brīvības Street), completely - in 2011.

• Specific objectives:– Closing down the heating plant located in a residential

area (Brīvības Street), replacing it with a new back-up heating plant, reduction of SO2 emissions – reached partially in 2009;

– Combined heat and power generation – reached completely in ~2011.

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Project Funding

• Budget of the project will be adjusted to market situation during negotiated procedure with credit institutions

• The market development trends for energy equipment as well as energy tariff dynamics have been take into consideration in the elaborated procurement documentation for the loan tender. The corresponding cash flows have been calculated up to 2031

• Opening of bids for the loan tender is planned to take place on 10/04/2008, followed by a negotiated procedure with the chosen credit institutions that will end simultaneously with tenders for works (June - July 2008).

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Updated Project Implementation Timeframe (indicative) (I)

02/10/2006 Elaboration of documentation for procurement contract

12/2007 – 01/2008 Procurement Commissions start their work 14/02/2008 Launch of loan procurement for project funding19/02/2008 Launch of procurement tender for

construction of a CHP plant02/04/2008 Closing tender for experts for evaluation of bids

for the construction of a CHP plant with no results (MoF)

04/2008 Planned launch of tenders for construction of a connecting pipeline and for engineering services

10/04/2008 Deadline for submission of tender bids for the loan tender

30/05/2008 Deadline for submission of tender bids for the construction of a CHP plant

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Updated Project Implementation Timeframe (indicative) (II)

06/2008 Planned evaluation of bids

06 - 07/2008 Planned signing of agreements

Q3 2009 Planned to complete construction of the connecting pipeline

(upon EC decision – 30/04/2009)Q4 2009 Planned to complete construction of a back-

up heating plant Q3 2011 Planned to complete construction of the CHP

plant (upon successful award of procurement contracts deadline for completion of works will be updated; one of the evaluation criteria – deadline for completion of contract) (upon EC decision – 30/11/2009)

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Timeframe

Project application (01/08/2005)

Signed EC decision (25/08/2006)

Agreement with Enprima/Lakalme (02/10/2006)

Participant agreement in PPP (27/02/2007)

Published by PMB – CHP station (19/02/2008)

Published by PMB – connecting pipeline, engineer (04/2008)

Signing of agreements (07/2008) – implementation 38 months

End of period’’0505 ’06’06 ’07 ’07 ’08 ’08 ’09 ’09 ’10 ’11 ’10 ’11 ’12 ’12

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Project Implementation Risks

• Capacity shortage in the energy market for equipment (producers/suppliers), market overheating continues

• Delays in timeframe (related with equipment supplier's delivery capacities)

• It is planned to complete the construction of the CHP plant in September 2011 which significantly exceeds the deadline for physical implementation stated in EC decision (30/11/2009), as well as the overall deadline for completion of physical implementation of the 2000 - 2006 period projects (December 2009).

• Increase in costs/growing prices for the project (taking into account when organising the loan tender)

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