Cohesion FundMonitoring Committee

Development of District Heating System in Ventspils, Latvia

Aivars JurjānsDirector, Project Implementation Department,

Ministry of Environment

2

Project costs, EUR

Costs (EUR) Planned in 2005 (project application,

EC Decision)

Total costs

(VAT included)

81 268 462

Total eligible costs 47 952 345

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

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Results of CHP tender (05.08.2008)

Procurement Bid 1, EUR (VAT excluded)

Bid 2, EUR (VAT excluded)

Results

Part 1 (CHP) 149 865 423 

104 000 000(irrelevant price

estimation)

Procedure stopped, new tender to be announced by

1 October

Part 2

(electrical cable)

 2 299 972 5 578 367  Evaluation

Part 3

(backup boiler house)

4 994 432   4 839 701 Procedure stopped, new tender to be

announced in October

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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

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Updated implementation timeframe

09. -10.2008 repeated call for proposals for construction of the CHP and backup boiler house

10.-11.2008 evaluation of connection construction proposals, negotiations on engineering services

11.-12.2008 evaluation of CHP proposals

01.2009 signing of agreements

IVQ 2009 planned date for connections(according to EC Decision – 30.04.2009)

IIQ 2010 planned date for backup boiler houseIIIQ 2011 planned 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 – 30.11.2009)

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Timeframe

Project application (01.08.05)

EC Decision (25.08.06)

Contract with Enprima/Lakalme (02.10.06)

PPP Association Agreement (27.02.07)

Call from PPMB – CHP (19.02.08)

Call from PPMB – connections (07.08.)

Repeated CHP tender (09.08)

Contracting (01.09) +32 months

Eligibility period deadline

Final Report (06.2012)

’’0505 ’06’06 ’07 ’07 ’08 ’08 ’09 ’09 ’10 ’11 ’10 ’11 ’12 ’12

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Project objectives

Overall objective: Reduction of SO2 emissions – partially in 2010 (closing of boiler house on Brīvības Street), fully in 2011.

Specific goals: Shutdown of boiler house in the residential area (on

Brīvības Street) substituted by the new backup boiler house, partial SO2 reduction in 2010;

Electricity and heat production by means of cogeneration facilities fully attained in 2011.

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Eligible costs

All costs will be declared as eligible in the early stages of project to fully absorb the necessary funds (at least 47 952 345 EUR) by the end of 2010

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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.

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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 (30.11.2009) and exceeds general works implementation deadline for 2000-2006 planning period (i.e. December of 2009).

Problems with return of VAT prior to construction works