Project No 2004/LV/16/C/PE/001Development of water services in Ventspils,

stage II

11 April 2008 Municipal company SIA “ŪDEKA” 2

General information• European Commission Decision signed on 28/12/2004• End date of eligible expenditure 31/12/2010• Total approved eligible expenditure for the project - EUR 21,783,620.00• CF funding – EUR 18,516,007.00• Absorbed funding ~ 72 %Status of agreements:• Within the project 25 agreements were signed (19 for works,

2 for services and 4 for supplies), incl. 1 agreement for works that was terminated with mutual arrangement.

• In Q1-3 2008 it is planned to launch 5 procurements.• Implementation of 9 agreements for works and 4 supply

agreements has been completed.

11 April 2008 Municipal company SIA “ŪDEKA” 3

Project activities and objectives in stage II (2006-2009)

1. Reconstruction of water main and sewerage network of more than 70 km;

2. Extension of water main and sewerage network of more than 60 km;

3. Reconstruction of main pressure conduits (Ogsils-road to Kolka and mains within city borders) ~ 8 km;

4. Supply of equipment for maintenance of networks;5. Installation of water consumption meters;6. Replacement of hydrants and valves.

Priority - increase network coverage in the city and provide centralised water supply and sewerage services for up to 92% of population in Ventspils, particularly those residing in private home areas where these services are not yet available

Construction works planned in ~130 street sections and inner yards of

multi-apartment buildings in Ventspils.

11 April 2008 Municipal company SIA “ŪDEKA” 4

Project funding for stage II (2006-2009)approved budget

Kohēzijas Fonds85%

Ventspils pilsētas dome1%

Pašvaldības SIA "ŪDEKA"

14% Funding sources of eligible expenditure

Planned budget, EUR %

Cohesion Fund 18,516,077 85%

Ventspils City Council 324,576 1%

Municipal SIA “Ūdeka” 2,942,967 14%

Total eligible expenditure of the project

21,783,620 100%

Ineligible expenditure of the project 5,554,254  

Total costs of the project 27,337,874  

11 April 2008 Municipal company SIA “ŪDEKA” 5

Project progress in stage II 2006-2007 (I)

2006 20071. Extension of water main network and reconstruction 5.9 km 9.03 km

2.  Household sewerage networks extension and reconstruction 8.2 km 10.5 km

3.Construction of rain wastewater networks 6.1 km 6.4 km

4. Reconstruction of main pressure conduit (km) 5.2 km___________________________________________________________TOTAL 20.2 km 31.13 km

4. Network servicing and maintenance equipment 15 pcs.

5. Installation of water consumption meters continues

6. Replacement of hydrants and valves started

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Project progress in stage II 2006-2007 (II)

Number of sites put into operation:- in 2006 - 21 sites, incl. in 15 street sections of Ventspils city, in 4 inner yards of

multi-apartment buildings.- in 2007 - 19 sites, incl. in 15 street sections of Ventspils city, in 3 inner yards of

multi-apartment buildings, reconstructed water main from the water abstraction point "Ogsils" up to the road to Kolka.

11 April 2008 Municipal company SIA “ŪDEKA” 7

Further implementation of works in stage II of the project in 2008-2009 (amended) (I)

So far: Construction works started in 2007 continue, incl. in Gāliņciems (11 sites), on Rūpniecības Street(Durbes Street - Liepāja railway crossing point); Installation of duplicate power supply for the sewerage pumping station at 2 Muitas Street;replacement/installation of valves and hydrants;technical supervision of works.

By 01/04/2008 Agreement for works to be signed for 2 objects, where the successful tenderer has been

announced. Works to be completed by 12/2008;03-05/2008 Procurement to be launched and agreements for

works to be signed for 12 sites (planned in 2008), works to be completed by ~12/2008.

11 April 2008 Municipal company SIA “ŪDEKA” 8

Further implementation of works in stage II of the project in 2008-2009(amended) (II)

06- 08/2008 Procurement to be launched and agreements to be signed for works in 13 sites (planned in 2009). Works to be completed by ~11/2009.

By 12/2008 Construction to be completed in 28 sites in Gāliņciems, Kurpniekciems and reconstruct.sites;

By 12/2008 Replacement of hydrants and valves completed;By 12/2008 Reconstr.of city water main completed 0.73 km;09/2008 – 09/2009 Works to be completed in sites planned for 2009

(incl. works in Jāņciems (private home area in Pārventa) planned to start in September 2008).

41 sites to be put into operation in 2008, installation/replacement of hydrants and valves to be completed.19 sites to be put into operation in 2009, installation of water meters to be completed.

11 April 2008 Municipal company SIA “ŪDEKA” 9

Changes to scope of works and funding planned in stage II of the project (I)

REASONS for increase of project costs: •rapid growth of construction costs compared to the budget approved by the EC Decision in 2004;•lack of competition in the construction sector in Latvia;•increase in cost of resources globally.CONSEQUENCES: •Total budget increases by 79 %, namely from EUR 21.7 M to EUR 38.9 M;•Due to insufficient funding the scope of works must be reduced (~36 sites);•Physical indicators set in the EC Decision not to be reached in at least 3 components - newly built water supply networks, sewerage networks, installation of water meters. NOTES:- The scope of works is planned to be reduced only to the extent that still would allow reaching the objectives set in the EC Decision (at least 88-90% of population in Ventspils to be provided with centralised water services); - amendments to the physical indicators and amount of funding in the EC Decision required; - sites excluded to be included in stage III of the project to reach the original objectives (providing at least 95% of population in Ventspils with centralised water services), thus significantly increasing the scope of works in stage III and the co-financing part of the project implementer, which poses the risk for project not to be implemented at the scope initially planned.

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Funding for stage II of the project (2006-2009)Budget with increase in costs based on costs in agreements signed, forecasted costs for 2009, reduction of scope of works by ~36 sites.

Kohēzijas Fonds47%

Ventspils pilsētas dome9%

Pašvaldības SIA "ŪDEKA"

15%

Valsts budžets29%

Funding sources of eligible expenditure

Planned budget, EUR %

Cohesion Fund 18,516,077 47%

Ventspils City Council 3,565,384 9%

Municipal SIA “Ūdeka” 5,680,968 15%

State budget 11,235,097 29%

Total eligible expenditure of the project

38,997,526 100%

Ineligible expenditure of the project 7,019,555  

Total costs of the project 46,017,081  

11 April 2008 Municipal company SIA “ŪDEKA” 11

Changes to scope of works and funding planned in stage II of the project (II) SOLUTIONS:-Additional funding received for increase in costs of the project in 2006-2007 - EUR 8.7 M, incl. EUR 7.4 M from State budget (85% of the increase in cost), while EUR 1.3 M (15% of the increase in cost) to be covered by the municipal company SIA “ŪDEKA”;

-To cover the increase in costs on 19/02/2008 the Cabinet of Ministers approved allocation of 44% of state budget funding, provided the project implementer would co-finance 56%, and approval received from the EC for reduction of scope of the project. The estimated increase in cost is EUR 8.4 M, incl.

co-financing from Ventspils City Council EUR 3.2 M, co-financing from SIA “ŪDEKA” EUR 1.4 M, state budget co-financing EUR 3.7 M.

Changes to scope of works and funding planned in stage II of the project (3)

• In order to receive approval from the EC, an updated CBA for the feasibility study of stage II of the project has been started);

• PSIA “Ūdeka” has identified ~36 sites where the works cannot be carried out for the funding from the period of 2000 – 2006 due to inflation. These sites will be a priority for the EU Funds in the 2007 - 2013 programming period.

Proposed amendments to EC Decision

Drafting of amendments to the EC Decision and physical indicators has been started. Submission to the Intermediate Body and the EC planned in 2009.

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THANK YOU FOR YOUR ATTENTION!