Public and Private Partnerships in the Baltic Region:Experience of Riga City

The experience of Riga City

Shortage of public infrastructure with shortage of finance from public bodies the reason for seeing PPP as one of solutions.

On the action plan for possible PPP development: Water and lightning; Roads and rail; Public administration buildings; National Opera building; Schools.

The aim of the project:TO ENFORCE THE MAINTANACE, EXTENSION AND REHABILITATION PROJECT OF RIGA STREET LIGHTNING NETWORK

Self governmental Agency of Riga “Rigas Gaisma” maintaining: 43109 light points (total electricity power is 8000 kW); 26805 poles; 1722,5 km of cables and air-wire lines; 46 electronic public clocks in Riga.

Main problems: Frequent failures and high cost penalties, owing to lack of periodic and

preventive maintenance; Lighting level widely below that available from equipment using modern

optical technologies; Poor illumination efficiency, for the following reasons:

There are worked out Technical and Maintenance programme which includes: Set up of the Data base; Full technical renovation of the system; Development and implementation new Maintenance system.

Street Lighting Project for Riga City

Street Lighting Project for Riga City Perspective financial model worked out by

consultants for PPP model:

CURRENT BUDGET PERSPECTIVE BUDGET

OPERATING COSTS

ENERGY 1.1 0.8

WAGES

2.3 1.8OVERHEAD

MATERIAL & EQUIPMENT

SUBTOTAL 3.4 2.6

LIFE CYCLE INVESTMENTS 0.3 1.1

TOTAL (M LVL) 3.7 3.7

ESTIMATED SAVINGS PER YEAR - 0.8

New administrative centre of Riga City Mainly inspired from the positive example from Vilnius City;

Departments and other structural units of Riga City Council located dispersedly;

Building costs just for RCC building accounts 44.7 millions LVL (63.6 millions EUR)

Some state institutions announced the interest to take part in the project;

Planned as a new administrative centre of Riga City including RCC building, state institution offices, new congress centre, shopping malls, hotels etc.

Trilateral co-operation between municipality, state and private sector needed to realise the project needed.

Final decision planned to make still in this year.

RCC building

Municipality

Agreement

Special Purpose Vehicle

Investment (~5%)

- Land

- Rent Investment (~95%)

- design

- construction

- operation

- letting

- transfer

RCC building: municipality

Investments Benefit

Land Land remains as a property of municipality

Funds from sales of real estate (if necessary)

Latterly, building passes to municipality (if Transfer is prescribed)

Possible funds from State investment program and EU

Receivement of clearly defined service and payment of adequate rent

Daily operational concerns transferred to private sector

RCC building: private partner

Investments Benefit

Design Long term rent agreement with RCC

Construction of building and infrastructure

Clearly defined long-term agreement and profit from efficiency in operation

Operational costs Potentially – RCC transfers land to SPV remaining the ownership (if other buildings in the territory are planned)

Potentially – collection of rent from other organisations (if building is built bigger than for RCC needed and rest or the building leased)

RCC building: investments and sources of financing

Investments LVLSources of

financing LVL %

Land* 1 602 720 Riga City Council 1 602 720 3.57%

Design** 421 200 Private partner 42 541 200 94.87%

Construction*** 42 120 000 SIF, EU 697 000 1.55%

Infrastructure*** 697 000      

Total 44 840 920   44 840 920 100%

* Potential market value 100 EUR/m2

** 1% from construction costs

*** Prices of October 2005

Location of new administrative centre of Riga City

Riga Northern corridor - segments

123.3 M EUR

96.2 M EUR

434.6 M EUR

Tunnel 1 km

Connections 4.6 km

Crossing 1.3 km

8.2 km

6.1km1.segment

2.segment

3.segment

4.segment

54,4 M EUR

4.9km

Completion of reconstruction of Latvian National Opera building Reconstruction of LNO building split into 3 parts, 2 of the

already realized.

Third (an last) part includes: Most of premises needed for artistic personnel; Most of premises needed for administrative use; Several technical premises; Cattering service; Undergroung level parking lot (as an additive).

As an alternative: an open concession (LNO building + underground level parking lot).

Investments needed – up to 5 millions LVL (7.11 millions EUR).

Development of Lucavsala Island Huge undeveloped territory located in the heart of

Riga.

Location very attractive to investors.

Must be seen in the context of transport organisation aspects in the area (need for new crossings of Daugava river).

Planned the city-in-the-city concept to apply.

Planned type of development: SPV or joint venture. Decision still in this year.

Location of Lucavsala Island

Conclusion

Riga City Council: next steps planned: introduction of PPP taskforce in the structure of Riga City

Council responsible both for strategic and day-to-day responsibilities of implementation of PPPs.

to continue the work with projects mentioned and to consider other possible projects of public infrastructure in Riga City to apply the principles of PPPs.

Adoption of new versions of Law of concession and Public procurement law will make the environment and situation in the framework of PPPs more obvious and will help Riga City Council with giving more options to act.

Thank you!

Riga City Council