Spanish offered to amend contract

  • 2012-05-30
  • From wire reports

DERAILED: Despite clear directions from the EU, management properly closed the train purchase contract.

RIGA - After discussions between the Finance Ministry, Pasazieru Vilciens (Passenger Train, PV), the Transport Ministry and the European Commission on May 25, it was decided to offer the Spanish company Construcciones y Ayxiliar de Ferrocarriles, S.A. (CAF) to amend the conditions in the train supply contract so that the project could receive European Union financing, reports

PV board chairman Artis Brikmanis, without naming the urgency, said that there is very little time to come to an agreement with CAF. “We must work quickly and effectively, and come to an agreement within a week,” Brikmanis said.
The European Commission has warned Latvia that if implementation of the train supply contract signed by Pasazieru Vilciens and Spain’s Construcciones y Ayxiliar de Ferrocarriles, S.A. continues, Latvia may have to itself pay the 100 million lats (142 million euros) that were to be provided from the European Union’s Cohesion Fund as co-financing for the project, according to a letter that the European Commission has sent to the Latvian Finance Ministry.

The letter emphasizes that if the implementation of the contract continues, the authorities of Latvia will be violating the EU public procurement regulations and, thus, forfeit EU funding.
The European Commission urges the Latvian authorities to find an alternative and take the necessary decisions.
The total cost of the project is expected at 144 million lats.

The problems with the train procurement contract are due to the company’s previous board, which signed a contract that did not meet the conditions set by the government or the European Commission’s opinion, Prime Minister Valdis Dombrovskis said in an interview with Latvian State Television on May 29.
When asked if Transport Minister Aivis Ronis should resign if the contract is terminated, Dombrovskis said the minister had not expected that the previous board of Pasazieru Vilciens would opt for violating the procedures it had to observe in signing the contract.

According to Dombrovskis, now there are two scenarios possible: either agreement is reached with the Spanish company on altering the conditions of the contract, so the contract would meet the conditions set for the procurement process, or the contract will have to be terminated.

The Transport Ministry has concluded that contract termination will incur no penalties from CAF. However, if the contract is implemented as is, the European Commission’s co-funding for the project could be lost.
Dombrovskis said that no one was pleased with how the new board was appointed at Pasazieru Vilciens, noting at the same time that appointing it was the transport minister’s duty. Taking into account the complicated situation, the minister had to act quickly. Dombrovskis said that Ronis had addressed several candidates, but most declined the offer to sit on the board.

Pasazieru Vilciens CEO Nils Freivalds stepped down on May 21, and the entire company’s board was replaced. Artis Birkmanis was appointed the new CEO, and Anrijs Brencans, Silvija Dreimane and Aigars Stokenbergs (Unity) were appointed board members.