ISPA Measure No:

2001/LV/16/P/PE/008

Financing Memorandum agreed between the Government of the Republic of Latvia and the European Commission concerning the grant of assistance from the Instrument for Structural Policies for Pre-accession to the following measure “Jurmala water services development located in Latvia”

The European Commission, hereinafter referred to as “the Commission”, acting for and on behalf of the European Community, hereinafter referred to as “the Community” represented by the Commissioner for Regional Policy, Mr. Michel Barnier, for the Commission

on the one part, and

The Government of the Republic of Latvia, hereinafter referred to as “the beneficiary”

on the other part,

HAVE AGREED AS FOLLOWS:

Article 1

The measure referred to in Article 2 below shall be implemented and financed out of the budgetary resources of the Community in accordance with the provisions set out in this Memorandum. The measure referred to in Article 2 below shall be implemented in line with the General Conditions annexed to the Framework Agreement signed between the Commission and the beneficiary and supplemented by the terms of this Memorandum and the provisions annexed hereto.

Article 2

Identification of the measure

The Instrument for Structural Policies for Pre-accession shall contribute, by way of a grant, towards the financing of the following measure as described in Annex I:

Measure number: 2001/LV/16/P/PE/008

Title: Jurmala water services development

Duration: Start date: The date of signature of the financing memorandum by the Commission

End date: Until 31 December 2006

Location: municipality of Jurmala

Group: Baltic Sea coastal area

Article 3

Commitment

1. The maximum public or equivalent expenditure which may be taken into account for the purpose of calculating assistance shall be e 11 042 548;

2. The rate of Community assistance granted to the measure is fixed at 75 % of total public or equivalent expenditure as indicated in the financing plan in Annex II;

3. The maximum amount of assistance from the Instrument for Structural Policies for Pre-accession is fixed at e 8 281 911;

4. An amount of e 6 625 529 is committed from the 2002 budget under budgetary line B7-020. Commitments in respect of subsequent instalments shall be based on the initial or revised financing plan for the measure, subject to the state of implementation of the measure and to budgetary availability.

Article 4

Payments

1. Community assistance shall cover payments on the measure for which legally binding commitments have been made by the beneficiary and for which the requisite finance has been specifically allocated. These payments must relate to the works described in Annex I.

2. Payments made before the date of signature of this financing memorandum by the Commission shall not be eligible for assistance from the Instrument for Structural Policies for Pre-accession.

3. The measure described in Annex I and payments by the body responsible for the implementation of the measure shall be completed no later than 31 December 2006.

The report required for the payment of the final balance should be submitted not later than 6 months after this date.

4. The advance payment is fixed at e 1 656 382, which shall be transferred as follows:

— An amount of e 828 191 is paid out after signature of this memorandum by the beneficiary;

— The remainder is paid out following the signing of the contract indicated in the procurement plan under Annex Ia as n°1 by the beneficiary, as well as fulfillment of the additional condition laid down in Article 8.3 as regards environmental impact assessment.

Article 5

Respect of Community law and policies

The measure shall be carried out in compliance with the relevant provisions set out in the Europe Agreements and shall contribute to the achievement of Community policies, in particular those concerning environmental protection and improvement.

Article 6

Intellectual property

The Beneficiary and the authority responsible for implementation mentioned in Annex I point 3 shall ensure that they acquire all necessary intellectual property rights to studies, drawings, plans, publicity and other material made in conjunction with planning, implementation, monitoring and evaluation of the project. They shall guarantee that the Commission, or any body or person delegated by the Commission shall have access and the right to use such material. The Commission will only use such material for its own purpose.

Article 7

Permits and authorisations

Any type of permits and or authorisations required for the implementation of the measure must be provided by the competent authorities of the Beneficiary in due time and in accordance with national law.

Article 8

Specific conditions related to the measure

Without prejudice to the general provisions specified in Annex III the Community grant for the measure is subject to the following conditions:

1. Condition on the assumptions and the status of the assets:

The Commission reserves the right to revise the amount of the assistance for ISPA set out in Article 3 if, within five years of the date of the completion of works, the operating conditions (tariffs, revenues, etc.) vary significantly relative to the original assumptions made in determining the level of the grant and/or there is a substantial modification:

a) affecting the nature of the operation or its implementing conditions, or giving to a private or public body an undue advantage; and

b) resulting either from a change in the nature of the ownership of any part of the financed infrastructure, or a cessation or material change in the operating arrangements.

The beneficiary country shall inform the Commission of any such change, and shall seek the ex-ante agreement of the Commission to these changes.

2. Condition on viability:

The Community grant for the measure is subject to the authorities concerned making available sufficient resources in order to ensure the effective operation and maintenance of the assets.

3. Condition relating to the environmental impact assessment:

The second instalment of the advance payment is conditional on the results of the on-going EIA procedure for the waste water treatment plant in Sloka, which will have to be agreed by the European Commission.

4. Condition relating to metering and to leakage and infiltration reduction programme:

The institutional strengthening programme shall take into account an accelerated metering programme as well as a leakage and infiltration reduction programme based on the network digital mapping. The final report should describe how metering, leakage and infiltration problems have been addressed.

5. Condition relating to dangerous substances discharged into the aquatic environment:

The final report shall include an inventory and a programme by the competent authority for the pollution reduction of substances covered by list I and list II of Directive 76/464/EEC and its specific directives 82/176/EEC, 83/513/EEC, 84/156/EEC, 84/491/EEC, 86/280/EEC (as amended by 88/347/EEC and 90/415/EEC) for the agglomeration covered by the measure. The inventory and the programme shall cover dangerous substances being discharged indirectly into the aquatic environment via sewerage system and waste water treatment plant. This programme should focus on the authorisation of indirect discharges of small and medium sized enterprises and the more generic pollution reduction from multiple sources, as mentioned in Directive 86/280/EEC, Article 5.

6. Condition relating to ensuring full compliance with EC legislation on waste water and drinking water:

The final report shall include an inventory of areas within the agglomeration covered by the measure where full compliance with the directive 91/271/EEC on urban waste water treatment, the directives on discharge of dangerous substances (76/464/EEC and its specific directives for list I substances 82/176/EEC, 83/513/EEC, 84/156/EEC, 84/491/EEC, 86/280/EEC as amended by 88/347/EEC and 90/415/EEC) and the directive on drinking water (80/778/EEC as amended by 98/83/EC) have been achieved.

If full compliance with these directives has not yet been achieved in the whole of the agglomeration, the final report shall include a detailed programme for how and by when full compliance will be achieved.

Article 9

The implementation provisions described in the Annexes to this financing memorandum form an integral part of it.

Non-compliance with the conditions and implementation provisions shall be dealt with by the Commission according to the procedure stipulated in Annex III.1. Section VIII.

Article 10

The authentic text of this financing memorandum is the present document as signed hereunder.

List of Annexes