Annual Review Meeting Operational Programme Growth and Employment

Annual Review Meeting Operational Programme «Growth and Employment» The Ministry of Finance 05. 12. 2019.

Agenda 5. Overview of the Programme Performance based on main points of the air and most updated information 5. 1. OP Growth and Employment implementation – The principal results achieved over the previous years and this year, including financial implementation – Performance of the programme taking into account the indicators – Performance Framework: moving towards the final targets – Major projects – Financial instruments – Issues affecting the implementation of the programme 2

5. 1. OP Growth and Employment implementation 3

Significant progress in 2019, especially with payments from EC Data till 31. 10. 2019. M EUR, % of EU funding, progress % since 31. 12. 2018 4

Speed of investment flow is good - no risk of EU funds allocation loss 2019: by October yearly target of EU funds payment claims to the Commission is reached , 2020 target could be reached already in the beginning of 2020. * execution below the red line (cumulative target value) means net EU funds allocation loss 5

updated Yearly budget expenditure forecast for project implementation Years 2019 -2024: Balanced expenditure flow based on previous planning periods’ experience 6

Financial progress by Priority Axis (PA) % of EU funds, data till 31. 10. 2019, increase in 2019 [%]) ■ Data till 31. 10. 2019. ■ Data till 31. 12. 2018. 1. Contracted projects 85% 84% 81% 2. Payments to final beneficiaries 90% 96% 90% 86% 85% 68% 67% 48% 36% 33% 40% 39% 38% 20% 1. PA 2. PA 3. PA 4. PA 5. PA 6. PA 7. PA 8. PA 9. PA 26% 1. PA 2. PA 3. PA 4. PA 5. PA 6. PA 7. PA 8. PA 9. PA 3. Declared expenditure* Incl. expenditure in «pipeline» to be declared to EC by the end of 2019 70% 50% 36% 19% 27% 30% 39% 36% 35% 23% 1. PA 2. PA 3. PA 4. PA 5. PA 6. PA 7. PA 8. PA 9. PA 7

Overall the best financial performers – ESF Employment & SME competitiveness, ERDF Transport & Education In 2019 greatest progress in Transport PA commitments & Education PA payments. (Data till 31. 10. 2019. , % of Allocation of EU funding in priority axis) «Skanstes tram» project was terminated Increase / Decrease in 2019 Priority Axis 1. PA 2. PA 3. PA 4. PA 5. PA 6. PA 7. PA 8. PA 9. PA Average Contracted projects 17% 10% 4% -6% 13% 26% 0% 5% 4% 11% Payments to final beneficeries 13% 10% 7% 16% 5% 7% 18% 11% 16% 8

Majority of Performance framework target values for 2018 of financial and output indicators are achieved > 100% + 983% 830% 800% 510% 470% 450% 400% 278% 239% 198% 190% 200% 213% 158% 153% 160% 179% 150% 130% 128% 126% 121% 128% 109% 105% 134% 127% 122% 139% 132% 104% 92% 100% 50% 177% ERDF 1. R&I 2. ICT ERDF ESF 3. SME ERDF CF 4. Energoefficency 5. Environment Financial indicators fulfillment ERDF CF 6. Transport ESF YNI 7. Employment ERDF ESF 8. Education 9. Social inclusion Average output indicators and key implementation steps fulfillment 9

In 2019 outputs & results keep progressing… Examples of indicators with highest growth dynamics in 2019, data till 31. 10. 2019 (% from 2023 target, progress in 2019) 2 171 household with improved energoefficiency (+1 455) 5% 62, 61 km reconstructed water gutters (+62, 61) 0% 30 611 tourist increase in supported culture objects (+22 611) 6% 428 Academia improved competence (+414) 2% 173 700 persons active in health promotion (+41 932) 26% 461 new jobs in supported infrastructure for business (SO 3. 3. 1) (+151) 30% 296 supported R&I enterprises (+88) 46% 0% 10% 20% 30% 40% 50% 2018 60% 2019 70% 80% 90% 10

Performance framework 2023: sufficient confidence to achieve target values Status of planned in projects contracts till 07. 11. 2019. – Majority in safety; 3 indicators lagging behind No 1 -9 = PAs 65% threshold from financial corrections 13 from 30 indicators have already achieved > 65% 11

Major projects Electrification Total Costs: 439, 7 M EUR, incl. EU Funds 318, 6 M EUR (+ reserve 28, 1 M EUR) ü 12. 07. 2019 EC approval ü 09. 10. 2019 Project contract ü 10. 08. 2018 Design and construction procurement, results ~ 2020/Q 2 Stradiņi - A 2 building Total costs: 91, 1 M EUR, incl. EU Funds 64, 3 M EUR ü 28. 08. 2017 Contract for development of Construction Project and the Author’s Supervision ü 01. 12. 2018 EC approval & 28. 01. 2019 Project contract ü 24. 10. 2019 The design project is completed ü 11. 04. 2019 Repeated Construction Procurement, results ~ 2020/Q 1 Ø 03. 10. 2019 Mo. H proposed OP amendments to increase project total costs to 120, 5 M EUR, EC approval is required Ø MP Application modifications + JASPERS assistance in pipeline Inčukalns Phase II Total Costs: 29, 7 M EUR, incl. EU Funds 11, 6 M EUR ü 23. 10. 2017 EC approval ü 09. 02. 2018 Rehabilitation and monitoring contract ü Until 01. 11. 2019: - southern pond excavated 23 989 t (76% of total) and disposed 18 327, 36 t (more than planed); ü - northern pond excavated and disposed all contaminated sand, pumped out 75 830 m 3 (70% of total) ü Approved payments 16, 2 M EUR Passenger trains for Riga/Pieriga (planned) Total Costs: 161, 2 M EUR, incl. EU Funds 114, 2 M EUR ü 10. 06. 2019 Mo. T proposed OP amendments – new major project «Purchase of electric trains for Riga and Pieriga passenger transport» in place of cancelled «Skanstes tram» project. Ø EC approval is required Ø MP Application + JASPERS assistance in pipeline 12

updated Financial Instruments as implemented by state-owned development finance institution ALTUM Cumulative data until 30. 06. 2019. , M EUR EU funding (without Performance reserve) Fund of Funds (without reserve – 7, 7 M EUR) Energy efficiency in residential buildings (without reserve – 11, 9 M EUR) 13

updated Financial Instruments (FOF) Notable progress in Loan guarantees and Microcredits Data until 30. 06. 2019. , M EUR EU funding 5 Microcredits and start-up loans 1, 9 1, 6 0 2 Loan guarantees 4 0 Technology accelerators 1, 3 1 5 2018 15 1, 2 5 10 19, 8 20 10 20 32 5, 5 25 30 831 Number of enterprises receiving financial support other than grants (93% from 2023 target) 377 Number of new enterprises supported (102% from 2023 target) 110 M EUR Private investments matching public support to enterprises (non - grants) (305% from 2023 target) - Loan guarantees 109, 5 MEUR - Venture capital 0, 5 MEUR 10, 7 1, 1 2 0 2017 3, 6 10 3, 1 13 0 nture capital 6, 6 5 7 0, 4 1, 2 1, 1 43, 8 6 8, 3 0 Mezzanine loans 0, 3 1 0 35 40 45 28, 9 10 06. 2019 15 20 25 30 35 Available EU financing Performance Reserve (MOE proposal 11. 2019) 14

Operational Programme amendments – under discussion Financial allocations to: • JSC “Pasažieru vilciens” rolling stock major project (TO 4) • Pauls Stradins Clinical University Hospital major project (TO 9) • Deinstitutionalisation projects (TO 9) Changes in indicators/intervention codes (related with proposed OP financial allocations) Changes in indicators/intervention codes (actual performance, previous redistributions between SO) 15

OP and PA amendments – indicative time table updated OP amendments: • Cabinet of Ministers (Co. M) decision December 3, 2019 • Submission via SFC –December, 2019 • In parallel – Co. M regulation, project selection criteria PA amendments: • December/beginning of January – coordination at national level (including MC) • Submission via SFC – January, 2019 16

updated TO DO • Major project close monitoring – speed up, effective amendments • OP amendments incl. national regulations – close monitoring of the decisions and reallocation of funds if necessary – EC support needed • EC further clarification necessary – propose LV+EC technical meeting: 1) definition of “other body that is part of the judicial system” for legal certainty” – (EC answer pending) 2) the limitation periods for detecting, reporting and recovery of irregularities within Cohesion policy projects (EC answer received but still open questions) questions 3) Penalties within procurement contracts & eligible costs for EU co-financing (EC answer received but still open questions) questions 4) SO 1. 1. 1. 3. «Innovation grants for students» lump sum methodology – still some clarifications & assurance needed 17

Annual Review Meeting Operational Programme «Growth and Employment» The Ministry of Finance 05. 12. 2019.

Additional materials 19

Within separate funds «envelopes» ERDF is a leader in submitted projects, ESF - in payments from EC Data till 31. 10. 2019. , M EUR, % of EU funding, progress % since 31. 12. 2018 20

Rapid progress in payments to final beneficiaries within Integrated territorial investment ITI projects ITI progress in Latvia (Till 31. 12. 2018 + 2019), M EUR 196, 0 20, 9 53, 0 216, 9 (100%) 149, 0 67, 5 35, 7 54, 3 97, 2 62, 2 } 203, 3 (94%) } 164, 7 (76%) } 97, 9 (45) 21

Liepāja, Rīga, Valmiera <50% projects in implementation Rēzekne, Daugavpils > 50% in payments to beneficiaries 22