FDI is still waiting for the FDI is still waiting for the «ease of doing business» in Latvia «ease of doing business» in Latvia

Matiss PaegleMatiss PaegleOctober 21, 2011October 21, 2011

AtmosClear SA

AtmosClearAtmosClear

AtmosClear SA identifies, AtmosClear SA identifies, develops and finances develops and finances sustainable and renewable energy sustainable and renewable energy projects for associate Clean and projects for associate Clean and Green FundsGreen Funds

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MarketsTechnology

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Waste to Energy

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AtmosClear AtmosClear –– one of the largest FDI in Latgaleone of the largest FDI in Latgale

Operational 130k tons/pa pellets plant 15 MEUR

In construction torrefied pellets plant 40k tons/pa 6.5 MEUR

Planned 4MW Biomass CHP Project 10-12 MEUR

Estimated Total Investment ~35 MEUR in Rezekne Free Economic Zone

Total ~35 MEUR

+ Wind park investment in the phase of Due Diligence ~12 MEUR investment

Rezekne OperationsRezekne Operations –– unexpected surprisesunexpected surprises

• Normally investors plan the total investment budget (including working capital & contingencies)• On top of the regular contingencies, we had a very unexpected one – VAT & IRS !!!

Operations started December 2010VAT Receivable (TEUR):Jan 2011 132Feb 2011 265Mar 2011 421Apr 2011 604May 2011 362Jun 2011 316Jul 2011 389Aug 2011 336Sep 2011 428Oct 2011e 575Nov 2011e 702

• If not for our own deep pockets, we would be insolvent even before starting to operate normally

The initial review

The 2nd thematic review

The 3nd thematic review (ongoing)

• Rezekne afraid/unskilled/unmotivated to take decisions – wait months for Riga OK

• Rotation of inspectors each month• No internal system to see what is

checked – each month start from scratch • On the last day of deadline for VAT

reimbursal, they always ask for formal additional info/translations/etc and extend the deadline

• The latest – reimbursal delayed 75 days – subject to repeted review by Riga

Bureaucracy!!!Bureaucracy!!!

• The volume of papers with original signatures for Enterprise Register, Landbook, IRS, Municipalities, Building Permits, Banks is INCREADIBLE!

• Man hours and money spent by investor’s managers, directors and beneficiaries in travel, document signing, attendance of institutions/notaries/lawyers is incomparable to the size of the investment

• Courts in Latvia, unfortunately, accept everything that is properly formated, not necessarily properly grounded; then you wait 5 years for the final decision.

• Intransparent processes – example: wind quota distributed by the Ministry of Economics in March 2009 – allocation process challenged by German investors.... final decision expected in 2-3 years. Till then no MW would be constructed

Were is the e-commerce? Why aren’t simple procedures available on the Internet?I see only one reason – job protection for the waste army of civil servants!

The ease of doing business in LatviaThe ease of doing business in Latvia

• The World Bank 2011 Ease of Doing Business Index (183 countries)

• In Estonia under the ministries of Justice, Economics and Finance together with business representatives for a number of years has worked a special task force with a sole aim – scrutinise every parameter of this Index and propose changes for improvement. When will Latvia do something similar?

Ease of Doing Business

Rank

Starting a Business

Dealing with Construction

Permits

Registering Property

Getting Credit

Protecting Investors

Paying Taxes Trading Across

Borders

Enforcing Contracts

Closing a Business

Estonia 17 37 24 13 32 59 30 4 50 70Lithuania 23 87 59 7 46 93 44 31 17 39Latvia 24 53 79 57 6 59 59 16 14 80

Latvia 2012 21 51 112 32 4 65 67 15 17 32

AtmosClear SA

Thank You!Thank You!

AtmosClear SAChemin du Polny 12B

1066 EpalingesSuisse

: +41 21 906 1000 Swiss Office: +371 266 888 68 Mobile: MP@AtmosClear.com