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SRE evaluates the justification of the increase of costs for the reconstruction project of the Valmiera Drama Theatre submitted by SBSC


SJSC “State Real Estate” evaluates the justification of the increase of costs for the reconstruction project of the Valmiera Drama Theatre submitted by general partnership SBSC. The capital company will continue to implement the initiated project of increasing the energy efficiency of the theatre building, reviewing several possible scenarios, informs Renārs Griškevičs, Chairman of the Board of SRE.

“SRE, as a responsible representative of the public interest are doing all it takes to solve the problems in the financing of construction works presented by external conditions in the best possible way. From our cooperation partners – “SBSC” – we really expected a more responsible approach to solving the problems, especially taking into account the fact that the delay in the work causes greater inconvenience to the theatre team than was originally planned. We are considering several options for solving the situation, but the provisions of the Law and the position of a caring owner do not allow us to pay more than there is reason to do so. However, in the reconstruction project of VDT, the negotiations with the general company “SBSC” are not proceeding at the expected pace. They were commenced relatively soon after Russia's invasion of Ukraine, but by September they failed to reach tangible results, that is, mutual agreement between both parties regarding an acceptable increase of the construction costs and justification of them. The lengthy discussions with the current construction contractor do not give SRE confidence that the works will be completed within the planned period until the end of 2023,” says Griškevičs.

The rapid changes in the geopolitical situation that took place in 2022 have significantly affected the construction market. In cooperation with all involved parties and state support, SRE has managed to find solutions for compensating the increase in the cost of construction works in large, national-scale projects, such as JRT, the restoration of Riga Castle. These construction works continue at the previous pace and extent; their implementation deadlines have not been significantly affected.

SRE evaluates the price increase in accordance with the guidelines published by the Ministry of Economics on 30 June 2022 “Guidelines for the evaluation of the increase in the cost of construction materials due to the Russian military aggression in Ukraine for amendments to the existing public works agreements regarding the construction of buildings”. The guidelines provide for a specific methodology for calculating the increase in the price of building materials, while the increase in the price of other components can be justified by the contractor providing evidence of both the increase in price itself and its causal connection with Russia's military aggression in Ukraine and its consequences.

Disregarding the encountered situation during the course of works, SRE is determined to complete the reconstruction of the Valmiera Drama Theatre building in the proper quality and as soon as possible, so that the Valmiera Theatre team can resume full function in the renovated premises at the end of next year. Until now, the VDT team has been determined to continue working in the existing premises at least partially during construction. The parties involved are working on solutions that would ensure the continuity of operations during the winter season as well.

The energy efficiency and energy management of the Valmiera Drama Theatre building will be increased, a more comfortable working environment will be provided to the theatre employees, a new “black box” hall will be built, and the accessibility of the environment will be improved. Currently, almost all necessary dismantling works have been performed and construction reinforcement works are taking place in the building, including strengthening of the existing foundations of the building and constructing new ones, as well as strengthening the secant wall near the ravine of the River Rāte. The construction of two staircases is also nearing completion. Dismantling of engineering networks was already carried out in advance, including the dismantling of the existing heating and sewage system.

The planned cost of the VDT project is 9.7 million euros (which includes the costs of construction, design, authorised supervision of construction works, equipment purchase, etc.), of which construction costs are 6.6 million euros (including VAT). The reconstruction of VDT was partially financed from the funds of the European Fund for Reconstruction and Development (EFRD). The total planned EFRD funding is 4.5 million euros, of which 0.44 million euros was spent by August; the rest of the funds are planned to be acquired during 2023.

SRE successfully implements 44 projects of national importance, of which 24 are in the construction stage. The total implementation budget of the projects is more than 336 million euros. Alongside the reconstruction of Valmiera Drama Theatre, the energy efficiency improvement and renovation works of three theatres important to Latvian culture are underway. The Daile Theatre energy efficiency project is nearing completion and the theatre forecourt revitalisation project is also progressing successfully. In the Latvia Puppet Theatre and the New Riga Theatre, the construction works of the new roof structures are nearing completion. The company provides professional real estate management and administration for approximately 365 real estate properties consisting of 1100 buildings with a total floor area of 0.95 million square metres, along with land beneath the buildings covering 602 hectares and more than 3536 land properties with an area of 903 hectares. SRE is one of 23 Latvian companies that has received the highest platinum award as part of the Sustainability Index of the Institute of Corporate Responsibility and Sustainability, confirming the good governance and sustainability of its operations. The company was founded in 1996 and is 100% owned by the Ministry of Finance of the Republic of Latvia.