In-Depth Review of the Investment Climate and Market Structure in the Energy Sector of the REPUBLIC of LATVIA

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In-Depth Review of the Investment Climate and Market Structure in the Energy Sector of the REPUBLIC of LATVIA In-depth review of the investment climate and market structure in the energy sector of THE REPUBLIC OF LATVIA ENERGY CHARTER SECRETARIAT 2015 In-depth review of the investment climate and market structure in the energy sector of THE REPUBLIC OF LATVIA ENERGY CHARTER SECRETARIAT 2015 ENERGY CHARTER SECRETARIAT 2015 THE ENERGY CHARTER SECRETARIAT The Energy Charter Secretariat is a permanent office based in Brussels supporting the Energy Charter Conference in the implementation of the Energy Charter Treaty. The Energy Charter Treaty and the Energy Charter Protocol on Energy Efficiency and Related Environmental Aspects were signed in December 1994 and entered into legal force in April 1998. To date, the Treaty has been signed or acceded to by 52 states, the European Community and Euratom (the total number of its members is therefore 54). The fundamental aim of the Energy Charter Treaty is to strengthen the rule of law on energy issues by creating a level playing field of rules to be observed by all participating governments, thereby mitigating risks associated with energy- related investment and trade. In a world of increasing interdependence between net exporters of energy and net importers, it is widely recognised that multilateral rules can provide a more balanced and efficient framework for international cooperation than is offered by bilateral agreements alone or by non-legislative instruments. The Energy Charter Treaty therefore plays an important role as part of an international effort to build a legal foundation for energy security, based on the principles of open, competitive markets and sustainable development. The Treaty was developed on the basis of the 1991 Energy Charter. Whereas the latter document was drawn up as a declaration of political intent to promote energy cooperation, the Energy Charter Treaty is a legally-binding multilateral instrument. Between 20 and 21 May 2015 the Energy Charter Conference and partner countries adopted the International Energy Charter which is a renewed political declaration mapping out common principles for international cooperation in the field of energy. The historic adoption and signing of the International Energy Charter took place at a High-Level Ministerial Conference in The Hague, Netherlands. The information contained in this work has been obtained from sources that are believed to be reliable. However, neither the Energy Charter Secretariat nor its authors guarantee the accuracy or completeness of any information published herein, and neither the Energy Charter Secretariat nor its authors shall be responsible for any losses or damages arising from the use of this information or from any errors or omissions therein. This work is published with the understanding that the Energy Charter Secretariat and its authors are supplying the information but are not attempting to render legal or other professional services. This document and any map or reference included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. This document does not involve any endorsement by the Energy Charter Conference or by any of its members in this respect. The Energy Charter Secretariat makes no representation or warranty, express or implied, in respect to the publication’s contents (including its completeness or accuracy) and shall not be responsible for any use of, or reliance on, the publication. © Energy Charter Secretariat, 2015 Boulevard de la Woluwe, 56 B-1200 Brussels, Belgium ISBN: 978-905948-169-5 (English, paperback) ISBN: 978-905948-170-1 (English, pdf) Depot number: D/2015/7850/2 The reproduction of this work, save where otherwise stated, is authorised, provided the source is acknowledged. All rights are otherwise reserved. Layout Design and Prepress: Diana Spotinova for Spotinov Print Ltd. Printed by Spotinov Print Ltd. Photo on the Cover: Riga Hydroelectric Power Plant (Rīgas hidroelektrostacija) Source : JSC Latvenergo (Latvenergo AS) Photo on the chapters: Kegums Hydroelectric Power Plant (Ķeguma hidroelektrostacija) Source : JSC Latvenergo (Latvenergo AS) Foreword by the Energy Charter Secretary General Under the Latvian Presidency of the Council of the European Union, the High Level Conference launched the important process for the formation of an Energy Union in February 2015. The Energy Union is a response to the current geopolitical situation in Europe and is expected to strengthen the EU’s energy independence. The Union is expected to address five dimensions of energy policy that are linked together: energy security and solidarity; a fully integrated internal energy market; energy efficiency as a contribution to the moderation of energy demand; decarbonisation of the economy; and research, innovation and competitiveness. Although the integration of energy systems within the Energy Union is well advanced among its Member States, more international cooperation is required with partner countries outwith the Energy Union's geographic coverage. The International Energy Charter, which was adopted and signed during the Ministerial Conference in The Hague on 20-21 May 2015, is the policy instrument for reaching out to countries around the world, especially the energy- producing states. Latvia has a favourable geographical position and is a strategic location for business operations targeting the developed economies of the EU and the emerging markets of its eastern neighbours. As a full member of the Energy Union and the Energy Charter Latvia is well positioned to benefit from multilateral cooperation in the energy sector and improve its energy security. This in-depth review of the investment climate and market structure inof the energy sector of Latvia provides extensive information about the investment climate along with valuable information on the legal frameworks for establishing business in the country. Insights into the structure of the energy market enable valuable analysis of the potential for further development and investment opportunities. In the light of the results of the review the Energy Charter Conference has adopted the recommendations presented in the book that are intended to assist national policy-makers to improve investment policies in the Latvian energy sector. Energy Charter Secretary General Amb. Urban Rusnák 3 In-depth review of the investment climate and market structure in the energy sector of the Republic of Latvia | 2015 Introduction Latvia ratified the Energy Charter Treaty (ECT) and the Protocol on Energy Efficiency and Related Environmental Aspects (PEEREA) in September 1995. Since then it has actively participated in the activities of the Energy Charter Conference. This in-depth investment climate and market structure (ICMS) review in the energy sector of Latvia report has been prepared in the first quarter of 2015 by the Ministry of Economics of the Republic of Latvia with the technical assistance of the Energy Charter Secretariat. The Energy Charter Secretariat conducted a mission to Latvia in march 2015 to interview public and private stakeholders. Peer review experts from Denmark and Kazakhstan contributed to preparation of the final report. The policy conclusions and recommendations proposed by the Energy Charter Secretariat were discussed at the meeting of the Investment Group on 21 April 2015 and adopted by the Energy Charter Conference in writing on 15 May 2015. It is hoped that the report, along with its policy recommendations and conclusions, may contribute to improving the investment climate and to developing effective legislation and regulation for a competitive energy market in Latvia. A stable, equitable, favourable and transparent investment climate will create the conditions for regulatory stability and market confidence attracting potential investors and possible cooperation partners. This exercise also aims at promoting energy investments in Latvia and at the same time reinforcing cooperation among the members of the Energy Charter Conference. Increased investment flows and regional cooperation are an essential component towards achieving the national strategic goals of energy security and sustainable energy. Interested stakeholders will find in this in-depth ICMS review updated information for the period from 2010 to 2015, based on publicly available data, concerning: recent developments of the national economy; the legal framework for energy investments and a sector by sector analysis of the energy market in the Republic of Latvia. 4 Table of Contents In-depth review of the investment climate and market structure in the energy sector of the Republic of Latvia | 2015 Table of Contents 1. Executive Summary and Policy Recommendations ............................................................................................................................11 2. General Information ............................................................................................................................................................................................................................19 2.1. Country information .......................................................................................................................................................................................................................20 2.2. Political System in Latvia ..........................................................................................................................................................................................................21
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