Riga municipal water utility Rigas Udens will be the first Latvian municipal company to issue bonds, which will then be listed on the stock exchange. Krisjanis Krumins, chairman of the board of Rigas Udens, said in an interview with LETA that the total value of the bonds is planned to reach EUR 60 million, but the issue will take place in several parts. However, the total investment program of Rigas Udens is much broader - EUR 235 million - and therefore negotiations are also underway with banks on loans.

Rigas Udens is preparing for a bond issue this year. How does it feel to finally be the first municipal company to issue bonds, not only in Riga, but in Latvia in general, after the long and not very fruitful discussions with politicians about using the opportunities provided by the capital market?

We are now in the final phase with the bond offer. It is a great pride and a challenge at the same time. We want to be the first municipal company in Latvia to issue bonds. In addition, we plan to issue green bonds in line with the European Green Bond Standards, which only came into force last December. As far as we know, currently only a few companies in Europe have issued bonds in line with these new criteria.

Last year, we also received a high rating of A3 from the international credit rating agency Moody's, which corresponds Latvia's sovereign credit rating. As the sovereign credit rating is the highest rating bar for state or municipal companies, we have reached it and the challenge is to maintain it in the future. It was also very gratifying to be invited by Moody's to present the company's approach to building a sustainable strategy to their subsidiaries around the world. Our experience was used as an example to illustrate the main challenges faced by companies in the European region. This was also very well received.

It was previously said that the bond issue could take place in May. Do you have a date for the issuance now?

We are now actively meeting with potential institutional investors across the Baltics, presenting the company, our strategy, financial results, which are of course an important part for investors, and gathering feedback. In these discussions, we are outlining that the issue is planned for the second quarter of the year. Time will tell whether there will be the best market conditions to launch on the capital market in May.

What is the planned volume of emissions?

The total issuance program is planned up to EUR 60 million and the bonds will be issued in several phases depending on the planned timetable for the investment projects.

What is the planned maturity of the bonds?

Currently, we are planning a maturity of between five and ten years. A specific maturity for the first issue will be announced as we get closer to issuance.

You mentioned that you are meeting investors. Can you already describe their interest?

There is considerable interest in our intention to issue bonds because it is important for institutional investors to have both financially sound and safe companies in their portfolios. I should also add that we have plans to offer bonds not only to institutional investors but also to retail investors, including our employees, through a public bond offering.

As Rigas Udens serves about half of Latvia's water needs, we also want to encourage the interest and involvement of local people in the company, allowing them to participate directly in its development and see the results of their investment in their own daily lives, using such a vital resource - water.

What would be the nominal value of a single bond in such a case, since the price of a single bond is usually quite high and this discourages a large number of individuals from participating in the bond market?

We are considering an investment threshold that would make this option available to a wider range of investors, for example EUR 100 per bond.

You have already mentioned that the bonds will be backed by concrete projects. Can you outline what is planned?

When we developed the 2030 medium-term strategy, we roughly outlined the first needs up to 2028. A total of EUR 235 million of investment is planned, of which 64 percent would meet the European Green Bond standard. Accordingly, the up to EUR 60 million we want to raise through bonds is only part of what covers the investment in our plans.

Our projects are divided into two blocks. The first block is related to climate change mitigation. One of the objectives in this area is to increase the capacity of the methane tanks at the Daugavgriva biological treatment plant. By processing sewage sludge into metal tanks, we achieve process efficiency and are able to increase the potential for electricity and heating energy. The second major block is the sustainable use and protection of water and marine resources. This includes the rehabilitation of sewerage networks and stations, the replacement of sewage pumps and the construction of a sewage storage reservoir. The purpose of the storage reservoir is to reduce emergency discharges into the Daugava River during heavy rainfall by storing wastewater and then diverting it to the Daugavgriva. This block also includes the Daugavgriva biological treatment plant expansion project.

So the project portfolio has been identified and is now larger than the planned bond issue.

What is the current state of the overall water and sewage system in Riga?

I would definitely describe the technical condition of Rigas Udens networks as good enough. We have carried out modelling, evaluating several scenarios to determine the optimal renewal rate for the water supply and sewage networks. Our calculations show that up to 15 percent of the total network length can be renewed by 2040.

Are there any sections that are currently of most concern? For example, there have been situations where potholes have been washed out under streets or in courtyards, and cars have even crashed into them.

I cannot single out such particularly critical sections. Riga has been built at different times, and we have pipes of different materials and different ages, but I cannot say that one particular street, for example, is in a critical situation.

Rigas Udens has started designing the development of centralized water supply and sewage systems in Darzini neighborhood, connecting the adjacent neighborhoods to the network. When could construction start? How much investment will be needed?

Rigas Udens medium-term strategy is to start designing and building the sewage system in Darzini, and the Riga City Council has already decided to allocate 30 percent of Rigas Udens profits to the development of the Darzini neighborhood. The total investment is currently expected to be up to EUR 40 million, and together with the Riga City Council's decision to allocate dividends, we need to invest around EUR 26.3 million in Darzini by 2030. This means that additional co-financing will be needed to build these networks. Over the next two years, we will make an assessment of the implementation phases.

Does this mean you will be applying for EU Cohesion Fund money again?

EU co-funding for such purposes - for network extensions - is no longer. At the moment, the Cohesion Fund is focusing on wastewater treatment, energy efficiency measures, etc.

Where will you get the necessary funding to install the network in Darzini?

I think it will be negotiations with the Riga City Council on municipal co-financing for the investment part.

Funds will also be earmarked to continue development of centralized water supply and sewage systems in Mangalsala. What will happen there?

The Riga City Council decided in the previous planning period to allocate 30 percent of the dividends to Mangalsala, and we have accumulated this amount every year. Currently, around EUR 6.3 million have been accumulated for this purpose. This year we plan to launch the tender and contract for the construction work, and the design will be finalized in the next few months.

Once the sewage and water supply networks are completed, it will be possible to connect about 1,100 residents in Mangalsala and 4,100 residents in Darzini to the network.

What is the overall situation with water and sewage connections to private homes? Has the municipal and Cohesion Fund support for private connections helped and are more people connecting?

Those households that were really waiting for the moment when a connection to the centralized networks would be available, used the opportunity very quickly. Municipal funding is also available for this process.

To sum up, in 2024, approximately 2,100 residents were connected to the city's sewage system and the total amount of co-financing for each connection was up to EUR 2,000.

Have you investigated why people do not connect to centralized networks when the opportunity arises?

The reasons are different. For example, some houses do not have indoor sanitary facilities but have an outdoor toilet. Other households have built biological treatment systems some time ago and therefore do not consider it necessary to connect to the centralized sewage network. There are groups of people for whom the cost of connection seems too high, even with co-funding.

How much do residents have to pay to have their house connected to the centralized sewage network?

The cost depends on how many meters of connection need to be built, but on average it is EUR 2,000 if the total connection costs around EUR 4,000 and half is co-financed by the Riga municipality.

Do you know how many households with access to centralized networks are not connected?

98.14 percent of the population in Riga has access to centralized sewage services, but 96.74 percent have connected, so in the whole of Riga about 12,000 people have not taken the opportunity to connect to centralized networks.

How many neighborhoods in Riga have no access to centralized sewage networks at all?

These include Darzini, Kundzinsala, Trisciems and some locations in other neighborhoods, such as Ciekurkalns.

It should be noted that we have planned to invest around EUR 2 million every year specifically for the construction of centralized networks in those neighborhoods where there are none at the moment. We have drawn up a list of priorities based on the population and the approximate costs in specific streets and neighborhoods.

How are you doing with EU requirements for centralized water supply and wastewater treatment?

We are treating our wastewater to the best possible standard, and the performance is even better than required by the legislation. If we look at the nitrogen and phosphorus load to the sea over the course of a year, it is well below the approved standards.

You already mentioned that the Daugavgriva wastewater treatment plant will be expanded. How will its capacity increase?

The total capacity will increase by almost 50 percent, but it should be noted here that this is hydraulic capacity. The plan is to expand the Daugavgriva biological treatment plant by the end of 2029. We are currently working on the technical specification and procurement documentation. The total estimated investment for the works is around EUR 50 million.

Will it be enough for Riga? Or will there still be situations where sewage goes straight into the Daugava during heavy rains?

For this reason, we will build storage reservoirs to collect and store wastewater. However, a situation where, during heavy rainfall, the flow of wastewater into the Daugava is prevented 100 percent is virtually impossible. At the same time, we are in any case within the permitted annual percentage of wastewater flowing into the Daugava. The overall figures are below 5 percent. It should also be noted that last July, when we experienced unusually heavy rainfall, the sewage that got into the Daugava was very heavily diluted - two thirds of it was rainwater.

What is the progress in eliminating the smell in the sludge fields in Varnukrogs, and how many complaints are you receiving from Spilve, Babite and Mezare in the Marupe municipality?

When the sludge fields in Varnukrugs were put into operation in 1994, they were located far from densely populated areas, but in recent decades the residential borders have expanded and residents have chosen this neighborhood as well. We are aware of this situation and have a concrete action plan to address it. First of all, a very important aspect is to be noted: the construction of two additional new methane tanks at the Daugavgriva biological treatment plant. The sludge will be recycled and passed on to farmers, who will be able to use it to fertilize their arable land. Currently, it is the unprocessed sludge that poses a challenge, as we lack the processing capacity. The construction of the methane tanks would help to address this issue.

We are also planning to cover existing sludge storage areas - with a biomembrane or special film - as a special solution to reduce smells and gas leakage. In addition, we already have equipment in place to limit smell discharges from Varnukrugs.

You have already mentioned that the total investment portfolio is planned at EUR 235 million. EUR 60 million is planned to be raised through bond issues. Where will you get the rest?

We are currently negotiating with the European Investment Bank to raise EUR 70 million, and we also plan to borrow from local commercial banks.

From 1 January, Rigas Udens tariffs were increased. Are changes planned for the next year as well, including in view of the extensive investment plans?

Regardless of the investment plans, end-user tariffs for water services are fully regulated. The tariffs for both water supply and sewage services are approved by the Public Utilities Commission to ensure the affordability and quality of services.

What about payment discipline? Do you also incur customer debts?

If we count arrears from day one, customers’ debts reach EUR 2.8 million, but actually more than half of that is cleared within a month. This figure has not changed for many years and we monitor it closely. In fact, it can be said that no more debt is being built up, but there is not much less of it either.

What are the overall trends in water consumption in Riga? Is it increasing, decreasing?

Water consumption has stabilized now, whereas in previous periods there was a decline. 2024 was even the first reference period in the last seven years when water consumption increased rather than decreased. We supply about 100,000 cubic meters of water to Riga every day and treat about 140,000 cubic meters of wastewater every day. Why is there such a difference? A large proportion is rainwater. Also, Marupe municipal farm discharges all of its wastewater to us, while Jurmala discharges about half, so there is a higher treatment volume. We observe that there is neither a significant decrease nor an increase in these volumes.

Was the drop in water consumption in previous periods due to the population decline in Riga?

Yes, of course, water consumption definitely correlates with population. At the moment, the number of customers has levelled off and there is no drop.

What are the company's financial results for 2024? What are the forecasts for 2025?

In 2024, our revenue level is the same as in 2023. In 2025, we expect to achieve a higher turnover of EUR 80 million. The projected increase in turnover is due to the tariff changes that came into effect on January 1 and the additional population that has become our customers - 2,250 people.

Last year we built the largest sewage pumping station in the Baltics, which saved us around EUR 0.5 million on electricity alone compared to the outdated station. Profit for 2024 is EUR 8.4 million, 10 percent of the profit go to the development of the Mangalsala project, 30 percent to Riga City Council, including co-financing to connect residents to our water and sewage network, the remaining 60 percent go to Rigas Udens investment projects.

What are your plans for this year?

There are no plans to increase the number of staff. This year's profit figures are likely to be higher than in 2024 due to tariff changes. In autumn 2025, further tariff changes will also be decided, as Rigas Udens is actually forced to increase tariffs every year due to investments made to maintain and improve service quality.