Latvia, Markets and Companies

Until today, Riga municipal companies had to publish on their websites the full versions of the audits performed. Some companies have so far only published audit summaries, including RNP.

According to the Law on Governance of Capital Shares of a Public Person and Capital.

Companies, a public person has a duty, not less than once in five years, to revaluate each of its direct participation in a capital company. In the case of Riga City Council, this revaluation must be carried out by December 15.

Andris Grafs, head of the management advisory board of the companies owned by the Riga City Council, explained to LETA that termination of shareholding did not mean liquidation of a company, as the company's shares could, for instance, be sold to other market players.

"There are several options and the decision will be made by the Riga City Council. This process is never quick because, for example, the state decided to privatize then-Lattelecom already in the early 2000s, but nothing has happened yet," said Grafs, adding that it is the next Riga City Council that will consider the matter.

In assessing the municipality's shareholding in the company, the auditors state that, given the number of market players in the sectors in which RNP operates, "there is no reason to believe that RNP operates in a strategically important sector where the market is unable to ensure implementation of public interest". Consequently, the Riga City Council's shareholding in RNP is unjustified.

In the opinion of the auditors, until the Riga City Councinl's revaluation of participation in RNP, the company should take actions that facilitate transfer of housing management responsibilities to apartment owners' associations or another person designated by the apartment owners' associations.

The management of RNP with the aim to not only maintain, but also to expand the number of customers goes against the Privatization Law, because the number of buildings managed by RNP should gradually decrease as this function is gradually taken over by the private sector, says the audit summary.

RNP was established in 2010 and is fully owned by the Riga City Council. The company was established by merging 15 municipal housing companies. RNP manages 4,200 buildings with almost 170,000 customers. In 2018, the company posted EUR 59.05 million in turnover and EUR 1.09 million in profit, according to Firmas.lv.