zemeunvalsts.lv commentary
A few points are important regarding this decision. Firstly, the Riga City Council’s Housing and Environment Committee prepared the Forest Management Plan during COVID-19, knowing even then that the municipality faced income issues, though, understandably, without predicting the Russian aggression in Ukraine. Secondly, as mentioned in the news, the sawmill’s potential losses will stem from a very specific decision, for which those who made it are responsible. Thirdly, the opinions of the State Audit Office and the Competition Council, it seems, were based on now quite distant periods (2015-2017 and 2018, respectively). Fourthly, and partly related to the Committee’s decision: has the Riga City Council, which does not hide its various ambitious plans, calculated that these plans will largely be built and realised by paying for them? Does the Council think, or pretend to think, about the city’s income, which some seem to believe “just comes on its own”? The question, of course, does not only apply to the Riga City Council, but is broad and relevant – how (and should) a professional in a field (sector, capital company, etc.) act if the owner of the capital company (the holder of capital shares) is incompetent or has a very narrow view of what is happening?
(...) Based on the findings of the State Audit Office and the Competition Council, an assessment of the assets and business of the “Norupe” sawmill has been carried out, and the most economically advantageous model for ending the company’s involvement in this business segment has been outlined. The study concluded that continuing the sawmill’s operation as part of the company will result in losses from 2023 onwards and reduce the value of Rīgas Meži’s shares, thus directly affecting the interests of Riga residents. Although the planned net profit from the sawmill in 2022 is forecast at over 80 thousand euros, from 2023 the operation will cause the company 230 thousand euros in losses, and by 2026, the losses could reach 350 thousand euros.
Furthermore, in analysing the sawmill’s operations, it was concluded that there has effectively never been a year in which the production facility would have turned a profit if the necessary roundwood had been purchased at market prices. The State Audit Office has also previously pointed out this fact.
In 2021, the committee approved amendments to the company’s Forest Management Plan confirmed by the Board of Rīgas Meži. These set out significant reductions in tree felling volumes, while simultaneously developing biodiversity and recreational areas in the forests. Consequently, from 2022, the timber harvesting volume at Rīgas Meži will decrease by 35 thousand m3 compared to the previously planned amount, which is 20% of the projected volume, with a further reduction of 46 thousand m3 in 2023. By significantly reducing felling volumes, Rīgas Meži will no longer be able to provide the necessary raw materials for the sawmill (using raw materials from other commercial entities is not permitted).