Bidder excluded from power grid procurement over security concerns

The Latvian electricity transmission provider High Voltage Network (Augstsprieguma tīkls, AST) signed a €77 million contract with Rolls-Royce Solutions last week to supply high-capacity battery systems. Another bidder, meanwhile, was excluded from the procurement over security concerns, Latvian Television's De Facto reported on February 18.

In February next year, Latvia and the rest of the Baltic States will disconnect from the Russian electricity grid. Stability will have to be provided locally. The Baltic States will officially announce the disconnection to Russia and Belarus in August.

One of the main objects needed is high-powered batteries. They are necessary to enable the AST grid to quickly adjust the system, where necessary to store energy from the grid, and later to inject back in the event of a lack of energy. AST board chairman Rolands Irklis explained: “These here batteries, either by taking energy from the grid or by giving energy into the grid, will be able to stabilize the operation of the grid, will provide frequency stability, will ensure that we do not have the lights out at the moment when there is some significant change in generation or consumption. These batteries are therefore extremely important.”

The procurement of batteries failed in the first try. There was only one bidder with a much more expensive offer than AST planned to commit to the project. Now the second attempt has come to an end.

The bids were submitted by three bidders, Italian “Nidec ASI”, German-based “Rolls-Royce Solutions” and local firm LLC “Monum”.

It was Monum that offered to do the work the cheapest – for EUR 74.6 million. However, they were excluded from procurement by the High Voltage Network on the basis of a recommendation from the intelligence service – Constitution Protection Bureau (SAB). Irklis said the opinion was not negative about “Monum” itself, but about a partner it would attract.

“A recommendation from the competent authority was received that they should not be contracted in this case because of perceived security risks,” Irklis said.

More specifically, which caused security risks in Monum's bid, neither AST nor SAB commented.

A similar situation was recently observed in the procurement of the Rail Baltica main route, where a Turkish applicant was excluded based on a recommendation of the State Security Service. The decision was upheld both by the Procurement Monitoring Bureau and later by the court. Monum has not attempted to appeal the exclusion.

Monum, meanwhile, said in a written response to LTV that it was still confused by the winner of the tender, as it is associated with a  “builders cartel.” At issue is Rolls-Royce Solutions affiliated subcontractor LEC Construction International. It is a German company wholly owned by Latvian company Latvijas Energoceltnieks, which was recognized by the Competition Council as a member of a cartel. 

Meanwhile, the Procurement Monitoring Bureau admitted that this is a way to circumvent the ban on “cartelists” starting in procurements. If “Latvijas Energoceltnieks” had been attracted as a sub-contractor itself, it would not have been possible to win the procurement,” said Artis Lapiņš, head of the Procurement Monitoring Bureau.

On the other hand, AST Board Chairman Rolands Irklis emphasized that the involvement of a cartel member was carefully evaluated in the procurement and concluded that this does not lead to an exclusion: “This is not one of those cases where it would be justified to exclude [the tenderer], despite the fact that the related company has also been in this cartel in Latvia. It has come under scrutiny from lawyers and procurement professionals. This procurement result is also not contested at the Procurement Monitoring Bureau, which gives us confidence that we are acting in accordance with the provisions of the Procurement Law.”

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