Changes in the Procedure for organising and administering the auctions for the entry into long-term and half-yearly contracts

After the Government of the Republic of Lithuania has adopted on 15 June 2022 Amendments to the Description of the Procedure of Trade in Raw Timber and Timber Harvesting Residues Produced in State-Owned Forests, the Procedure for organising and administering the auctions for the entry into long-term and half-yearly contracts and the terms for the participation in these auctions have changed. The administrator of the Electronic System for the sale of raw timber and/or timber harvesting residues (hereinafter – EMPS) provides the summary of the most important changes that have taken effect.

1. The right of the bidder to bid up, at the main (primary) auction for the entry into long-term and half-yearly contracts, the price that is up to 20 percent lower than the initial price bided up by the seller has been repealed. The right to bid up the price, that is 20 percent lower, at the repeated auction remains.

2. The time limits for the announcement, start and end of auctions and for notification of timber to be sold are shortened up to 10 working days

3. In establishing the list of successful bidders at the auction for the entry into half-yearly contracts (does not apply to long-term and short-term contracts), the maximum possible purchase limit of the amount of raw timber applies to bidders (hereinafter – the Limit), that is:

• the Limit is shown to the bidder after the registration in the EMPS for the half-yearly auction;
• the Limit does not restrict the possibility of bidding at the auction, that is, although the limit of 1,000 ktm is set for the bidder, he may bid for the purchase of 5,000 ktm of raw timber, but he will be able to win only 1,000 ktm at the auction;
• the Limit applies only to raw timber (including firewood), but not to timber harvesting residues (KA, KAD and KAK);
• the Limit is calculated as the average amount of raw timber of the last 4 calendar half-years, that has been actually transferred to the bidder under half-yearly contract, increased by 10%;
• in all cases, the bidder is provided with the Limit of at least 1,000 ktm;
• the Limit does not apply at repeated auctions.

4. The Limit can be increased if the bidder has acquired, not later than 24 months in advance, ownership of equipment for raw timber processing, using which he can process additional amount of raw timber or start processing raw timber. The amount of raw timber, that is forecasted to be processed additionally, shall be determined according to the information approved by the manager of the bidder, which has to be approved additionally by an independent financial auditor. The auditor‘s approval shall be prepared according to the task for independent auditors to perform agreed procedures, that has been prepared by the administrator of EMPS:

• only if, because of this equipment, additional amount of raw timber has been started to be processed, that is, the amount of raw timber, that was purchased before and after the commissioning of the equipment, must be assessed;
• the aim is to find out whether this equipment was actually used/will be actually used for processing of raw timber. If the equipment was acquired, but raw timber was not purchased, and the equipment was not used, the additional Limit will not be provided;
• after the change of the provided information, the administrator of EMPS will require to provide, once again, the updated information approved by an auditor, for example, if the bidder will provide information about the equipment, from the commissioning of which less than 3 months have passed, before the auction of the first half of 2023, the administrator of EMPS will ask to update the information provided.

5. After the end of the auction, EMPS will automatically form a rank of all bids made during the auction according to the percentage difference between the price, that was bided up by the bidder and the initial price of the seller in descending order, that is, bidders should assess the Limit, that has been provided to them, and give the biggest price difference to the raw timber, that they most want to purchase.

For example, the Limit of 1,500 ktm has been provided to the bidder. The bidder makes bids for the purchase: in Druskininkai regional subdivision – 1,100 ktm Packing logs for 74 EUR/ktm (initial price 73.50 EUR/ktm); in Anykščiai regional subdivision – 1,200 ktm Firewood III for 45 EUR/ktm (initial price 38.50 EUR/ktm); and in Biržai regional subdivision – 570 ktm Firewood II for 45 EUR/km (initial price 39 EUR/km). Although the bidder made the highest price bids at all auctions, the Limit, however, will be first used in purchasing in Anykščiai regional subdivision 1,200 ktm Firewood III, because the offered difference between the price and initial price is the biggest (difference – 16.88 %), then the Limit will be used in purchasing in Biržai regional subdivision 300 ktm Firewood II (difference – 15.38 %), and the bidder would not be able to enter into more contracts because of the amount of the Limit provided.