Autostrada gets nod for gov't backing of roadway
Construction on the long-awaited A2 motorway in western Poland could begin next year following an agreement that paves the way for a government guarantee to finance roadway construction, according to Autostrada Wielkopolska, the consortium that holds the concession to develop the roadway.
Autostrada Wielkopolska won the A2 concession in March 1997 to build a stretch of roadway from Strychow, near Lodz, to Swiecko on the German border. But construction, scheduled to start last March on the first portion of the roadway from Konin-Nowy Tomysl, never began because banks and other institutions refused to approve loans without a government guarantee.
The breakthrough came Oct. 29, when Transportation Minister Tadeusz Syryjczyk signed an appendix to the 2-year-old concession agreement that signaled the government's willingness to back part of ECU 622 million in construction costs. The recent agreement could also pave the way for additional roadway projects nationwide, according to industry members.
"The intention is to create conditions that are required by banks" and the international finance community, said Krzysztof Link, vice president of the Agency for Motorway Construction and Exploitation, a division of the Transportation Ministry.
But government backing is not a given, Link said. The government has only agreed to review the plan, and if proper financing and construction plans can be secured then Autostrada can expect to get a government guarantee, he said.
Compromise is the buzzword for the agreement reached after five months of intensive talks between Autostrada Wielkopolska and the government earlier this year, sources close to the deal said. To get the government to open its doors to supporting the project, Autostrada Wielkopolska reduced the percentage of government backing and the scope of the project, which included giving up the Konin-Strychow stretch of roadway. The Konin-Strychow link will be sold in a separate tender next year. Construction costs for the 149-kilometer roadway Konin-Nowy Tomysl were pared down to ECU 622 million from more than ECU 720 million. In addition, Autostrada will seek a government guarantee for only slightly more than 30% of the costs, down from about 50% earlier. The remaining stretch of roadway from Nowy Tomysl to Swiecko on the German border is not covered in the recent agreement.
The financing plan calls for Autostrada to fund 26% of the projected costs from own funds. Between 40-45% of costs will be funded through a syndicated loan from various foreign and Polish banks, and will not require a guarantee, said Robert Moren, a media specialist for public relations agency Point of View, which represents Autostrada.
The remainder will be financed through bonds, issued by Merrill Lynch and Deutsche Bank and sold in the United States and Western Europe. Proceeds of the bond sale will go to a third bank, which will then distribute the money as a loan, backed by a government guarantee. That's the template, Moren said, adding that the percentages could change. Financial closing for the project must now be completed within nine months of the October signing, Moren said. After that, construction permits can be given and Autostrada can start to build the roadway, he added.
Completion of the Konin-Nowy Tomysl route is expected by 2005, with the subsection Konin-Wrzesnia to come on line earlier in 2002 and 2003 and then push westward to Nowy Tomysl, Link said. With financing still to be worked out, construction on the remaining Nowy Tomysl-Swiecko section is expected to begin between 2005 and 2007.
The current agreement represents a reality check for those taking part in the roadway project, industry members said. "It's clear for everybody that the financial obligations were too big" under the previous agreement, said Robert Kietlinski, transportation sector officer with the World Bank.
Despite its reduced scope, the agreement reached between the concessionaire and government is also a positive sign that could signal renewed interest in the 5-year-old, $8 billion project to build 2,600 kilometers of toll roads nationwide.
"This raises the hope that finally the agency will have time for other projects," said Bernard Pisarski, trade director of the Gdansk Transport Company. The transportation company won a concession to build a 152-kilometer stretch of the A1 highway, projected to run from Gdansk to the Czech border. Company and government officials are to meet this month to agree on a financial schedule probably using a combination of private and public funding.
Initially the government sought financing from private sources issuing long-term concession agreements to private operators under a build-operate-transfer (BOT) scheme. But mainly due to difficulties in forecasting revenue from toll roads, financial institutions have been unwilling to back projects. The government is now preparing final amendments to the Toll Motorway Act of 1994 that would provide for government financing on a case-by-case basis.
