Gov't guarantee only roadblock to A2 motorway construction
Road builder Autostrada Wielkopolska (AW) took a major step forward at the end of March when it chose a consortium led by Credit Lyonnais and Commerzbank for a o280 million syndicated loan to finance the construction of the long-awaited A2 motorway.
But before it can get to work, Autostrada is going to have to secure a government guarantee, a difficult process with no sure outcome.
Krzysztof Link, vice president of the Agency for Motorway Construction and Exploitation, an arm of the Transportation Ministry, said Autostrada must now begin the long procedure of filling out the stacks of paperwork necessary for a guarantee. Despite the red tape, he remained optimistic that the government would back the loan, paving the way for Autostrada to finally begin work on the road between Konin and Nowy Tomysl. "Both sides are interested in the completion of this project," he said.
Robert Moren, media specialist at public relations company Point of View, which represents Autostrada, said the company decided to accept Credit Lyonnais/Commerzbank consortium's loan proposal almost two weeks ago. o188 million of the loan is to go to finance a stretch of the A2 from the town of Konin to Nowy Tomysl. The remaining money will go to interest payments. Moren said the consortium offered the best conditions, although he did not elaborate.
"The offer of Credit Lyonnais and Commerzbank made the whole project easier," Moren said.
The syndicated loan is expected to cover approximately 27.2% of total construction costs, while funds from AW shareholders are expected to make up slightly more than 34% of costs. The remaining part of the funding, for which AW is seeking a government guarantee, is to come from a bond issue underwritten by investment bank Merrill Lynch, with funds handled by Deutsche Bank.
"We have the vital ingredients for a successful project," Brett Forbes, a Commerzbank representative, said at a press conference held last week.
AW board members were also optimistic about the outcome of the deal between the road builder and the consortium, and did not foresee any further complications in obtaining the loan. "I am personally convinced that it will be done quite quickly," said Wojciech Gebicki, AW vice president.
According to AW's concession, the financing of the construction of the 149-kilometer stretch of the A2 highway must be closed by July 29.
If things go according to schedule, construction on A2 could start in autumn, a delay of more than a year and a half. Construction was originally slated to begin in March 1999. Problems in raising financing under the guidelines of the original concession which called for no government involvement caused AW to miss the March deadline. Haggling over how the financing would be handled and the government's agreement to guarantee a loan got the project moving again.
To be able to issue a guarantee, however, the government had to amend the Toll Motorway Act of 1995. The new act, which allows for a government guarantee covering more of the government's costs, could also help fellow road builder Gdansk Transport Company, which won a concession to build a 152-kilometer stretch of the A1 motorway from Gdansk to Torun. Difficulty in raising financing, however, has also brought that project to a halt.
Link said talks between the government and Gdansk are on again. "It's looking promising," he said, adding that financing for that project could potentially be closed by the end of the year.
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