Polands A2 Motorway

- Case Analysis

Bhanu | Divya | Harsh | Namita

 The Project
AWSA, had won an exclusive concession to build
and operate the proposed A2 Motorway
A 934 million Project
BOT model to build and operate a 254 km
Motorway.
Part of the Polish Governments program of
upgrading and expanding the countrys
transportation infrastructure.
The challenge of this project was its size, traffic
forecast, financial projection & significant
experience in structuring project of this size.
 Poland and the Toll Motorways Act 1994

A natural land bridge between Eastern and

Western Europe
Government approved construction of toll
motorways(2,600km)
Authorized the government to grant
concessions on a competitive tender basis
Also authorized the government to guarantee
financing
 The Concession Agreement
In 1997, AWSA awarded 30 years BOT concession
agreement.
AWSA was owned by 10 Polish firms with diversified
commercial interests
AWSA was obligated to finish Phase 1 within 6.25 years
after financial close
Land leased by Government
Local permit by AWSA
Compensation to AWSA if permit gets delay due to
government authorities.
The government had the right to terminate the concession
(on deadline & payment)
 Design, Construction and Financing
Fixed-price design and construction contract.
(16 million and 622 million respectively)
15% advance payment, remaining on monthly
basis)
Government was responsible to construct
feeder & parallel/by-pass roads
Liquidated damages for each day of delay by
contractors
 Operation
10-year renewable contract to operate and
maintain.
Routine maintenance - Operating Company
Heavy maintenance AWSA
Revenue from tolls, petrol stations, roadside
restaurants, and eventually hotels
Concession agreement contained
commitments by the government to generate
satisfactory traffic volume.
 Insurance Arrangements
During construction, all risk coverage for property
damage up to the full design and construction
cost US$ 667 million, declining to US$100 million
per event post completion
Insurance for lost profits due to delay in
completion set at 30 days' projected gross
revenues
After completion, business interruption insurance
would cover revenue losses for up to 12 months
Third-party liability insurance was US$ 50 million
 Financing Plan
934 million - Total estimated cost
Financing plan was based on a model created
by Deutsche Bank
1.5 DSCR to be maintain
Source of Fund
Subordinated debt and
Commercial Banks Zero coupon bonds
equity
Senior secured project
Three tranches AWSA shareholders
loan
266 million (face
242 million 235 million
amount at 800 million)
 Financing Plan cont.
Loan rate = spread over 6-month LIBOR (180 bp to 235 bp)

Cash "waterfall" mechanism

1. Current operating expenses
2. Capital expenditure and maintenance reserve accounts
3. Current interest and principal payments on senior debt
4. Senior debt service reserve account
5. All remaining cash to the zero coupon bond sinking fund

Senior debt contracts would be governed by U.K. common

law, rest by Poland's civil law system