1. Poland’s A2 Motorway
Ankit Agarwal
Aman preet Singh
Ankit Garg
Neha Kumar
Sovan Satya Prakash
Rahul Mishra
Deepthi Tripathi

2. AWSA and A2 Motorway
• AWSA- Special purpose consortium incorporated to bid onA2 concession
• AWSA
• 254 km of A2 motorway (1/3rd ) on the western side
Hotels andTourism
Finance
PowerTransmission
Insurance
Private Equity Firms
77%
Western European
Firms engaged in
heavy
construction
23%

3. Overview of the Case
• AutostradaWielkopolska, S.A.(AWSA) won an exclusive concession to build and
operate a major segment of the proposedA2 Motorway, the first private toll
road in Poland
• Project’s total cost €934 million
• Wojciech Gebicki had been hired in October 1999, to secure a €242 million
commercial bank loan
• February,2000, AWSA chose Credit Lyonnais and Commerzbank as joint lead
arrangers for the bank financing
• If financing were not closed by July 29,2000 the concession would expire

4. Facts about the Phase 1
Konin
• Opening date of July 2002
• Reconstruction of Old National Route No. 2
Bypass to
Poznan
• Government’s Responsibility
• Toll Free Road
• Opening by Mid 2003
Nowy
• Opening by late 2005
• Running parallel to National Route No. 2

5. Benefits for Government
• Employment during Construction
• Easy movement of trade and commerce within the neighbouring countries
• VAT Applicable to tolls
• Share in cash flows (Probable)
• Optimum Case – 20% of Distributable cash flows (when cumulative real return is 10% or
more )
• Optimum Case – 50% of Distributable cash flows ( when cumulative real return is 15% or
more )

6. Major Options facing Gebicki
• Option 1: Convince the bankers that their analysis was too pessimistic. As
evidence, he could point to the early results from the A4Toll Motorway.
• Option 2: Issuing additional bonds.
• Option 3: Use European Investment Bank (EIB) funds that expressed
renewed interest in financing part of the A2 Motorway.
• Option 4: Pull altogether a new financing plan before the deadline.

7. Major Risks of the project
Political Risk:
Change in Government : A different political party takes control
Effect:This could create delays due to the risk of change in govt.
The Government responsible for fully covering debt obligations plus NPV of cash flow
No privately financed Project in the country: State owns most of the businesses
Effect:There were no precedent regulations, and neither the government nor the private
participants had any previous experience
Mitigation Strategy:
 Use of UK law, enforceable through Polish courts
 Counter guarantees by government against building competing systems, ending concession

8. Major Risks of the project
Market Risk:
Difficult in estimation of traffic: No prior projects in the country so the traffic of the toll is difficult to
estimate
Effect: Poland has been a welfare state for years and citizens are used to price control and subsidies,
hence, paying for using a road may be an issue that public would not accept
Mitigation Strategy:
 Market risk was mitigated by engagement with the hiring qualified contractors

9. Major Risks of the project
Currency Risk:
 Weakening of the Zloty vs. the Euro(2.22 zloty/euro in 1993 to 4 zloty/euro)
Mismatch between zloty revenue and euro-denominated debt gives exposure to currency risk
Mitigation Strategy:
 The best strategy is hedge the exchange rate risk. According AWSA explanation there is no derivative available for hedging
zloty/euro currency risk. So they have not gone for currency hedging
 They should have gone for cross-hedging the exchange-rate risk by using the forward markets of a third country's currency.
 If they are not hedging they should try to purchase materials from Poland suppliers when possible.

10. Major Risks of the project
Interest Rate Risk:
Fluctuation in spread between Polish interbank rate and LIBOR. Spread has
increased for 185 bps to 235 bps
As the senior debt are based upon spread over 6month LIBOR they are
exposed to interest rate risk
Mitigation Strategy:
Interest rate Swap(plain vanilla interest rate swap: Fix for floating)

11. Other Financial Risk Mitigation Strategy
Best controlled by Sponsor and lenders
Low senior debt(Around 26%), adequate reserves and debt coverage, flexible principle
repayment
Control of waterfall by lenders gives better cash control
Repayment of Loans on basis of worst case scenario
Available of mezzanine debt with longest possible maturity and with govt guarantee
Provision for collateralized lender account to finance the future

12. Role of Gebicki
Responsible to negotiate with the shareholders.
Responsible to present better scenario to the financial bank in terms of
revenue and the traffic forecast.
Expiry of the concession

13. What Gebicki can/should do?
Gebicki should convince the bankers that their analysis was too pessimistic
He should convince the bankers that the early results of the A4Toll
Motorway showed 80% of available traffic whereas bankers had considered
Wilbur’s assumption forA2 at 50%
He should respond to them saying that European Investment bank are
willing to finance part of the A2 project