Copyright

Poland's A2 Motorway
Harvard Business School Case 9-202-030
Case Software 2-202-701
Copyright 2001 by the President and Fellows of Harvard College
This case was prepared as the basis for class discussion rather than to illustrate either effective or
ineffective handling of an administrative situation.

Exhibit 2

Exhibit 2 Polish Economic Data 1991-1999

Units
Population

million

Macroeconomic Data
Gross Domestic Product (real)
Change in real GDP
Nominal GDP per capita
Unemployment rate
Total exports (fob)
Total imports (cif)
Foreign direct investment
Government fiscal balance

million PLN
% change
$US
percent
million $US
million $US
million $US
million zloty

Rates and Inflation

Exchange rate (average)
Bank lending rate
Consumer prices

Zloty/$US
% p.a.
% change

Country Credit Ratings

S&P Long-term Foreign Currency Debt Rating
Institutional Investor Country Credit Rating a
ICRG Composite Risk Rating b

1991

1992

38.2

52,121
(7.0)
4,240
n/a
14,913
15,766
291
n/a

1.06
54.6
60.4

Not rated
24.4
61.0

1993

38.4

38.5

53,490
2.6
4,450
13.6
13,187
16,142
678
n/a

55,422
3.8
4,715
15.0
14,219
18,779
1,715
n/a

1.36
39.0
44.3

Not rated
24.7
70.5

1.81
35.3
37.6

Not rated
28.6
73.5

1994

1995

38.5

58,409
5.2
5,050
16.5
17,272
21,596
1,875
(4,812)

2.27
32.8
29.5

Not rated
33.1
76.0

1996

38.6

62,477
7.0
5,520
15.2
22,893
29,073
3,659
(5,762)

1997

38.6

66,245
6.0
5,960
14.3
24,440
37,137
4,498
(7,826)

1998

38.6

70,778
6.8
6,480
11.5
25,751
42,308
4,908
(6,162)

1999

38.7

74,200
4.8
6,880
10.0
28,229
47,054
6,365
(5,561)

38.7

77,250
4.1
7,270
12.3
27,407
45,911
n/a
n/a

2.43
33.5
21.6

2.70
26.1
18.5

3.28
25.0
13.2

3.48
24.5
8.6

3.97
17.0
9.8

BB
37.6
78.0

BBB44.0
80.0

BBB50.2
79.3

BBB56.7
82.0

BBB
57.5
74.8

Sources: The Economist Intelligence Unit, EIU Country Profile and EIU Country Report , May 2001, p. 7; International Monetary Fund, International Financial Statistics Yearbook 2000, pp. 806-809; Standard & Poors Credit Week, June 11, 1997, p.25.
a

The Institutional Investor country credit rating is based on a semi-annual survey of 75-100 international bankers who were asked to grade each country on a scale of 1 (very high chance of default) to 100 (least chance of default), and is available at www.iimagazine.com.

The International Country Risk Guide (ICRG) provides a rating composed of 22 variables in three risk categories: political (100 points), financial (50 points), and economic (50 points). ICRG provides ratings for 140 countries on a monthly basis where higher numbers indicate lower risk. The composite risk rating equals the sum of the individual ratings divided by two: 0 to 49.5 is considered very high risk; 80 to 100 is considered very low risk

Exhibit 5

Exhibit 5 Ownership of Autostrada Wielkopolska S.A.

Ownership

1998 (million Euros, consolidated))

(percent)
Polish Shareholders
PSE S.A. (Polish Power Co.)
Kulczyk Holding S.A.
Elektrim Autoinvest S.A.a,b
Wielkopolski Bank Krediytowy
ORBIS S.A.
TuiR Warta S.A. Insurance
Others (5 companies)
Total

19.77%
18.83
10.27
9.98
9.22
4.75
4.18
76.99%

International Shareholders
Strabag International
Impregilo SpA b
NCC AB
Teerbau GmbH b
Strabag Oesterreich c
Bau Holding AG
EGIS
Total

5.52%
4.75
4.75
4.75
2.00
1.00
0.24
23.01%

Country

Assets
1,490.0
84.6
1,054.9
2,047.8
276.1
478.6

Germany
Italy
Sweden
Germany
Austria
Austria
France

1,263.4
2,780.3
n/a
319.2
133.0
1,071.3
430.6

Revenues
3,304.7
22.3
750.0
386.8
176.5
251.2

2,198.6
973.0
3,597.0
701.5
1,030.0
1,246.1
412.4

NPAT

8.3
21.5
12.9
45.3
17.2
10.8

(28.8)
18.6
57.2
2.2
19.8
12.0
(8.2)

Source: Deutsche Bank AG, A2 Motorway POLAND Information Memorandum , November 1999.
a Data are for the Elektrim Group consolidated including Elektrim Autoinvest S.A. and Elektrim S.A.
b Later sold shares and left the project company.
c Data is for 1997. Bau Holding acquired a controlling majority interest in the Strabag Group companies in 1998.
d NPAT = net profit after tax.

Exhibit 5

panies in 1998.

Exhibit 7

Exhibit 7 Sources and Uses of Funds

Funding Requirement

Euro (mils) PLN (mils)

Funding Sources
Equity
Shareholder loan A
Shareholder loan B
Shareholder funds

108
73
53
235

461
327
239
1,027

10.9%
7.8
5.7
24.4

Senior debt
Bonds (3 tranches)
Bond interest, F/X losses
Debt funds

242
266
135
878

1,100
1,196
630
2,926

26.1
28.4
14.9
69.4

Early toll revenues

Interest on cash balance

34
22

164
100

3.9
2.4

4,217

100.0

Construction costs
Design costs
Owners and other costs
Pre-operating costs
Concession costs
Project Costs

622
16
63
3
10
713

2,804
69
269
13
37
3,192

66.5%
1.6
6.4
0.3
0.9
75.7

Loan fees
Interest rolled-up
Capital reserve account
O&M during construction
Taxes
Working capital
Cash
Total Requirement

9
182
11
15
2
(2)
4
934

38
852
52
73
8
(4)
5
4,217

0.9
20.2
1.2
1.7
0.2
(0.1)
0.1
100

Total Sources

Euro (mils) PLN (mils)

934

Exhibit 8

Exhibit 8 Projected Daily Traffic and Toll Rates (Nominal Cash Flows in Zloty)
July December, 2002

Average
Daily
Traffic

July December, 2005

SemiAnnual
Toll per Cash Flow
Vehicle
(millions)

Average
Daily
Traffic

SemiAnnual
Toll per Cash Flow
(millions)
Vehicle

July December, 2007

AverageDa
ily Traffic

SemiAnnual
Toll per Cash Flow
(millions)
Vehicle

July December, 2012

Average
Daily
Traffic

Toll per
Vehicle

SemiAnnual
Cash Flow
(millions)

Type of Vehicle
Passenger

3,400

9.48

3,539

14,200

12.53

32,560

15,800

15.04

43,487

20,600

20.8

78,412

Commercial 1

1,680

14.22

2,623

6,080

20.14

22,406

6,730

23.97

29,521

8,540

34.32

53,636

Commercial 2

710

21.33

1,663

2,590

30.25

14,338

2,660

35.91

17,479

3,090

51.48

29,110

Commercial 3

1,810

33.18

6,594

6,530

46.99

56,150

7,210

55.93

73,796

8,970

80.08

131,452

14,419

29,400

125,454

32,400

164,283

41,200

Total
Operating, Maintenance, and
Other Costs
Operating Profit

7,600

292,610

8,000
6,419

29,000
96,454

34,000
130,283

42,000
250,610

0
0
6,419

22,000
0
118,454

0
0
130,283

0
0
250,610

0
0

40,000
39,000

36,000
42,000

6,000
149,000

79,000

78,000

155,000

Decrease / (Increase) in Net

Working Capital
Taxes
Cash Flow Available for Debt
Service
Senior Debt Payments
Interest
Principal
Total

Source: Case writer estimates based on Deutsche Bank Information Memorandum and Wilbur Smith Associates analysis.

Exhibit 9

Exhibit 9 Poland's A2 Motorway: Summary of Financial Projections 2000 to 2025 (in millions of zloty)

Construction
and Other
Costs a

Bonds c

Project
Year

Calendar
Year

2000

PLN (852)

2001

(746)

2002

(583)

21

2003

(433)

36

2004

(297)

2005

(98)

2006

Senior Debt c
Principal
Interest

(Mezzanine Debt)
Principal
Interest

Refinancing c
Principal
Interest

Shareholder
Payouts on
Surbordinated
Debt and
Equity

Toll
Revenues b

Operating
Costs

Taxes

PLN 0

PLN 0

PLN 0

PLN 243

PLN 6

PLN 63

PLN 372

226

23

104

232

(12)

203

40

116

175

(18)

183

51

128

126

57

(26)

159

65

142

83

175

(42)

47

(3)

157

41

278

(55)

(64)

(78)

171

2007

318

(74)

(78)

(73)

187

PLN 1,147

2008

358

(65)

(115)

(68)

203

10

2009

402

(82)

(143)

(60)

219

11

2010

451

(72)

(200)

(49)

237

12

2011

506

(186) (d)

(240)

(35)

13

2012

562

(81)

(301)

(17)

(1300)

232

734

(19)

14

2013

605

(89)

(39)

(1)

(1210)

148

842

(60)

15

2014

652

(199)

(1191)

51

542

(102)

16

2015

705

(210)

(500)

(106)

17

2016

761

(107)

(588)

(77)

18

2017

821

(97)

(688)

(45)

19

2018

890

(96)

(342)

(9)

(451)

20

2019

964

(92)

(880)

21

2020

1,045

(89)

(13)

(952)

22

2021

1,132

(177)

(49)

(908)

23

2022

1,218

(87)

(61)

(1086)

24

2023

1,282

(88)

(113)

(1090)

25

2024

1,350

(187)

(144)

(1018)

26

2025

1,421

(211)

(156)

(1061)

257

Source: Deutsche Bank AG, Information Memorandum, November 1999.

a

Construction and Other Costs includes design costs, fees, and working capital.

Total Revenues includes other revenues.

For interest amounts, positive numbers indicate accretion and negative numbers indicate cash payments; for principal amounts, positive numbers indicate drawdowns and negative numbers indicate cash repayments.

For 2011, operating expenses include PLN104 million of extraordinary expense for resurfacing and maintenance.

Exhibit 10

Exhibit 10 Poland's A2 Motorway: Summary of Senior Debt Sensitivities

Annual Debt Service

Cover Ratio (ADSCR)
Minimum

Average

Annual Interest Net Present Value

Cover Ratio
Loan Life Cover Senior Debt
(AISCR) (b)
Ratio with
Maturity
Minimum

Reserves (c)

(years)

Internal Rate
of Return
(Real % p.a.)

1.50X

1.99X

2.57X

2.45X

13

0.0924

30% traffic downside

1.15

1.44

1.43

2.08

15

6.6

Macro-economic sensitivities
Traffic volume growth rates at 0%
Toll growth rates at 0%
Traffic ramp up
Higher Polish inflation
Higher long-term interest rates
Higher interest throughout concession
Combined interest and inflation
Exchange rates
Higher corporate income tax

1.14
1.09
1.15
1.5
1.5
1.5
1.5
1.5
1.5

1.78
1.48
2.59
1.75
1.73
2.29
1.62
1.67
1.97

2.39
2.32
1.48
2.56
2.39
1.74
2.1
2.3
2.56

2.45
2.36
2.43
2.45
2.41
2.44
2.2
2.53
2.45

14.5
14.5
13.5
13
13
14
12
13.5
13

5.24
5.83
9.06
9.26
9.26
9.24
9.58
9.22
9.24

1
1
1

1.06
1.36
1.43

1.24
2.29
2.34

0.56
1.89
2.1

15
14.5
14.5

6.09
5.15
4.22

1.5
1.5

1.61
1.82

2.35
2.57

2.39
2.44

13
13

9.08
9.08

Base case

Break-even analysis
Traffic downside of 35%
Toll growth at - 0.4%
Traffic growth at - 0.55%
Cost overrun sensitivities
Renewal costs plus 100%
First heavy maintenance plus 100%

Source: Deutsche Bank AG, Information Memorandum, November 1999.

a

ADSCR equals cash flow available for Senior Debt service plus transfers from the Debt Service Reserve Account divided by Total Senior Debt Service (interest and principal).

AICR equals cash flow available for Senior Debt service divided by Total Interest on Senior Debt.

Net Present Value (NPV) Loan Life Cover Ratio equals the NPV of future cash flows for senior debt divided by the outstanding loan balance at the beginning of the period