Poland A2 Motorway case Political amp Financial Risks Team 3 Richard Buskey Jonathan Weiss Daniel Mahzonni Prashant Mishra Vijay Gadigeppa Jonathan Koenig httpusersbusinessuconnedusnairopim5894html ID: 347067
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OPIM 5894 Advanced Project managementPoland A2 Motorway case - Political & Financial Risks
Team 3Richard BuskeyJonathan WeissDaniel MahzonniPrashant MishraVijay GadigeppaJonathan Koenig
http://users.business.uconn.edu/snair/opim5894.html
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Poland A2 Motorway case2Political Risks1. Change in governmentA different political party takes control
IDed and assessed – Yes, delays create risk of change in heartWho? – Government responsible for fully covering debt obligations plus NPV of cash flowMitigation – Contracts with government guaranteed, counter guarantees by government against building competing systems, ending concessionProf. Suresh Nair, University of ConnecticutSlide3
Poland A2 Motorway case3Political Risks2. Change in government prioritiesWar, trade issues, natural disasters, riots, etc.
IDed/Assessed – yes, delays caused by environment could jeopardize projectWho? – AWSA Mitigation – insurance will compensate a maximum of 650 thousand EUR per year for operational loss, government agreed to compensate based on archaeological or hazardous materialsProf. Suresh Nair, University of ConnecticutSlide4
Poland A2 Motorway case4Political Risks3. Use of UK law, enforceable through Polish courts
E.g., interest on interest not allowed in default situationsIDed and assessed – Somewhat, risk is known but severity not yet determinedWho? – Law firm (Baker & McKenzie)Mitigation – Lobby/promote change in laws based on UK structureProf. Suresh Nair, University of ConnecticutSlide5
Poland A2 Motorway case5Political Risks – Heat Map
Prof. Suresh Nair, University of Connecticut
Change in Government
Change in Government priorities
Use of UK law, enforceable by Polish courtsSlide6
Poland A2 Motorway case6Financial Risks1. Financing not processed in time to meet deadline
IDed and assessed – Banks (Credit Lyonnais, Commerzbank) expressed concern with traffic forecasts and recommended additional 60-90 million EUR to cover shortfallsWho? – AWSAMitigation – Secure extra funding from European Investment Bank, present case why Wilbur Smith estimates are too conservative
Prof. Suresh Nair, University of ConnecticutSlide7
Poland A2 Motorway case7Financial Risks2. The new road would capture less than the expected 50% of traffic
Competition from alternate roadways or methods of travelIDed and assessed – S&P studies, Wilbur Smith analysisWho? – AWSA Mitigation – Included in concessions that the government could not back other roadways or alternate modes of travel
Prof. Suresh Nair, University of ConnecticutSlide8
Poland A2 Motorway case8Financial Risks3. Polish inflation would not decrease to 2% by 2008 and/or Polish corporate taxes would not decrease to 22% by 2004
IDed and assessed – Finance model by Deutsche Bank being used for forecasting Who? – AWSAMitigation – None, risk must be accepted. Forecasts are in line with government estimates.Prof. Suresh Nair, University of ConnecticutSlide9
Poland A2 Motorway case9Financial Risks4. Weakening of the Zloty vs. the EuroIDed and assessed – No, consequence is funding gap could be created
Who? – AWSA and Polish governmentMitigation – Do not hedge against exchange rate, purchase materials from Poland suppliers when possibleProf. Suresh Nair, University of ConnecticutSlide10
Poland A2 Motorway case10Financial Risks
– Heat MapProf. Suresh Nair, University of Connecticut
Financing not
processed in time to meet deadline
The new road would capture less than the expected 50% of traffic
Polish inflation would not decrease to 2% by 2008 and/or Polish corporate taxes would not decrease to 22% by 2004
Weakening of the Zloty vs. the Euro