International Airport Warsaw, Poland

Case Study/Country International Airport Warsaw - Poland

Rationale/Objectives of the PPP Construction of a major transport infrastructure
under constraint public budgets
PPP Actors Hochtief Airport AG; Polish Airports enterprise
Financial Structure Citybank AG loan,
E.U. Support? EIB
Contract Agreement between Parties Design, Build Finance
Risk Allocation On private partner
Institutional/Managerial Structure Political and institutional support
Tariff Setting Fixed at the contract
Strong Points Strong government and international support
Weak Points –

Background
A significant growth of freight volume and passenger numbers is forecasted for the Candidate
Countries for the period 2002 to 2020. In this context the construction of a new passenger terminal
and associated infrastructure between 1990 and 1992 for the International Airport in Warsaw was the
first major planned PPP airport pilot project in the EU Candidate Countries. The private partner was
Hochtief Construction AG. The Warsaw airport PPP was financed by Citybank AG, which had some
experiences in international PPP financing, especially together with Hochtief AG. Because of the
unique character of the airport extension, the European Investment Bank (EIB) supported the
construction of the new terminal I in the year 1992 with a €50m loan to PPL (Przedsiebiotwo Porty
Lotnicze), the state enterprise Polish Airports.
This first extension helped to increase the airport’s capacity to 3 million passengers. Passenger traffic,
however, has grown at rates exceeding forecast, reaching 4.7 million passengers/year in 2001 and is
expected to increase to almost 6.3m by 2005 and 9.4m by 2010. Therefore in December 2002 EIB
decided to lend PPL a further €200m for co-financing a new passenger terminal and associated airside
and landside work. The new terminal will provide capacity for an additional 6.5m passengers per year
thus increasing the airport’s overall capacity to 10 million passengers.
An important argument for EIB to support the airport extension was the added value that this project
could give to other major projects in the metropolitan region of Warsaw with private participation
including a Technology Park, Integrated Logistics Centre, Exposition of Warsaw Products, Futurallia
2006, Congress Centre, Convention Bureau, Multifunctional Sports and Entertainment Arena, New
City Hall and PPP possibilities in the National Motorway Programme. The accumulation of
publicprivate
partnership experience would foster a local knowledge transfer concerning the opportunities
and risks of PPP.
The case illustrates how PPP models for international airport extension can
be tested in pilot projects with calculable risks of financing and project
management

PPP Features
The objectives of the Warsaw airport extension PPP were:
for PPL as the public side to obtain a ready to use new terminal and examine alternative PPP
models for airport construction and financing.
for the EIB to examine and test the optimal combination of private and E.U. financing concepts
for major PPP infrastructure projects.
It was considered that only an international consortium consisting of a large construction company as
general contractor with both international PPP experience and established relationships to experienced
subcontractors could manage the project and meet E.U. environmental and procurement standards to
avoid political and legal conflicts.
The loan repayment to involved private banks began in 1993 on a quarterly basis and was completed
by the end of 2000. According to the agreement between PPL and Citybank AG the latter is allowed
to collect all hard currency payments owed to PPL by the foreign flag carriers, interest on the loan and
other fees owed to Citibank AG. A fixed amount of money was calculated as a reserve in a collateral
account. Concerning the tariff fees as base for these contractual regulations Hochtief AG, Citybank
AG and PPL had agreed on a fixed model in the project framework contract.
A number of other positive elements have also assisted the success of the project. An independent
Environmental Impact Assessment (EI A) was undertaken. Regarding the results of this study the
public-private airport extension of the 90s is compliant with the Polish Environmental Protection Act
of 27 April 2001 and with E.U. environmental legislation. Furthermore the procurement process for
the design, finance and build contract comprised an open international tender competition between
pre-qualified consortia, following advertisement in the OJEC. The tenderers had been also asked to
propose the method of financing of the investment. Additionally the national Polish airline Lot
financed one-third of the private loan of DM 221.7m in a long term contract and that a HERMES
security was given by the German national export insurance company (with support of the national
Polish Government).