Below you can see the memo report that I had to write to The Directors of the Polish Airports Agency. We had negotiations about a second runway, a construction of a new world-class passenger terminal, a cargo terminal and a catering base. All in all, I think the negotiations went well, and we came to mutual agreements.
Memo Report
To: The Directors of the Polish Airports Agency
From: C. de Boer and T.E.L. Nanlohij (Polish Airports and Ministry of Infrastructure)
Date: 11 October 2011
Subject: PPP Negotiations
Introduction
Konopnicka Airport is one of the regional airports operated by the Polish Airports Agency (PAA). Last year, more than 5.5 million passengers passed through the passenger terminal, and a significant growth of freight volume and passenger traffic is forecast for the period to 2020. Passenger traffic has already grown at rates exceeding forecasts and is expected to increase to around 9.4 million in four years’ time. Capacity of the passenger terminal has been set at 12 million passengers yearly. Konopnicka Airport is well suited for further development as an international hub airport and enjoys a geographic advantage, along with other Central European airports. That may relieve the air traffic congestion in many western European countries
Problem definition
In order to adapt Konopnicka Airport to the increasing freight and passenger traffic, the PAA and the Ministry of Infrastructure have taken the decision to add a second runway and construct a new world-class passenger terminal, a cargo terminal and a catering base. The next step in this decision is to choose a suitable construction company and make a favourable contract.
Financing
The airport will cost 120 million to build. 85% will be loaned by the Weber-Merkel bank with a interest rate of 3,5%. The remaining 15% will be financed by Polish Airports. We agreed that Laumann will take full responsibility for designing and building new facilities at Konopnicka Airport. Guarantees will be given by the Polish Government.
Operation and management
The ownership of assets will fully remain with the Polish Airports and Laumann will get the option to manage airport services for 80% and on 8-year concession.
Repayment terms
The loan will be repaid over 15 years and the repayments will begin on full completion of works on a monthly basis. We decided that Polish Airports will collect take-off and landing charges from foreign airlines and over flight fees. These charges will be used to make loan repayments. Excess funds will belong to Polish Airports.
Building Schedule
The construction project will take 30 months, and Laumann is allowed to sub-contract work to and cooperate with Polish construction companies, but they do need to have a proven record.
Risk allocation
We are in agreement that Laumann will get a $150.000 fine for every week’s delay, up to a maximum of $3 million. The polish airport and government will be responsible for adverse weather conditions and the private contractor will be responsible for preliminary environmental studies and consultation of local residents. The risk of low air-traffic volumes will be shared on a 50/50 basis between Polish government and private contractor.
Conclusion
We think that the negotiations worked out well. The appointments are clear and mostly in favour of all the parties involved.
Casper de Boer (2171597)
Tyrza Nanlohij (2037300)
(449 words)
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