Risks & Mitigation

Political Risks

New government formation

A different political party forms government

Identified and assessed Yes

Risk Bearer Government responsible for fully covering

debt obligations plus NPV of cash flow distributions that
would have been made
Mitigation Government guarantee to fully cover debt
obligations and guarantee against building parallel roads

Risks & Mitigation

Political Risks

Using european laws instead of polish laws

In poland interest on interest is not allowed in default

situations
Identified and assessed Not completely,As risk is not
fully estimated

Risk Bearer Law firm (Baker & McKenzie)

Mitigation By forcing government to change the laws

Risks & Mitigation

Financial Risks

road may capture less than the expected 50%

of traffic

Because of competition from new parallel roads or due to

high tolls
Identified and assessed Yes, by S&P studies, Wilbur
Smith analysis
Risk Bearer AWSA
Mitigation Guarantee that government would permit
competing roads and also by reducing tolls

Risks & Mitigation

Financial Risks

Polish corporate taxes would not decrease to

22% by 2004

Because of competition from new parallel roads or due to

high tolls
Identified and assessed Yes, Finance model by
Deutsche Bank is used

Risk Bearer AWSA

Mitigation Risks need to be beared

Risks & Mitigation

Financial Risks

Polish currency weakened against Euro

Loans have to paid in Euros

Identified and assessed No

Risk Bearer AWSA and Polish government

Mitigation Hedge against exchange rate

Strategies to manage project risks

Political risks-Allocate with contracts and profit

sharing or insure with political risk insurance
Market risks- Hedge against risks
Project specific risks-Insure or diversify against force
majuira
Construction & operating risks-Allocate with contracts
against operator perfomance,land acquisition etc

Gebicki response to the bankers

concerns in June 2000?

Convince bankers that their analysis was too

pessimistic,their estimated capture rate was well
above Wilbur smiths's assumed 50% rate
Lastly, he should inform them that European
Investment bank are willing to finance part of the A2
project