My first memo report：Konopnicka Airport New Construction in Poland

Konopnicka Airport New Construction in Poland

By ziyu xu S2150727

Instruction:

  This report concerns about:

1.       Financial definition in the construction

2.       Operation and management issues during and after the construction

3.       Details in repayment

4.       The schedule of the building

5.       Risk and responsibilities between different companies

Negotiations:

Finance

There are guarantees given by Polish Government, therefore the Airports Company decided to lend 108 million euro from Weber-Merkel Bank at a preferably interest rate of 2.5%. However, the Bank prefers a higher interest for the total huge loan agreement.

Operation and Management

Both companies would like to own the operation of airport service, and the ownership of assets still remains by the Airport Company.

Repayment

During the meeting, the representatives from both company had different the opinions about how long it will take for the Airport company to repay the loan and when it stars. Besides, the ownerships of some charges and fee also aroused sever discussions.

Building Schedule

This part lays about the whole duration of the construction and the corporation form.

Risk Allocation

Finally, some commercial risks were attached much importance by both sides. And the responsibility and penalty fines about the delays in building program should be clarify and explicit.

Conclusion and Further Recommendation

This report indicates Weber-Market Bank decided to lend money to the Konopnicka Airport Company for its new airport in Poland, but something still need be discussed before carrying it out.

In the general financial part, we both agree with the total amount of 120m in the whole construction, whereas only 96million of them will come from the loan of The Bank, at an interest rate of 3.5%.Concerning about the operation and management, the Airport Company remains the ownership of all the assets, but the first six year operation of airport service belongs to the Bank.

Besides, both companies compromised that the Airport Company should repay all the loan at the end of 17^th years, since all the projects are finished, and the loan have to be repaid monthly .After the completion, the Polish Airport will collect take-off and landing charges and the incomes from the overflight fees will be obtained by the Bank.The Airport should be put into use after 25months under the operation of Lauman and Polish with a proven track record.

At last, the risk issues were divided into two inspects. From the aspect of commercial risk, Polish Airport will take the responsibility for the preliminary environmental studies and consultation of local residents, and Laumann will take charge of any possibility that may lead to the delays in building schedule except for the circumstances out of control. What’s more, the delays fine which is responsible for the Launmann is arranged from 0.5 million to 4 million per two weeks and risk associated with low air traffic volumes shared on 40-60 between Polish Government and private contractor.