Memo Report Konopnicka Airport

Together with Laurence and Marijn I negotiated with Hedde, Jana and Jasperabout the expansion of Konopnicka Airport, a case in 'Market Leader', the study book we use for English I. The negotiation was very interesting, both the parties tried to get the most out of it. We represented the Polish Ministry of Infrastructure and Polish Airports whilst Hedde's team represented the building company Laumann and the bank Weber-Merkel. After all, I think we made a very good deal. The most important aspects of the deal were the interest rates on the loan and we think we negotiated this very well. Here follows the memo report of the negotiation:

Memo report Konopnicka Airport

To :   Heads of Polish Airports and the Polish Ministry of Infrastructure
From :   P.J. Sijbrandij (Polish Airports)
Date :   06-10-2011
Subject :   Expansion of Konopnicka Airport

Introduction
In this memo report about the meeting concerning the expansion of Konopnicka Airport I will discuss the points we, as Polish Airports (PA) and Ministry of Infrastructure of Poland, agreed upon with Laumann and Weber-Merkel. Laumann will be building the new project and the Weber-Merkel bank will finance our loan.

Financing
Financing of the project will be provided by the Weber-Merkel bank. They will lend us a total of €108 million divided in three parts. The interest rates on this loan will be 3% on the first two parts of €48 and 4% on the final part of €12 million. The design of the airport will be done by Laumann, but PA has the final word about it. The remaining 10% will be financed by the Polish government.

Operation and management
The ownership of assets and operations of airport services will remain with PA. Laumann will receive a VIP lounge in the airport.

Repayment terms
Repayment times are different for all three parts of the loan. Part I (€48 million) will be paid back within 19 years. Part II (€48 million) will be paid back in 15 years. The final part (€12 million) will be paid back in 10 years.

Repayments of the loans will start after half completion of the works and will be on a bimonthly basis. PA will collect take-off, landing and other charges with which we pay off the loan. Guarantees are given by the Polish government and the Merkel-Weber bank will receive the charges if PA is not able to repay the loan. Excess funds belong to Polish Airports.

Building schedule
The construction of the airport will take 32 months. Laumann will work with Polish construction companies and sub-contract work to Polish companies. Laumann will only do this if these companies have a proven track record of delivering a quality job.

Risk allocation
The commercial risks, delays in the building schedule and other risks are transferred to Laumann. PA is only responsible for arranging permits. Delays in the building program will incur fines of €500.000 per week.

Conclusion and recommendations

We at Polish Airports conclude that we have negotiated a very reasonable deal. The interest rates and repayment terms, according to us the most important aspects of this deal, have turned out positive for us. Besides that, PA remains owner of all assets. We advise to look carefully at the design of the building as Laumann is in control of that aspect.