Sunday, 10 June 2012

Time to take back the prophecy of doom

OK, Poland has not made such significant stride in infrastructure development, as Mr Tusk had promised in his inaugural speech in November 2007, but the progress is visible. Almost all roads, planned to be finished before the football championship, are still under construction, some long behind schedule, but road-builders have pulled up their sleeves and prepared a huge surprise for motorists.

A lot is being built in Poland, but every observer’s eyes have been focused on the 91-kilometre long section of A2 motorway linking Warsaw to Łódź and then with the European network of motorways. At the beginning of April, in my road construction programme summary I wrote:

A2 motorway – great to have a toll road (with some short free of charge sections) all the way from the German border east to Stryków, where on a big junction A1 and A2 one day will meet. But then in Stryków masses of football fans travelling from the western Europe will end their journey via up-to-the standard roads and will continue the drive to Warsaw through old, congested National Road 2. There’s no chance that two out of five sections of A2 between Łódź and Warsaw forsaken in June 2011 by bankrupt Chinese companies will be finished, or at least passable. Funnily enough, two sections near Warsaw are almost finished, so there’s a contingency plan that they are opened, as scheduled (the one closest to Warsaw even one month before deadline), but does it make any practicable solution. The motorway would end in the middle of nowhere somewhere near Grodzisk Mazowiecki. For the locals – a great link to the capital, for transit traffic – a useless facility..

Given the progress of works at that time, I could not believe this road would be opened just before Euro 2012. I am not ashamed of my lack of faith in road-builders. I dare to claim my pessimism was fully justified. Only as time went by, it faded and gave way to glimmers of hope in completion before the sports event. A2, being one of very few roads planned to be opened before Euro 2012, was divided into five sections, marked with letters from A to E (A – closest to Łódź, E – closest to Warsaw), each built by a different lead contractor and set of subcontractors. Works kicked off late – in autumn 2010. This delay in putting together all the necessary documentation and obtaining all official permits meant deadline for completion was very tight. Tenders for two sections were won by a Chinese consortium COVEC. The Asian company bid to build a motorway at dumping price and hence beat all competitors. The contract in Poland, deliberately quoted much below real costs, was, in COVEC’s plans, a way to get foothold on the European market. Unfortunately, COVEC’s financial planners have overestimated financial strength of their company and in mid-2011 the bankrupt Chinese contractors left the unfinished road, unpaid subcontractors and guarantees issued by Chinese banks with which the Polish government still hassles. Construction works have been halted for two months, before resumption in late July 2011. Section A was taken over by Eurovia-led consortium, while building of section C, with the biggest delay, was conducted since then by Dolnośląskie Surowce Skalne. The latter firm has also overreached itself. It caught up with many works, but due to liquidity problems filed for insolvency in March 2012. Its bankruptcy was formally declared in April. From March the hapless section has been under administration of Boegl a Krysl (Czech-German enterprise). Guys worked night and day, weather permitting, to make the road passable in early June. Almost nobody believed in success; many pointed at potentially poor quality of hastily done works (time will prove these concerns right or wrong), others yelled the road would be only “passable”, not completed and hence dangerous for users.

According to official declarations, the motorway would not be opened before Euro 2012 and in mid-May the transport ministry presented official detour guidelines, showing how to pass by the unfinished section C. These were contingency plans…

Opening festival began in the third decade of May. Section E to Pruszków was opened on 23 May, its extension, section D to Grodzisk was opened on 29 May, section A and short part of section B (only the latter has been completed, most of section A lack the last layer of stone mastic asphalt) was opened on 3 June and 6 June went down in history as the day when the whole motorway passable. Laying the last layer of tarmac was finished on 5 June, then construction crews assembled signage, crash barriers and painted lane-dividing lines. So drivers can enjoy a problem-free, hour-long journey from Warsaw to Stryków near Łódź, but sections A and C will have to be finished after the football championship (which does not mean any closures).

Despite everything, against all odds, football fans travelling to the capital of Poland from western Europe by car will get to Warsaw in a civilised way. They will surely end up in a traffic hell in Warsaw, but who cares?

Last days also saw the completion of part of S8 expressway in northern Warsaw and opening of two S5 and S11 sections near Poznań. Yesterday southern bypass of Gdańsk was thrown open, making a great alternative to ever-congested notorious ul. Kartuzka. Next openings are scheduled for July and then by the end of 2012 Poland is going to have a much broader network of expressways and motorways. Unfortunately this year there is no chance that part of Warsaw’s southern bypass is finished. Construction of this short expressway got under way a few months before works on A2 started. A2 is now at use, while S2 and S79 have one-year delay and its contractors are still taking their time.

It has to be noted the government-funded infrastructure development programme has brought the construction industry to its knees. The best example of this collapse are bankrupt DSS (general contractor of A2 section C) and PBG (general contractor of the National Stadium in Warsaw) and its two subsidiaries that filed to bankruptcy this week. All companies profit and loss accounts would show they are profitable (albeit with significant margin squeezes), but further analysis of their financial statements draws to a conclusion liquidity squeeze (late payments from Road Construction & Administration Authority / over-competitive prices) killed them and their subcontractors, who have fallen victims of co-operation with reputable industry players.

Corporate bonds issued by these companies hit valuation of many “safe” investment funds, write-downs on loans granted to them are hitting many banks, for many meaning nine-digit losses and being a substantial drag on profitability. The bank I work at is quite conservatively run and it least is not considerably exposed to the ailing sector, so at least it spares my colleagues and me troubles.

I must say the football championship does not rub off on me. I do not root for the Polish football team (although as a Pole I wish them well), I have not bought any Euro 2012 gadgets, I generally find the whole event a nuisance rather than a reason to be excited…

I’m off for holidays for two weeks. The computer stays at home, so expect the next posting with holidays coverage (or something else, provided a noteworthy event occurs) around 24 June

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