Szczecin-Goleniów Airport


Market development prospects

As a result of the current slowdown in GDP growth in Poland, a majority of the institutions who publish forecasts of macroeconomic indicators adjusted the projected economic growth rate for Poland for the coming years. According to the forecast published on 1 February 2017 by the Gdansk Institute for Market Economics, real GDP growth in 2017 should amount to 3.0 per cent, whereas the growth projected in April 2016 was 3.3 per cent. Average annual inflation should amount to 1.3 per cent and the unemployment rate at the end of 2017 is projected to be 8.3 per cent.

Construction market development perspectives for 2017 are stable with a slight growth perspective. In 2018-2020 we should expect much more rapid growth due to the implementation of construction works based on the contracts co-financed from the new EU perspective. In the sector of construction companies, an improvement in the assessment of the general business climate is recorded. In January 2017, the general business climate indicator recorded a significant improvement as compared to the corresponding period of 2015 and 2016.

The “National Road Construction Programme for 2014-2020, with perspective until 2025” (Program Budowy Dróg Krajowych, PBDK), approved in September 2015, provides that as part of tasks defined in appendix 1 to the PBDK, the amount spent on the project will be PLN 107.1 billion. The investment list comprises tasks with a total length of 4 783 kilometres. In accordance with information provided by the heads of the Ministry of Infrastructure and Construction (MIiB) in January 2016, the completion of the entire material scope of the PBDK requires the amount of PLN 198 billion. As a result, the government decided to commence works on the optimisation of the programme costs, while prioritising the implementation of selected projects. According to the MIiB’s plan, a draft version of the amended PBDK will be published in the first half of 2017. Between 2013 and 2016, the General Directorate for National Roads and Motorways (Generalna Dyrekcja Dróg Krajowych i Autostrad – GDDKiA) announced tenders under the PBDK for tasks with a total length of approx. 2 100 kilometres, among which approx. 70 per cent of the contracts will be executed in the design & build formula. The gross value of bids opened by the GDDKiA under the PBDK in 2014-2016, as regards general contracting contracts with a significant value, amounted to PLN 40.5 billion. In material terms, the significant value bids opened cover the implementation of 97 general contracting tasks with the total length of approx. 1 332 kilometres. As at the end of January 2016, the GDDKiA is conducting tender procedures under the PBDK for sections with a total length of 745 kilometres. The gross value of significant general contracting contracts for road investment projects signed under the PBDK by the GDDKiA in 2016 amounted to PLN 8.6 billion and was significantly lower than in 2015, when the total gross value of similar contracts reached PLN 23.0 billion. According to the data published by the MIiB, the value of expenditure on the statutory activities of the GDDKiA in 2016 amounted to PLN 15.7 billion and was higher by PLN 4.2 billion than the amount of such expenditure in 2015. Due to the planned acceleration of the tender awarding process and the entry of contracts executed in the design & build formula into the “build” phase, the GDDKiA plans to increase the dynamics of expenditure on road tasks in the current year. The goal for 2017 is to increase this expenditure to approx. PLN 23 billion.

The standard list of risk factors of the road infrastructural construction market, which includes uncertainty associated with the prices of raw materials, construction materials and costs of subcontractors, is being extended by the execution of contracts in the design & build formula. Furthermore, there is a high risk of an accumulation of works in 2018-2020, which may result in difficulties with the mobilisation of sufficient capital, human and material resources. It is also difficult to foresee the impact of implementation of the GDDKiA’s announcement of calling for tenders in a single-stage mode (without pre-selection) which are intended to accelerate the investment process. There is also uncertainty about the effects of the planned widespread adoption of non-price criteria in the process of selecting contractors for road construction projects.

Prospects for the railway construction sector are relatively positive. In November 2016, the government adopted the updated “National Railway Programme until 2023” (Krajowy Program Kolejowy, KPK). In accordance with the programme financing plan, between 2015 and 2023 PKP PLK will implement projects included in the basic list with a value of PLN 63.7 billion. Additionally, the reserve list includes more than 70 projects with a value of approx. PLN 35 billion, the execution of which depends on potential savings generated in the course of the implementation of the KPK. Changes made in the KPK, as compared to the version adopted by the previous government in 2015, are insignificant. Adjustments to the previous programme included primarily an update of the value of projects, taking into account the results of the first and second stage of selection to the CEF (“Connecting Europe Facility”) programme and shifting a small number of projects between the basic and reserve list. The aggregate level of planned capital expenditure decreased by PLN 0.8 billion. According to PKP PLK, in 2015 PKP PLK announced tenders with an all-time high value of approx. PLN 17 billion. In 2016, this value amounted to approx. PLN 10 billion and was higher by more than PLN 2 billion than the planned amount. A predominant share in the value of tenders published in 2015-2016 was held by large general contracting contracts of significant value. Between July 2015 and December 2016, PKP PLK announced 40 such tenders (of which more than half were conducted in the two-stage procedure), and over the last few months of 2016 the pace of awarding such contracts increased. As at the end of 2016, the contractors submitted bids in 15 tenders. The gross value of the lowest bids submitted by potential contractors amounted to PLN 6.9 billion. The average value of tender savings generated in comparison with the investor’s budget was approx. 30 per cent. At the end of 2016, PKP PLK conducted approx. 20 large tender proceedings at the pre-bid stage, with the total estimated value of PLN 10 billion. According to the MIiB, the value of railway investment contracts signed in 2016 was PLN 4 billion, and in the current year this value should increase to approx. PLN 30 billion. As announced by the President of the Management Board of PKP PLK in December 2016, the value of the company’s spendings in 2016 will be slightly higher than PLN 4.0 billion. This amount would be significantly lower than the PLN 5.4 billion of spendings planned in KPK (document dated September 2015).

To avoid the accumulation of construction works under railway investment projects, the MIiB estimates that the pace of announcing tenders under KPK in 2017 should be decreased, to become more intensive in 2018, when the estimated value of tenders announced will reach a value similar to the one recorded in 2015, i.e. PLN 18 billion. To speed up the process of awarding tenders, in mid-2016 PKP PLK abandoned announcing tenders in the two-stage procedure (with pre-selection of contractors) and replaced it with a single-stage (open) procedure. To eliminate the situation where contractors compete based on low price only, the assessment of bids includes non-price criteria; however, the majority of such criteria have no effect on the outcome. In the face of numerous organisational problems in announcing tenders and coordinating investments, the railway infrastructure manager intends to implement a plan aimed at putting the process of executing the investment programme in order. PKP PLK plans to improve relations between the investor and the contractor by, among other things, introducing an advance payment mechanism, payment for materials used on construction sites and partial payments to contractors. This is to allow for better utilisation of EU funds and avoiding mistakes made when spending funds from the EU financial perspective for 2007-2013.

New priorities and challenges are currently being defined in the hydraulic engineering sector. In January 2017, the president signed an act on ratification of the European agreement on main inland waterways (the AGN Convention). Under this convention, Poland undertook to bring the main waterways up to European standards. In accordance with the “Assumptions to the development programme for inland waterways in Poland for the years 2016-2020, with an outlook to 2030” adopted by the government, the planned value of investments in the area of inland waterways in the years 2016-2030 amounts to more than PLN 77 billion, including nearly PLN 9 billion to be invested by 2020. Investments in the area of waterway transport are to be supported with an increase in expenditure on investment projects in the flood protection area, which will receive significant financial support from, among other institutions, the World Bank.

The power engineering segment will probably maintain a good growth rate owing to large construction projects for several power units which are currently at the implementation stage. Even though the largest contracts have already been awarded, several major investments in the broadly understood conventional power engineering sector are still in planning or tenders. In the near future, the Ministry of Energy plans to launch the construction of new 5-6 power units with the total value of PLN 45-50 billion. Priority investment projects include a new power unit with a capacity of 1 000 MW at Ostrołęka Power Plant, a “clean coal” power plant at Bogdanka mine, a new power unit with a capacity of 500 MW at Zespół Elektrowni Dolna Odra, as well as the construction of a gas-fired unit at Żerań Plant in Warsaw. Long-term development forecasts for the power engineering sector are optimistic. According to the “Forecast of coverage of peak energy demand in 2016-2035” published by Polskie Sieci Elektroenergetyczne (PSE), the required growth of generating capacity in the electro-energy system in the years 2016-2035 should amount to 15.8 GW, for the BAT modernisation scenario. The corresponding value for the BAT decommissioning scenario should amount to 22.3 GW. Therefore, large investment needs in the area of power units will be the driver for growth in the power engineering sector in the coming years. For the market of plants for thermal conversion of municipal waste, the year 2016 was marked by stagnation in awarding new tenders for the construction of such plants. The planned investments in Gdańsk, Warsaw and Olsztyn are currently at the tender or pre-tender stage. The implementation of other planned investment projects is highly uncertain. As announced by the Ministry of the Environment, the list of 74 incineration plants declared during the update of provincial waste management plans will be significantly reduced, taking account of the assessment of the economic rationale behind individual projects.

It seems that the coming years will be a period of growth for the electrical power and gas transfer and distribution market. According to development plans adopted by the managers of the domestic electricity transmission (Polskie Sieci Elektroenergetyczne) and gas transmission (Gaz System) networks, the value of investment projects planned for the period from 2016 to 2025 was estimated at, respectively, approx. PLN 13 billion and approx. PLN 15 billion. The long-term development of the aforementioned sectors depends, to a large extent, on external factors. The potential of the electricity transmission market will be strongly correlated with the pace of development of the electricity generation market, while the long-term growth on the gas transmission market will depend on the progress of works on further diversification of gas supply sources, from directions other than the east.

2017 may bring a further increase in the number of flats sold by development companies. However, the high level of the base reached in 2016, i.e. the record-high 62 thousand flats sold on the 6 largest markets in Warsaw, Wrocław, Kraków, Łódź, Poznań and Tri-City may significantly affect its dynamics in 2017. The largest market players have announced a similar or slightly higher level of flat pre-selling in 2017 in comparison with 2016. However, keeping up a comparable number of transactions may be challenging. The biggest players carrying on business in large cities in Poland whose offers are adapted to market expectations have probably the best chances for further growth. Factors that may positively influence the market in 2017 will probably include low interest rates and the growing creditworthiness of Poles. On the other hand, further increase in the minimum down-payment in mortgage loans (from 15 per cent to 20 per cent), the phasing-out of the MdM programme and the new bank tax which generates an increase in the margin earned by banks on mortgage loans may cause loans to be less available for some customers, thus impeding market growth. On the other hand, it is still difficult to assess the influence of the new government programme “Mieszkanie Plus” (“Flat Plus”) on the development market.

The opportunity of the further development of the construction market may also be based on the public-private partnership (PPP) formula. PPP is still applied in Poland to a very limited degree, usually with respect to small projects. A positive sign is the drafting of a strategic document “Government policy on PPP development” by a PPP team in the Ministry of Development. The document assumes that at least 100 new PPP agreements will be signed between 2017 and 2020, and the share of PPP agreements signed in the capital expenditure of the national economy within the public sector should reach 5 per cent.