Euro 2012 – Ukraine and Poland

September 4, 2007

Poland risks losing the right to host the Euro 2012 football tournament to Italy

Filed under: Poland,Stadiums,Ukraine — Ivan @ 3:37 am

Poland risks losing the right to host the Euro 2012 football tournament to Italy as it struggles to decide what it wants for the new National Stadium in Warsaw.

As politicians dither over the post-Euro 2012 future of the new facility, experts doubt whether enough time remains to build a stadium that is up to standards. In August, Minister of Sports El├Żbieta Jakubiak asked for an extra year to construct Warsaw?s National Stadium, but experts have warned that even that might not be enough. As multinational companies keep their distance from the high-risk project, the country teeters on the verge of losing the competition to Italy.

Legal teams are hurriedly tapping out new legislation in an attempt to clear the path for an expedited tender process that could get construction underway by next year. Unlike the other stadiums needed for the competition, the National Stadium is in the hands of the national government because the land is owned by the State Treasury.

Determining a stadium?s future use, or legacy, is one of the most pivotal and difficult decisions on any project as it has a massive impact on the design, construction, long-term operation and crucially, financing. It is also one of the most common causes of delay on stadium projects.

?Politically, the legacy usage is the most challenging. There are very few examples of countries that have made it work,? said Andrew Briggs, a stadium expert and partner at international law firm Lovells. The government and its Euro 2012 organizational committee is still stuck trying to decide on the legacy of the stadium. Sports Ministry Political Office head Michal Borowski said in August the stadium would be ?either a 55,000-seat stadium just for football and Euro 2012 or a 70,000 seat stadium for Euro 2012 and other events. Either of these built on the site of the [existing 10th Anniversary] Stadium or next to it, or on another site altogether, such as the racetrack.?

The lack of plan is not good news, according to Briggs. ?I suspect it stems from the government not knowing what the legacy usage is and not knowing how you are going to pay for it. ? A national white elephant will be paid for by the government,? said Briggs. ?If you have carefully planned its legacy you know who will be using it throughout its lifetime, then you can calculate how it will be paid for,? he added.

?It is important to make this decision as early as possible, as there are very different designs depending on the outcome,? said Briggs. ?If you want a running track then you need a larger stadium and the seats will be further from the pitch. But typically football draws a larger crowd than track and field, so you would want the stadium geared toward that. The only sensible compromise is a false floor,? he added. A false floor involves building a temporary floor above the first dozen or so rows of seats, thereby increasing the floor space and keeping the audience close to the action.

?The state needs to decide if the stadium is to be built on the site of the 10th Anniversary Stadium or near it, because the technical experts need time to look at the demolition costs,? said Michal Kurzy?ski, head of mergers and acquisitions for real estate law firm Eversheds.
Law and order

Kurzy?ski, who is working as an adviser to the government on the legal issues around the stadium, explained that he is working on a law proposed by the Ministry of Sports that seeks to separate the business from the politics.

?The law proposes the creation of two companies: one responsible for building the stadium and one for the overall Euro 2012 project. This is not definite, it could change,? he said. ?The companies would have the power to appoint people specifically to take central liabilities for the project, making them act more like a manager than a clerk. It will also help attract experts from outside the ministry.? Kurzy?ski added that the new law will have the advantage of separating the companies? finances from the sports minister?s budget. It should also make it faster and easier to sign contracts as they won?t be subject to ministry bureaucracy.

?In the current unstable political situation, it is difficult to know when the laws could be enacted. We aim to have it done as soon as possible, hopefully by the end of the year. We need to start work on the stadium early next year,? Kurzy?ski said.

Yet other worries remain. ?If they can delegate power to somebody who can make decisions, then great, but it doesn?t solve the problem of where the money is coming from,? Briggs said.

With the stadium potentially costing more than Zl 1 billion (K? 7.2 billion/ ? 261 million), finding the funding and making it quickly accessible is fundamental to the success of the project.

?If they are simply looking to recover the money with games or events in the future, then I think they may struggle, as I don?t think the stadium could command a high enough gate price,? Briggs said.

There are three areas the stadium could find funds from: an anchor tenant, such as a local football club, a grant from the national government or credit from the City of Warsaw for the long term benefits of the stadium. Otherwise it will be left to the national government to simply write a check.

?Currently, it is estimated that it will take four years to build the stadium, 45 months precisely and it is 60 months till the opening match. [It comes out to] 1.5 years for design and 2.5 years for construction.? the Sports Ministry?s Borowski said.

Briggs said there is not much room left for delay. ?The time scales on the project are very aggressive. They don?t have a lot of time to put in an organizational structure or construct a complicated credit structure, as they will need to draw a lot of money down very quickly to get the project underway.?

Most stadiums are now built using design and build contracts, which effectively hands much of the project?s risk to the winner of the tender, or on design, build, finance and operate (DBFO) contracts that give the construction firm responsibility for the long-term success of the stadium. ?But to put in place a contract for that kind of construction is complicated and time-consuming,? Briggs said.
A little tender

?Another fly in the ointment is the public-procurement and tender laws. There are minimum time scales that have to be adhered to unless you want to breach EU law,? Briggs said.

Eversheds? Kurzy?ski said that his office is also working on new tender laws to try to cut the bureaucracy.

According to Briggs, under EU tender law, a typical project of this size and complexity would take 12-18 months to tender. ?I have occasionally seen it done in nine,? he said. ?The Poles have five months. The legal minimum is something like 60 days, but it is practically impossible to do it in that time.?

Kurzy?ski remains optimistic. ?If we manage to limit the whole [tender] process to three months, then it will be a success,? he said. ?But we cannot just ignore EU law. We will not contradict it because we do not want any challenges going to the EU commission, which will only delay things further.?

Multinational giants are keeping a close eye on the development of the championship but are keen to keep their distance, fearing the project could easily turn sour. One senior source in a multinational firm who declined to be identified said his firm was not bidding. ?We see another Wembley there,? he said, referring to the stadium in the U.K. that faced several delays and budget hikes.

Briggs said that if the government plans something ?quick and dirty,? international companies would not be attracted. ?They could find Polish firms to do that kind of project,? he said. ?If it?s more complicated and they want the builder to bring the finance [in a DBFO style project] then I doubt there is a Polish player who could manage that,? added Briggs. ?It would require big international lenders and they would feel more secure lending to an international company. But I am really doubtful there is enough time for anything of that complexity.?
Substitute player

UEFA declined to comment on the competition, saying it ?is currently focusing on Euro 2008, although we have regular contacts with both the Polish and Ukrainian football associations (FAs). The exact set-up for the organization of the tournament has not been finalized yet so we cannot give you more details on this at this stage of the project.? Ukraine is sharing the hosting of the tournament with Poland

UEFA will likely give Poland a bit of slack. With Italy as the designated reserve country, which experts say could run Euro 2012 with very little development, there is little to worry about at the moment.

?Italy could do it with two years? notice. It would just need time to sort out things like the ticketing and the policing,? Briggs said. ?There is a real danger that if Poland doesn?t have the flagship stadium under construction by the end of next year, then UEFA will have no choice but to pull [the tournament].?

And in the current political climate, with everyone focused on the early elections following the collapse of the government, Euro 2012 could very easily drop off the radar.

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1 Comment

  1. In my NSH opinion, we’re going to loose our rights to E2012. And we deserve it.

    Comment by opi — September 4, 2007 @ 5:48 am

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