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Edited Transcript of FER.MC earnings conference call or presentation 30-Oct-19 5:00pm GMT

Nine Months 2019 Ferrovial SA Earnings Call

Madrid Nov 3, 2019 (Thomson StreetEvents) -- Edited Transcript of Ferrovial SA earnings conference call or presentation Wednesday, October 30, 2019 at 5:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Ernesto López Mozo

Ferrovial, S.A. - CFO

* Francisco J. Clemente Sánchez

Cintra Infraestructuras S.A. - CFO

* Ricardo Jiménez

Ferrovial, S.A. - Head of IR

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Presentation

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Ricardo Jiménez, Ferrovial, S.A. - Head of IR [1]

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Good afternoon, everybody, and welcome to Ferrovial's conference call to discuss 2019 nine months financial results. Both the result report and presentation are available to you in our website. If you have any questions, you may ask them to our e-mail to ir@ferrovial.com.

I will hand over the call to Ernesto López Mozo, Ferrovial CFO.

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Ernesto López Mozo, Ferrovial, S.A. - CFO [2]

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Thank you, Ricardo. Good afternoon, and thank you for attending the first 9 months of 2019 results conference call. Starting with the highlights for the first 9 months, we go with the outstanding performance of our toll roads. The 407ETR traffic was up 1.5% in this third quarter, leaving the traffic year-to-date close to neutral despite the harsh weather conditions in the first half of the year. And also in the quarter, it posted more than 10% growth in revenues. This strong performance allowed the full year 2019 dividend from 407ETR to grow by 14% to CAD 1.05 billion, which is above the expectations of our high case presented in the 2018 models that we published.

Regarding the Managed Lanes, the Texas Managed Lanes growth reached double digit in all 3 open assets, boosted by new connections in the Dallas-Fort Worth area. Ferrovial reached the financial close of a new Managed Lane, the NTE 35 West 3C segment.

Regarding the I-77, there's solid uptake after just 4 months, and the north segment that opened is up 44% in June to September in terms of transactions. The full opening is expected by the end of 2019. Heathrow continues to reach new record high traffic levels with 61 million passengers traveling through the airport. The strong revenue performance also supported by the performance of its retail revenues that were up 3.1%.

In Construction, as a reminder, in the first quarter of this year, there was a provision of EUR 345 million for onerous contract, and the division currently is making no margin. The current focus is on reining in risk management and cost control.

Okay. So moving on to the overall view of the Toll Roads division, we see that the revenues are supported by the higher contribution from Managed Lanes and the traffic growth at most assets. Like-for-like revenues are growing at 31.8%, while EBITDA is growing even more at 40.6% and the contribution coming from the U.S. reaches almost 60%.

Also, the agreement on the sale of 65% stake of Ausol that is still pending administrative approvals but should close before year-end. It continues to add to the consolidated P&L. The administrative approvals, as I said, are expected shortly, and the cash-in should also take place in 2019. The deal, as we already mentioned, will provide a capital gain of around EUR 470 million, and this includes the fair value adjustment for the remaining stake.

The implied valuation of the asset was 60% above market consensus and ensures a strong appetite for this type of infrastructure.

Moving on to the 407ETR. The results were published last week, but I would like to highlight the outstanding performance in this third quarter. Despite the difficult first half, negative impact and harsh weather conditions, the fact that it's growing this quarter at 1.5% in terms of traffic and revenues and EBITDA above 10% has improved the performance of the whole year. The traffic year-to-date is practically flat. The 9-month EBITDA growth is up by 8.4%, and the EBITDA margin is at 87.4%.

As we mentioned in the opening slide, the 407 has paid CAD 750 million in dividends, but it has declared that for the full year, it would be CAD 1.05 billion. This implies a 14% growth and is 6% above our high case published in December, as I already mentioned.

Moving on to the Managed Lanes slide, first one on this topic. We see the outstanding performance. And we can say that the ramp-up period in NTE and LBJ has finished, if we measure ramp-up by the knowledge of the drivers in the area about the asset and how it works and the way they use it. Still, it will keep posting excellent growth. So ramp-up is just about knowledge and not about growth in the asset.

Regarding NTE, the EBITDA in the third quarter 2019 is 32% up, reflecting a strong traffic evolution. The NTE traffic in the third quarter was up 12.8%. So revenues are growing higher with a better uptake of higher tariffs. This NTE traffic is supported by the full opening of NTE 35 West in July 2018, and it connects directly into NTE's Segment 1. Also, the opening of the 183 TEXpress, the Midtown Express, in October 2018 that connects directly to NTE's Segment 2.

LBJ had a stellar 3 -- third quarter performance with EBITDA growth of plus 28%, traffic was up 13.8%, and it was impacted by 2 sources of [indiscernible] one of them is the opening of the 183 TEXpress in October 2018, which connects directly to LBJ's Segment 1, providing a new and direct connection between NTE and LBJ.

The latest opening is the increase in traffic from the US-75, following the completion of construction at its intersection with President George Bush Turnpike in the second quarter 2019.

Regarding the latest arrival to the portfolio, the NTE 35 West, the latest addition in Texas, the third quarter of 2019 showed traffic up 44%. This third quarter is the first full quarter we can compare as the asset opened in July 2018 fully. As drivers are returning to the highway, exceeding pre-construction levels, and the increase in share of traffic that is choosing the Managed Lane and also commercial traffic is having a very good performance here.

Reported figures are impacted by the award of the NTE 3C, an award which took place in August this year, and that we will explain in more detail in a minute. This impacted because there was a $20 million success fee paid by the concession, and this will be consolidated with NTE 35 West. It is an extension. So this success fee, I mean, we basically have taken it out in this slide to show the growth in EBITDA. A substantial part of this success fee will go to Cintra.

A strong element supporting this good performance of the 3 Managed Lanes is the improving connectivity in the whole corridor. The Dallas-Fort Worth Metroplex has a 100-mile connected system of TEXpress lanes and 20 miles of additional Managed Lane capacity will be added in the next 5 years. One part of this is the construction of the NTE 3C to the north of NTE 35 West Segment 3A-3B and also the 635 East to the east of LBJ.

Okay. So moving to the next slide, we get into more detail on the NTE 3C. This was, as we said, awarded in the summer. And it follows the 3 very successful Managed Lanes that we own and operate in the area, in response to the demand to improve traffic flow in a very busy area, which has a booming economy that is outperforming the U.S. economy at large. It was awarded in August, as I mentioned before, and it includes the development, design, construction and operation of the segment. It is a 6.7-mile north-bound extension of the NTE 35 West 3A-3B, with 2 Managed Lanes in each direction as well as the reconstruction of the exiting general purpose lanes, construction of access ramps and frontage roads, the construction of IH-820, I-35 West Managed Lane direct connector and the installation of intelligent transportation systems and tolling systems. It will be completed by the end of 2023, and the concession term ends in 2061. The total enterprise value will reach more than $900 million. And the -- our stake owned by Cintra will be 53.8% (sic) [53.7%].

If you look at the slide, I mean, you see the proportion that it means compared to 3A-3B and how it connects to the Fort Worth Alliance Airport. It is an area of high growth from a commercial and logistics point of view and issued -- I mean our expectations are high regarding this asset.

Moving on to another Managed Lane. This is another region. This is in the I-77 from Texas to North Carolina. It opened the northern portion on June 1 this year, and we expect the full opening before the end of the year. The results since this partial opening have shown that drivers are adapting to the value proposition of the Managed Lanes very fast.

Traffic in the segment of the Managed Lanes has grown by 44% since opening measured in transactions. This is just 4 months of operations. Okay. So as we said in the beginning, a solid uptake, and we'll keep monitoring this asset.

Moving on to airports. From toll roads, we move into Heathrow. The results were published last week, but it's worth to quickly go over some data like the record high passenger numbers it achieved, 61 million passengers that traveled through Heathrow in the first 9 months of the year, implying a growth of 0.7%, leaving the airport on track to achieve its ninth consecutive year of traffic growth.

Financial performance. Revenues were up by 4.1%, with a strong growth in both aeronautical revenues, up 5.5%; and retail revenues, up 3.1%, led by concessions and catering.

Adjusted EBITDA was up by 6.3%, helped by IFRS 16. Without the impact of this new accounting rule, it would have been up by 3.6%.

It is worth pointing out that these results have been achieved while Heathrow maintains extremely high service quality, with an overall score of 4.12 over 5, with 82% of passengers rating their experience as excellent or very good, better immigration following investments in e-gate and upgraded passenger WiFi facilities. Departure punctuality and baggage connection have also improved year-on-year. Dividends amounted to GBP 300 million for 100% in the first 9 months of 2019.

We move on with Heathrow to the next slide, where the main point is the expansion that lies ahead. And here, sustainability is the key. Heathrow is advancing on its Heathrow 2.0 sustainability plan, which has 3 main targets: carbon neutral airport operations from 2020; 0 carbon airport operations by 250 -- 2050; and carbon neutral growth from the new runway.

In terms of the airport expansion, Heathrow remains committed to it being sustainable in the long term. In its airport expansion consultation, it has presented its proposals for an environmentally managed growth framework, explaining how its growth would be managed in accordance with environmental limits in air quality, surface access, noise and carbon, and supports growth in flights at the airport while ensuring Heathrow's environmental performance stays within maximum limits.

Moving on to Construction in the next slide. As announced in the first half results, we registered a EUR 345 million provision for estimated future costs or onerous contracts in U.S. projects.

In the 9-month results that are in line with the first half of 2019, there is negative EUR 348 million EBIT, with Budimex and Webber presenting a positive performance and profitability similar to recent quarters.

FA in the third quarter stand-alone posted a minus EUR 24 million EBIT mainly on overhead costs allocated to onerous contracts in the U.S., around [EUR 8 million] and ongoing costs in some projects, where we expect to offset this cost with income from claims or rights in the contract for compensation. Okay. So no potential income from those claims is included in the results. So this is a different timing between cost recognition and revenue recognition.

Moving to the next slide on Services. The divestment process is progressing, following 2 separate routes. One of them is Spain, Australia and the international part rest of the world. And then another one is Amey. The sale is taking longer because the transaction is more likely to be based on subsets of the original permitter, and this is taking harder to prepare. And also, it's worth mentioning that Ferrovial could potentially retain several PFI projects that are infrastructure-type business.

Moving on to the P&L results. We see that the main impacts on Ferrovial's P&L. So some of the operations' impacts have been already discussed, and I will focus on other lines. So you have the financial results, the infra financial results with higher expenses, and this is because of the opening the full year -- opening of NTE 35 West compared to 6 months last year. So we have 9 months versus 6 months this time. And the opening of segment of I-77. This has been partially offset by better remuneration of the gross cash position.

Ex infra projects, we have EUR 41 million of financial income in the first 9 months, again, thanks to a better remuneration of cash position and also the performance of the equity swaps linked to performance share plans. These hedges led to a EUR 14 million profit in 2019 versus EUR 2 million profit in the first 9 months of 2018.

Then in the equity accounted results, we have a lower result, EUR 115 million after-tax compared to EUR 206 million last year. And here, the main impact is, at Heathrow, we have the fair value adjustment of inflation derivatives, and this is linked to the curve at the end of September, expecting higher inflation with a higher probability of a non-deal Brexit. Now at the close of October, this impact would be positive with the curve of the 30th of October, right? So very much inflation expectations seem to be driven by the likelihood of a negotiated deal or a non-deal Brexit.

In terms of Autema, we also had the provision of our goodwill, just in case our appeal is not successful. And in the discontinued operations, we have results that show a net income of EUR 28 million compared to a net profit at the end of June of EUR 135 million. Results from discontinued operations were increasing the book value compared to December 2018, mainly because there is no amortization charge following IFRS 5. An adjustment in carrying value has taken place.

Okay. If we move to the next slide, we can have a review of the ex-infrastructure cash flow evolution. We have the bridge with year-end. And here, the main drivers of the change in net cash position are, first of all, the positive input of dividends from projects. This is EUR 365 million that includes EUR 33 million from Services projects.

And in terms of the EBITDA from ex-infrastructure projects, we have a working capital impact, that is, the payout of the provision from construction. We have a payout of around EUR 118 million. And the rest of the working capital evolution, we have the consumption at Budimex, also around EUR 119 million, and Amey ex-Birmingham at EUR 154 million. These numbers except -- I mean are very similar to the ones we were seeing last year in terms of cash outflow this part of the year. What is different is the payment to Birmingham. I mean, the Birmingham (inaudible) has implied a cash outflow of EUR 166 million, including GBP 130 million of the settlement payment, and the rest of the cash outflow is related to investment EUR 161 million with no significant divestments. And here, it is important to mention that [our source] should be coming in before year-end in terms of divestments, and the other positive impacts we expect at the end of the year is higher dividends from infrastructure. The 407 already announced that. We expect the first dividend from NTE, and we'll have to assess also the possibility of Heathrow improving the dividend more in line with last year. But that's something that the Heathrow Board will have to decide at the end of the year.

Okay. So after the review of the cash, just the final remarks. We have 6 squares here that show the main highlights for conclusion. Starting with the bottom right corner on the slide, regarding contracting, we are addressing the sale of Services, working to improve -- [developing] Construction focused on risks. And then regarding the infrastructure assets, we can just talk good news with Managed Lanes continue booming. The 407, solid performance and growth in dividend. New record high at Heathrow in terms of passengers. And we can see that, in general, our portfolio is highly coveted by investors in this type of business. So news here should remain upbeat.

Regarding the financial position, with a net cash position of EUR 662 million before the Ausol proceeds and dividends for the projects, the position is very robust.

Okay. So that concludes the presentation, and we get into the Q&A session.

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Questions and Answers

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Operator [1]

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(Operator Instructions)

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Unidentified Company Representative, [2]

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So the first question, which was sent via e-mail, came from Jenny Ping from Citigroup. Question is, would you be able to provide an update on where you are on the disposal of the Services business. The press is talking about combining bids from 2 bidders. What is the time line? And when can we expect to hear on the deal and the proceeds?

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Ernesto López Mozo, Ferrovial, S.A. - CFO [3]

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Okay. Thank you, Jenny, for the question. We are progressing with discussions. We won't get into details regarding timing, and we are in the kind of 12-month period that we were giving ourselves for this. Well, it's advancing well, but I cannot give you any specific date, okay?

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Unidentified Company Representative, [4]

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Second question, can you also confirm that you wrote off further assets in the book value of Services? If so, what is the amount of the write-off?

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Ernesto López Mozo, Ferrovial, S.A. - CFO [5]

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Okay. As I mentioned, I mean, book value was going up, especially with the fact that you don't amortize the assets with IFRS 5. So yes, we took a EUR 170 million hit, but I cannot give more specifics at this time because we are negotiating with bidders, and this could be sensitive information.

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Unidentified Company Representative, [6]

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And lastly, regarding Heathrow, what do you see is an appropriate level of return for H7? The 2.6% talked about by the CAA's consultant, is that sufficient in your view?

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Ernesto López Mozo, Ferrovial, S.A. - CFO [7]

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Okay. I won't comment on any specific level for the return here because also there's different moving pieces, and the risk of the asset now is very different with all the construction involved and new capacity, right? So I mean, things will be discussed. We won't be providing guidance what we see as sufficient now because also the regulatory building blocks are moving.

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Unidentified Company Representative, [8]

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Thank you, Ernesto. Next set of questions come from Guillermo Fernández-Gao from Kepler Cheuvreux. The question is on the Services divestment. How material would be the business you would potentially retain in U.K. PFIs in terms of EBITDA and net debt if they are globally consolidated?

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Ernesto López Mozo, Ferrovial, S.A. - CFO [9]

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I cannot provide you much color here because it's being discussed. And it will be clear if -- when we have our transactions. So I cannot give details now, but it will be fully explained upon reaching an agreement.

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Unidentified Company Representative, [10]

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Thank you, Ernesto. The next set of questions come from Marcin Wojtal in Bank of America. The first question would be, can you comment on the pipeline for Cintra and specifically on the Maryland Congestion Relief Program? When do you expect the first awards from this program? And what is the size of the potential investment for Cintra?

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Francisco J. Clemente Sánchez, Cintra Infraestructuras S.A. - CFO [11]

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Yes. Well, this is Paco Clemente speaking. The first Maryland project that we are expecting is the I-270 South Maryland. We expect that the request for qualification will be launched at the year-end, and the request for proposal during 2020. And the amount of investment is roughly EUR 2.6 billion, and the equity that could be potentially injected by Cintra will be around EUR 375 million.

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Ernesto López Mozo, Ferrovial, S.A. - CFO [12]

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Also, I missed a part of the prior answer -- sorry, question. Sorry about that. They were talking if PFIs were located in the U.K. Well, I was talking about other geographies, but as I said, we cannot be specific now. I mean, it's early stages.

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Unidentified Company Representative, [13]

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Third question also from Marcin. Do you currently expect the Construction division to be profitable at EBIT level in 2020?

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Ernesto López Mozo, Ferrovial, S.A. - CFO [14]

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We are not providing guidance for 2020. We will have more information on the close-of-year conference call in February.

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Unidentified Company Representative, [15]

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The next set of questions come from Stephanie D'Ath in RBC. On the 407ETR, on the stake increase, what is the update on the legal procedure?

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Francisco J. Clemente Sánchez, Cintra Infraestructuras S.A. - CFO [16]

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Well, again, I think it's public that Cintra has made an appeal of the -- on the process. We do not expect any news up to the hearing next year.

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Unidentified Company Representative, [17]

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Could you please comment on the joint bid with SNCF for a concession to operate one of Spain's high-speed rail trains?

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Ernesto López Mozo, Ferrovial, S.A. - CFO [18]

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Okay. We have analyzed this opportunity. We haven't made a decision yet if we'll go for this business, still analyzing that.

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Unidentified Company Representative, [19]

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Could you comment on the progress of discussions with airlines to shift the agreement-based contract away from regulated asset base?

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Ernesto López Mozo, Ferrovial, S.A. - CFO [20]

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Okay. There is -- I mean the possibility of that happening, there's no open negotiation at the moment. Still the -- but the discussions regarding expansion are more about providing the initial business plan and the regulator -- on the Heathrow side and the regulator providing building blocks for the regulatory period. So there's no discussions really at this point in time, but I guess that all parties remain open.

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Unidentified Company Representative, [21]

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And the last question from Stephanie regarding Heathrow and the potential -- potentially improving dividends in full year 2019. What is the sustainability of this given runway 3 investments ahead?

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Ernesto López Mozo, Ferrovial, S.A. - CFO [22]

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Well, we are not discussing future dividends from the asset. The asset has healthy 2-runway operations and could be providing dividends. So money here is quite fungible and -- as you probably are suggesting. So these dividends could be reinvested. It would depend on the business case. And as I said, the business case will be more clear to the market end of this year and more at the end of 2020.

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Unidentified Company Representative, [23]

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Thank you, Ernesto. The next set of questions come from Nabil Ahmed from Barclays. Please, could you provide an update on Managed Lanes dividend? When do you expect NTE and LBJ to pay their first dividend?

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Ernesto López Mozo, Ferrovial, S.A. - CFO [24]

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Well, NTE at the end of 2019 and LBJ at the end of 2020. This should be their first dividends.

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Unidentified Company Representative, [25]

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What about the refinancing potential for the Managed Lanes? Could you provide an idea of the timing and potential benefits of the refinancing?

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Francisco J. Clemente Sánchez, Cintra Infraestructuras S.A. - CFO [26]

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Well, in regards of NTE, we have a call date at the year-end this year, and we are expecting that we will be able to reach financial close before that date. And in regards of LBJ, the call date is scheduled at mid-next year. We -- again, we expect that we will be refinancing at least (inaudible) in the second half of next year.

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Unidentified Company Representative, [27]

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And the last question from Nabil. Could you provide a guidance for net cash position by year-end?

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Ernesto López Mozo, Ferrovial, S.A. - CFO [28]

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Well, we usually don't provide guidance before year-end, when we talk about the building blocks that could compose this end of cash position, right? So we should be getting the sale proceeds from Ausol, also the dividend from NTE. And then construction will depend on the -- getting some advanced payments on some projects that are closing in this last part of the year. Also at the end of the year, we should see cash improvements in Amey and broader spectrum that are usually seasonal. So we should see some seasonal effect, probably not as strong and favorable as other years, but we have these other impacts that should help. Beside the building blocks, we don't provide a specific guidance, but it looks like improving this current level for sure.

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Unidentified Company Representative, [29]

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Thank you, Ernesto. The next question comes from Ellen Elberfeld from Duff & Phelps Investment Management. How will proceeds of Services sale be spent? Will it be used to fund an equity injection into Heathrow to help fund the expansion CapEx?

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Ernesto López Mozo, Ferrovial, S.A. - CFO [30]

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Well, we don't have a different guidance here what we've said since the results conference call in February. We are looking to invest in infrastructure that could be attractive. We could also do shareholder remuneration. So those are the main uses. Of course, Heathrow expansion should be an interesting project. And yes, we could be looking at that. As I said, Heathrow itself is capable of generating dividends. But yes, it could be a possibility to inject in Heathrow. But this will be happening later on. I mean, start of construction probably is two years ahead easily.

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Unidentified Company Representative, [31]

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The next question comes from Jacopo Di Nardo from Makuria. I just wanted to understand what the EBITDA is on the I-77 on tolls this quarter.

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Francisco J. Clemente Sánchez, Cintra Infraestructuras S.A. - CFO [32]

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For this quarter, the total revenue of the I-77 is EUR [8.4 million.] And out of them, we got EBITDA of -- and OpEx is [EUR 42 million] so EBITDA is [EUR 50 million,] no?

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Ernesto López Mozo, Ferrovial, S.A. - CFO [33]

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Okay. So I mean, just to provide the exact breakdown, revenues are $20 million, of which tolls are $3 million. The -- then there's $17 million from liquidated damages. This is something that Cintra is charging the construction JV for delays and is supposed to replace toll revenues, right? And then there's also -- I mean EBITDA is [stable] because there's some capitalization of costs due to construction still going on, and the capitalization of costs is -- I mean the exact number of capitalized cost is $5 million, okay? So that is helping to improve the EBITDA margin, this capitalization of the asset.

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Unidentified Company Representative, [34]

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Thank you very much, Ernesto. The next question comes from José Manuel Arroyas from Santander. Weather conditions were particularly bad in Dallas-Fort Worth in the third quarter of 2019 with heavy rain. Were the Managed Lanes there hurt by the weather?

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Ernesto López Mozo, Ferrovial, S.A. - CFO [35]

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No, not really. We cannot say that there was an underperformance due to weather in the Managed Lanes.

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Unidentified Company Representative, [36]

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And then last question from José Manuel. The cost of funding from NTE and LBJ carries very high coupons, close to 5.3%, and the assets are performing well. Is there an opportunity to refinance these assets anytime soon? If so, when? And have you received any quote thus far?

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Francisco J. Clemente Sánchez, Cintra Infraestructuras S.A. - CFO [37]

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As I said, we are expecting that we -- at least we will be refinancing the (inaudible) in [NTE] at the year-end, maybe [TC] as well will be refinanced. We will see. And in regards of the LBJ, again, we will try to refinance once the call date will elapse, which is next June 2020. And in both cases, we will expect to reduce substantially the cost of funds of both projects.

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Unidentified Company Representative, [38]

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And a follow-up question also from José Manuel. You will receive the first-ever dividend from NTE. The asset is outperforming your business plan by about 20%. Is there a potential for higher dividend than the $125 million you guided for earlier?

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Ernesto López Mozo, Ferrovial, S.A. - CFO [39]

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I mean, you're right, and -- [José Manuel.] And the asset is performing better. So there's more excess cash. Yes, it could be a higher dividend, but maybe it spills into early 2020. So I mean, we'll get more clarity here during the end of this quarter. But yes, definitely, the expectation is that either this year or between this year and 2020, we should have a better performance.

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Unidentified Company Representative, [40]

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The following question comes from Charles Maynadier from Kempen. The 407ETR dividend growth highlights again that your forecasts were too conservative. When could we expect an update on the toll roads valuation, including models, or at least some more visibility on NTE 35 W and the I-77?

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Ernesto López Mozo, Ferrovial, S.A. - CFO [41]

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Okay. We are debating this, in particular, on the NTE 35 West, you will start seeing construction in the north end. And the I-77 still has to open, right? So given these facts, and we usually wait a little bit to see more the performance of the asset before updating. I mean, we won't be doing it now. So we are debating internally. We'll keep you posted.

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Unidentified Company Representative, [42]

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The following question comes from Elodie Rall from JPMorgan. Can you give us your view regarding 2020 construction margin?

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Ernesto López Mozo, Ferrovial, S.A. - CFO [43]

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I already took this on a prior question. I mean, we'll probably talk about this in February with the year-end results of 2019.

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Unidentified Company Representative, [44]

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On the 3C portion of the 35 W, what kind of pricing are you expecting? Would it be similar to the other Managed Lanes? Or is there better potential?

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Ernesto López Mozo, Ferrovial, S.A. - CFO [45]

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We think it's quite similar, but it will have to open. I mean we think it's quite similar because there's a lot of commercial, industrial activity to the north. As I mentioned in the presentation, there's the Alliance Airport over there. So there's no reason to expect a different mix in terms of traffic, but it's early to tell.

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Unidentified Company Representative, [46]

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And finally, from Elodie on Heathrow. Can you give a bit of color on the moving parts below EBITDA as the equity contribution is negative for EUR 9 million?

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Ernesto López Mozo, Ferrovial, S.A. - CFO [47]

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Well, as I mentioned before, this has been affected mainly by the impact on the hedge on inflation, right? At the close of September, (inaudible) a curve with very high inflation expectations given that the likelihood that the market was attaching to a no-deal Brexit was quite high. That has reverted now, right? So we could see, basically, in our accounts an improvement, given the curve today. That could be around EUR 80 million improvement, right? So it's based on this. And as I said, it is an economic hedge, and it will depend on how the Brexit saga evolves. I mean a deal Brexit should bring this kind of inflation expectations, a no-deal would have the same impact that we've seen at the end of September.

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Unidentified Company Representative, [48]

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The next question comes from Jean-Charles Belvo from INOCAP. Is the construction of I-66 going according to plan? When do you expect it to be launched?

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Ernesto López Mozo, Ferrovial, S.A. - CFO [49]

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It's going according to plan, and the opening is expected in 2022. It's a big project. That's our expectation now. We will keep updating you on this project given the magnitude. But right now, our expectation is 2022.

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Unidentified Company Representative, [50]

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The next question comes from Nicolas Mora from Morgan Stanley. In Construction, you continued to rack up EUR 20 million to EUR 30 million of losses per quarter at Ferrovial Agroman. Something to continue into the fourth quarter of the year?

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Ernesto López Mozo, Ferrovial, S.A. - CFO [51]

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Well, as I mentioned in the prior call and in the explanation this year, it would depend -- sorry, this call, it will depend on the signing off of clients to claims that we believe we are due by contract, right? So if they keep coming, it could improve. If not, we could see this similar situation. So we'll keep you updated. No reason to change the outlook for year-end at this point in time.

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Unidentified Company Representative, [52]

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Thank you. The following question comes from Robert Crimes from Insight. Why did you pay the special dividend at 407ETR? Is there a potential to be repeated in 2020?

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Francisco J. Clemente Sánchez, Cintra Infraestructuras S.A. - CFO [53]

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Yes. This is Paco, again. Robert, as you know, in the 407, since 2017, we have been updating, reviewing and revising the final dividend at the year-end each year. We did it in 2017, '18, and we did also this year. It depends how the performance of the concession has been evolved during the rest of the year. So it could be or could be not.

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Unidentified Company Representative, [54]

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The following question comes from Bruno Da Silva from CaixaBank. Could you please give the contribution of discontinued activities to the net cash position of September 2019?

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Ernesto López Mozo, Ferrovial, S.A. - CFO [55]

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Okay. The net cash position of the discontinued activities is EUR 17 million at the end of September.

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Unidentified Company Representative, [56]

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On Construction on Ferrovial Agroman, is there any reason to believe of a risk of a new provision going forward?

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Ernesto López Mozo, Ferrovial, S.A. - CFO [57]

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There is no change from the expectations we've had, right? So here, we'll keep updating. Things are evolving along our expectations for the time being in Construction.

Well, I think we've taken care of all the questions. There were more questions on details regarding Services. As I mentioned, we cannot provide at this point on time, but we expect to be providing in the near future. So thanks for attending the call.

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Operator [58]

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Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines.