Earnings Call: Q4 2020

Feb 25, 2021

Good afternoon, everybody, and welcome to Ferrovial's conference call to discuss the financial results for the full year 2020. Just as a reminder, both the results report and presentation are available to you on our website. A couple of highlights on today's results. Financial information included in our report has been impacted by COVID-nineteen outbreak, mainly since the second half of March. Given the uncertainty regarding the speed and extent of resumption in activity, it is not possible to predict how health crisis will affect Ferrovial's performance in 2021. Ferrovial will continue to closely monitor trading conditions and further evidence on wider economic impacts. I am joined here today by Mr. Rafael del Pino, Frovial's Chairman Mr. Ignacio Madirejos, Frovial's CEO and Mr. Ernesto Lopez Motto, our CFO. If you have any questions, you may ask them through the form included in the webcast. During the Q and A session at the end of this call, We will be reading out your questions and who they are from. With this, I will hand over to Mr. Delpino. Rafael, the floor is yours. Thank you, Begona. 2020 has been a difficult year with an unprecedented health crisis that has impacted All aspects of our lives. COVID-nineteen forced governments to impose mobility restrictions, Travel bans and quarantines across the globe, which in turn led the economies closing down. In this scenario, we have seen our operations impacted, especially in terms of traffic levels in toll roads and airports. Although whenever restrictions were lifted, we saw a quick recovery in performance, especially in our toll roads in North America. We have taken measures to mitigate the COVID-nineteen impact through reduction in costs and CapEx plans at corporate and also at asset level. Although also impacted by COVID-nineteen, our contracting business showed resilient performance. Production levels in construction were strong, And EBIT margin reached 2.3%, which is much better than what we were initially expecting for the year. We were also able to generate a strong activity cash flow in the year, especially helped by improved working capital on the back of better collection terms services, the strong performance of Budimex and divestments that were completed. Ferrovial faced COVID-nineteen with a record high level of liquidity and a strong cash position. Throughout the year, we have Tried to preserve and improve even further the liquidity position of the company, issuing corporate bonds, drawing syndicated credit facilities Issued through ECB pandemic emergency pressure program. We closed 2020 with 8,000,000,000 Euro of available liquidity ex infrastructure and BRL 1,300,000,000 in available liquidity lines. Net cash position ex infra at close to €2,000,000,000 including discontinued activities. We are following our strategy, which is aligned with the Horizon 24 plan presented a year ago. We are refocusing on the development and operation of sustainable infrastructure with high concessional value, rotation of mature assets and increasing our exposure to managed Examples of these are the sale of Broad Spectrum at AUD485,000,000 included in divestment Services to which Carabial is still committed. The sale of our Portuguese assets, Norte Littoral and Algarve, For €171,000,000 cash inflow part in 2020 and part will happen in 2021. The acquisition of an additional 15% in the I-seventy seven managed lane and the sale of 5% of Budimex For €58,000,000 while maintaining still maintaining a controlling 50.1% stake. Sustainability is also a core part of our strategy and fully aligned with our business strategy. Although we will explain it in further detail later on, some of the highlights are: we have ambitious Decarbonization plans until 2,030 and plan to reach carbon neutrality by 2,050 through several milestones, including reaching 100 percent of renewable electricity sourcing by 2025. We Are a pioneer in reaching 3rd party verification on the alignment of Theravial's value chain with United Nations' sustainable development goals. And our effort in sustainability has gained us recognition by the main sustainability indices. We review in the following slide some of the main figures for the year. Revenues grew by 9.9 percent, like for like to over €6,000,000,000 On the back of higher construction revenues, partially offset by lower contribution from toll roads. Dividends from projects reached €458,000,000 a bit lower than the €729,000,000 that happened in 2019. Our operating cash flow reached over €800,000,000 And divestments in the year, some of which I mentioned in the previous slide, totaled €501,000,000 in inflows, With some transactions still pending full closure in 2021. On the net cash position, ex infrastructure assets reached Close to €2,000,000,000 while liquidity levels were at close to €8,000,000,000 In the current situation, short term visibility remains limited, and it is difficult to provide any guidance on the results of the coming quarters. This being said, we remain confident when we look ahead. Our assets have long duration, Are located in diversified growth areas, have flexibility to adapt to changes in behavior patterns that may come That should play a key role in relieving capacity constraints in their regions. Our strategy is clear, Focusing on developing efficient, innovative and sustainable infrastructure that will create value for all our stakeholders. We see clear opportunities ahead, not only building on our competitive advantage, but also with enough financial strength So now, Ignacio, please, you have the floor. Thank you, Rafael, and hello, everyone. A pleasure to present 2020 financial results. A difficult year because of the pandemic, but we delivered on the things that we can control. Let me start again reminding you of our strategy. As you know, we develop And operate innovative, efficient and sustainable infrastructure while creating value for stakeholders. Our focus is on developing managed lanes in the U. S. We also develop and operate other high quality toll roads and airports that contribute to our corporate portfolio. Our Construction division is not only a cash contributor, but a Key part of our strategy as it helps us to develop complex infra projects. We have a target of 30% revenues coming from internal projects. These construction capabilities will also help us develop concessional projects on electrification, water and mobility. Our geographical focus is on the U. S, but we also consider core geographies other markets like Canada, Poland, Spain, U. K, Chile, Colombia or Peru. We have a strong pipeline of projects, mainly U. S.-managed lanes, but also other toll roads and yellowfield airports And even in water or electrification. Some of these projects may not become a reality and others, we may lose to competitors because we will maintain Our financial discipline to get double digit returns, but we will continue working to develop our portfolio with some of the best infra assets in the industry. At Ferrovial, we look at the main global challenges and turn them into business opportunities. No doubt, we can contribute to create a better world. We have a sustainability strategy which is fully aligned with our business strategy and in which we have been working for years. We are the 1st company to certify the impact of our strategy on the United Nations' Sustainable Development Goals And define metrics to measure our progress. We have a plan to become carbon neutral by 2,050 with intermediate milestones 100% from renewable energy by 2025 and 32% reduction of scope 1 and 2 emissions by 2,030 Compared to 2,009. I'm sure we will deliver in a similar way we were ahead of our 2020 targets. In the case of water, we also have plans to reduced 20% of water consumption by 2,030 compared to base year 2017 and to compensate annually 30 times our consumption With treatment and access, our sustainability efforts through the years have helped us to be part of the Dow Jones Sustainable Index For 19 years and other highly recognized indexes. COVID-nineteen has impacted our P and L, Mainly with lower traffic both in our toll roads and our airports, in the later also with exceptional cost and fixed assets impairments. In our construction unit, our projects were affected by stoppages, loss of productivity and other effects of mobility restrictions With an estimated negative impact to EBIT of €49,000,000 In the case of our services unit, it was affected in a similar way With a EUR102 million negative impact at EBITDA level. It has also impacted our cash flow With lower dividends from infra assets, distribution of €458,000,000 including services projects dividends Compared to €729,000,000 in 2019. Of course, we took measures to mitigate all these negative effects. We are CIFOR committed €26,000,000 corporate cost reduction for the year 2020 and on top of it, implemented Additional €23,000,000 of OpEx savings related to COVID. In all divisions, we implemented OpEx and CapEx savings, most relevant in airport, With £303,000,000 OpEx reduction and £700,000,000 CapEx reduction at Hydro and in a similar way, €37,000,000 25,000,000 at AES. All priorities during the pandemic have been to protect the health of our employees and clients, Reinforce our financial position and support the community. I want to thank all employees for their contribution during this pandemic. I'm very proud I'll follow-up then. Now moving to our toll road business. As commented, traffic heavily impacted by COVID-nineteen, But we experienced a solid recovery when mobility restrictions were lifted. Our EBITDA was €251,000,000 92 percent in the U. S. And we received €340,000,000 dividends from Toll Roads, €109,000,000 coming from LVA That distributed its first dividend. During the year, we reclassified Altima to an intangible asset with traffic restating 2020 results. We divested a part of Nortelitradellar and Algarve collecting €100,000,000 and pending authorities approval for the 20% remaining value €70,000,000 And also, we bought an additional 15% in I77 to reach 65 0.1% with an investment of €68,000,000 We are progressing well on our new toll roads, especially our new managed lanes, Our 6.7 miles extension of the NTE 35 West is progressing according to schedule, being 20% complete and expected to be open In 2023, the I66 is progressing well, is 57% complete and expected to open at the beginning of 2023. In the case of other toll roads, Crutile Cacao is 68% complete, Bratislava 86% and Ozark 97%, all of them partially open to traffic. As commented, the most relevant indicator of our pro form a last year was the restrictions to mobility made by authorities because of the pandemic. And Toronto was one of the most restrictive areas of the world, if not the most. The reopening after the April lockdown was in phases during a long period of time. And after an increase of cases after the summer, restrictions were back very fast. Today Toronto is under a stay at home order with the schools operating remotely. It is worth highlighting the lower impact on traffic that this second lockdown has had when compared to the first one last April when traffic was down by 80%. The most relevant indicator this year is going to be vaccination and Canada started slowly, but they have bought more vaccines per capita Than many other countries. So this will be in a better situation for the distribution than what we are seeing in other regions such as in Europe. The situation in Dallas forward was different and the way to face the pandemic much less restrictive than what we saw in Toronto. After the April lockdown, they lifted some of the restrictions to recover the economy pretty fast, leading at a strong recovery on traffic levels, too. They had an increase of cases at the beginning of the summer, around mid June and the last quarter of the year, but they decided to maintain similar level of restrictions Until the case is upswing after Thanksgiving, when restrictions again became tighter. The pace of recovery has been different in Eastmanal Lane Depending on their specific features, like NTE 35 West that has ended up the year only 10% below last year traffic level, Thanks to the higher exposure to commercial traffic and the fact that this asset is still ramping up. Like in the case of Toronto, increasing restrictions on year end Was made by a smaller impact on traffic levels than what we saw in the beginning of the pandemic. Dallas Fort Worth is progressing well with the vaccination, And we expect it will have a positive result in recovery mobility in the area in the following months. Now entering in more detail about the 407 results. We're talking off about traffic and the severe restrictions to mobility that have influenced results last year. In terms of tariffs, we increased them in February last year and maintained for the rest of 2020. This implies that of seasonal tariff scheme that we announced in December 2019, only the first of the 10 years was implemented. We have not announced a tariff increase for 2021 in December because we are in the middle of a stay at home order. This being said, we have the flexibility to change prices at any point during 2021 if restrictions to mobility are lifted and traffic recovers. In terms of Schedule 22, including the conditions of the contract, a pandemic is a reason of first major With Sol, prevent the Schedule 22 from being applied. In addition, the spirit of the contract is to relieve off congestion in the network, especially the 401 And congestion, which is not the system today. For this reason and following the view of both internal and external country, we have not registered a provision for scheduled 22 payments since the pandemic, the administration decision is expected for mid April. 407 ATR distributed 2,500,000 Canadians in 2020 that at favorable stake, it is €160,000,000 The 407 Board will monitor the evolution of the pandemic And we'll decide about new dividends this year. We are above the 1.35x debt service coverage ratio. It is, however, not We expect to see dividends from 407 at least until the 2nd part of the year. Although March will depend on the performance of the asset and traffic evolution. The financial position of the 407 is very strong with a CAD640 1,000,000 cash position and limited debt payments in the following years. We will now take a closer look at the different levers that will impact TAFIC performance on the 407 UTR In the same way, we'll do for the Managed Lens later on, levers which make us very optimistic about the 407 ETR future. The most important drivers in the long term are population growth and economic activity in the area. 3rd party forecasts about these factors are very positive. Greater Toronto and Hamilton area is expected to add over 2,000,000 people in the next 20 years, thanks to a diversified economy that will immigration from other areas and is expected to grow GDP by 5% in 2021 and 4.5% in 2022. The 407 will be a facilitator of this growth, connecting business and population along the corridor, which will capture much of the population growth. In 2020, 74% of the growth in the area took place in areas which we were directly serviced by the 407 ETR. E commerce has already had a positive impact on traffic in 2020. There has been a strong growth of delivery company strips through the year. E commerce will be a positive contributor to the 407. There are many different estimates, but all point to relevant growth. We have seen more and more companies locating close to the 407 to take advantage of the time savings Compared to alternative routes, the 407 is good value for Mondi for them. But e commerce growth in traffic comes from additional impacts. More individual purchases, sale deliveries, returns and shorter delivery time frames being offered to customers. It is also changing patterns with more traffic at peaks and mid days and less on weekends and nights. With our price flexibility, we can adapt to these changes on patterns. I know that change in work from home has been a topic difficult to forecast. Before the pandemic, between 7% to 13% of Canadians were doing some kind of working from home. During the worst times of the pandemic in April, With a stay at home order, 40% of Canadians were working from home. Last employer survey, that is from the Q3 of 2020, suggests that most businesses Expect workers to be back in the office after the pandemic. 3rd party estimates suggest that the percentage of people will do some kind of work from home will be between 15% 20% and very few full time. In addition, it is good to remember that 85.6% of personal customers Make less than 3 trips a month and most customers do not use the 407 daily even if commuting. No doubt that there will be an impact From work from home in the short term, but we are confident that it will be soon compensated by population and economic growth. There have been some comments about the impact of new highway at the north of the 407 Between 10 to 15 kilometers from segment C3 and C4. We have brought 2 maps That could be illustrative about this highway. The first on the left is from Google Maps, and it shows congestion in Toronto On a normal Wednesday at 5:20 p. M. Before the pandemic, red and orange lines are dosed with congestion. You can see how relevant is the 407 to solve the problem of congestion in the city and how far is the 430 from congested areas. There are no time savings using this potential new highway. The map on the right is also from Google Maps, and you can see organized areas in Toronto And the green belt. Even if the four zero seven is built in 10, 15 years' times, our estimates of the impact on traffic in the 407 At that time, are minimal. Now moving to Managed Lease. I commented previously how Dallas was less affected than Toronto By mobility restrictions, any reflected on traffic, now afternoon peaks are close to pre COVID levels, even the NTE had entered mandatory mode Several times during December. Some of these managed lanes are very young and we are still ramping up prices. We also benefited from heavy vehicle resilience supported by e commerce that helped to have health increases of average revenue per transaction. LVA, as commented previously, distributed its 1st dividend last year €109,000,000 at Ferroglia SER And NTE distributed €25,000,000 to Ferrovial. Debt service coverage ratio is 1.2x for NTE and LV8, And NTE 35 West cannot pay dividends until 5 years after fully opened, which will happen in 2023. We also refinanced the paths at LBEA, reducing interest payments by $22,000,000 per annum. Looking at the main indicator for Dallas Fort Worth of population and economic growth, the perspective for Manas Lane there looks great. This area brought many new businesses last year with a 1.7% increase in population, and it is expected to add another 4,000,000 in the next 20 years, Thanks to a diversified and dynamic economy. Our Manas lanes are located close to the most congested areas of the region And we'll add great value to our customers in terms of time savings and reliability. In terms of e commerce, things are also looking good, different statistics, but all pointing in the same direction with very relevant growth in the next 10 years. Most of the new warehouses in the area are located close to our managed lanes. We have already talked about the benefits, so I do not need to do it again, But e commerce has a multiplier effect with additional positive changes on traffic patterns. Now touching work from home. In the case of Dallas, we are giving some external data that could be useful. Before the pandemic, 8% worked only from home more than 2 times a month. During peak COVID, Work from home rose to around 30% to 45%. In the case of Dallas, office occupancy stands at 37.1% in February, 1 of the highest in the country and considering that offices are restricted to 50% capacity. And according to Agioriatek study, work from home could reach 10% after the pandemic. It is true that work from home could bring some work flexibility, But we can also adapt our toll rate to change in patterns in a more congested area. Also, it is relevant to understand that 82% of our managed lanes Customers use them less than one trip per month and that only 0.5% of light vehicles customers made more than 5 trips a week Pre COVID. Moving to Hydro. Total passengers last year were EUR 22,100,000, a 72.7 Percent reduction versus previous year, even with an increase in cargo performance and the concentration of incumbent airlines And 8 new entrants. Our EBITDA was £270,000,000 with £184,000,000 exceptional cost related to business transformation and asset impairments and write offs. Hillsboro reduced OpEx by £303,000,000 in 2020 And deferral can sell £700,000,000 of CapEx financial position of £3,900,000,000 Sufficient liquidity to cover next 18 to 28 to 24 months. We took adequate measures to strengthen the capital structure mitigate pre-twenty 21 in anticipation of continuous mobility restrictions that will be relaxed hopefully during the year. Looking ahead at Hydro, at the investor report prepared in December, they were expecting 37,000,000 passengers in 2021 And no covenant breach considering mitigation measures and cost savings. 2021 is an intense year in terms of regulatory development for Hydro. CAA launched this month a new consultation with 4 options to deal with these exceptional circumstances in which no intervention is not an option. We expect CAA will define a regulatory framework not only to recover of investment provided to improve hydro for customers but also to get Fair return. Also this year, the CIA must define a 7 regulatory framework that needs to rebalance risk and return And consider our business plan affected by the pandemic. The CIA must ultimately take a decision, but failure to act in the right way And in a timely manner, we'll see confidence in effective regulation evaporate. Our expansion, as you know, Supreme Court unanimously ruled The ANTS as lawful and HILGO will consult with all stakeholders on next steps considering green growth agenda And the need of additional per port capacity. Sustainability is a strong part of Quebras' strategy. It has a plan to achieve Net 0 emissions by 2,050 has a sustainability strategy aligned with UN Sustainable Development Goals and its advances To our full maturity in this disclosure. AES also suffered a traffic reduction of 75.9% With a £25,000,000 negative EBITDA, at Hero, we took the steps to reduce OpEx by £37,000,000 And CapEx by £25,000,000 Total debt is £739,000,000 with maturity in 2022, And we have ongoing dialogues to extend current financing packets. So far, £50,000,000 have been contributed by shareholders With a favorable sale of £25,000,000 Construction has A good 2020 with 11.4% increase in revenues and better EBIT margins than expected despite €49,000,000 COVID impact. EBIT margin stood at 2.3%, which is considerably better than the 1% that we expected to end the year with. This improvement was supported by the strong performance of Budimes in all its business lines that increased EBIT margin from 4% in 2019 To 7.6 percent in 2020. Very solid activity cash flow generation of €293,000,000 That includes €98,000,000 of divestments, and it is also supported by Budimex and the positive trend in collections. Other events to date include the conditional agreement reached this month to sell Budimex Real Estate Business for 331,000,000 euros and the agreement to sell 100 percent of Triciones Figueres for €41,000,000 and 22 percent of Urbixa For €60,000,000 which was reached last December and is pending approval. Some of the impacts in the last Year activity cash flow generation are exceptional. In 2021, U. S. Works is still expected to consume cash. We continue with the sale of our Services division. We closed the sale of Broad Spectrum last year I'll continue with the sale of subsets. This business generated a strong activity cash flow last year of €275,000,000 Excluding the €300,000,000 sale of Broad Spectrum, thanks in part to good collections. We were affected by COVID, especially at the beginning of the pandemic, with an estimated negative impact of €100,000,000 but will recover at the end of the year, Especially in Spain with revenues, EBITDA and margins above those in 2019. And now Ernesto will continue with the financial results. Thank you, Ignacio, and good afternoon, good morning. Well, starting in the Results below the operating EBITDA. We have the disposals and EBITDA. We have the disposals and impairments. And here, we have a low number for this year. In 2019, please remember that we had the divestment of our Sol with that important Capital gain. If we get into financial results, really, we can explain the main difference Just by the performance of the equity swaps that hedge the share plans for employees, Remember that in 2019, we had an appreciation of the share that led to €25,000,000 Income from these hedges, but the drop in 2020 has meant a €10,000,000 drop. This €35,000,000 difference is the main explanation For this difference in financial expenses. You have other effects, but they are described here in this slide, but pretty much Offset one another. If we go into the Equity Accounting Affiliates, as Ignacio was mentioning before, the drop in traffic has affected the results from Airports Heathrow mainly. That is the main impact in this And the depreciation and financial expenses have weighed heavily in the results here. But also, There are other extraordinary items, most of them noncash, that are described at the bottom of the slide that I will briefly comment. The first one is derivatives that you know from other presentations to hedge inflation exposure To the RAV and revenues, also cross currency swaps, all these are economic hedges, but they don't have treatment in accounting For hedges, right? I would like to thanks all the comments that have been given to a freak on of the standard looking for hedge treatment for these volatile results. In terms of fixed assets, we have had some write offs. These are of projects that no longer would be pursued. And You don't capitalize them. You have to spend them. Then you have a positive inflow in pensions that is EUR 11,500,000, And this is reflecting the better conditions after the negotiation with the employees to make Heathrow more efficient. Of course, all these initiatives of cost efficiencies have come with restructuring provisions that we mentioned there, £32,500,000, all these are at our share. And then you have the last one is the change in the UK corporate income tax That has an effect on deferred tax liabilities of €27,800,000 Of course, this is not a this is a noncash item, okay? So Heathrow is affected by these volatility in results that most of them doesn't impact in cash terms. If we move into the corporate income tax, I mean, if you take into Accounted liquidity accounted affiliates already come net of taxes. You will see that this positive Income from taxes compared to the profit before taxes. Well, this is due to the recognition of the fair tax assets In Spain and the U. S, even though we have a prudent approach, we had to release and bring to the balance sheet those credits. Then you have the net profit from discontinued operations. And here, you have a mix of Fair value adjustment in Aimia EUR 34,000,000. Well, this is related to some specific projects. I mean, we corrected the And carrying the amount of investment in these projects because they are likely or subject To be sold separately, okay? Had they been in the mix of AIMI, probably they we wouldn't have had this impact. Then we have something similar in Fravail Services International of €25,000,000 The impact of the spectrum was discussed in other meetings and basically is translation differences that have to come to the P and L once it's sold. And last but not least, we have a positive inflow of well, a positive recognition of €121,000,000 in Frabial Services Spain and here, according to the standards, you recognize the results. There's headroom in the And fair value, and these results reflect the good performance, in particular, of the waste treatment business. Okay. So With all that, let's move to the following slide to look at the cash generation. And here, we see different inflows. We have the dividends from projects for 158. Here, you have probably noticed that we have dividends from toll roads in EUR 340,000,000 Eu airports, €29,000,000 and therefore, the rest is from concessions from services. They are from waste concessions or tunnel operation concessions, and these are In the process of being sold, we have had these dividends ahead of the sale. Then we have The EBITDA and the working capital evolution. Here, the working capital evolution, I would like to mention that the Improvement is in part due to an important part due to better collection from public clients, and this is something we Expect to continue until the economy is in a more solid footing, okay? So could there's a soft collection here? Then in taxes, the main component is Poland. And here In Poland, the underlying business is very solid. And therefore, if you take provisions for and then of contracts or whatever, they are not deductible, that's the reason why we have this cash outflow in taxes. Then we have investments and divestments that we have mentioned And shareholder remuneration. In other financing cash flows, just to close the gap to the final position, We have the deconsolidation of the net cash from a broad spectrum. We also have Dividends to minorities in Budimex that come here and then FX translation effect in cash balances in And it has been a very good year in cash generation. The presumed has improved in EUR 360,000,000 And we leave the year with EUR 2,000,000,000 in net cash position. And now let me hand over to Rafael for the closing remarks. Thank you, Ernesto. Well, as I said Paul, in the current situation, the visibility remains limited, and it is difficult to provide any guidance. This being said, we remain confident that when we look ahead that our assets have long duration, are located in diversified growth areas, Have flexibility to adapt to changes in behavior patterns that may come and should play a key role in relieving capacity constraints in their regions. Our strategy is also clear, focusing on developing efficient, innovative and sustainable infrastructure that will create value for all our stakeholders. And we see clear opportunities ahead, not only building on our competitive advantage here, but also Having enough financial strength to reap attractive growth opportunities that we believe will come. Lastly, looking at shareholder remuneration, The board has approved 2 scrip dividends, which, as a reference, would imply 0.20 0.3 €3 And we will continue with our share buyback program of up to 320,000,000 or 22,000,000 shares. So now we open the floor to questions. Thank you. Begonia? Thank you very much, Rafael, Ignacio and Ernesto. The Q and A session will begin shortly. Please stay tuned. So the first set of questions come from Alejandro Vigil from BEST INBED. First of all, Ontario's proposal of the new Highway 413. What is Ferrovial's view of the possibility and its impact in the 407 ETR? Thank you, Alejandro. And yes, I commented previously on the 4.13 that as you saw, it's very far from the congestion in the area. And also it's very close to Greenbelt, no, with not residential a lot of residential business around that area. Because of that, what we consider it, these projects that goes ahead, that it will take time before they get environmental Assessment approval and then the construction that it will not happen before 10, 15 years. At the end, they get the environmental approval, considering that is a green belt. Our estimates at that time is that the impact on traffic for the 407 will be minimal because we are much closer to the congestion area, And we have the time savings that the Forcan team will not have, no? Thank you, Ignacio. The next question also from Alejandro. Dividend to be collected in terms of expectations for 2021 2022 and CapEx commitment in 2021 2022 referring to the 407 ETR. Okay. Thanks. So I mean, we don't provide guidance for expectations of dividends In the 407 under the current situation, what we've always mentioned is that dividends in 2021 We'll have to be backloaded at the end of the year due to the natural evolution of the traffic, right? I mean, remember that In 2020, the pandemic hit more deeply in April, mid March Through June, right? So that comparison would affect to the, let's say, ratios needed for the payment of dividends. So We expect dividends to be backloaded in the second half of the year, more at the end. Regarding the CapEx commitments, where the 407, you know that on a regular basis, invests close to CAD 100,000,000 in Wideness and refurbishments. And we would expect something below that, but that should be the normal running number here. Thank you, Ernesto. The next question also from Alejandro. Dividend apologies pipeline of new infrastructure projects, opportunities for Ferrovial in U. S.-managed lanes, etcetera. As commented previously, for us, A relevant part of our strategy is to develop a toll road in the U. S, Manus Lane, and it will continue to be the case. We have identified as part of the pipeline and we include there minus lanes, but also other toll roads in other markets, but the total amount is €8,000,000,000 of equity is a pipeline that is including unsolicited projects. We are not disclosing the places in which we are working yet, but the main focus is in the U. S. Of course, this is a pipeline that takes time. And some of these projects may not happen in the future. And some of them, I mean, will be a competitive bidding, like the one in Maryland. Thank you, Ignacio. The next question also from Alessandro. Could you update on the disposal process on services? Yes. As commented, we are proceeding now with the sale of subsets. So everything is under sale right now in different processes. And as soon as we have some information that we close an agreement with Avaya, we will communicate. But hopefully, We see some traction during this year 2021. We are working on all separate subsets, and we'll communicate whenever we have information to share with you. Thank you, Ignacio. The last question from Alejandro refers to new business There's media coverage regarding the interest in transmission lines in Chile, flying taxis venture in Florida, etcetera, etcetera. What would be the investment size in the new businesses? Yes. As commented, as part of our strategy, we are interested in developing other infra assets. And we define there a pipeline at around €500,000,000 in transmission lines in general. This is mainly in Latin America markets, Colombia, Peru or others, and we are working on them. Of course, we don't comment about any specific transaction or bidding process in we are. Mobility, as you know, we are there in order to understand how the new infra is going to develop. And one of the things that It's happening today. It's talking a lot about the eVTOLs and the Vertiports. And what we are doing is trying to learn about The new infra that is going to be needed for this new type of mobility, of course, this is a very limited investment that it will happen in several years' time. And what we are doing right now is learning. Of course, we have reached an agreement and was with communicating with Lilium and exploring in Florida A number of verticals there, but I think that location is important, and that's why we are anticipating for a new infra that may be needed in the future. Thank you, Ignacio. The next set of Questions come from Filipe Leite from CaixaBank BPI. Can you give us an update on the situation of the Maryland managed lanes? Well, yes, about Maryland. As you know, we are the largest developer, builder and operator of managed lanes in the U. S. We have proven expertise in these complex projects. The decision was communicated last week and which was defined Another consortia, gas winner. We are as a result of that announcement and a result of the significant gap in the ASL score of the bidders communicated to the public by the owner. We are in the process of analyzing the results and any information provided In connection to the bid process, we have signed a confidentiality agreement. And unfortunately, I cannot comment further at this point in time. But I can assure you that we are very focused on continuing developing managed lanes in the U. S. Thank you, Ignacio. Lastly from Filipe, do you expect dividends from infrastructure assets in 2021 'twenty two to cover the required equity investment in the I66. Well, The CapEx investment in the I-sixty six next year is around €600,000,000 figure close to that In 2 years, no, yes, sorry. Season will not happen only next year, but it's between this and the following year. It's around EUR 6,000,000. We don't give any, of course, Guidance about what is going to be the dividends and the rationale was explained before by Neste and Casa Prosemi and similar in other places, But we don't give information about the expected dividends and guidance about that. Thank you, Ignacio. The next set of questions come from Fernanda Lafuente from Alantra Capital. On the 407 ETR Schedule 22 scheme, If it were to apply for 2020, what would be the penalty that you would face? Well, as commented, right now, we are the pandemic is a force majeure, closed as part of the contract. And at the same time, the spirit of that clause is related to congestion in the area, especially the 401. So that's why we didn't take Any provision for scheduled 22 payments since the beginning of the pandemic, no? In the future, of course, one is this over. As you know, it's way it works, no, that is traffic is compared to certain target and there is a penalty that you have to pay on the risk of those targets. But the reference, as you know, is 2019, in which we paid less than 3,000,000 Canadians with the traffic at that time. Thank you, Ignacio. The next question, from Fernando. Regarding 407 ETR tariffs, They were flat year to date. But given the difference in traffic mix, what are the average tariffs going to do in 2021? Are they Yes. Last year, as you know, as commented previously, we increased tariffs in February last year. Since then, we have kept them flat. We have not announced an increase for 2021. But as you know, we have the flexibility to do at any point of time if the traffic recovers. With that price flat, of course, yes, it will depend on the timing of the traffic, traffic mix and And all the other parameters, not that the road, I mean, that it may change if it's peak or not peak, it's which section of the road and so on that we have, as you know, Different type of tariffs, different time of the day with different type of vehicles. So we'll depend on that until we decide to change the tariffs. Thank you very much. Ignacio, the next question also from Fernando and his last one regarding Construction EBITDA and EBIT, it almost doubled at year end versus the 9 months 2020 results. Can you explain why? Does it include any exceptionals? Or is the performance sustainable going forward? In addition, what is the EBIT margin guidance for 2021? The guidance that we gave about that is 3.5 percent EBIT by year 2024, and This is what we are working for. And at the end of the quarter, I think we have a good performance coming from Budimex And especially from the real estate business. And I don't know if, Ernesto, you want to comment something further? Yes. Well, regarding the margins, just the Q4 was very good for different reasons in all Construction, I can mention some of them. Well, the first one is that impact from COVID-nineteen were not really that material in the 4th In quarter, I mean, the cumulative for the year is close to €49,000,000 And in September, we were at 44,000,000 So very limited impact and very good production, even though there were a lot of lockdowns. I mean, our sites continued producing very well. Then in Budimax, it's true that the real estate business was doing very well and even had some release Of provisions, but clearly had a very good quarter. And also, we had in other regions Some claims that were recognized and collected end of the year. So yes, a very good quarter. We cannot Extrapolate, let's say, the margin for this quarter going forward. Thank you, Ignacio Andres. So the next set of questions come from Martin Wortgahl from Bank of America. The decision about dividends will be taken by the Board of NT and LVA. And of course, it will be based on the traffic Evolution and their expectations and also with the goal to keep investment grade in all the both NT and LBA. And based on that, they will distribute the dividends. Thank you, Ignacio. Also for margin, how much of the traffic in 407 ETR and U. S. Managed lanes relates to daily commuting. We don't disclose information about that. But during the presentation today, we give some information about that usually users don't use it. Very few will use it more than 5 times a week. So very few are daily commuters but That used regularly, no? So most people use 3 times a month or less. Thank you, Ignacio. Lastly from Marcin. Should the granter require the 407 ETR to make a payment based on schedule 22 for 2020, Is there any mechanism to appeal such a decision? Yes. There is an appeal process that we can Yes, it will be based, of course, on the contract. But yes, we can appeal to the decision. Thank you, Ignacio. The next set of questions come from Jenny Ping from Citigroup. Can you tell us how the recent extreme weather has impacted mobility in Texas? Well, it has been Very, very sad, what happened in Texas with this winter storm, knowing it's has impacted not only the traffic, But also the power and water outage that affected so many people and so many there's some people affected, no? I have to say that, yes, because of the winter storm, most of the lines of the Our main toll roads were closed, and we only abilitate 1 or 2 lanes that were cleaned during the winter storm. So it affected from the February 13 to 21, in which we closed the managed lanes and also the general port lanes was only 1 or 2 lanes that were In perfect condition for the traffic, no? So yes, we were affected by the winter storm during this period of time. Thank you, Ignacio. Also from Jenny, can you confirm if the recent accident in Texas Highway on your tolled was on your tolled assets? If so, can you give us more details of the closure of such an asset? Yes. As commented previously, no, about this exceptional winter storm, Not that affected car accidents, but also power and water outlets. There was a multiple collision in the NTE3 project And sadly resulting in 6 fatalities and several people injured. Prior to the accident, NT 35 West predicted the road in accordance with applicable standards and best practices and continue to patrol and monitor the road conditions through the storm. In addition, at the time of the incident, the electronic variable signals was advising drivers of the adverse weather condition and asking drivers to proceed with caution. Yes, we are cooperating with authorities' investigation, especially the NTSB. That is the one in charge of this investigation. Thank you, Ignacio. The next question comes from Robert Grimes from Incyte. How keen were you to win Maryland Phase 1? What were the main differences in the Ferrovial bid and that of Winner Transurban? Well, of course, I mean, this was a very relevant project for us. And as commented previously, we are the largest developer, builder and operator of Manas Lane. So we put all our expertise, proven expertise in this complex project that We think that we could deliver with in an excellent way. Also, I've commented previously But on this one, the communication coming from the to the public, not by the owner, we saw a significant gap in the financial score. And what we are now is in the process of analyzing these results and any information provided in connection to the bid process. Unfortunately, at this point of time, we cannot say more because of this confidentiality agreement that we signed. But we are, I mean, very open in the future to comment about it once we don't have this NDA in place or With any public information that could come from the owner in the following days. Thank you, Ignacio. The next set of questions come from Jose Arroyas from Santander. Will Ferroveal not participate in Phase II of the Maryland traffic relief program? Well, At this time, Maryland DOT selected the phase developer that is for Phase 1, and they also will have right to develop the 2nd phase. So if they close and they reach commercial agreement, they will have a right to develop the following phase. Thank you, Ignacio. Also from Jose, Ferrovial's holding company is very strongly capitalized now, With net cash approaching €2,000,000,000 and further expected cash inflows in 2021 from planned sales of other assets, How should we think about Ferrovial using this cash in the medium and long term? Well, The first priority will be to develop the pipeline that we have commented previously. We'll focus on developing managed lanes in the U. S. And toll roads, Airports and other infra assets. So hopefully, we develop enough opportunities with the Double digit return that we recover to our investments and we allocate this money to develop this infrastructure. Thank you, Ignacio. Next set of questions come from Nabil Ahmed from Barclays. First of all, you mentioned flat prices for 407 ETR. Could you please elaborate on Texas managed lane pricing strategy this year? Is it fair to assume modest or no increase initially and maybe the unwinding of the positive mix when traffic normalizes? In the case of the Dallas managed lanes and the pricing expectations, First, you have to consider that we are ramping up some of these assets and also in not only in traffic, but also in terms of pricing, especially the NT 35 West and still also we have opportunities at the NT level and of course, the I77, of course. Also, we have price flexibility. As commented, we may see some changes in traffic patterns, especially in the mid day that we see more traffic Than before, so there could be opportunities to take advantage of these traffic partners to with the price flexibility that we have. Also, we have some increase in place, an increase in the soft cap. That may be, depending on the traffic, increase is based on mandatory mode And also a mixed traffic, no, that also could influence the evolution of tariffs in these managed lanes. So these are the things, but of course, it will depend on the traffic and the opportunities that we may have based always on the value that we can give to customers for time savings and reliability. Thank you, Ignacio. The next Question also from Nabil. Could you please elaborate about the £600,000,000 cash injection in Heathrow SP in the Q4 of the year? Would you expect to contribute more? Yes. Thanks for the question, Nabil. Well, the First is I need to clear out where this money comes from. I mean, Heathrow raised Deeply subordinated debt, GBP 750,000,000 above Heathrow Finance, that is the holding Above Heathrow SP, okay. So we have 3 layers. This layer that is the most subordinated, £750,000,000 were raised in the market. And this was subsequently injected into Heathrow Finance and Heathrow SP. So the EUR 600,000,000 equity into Heathrow SP Comes from that Capital Market transaction. So it has not been a direct cash by shareholders. Of course, it's equity for Heathrow SPD ring fence. Okay. So the question is if we Expect sorry, the last question was we expect to do more of this. Well, there's plenty of liquidity right now. There's no need for further liquidity. In terms of covenants Heathrow explained very well in yesterday's Results conference call that according to their projections of 37,000,000 passengers, there is no Need no risk in covenants. If a severe but downside plausible scenario, let's say, That they mentioned of 27,000,000 passengers also could be handled with some of the mitigating actions that they have. So they have A lot of leeway, of course, if the situation is worse, we'd have to readdress this. But with the current scenario that Heathrow has, there's no On need for, let's say, additional liquidity or capital. Thank you, Ernesto. The next question also from Nabil. Heathrow Liquidity Seems to be managed for 2021 only. What if the CAA regulation does not come in time or does not provide the support that you are hoping for? Well, really, Heathrow is not asking the regulator For liquidity, I mean, this needs to be very clear. What Heathrow is asking for is A restatement of the RAP that covers for the recovery of the investment a long time. In the future, when users use The airport would be paying the investment and the Return. So it's the minimum required and return and recovery of the investment that Heathrow is asking for. You have to remember That the asset is being depreciated now and without any income, right? So that's So like, let's say, not recovering the investments, like giving that investment for free, right? So what Heathrow is asking for is for regulation to act Here and protect the investment, of course, investment that will be collected in the future. So it's not asking for liquidity now. So Chevre, first question, can a situation in which shareholders have to inject capital into Heathrow TopCo be completely ruled out? Sorry, this question has already been answered Previously by Ernesto, I will move on to the following question. Could you please provide a bit of granularity on the potential North American Pipeline, including the €8,000,000,000 figure on Slide 5. This U. S. Is most of this €8,000,000,000 equities. So we are working mainly to develop mainly managed lanes in the U. S, also another toll roads that Traffic risk that they could be in the U. S, that is mainly Manus Lane. Some of the projects, most of them are unsolicited that we are working with the DOTs. We are including also other projects, but smaller ones in Chile, Peru and Colombia, no compared to that. We don't disclose further information for the time being because, I mean, this we don't want to give information to competitors about which We are working. But you can assume that most of it is related to the U. S. And most of it to Managed The next set of questions come from Ruchilpaeva from Stifel Europe. Question number 1, do you have an estimate of where you think the Construction division's underlying EBIT margin currently sits? And do you have a target margin for 2021? Part of this has already been answered before. Additionally, is the 2024 EBIT margin of 3.5% still maintained? Yes, it is maintained. As commented previously, our target is to reach the 3.5% margin by 2024. We don't disclose internal targets for 2021. Yes, we have them, but we are not disclosing it, no. But we are working hard to reach this 3.5% by 20 Question also from Rucho. Are you able to provide an update on motorway traffic across the U. S. Managed lanes business and the 407 ETR in the year to date, especially as the risk from COVID-nineteen in the United States seems to be slowing in the past few weeks. Well, as commented during the presentation, in the 407 is still at Toronto area, is still at still on pill We are a stay at home order. So the traffic has been affected since the end of December because of that, But not at the levels that we saw in April that were 80% below previous year. That's better than at that period of time even with a similar Lockdown. Of course, in the following weeks or months, we'll see hopefully an improvement with the vaccination and the reduction of New positives in the area and some of the neighborhoods, not Toronto, but they are starting to relax some of this lockdown. So we expect that It will improve, no? In the case of Texas, they are very fast with the vaccination. And as you know, I mean, in some cases, 12% or above. And they are, I mean, moving very fast. For the time being, because of Christmas And the effect of Thanksgiving is they maintain still the same mobility restrictions, but we should expect that in the following months, we'll see An improvement, no, because of the vaccination reaching certain levels and the new, I mean, level of positives will be much lower than before. We have been affected, as commented previously, by the winter storm and especially this almost a week in which the management were not operating Because of the stream weather conditions. Thank you, Ignacio. The next question comes from Samson Jayes from Ananda Asset Management. Would you consider divesting any further infrastructure assets? Well, our strategy is to develop infra assets. And at the same time, as part of that strategy is to rotate them when Once they are mature, no? So I think that the same way that we did with OXXO last year with Nortelitoral, for instance, so Algarve. I mean, if some assets are mature and they have more value for us reported than to us, we'll do it. Thank you. Ignacio, next set of questions come from Tobias Werner from Stifel Europe. Do you have railway construction capability in the U. S. Given that this is an area of interest for Joe Biden? Is there also an opportunity for railway concessions? And if so, would you be interested? Yes. We will be interested in rail opportunities in the areas in which we have construction capabilities in the U. S. We are doing today Construction, the highest speed rail in California, one of the sections we are building them today. So yes, we have we are doing metros Under our metrics in many other places, yes, we have rail capabilities that if there are concessions, we were very open to analyze, But only respective to the places where we have construction capabilities. Thank you, Ignacio. Also from Tobias, how do you see the recovery for Heathrow in terms of profitability over the years? What things do we have to consider long term effects of the crisis? Well, as you know, Hydro is a regulated asset. So there will be a Phase 7, the period in which we are considering as part of the business plan that it will take a long period of time to recover The level of traffic that we had before, no? But we recover and we expect to have a return for the investment that we have made during this period of time Based on the traffic that we are forecasting, no? So even if we see that there may be an impact in the short term to recover The level of passengers, that will be included as part of the business plan and also as part of the number of passengers and the returns that they are giving to the investment that we are Taken there, we have taken there. Thank you, Ignacio. Also from Tobias, what about AGS? Do you need to insert capital here over and above the £25,000,000 Already committed? Okay. So here, the €25,000,000 committed, I mean, it's what is expected in terms of liquidity needs maybe for this year with some recovery in traffic. What is true is that negotiations to extend the financing will take place. And then, of course, This will be commercially sensitive. There could be a number of capital part of the financing discussions, but that is something that we will see a long time. In term of Liquidity needs, it would be more or less enough. Thank you, Ernesto. Lastly from Tobias, what impact could you see the EU next generation recovery plan to have on your activities in Europe and Spain and Poland. When do you expect this to take place? Well, we have presented several initiatives For this next year, so we have hopefully, we see some traction during this year, but it's a large amount stimulus, it's mainly related to things that could improve the sustainability, the digital and also Real and inclusion, so we will participate in part of it, mainly related to in Spain to residential buildings, improvement In some of the projects that they could be, so it could be a large pipeline, nothing concrete in the short term. We have presented several proposals. And let's see which of them will have the capabilities and we can take value out of them. But there still is nothing concrete in the short term. Thank you, Ignacio. The next question comes from Nicholas Moura from Morgan Stanley, in terms of disposals, the bears will say you seem engulfed in a fire sale of assets. The bulls will Well, it is part of our strategy that we have defined before. So we are concentrating on developing and operating innovative, efficient and sustainable infrastructure. And the core business are related to toll roads, airport And also other infra assets, no, that we want to develop. So at the end, those that are not related like the services division, We are divesting. And also, as commented previously, those that are mature and Availability is that it has more value for a third party, either type of ourselves, not that we have financial institutions. They are taking them from a much lower returns than they were we are expecting from our investments. Well, we rotate them once they are mature, not like the availabilities. But I would say that all what we are doing is part of our strategy. And our main value is related to developing infra assets And those like services, we'll discuss them, no? Thank you. Ignacio, the next set of questions come from Charles Maynard from Kempen. What is the timeline of the €9,500,000,000 pipeline described for its toll roads, airports, electrification and water? Well, this is the pipeline that in which we are working, I would say, for the next years. Of course, as commented previously, maybe some of it It will not happen, no, but things are in which some of them we are bidding or preparing to bid and others in which we are still working and We may see that is launched in the following months. Hopefully, I think that as part of the recovery and with COVID, we'll see more traction with some of the projects. And hopefully, we see them transforming to opportunities very soon. Thank you. Ignacio also from Charles. Could you remind us what the rationale is to go into Yes. As you saw before, I mean, the main pipeline and things in which we are working are related to toll roads and And also, airports, no? And still, the pipeline that we have related to electrification of water is not very large, no? It's less than EUR 500,000,000. We already have capabilities in both in water and electrification. In the case of electrification, we have transmission lines In Chile, also we have IPR contractor capabilities. We are doing renewable energy renewable projects. We are doing substations. We are doing concessional projects, energy efficiency also in Spain and other markets. So it's an area in which we feel comfortable. It will be just reduced to the countries in which we have defined as top tier and core. And there, we have the capabilities to develop other infrastructure assets That I think that it will be increasing in the future that the request for this type of projects. Now in the case of water, We have 2 companies, Kadawa and Pepper Lufton in the U. S. And we do contracting work, but also we do some maintenance and And we have capabilities also to do concessional works in water. Some of these pipeline will take a longer time, but there are some projects that It may happen at some point of time, especially now with COVID, that municipalities and different administrations will need more from private Investors, no, in order to develop some of the infrastructure that is very well needed. So we have capabilities in these areas. We want to grow them if we see that they are requesting for concessional projects. And we will do them if we see that they create value And we can get these double digit returns. In some of the places, there are competitors, but I will say that similar number of competitors are the ones that We see the transport business both in toll roads and airport, not even in airports. In the past, we used to have more competitions than in this infra electrification and water. Thank you, Ignacio. Last question from Charles. Are you committed you keeping your stake in Budimex? Or can we expect a divestment at some point in the future? No, we are comfortable with our position in Budimex. I think it's a key player in the Polish market. I see them more Focus on developing infrastructure. They have very good capabilities, so we are very happy with our position in Budimex. Thank you, Ignacio. The last question comes from Elodie Raul from JPMorgan. When will you be in a position to revert to precrisis level of dividends? Regarding dividends, of course, we'll take the decisions by the Board, And it will be based on the forecast that we have for the following years of investments that we may have and other sources of income. And And based on that and the cash that we generate with the different business, it will be taking the decision by the Board every year with the same policies that we have until now. There are no further questions. Okay. Thank you very much for attending this 2020 results conference And look forward to engaging with you again soon. Thank you very much. Good afternoon or good morning to wherever you are. Good evening.