Earnings Call: Q2 2020

Jul 30, 2020

Good afternoon, everybody, and welcome to Ferriba's conference call to discuss the financial results for the first half of twenty twenty. I'm joined today by Ernesto Lopez Motto, Ferroviar's CFO, and the CFO's of our business divisions. Just as a reminder, Both the results report and the presentation are available to you on our website. 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 it the call over to Ernesto Robert Motto, who will be leading the the this conference call. Ernesto, the floor is yours. Thank you, Vivania, and, welcome everybody. Hope you're all healthy and well. The first half of twenty and 20, the highlights probably should start with the operating impact. Total staffing was set quite impacted, especially in in April, but have been improving since as restrictions, ease and the economy reopens. In airports, there's a strong impact on traffic in Heathrow and AGS. Construction has kept high levels of, production, in particular in the US and Poland, but, of course, there's been additional costs, of producing in this environment. The company has record high liquidity, 7,500,000,000 and a net cash position, exchange for projects of, more than one point €6, uh,000,000. There's been several measures to increase its liquidity, like, corporate auditions, drawing downs of, credit facilities and, European commercial, pay per issuance. In the main interest, as the main projects, there's also strong liquidity. And, therefore, the, 1st 6 months of the year, close with, strong cash flow, and, generated, in an important part from construction and services. In this environment, also operational efficiencies are a must, and the company has engaged in the different initiatives for, reducing operating expenses and, reducing CapEx as well. The streamlining of operations in Heathrow And EUS has been a major, even though, some of the effects will be more seen in the 2nd part of the year. But clearly all the initiatives have started and some of them landed already. Also, the program horizon 24 is advancing according to plan. It's a new operating model that would make us more efficient, more digital. That keeps its pace, as you will see in the numbers. And then, of course across the group, there's, overhead streamlining and saving initiatives. We'll see more of this later. From an M and A point of view, a couple of divestments here, 5% stake of budimics was sold there for 57 1,000,000, and, brought a spectrum sale close that was announced before the year. Most of it closed, before the end of June, but, there was a smaller part, €12,000,000 that closed in July and is not included in these numbers. Okay. We move over to, the specific impacts of, COVID 19. I'll start on the top left corner and move, clockwise. From a P and L perspective, the, in airports and traffic drops, affected, but also we have some, extraordinary initiatives that, should help to make, the business more efficient going forward. There was a £37,000,000 provision at Heathrow, that will help also to, have a reduced cost base There was also an £85,000,000 fixed asset impairment. And here, it has to do with, projects that, will take time to renegotiate or maybe are not considered to, and go on in the, in the future. But probably it's more about timing most of the things. We could get them back in the future from an accounting point of view, but this is a high hurdle. But what is more important, I mean, they are part of the regulated asset base. So from an economic point of view, the fixed asset impairment does not affect us, and the £37,000,000 provision has a clear positive MPD. In AES, at the same time, there was a $2,000,000 provision. In toll roads, there were traffic drops at NT of 29%, LPA, 32% and the 35 West 17 percent. We'll see that the traffic mix, didn't have homogeneous drops, and heavy, traffic behaved much better. In construction, we have additional costs within, impact on EBIT of, 44,000,000 and, we'll talk about, mitigations for this, but right now, I mean, you have to take the cost of, maybe some delays or additional costs, caused by this, pandemic. And then in services, discontinued activity, we had lower industrial activity and services related to, transportation or infrastructure maintenance, because, most of the other business were quite resilient, like, waste, treatment in Spain, for instance. And the EBITDA impact in services was €72,000,000. Moving clockwise, as I mentioned, we have the cash flow impacts, the main one from, infrastructure is that there were lower dividends, and you can see that most of the dividends were captured in the first quarter. And the, remainder of the year, if traffic keeps improving. We should see, dividends from, from the main infrastructure assets because they have ample liquidity. But, we'll need to see this kind of operating improvement. In terms of, Heathrow, there were no dividends in the in the quarter, yes, in the first quarter. And, of course, during the waiver period that, Hithrow, carried out a preemptive, waiver. During the waiver period, there would be no no dividends or until you have, the regulated asset ratio that is the, the ratio of the net to wrap, below 87.5 percent. Piranum course, this year, we only, are able to reach, but it's a very good mark given that we started the most of the initiatives in the 2nd quarter. Will, be able to reap, €25,000,000 of savings throughout the company and additional measures are being agressed. In toll roads, all the OpEx and CapEx has been reviewed. And throughout the year, we should be able to reduce the bill in our projects from, these captions by €33,000,000. In, airports, there were a lot of initiatives, as I mentioned before, in terms of, savings at 100% of Heathrow, OpEx will be reduced by more than GBP 300,000,000 and, CapEx by more than GBP 650,000,000 in 2020. And also, yes, although much smaller has very important efforts with, OpEx being reduced by £27,000,000 and CapEx by 23,000,000. These are estimates for the, for the whole year, for 2020. In construction, the, proportional cost reduction is, is small, even though, I mean, part of the initiatives in, the Horizon 24 effect construction. But directly, we're talking about a small amount, because activity has been pretty high, as I mentioned, and the, initiative that is also taking place is, logging of, claims, asking for compensation because we have in some contrast force majeure or change in law, and, we have not recognized any income or revenue from these claims whatsoever. This could take time and maybe be uncertain. So in this quarter, we've reflected the cost, but not the opportunity of recovering them. In, in services, also the more efficiencies that, should help also in the divestment, the process because they, can be, let's say, carried out, a long time. You can view them as as permanent this 28,000,000,000 cost reduction is that is taking place more in the 2nd part of the year. And it does not include any of the lower costs from, temporary reduction of employments or follows as you call them in the UK or the US. Well, and finally, regarding the strategy for our strategy, the group's, priorities during the pandemic has been, of, 1st and foremost, the safety of the workplace and protect the health of employees and and clients, second, protect the company's liquidity and its financial position. And, the third one's been to support the, community with, a fund to help different, people in the countries where we operate affected by COVID 19. Okay. So this is kind of a slide for the mid-nineteen impacts on different initiatives. As I said, all the cost initiatives will be seen more in the second part of the of the year given that, now you have the, initial one offs that, they allow you to get you to that position but the reductions come later on in in cars. Okay. We move to the section of, toll roads we can see that traffic has been, recovery recovering as lockdowns, were east. And, If you look at the different, graphs, really the, last part of, of June, was clearly looking, better. And in some cases, like the 35 West on the far right of the slide, getting close to a last, a year's level. So there's been a little bit of a setback in in Texas. You are all aware that there have been a a surge in, COVID cases, and that has, kind of, put a little bit of a of a hold to the recovery, but still if you are at much better levels than, at the troughing in April. In the following slides, please don't flip over. We'll see how, patterns are recovering, and I think that these are very good signs of, the potential for recovery of of these roads. On the left, we have the 407 ETR. And here, the recovery has been a little bit slower also because probably there were more restrictions in in place. The economy has been slower to, reopen. Important news is that, throughout this period, we haven't seen really any, slow traffic in the alternatives that has been pretty much free flows throughout the day. And now in July, we are starting to get some data that shows that, speeds are starting to slow down in the in the 401, for instance. Okay. So let's let's flip over to the page where we have the 407, the 407 you have seen the results already, so I won't dwell too much time into the, results. I mean, you see that revenues, dropped by, 40%. Of course, you had some, higher tariffs from, the 1st, of February. And, in general, with the drop off traffic has been kind of, partially compensated, but in the 407 with the 401 free flow. You haven't really seen patterns where you could, picture, peak traffic in the evening or in the, in the morning, right? But of course, this is something that is, as the, alternative, approaches, let's say, as lower speeds has, more, more traffic, we should start to see the shape of, traffic that we are seeing in in Texas, and we'll see in the next, Also, very important if we look into the top, right? We have taken the decision to withdraw the appeal to exercise our our right of first refusal for 5% stake in in the asset that was sold by SNC level land. This is a decision that has been taken in order to preserve, a liquid in the current environment. We believe that a strong balance sheet and liquidity will provide opportunities for a high value, creation, and there's uncertainty on the how long the, recovery or putting the health issues behind will take. This has nothing to do and should not be read as I was not thinking this is a great investment, a great investment for value creation. I always say that the with the 407, what people miss is, with the long duration, the area being so diversified you end up having, even problems in conjunction with the 407 just to growth in population and traffic. And that leaves you to higher revenues even with, with higher prices just to keep the quality of the asset, right? So the duration, the fact that the area will keep, growing and growth will happen along the 407. Is it still there? We like the asset. We like the investment, but now we have to be tactical. We have to preserve liquidity. But it shouldn't be read in a different manner. In terms of dividends from the 407, there has been no dividend this quarter. The 407 is monitoring the situation, I mean, it's clearly a steady recovery, but probably, I mean, we'll wait to see this kind of, continuous, performance and, and, and recovery in place before making any taking any decision on dividends. From a rating or financial basis point of view, very solid rating agencies have, ratified their high investment grade ratings, and there's enough liquidity to satisfy, obligations in the coming months and into next year. Okay. So it's low, but recovering, the shape, the, the 407. Let's move now into the managed lanes And I'll show you some graphics, some graphics that, tell more than a 1000 words, but still I have to tell you some words about these graphics, right? I mean, the first one is that you don't see, numbers on the y axis, access that has been on purpose. This could be commercially sensitive. The other thing is that, scale is comparable within, at all roads. So for instance, in NTE, heavy and lights, the, the graphs are comparable, but are not comparable to LPG in terms of scale. Right? So let's look at the different colors that we have here, the light gray is the color that reflects before the pandemic arrived. So that was kind of the best performance we saw at the time. And then you can see some, patterns that are clear, the peak in the morning and the afternoon, but look at the heavy traffic in NT or 35 West, you see that it's pretty much at a very high level throughout the day, right, throughout the daylight. And In the, last part of June, I mean, 3rd week of June, you can see that the black line was approaching that kind of, level, both in the 35 West and, and NT. LPGA has more of, pigs and trucks, even in in heavies, probably this is natural given that it's a, kind of, if I ring wrong with one segment being a little bit more more commercial, but it's still, I mean, you can see that 3rd week of June, it was clearly approaching the, the light gray that was the, the 1st week of March. When you look into the, in two lights, the story here is, is, different, but look how it was approaching in MT and 35 West, the peaks in the in the evening or or afternoon. Course, in the morning with the schools being, closed and, let's say, always, and drivers favoring the use of the road when they get out of work, and the PM, peak is is performing better. But I think that these graphs show that, as long as the economy reopens more and more broadly, patterns end up being quite, quite similar. Of course, one of the things that is, that is apparent when you look into heavies or commercials is that e commerce has has grown a lot, and now it's 27% of volume, April, of, retail sales in the area with all the one is not only of, delivery logistics, but also reverse logistics or where people return merchandise that they don't like or whatever did that influences the traffic as well. Okay. So, the area now, I hope, recovers quickly and all the best in health to, to people in the in the area, should, recover the, let's say, the strength and, diversity that the economy has. Okay. If we move to the next slide, we see more of the numbers, let's say, graphs. And, here, you can see that, the average revenue per transaction has been coming up and, we think there's room to, to, to go still in these let's say, revenue per transaction, this reflects more moves that happened before the COVID arrived. We'll see along, along time, and with the different patterns, how these, balls, where they still have the the sensation that, there's still room, room to go. Of course, in terms of, revenues, you can see that the, mix of, traffic, has hurt the in improvement in, in revenues, right? And this is, this is great news that they keep increasing share. Also, the share of heavies here is higher than in the in the 407 in all these three routes. Looking at the financial position of these assets, I mean, this financing doesn't have the typical events of default that can accelerate debt. I mean, they have some, ratios that you have to, to meet for a dividend distribution. And, these are, at 1.2 in NTN LPGA, and in 35 was 1, 1.3, but, of course, 35 West has to wait a little bit for the first dividend. LPGA has, a strongly created position accumulated throughout the the years and is looking forward to, refinancing all or part of the debt, this year. So rating agencies have been on that and the process is following the expected schedule. Regarding the dividends of LBA and NTE, they will be decided by the bores there and will depend, really on operational performance. We wanted to put some information on how diversified the economy these areas. We've done this in the past, and also the growth in population. Well, in the restart of the economy, we think this area is really dynamic, and that's another of the important factors in our roads. Okay. So that would be pretty much for the, toll road section, and I'm gonna move into Heathrow, that, again, had the results conference yesterday. And, they were it talks about different topics that have been on the press. Right? So clearly, the, operational performance is affected by travel restrictions, and one of the most important probably the quarantine requirements that could be imposed. I mean, if you are traveling somewhere and you have to stay put for a for a fortnight that, really, drives out a lot of traffic. Right? So it's important to get to models that, I mean, focus more on testing as Heathrow was saying yesterday. There's been a lot of efforts to improve all the, protection to custom value that makes it, safe. So I think that Heathrow and the industry is, moving to provide ease of, of travel. And, in in in fact, I mean, the projections that were released by Heathrow for the preemptive waiver negotiation, are being beaten at this point of time. But the the fall, I think, will need, to, write on a on a successful summer, and the summer needs probably some, reopening or ease of of currencies. In terms of financial performance, I mean, you've seen that, published. I already discussed the additional exceptional charges, that, as I said, are for a better Heathrow going forward and the write offs don't affect economically the write offs of, of CapEx, the revenue and the adjusted EBITDA fall, of course. And then we have, below operating, in financial other, items that I will touch on, in the in general, all these extraordinary items are non, non cash, and they are moving in the right direction to save cash from Heathrow, but more on that on a on a page, later. Here, you see the impact of, have here where really a quarter almost had no traffic. Then, Heathrow is, preserving liquidity or even drawing down, the lines that we've had. It managed to get a preemptive waiver at Heathrow Finance, with, bond holders. And now the interest coverage ratio covenant that, goes through December 2020, and that's the engine 2021 has been waived. And you have, all the covenants have been amended, regarding a leverage to 95% net debt to RAB in in December 2020 and 93 and a half percent in December 2021. As I said before in the introduction, no dividends to be paid until the regulated asset ratio returns to below 87a half percent. A lot of initiatives from Heathrow to make it more efficient and more ideas to to come, in the future and probably technology will play a part going forward, to make a Heathrow, more easy to, to use and more efficient. And in terms of, cost efficiencies, as I said, it will capture more than 300 but in this, say, half year, only, was able to reach 100 due to timing, right, costs in the quarter are down by 24.6%. And here, different initiatives were, right away capturing, let's say reductions in costs like company wide pay reduction that follow schemes and, simplification, restriction of the organization, renegotiating, contracts with suppliers and stopping all nonessential costs. And, of course, CapEx was also reduced by, more than 650,000,000 for 2020. So a lot of effort and work by all the Heathrow team. Congratulations to them on all the incredible effort, and speed they are taking on these initiatives. If we move over to the, the history of looking ahead, as I said, there was a forecast, produced that is being made, or let's say, even it's been, traffic is doing better than this forecast, but you always have to have a disclaimer here because of all the uncertainty. With quarantines and the evolution of the pandemic. Also, looking at adjusted EBITDA with an important declined versus 2019. So here, you have to look more beyond that. I mean, we have to remember that Heathrow is a regulated asset. The new regulatory period starts in January in 2022. The CA has been commenting on, risk rewards. And producing, I mean, commissioning studies, from third parties before the pandemic that were showing that there was more risk to the business and should be reflected. And so all these discussions and, business plan for Heatron to be submitted in the fall will, provide the building blocks for the, regulation that starts in 2032, but also something we we are really aware is that regulation takes into consideration, a degree of risk in the business this pandemic is way beyond. So, I mean, discussion also on, on this, should take place. Regarding AGS on the on the following page, we can see that, the impact of traffic has been, a mayor, and, we had only, 2,200,000 passengers also affected by the collapse of some, travel companies like Thomas Cook or a local sterilite, like, flybee. Traffic for all Algas, to the North Sea has been resilient, and, really, management has been doing a great job trying to respond quickly to backfill and fly these routes. So a lot of effort also in reducing costs and, and CapEx and also negotiating with, with lenders, preemptive, waiver and and drawing down, facilities to get to get liquidity. So, the waiver for June and December was achieved. Of course, you need a minimum, liquidity, in, in the fall, in the in November, I believe, to to keep this this waiver for the the company is, looking at different alternatives that are available to provide that, that liquidity. Okay. So, I mean, the hard numbers is that, in response to COVID, OpEx has been reduced by £27,000,000,000 CapEx by £23,000,000 and the you name the, you can name the initiatives, right, shrinking operations, synchronization, removing on essential cars, furloughs. Also, something that Heathrow has not been able to do is business rates waiver is the tax you get for, usage of buildings, real estate, something that this government has allowed, but Heathrow is not able to get, yet. Hopefully, that, could change in the in the in the future. So CapEx is maintained at at minimum levels. Okay. So, moving from airports into construction, we can see that, there has been a high level of production and cash flow has been way better than, than last year. Keeping high production levels also comes with a with a cost. And then COVID-nineteen has been quantified in this first half as costing additional €44,000,000, I mean, with the lockouts and different sheets, work to keep production pace and some increase in provision for losses for estimated higher costs in an IRS contracts. In the end, without this COVID impact, EBIT would have, reached 1,000,000. So, is clearly on the parts that we were, expecting. And then, probably, we didn't make sense wherever it stand out, the especially with MX is having a, a great, a year with, a very good cash generation. And then this comes from better underlying performance, good collection terms, and also some advanced payments at the beginning. Of, of the year. Okay. So, construction, even though it doesn't, get any marginal point in time, if, in COVID is not coming back, it's on, on good track to improve margins. In the second part of, of the year. Okay. We could move to services now in the next slide as discontinued activity. You saw that we closed the transaction with, with VENTIA, for the price agreed, $485,000,000 was the price It was broken down into 2 components to transactions. The bulk of it was sold to VENTIA for 465,000,000 Australian dollars. And the, the last part was a stake in a joint venture where the partner bought the, the stake and was closed in July. So is there for not in these numbers? And that was the additional 20,000,000 Australian dollars, that, as I said, are not recorded in, in June, but, have been recorded in in July. They are not in these, numbers. The cash flow generation from services stands out. I mean, the services management has done a great job of, taking advantage of, in early payments, chasing, shortening of days of collection, and also taking advantage of delays in, in taxes, especially in the UK, PE and VAT have been delayed. And that helped, to improve the the cash, performance. Okay. So, some of the, impacts that I will cover in the next slide there that are below the operating level in terms of P and L products better than I address them, here, in terms of, fair value adjustment, risk taking an adjustment of €44,000,000 in, in Amy, really, there's transactions now in the in the UK. So, the, I mean, you could raise your eyebrows if, this is the right time to take this, having seen transactions, that have looked at better multiples than what we have considered recently and in a sector that probably is looking for a more budget being allocated. And, more maintenance and, reshaping of infrastructure likely to take place. So the the sector is awaiting news there. Hopefully, they will get it. The infrastructure is in good need of, repairing many areas. And that should help the sector probably also. That's one of the reasons why we saw transactions, and we saw should see some and consolidation. Nevertheless, we were prudent here, and, just in case this takes longer, we, provided for $44,000,000 of reduced fair, fair value. Then in terms of the some divestment. Also, when you close, you, recognize different, items, like, foreign exchange translation that goes through the P and L now, among other things. This here, we had you have some historical investments from the former brother Spectrum into New Zealand, Papua New Guinea, other places that was affecting. And, the main, the main impact is from, foreign exchange reserves. As I said, had their hedges, but, with the difference in, finance cost between the Australian dollar and the euro don't really mitigate the the impact, right, but this is an on cash item. And it closes the debt transaction. In terms of, results, yes, we've recognized results and increasing fair value in in the Spain, as I said, apart from this impacting the, maintenance of transport infrastructure services for transport, the rest has been quite resilient, and we carry on. We increase their value because it's not amortizing. And we have that positive result. Okay. So in general, services has weather was disbarred in terms of the process, that we have there before we get into the, other lines of, the P and L, in Ferrobiale, services divestment. We are carrying on a smaller divestments with counterparties interested in international and so on the small parts of, of Amy, not the bulk of Amy, nor the bulk of, Ferribunal services, but clearly the market is moving, and the market is moving for specific products and services or specific countries. Is really focusing to consolidation, looking ahead for, more maintenance, coming up. Okay. So in enough of services, I move into the consolidated P and L. And, here, I will also touch on, some items regarding, regarding Heathrow. Okay. So pretty much the, financial results are similar to last year. The main difference is because last year, all the hedges for the employee stock option, or, sorry, share programs they really enjoyed the, share price going up, right, and that was, quite a big impact And now with the share coming down, you have an impact of, like, 9, or like, 9,000,000. And, the rest probably is more also from their opening of the 77 for the full, for the full year. Okay. So you have some higher expenses in financial results. The main explanation is what I mentioned, these, these hedges on the on the share price. And if you move into the, the, impact from the equity accounting affiliates, Here, you have impacts from some, derivatives from, Heathrow, and I will explain how they are adding value, but they have, a negative impact, right? I will start with inflation, derivatives. They, the hedges are used to protect equity value. Remember that all the regulated asset base, is linked to, to inflation And therefore, it helps to, secure dividends and, maintain the gearing ratios in relation to the regulated asset base. The alternative is to do nominal bonds because heater is required by the common terms agreement of the financing to have at least 75% fixed, right? So a Heathrow that has the alternative of doing a fixed nominal bond or a real rate, bond. The real rate is done by shopping a fixed, a nominal bond into fixed real and floating or variable inflation. Since inflation has been, let's say locked in, at levels, well, locked in has been closed with real rate and nominal rate. Our levels above 3.5%. And the last 10 years have shown an average of 3 or lower, and now it's at 1. So the financial expenses of Hydro are much lower. He's very good for shareholders that you have this lower cash outflow from the variable an RPI or inflation, but, it's a mark to market. It's considered speculative, not a hedge. Even though this is, part of the freight agenda, and has been, logged in for consideration because we believe IFRS 9 takes this into account, and it should be considered a hedge. Right? So, until until and if we get, hedge treatment, this is speculative. And what happens is that real rates are now lower because rates are much lower. Okay. So, something that is a clear economic hedge and has benefited with lower cash outflows provides this kind of negative, mark to market. But of course, enough of this for this presentation. Happy to take calls with you apart from this, to, to see how it works. Because it has really worked in in favor. And the other part that is, also something, consequence of this pandemic, the cross currency swaps that are having a a good and positive mark to market, you have to take a hit for what is considered the deterioration of the credit of the counterparts. Right? So this is something that comes from IFRS 9. And even though it shouldn't have an impact on on cash, it's something that you to take into account, and the CDS of many banks have gone up, and therefore, you have to take a hit. So, things that are making money for the, for the company for shareholders need to take this sort of, of heat from mark to markets. One of them, a little bit artificial, and the other, instead of being considered hedged is being mark mark to market, and it's suffering from the lower rates. Okay. So probably I went too long for that, but I think it's, it's worth it. Then the other impacts below operations have been discussed, pretty much. Okay. So I move to the next slide. That is the cash flow generation. And here, when you compared to the closing of December 19, we see that we have a better position. And, here, it's a mixture of dividends from projects and divestments helping, but also you don't have pretty much working capital consumption that is, that is, something to stand out. I mean, every first half of the year, we usually have a working capital consumption it's negligible this time. That doesn't mean that, is something that, shouldn't be reverted in an important part in, especially in services. In the 2nd part of the year and next year, but, very good performance now. So holy remuneration includes, 93 a million roughly of or 94 of cash dividend, and the rest is share buybacks, related to that, to that scraped dividend. And then in other financing flows, the most important component is the deconsolidation of the net debt from brand spectrum that is close to €80,000,000. All in all, it ends up with a situation that is, better net cash position than at the end of next year. Okay. So if we move into the concluding remarks, Of course, traffic has been impacted by COVID-nineteen, but the signs that we get when there's reopening and there's a sense of of safety is that, that people are back on the on the roads. That has forwards and turned to our economies that are very well diversified and should lead the growth in their areas and also where there's high end ecommerce presence and and mobility needs. Right? So, the assets are located in great areas. Other features is not only location that they have long duration, and they have pricing flexibility and that allow us to, make the most of the different situations and and segmentations. But, of course, we cannot fool anyone, uncertainty remains there. We have to preserve liquidity and continue focus on, operating efficiencies. And, we, of course, keep our strategy intact. We have to develop and operate in innovative, efficient, and sustainable infrastructure. While creating value for our stakeholders. So thanks for bearing with me. It probably took a little bit longer than usual. Now we opened the floor for Q and a. Thank you. The first question comes JPMorgan. Could you provide a monthly breakdown of the US managed lanes traffic, please? And also, how should we think about the prospects of dividends from the US managed friend? Thanks, Aganna. Hi. Hi, Elodie. The well, the the this is, sorry, this is Pedro. It's interesting if I was speaking. The the breakdown, the monthly breakdown of the US Madeline's, traffic. You have that in the in the report. So it makes probably no sense to go one by by one on your second question related to to dividends. We are, keep on working on getting the, the dividend flow that we were expecting, from early 2020 from our assets in LPG and NTE, due to the the traffic, performance, we need to to wait a little bit further to understand whether we are gonna receive some some of these dividends from these assets and and is also related to, the ability to end up in, above the the local ratio that we've got under the finance and contract. And and, more than that, we can provide more more guidance, at this point. Thank you, Pedro. The next question also from L. D. In the first quarter, you said, an equity injection in airports would be unlikely but not ruled out. What are your thoughts now? Thank you very much for calling. Nice to meet you, Ali. This is Ignacio, as they come from Ferrogalia Airport. I think the answer to your question is, as we hold to our previous statements in these uncertain times, we we we cannot rule out any equity injection in the airports. Having said that with respect to Hydro, given the strong a cash position, we think that is highly unlikely that that may happen. In the case of AES, despite their healthy cash position at the end of June, given the new quarantine rules, the waiver terms and the refinancing coming in 2022, we think that is a possible scenario having to inject equity. Thank you very much. Thank you Ignacio. The next question also from LED. Could you give us an update on the process for the Maryland projects? Hi. This is Pedro Gonzala again. As you may all know, we have been prequalify, with another 3 consultant. As a part of the prequalification process, we have signed an NDA, a confidentiality agreement that, not allowed us to disclose anything related to the process or to the project. So sorry about that, but at this point, we cannot provide any, further details about this project. Thank you, Peter. And the final question from LED, what is the plan for restarting the services disposal process? Hi. Thanks, Gunja. This is Ernesto speaking. Well, I I mentioned that we are already doing some, smaller projects in the international part, right, like Chile, North America, We're also doing some, divestments like, collections, treatment in, in the UK in Amy. So, that, together with the streamlining of operations, it should be pretty much over before we do other other parts. It's true that, maybe we could change space at one point in time. For two reasons, there seems to be, interest in an area that is quite resilient and probably could have some some tailwinds, like, all the waste cycle. Right? And, if that's the case, maybe something could, be renegotiated. But the at this point in time, as I said, we're doing so many smaller ones and simplifying the organization in the different countries just getting ready for the, for the second wave, but we'll we'll keep you posted as as things evolve. Thank you, Ernesto. The next set of questions come from Fernando Afuente from Alanta. What are your views for the remainder of 2020 in terms of traffic and tariffs, for the US managed lanes and how do tariffs play in the current environment? Is there room to keep on increasing them? It's it's it's probably too early to understand which is the category for the next part of 2020 due to the circumstances. We have, still some restrictions for mobility, some businesses that has already open, some restaurants with limitations of 50%. So under this scenario, it's it's complicated to understand that whether we we could settle at this point any different strategy as the one that we have already in place. And so, we need to see a little bit further how things are evolving. It looks like things are stabilizing a little bit more intense of, of the growing up of the pandemic again in the area, but we need to wait and see a little bit more. Thank you, Pedro. And also from Federlanda, what is your view on Ferrogalia's dividend to its shareholders? Does it make sense to keep it flat versus 2019 in the current environment and how dependent is it on dividends to be received from the ETR or the managed lanes? Thanks, Vivania. Well, but we've said at the Jira's holders meeting that approve the 1st tranche of the dividend is that the board will have to analyze at the time. We probably will be analyzing this in in the fall, around October November with more information. At the moment, there's no there's no comment on the on the dividend. Until we reach that Thank you, Ernesto. The next question comes from Martin Watgel from Bank of America. Which of Ferrogl's infrastructure assets are the most likely to distribute dividends to the parent company in the second half of twenty twenty? Do you still expect a jumbo dividend from LBJ managed lanes in 2020? Okay. This is Pedro. Hi, Martin. I will start with, answering the second part of your question, which is related to the potential dividend on LBJ. As as you know, the idea is to replicate what we did in 2019 with the refinancing of NTE, that allow us to, another thing is distribute after the 5 years of operation, jumbo jumbo dividend, as Jim mentioned, it's true that the main, the main, thing that we need to take care is, the operating performance. That's the number one, priority to understand whether we can end up distributing the dividend. But then also we are working with the, refinancing of the current financing structure, you know, that is a mix of private activity bonds plus TIFI alone. We are working quite well with the, with the rating agencies and with good feedback I'm working with the documentation. Probably this is gonna be also important to, as well as with the operating performance understand whether we are gonna see that, due motivated by the by the end of, of this year. But as I said, the main feature is to have the the delivery of the operating performance and the delivery of the traffic growth that we are expecting. Thank you, Pedro. Also for my team, his last question, are you working on any further asset divestments for the rest of 2020? K. Well, thanks, bugonya, this Ernesto here is true that, even with this uncertainty, there's a lot of interest for investors. In, availability projects that we have. And it's also true that, government rates that are the main payer of this kind of, of project have been coming down a lot. So we are getting reverse inquiries for, some of our availability projects, and we could entertain a part of, of that. We'll keep you updated. But apart from, from that, nothing else. Thank you, Ernesto. The next question comes from Kenton Morehead from DWS. Was it the potential CASK cash uses instead of investing in the 407 ETR. Is it to sustain other assets? Do you think that the 407 is a safer investment than bidding against competitors or new projects? Okay. Thanks, Kenton Ernesto here. Yeah, we think the 407 is a very safe, very safe, investment. It's also true that when we look into other investments that could have more risk, we take into account the return we get in the downside scenarios and, has to be quite high. So, the short answer is Of course, we would be looking to have a a risk return situation more, a favorable when this situation, comes up. As I said, right now, it's a mixture of tactics. We think, these opportunities are likely to come. And it's good to be more solid. Okay? It has nothing to do with, as you rightly said, the safety and, value creation of the 407. That is fantastic. Thank you, Ernesto. Next question comes from Jose Manuela Royas from Santander. It's a question on the 407 ETR in the second quarter of this year, fee revenues, stream declined by 57% year on year due to a temporary suspension of the late payment charge enforcement fees for new license plate denial notices and lease fee charges to help mitigate the economic impact of the pandemic on customers. Have these fee waivers been applied to all types of customers or just to a few, categories of them? When should we assume these waivers will cease? Thank you, everyone. Yeah. Hi, Jose Manuel. It's Pedro, Losada speaking. The answer is, yes, the fee waivers been applied to all type of customers, not just to, a few categories. And the second part of the question is, I would say that, I mean, this, waivers started when restrictions, started. So when the state of alarm and the shelter in place started, if we, we could we consider, to end up with this waiver if we see that these restrictions are over. Again, it's a little bit too early, than me, hopefully, we are close to it. Thank you. Thank you, Pedro. The next question comes from Bosco Ojeda from UBS. Do you see any scenario? Excuse me. Do you see any scenario where the ETR 47 tariffs could be revised down even if temporarily? Hi, Bosco. This is Pedro. The the there's there's no there's, actually, there's no clue, what is gonna happen with the with the tariffs. We started the the seasonal toll regime on February 1st, then we didn't apply the one that we were expecting early in this year on on May. At this point, what we say is that we will remain with the studies that we've got, at this point, nothing, again, we need to see a little bit more. We need have a little bit more visibility to understand which is gonna be the, tariff strategy going forward. The next set of questions come from Stephanie Death from RBC. Why divest 5% of booty mix? And would you consider why did you divest sorry, 5% of Burdymax. And would you consider selling any more and dropping below 50%? Okay. Hi. It's Stephanie Ernesto here. Well, this was, really opportunistic. We think that the asset still has more value and room to go, there was, volume that is something very rare, for 5%. And we took the opportunity to get some liquidity, but we remain very happy with the 50.1%. There's no intention to go below that. And as I said, we think it's a fair value, but we think that the, companies that has room ahead and is performing great. Ah, okay. So then, you have a second question, Stephanie, if we clarify what you mean by quick recovery, for traffic in slide 16. Well, what we were just saying is that, the moment that, restrictions reopened, you saw how the patterns quickly approached last year patterns. And it's something that we showed in the slide where we see the graphs with the different time, traffics in, in our toll roads in in Texas, right, Of course, there's still restrictions like schools and so on, but clearly, the, mobility was coming back pretty, pretty quick Right? So if health issues are behind and the economy reopens, the expectation should be for a quick recovery. We will we were just preparing to those graphs where you could see that we were just like, last year, let's say, in the 3rd week of June, and that's the the comment. Referring to. Thank you. Ernesto, the next question comes from Ruben Gonzalez from Zurich. Are you expecting Excuse me. Sorry. We had a bit of a technical problem with the question. I'll move to the next question. The next question comes, from Pema Chapa from Fidelis. Could you quantify the equity injection for AGS? Thank you very much, Vagonia. Nice to meet you, Pefa. This is Ignacio Castecom from Frogarapots again. With respect to an equity injection in AES, we cannot rule out an equity injection at AES is a possible scenario. Having said that, it's too early to provide any kind of estimate given that, the timing and the traffic, and how that those 2 things evolve in the following months will will help us to understand if that is, an equity injection is shortened in in any case. At that moment in time, after a few months of trading, we'll be able to know if that is necessary. Thank you, Ignacio. Next question, and I will recover it. Which is the one we lost before is from Duven Gonzalez from Zurich. Are you expecting an increase to the construction provisions on U. S. Projects for the remainder of the year. Mean, this is Ignacio Garcia, CFO of for real construction. No, well, we we redo, I mean, the projects three times in the year. So we we know that in this moment, I mean, we we are not increasing the the provisions. So in this moment, I mean, the 145,000,000 that were provided last year, the decrease, I mean, because of the execution of the of the, of the year sites. And in this moment, I mean, the provision is 251, and we are not expecting to increase that on the other side, I mean, to decrease due to the execution. Let's see. To put it in, in other words, Ruben, we would be the provision now, we were expecting that. So, we we think it's balanced. Thank you very much Ernesto. The next question comes from Rushil Pawa from MainFirst. Can you provide a little more detail regarding the 407's ETR covenant position? Where does it currently sit in relation to its covenant and do you anticipate the assets recovering back above its covenants in the near term given the progressively improving traffic trends? Hi, Lucy. This is, Pedro speaking. I think your question, it's I'm not sure if it's it's it's correct because you are, referring to the the covenant position of the 407, it's, below the certain level, which is not just not the case. Currently, the 407 covenant position is, comfort enough. We, we shouldn't have any problem to keep on, going above certain, financial covenants, like the local operations, for example, it's true that if things go worse than expected, we can enter into such a situation, but wouldn't affect other things that, dividend distribution, but at this date, we are not in such, position. And again, our our ratios, are about, comfortably the, the 135 lookup ratio. Thank you, Pedro. Also, for Michelle, can you, can you provide a little more color on the performance of Ferrovia Lagraman? Which appears to be still struggling somewhat, was the additional COVID to construction costs included within agroman. Has agreement now concluded with the previous onerous contracts that caused issues last year? Thank you, Brissy. Ignacio Garcia again, I mean, from FAFSA, no FAFSA man, any any longer. I well, I mean, we see the performance in in as as a step, you know, in in for real construction because you must take in consideration the the COVID impact that in case of Faroegh Gallraction is being 35,000,000 out of the 44 I'm also in the owner's contracts. I mean, as in in the same way that we are not increasing the provision, you you must, consider that, still the internal fees that cannot be provided for are impacting also there. I mean, so, in this, at this time of the year, in June, I mean, you have another 20,000,000 in this, in this onerous contracts in the, in the U. S. Your second question was was about the, we, believe that, the causes that sorry, I mean, that, if the provisions have finished in this contract in the in the USS, Yes. For sure. This is what was, was commented previously, and and the provision now is is being reduced. I mean, just just because of the of the execution. Also, I mean, with the COVID impact, the the the president has to increase. Yeah. So, I mean, as as as Sanjay said, we are not expecting any further provisions, but, of course, circumstances can change have new wages of, new new waves of COVID with additional cars, and there's still some way to go to execute. Right? So we think we have a good balance here, but, I mean, there's a lot of uncertainty. So in that case, absolutely right. I agree. We don't expect, but, we have to have the disclaimer that, the COVID impact could, keep going and affect additional costs. Hopefully not. Thank you, Inaki and Ernesto. The next question comes from Daniel Gandoy from JB Capital. 10,000,000 of working capital outflow in the first half. What can we expect terms of working capital for the second half of the year, is the current performance sustainable? Okay. Hi, Danny. The, working capital is something where we usually don't provide guidance, but give some ideas of what could move it. Right? Some of the things that move in favor of, working capital is when we have, big projects being, closed financial closed and you get an advanced payment. Or, like, in some countries, at the end of the year, you get advanced payments, like, it happens in, in Poland. Right? And if you remember, usually the 2nd part of the year from a seasonal point of view is bearing working capital in countries like, let's say, Poland. But it's also true that, I mean, we're not expecting any big financial close this year that could help in construction. In services. Some of the help from the UK authorities will not be there in the second part, right? So you will have to pay back the payee that was delayed, until, July, and the VAT probably will be delayed until March 31. Right? So, no, I think there's gonna be, a probably worse working capital performance in the 2nd part of the year, but, it's not clear the exact number. And as always, will strive to close things that could have advanced payments, and we'll try to see how to handle that. So I'm sorry that I cannot provide more color, of course, this 1st semester has been exceptional and some has to give back, but maybe other levers come up. We'll have to see. Thank you, Ernesto. The next set of questions come from Nabil Ahmed from Barclays. First question, please, can you provide a sense of the Texas managed lanes average tariff in the 2nd quarter, excluding the impact of light vehicle versus heavy vehicle, performance. Yeah. Thank you. Thanks, Sonia. Hi, Labille. Pedros are speaking, we exclude the mix of a light and heavy vehicles, what I what I what we could say is that, there's no tariff increases during Q2. However, we have seen some, slight increases during the first half of the year. So that explains, part of the average tariff, but the rest of, if you are looking to assign it to the Q2, the rest of the increase of the average tariff comes from the mix of light vehicles and and heavy vehicles with more, increase on the second ones. Thank you. Thank you, Pedro. Also from Nabil, on the NT35 West EBITDA was up despite traffic headwinds. Could you please explain? Sure, Ivana. Yeah, as I said, I mean, it's also related with, deform a question. NDA35 West has, and the presentation has, evolved quite well better than the other Texas managed lanes. And and one of the things is, related of this mix of heavy vehicles and light vehicles the the the asset where, the the weight of the, heavies has grown more has been precisely on the 35 West, and probably that's the way to explain how this, everyday has suffered a little bit less. Thank you. Thank you, Pedro. Also from Nabil, could you please remind us Heathrow's retail is operated. MAG's joint ventures, if MAG's has there been any MAGs waving during the first half of this year and with COVID? Thank you very much, Vagonia. Hi, Navios. This is Ignacio Castecom from Ferrogel Airports. With respect to this topic, We have around 38% of outlets open in terminal representing, in terminal 2 and 5. Those are the terminals right now operating. For this, for these outlets, mini minimum guarantees are being reintroduced. With respect to terminals 3 and 4, there is a relief in place because those terminals are due to reopening the following months, depending, depending on traffic, of course. And with respect to basically, other outlets that the terms and conditions are being renegotiated, those minimum guarantees are being part of the overall ongoing commercial discussions with those retailers. Thank you. Thank you, Matthew. The next question and last also from Nabil, How do you think about your North American toll rates if working from home still persists? Is it a good or a bad thing, between potential lower congestion from light vehicles and expansion of e Commerce, what do you think is the net impact between these two? Thanks, Nabil. It's a very good question. We are, everyday analyzing the different good and bad impacts that we we will have in this new, normal life, coming up. It's true that the the working, from home could have a, an impact that could be offset by, social distancing, people, traveling less in in public transportation because of that, we can, have, as you've mentioned, the e commerce impact that we have seen during this, sitting at home, state and and and the the the growth of the of the ecommerce has been has been huge, and that's, as we have mentioned several times in this call, has, may a a huge weight of the heavy vehicles in in our road. So it's it's, it's it's difficult to to predict nowadays and to give any any kind of guidance on which are the different impacts, net net, but, we we need to keep on following to understand the new patterns of the of the uses of the highways. So next question comes from Victor Attitorez from Societe Generale. On the ETR 47, the average revenue per trip of 3.3% increase at June 2020 seems low versus the average tariff increase announced in February. What is the reason for that? Hi, Victor. There's no clear answer on on that. We are keeping analyzing the different behaviors. Probably there's a mix of different things there, less, white colors what color, sorry, movements, during, AM hours commuting that they used to, do but those, same, users maybe are, doing some kind of other stuff, not probably related to lesser, sometimes they're shopping, and that could reduce the average length, that they are doing as well as, you know, that probably today in this scenario, we are, having an impact of less, vacations trips that again, to reduce, the average, length trip. So probably as of today, that is the only response that we can give. Thank you. Thank you, Pedro. And the next question comes from Nicholas Mora from Morgan Stanley. In the 407 ETR, how much of the traffic would you say is driven by commuters and potentially impacted by work from home? Hi, Nicholas. Sorry, but we, you know, we used to not give, this, this data, so sorry about that. Thank you, Pedro. Also from Nicholas, in the 47 ETR with lower traffic is the risk of scheduled 22 payments rising what is the risk for 20202021 in a ballpark figure? Thanks, Nicholas. It's it's, well, there's there's nothing that has changed since we, discussed this in the last, resource presentations, the the the skill 22 is in the in the in the contract and and pandemia is a is a force majeure event. So this is specifically a force a force majeure event. We have a an extraordinary, extraordinary relationship with, with the authority, and we are working in a very collaborative way and with, the management is in a constant, contact with them, having conversation. But at this point, it's quite difficult, to foresee, which is, the the final resolution of how scalability do will impact the spirit of the of the contract is that the the 407 may may be applied to to, to a certain mechanisms that is by contract if do not provide a relief, of the congestion of the corridor since this, traffic and mobility restrictions, obviously that that, that, that, restrictions has, put the the corridor in a no congested situation. So there's not there's no there's nothing to relieve from from the company's standpoint, skill 22 shouldn't apply, but again, we we need to entering into more discussions and and, and conversations with the authority, as the time goes by. Thank you, Pedro. And last question from Nicholas Mora, on the managed lanes what is driving the latest tariff hikes in LBJ at midday weekends? Well, we we do have, this, base rates in the in the manage lanes, in the in the dollar, in the Texas managed lanes, on top of those, base rates, we can enter into dynamic, mode if, traffic goes, above, certain thresholds where we have seen it's also, based on the elasticity, that we can, high grade targets, as you mentioned, in certain off peak, and and that includes, the weekends, periods, and we are, you know, trying to to to, understand that that is elasticity and and the demand, to put the most appropriate, tariffs. We have mentioned several times we are far from the optimized tariffs. So there's a lot of room in probably not only off peak and also, peak hours. Thank you. The next set of questions come from Patrick Crusade from Goldman Sachs. Following the solid first half performance you still expect to burn cash in construction ex Moody Mc Steak disposal that is for the full year? If so, what level of cash flow consumption do you anticipate? K. Thanks, Patrick, and I'll this is Ernesto. Taking this. A previous one regarding, regarding working capital. But we announced that we were expecting to, consume more than €300,000,000 in construction this year. That that's still the case. I mean, we're executing contracts where we to provisions, and we have to give back advanced payments in the US. Right? And that's the main, driver. Right? So when we're looking into the the working capital, not only these things in, in services need to be unwound. Also, we need to bear in mind that we are execution these, these, contracts. To compensate that, we could have other, other businesses having the seasonal working capital helping them or maybe close of some works, but the realities that we still expect this sort of level or even, even higher to, consume in in construction. Okay. So no change in that number. Thank you, Ernesto. The last question from Patrick, can you give an update on the A66 construction on timing and budget. Thank you, Patrick. Ignac again. VI66 is performing on track, with, very good, production. I mean, in in this first half, 240 a €1,000,000 of execution compared, for example, with this 70, I mean, of last year, also good. I mean, that, the design has been already finished. I mean, 93% of the design is is finished. So so, you know, perfectly, I mean, the the, the the the limits of the of the and the scale of the of the period. And as of today, around 30 percent of the of the, work is is being done. So, I mean, performing really well, even even above West patients, I mean, in the in the construction and and in favor, I mean, we have at the, default, slide. Thank you, Inyaki. The next question comes from Ellen Elberfeld from Daven Phelps. What are your expectations for construction margins in the second half of the year, what variables should we be considering cost savings initiatives, additional COVID costs, etcetera? Thank you. Okay. Well, thanks, Alan. Actually, I I I took that kind of when I was commenting this slide on on construction, really you, have taking some additional costs from COVID now. So we've had there's no additional COVID related, measure, and it will depend on the health situation, we should have an improvement in margins in the in the second half. So it it's really dependent on this external factors. Production per se would be getting better margins that we would have reflected in the first half that was affected by COVID. Thank you, Ernesto. The next question comes from Stephanie Darrff from RBC. On slide 8, of your presentations, you highlight dividend lock up ratios for NT and LBJ of 1.21.3 debt service coverage ratios. I'm sorry, and 1.3 from the NT 35 West. Where are you currently on those ratios, please, and what frequency do you look at those? Is it on a rolling 12 month basis? And would it be fair to assume the ratio deteriorate comes from the next period? Thanks, Vivonia. And, and hi, Stephanie. Starting with the NPE, ratio, we we have, you know, buffer, definitely above the 1.2, local ratio. There's no There's no, concern here. Obviously, it will depends on the way traffic is gonna evolve during the rest of the of the year. It's tighter on on on LPG. Definitely, but but it's still, above the the lookup ratio, on the 35 West the 1.3 lookup ratio is, we're still, also comfortably above it, but it's less important in this case since, we are not gonna distribute dividends, until 5th anniversary, which comes in 2023. That is the case for the 35 worst the way it's been calculated. It's on a backwards basis looking to the last, 12 months and typically, it's, it's being calculated twice a year. I think it's in June December. And then, your last part of the the last part of your question, which is we should assume a deterioration in the ratio, in the next period, I would say hopefully, the other way around, we are expecting to see, traffic, recovery across the board and, hopefully, this will end up in a better ratio situation than the one that we have, for the next few months. This, is, just I wanted to mention also, that I mentioned that on on LPGs is tighter the the the ratio closer to the lookup, but also that is one of the reasons why we are, rushing up with the, with the refinancing the the current travel activity bonds, cost of debt are around 7 to 7.5 percent So we believe that, there's certain, savings, around, moving 200 to 250 basis points unless that we can get on, definitely, that will have the ratio calculations. Thank you. Thank you, Peter. And the last question for today comes from Charles May Nadeer from Kempen. Regarding your comment of future dividends from toll roads being mainly linked to the operational performance, could you give more color on what operational performance you're looking for and what level of traffic recoveries needed in the second half in your view. Hey. Thanks, Charles Ernesto here. We don't provide specific guidance here. I mean, the better the operational performance the more value, the better it is. Of course, the last, pattern we were seeing at the end of June was enough for this, kind of, dividend distribution, but we will look at more, things and hopefully look to, to a better, performance. And that is the, the the key to get, more traffic back again as normal. Thank you, Ernesto. There are no further questions. Okay. So, well, thanks a lot everybody. Thanks for bearing with us. Please stay healthy and, let's put all this pandemic behind as soon as possible. Thank you. Take care.