Good afternoon, everybody, welcome to Ferrovial's conference call to discuss 2019 first quarter financial results. 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 this webcast, through an email to ir@ferrovial.com, or via this conference in the Q&A session at the end of this call. With this, I will hand over Ernesto López Mozo, Ferrovial's CFO, who will be leading this conference call.
Thank you, Ricardo. Good afternoon, thank you for attending the first quarter of 2019 results presentation. We're starting with the highlights and with our main infra assets. The managed lanes performance has been boosted by new connections in the Dallas-Fort Worth area. Heathrow posted record traffic again, almost 18 million passengers. The 407 ETR posted solid EBITDA growth despite traffic impacted by severe weather conditions compared to last year, but the underlying remains as always. The company decided to classify Ausol as held for sale. Well, Ausol, after 20 years of operations, it's time to redeploy capital allocated to this asset and also answers reverse inquiries that we were getting on this particular asset.
The negative part of the results is construction that registered a EUR 345 million provision related to contracts, projects that are on the very early phases, some of them finalizing the design, in the U.S. and all of them outside Texas. I will discuss more in detail later on. This is right now the top priority of the company to address this. Services is presented as a discontinued activity, and the divestment process is on track. If we move on to the slide on the 407, with the main operations. In the 407, the result is already out, and you probably know. The quarter showed an EBITDA growth of 5%, despite extreme weather conditions that brought a decline in traffic compared to last year, a growth of - 2%.
Here, we'll detail in the following slide, the comparison in terms of weather, but really the underlying is close to 0%-1% growth in traffic. In terms of economic performance and the asset reaction, it's pretty much as in the past quarters. Dividends grew from this asset by 10.5%, CAD 250 million. At the April board meeting, the second quarter dividend payment was approved, again, CAD 250 million. Okay. If we move into the next slide to see in detail the graphs about the traffic that I mentioned. Well, you see that severe conditions, especially in January, that show the record single day snowfall on a workday of 24 cm, and in February with 4.6% decline in monthly traffic, that saw a lot of days with freezing rains and ice pellets and with five major winter school closures implying bus cancellations.
This was clearly a lot of difference compared to last year. As I said, in comparable days, we see something between 0%-1% traffic growth. April is showing a good performance in comparable terms, pretty much as I showed. In terms of traffic, it will be higher due to better weather than last year. If we move on to the managed lanes, here we start with NTE and LBJ. As I mentioned, the growth in EBITDA is excellent, also in revenues. You have NTE in terms of transactions, 20.8% up. This was held by the full opening of the NTE 35 West. Also, we will have more of this detail in the following slide, the opening of the 183 TEXpress in late October 2018.
All this is providing more connections. More and more people are coming to the corridor given the better connections. We have the LBJ, where traffic is growing by 5.5%. I mean, the Segment 1 , that is the one further to the west, was held by the opening of the 183, the east is having some congestion problems outside our road, that is affecting the growth, it's lower because of this. I will get into more detail regarding the connections in the following slide, if I may. Let's go to the slide where we see the maps with the different connections of NTE 183 T EXpress, and LBJ. Here you see that the 183 is basically connecting NTE with LBJ.
In LBJ, if you see in detail in the map, segment three to the east. Here you have congestions, here TxDOT is looking to increase capacity of the connecting road. That will imply that you have some works now, in some years, you will have a much better connection and definitely much better traffic growth going forward because this is affecting this part of the road. In terms of the NTE 35 West that increased the connectivity, here we can see that the corridor has recovered traffic volumes and even overtaken the ones that we saw prior to construction. Right now, in the first quarter, we see volumes 40% above the pre-construction levels. This corridor really has a lot of commercial traffic, something that we lean on.
Another point of attention is that we are having a lot of rush hour demand that brings the mandatory mode. The mandatory mode with certain conditions of traffic are not met. We are forced to price above the soft cap, that is EUR 0.90 per mile. We are seeing several events like this in the NTE 1, 2 happening already. Summarizing the contribution of toll roads, we have in the following slide the overall EBITDA growth of 45%. We have more than 60% coming from the U.S., this is driven by the managed lanes of course and the NTE 35 West already bringing EUR 11 million to the consolidated EBITDA. As I said, Ausol has been classified as held for sale at the end of the quarter.
So there's no effect on the P&L, just on the balance sheet, where you can see some deconsolidation of non-recourse or project debt that is north of EUR 600 million. We will keep you posted once we have the final offers. We have non-binding offers already, so it looks good. If we move on to airports, Heathrow, moving on to Heathrow, has published this set of results last week, but maybe we should review some of the numbers. We have record high passengers. I mean, the first quarter recorded the highest passengers with 1.4% growth. We're having lower aeronautical tariffs per passenger, and this is part of a deal negotiated with the airlines that is beneficial to both parties. We have, in terms of growth in traffic, the benefit of new routes that boost U.K.'s connectivity.
Over 210 global destinations are now connected via direct flight from Heathrow. We had high retail spending, 2.6%, and this contributed to overall revenues of GBP 679 million. EBITDA also increased. Of course, it's also helped in part by the IFRS 16 new standard that takes away operating expenses for operating leases, and they are classified as financial leases. In net income, there's no impact. In terms of financing for Heathrow, there's a lot of appetite ahead of expansion, and Heathrow raised GBP 1 billion already at attractive rates in 2019. Heathrow is delivering good value for passengers with airport charges declining 2.4% and passengers saying they had an excellent or very good experience at Heathrow. Next, we have just for your perusal, a reminder of the calendar for expansion, and the dates Heathrow is working on.
In terms of regulation, in addition to the H7 framework, as I mentioned before, a commercial agreement has been done with airlines for the charges to apply in 2019 through 2021, when expansion is expected to start. Here, the agreement offers a rebate to airlines depending on actual passenger traffic volumes. Also we have protection in the event that passenger volumes were to fall below current levels prior to 2022. So this is also beneficial in the way that parties now focus on the financeability and affordability of expansion at Heathrow. Moving on to construction in the next slide. As I mentioned at the beginning of the call, we have taken a provision of EUR 345 million. The hit arises from several factors. There's a boom in construction that brings a surge in subcontractor prices. Also, these are states where we are starting operations, let's say. It's not Texas.
Raw materials are going up. We hedge, but that can only be partially hedged. Design has taken longer for approvals than expected, but in any case, nothing is an excuse here. The delay means that you cannot sign off prices with subcontractors because the bidding is done on detailed designs. Most of these losses are in projects that are at a very early stage, like the I-66 or the I-285. We are working to improve the outlook, but we must take a prudent approach. We are extremely upset with this performance. It's a top priority for us to deliver in execution, and construction help to acquire high value infrastructure assets.
Part of the solutions going forward, and when we look into the Maryland projects, is also to have a higher way to own resources, to do self-performance, and to shorter the design to put the subcontractors to compete on a final design. As I said, this is the news that are the top priority of the management now to address. In terms of Budimex, we still see cost pressure. You saw the results that were published. If we don't include the real estate results, EBIT margin is 2.3%. Moving on to services on the next slide. It's classified as discontinued activities. We show the numbers just for comparison to last year's, but I won't go through them on detail. Basically, these numbers are trading as expected in our budgets and business plans, and the sale process is on track. Well, Amey is not part in the process.
Amey keeps negotiating with the parties to the Birmingham City Council PFI for road infrastructure maintenance. That's advancing, but Amey is not part of the process. We have a lot of interest, and parties analyzing the information memorandum. The process is going along expectations. Moving on to the consolidated P&L impact. IFRS 16, the first application is not really any major impact in the continued operations. You see that it almost has no impact on amortization. It's in the tune of EUR 6 million. In terms of services, yes, it has a bigger impact, and the bigger impact is because you don't amortize according to IFRS 5 when an entity is designed as held for sale. You don't amortize the non-current assets.
Here, it's true that in the discontinued activities, we have a positive impact of EUR 64 million because we are not amortizing, but it's not really related with IFRS 16. As I said, it's related to both 16 and IFRS 5. Ausol is classified as held for sale, but as I said, the impact is a net debt reduction when you take into account also the cash and the asset of EUR 439 million. I mentioned before EUR 600 million, I was talking about more gross debt there. In terms of P&L in more detail, moving to the next slide. We see in revenues, a higher contribution from U.S. toll roads helping this growth in revenues. Of course, we have the provision from construction. With the leases reclassification, has improved the EBITDA in EUR 6 million.
Depreciation increased due to the IFRS 16 impact, and is the main explanation on this movement from EUR 27 million-EUR 33 million expense. Disposal and impairments is just the impairment at Autema, just in case we lose the appeal we have regarding the change in conditions to the concession. In the financial results are slightly lower to last year. We have the impact of additional interest expense from the consolidation of NTE 35W, and we have the positive evolution of the hedges on the employee stock plan. In terms of the equity accounted results are very similar to last year, only Heathrow has a less positive number. Basically, the impact for the real estate mark-to-market on inflation mainly is slightly less positive this year than the last.
This is a quick run of the different lines of the P&L. In the next slide, we move into the cash flow. Here, the main sources are, of course, dividends from infrastructure projects, EUR 117 million. Here I didn't comment, probably it will be a question that will come later on, that Heathrow had a lower dividend than last year, this quarter. You know from the investor report that Heathrow published that they were expecting a lower EBITDA this year just because of Brexit impact, something in the tune of GBP 100 million lower, therefore they were forecasting a lower dividend. The moment that scenario doesn't happen and it's not trading as it were to happen, you could have better news. We'll keep an eye on that. The underlying operations keep as last year, really.
In terms of other impacts, minor divestments that it's not worth mentioning. Of course, in terms of uses of funds, we have the working capital evolution that is normal in the first quarter of the year. It's similar to the one last year. I won't spend more time there. If we move into the conclusions looking forward, I think this is the most important part. The first one is that we are focused on construction risks. This has been an upsetting result, this provision this quarter. It has implications. We have a new management there looking to improve negotiations. As I said, it's mostly related to things that have to happen, we need to be closing contracts now that the design is final, we cannot leave this risk open.
Of course, it will imply changes for bigger projects that are to come, where we have important expectations. Services keeps on track. The disposal process and Amey keeps advancing to try to find an end to the PFI contract in the U.K. In terms of capital allocation, the focus on infra projects, we say mainly in North America. We always talk about the U.S., we also have to mention Canada. We saw the price of the disposal that SNC is looking at. We haven't published our evaluation this year, you have noticed that, it will come later on. The valuation of the 407 has improved, therefore, we think it has merit to look at the potential to invest at that kind of price.
We'll keep you posted if finally we come to a conclusion, we are interested in acquiring a part of SNC's stake at that kind of price, that kind of level. Last but not least, we have NTE and LBJ. NTE will be paying dividends in 2019, LBJ in 2020. The outlook for dividends of infrastructure projects is improving. Thanks, we'll enter into the Q&A session now.
Thank you. Ladies and gentlemen, if you'd like to ask a question, please press star followed by one on your telephone keypad now. If you change your mind and wish to withdraw your question, please press star followed by two. When prepared to ask your question, please ensure your phone is unmuted locally. Our first question today comes from Marcin Wojtal of Bank of America Merrill Lynch. Marcin, your line is now open.
Yes. Good afternoon. Thank you for taking my questions. The first one, can you provide a bit more detail on those problematic contracts in U.S. construction? Can you share what is approximately the total amount of future revenue or backlog on those contracts on which you have taken the provision? How many years approximately will it take you think, to actually execute on those contracts? Are we talking three, four years? I think you mentioned I-66, which I think is scheduled for completion in 2022. If you could provide a bit more detail. Question number two is on Amey, U.K. services. It is still classified as an asset held for sale, you said it is not included in the current potential disposal track. What can happen at Amey?
Are you expecting to run a separate sale process later in the year? Once you have more visibility on the Birmingham contract, what are the possible scenarios for Amey?
Thanks, Marcin. Yeah, you're absolutely right. These contracts, we're talking about, basically three of them. Two of them have a lot of execution pending. We are talking that in terms of dollars, the backlog, the revenues pending, are around $2.7 billion. Right? Yes, they will take between three to four years. Hopefully we'll be able to manage things better, but we have to de-risk and take this hit. Right? It's basically contracts in Virginia, in Georgia, and part of that is also finalization with some delays on the I-77 in North Carolina. Okay, these are the contracts. As I said, we will put all our focus on trying to manage that better, also in changing going forward with a higher mix of self-perform in some of the important projects that will be coming.
In terms of Amey, yes, it's about weeks or so to see if there's a solution, probably, with this PFI contract. There are two possibilities after that. If it gets sorted out, it could be sold separately or with the rest. If it doesn't get sorted out, yeah, the kind of sale would be different and would be on a standalone basis for sure. Yes, we intend to dispose Amey in any scenario. Well, I think that was all the questions, right? Thanks, Marcin.
Thank you.
I'll go on to the next question, then. The next question on the line is from Vittorio Carelli from Santander. Vittorio, please go ahead.
Hi, Ernesto. Good evening. Three questions. The first one is related to the ETR 407 ROFO. According to SNC, only one shareholder has declared its intention to exercise the ROFO. You told us that you are eventually considering only the acquisition of part of the SNC stake. If you can elaborate a little bit more on which are the intention of the company regarding the 10% stake. Second question is on construction. Apologies for my ignorance, but can you explain a little again which are the impact of the further reason why you had this massive provision in the U.S.? You mentioned delays in design approval that in practice cannot be signed off with subcontractors. It means that there is no visibility about the cost base of the next projects, or if you can explain again a little bit more of that.
The third question is related to Heathrow. You mentioned the new debt that you are issued so far for the expansion. Which is the target of Heathrow regarding the marginal cost of debt to finance this expansion? Thank you.
Thanks, Vittorio. Okay, I'll start with the first one on the 407. We don't make any comment on the rights of first refusals or items related to shareholders' agreements. Those are confidential, we make no comment there. What I said is that we are interested, and we could be part of a transaction there. We have earmarked capital for that could happen. We'll keep you posted. It's not about explaining how we come to that conclusion. The only message is our valuation is clearly higher than that one, and we think that capital allocation to that asset makes sense. We'll see if we come to a conclusion where we are part of that. The second one, regarding construction, let me try and walk you through these things.
Well, basically, you do the bidding, taking into account some risks when you have tested the market, of course, you have your own resources, and you check how you can deliver the design. What happens is that then you have to get into the final details that get into a contract. You don't have, let's say, gray or vague contracts in construction for bidding. You have them that are more detailed. It took a while to get the final approvals, and the cycle really went against us. The only way to protect from that is to factor in that the cycle could go against you and do more self-performance, more work with your own resources. Right? Here, well, that didn't work. We are seeing that the potential for losses is there, and we prefer to be prudent. Right?
We've taken that hit, and it has to do with basically the cycle moving away, and we are upset that we haven't been able to manage it. For future projects. There has to be risk allocated to this and more self-performance. Okay, that's the explanation. The third one, regarding Heathrow, all the economic parameters are on preliminary discussions. Let's say, the business plan will be presented more at the end of this year, and the economics of regulation will be clearer probably next year. It certainly is no point on discussing now what could be the cost of debt for expansion. Everything's very preliminary.
Okay. Thank you. I'm sorry for ETR. Are you comfortable to have eventually [audio distortion] with a higher stake in ETR compared to your stake?
To this transaction, right? The third one, if I heard it correctly, was about if Brexit keeps going like it is, basically no dealer scenario or no hard Brexit, if we could see a better performance or reverse separation. Really, it's not a provision. It was a guidance that Heathrow made for their expected EBITDA for 2019. The short answer to all that is that, yes, we should have a better EBITDA than what they mentioned in their investor report. It's even written there and explained that if that doesn't happen, performance should be adding that back. Right? Yeah. It looks better than the provision expectation. Did I miss anything, Stephanie?
Yes, sir. Thanks so much. For the full-year guidance update on construction, including the provision, because if I am not mistaken, you expected some margin recovery in 2020 in construction. Is that still the case?
Our construction margins, taking out this provision, are going to remain low. Okay? We would be looking to EBIT margins that are hovering around 1%, let's say. Okay? We are working to improve that, but that's the expectation, and that is with the provision set aside.
Thank you.
Our next question on the phone line today comes from Jenny Ping of Citigroup. Jenny, please go ahead.
Thank you very much. Good evening. A couple questions from me. Firstly, can you just remind us what you communicated in terms of the use of cash post the disposal of the services unit? And in that context, whether you have made any commentaries about the Hobart Airport, that's been mentioned in the papers. Secondly, just following on from an early question in terms of the construction business. You mentioned a 60% subcontracting price, which is where it is now compared to where you originally bid. Have you been looking forward, already marked to market, the 60% higher prices? Or have you assumed that the cycle moved back in your favor? And then lastly, just in terms of the NTE and LBJ dividends, are you able to give us a feel of the magnitude that you're expecting to be paid out as a percentage in relation to the ?
Jenny, I really struggled hearing your question. Could we just try and do it one by one? If you could speak closer to the microphone, and I will be taking them one by one, please.
Okay. Sorry about that. First question is the use of the cash post the services disposal. Have you said what stated your intention for the use of cash? Is it return to investors, or is it reinvestment? In the context of that, what have you said about Hobart Airport, which is rumored to be in the press as something that you're interested to acquire?
Okay. Thanks. Well, basically what we said with the proceeds, that they would be used for investment in infrastructure and also, we could contemplate shareholder remuneration. Regarding the Hobart Airport, we are not in that process. We are not interested.
Okay. You haven't said the split between what's going to investors versus what's going back into the business.
No, we haven't.
Then my second question is on the construction business. You mentioned earlier the spot price for subcontracting is 60% above what the bid base case that you have originally worked on. The provision that you've provided for today, is that based on the current 60% higher pricing, or do you assume the cycle moves back to your favor, i.e., prices start to fall again?
No, we've been prudent with prices. This is commercially sensitive, but we've taken into consideration risks and the opportunities to manage this, that they will be more with self-performance that we are looking to do. Right? That's going to be our lever to improve. Of course, we have some margin of error in the provision. Of course, there's always risks, but we should be okay.
Okay. Just to be clear, you've assumed the higher cost going forward?
We've assumed a realistic and prudent closing of contracts, improvements could come from the sales performance.
Okay. Very last question is on the NTE and LBJ dividends. Are you able to give us a feel of the magnitude of the dividends that's coming from these two assets?
Well, we can say again what we said in the past, basically, the operational performance is better, hopefully we'll improve them because of the operational performance. What we said was that NTE would provide $125 million our share.
That's just NTE.
Okay. That's all we have provided in the past. Probably in the models, you can get some idea of better detail on the models that we will be publishing later on, probably this month. We are pondering that. Basically, the numbers with a better operational performance, maybe we could improve them.
Okay. Thank you.
Thank you. Next question, please.
The next question on the line is from Bruno Silva of CaixaBank. Bruno, your line is now open.
Yes. Good afternoon, everyone. Thank you for taking my questions. First one, going back to construction, sorry for insisting on this one. My question is really about the context of this provision and the changes in the contracted prices. That is not the first time, and it is not the only company reporting that. You are still feeling that in Budimex, now in the West. Probably this is a more global context. To some extent, what is the reason for only now taking this provision, and whether or not are we going to witness over the coming quarters more provisions taken on construction in other geographies and other projects, things that you are still probably reassessing? Second, could you please provide us with a rough figure of net cash flow that you expect from the construction unit in 2019 and 2020?
Third question is just a confirmation regarding possible, I don't know if there was a restatement in the net cash ex-infra at year-end 2018. I remember that you had published roughly more than EUR 900 million, and now it's EUR 1,236 million. I don't know if it is to work, and I missed that detail. Finally, regarding ETR for 7% and 10% for SNC, just clarification. Could you assume to the market that you do not want to increase it above 50%? So you'll be ruling out fully consolidating at this time, or is everything possible at this moment? Just a detail, regarding the break fee, would that be something to be supported by the buyer exercising the option, or is it something to be a cost to SNC? Thank you very much.
Okay. Well, thanks. Lots of questions. Let me see if I don't miss anyone. Okay. Regarding construction, we are talking about the main projects in the U.S. that we are addressing in early stages. We have another big one in Houston, Grand Parkway, that is going along the expected lines, we don't expect anything there. The remainder of construction, we expect low margins, but not any major issues because of design being completed, things that you have to subcontract. Of course, the business can have low margins. Right now, we are not expecting anything like that. We have assessed all the big projects that is part of the review we do from a strategic point of view.
While this is the case, of course, construction has its risks, and what we are trying to do as management is to contain those risks, reduce them, have less exposure, and use construction to help to create value with infrastructure. Moving forward, we should be seeing less of this and much more risk management for sure. Okay. Regarding the net cash flow from construction division, this year we'll drain cash, probably something around EUR 300 million drain. Of course, the company will have more dividends, sources of cash from disposals. Cash is not an issue, but this is a provision that costs money, construction should drain cash this year. For next year, it's early days, but we could maybe be talking about zero cash contribution. No drainage, no contribution. But as I said, it's early days, and we will keep you updated.
You have another question that was regarding the net cash position ex-infra. One thing that you have to bear in mind when you mention the two numbers, one of them is if you consider continued operations plus discontinued operations or only continued operations. Because basically the EUR 1.236 billion, I think it was the number, if my brain is not failing, basically it was something like EUR 1.236 billion, that included both services, that is discontinued operations and the continued operations. If you take out the net cash position of services, you go to the EUR 900-something million. For me, it doesn't make sense to differentiate that because any cash in services would be valued in the disposal. I prefer to look at the EUR 1.236 billion number. Okay. Then, regarding the increase or consolidation or whatever consolidation, it has to do with many things.
One of them, of course, is the stake. The other one is the rights you have. As I mentioned in the answer of a prior question, you don't get any more rights for buying more, nor if someone gets a bigger participation gets more rights. The shareholders' agreement doesn't change with our current participation, nor if we increase. Okay.
Okay.
Okay. Thank you. Next question, please.
The next question on the phone line today comes from Guillermo Fernandez of Kepler. Guillermo, your line is now open.
Hello, Ernesto. Thanks for taking my question. A number of them have been already answered. The main one would be whether you consider sustainable, the kind of growth that you've seen Q1 in the management, both particularly at the NTE with the traffic double-digit through the year, and also at the tariff level in both
Yeah.
Second one would be on the ETR process, whether the construction you are planning or thinking about would involve a releverage on the asset, whether you consider the room to do it at the project level or above it. The third one actually would be a clarification on latest Bruno's question. You mentioned a cash drain of construction expected for 2019. You said a figure, but sorry, I missed that. Thank you.
Thanks, Guillermo. Okay. Again, the sound was not the best, to say the least, but let me try and address what I understood. Well, regarding NTE and LBJ, we don't provide a yearly guidance. All the parameters behind the business plan that we have shown at the investor day, and then when we publish, are still there. The dynamics are very good. We won't be getting into specifics. The only thing I mention is that LBJ, you see that is growing less in terms of traffic, and it has to do with congestion on the east end. There you will see works in the coming years that will improve that. Regarding the business plan is fine, but probably you will see less growth in LBJ than in the NTEs 1, 2, and 3.
We think the performance is going to be better than what we expected for this year. We don't get into specifics. Regarding the 407 ETR, no, our analysis is not based on additional releverage at the opco nor on the holding company. It's a resource you can always have, but we are not banking on that for our numbers. The last question was on cash. Yes, we say that construction, in terms of the contribution to the cash flow this year, probably we're looking at a drain of EUR 300 million. Of course, as always, we will work to improve that, but the best estimate we have now is that one. Was that all, Guillermo?
Yes, that was all. Thank you.
Okay, thanks, Guillermo. Next question, please.
As a reminder, ladies and gentlemen, if you'd like to ask a question from the phone line, please press star followed by one on your telephone keypad now.
Okay. Operator, I have some questions that came through the email. I will take the first one. The first one is from Charles Maynadier from Kempen, it says: Depending on the stake you're potentially acquiring the 407 ETR from SNC-Lavalin, can you confirm that you will need to consolidate the asset? If so, is that an important part of your decision to increase your stake? Do you see any benefit of consolidating? The answer indirectly has been already given. We don't consolidate depending on the percentage of the stake you have. It depends on your capacity to run or impose decisions on the asset, and that doesn't change. That doesn't change neither with other parties acquiring a higher participation. In terms of the benefit of consolidating from optics or not, it's not something that could drive a huge investment.
Any investment of money has to be done with cash flow analysis rather than accounting. Of course, we are aware that optics sometimes help. No, the decision is done only based on returns. Okay. The next question comes from Olivia Peters. Olivia Peters asks, while the LBJ traffic was weaker, it grows, but it's something that I already mentioned. How long will the improvement in the connectors take to be in place? Shall we assume traffic's negatively impacted by construction? Okay. Regarding this one with the LBJ, I'm just checking how long it could take to do the works, but probably we're talking about three to five years. I would try to be more specific, we'll come back to you on this. Yes, the answer is that during construction, traffic is negatively impacted. Afterwards, it gets a much better improvement.
The net effect on the business plan or value is much better. Okay. We will come back on the timing of those works in the connecting road. The next question, also from Olivia, is timing around services disposal. Any update? No. It is going along the normal process, and regarding the Birmingham negotiation, no, I already mentioned that things are advancing, and probably if they are sorted out, it will be in weeks. If not, there will be no solution, right? The third one is, would you regear the NTE once the dividend paid and debt refinanced? It is not the idea now, but we constantly monitor opportunities there. No, it's not the idea to regear the NTE once the dividend is paid and debt is refinanced. Okay.
I got the information regarding the works on the IH 635, that is east of the A, works should be carried out during 2020 to 2024, right? These are the years when traffic should be negatively impact in this part of the road. I think I addressed all the questions we received via email. No. Okay, we are getting some more on the call. Okay, operator, let's get to the next question, please.
Of course. The next question from the phone lines is Victor Acitores from Société Générale. Victor, please go ahead.
Hi, Ernesto. Good evening. Thank you for your time. I only have one question regarding the timing of your in-house valuation of concessions. You can give us any indication of when you are thinking to communicate the internal valuation of the assets? Thank you.
Okay. In any case, it will have to be after the potential transaction in the 407. Okay. It will have to be after anything closes there, and probably before the summer.
Okay. Thank you so much.
Thank you. Next question, please.
The next question on the line is from Nicolas Mora of Morgan Stanley. Nicolas, your line is now open.
Yes, Ernesto. Just a couple of ones. Just coming back on the construction, just can you explain a little bit, you said that the three contracts which were mainly affected were totaling basically $2.7 billion, including the I-66, the Georgia, so I-285, SR 400, and then the I-77. I don't really get to that $2.7 billion. Georgia's been on for a couple of years. I-77 is basically done. In I-66, you've spent a few hundred million dollars, so the bulk of the $2 billion are left. That looks quite a high number. Are you including a few other basically smaller contracts in the $2.7 billion?
No.
Second question linked to this-
Sorry, Nicolas. I thought that was the only question. I can take them one by one. Okay. Well, basically-
Okay
in the I-66, I'm talking about $2.3 billion, the I-285, SR 400, right? The I-66 really has less than 7% completion. The I-285 has less than 20% completion. Then the I-77, that is $594 million, has something like 80% completion, right? That's roughly the quick calculation I came up with the $2.7 billion, and it adds up.
On this, you've talked about basically you having maybe engaging into riskier regions or regions where you were not used to working, so typically Virginia, North Carolina. There's another contract which comes up to mind, which is in Denver and Colorado. Could that project also be? Has this project been revised? Could there be risk as well attached to it?
No. Well, basically the Denver project, what has appeared is that the conditions of the preexisting structure are not in good shape, right? The parties are looking the way to move forward. Probably you will need to address some sort of different design, but it's because the conditions were not there. That's not something that our construction is liable for. It's something different. Delays come from something different.
Okay. Last one, just on the net working capital changes. You said Q1 was in line with the last year. The last year included services now which were suffer outflows of working cap in Q1. Does it mean construction being the main part of the working capital outflows a bit worse than it was last year, in the first part of 2019 versus last year?
Yes, construction is slightly worse.
Okay. All right. Thank you very much, Ernesto.
Thank you, Nicolas. Next question, please.
The next question on the phone line comes from James Sparrow of BNP Paribas. James, please ask the question.
Yes, good evening. Just got one question on the credit side, regarding your credit rating. You've just been put on watch, developing by S&P, which is a bit strange. They kind of give themselves the option to either take the rating up or down. Just curious to know if you have any sort of target credit rating in mind. Thanks.
Yeah. For us, it's key to have an investment-grade rating. Triple B is the spot where we want to be. The reason for that is because when you are winning this kind of infrastructure assets, it also helps to acquire them on a greenfield situation, right? Yeah, it's extremely important for us to have that rating. We think that the evolution of the company with infrastructure bringing more cash will be a good situation for that, right? I think that the S&P note talks more about what kind of metrics they would use now that services is out. Not that the company is not very solid.
Okay. That's great. Thank you.
Thank you. Next question, please.
We have no further questions on the phone line, I'll hand back to you, gentlemen.
Okay. Well, thank you all. We'll be talking about the developments of all the assets we have, either for sale or for potential acquisition. Thank you. Bye-bye.