Earnings Call: Q1 2019

May 7, 2019

Good afternoon, everybody, and welcome to Ferrobiad's conference call to discuss 2019 First Quarter Financial Results. Just as a reminder, both the result report and the presentation are available to you in our website. If you have any question, you may ask them through their form included in this webcast through an email to irferobial.com or via this conference in the Q And A session at the end of this call. With this, I will hand over Ernesto Lopez Moto, Ferrovial CFO, who will be leading this conference call. Thank you, Ricardo. Good afternoon, and thank you for attending the first quarter of 2019 results presentation. Well, 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 18,000,000 passengers, The 407 ETR posted solid EBITDA growth despite traffic impacted by severe weather conditions compared to last year, but underlying remains as always. The company decided to classify our solar sale for sale, while our solar 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 at EUR 345,000,000 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. And this is, right now, the top priority of the company to address this. And then services is presented as a discontinued activity and the divestment process is on track. If we move on to the slide on the 407, We, 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 negative 2%. Here, with the detail in the following slide, the comparison in terms of weather, but really the underlying is close to 0 to 1% growth in traffic. So, 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 percent, Canadian $250,000,000. And at the April board meeting, the 2nd quarter dividend payment was approved, again, CHF 250,000,000. Okay. We move into the next slide to see in detail the graphs about the traffic that I mentioned. Well, do you see that's a brief condition, especially in January, that showed a record, single day is no fall on a work day of 24 centimeters. And in February, with 4.6% declining monthly traffic, that's so a lot of, days with freezing rains and ice pellets and with 5 major winter school closures. Implying bus cancellations, right? So this was clearly a lot of difference compared to last year. And as I said, in comparable days, we see something between 0% 1% traffic growth. And April is showing good performance in comparable terms, pretty much as I showed. In terms of traffic, it will be higher due to better weather, than as year. Okay. So, if we move on to the managed lanes and Here, we start with NT and L BJ. As I mentioned, the growth in the EBITDA is Excellent. And also in revenues, you have NT in terms of transactions, 20.8 percent up. And this was held by the full opening of the NT35 West and also, and we will have more of this detail in the following slide. The opening of the 183 Texas Press in late October 2018. All this is providing more connections. So more and more people are coming to the corridor given the better connections. Then we have the LPG where traffic is growing by 5.5%. And then, I mean, the segment, one that is the the one further to the West West held by the opening of the 183, but this is having some congestion problems outside our road and that is affecting the growth. So it's lower because of this. So I will get into more detail regarding the connections in the following slide, if I may. So, let's go to, this slide where we see the maps with the different connections of NTE183 T Express and LPGA. And then here, you see that the 180 3 is basically connecting NT with L BJ. But in L BJ, if you see in detail in the map, segment 3, to the east. Here, you have congestions and here, Texo is looking to increase of the connecting road. So that will imply that you have some works now, but in 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 NT35, was 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. So right now, in the first quarter, we see volumes 40% above the brick construction levels. This corridor really has a lot of commercial traffic, something that we lean on. Okay. So 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 per mile. And we are seeing several events like this in the NTE want to happen in already. Okay. So 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. And, this is driven by the managed lanes of course and the NT35 West already bringing 11,000,000 to the consolidated EBITDA. As I said, our Sol has been classified as held for sale at the end of of the quarter, right? So there's no effect on the P and L just on the balance sheet where you and can see some deconsolidation of non recourse or project debt that is north of 1,000,000 the process is progressing probably better than what we expected. And 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 was 1.4% growth, and 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 UK'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 our overall revenues of 1000000 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, right? In net income, there's no impact. In terms of financing for Heathrow, there's a lot of appetite ahead of expansion, and the Heathrow raised 1,000,000,000 already at attractive rates in 2019. And, is delivering good value for passengers with airport charges declining 2.4%. And the passengers saying they had an excellent or very good experience. At Heathrow. Next, we have just, for your per usual, a reminder of the calendar for expansion and the dates that Heathrow is working on. In terms of regulation, in addition to the age seven framework, as I mentioned before, an agreement has 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 are rebate to airlines, depending on actual passenger traffic volumes, and 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 a part is now focused on the financeability and affordability of expansion at Heathrow. Okay. So moving on to construction in the next slide, as I mentioned at the beginning of the call, we have taken a provision of 1,000,000. The heat arises from several factors. I mean, there's a boom in construction that brings a source in subcontractor prices, Also, these are states where we are starting operations, let's say, is not Texas. Also, raw materials are going up. We hedge, but that can only be partially hedged. And design has taken longer for approvals than expected, but in any case, nothing is unclear here. And the delay means that you cannot sign off prices with subcontractor because the bidding is done on detail this size. Okay. So, most of, I mean, these losses are in projects that are a very easily staged like the I-sixty six or the I-two eighty five. And we are working to improve the outlook, but we must take a prudent approach. We are extremely upset with this performance, and it's a top priority for us to deliver in execution and construction help to acquire high value infrastructure assets. Okay. So, part of the solutions going forward and when we look into the Emeryland projects, It's also to have a higher way to phone resources to do self performance and to shorter the design to put the subcontractors to compete on a final design. Okay. So as I said, this is the news that are the top priority of the management now to address. In terms of Budimas, we still see cost pressure, you saw the results that were published. If we don't include the real estate results, EBIT margin is two point 3%. Okay. So moving on to services on the next slide, it's classified as discontinued activities. We show the numbers just for comparison to last years, 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 crack. Well, Amy is not part of the process. Amy keeps negotiating with the parties to the Birmingham City Council, PFI for a road infrastructure maintenance. That's advancing, but aim is not part of the process. The rest is, and we have a lot of interest and parties can now license the information memorandum. So the process is going along expectations. Okay. Moving on to the consolidated P and L impacts, Well, IFRS 16, the first application is not really any major impact in the continued operations. I mean, do you see that it almost has no impact on amortization is in the tune of 1,000,000 and 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 carried assets. So here, it's true that in the discontinued activities we have a positive impact of 1,000,000 because we are not amortizing, but it's not really related with the IFRRS 16 as it relates to both 16 and IFRS 5. Okay. Our soul is classified as held for sale, but as I said, the impact is a net debt a reduction when you take into account the, also the cash and the asset of 1,000,000, I mentioned before C600 that was talking about more gross debt there. Okay. So, in terms of P and L in more detail, moving to the next slide, do we see in revenues higher contribution from U. S. Tollros, helping this growth in revenues. Then of course, we have the provision from, construction. EBITDA, I mean, with the leases reclassification has an improved EBITDA in 1,000,000, depreciation increased due to the IFRS 16 impact and is the main explanation on these a movement from 27,000,000 to 33,000,000 expense. This porcelain impairment is just, I mean, in the impairment that autema, just in case we lose the appeal we have regarding the change in conditions to the concession. And in the financial results are slightly lower to last year, we have the impact of additional interest expense from the consolidation of NT35 West, and we have the positive evolution of the hedges on the employee stock plan. In terms of the equity accounted results, results are very similar to last year. Only Heathrow has a lower a less positive number. Basically, the impact for derivatives mark to market noninflation mainly is a slightly less positive this year than the last. Okay. So this is a quick run of the different lines of the P and L. And in the next slide, we move into the cash flow. Here, the main sources are, of course, dividends from infrastructure projects, 1,000,000. Here, I didn't come and employed. It was it will be a question that will come later on that Heathrow had a lower dividend than last year this quarter. Well, 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 £100,000,000 lower, and therefore, they were forecasting a lower dividend. The moment that the scenario doesn't happen and it's not trading as it were to happen, well, basically, you could have better news, okay? So we'll keep an eye on that. Then the line operations keep, as as last year, really. Okay. So, in terms of other impacts, minor divestments, that it's not worth mentioning. And of course, in terms of uses of funds, we have the working capital evolution that is normal in the first quarter of the year is similar to the one last year. So I won't spend more time there. Okay. So 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 resolved 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, but we need to be close in contracts now that the design is final. And 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 disposal process and, Amy keeps advancing to try to find an end to the PFI contract in the UK. And then in terms of capital allocation, that the focus on infra projects, we say mainly in North America. We always talk about the U. S, but we also have to mention Canada. I mean, we, so the price of the disposal that SNC is looking at We haven't published our evaluation this year. You have noticed that, and it will come later on, but the evaluation of the 407 has improved. And therefore, we think it has merit to look at the potential to invest at that kind of price. So We'll keep you posted. If finally, we'll come to a conclusion, but we are interested in acquiring a part of of, of SNC's stake at the, at that kind of price, that kind of level. Okay. And last but not least, last but not least, we have NT and LBA. NT will be paying dividends in 2019 and LPGA in 2020. So, the outlook for dividends of infrastructure projects is improving. Okay. So thanks, and we'll enter into the Q And A session now. Thank you. Sure your phone is Our first question today comes from Martin Watal of Bank of America Merrill Lynch. Martin, your line is now open. Oh, 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. I mean, can you share what is approximately the total amount of future revenue or backlog those contracts on which you have taken the provision and how many years approximately, how will it take you, you think, to actually execute on those contracts? Are we talking 3, 4 years? I think you mentioned I-sixty six, which I think is scheduled for completion in 2022. So if you could provide a bit more detail. The question number 2 is on Amy U. K. Services. I mean, it is still classified as an asset held for sale, but then then you said it is not included in the current potential disposal track. So what can happen at Amy? Are you expecting run a separate sale process later in the year, one on one, once you have more visibility on the Birmingham contract, but what are the scenarios for Amy? Thanks, Martin. Yeah, you're absolutely Right. I mean, these contracts we're talking about, basically, 3 of them, 2 of them have a lot of execution pending. And we were talking that in terms of dollars, the backlog, the revenues spending are around 2,700,000,000 dollars, right? And yes, they will take between 3 to 4 years. So Hopefully, we'll be able to, to manage things better, but we have to derisk and and take this hit, right? So it's basically, contract in Virginia, in Georgia. And part of that is also a finalization with some delays on the I-seventy seven in North Carolina. Okay. So these are the contracts. As I said, we will put all our focus on trying to manage that better. And also in changing going forward with higher mix of self perform in some of the important projects that will be coming. In terms of Amy, Yes, it's about weeks or so to see if there's a solution probably with this PFI contract. So there's 2 possibilities. After that, if it gets sorted out, it could be sold separately or with the rest. If it doesn't get sorted out, yes, the kind of sale would be different and would be on a stand alone basis, for sure. So, yes, we intend to, on the post Amy in this scenario. And, well, I think that was all the questions, right? Thanks Martin. Thank you. I'll go on to the next question then. So the next question on the line is from Victoria Carali from Santander. Vittorio, please go ahead. Three questions. The first one is related to the ETR 47 RAVO. According to CNC, only one shareholder has declared intention to exercise the RAVO. But you told us that we are eventually considering only the acquisition of part of the SNC stake. So if you can elaborate a little bit more on which are the infection of the company regarding the 10%. Mistake. 2nd question is on the, on construction. Apologies for my ignorance, but can I explain a little, again, which had the impact of the further It's a reason why you had this provision, multiple division in the U? S. So you mentioned delayed in design approval that implied practice cannot be signed off with course. So it means that there is no visibility about the cost base of the next projects or if you can playing again a little bit more on that. And the third question is related to the And you mentioned the new debt that you are issued so far for the expansion. So which is the target of Heathrow regarding the marginal cost of debt finance lease expense? Thanks, Bittori. Okay, I'll start with the first one on the 407. We don't make any comment on rights of 1st refusals or items related to shareholders agreement. Those are confidential. We make no comment there. What I said is that we are interested and we could be part of our transaction there. We have earmarked capital for that, so that could happen. So we'll keep you posted. So, 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, these things. Well, basically, you do the bidding, taking into account some, risks when you have, I mean, 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. I mean, you don't have, let's say, gray or vague contracts in construction for a 4,000,000,000. You have them that are more detailed. So it took it took a while to get the final approvals and the cycle really went against us. So the only way to 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? So here, well, that didn't work, we are seeing that the potential for losses is there, and we prefer to be prudent, right? So we've taken that hit, and it has to do with basically the cycle moving away. And I mean, 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? So that's the explanation. And the third one regarding Heathrow, I mean, all the economic parameters are on preliminary discussions. And the, let's say, the business plan will be presented more at the end of, of this year. And the economics of regulation will be clearer probably next year, right? So it's certainly no point on discussing now, what could be the cost of debt for expansion? Everything is very preliminary. Okay. Thank you. So I'm sorry for RBR, are you comfortable to have eventually CTP with a higher stake NTR compared to your stake? In the end, it's important the rights of the shareholders agreements. So nothing changes with our increasing participation or if we don't increase. So the rights remain the same. The next question on the line is from Olivia Peters, which is on your first line from Macquarie. Olivia, your line is now open. Please go ahead and ask your question. Firstly, I'd like to point out, in terms of the provision that you spoke in Olivia, sorry. I don't want to interrupt, but we can hear nothing. If you could speak closer to the microphone, please. Slightly. Now it's better. And if there's any difficulty, I mean, you can send us an email or whatever and we'll take the the question on the call as well. Okay. Alright. Apart I'm really sorry about this. I don't know what's going on. So in terms of cost cost inflation, for in terms of a provision you've booked in the US, Are you seeing any dissipate in any sort of let up in terms of cost inflation and building material inflation? Have you priced that in the provision that you've booked? That's my first question. Okay. You'd want to take me one by one. Building materials, we're seeing some pressure, but it's more subcontractors that deliver certain units of work, right? So it's subcontractor prices. That carry most of the weight in Are those still decreasing? I couldn't hear you Olivia. I'm sorry. Are the costs of increasing, in the U S, the subcontractor costs? I'm assuming yes. I just want to get a sense of how conservative you really are being. Well, I mean, it's something that we'll check. I mean, we are taking prices that are pretty much 60% above what we were considering at the, at the big time, right? So, the benchmark would be we can deliver with our self- performance better. And that would be the deliver we have to improve this. Okay. And I'll send my next question by email. I don't want to hold up the line if people can't hear me. Okay. Thanks, Olivia. We'll take the questions as they arrive. The next question on the line is from Stephanie Zaff from Royal Bank of Canada. Stephanie, your line is now open. Good afternoon. My first question is on the Bethesda exercise of the operation, right, of the FMC Lebanon state. Could you maybe specify the timing and if you would financially be able to take up this time today? And would you then finance it with the proceeds from services? My second question is on construction. Could you maybe give us an updated guidance for 2019, 2020, given the provision? You booked this week, excluding it's good, the one you gave us at Pugeti Valley. And then finally, my third question is on Heathrow and their guidance through the component, related to Brexit. And, as mentioned earlier, therefore lower distance, given where it postponed, could we see, that reverse? Thank you so much. Okay, Stephanie. I really had trouble hearing correctly. They are passing me some of the questions. And if they are not right, please answer back again. Ask back again. So I mean, the first one, if we took it correctly, is the timing of the SNC LevelLAN transaction Well, we are not disclosing that, but it shouldn't take long If we have the we are financially able to go ahead, we have plenty of liquidity. And It's not only that this kind of transaction could be self financed with non reverse financing. No, we're talking that we have plenty of liquidity to do this, to this transaction, right? The third one, I, I mean, if I heard it correctly, was about, if Brexit keeps going, like it is, and basically no, no dealer scenario or no, car Brexit, if, we could see a better performance or reverse operation really is not a provision. It was a guidance that Heathrow made for their EBITDA, expected EBITDA for 2019. So the short answer to all that is that, yes, we should have a better EBITDA than what they, mentioned in their investor report, but it's even reading there and explained that, if that doesn't happen, performance should be adding that back, right? So yeah, it looks like it looks better than the provision expectation. Did they miss anything, Stephanie? Yes. Sorry. Thank you so much. For the full year again, please, on the provision. Because if I am not mistaken, you expected, some margin recovery in 2020 construction. Is that still the case? Our construction margins taking out this provision are going to remain low, okay? So, we would be looking to EBIT margins that are hovering around 1%, let's say, okay? So, we are working to improve that, but that's the expectation. And that is with the provisions set aside. Our next question on the phone lines today comes from Jenny Ping of Citigroup. Jenny, please go ahead. Thank you very much. Good evening. For the questions from me. Firstly, can you just remind us what you've communicated in terms of the use of cash for 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 up from an early session in terms of the construction business, you mentioned the 60 percent subcontracting price, which is where he is now compared to where you originally think. Have you been looking forward already mark 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 entity and LJ dividend, are you able to give us a feel of the magnitude that you're Jenny, I really struggled hearing your questions. So, could we just try and do it one by one. If you could speak closer to the microphone, and I will be taking them 1 by 1, please. Okay. Sorry about that. So 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 returned to investors, or is it reinvestment And 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. So well, basically what said with proceeds that they would be used for investment in infrastructure and also where we could contemplate shareholder remuneration regarding the Hobart Airport we are not in that process. We are not interested. Okay. But you haven't said the split between what's going to investors versus what's going back into the business? No, we haven't. Okay. And then my second question is on the construction business. You mentioned earlier the spot price was subcontracting at 60% above what the bid base case that you have originally worked on. So the provision that you've provided for today that based on the current 16% higher pricing, or do you assume the cycle moves back to your favor, I. E. Prices dot fall again? No, we've been prudent with prices. And this is commercially sensitive, but we've taken into consideration risks and the opportunities to manage this that they are, will be more with self performance that we are looking to do, right? So that's going to be our lever to improve. And of course, we have some margin of error in the provision. Of course, there's always risk, but we should be okay. Okay. So just to be clear, you've assumed the higher cost going forward? We've assumed a realistic and prudent closing of contracts and improvements could come from the self performance. Okay. And very last question is on the NTP E and L BJ 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. And basically, the operational performance is better. So hopefully, we'll improve them because of the operational performance So what we said was that NT would provide 125 dollars our share. And that's just that. 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. But basically, the numbers are with a better operational performance, maybe we could improve them. Okay. Thank you. The next question on the line is from Bruno Silver of Caistra Bank. 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. And that is not the first time and it's not the only company being reporting that and you are still feeling that in, in, in, in, now in the West, probably this is a more global more global context. So 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? And second, could you please provide us with a rough figure of net cash flow that you expect from the construction unit in 2019 2020? The question is just a confirmation, regarding, possible. I don't know if there was a restatement in the net cash infra at year end 'eighteen. I remember that you had published roughly more than 1,000,000 and now it's $1256,000,000. I don't know. It is to walk in the 90s, that detail. And finally, regarding ETS for a 7% and the 10% for a minute, SMC just clarification, could you assume, to the market that you do not want to increase this above 50%. So we will be ruling out fully consolidating at this time. Or is everything possible at this moment? And just the detail regarding the breaks, the breaking fee, Would that something to be supported by the buyer exercising the option or or is it something to be a cost to SNC? Thank you very much. Well, thanks. Lots of questions. Let me see if I don't miss anyone. Okay. Regarding construction, I mean, we've we are talking about the main projects in the U. S. That we are addressing on an early stages. We have another big one in Houston, Grand Parkway, that is going along the expected lines, and we don't expect anything there. And the remainder of of construction, I mean, we expect low margins, but not any major issues because of design being completed, things that you have to subcontract, right? So, of course, I mean, the business can have low margins. Right now, we are expecting anything like that. I mean, we have assessed all the big projects that is part of the review we do from a strategic point of view. And, well, this is the case. Of course, construction has it risks. And what we are trying to do as management is to contain those rigs, reduce them, have less exposure and use construction to help to create value with infrastructure, right? So moving forward, we should be seeing less of this and much more risk management for sure. Okay. So regarding the net cash flow from construction division, this year, we'll drain cash, probably something around 1,000,000 dream. Of course, the company will have more dividends, sources of cash from disposals. So I mean, cash is not an issue, but this is a provision that costs money and construction should drain. Cash this year. For next year, it's early early days, but we could maybe be talking about no zero cash contribution, no drainage, no contribution, but as I said, it's early days and we will keep you updated. And well, regarding the, well, we do have another question that was regarding the net cash position ex infra, One thing that you have to bear in mind, when you mentioned the two numbers, one of them is if you consider continued operations plus discontinued operations or only continued operations, because basically the 1.236, I think it was the number if my brain is not failing, basically it was something like 1.236 that included both services as discontinued operations and the continued operations. If you take out the net cash position of services, you go to the 900 something So I mean, for me, it doesn't make sense to differentiate that because any cash in services would be valued in the in the disposal, right? So that preferred to look at the 1.236 number. Okay. And then regarding the increase or consolidation or whatever consolidation has to do with many things. One of them, of course, is a stake but the other one is the rights you have, right? So, 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, right? So the shareholders agreement, it doesn't change with our current participation and nor have we increased? Okay, thank you. The next question on the phone lines today comes from Golamos Fernandez of Kepler. Colamos, your line is now open. Hello, Ernesto, and thanks for taking my questions. A number of them has been already answered, but I have one main one would be whether you consider a sustainable, the kind of growth you've seen with you wanting to manage that for particularly at the end the rapid double digit through the year and also at the tariff level, in both. And second one would be on the EDF or whether the transaction you are of thinking about would involve our re leverage on the assets, whether you want to do at the project level or above it. And with that one, actually, we have verification on latest Bruno's question. You mentioned a cash drain of construction, 2019. Okay. Again, the sound was not the best to say the least, but let me try and address what I understood. Well, regarding NTN LPG, we don't provide a yearly guidance, I mean, all the parameters behind the business plan that we have shown at the Investor Day, and then when we publish are still there, so the dynamics are are very good. We won't be getting into specifics. The only thing I mentioned is that LBA, you see that it's growing less in terms of traffic and it has to do with congestion on the east end. And there, you will see works in the coming years that will improve that. So regarding the business plan is fine, but probably you will see less growth in LPGA than in the NTEs 1, 2 and 3. So, I mean, we think the performance is going to be better than what for this year, we don't get into specifics. Then regarding the 407 ETR, no, our analysis is not based on additional re leverage at the UPCO nor in the holding company. Is that resource due cannal we have, but we are not banking, on that for our numbers. And, then the last question was on cash. Yes, we say that construction in terms of the contribution to the cash flow this year, probably with looking at that range of 300, of course. As always, we will work to improve that, but the best estimate we have now is that one. What's at all Guillermo? Yes. I would have. Okay. Thanks. Guillermo, next question, please. I have some questions that came through the email, I will take the first one. The first one is from Charles Maynader from Kempen. And it says, depending on the stake that you potentially acquiring the 407 and 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? Well, the answer indirectly has been already given, right, because we don't consolidate depending on the percentage of the stake you have. Depends on your capacity to run or impose decisions on the asset and that doesn't change neither with other parties acquiring a higher participation, right? And also, in terms of the benefit of consolidating from optics or not, I mean, it's not something that could drive a huge investment. I mean, any investment of money has to be done with cash flow analysis rather than accounting, but of course, we are worried when we are aware that optics sometimes help, but no, the decision is done only based on returns. Okay. The next question comes from Olivia Peters. Olivia, Peter's, asks, well, the LPGA traffic was weaker, how long I mean, it grows, but it's something that I already mentioned though. How long will the improvement in the connectors take to be in place So we assume traffic is negatively impacted by, construction. Okay, so regarding this one with the LPG, I'm just checking how long it could take to do the works, but probably we're talking about 3 to 5 years. I would try to be more specific, we'll come back to you on this. But yes, the answer is that during construction, traffic is negatively impacted. Afterwards, it gets a much better improvement. So the net effect on the business plan or value is much is much better, okay? So we will come back on the timing of those works in the connecting road. Then the next question also from Olivia is timing around services disposal. Any update? No, going along the normal process and regarding the Birmingham negotiation. Now I already mentioned that, things are advancing. And probably they will if they are sorted out, it will be in Wix. If not, they I mean, there will be no solution, right? So, the, third one is, would you rate gear the NTE once the dividend paid and debt refinance? Is not the idea now, but we constantly monitored opportunities there. No, it's not the idea to regear the NT once the dividend display than this refinanced. Okay. So, well, and I got the information regarding the the works on the IH635 that is east of the day works should be carried out during 2020 2024, right? So this is the early years when traffic should be negatively impact in this part of the road. So I think I addressed all the questions we received via email. No, we Okay. We are getting some more on the call. Okay. So operator, let's get to the next question, please. Of course, So the next question from the phone line is Victor Athora from Societe Generale. Victor, please go ahead. Hi, Ernesto. Good evening. Thank you for your time. I only have one one question regarding the timing of your in house valuation of concession. You can give us any indication of when you are thinking to communicate the internal evaluation of the asset. Okay. In any case, it will have to be after the potential transaction in the 407, okay. So, it would have to be after anything closes there. And probably before probably before the summer. The next question on the line is from Nicholas Maurer of Morgan Stanley. Nicholas, your line is now open. Just a couple of ones, just coming back on the construction. Just can you explain a little bit the, you said that the 3 contracts which were mainly affected were, we're totaling basically $2,700,000,000, including, so the I66, the Georgia, so I I-two eighty five SR400 and then the I-seventy seven. I mean, I don't really get to that 2.7. I mean, Georgia has been been on for a couple of years. I-seventy seven is basically done. In I-sixty six, you've spent a few, a few $100,000,000. So there's the bulk of the $2,000,000,000 left, but that looks quite a high number. Are you including a few other basically smaller contracts in the $2,700,000,000? And second question linked to this, I mean Sorry, Nicholas. I thought that was the only question. I can take them 1 by 1. Okay. Well, basically in the, in the I-sixty six, I'm talking about $2,300,000,000, the $825, 485, right? DI66 really has less than 7% completion. The I-two eighty five has less than 20% completion. And then the A77, that is by $424,000,000 has something like 80% completion, right? So that's roughly the quick calculation I came up with 2.7 and it adds up. Okay. And on this, you've talked about basically you having maybe engaged into, into risky 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. I mean, could that project also be? I mean, 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 pre existing structure are not in good shape, right? So, the parties are looking the way to move forward. So, probably you would need to address some sort of different design, but it's because the conditions were not there, but that's not something that our construction is liable for. So it's, no, it's something different. Delays come from something different. Okay. And then last one, just on the net working capital changes. So you said Q1 was in line with the last year. The last year included services, which were, which stuff are outflows, are working capital in Q1. Does it mean construction is a I mean, construction being the main part of the work capital, so it's a bit worse than it was last year? In the 1st part of 2019 versus last year? Yes, construction. This is slightly worse. Okay. All right. Thank you very much, Vanessa. Thank you, Nicolas. Next question please. The next question on the phone line comes from James Sparrow of BNP Paribas. James, please ask your question. Just got one question on the credit side, regarding your credit rating. You've just been put on what's developing via S and P, which is a bit strange kind of give themselves the option to either take the rating up or down. Just curious to know what if you have any sort of target credit rating in mind? Yes. I mean, for us, it's key to have an investment grade rating. BBB is the spot where we want to be. And the reason for that is, is because, I mean, when you are winning this kind of infrastructure assets, it also helps to acquire them on a greenfield situation, right? So yes, it's extremely important for us to have that, that rating And we think that the evolution of the company with infrastructure bring in more cash will be a good situation for that, right? I mean, I think that the SMP 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. We have no further questions on the phone line. So I'll hand back to you gentlemen. Okay. Well, thank you all and we'll be talking about the developments of all the assets we have either for sale or for potential acquisition.