Ferrovial SE

AEX:FER

Earnings Call Transcript 2023-Q1

[Silvia Ruiz, executive]

Good afternoon, everybody. This is Silvia Ruiz speaking, and I would like to welcome you to Ferrovial’s conference call to discuss the financial results for the first quarter of 2023. Just as a reminder, both the results report and presentation are available to you on our website. I am joined here today by Ernesto Lopez Mozo, our CFO; and by the CFOs of the different business divisions. If you have any questions, you may ask them through the forum included in the webcast. During the Q&A session at the end of this call, we will be reading out your questions and who they are from. With this, I will hand over to Ernesto. Ernesto, the floor is yours.

[Ernesto Lopez Mozo, executive]

Yes. Thanks, Sylvia. Hello, everyone, for joining us for the first quarter results. Moving to the first slide. I mean, we have the overview of what we believe is a very strong quarter. In terms of performance of the main assets, you have in toll road solid traffic increase versus the first quarter last year. And managed Days posted a strong revenue growth. Airports also show the strong traffic recovery you've seen Heathrow already and the rest as well. Construction profitability is in line with the same quarter of 2022. In terms of cash position, I mean, we don't have any significant cash consumption in the quarter despite having the seasonality in construction. We invested and remunerated shareholders. I mean that was the main component of the EUR 142 million cash outflow that we saw in the quarter. We'll have more detail in coming slides. In terms of the reverse merger and dual listing, we had more than 93% of the quorum back in the corporate reorganization. In terms of the separation rights period, we are almost done. I mean, it will finish next week on May 18. When the transaction is over, I mean, when the reverse merger is completed, we expect to repurchase the hybrid bond as we announced. And also it's worth mentioning that the scrip dividend payments will take place after the execution of this reverse measure. Moving into ESG. We presented the annual report on climate strategy to the AGM as well for advisory board. It was approved by more than 90% of the quarter. This report mentions ongoing measures and initiatives that we are taking to reduce emissions related to our activity. At the same time, offering more sustainable mobility and infrastructure solutions helps drive profitable growth while we improve life of the communities where we invest. Regarding the social initiatives related to local community development, Ferrovial [Indiscernible] its annual policy -- its annual social program that will improve the living conditions of more than 52,000 people by 2023. Also during the first quarter of 2023, Ferrovial has been included once again in the S&P's Global Sustainability Yearbook of 2023. It recognizes companies with the highest performance and sustainability. Moving to the slide on toll roads. We see the strong growth from the U.S. assets. I mean, revenues growing by 37% and EBITDA 41.1% in like-for-like terms. Here, I mean, the U.S. asset revenue growth quarter-on-quarter, I mean this quarter versus the same quarter last year was more than 50%. The EBITDA growth of this asset was more than 47%. And we will review the first quarter since opening of the I-66.We have to remind you also that we have important assets under development, the NTE3C in particular. It has about 6.7 miles and that would be an increase of 66% to the existing 35 West. This concession goes all the way through 2061. And the opening is scheduled for September 2023, you can imagine that we are doing awareness to try to accelerate that. Please remember that we have a potential dividend distribution after opening. I mean all these roles have been operating. I mean the rest of 35 West has been operating for some years, and the cash accumulated could be distributable after opening of segment 3C.We have invested 53 million equities to date in [indiscernible] equity in this segment, and we have 28 million. Also, as we mentioned in the first quarter, we are looking at the ultimate configuration on the NT. This is an expansion of additional general purposes and managed lanes linked to revenue performance and the construction periods go from 2023 to 2027, I mean, it's all fully debt financed. Okay. So we move to the next slide. We look at the 407, you already saw the results of these assets. So I mean, we will review them slightly, and then we'll also talk about the area and the long-term prospects that it has. In terms of traffic, a very important growth vis-a-vis last year affected by Omicron. So we have VKTs growing more than 28%. Revenues and EBITDA growing all of them around 25%. And of course, it keeps the high EBITDA margins that is use in this type of business, more than 82%. Okay. The average revenue per trip is similar, a slight decline vis-a-vis the first quarter of 2022 that was affected by the reversal of some loyalty schemes and this an effect that gets diluted along the year. In terms of dividends, even though there was no dividend distribution in the first quarter of 2023 or in the first quarter of 2022, the Board announced a 150 million Canadian dividend in the second quarter to be paid in the second quarter of 2023. When we look into the ETR performance. And I mean, we go back to the -- to this slide, when we're looking to the traffic performance, we see a gradual recovery along the quarter. And it has to do, of course, also with weather improvement, the seasonality and also more of a return to the office enforcement or, let's say, the flexibility policies that were in place being more enforced unless large than they were. So we see -- and we will review that in the next slide, and more presence in the office. And I mean anticipating question, April shows this improved trend. I mean the reason for the worst performance at the beginning of the year is due to the normal seasonality that is accentuated by the higher workplace flexibility. So I mean people not only stay at home during the bad weather situation, but also maybe a couple of days or 3 after the storm has passed. In terms of the Highway 401, I mean, there was also an impact in terms of the widening being -- of the 401 being completed in December 22. So we have an impact that, by the way, we anticipated when we released models some time ago now in 2017, so it's in line with the expectations we had. So we move to the next slide. Please, we see some interesting data about the performance in the region. I mean the first thing on the top left-hand corner, we see that the performance of traffic between the 407 and the main alternatives is pretty similar, right? So I mean, there's no major issue with capture rate. I mean probably the people using now the 407 have the natural rural route as you wish in the 407. So this [Indiscernible] well for the potential tariff increases. In terms of the work from home or presence in the office, I mean we have the graph that we've been showing that keeps ticking up, and we see a 47% presence in the office. And again, well, the average high performance of different sectors, right? I mean we have small and medium enterprises well above this, probably, I don't know, there could be in levels not of 70%, 80%. We'll have an average that is probably more in line with public institutions, I mean government employment. And much below this, we have sectors like the financial sector. So it's worth keeping an eye on this sector, and we have on the top -- I mean, just above that graph, some news from RBC, for instance, and the financial sector seems to be -- will provide more, let's say, stress to the message that people have to return to the office, right? So I mean, gradual improvement messages are clearly along the same line. In terms of also housing start development of the region, we still see that housing starts tend to happen more along the regions where the 47 is rather than in downtown Toronto, that's obvious for capacity resource. Okay. So if we move to the next slide, we get now into the Dallas Forward area and with a very strong performance that keeps exceeding our expectations. Of course, you know that the soft cap is, I mean, lifted with inflation every year. But I mean, you have, I mean, revenue per transaction going up above that. So that shows the interesting dynamics and the freedom of pricing that the asset has. And of course, it also shows that there is traffic situations where you have to price above the soft cap. So all growing pretty well. Let me remind you that 35 that seems to be lagging is affected by construction works. There's no reason to believe that when the asset reopens, people won't come back to the corridor. And also, worth mentioning the performance of LBJ and not only growing against last year, but also we saw a good performance in March, just around the 2% drop versus March '19. So I mean, there's increased activity in the region and our network is in the middle of where the action happens. So if we move to the next slide, please. We see more news about the long-term prospects of the area, right? So starting with the top right-hand corner, we see the movement of headquarters to Texas and in particular, to Dallas forward. So I mean you know that lots of companies are moving into Texas, but Dallas forward is reaching more than 45% of that. So that trend keeps going and it, of course, helps also population growth into -- if we look into the bottom part of the of the map, even though the map could be a little bit old because it's 2018, we have the projection of growth estimates. And one of the areas of development is exactly above the NTE35 West. You see here all the segments, even 3C anticipated in yellow. So it's not only the dense areas. Also, an important part of the growth is happening north of that. Also, in terms of -- I mean, the general economy, you see that Texas is #1 in the U.S. for job growth and is growing at a faster rate versus the U.S. in every major industry. And well, more topsides here than all other is over the last year. So the area keeps growing and is expected to continue a trend of economic performance and population performance. Okay. So if we move to the next slide, please. Okay, here we start with the I-66. And here, we'll have a combination of data that are typical of a ramp-up situation. I mean if I may say, how is this trading compared to our expectations, well January is expected below, quite low, February better than January, March is approaching our bid expectations and April is doing better than March, right? So I guess that it's normal to see this kind of ramp-up and the main indicators that drive the business plan are as valid or more than so we are really cautiously optimistic on these assets. So I mean, things that weren't into our business plan is the worth in the region. And you can see all these yellow bars that are surrounded by the red line. If you can match them in the map, you see that also some areas are circled with a dotted line. So you see that there's a lot of wealth in the northwest of the asset and also inside the dotted [Indiscernible] all these kind of fees, the performance of the asset. Also here, we are seeing interesting headquarter moves to the area like Boeing, Ratio Technologies and Amentum. So there is a good development in the area and the long-term prospects keep being very healthy we’ll keep you updating. As I said, this is a typical ramp-up performance. We are really looking forward to this asset. If we move to the next slide, please. Okay. Here we have the I-77 and the I-77 that is often overlooked by many investors keep bidding even our best expectations by [ Allot ]. So transactions grow up a lot 24%. I mean revenue per transaction is like 38% above last year's same quarter. Of course, that goes into an even higher EBITDA growth. So the asset and the area keeps keep growing and looking forward to more developments in this winter. If we move to the next one, please. Okay. Here we go to Heathrow conference call. Here, clearly, Heathrow is outperforming other airports in terms of traffic growth is very close to pre-pandemic levels. Probably, I mean, the limitation going forward is more about operational capacity of [Indiscernible] more than underlying demand. And this is something that it's important that it gets addressed for the summer. In any case, Heathrow has raised the traffic expectations and now the range is from EUR 70 million to EUR 78 million passengers. So clearly, the outlook is strong demand that clearly leisure was there and it's even increasing. It's also being joined back by a good recovery in business travel. And also what I mentioned Heathrow was more outbound leisure out of the U.K. into the destinations. And now we also have good performance of inbound traffic and some regions that had traffic -- sorry, travel restrictions are going back to travel. So the forecast has been increased and looking forward to the performance of the asset along the year. I mean this has also been reflected by the rating agencies. And well, last but not least, you know that Heathrow has asked for the right to appeal the CAA's decision, and we should have the answer for the CMA if it's allowed to appeal next week in several grounds where Heathrow is claiming to correct errors in the CAA settlement. Well, those are the COV-related RAB adjustment with the average cost of capital, that, of course, has components in both equity and debt. And then the K-Factor incurred during the pandemic and also the CapEx incentives model that has been proposed by the CEO. So looking forward to this and let's see if these actual levels are correct. Some airlines have appealed as well, so we'll keep an eye on that. Well, we are on the next slide already. And here, we can review AGS Dalaman a new terminal 1. AGS also shows a strong growth. Is it still not at the 2019 level. So it's lagging Heathrow in this regard, but clearly improving performance, okay? So looking forward to this market recovering and airlines renewing flights to this this airport. In terms of Dalaman, I mean, quite encouraging that we saw performance better than 2019. Of course, this is an asset that drives profitability between spring and mainly summer and the fact that you have a negative minus 1%, that doesn't mean anything the asset is outperforming and expected to continue to do better than our acquisition business plan. So looking forward also to see the development in the coming months of the asset. Regarding NTO, the project remains on schedule and also negotiation with airlines for the loss for the opening in 2026. Okay. In terms of investment, EUR 83 million so far. Okay. So now we are in construction with this fast-moving presentation and the profitability is in line with the first quarter of 2022. The revenues are growing in the different divisions. In terms of margin, Budimex clearly has a strong performance, keeps doing so, Weber has stable margins. And then we have the rest of Ferrovial Construction that right now is in situation where we are still finalizing the works on I-285. I think is all these big projects. They still keep overheads until those are finalized and that affects profitability. Also new works that have increased the backlog a lot. We don't recognize margin on early stages. And also, of course, we have additional expenses preparing for bids like the SR 400, right? So it's kind of on a, let's say, a situation of some mature contracts and some new ones that doesn't reflect what could be expected in the medium to long term of that division. In terms of the order book is still at very high levels, and we have EUR 1.5 billion of contracts that have not been included. Okay. So in terms of performance, and we will review the cash performance later on. I mean it has performed well on the back of some balanced payments of the Ontario line. I mean this big product that was gone at the end of last year that also got some next year cumulative, right? So it's in line with our expectations, still working on the conclusion of some important projects in the U.S. Okay. So yes, going to cash, we closed drivers of the cash consumption are investments and shareholder remuneration. I mean the note financing costs, what you're starting to see is the higher remuneration on the cash that we hold and helping to compensate the shareholder remuneration. Okay. So if we move to the next slide, please. Well, looking ahead, you really need to bear in mind the growth in the toll road portfolio that will increase dividends. This is a very strong asset portfolio. The value creation that we've seen through pricing flexibility and look at the, in particular, the long-term prospects of the area. In terms of the pipeline ahead, looking forward to a more visible margin pipeline. The corporate organization is on track after the support from shareholders in the shareholder meeting. And after that, we would be looking to apply for the U.S. listing that we mentioned. And of course, last but not least, we continue advancing on decarbonization of our business. Okay. So thanks for being with us, and we open the Q&A session.

[Silvia Ruiz, executive]

Thank you, Ernesto. So the Q&A session will be in shortly. Okay. So first set of questions coming from Fernando Lafuente from Alantra. First question, what is the reason for the EUR 11 million negative EBITDA at the Airports division.

[Laura Lopez, executive]

Hello. This is Laura Lopez, the CFO of Ferrovial Airports. Thanks Fernando. So the EBITDA negative at airports is driven by Dalaman and overheads. Dalaman is negative due to the seasonality as far as Q1 is of peak season, summer starting in March. The OpEx is more linear through the year through the quarter, while revenues are concentrated in peak season. Marconi negative trend of the Dalaman EBITDA will regard in coming months.

[Silvia Ruiz, executive]

Next question. [Indiscernible] has not paid dividends in the first quarter similar to 2022. Should we expect the 2022 payment pattern to be also applicable in 2023. For example, payments concentrated in Q3 and especially in Q4.

[Unknown Executive]

Thank you, Fernando. This is [Indiscernible], and CFO of [Indiscernible]. That’s not a special pattern to pay dividends in 2023 or even 2022. The Board decided to pay dividends when is comfortable enough with the performance of the asset. We have the liquidity that we're considering that is necessarily enough for the asset and for the rating agencies. And once, as you know, we can pay dividend every quarter. So once we comply with all the ratios and all the internal or contracts, we will pay dividends. So we need to wait for the performance of the asset. It's important to see when we can issue debt this year and monitor the liquidity of the asset as well and comply with our ratios and the different aspects of our contracts.

[Silvia Ruiz, executive]

Next question also on the 407ETR, EBITDA is up by 25% year-on-year in constant currency. Dividends were expected to evolve in line with operating performance, why not approving a dividend with such a strong performance in the first quarter?

[Unknown Executive]

Yes, EBITDA is up 25%. You're right. So it's really good news for the asset. The performance of the asset is evolving well. And we didn't approve a dividend in the first quarter. We prefer to wait until April for this USD 150 million, basically because we wanted to see the -- how the seasonality affect the first quarter because we didn't have any comparison taking into account that 2022 was impacted by Omicron. And we had -- in January, it was the first month with the impact of the 401 widening. So considering that we have these 2 things to monitor during the first quarter. We thought that we were more prudent to wait in [ Apio ] to pay CAD 150 million, which is very positive for the shareholders.

[Silvia Ruiz, executive]

Last question from Fernando. What is the dividend outlook for the managed lanes for this year?

[Unknown Executive]

For the moment, we have the first quarter strong performance, as Ernesto mentioned. So since the trend is very positive. We expect that we're continuing that way during the year. So the dividend will evolve according to the traffic and the revenue performance for sure, and operating cash flows. But one thing that is important to note here is as Ernesto mentioned in his speech that we are trying to accelerate the construction works in the 3C segment. I'm talking about the 35 West. So if we can meet our goal and accelerate this construction is likely to pay -- we'll be able to pay a dividend and important dividend in June. And I think this is the thing that we need to keep an eye on it. And the dividend is the accommodated money -- accommodated cash flows since the end of the constraint now.

[Silvia Ruiz, executive]

Next set of questions coming from Elodie Rall from JPMorgan. First question. On the 407ETR, you continue to expect trends to improve from here from return to the office, but ultimately, would you say there is likely a structural impact from COVID this asset and that congestion will remain lower than pre-COVID. How does this impact your view on future tariff increase.

[Ernesto Lopez Mozo, executive]

Thank you, Elodie for your question. Yes. Well, if we take the presentation, on the graph with the percentage of office occupancy in downtown Toronto, the trend is positive. We are seeing how the employees are coming back to the office. We are seeing as different institutions are with some kind of enforcement to their employees just to go to the office at least 3 days a week in this hybrid [Indiscernible] implemented a year ago. So this has an impact, for sure, in general mobility in the corridor, and that increased the congestion on therefore, increase our traffic in our annual toll road. So how can impact this in the tariff increase? The tariff increase, as we always say, is a decision, an economic decision. So we will reset the tariff where it makes economic sense. We are internally analyzing and monitoring all the patterns and the traffic and the user batters and how this return to the FS evolve. And according to this internal analysis, when we will see economic sense, we will [Indiscernible] the tariff is the only information I can provide.

[Silvia Ruiz, executive]

Next question from Alloy. Is it fair to say that it would make more sense at this stage to wait until January 2024 now before increasing tariffs given the competition of Schedule 22 would then be pushed to 2025.

[Ernesto Lopez Mozo, executive]

Thank you for your question again. You are right. If we raise the total rate in January 2024, we pushed a set to 2025. But as you know, we are -- we can raise at all whatever we want and could be in any time. So it's only that we need to analyze internally if it makes economic sense. So we are open to open any time. We are open to increase the time, tolerating any time.

[Silvia Ruiz, executive]

Next set of questions coming from Luis Prieto from Kepler Chevreux. Could you provide us with an idea of what would you expect to trend in monthly number of transactions to be for the I-66 in 2023? I guess what I'm trying to get is a feel for whether we should see continued and relevant increases from the 1.8, 18 and 2.2 registered in January, February, March or if the 2.2% is sort of a stable monthly run rate for the time being.

[Unknown Executive]

Thank you, Luis. It's Tim again. What we are seeing in April is that we are continuing with the trend that we are seeing -- that we saw in the first quarter. So it's the only information that I can provide you. Just we are seeing a better than expected in a available is better weather. And it's good to note as well that just in April opened the construction work season in the we have construction work season in the follow on.

[Silvia Ruiz, executive]

Next question from Luis all the still down versus pre-pandemic levels, there seems to have been a significant improvement in LBJ traffic in March, minus 3.1%. Is this level sustainable? Or is there any seasonal impact?

[Unknown Executive]

Thank you, Luis, is again for your question. So yes, this is really good news in [Indiscernible] traffic, which this minus 2.1% compared to 2019. And the reason of this improvement is because we are seeing more employees return to the office. That is increasing the mobility in the area, the congestion. And for that reason, we are seeing this kind of improvement in this asset.

[Silvia Ruiz, executive]

Next set of questions coming from Nicolas Mora from Morgan Stanley. First question. How would you rate the I-66 performance versus the 2016 fun expectations for year one-off operations, revenues of $129 million, 76% EBITDA margin expected to do better on tariffs or worse on traffic.

[Ernesto Lopez Mozo, executive]

Thank you, Nicolas. In the case of the pump prospectus, for comparison purpose, I don't know if it's the right one first because it's not an internal forecast is a forecast for an external source. And secondly, this is based in a pre-pandemic forecast. So in order to compare with the current performance and using this information, you need to normalize this forecast with [Indiscernible].

[Silvia Ruiz, executive]

Next question from Nicolas. Can you share color on the performance of BA in the first quarter? The asset has been struggling for 3 years and suddenly seems to be jumping off the charge on profit.

[Ernesto Lopez Mozo, executive]

Thank you. Thank you again, sorry. Yes, well, I'm reading your question. So the asset has been struggling for 3 years. But as I said before, we are seeing an improvement in the return to the office, and that's created an increase in the mobility in the area and the congestion and come back again in this asset and with a positive impact in the traffic.

[Silvia Ruiz, executive]

Next question from Nicolas. Net working capital, very strong. How big was the prepayment from the entire line, expecting more cash consumption on U.S. legacy projects during the second quarter or second half of 2023.

[Unknown Executive]

Nicolas... This is [Indiscernible] from Ferrovial Construction. Yes, I mean, the working capital was quite strong in construction, EUR 90 million. And out of that Ontario line is about $65 million. You know that this project is in the early stages is still in the design phase and all of this is prepayments based on fulfilling the different milestones. Regarding the legacy projects, and as I mentioned at the end of December and now by Ernesto, we expect cash consumption, but both projects are going to finish in this year. Remember that the I-66 the emergency lines are open, but the purpose lines are still finishing and of course, the past list of these projects will be paid off. On the other side, net-net, probably at the end of the year, if no big contracts with big advance payments are probably in total, I mean there will be a cash consumption in construction.Thank you.

[Silvia Ruiz, executive]

Next set of questions coming from Marcin Wojtal from Bank of America. First question, for the next steps you are taking to obtain a use listing? And do you expect the process to be completed before the end of 2023.

[Ernesto Lopez Mozo, executive]

Thanks, Marcin. Well, you know that the first step you said to get the reverse merger with listing in the Netherlands and Spain, and then our prospectus would be filed for -- after that in for a listing in the U.S. with the SEC. I mean we are on schedule, and therefore, that should be completed before the end of the year. But I mean, timing in terms of prospectus is not only in our hand. But yes, we should be done in the late fall.

[Silvia Ruiz, executive]

Next question from Marcin. Can you confirm with the construction works on the JFK Terminal 1 project are on budget? And please remind us to what extent the risk of cost overruns has been transferred to third-party contractors.

[Unknown Executive]

[Indiscernible] Marcin. This is [ Lara ]. Progress of construction has been satisfactory. The project is on schedule and on budget. Let me share with you some key construction milestones. The steel erection comments on the 1st of May and is planning to finalize for the entry and closure by the end of the year. The closure of T2 and demolition started in January and is planning to end by the third quarter of 2023, comprehensive final designs conditionally been approved, and the team is working towards 100% designed to be completed later in the year. So we are confident the majority of the cost is already compromised by the guaranteed maximum price GMP with icons. The contractor at contestant has an extensive experience working on projects for the [ port of ]New York and New Jersey and specifically in New York City. And additionally, for real construction is providing the PMO services, which is the oversight of the construction. So we are confident that the construction is on budget. Hopefully answered. Thanks for your questions.

[Silvia Ruiz, executive]

Next question from Marcin. What in your views explain the lack of improvement in force ETR working day traffic in Q1 '23 versus Q4 '22 despite rising office occupancy in Toronto?

[Ernesto Lopez Mozo, executive]

Thank you for your question, Martin. You have to take into account is in this quarter, we have 2 factors to consider. The first one is the seasonality that has been deeper than we expected because of the facility work and the other one is the [Indiscernible] wagering. I think that the rise in office, we could Toronto is having a positive impact. Probably we will see an improvement in the performance in the future because of that.

[Silvia Ruiz, executive]

Next -- last question for Marcin. Do you step through to you start dividend distributions to its ultimate shareholders in the next 2 years?

[Unknown Executive]

Thanks Marcin. Lorain. No decision on the next dividend distribution will take place has been taken in current discussion. It will depend on tax evolution during summer and airline resources and airport capacity to handle generally with the CMA appeal outcome. There has been positive news regarding rating agency that have configured the rating for [Indiscernible] and thus improved their outlook to stable from negative. Also, there is positive impact of inflation on the regulatory asset base, resulting in a reduction of [Indiscernible] in year-end with covenant [ hydro ] remains comfortable, but we will have to wait until be more advanced in the year to address your question.

[Silvia Ruiz, executive]

Next set of questions coming from Bosco Ojeda here from UBS. First question, made traffic in Toronto City is now up versus 2019. Do you think that this is just a good weather. If traffic is only solid during spring summer, would that limit your long-term price expectations?

[Ernesto Lopez Mozo, executive]

Thank you for your question, Bosco. What we are seeing is that there is a correlation between weather and mobility in both ways, positive and negative. So better-than-expected weather could have a positive impact. But as well, I mentioned before that in April, we started the [Indiscernible] working -- construction working in the follow on. So that will have an impact as well. Thank you.

[Silvia Ruiz, executive]

Next question from Bosco. Can you give us some color on the I-77 which have very strong revenue transaction in the first quarter?

[Ernesto Lopez Mozo, executive]

Thank you for your question again. So the I-77 is doing a great performance in this quarter with a new record in ADT. So the -- we have a great perspective on -- with this asset. And even though we are raising to substantially this quarter, the traffic is performing quite good. Thank you.

[Silvia Ruiz, executive]

Next question from Alvaro Navarro from Bestinver. Could you update on the main biddings for this year, the SR 400 in Georgia?

[Unknown Executive]

Thank you. Thank you for your question. Tim, again, we are optimistic in general about the pipeline in the U.S., focusing the Management, and we are focusing on the management and traffic revenue risk in the U.S. As you know, we are prequalified for the SR 400 and the I-10, and we expect to submit albeit in the following months. We are active as well in other initiatives in other states, such as the I-77 [ South ] on the 495 in Virginia that are expected to come to the market in the following months. Thank you.

[Silvia Ruiz, executive]

Next set of questions coming from Augustin Cendre from Stifel. First question, Box is showing strong performance at the revenue margin level despite weak Polish construction indicators. Could you please elaborate on the current market environment in the country?

[Unknown Executive]

Thank you. This is [Indiscernible]. Budimex has a very good backlog. I mean, remember that last year it reached a record and picks this record. And also, as we mentioned several times, I mean, it's a very, very healthy backlog. I mean, roads and rails, particularly. Regarding -- so I mean, we believe that the profitability comes from these projects. Remember also that last year, there was a rising in the cap in decision in the public contracts in the roads. And also after several months of discussion also in the rail sector, I mean, this gap from 5% limit to 10% has been the embrace. So this is also a good lever for profitability. And regarding the weak indicators, we believe that there are funds, I mean, for all the infrastructures that Poland needs. During this time, we are seeing that the national government is giving bridge financing into these projects. So we are not seeing a bigger top on the bidding. And also, we are diversifying the business. I mean we are doing more things in the energy business. We are doing more things on building. I mean, so we see still the huge potential for the contrary in the construction business. Thank you.

[Silvia Ruiz, executive]

Next question from Augustin. On Energy & Mobility, you previously mentioned that you want to explore new opportunities. Could you please give us a flavor of the opportunities you see in the market?

[Unknown Executive]

Hello, everybody. This is Alejandro [Indiscernible] the CFO of the Energy [Indiscernible] Mobility division. As you know, the division was created in 2021. Since then we have 50 megawatts photovoltaic project in Spain, and we have 2 transmission lines in Chile, one in construction and one in operations. We have recently signed an agreement for additional 100 megawatts photovoltaic plant in the south Spain. So the strategy will be focused on generation, maybe PV plants, onshore wind and storage and in the main countries for Ferrovial, that mainly would be U.S., Spain and Poland, where we have signed a JV with Budimex. And on transmission line, will be focused mainly in Chile and the U.S.

[Silvia Ruiz, executive]

Next set of questions coming from Filipe Leite from [Indiscernible] BPI. First question, do you still see as possible a tariff increase at 407ETR during this year or more probably only during next year?

[Ernesto Lopez Mozo, executive]

Thank you, Filipe, for your question. As I mentioned before, the decision to raise tolls is only economical. We are monitoring the performance of the asset and running our internal analysis, and we will raise the toll when we see economic value.

[Silvia Ruiz, executive]

Thank you. Next question from Filipe. But your projects in your pipeline should be awarded during the upcoming 6 to 9 months?

[Ernesto Lopez Mozo, executive]

Yes. Thank you for your question again. As I mentioned before, we are prequalified for the SR 400 in Georgia and the I-10 in Louisiana, and we are expecting to submit or within the following months. Thank you.

[Silvia Ruiz, executive]

Last question from Filipe where the EBITDA margin of energy infrastructure and mobility was below last year, below 4% in the first quarter of 2023 versus 5% in the first quarter of 2022. Should we see it as a normalized margin going forward, but do you expect better margins in the upcoming quarters?

[Unknown Executive]

Hello, everybody. This is Alejandro [Indiscernible]. Yes. Well, the EBITDA in the division is very, very small. So it's very sensitive to anything. So basically, it would be because as we are growing through bidding, this would be mainly due to in higher bidding costs. What we expect in the [Indiscernible] is obviously being successful and having a higher EBITDA.

[Silvia Ruiz, executive]

Next question coming from Patrick Creuset from Goldman Sachs. First question. On I-66, you mentioned you see typical ramp-up performance thus far. In how far would you see the Dallas Forward management history as a good guide for the further I-66 traffic progression. It's the AB3 ratio thus far in line with your expectations? Or is this going to make a difference versus Dallas?

[Unknown Executive]

Thank you for your question, Patrick. I think that use mentioned that we are in a typical ramp-up is that we are observing that the users are getting used to setup in the highway and everything progress in an adequate way. Compared to Dallas, I think that here in Washington, there's one advantage compared to data that the users are getting -- they don't need to get used to pay tolls because they have several tolls in the area. So this -- I think there is quite an advantage for DC compared to ATCs compared to Matas lens. Is there the information that I can provide you about this.

[Silvia Ruiz, executive]

Next question from Patrick. 407. I believe you mentioned in your intro, you saw a continuation of the sequentially improving traffic trends on the 407ETR in April. How long would you want to monitor or set in full performance before seeing a favorable trade-off between scheduled unit payments on toll hikes?

[Unknown Executive]

Thank you for your questions. So I think that we will monitor the trends and the traffic performance and the patterns of the user, the tender is necessary to make the right decision. As I said before, the right -- we will make the right decision to raise the toll when it makes [Indiscernible] sense.

[Silvia Ruiz, executive]

Next question from Elodie Rall from JPMorgan. Regarding the listing process, do you envisage having 3 teams in place in midterm, for example, Spain, Netherlands and the U.S., is that realistic?

[Ernesto Lopez Mozo, executive]

Yes. Thanks, Elodie. Well, midterm, yes. I mean, the thing is that when you look into any proper model and you look into the results and cash generation that our U.S. assets and Canadians will provide the expectation that in 10 years, the U.S. will dominate absolutely, right? So that will dictate what we do, right? So midterm, yes, it's natural to have the 3. But I mean, in the long term, the U.S. should dominate.

[Silvia Ruiz, executive]

Next question from Robert Crimes from Insight. Any risk the Spanish government could take legal action to stop moving the list in from Spain?

[Ernesto Lopez Mozo, executive]

Thanks, Robert. Well, according to our external legal adviser. No, there's no risk.

[Silvia Ruiz, executive]

Next set of questions coming from Jose Ramon [Indiscernible] from Santander. First question, I-66. Can you share how heavy vehicle traffic is performing and what pricing policy for heavy vehicles for real is supplying?

[Unknown Executive]

Thank you for your question, [Indiscernible]. What is good in this asset in the I-66 is that we have the freedom to set the multipliers of the heavy trucks. And even that we can free this multiplier, we can set different type of vehicles as well. So that gives you -- give us some flexibility to optimize their revenue through the toll rate.

[Silvia Ruiz, executive]

Next question from Jose Manuel. Can you update us on your thoughts on the extension for 77 managed lane that we have proposed to the grander and also share your thoughts on the possibility that real secures the I-270 [Indiscernible] in Maryland that Transurban has abandoned?

[Unknown Executive]

Yes. Thank you for your question. Again, let's go for I think, I-77 [Indiscernible]. So now it is on the study, and it will take at least 12 months just to see if it's going to be to the market if it's going to be in the market or not. So there's nothing I cannot add here. In terms of Maryland and the process with Transurban. We don't have any news from the DOD after this decision. So we need to wait to receive any information about that just to give our opinion.

[Silvia Ruiz, executive]

Next set of questions coming from Graham Hunt from Jefferies. First question. How has customer feedback been for the early months of operation for the I-66? Have there been any technical challenges with tolling? How do you see commuters responding to the dynamic tariffs relative to expectations?

[Unknown Executive]

Yes. As Ernesto said, we are ramping up, ramping up means that we -- everyone is learning. We are learning with -- to operate the highway as well that the users are getting used to the new set in the highway. So I didn't see any big problem here. Everything is going as smoothly as we expected and the commuters are responding quite well to the bear because it's something that they experienced before in other toll roads in the area.

[Silvia Ruiz, executive]

Next question from Graham. Is the appeal process for Heathrow fails are there any other options for Heathrow to address issues it sees with the regulatory framework and that's fully as you say, remain as attractive long-term investment in the appeal fails.

[Ernesto Lopez Mozo, executive]

Thanks, Graham. Well, basically, if the CMA appeal does not work, it would be on the hand of the CA to correct any of the errors that we have mentioned, no other avenue that we envision at the moment. Right. So we'll have to wait until the CMA appeal is over for me to answer the other question, no comments until the CMA appeal is over.

[Silvia Ruiz, executive]

Next question from Victor Acitores from Societe Generale. What was the first quarter traffic in 2023 versus the first quarter in 2019 in Texas managed lanes?

[Unknown Executive]

Thank you, Victor, for your question. This -- we provide this information in all the packets that we sent to the market. But okay, we can -- I can read for you. [Indiscernible] compared with 2019, we are over -- we are over 13.1%, the 35 West over 2019 levels on 12.9% and RBA is lagging compared with 2019, in minus 9.8%. Thank you.

[Silvia Ruiz, executive]

Sorry, we were waiting for last questions here. So Nicolas Mora again from Morgan Stanley. NT35 [ wise ], you've talked of the possibility for an early opening of segments we see before in June, considering we already made May, how like is this? How much work are needed to get here?

[Unknown Executive]

Thank you for your question, Nicolas. Yes, you're right. We are in mid-May, but 1 month in construction work is matters. So we cannot give you any probability of success, but I can assure you that we are doing a great effort with our construction company to accelerate and try to open earlier that we expected.

[Silvia Ruiz, executive]

Okay. There is no more questions. Thank you for being with us.

[Ernesto Lopez Mozo, executive]

Thanks a lot, guys, for being with us. I mean, we think this has been a great state of results with a very positive traffic trends. So we're looking forward to meeting you in short time. Thank you. Bye.