Ferrovial SE

AEX:FER

Earnings Call Transcript 2022-Q4

[Silvia Ruiz, IR]

[Starts Abruptly]

…the financial results for the full year 2022. Just as a reminder, both the results report and the presentation are available to you on our website. If you have any questions, you may ask them through the form included in the webcast. During the Q&A session at the end of this call, we will be reading out your questions and who they are from.

I am joined here today by Mr. Rafael del Pino, Ferrovial's Chairman; Mr. Ignacio Madridejos, Ferrovial's CEO; and Mr. Ernesto Lopez Mozo our CFO.

With this, I will hand over to Del Pino. Rafael, the floor is yours.

[Rafael del Pino, Chairman]

Thank you Silvia, and good afternoon everyone. Ferrovial's showed a solid performance in its many assets in 2022. In Toll Roads, the U.S management posted a strong revenue growth in the year on the back of higher traffic and double digit revenue per transaction increase, despite lower GDP growth. For over 7-8 year registered a significant increase versus 2021, following the lifting of the restrictions in Toronto, but with as low return to the office.

The airport's division also showed a relevant traffic recovery in the UK. HEAER and HGS has a steady improvement versus 2021, since the removal of U.K travel restrictions in March and Dalaman in Turkey, showed a great operating performance with traffic, at the end of the year above pre-pandemic levels.

In construction, the inflationary pressure has been actively managed through mitigation measures getting an EBIT margin of 1%. In terms of order book, the figure ended the year at an all-time high bridging EUR 14.7 billion. This positive operating performance has been combined with important developments to reinforce our strategy with a clear focus on growth in our coal market, the U.S.

The I-66 managed lane in Virginia opened to traffic in its full configuration at the end of November. We also increased our exposure to I-77 managed lanes by acquiring an additional stake in November. Ferrovial has been pre-qualified for the SR-400 managed lanes project in Georgia, also in the U.S. The construction works for the extension of the NTE 35W, NTE 3C in Texas, are advancing in according to schedule and the opening is expected for September.

In airports, Ferrovial acquired a 49% stake in JFK Airport new Terminal One in New York, and completed an acquisition of Dalaman International Airport. And lastly, at the end of 2022, Ferrovial reached the completion of the Amey sale, ending the the investment process of the services division. And I shall step further in our international growth is to list Ferrovial in the U.S, who will propose for approval to our [indiscernible] A corporate reorganization follow, followed by an application to list ordinary shares there.

In terms of cash, we finished the year with a strong cash position reaching EUR 1.4 billion, thanks to dividends collected from our main projects and the positive impact from advanced payments in contraction. The cash outflows were driven by the good reasons related to all the investments for future growth that we have just mentioned in form of acquisitions and equity injections in new projects. The shareholder remuneration reached EUR 578 million.

ESG keeps being a fully aligned with our businesses strategy. I would like to highlight the advances in terms of a scope one and two emission reductions on the back of renewable energy production and procurement. Other important milestones in 2022 were the update of our human rights policy that was approved by the BOD and also for well becoming the first infrastructure company to receive the Good Corporate Governance Index by INR.

In the following slide, we review some of the main figures of the year. Revenues is stood at EUR 7.6 billion on the back of higher construction revenues and higher contribution from Toll roads. Construction Order Book reached an all-time high at EUR 14.7 billion with 45% coming from North American projects. Dividends from projects reached EUR 475 million.

Gross investments of EUR 856 million with the I-66, taking the biggest share amounting to EUR 322 million. Growth developments in the year total. EUR 429 million highlighting infrastructure services in Spain for EUR 175 million and a EUR 432 million and the net cash positions are projects reached EUR 1.4 billion.

Now Ignacio will review for strategy on the 2022 results by business unit. Ignacio, you have the floor.

[Ignacio Madridejos, CEO]

Thank you Rafael. Now, Hello everyone. Let start giving an update of on our Horizon '24 strategy. We continue with our revision to develop and manage sustainable, efficient and innovative infrastructure for a wall on the move. With a focus to grow in the U.S our main market. In Bregania[ph] we contributed to reduce congestion in the great area by the opening of 22.5 miles of lanes in the I-66. Follow this year with 6.7 miles of lanes in the 35-west. In supporting one of the main logistics in the U.S.

We continue developing a pipeline of new managed lanes in the U.S. This year we will rebuild SR 400 in Atlanta together with other two pre-qualified bids. We also increased last year our exposure to I-77 in Charlotte with acquisition of additional 7% stake reaching 72% and we took a 49% participation in the consortium, appointed to design, build and operate the new Terminal One at the JFK airport.

Outside the U.S we participated in selective investment with acquisition of a 60% of Taliban airport in Turkey. We almost completed the investment of our services division with the sale of Amey and infra-services in Spain to concentrate on developing infrastructure and continue with our strategy or rotating material assets with the sale of a 15% of salt and the completion of the sale of Algarve.

In new businesses, we will open this year or first 50 megabytes [indiscernible] type plant in Spain and a new transmission line in Chile, while we continue growing our pipeline in water projects and then re solutions. Last year we also increased our shareholder ration, including [indiscernible] to EUR 578 million. And finally at the core of our strategy, helping us to capture new contract and opportunities for eastern related to energy efficiency, be more competitive in obedient in the .U.S. Thanks to our collaboration with disadvantaged groups and growing while reducing our carbon footprint.

We are progressing well in our sustainability. [indiscernible] or scope one and two absolute emissions were reduced by 25.4% compared to 2009 and it was 3.6% lower than previous year. 70% of electricity consumption was from renewable sources For water consumption was reduced by 29.7% versus 2017 with a 125 times annual compensation and 23% of present of women in leadership roles, 2.8%, 12 points better than previous year.

We reduced the number of fatalities but increase the serious injury frequency rate. We were hard to get all people working with us to go back home safe every day. Regarding new taxonomy, still there is a lot of uncertainty about the criteria to be used to measure it following industry standards in which transport infrastructure with low carbon measures following the wording of the taxonomy are included or eligible revenue is 84%, but if we do not include this infrastructure will be 40%.

In the case of alignment, in the first case, it is 54% adding the second 25% of revenue. Last year we reinforce our position in all main sustainability indexes, renewing our presence in the Dow Jones sustainable index, FTSE4Good, and CDP at A level, Bloomberg Gender Equality Index, and BEGI among others. We are well positioned in an inflationary environment. 82% of Ferrovial’s value assets, half pricing frameworks allowing to increase tariffs above inflation.

On top of that, we have other assets like Heathrow and other Toll roads like IRB and relevant part of construction linked to inflation. We are also well protected to an increase in interest rates because most of our debt is hedge or with fixed rates are long term. Also, our infra assets after eliminated construction and ramp up risk should reduce their discount rates.

Now moving to our Toll roads division last year we increased our Toll roads revenues by 22.4% and EBITDA by 21.6%. This data does not include equity accounted assets. The U.S projects represent 78% of toll red road revenues and 91% of EBITDA and supported last year growth with 44.5% revenue growth and 45% EBITDA growth in Euros. Total dividends from Toll roads were EUR 388 million, 237 million from the 407, 92 million from NTE and 31 million from LBA.

We finished last year with EUR 190 million committed equity investment for this year, still 54 million for the S-66 and 35 million for the 35-West 3-C that we expect to open this summer. Last year, the contractual obligation to build then the ultimate configuration was triggered because the good performance of the asset, it means one additional manage lane in segment two and one additional general purpose lane in segment one that will help to capture future traffic growth.

The construction will start next year and will last until first months of 2027. It will not need additional equity injections. If we move now to the 407 and Toronto area, traffic in the 407 has improved 30.5% and EBI DDA 32.6% compared to 2021. Average revenue per trip increase 1.5% versus 2021 supported by longer average trip length of 2.4% has commented previously, the 407 distributed a total of CAD 750 million during the second half of last year be 600 million previous year, showing a very robust asset.

It has a strong financial position with cash and equivalence of CAD 370 million dollars and own credit facilities of 800 billion Canadian with no significant maturities ahead traffic. The four quarter last year was 13.5% above previous year and minus 14.7% compared to 2019. For the whole year, traffic was 30.5% above 2021 and minus 19.3% below 2019. Traffic was affected at the beginning of the year by lockdowns related to Omicron wave with a slow reopening throughout the year.

Mobility in Toronto last quarter was affected by the calendar effect of work days and the seasonal effect increase after the pandemic of production of mobility close to holidays and days of bad weather. However, the trend to return to office continue in Toronto, like other North American cities and it may impact positively in days without winter and holidays effect. The 407 was also affected by the end of construction work in the 401 during the month of November with an increasing capacity compared to previous months.

Like previous quarters, traffic during weekends recover faster than war days. Last quarter, war day traffic was 18.9% lower than 2019. Network congestion is expected to grow in Toronto area. Canada's immigration plan targets to increase around 500,000 permanent residents per year until 2025 and historically more than 40% of that population cost on Ontario with GTA absorbing most of it.

This new population will live and work mainly around the 407. As we can see in the map with the mayor employment zone in Toronto. We confirm our strategy of delivering value to our customers, offering a reliable alternative in a very congested corridor and continue monitoring traffic to decide when to increase tariffs. We are confident about the long term value of the asset.

Moving now to the Texas maganed lanes, we can see the revenue per transaction of the three assets with growth versus previous year of 18.8% at NTE, 11.8% at LBJ and 20.7% at 35 west in January, 2023. Sub cap was increased by 6.5% in the three minus lanes traffic last quarter of the year was 12.7% above 20 2019 at NTE, 4% at 35-west and minus 19.5% at LBA. Even if the last two were affected by construction work in the area compared to previous EBITDA was 30.4% higher at NTE, 24.8% at LBJ and 16.4% at 35-west with margins above 80% for all of them.

Probably this is the last time that we present this slide, but it is a good way to illustrate that all our US managed lanes outperform in revenues versus prior covid levels. Excellent performance of our US assets supported by the value giving to our customers who appreciate the time savings and reliability of our manage lanes versus co congested alternatives in very dynamic urban centers.

A good sample of a dynamic urban center is Dallas Port worth. It continues attracting new businesses like Samsung, Goldman Sachs, or well Fargo. Employment grew 6.1% last year versus the 3.2% average of the US industrial leasing continues very robust and the area leads the country in industrial development with a 3.1% GDP growth 0.4% tax points above the U.S. GDP forward area is expected to grow from 8.2 million people in 2023 to 11.4 in 2045, increasing the number of jobs from 5.7 million to 8.1 million in 2045.

We move to the I-77 on Nexus slide. The project increased revenues and EBITDA versus previous year by 67% and 91% respectively. Revenues per transaction grew 43% supported by higher to rates. We took advantage of the opportunity to increase our participation in the asset and pay 109 million to acquire an additional 71% to reach 72.2% expected returns are like past investment with similar risk. The region keeps growing, attracting new jobs with a 4.9% growth in employment last year, consolidates as the second largest banking hub in the nation after New York City segment.

One of the I-66 was open four months in advance and the full manage lane was open November also ahead of the schedule. Despite covid and supply chain disruption, we will report traffic and revenues with first quarter results, but the asset is ramping up in line with expectations. I-66 has the advantage of a flexible pricing framework with north of CAP and freedom to set heavy multipliers.

It is an area with a higher household income than dollar forward and it is growing, bringing new employment to the region. The pending investment for this year is EUR 55 million, mainly working intersections, bike lanes and landscaping. Total equity injected by federal until now was EUR 857 million. IRB had a good 2022 increase in revenues, 10.7% and EBITDA 14.2% in euros.

Main assets grew traffic with double digits and to rates are linked to inflation. IRB improved its corporate ratings to double A minus by FITS and was able to refinance some assets. There is a huge pipeline in India last year. IRB won the GANGAS price a 36 year IRB and also a 50 year [indiscernible]. This year, there is a relevant allocation of funding to transport and roles and IRB was recently selected Preferred bid in a new BOT, enhance his ESG last year by being a member of India Global Compact and by issuing a sustainability report IRB implemented new corporate policies following global best practices.

Now moving to the airport business, Heathrow revenues growth 140% last year and EBITDA rates 1,684 million British pounds last year. Traffic at hit reach 61.6 million passengers recovering from COVID restrictions. This is 23.8% below 2019. December closed with our traffic 11% below 2019. The recovery last year was driven by outbound leisure, although we are seeing a recovery of inbound leisure and business travel, which in the last quarter of 2022 was 28% of total passengers versus 32% pre pandemic.

The regulation is more than a year delay. It is difficult to understand why the CIA is taking so long. This uncertainty and arbitrariness are not good for investors and it may affect the service that passengers expect. We hope for CIA. A final decision, corrects the errors in the CIA's forecast of key regulatory building blocks after the final decision Heathrow airlines have the option to appeal to the CMA.

Improved revenues, traffic and EBITDA compared to previous year, traffic was 9.2 million passengers 164% above 2021, but still 32.5% below 2019. Dalaman traffic reached 4.5 million passengers only 7.5% below 2019, but the end of the year was above pre-covid levels. U.K passengers represented 46% of total and substituted most of Russian and Ukrainian tourist. The new terminal one project is on the schedule and on budget of hostility.

Early days or equity contribution last year were EUR 59 million. Looking at the construction business, we ended 2022 with EUR 144 million operating cash flow and a positive activity. Cash flow supported by advanced payments in Canada of EUR 160 million. Margins were flat compared to previous quarters and we closed the year with a 1% edit affected by the inflation impact of suppliers and subcontracts or, or the book reads at time high and it is mainly concentrated in North America. That represents 45% of our backlog followed by Poland. That represents 22% and Spain 15%. We do not have visibility today of similar advanced payments in 2023. We continue working to achieve our Horizon '24 target or 3.5% e margin.

And now Ernesto will continue with the main financial figures.

[Ernesto Lopez Mozo, CFO]

Thank you Ignacio. Hello everybody. Looking into the financial results below the operating lines that were discussed by nao I go into the financial result from infrastructure projects and there you see a growth vis-a-vis last year. Part of this has to do with perimeter remember that we acquired further stake in 1956 at the end of last year. We consolidated the asset that has opened to operations along this year, and therefore we are accruing interests that were before him capitalized.

Also, we have some additional expenses from [indiscernible] that are exposed to inflation have been discussed in in other calls regarding ex infrastructure projects. We have a positive result compared to a last year expense. This has said to do with the unwinding on hedge for bond issues and you see that we have a net cash position that in 2022 didn't accrue much in the interest given the low rates in the Euro, but now in 2023, you are starting to see interest accruing across the board.

Equity accounted affiliates show a positive result. Well back to the contribution for from 407 ETR and, and IRB and we don't have negative impacts from Heathrow or ADS they have both improved, but we are not incorporating any result from that. Due to IAS-28. Corporate income tax rate is in line with a corporate tax rate and the result from continuing operations comes up to EUR 238 a million.

Remember that last year we had the positive effect of the revaluing of the whole stake in, in the I-66 after the purchase of controlling stake in terms of net profit from discontinued operations, we have a positive EUR 64 million that is related mainly to the divestment of the services business.

Moving on to the cash precision, we see dividends from projects helping for the cash generation. I mean, these are basically from toll roads. You have a broader portfolio of toll roads paying dividends and you have portfolio that is growing and will bring more dividends in the coming in years. There's no dividends from airport though. Heathrow has been in the levering through the pandemic and now it's at the similar levels or even better than pre-pandemic in terms of net to Iraq, but is not paying dividend and is awaiting regulation as in Ignacio explained before long delayed by the way.

In terms of EBITDA working capital evolution, we see a slight draw from work capital and then a taxes payment that is basically related to Poland. Also some payments in Spain and Canada, but it's not recurrent. Then we have investments in the different infrastructure, mainly I-66 , but also airports. And this is a good reason to draw cash. I mean basically this investments for growth in the different assets that we mentioned along the year. The investments related to services mainly, and then we have to hold remuneration that, as you see is even above pre pandemic levels.

In terms of other financing flows, you have the net cash that is deconsolidated after sale of some assets and also some minorities distribution that is in [indiscernible] and FX effect. The 1.4-40, basically rounding up, net cast position does not include vendor loans. From the sale of Amy, we have close to EUR190 million that are not reflecting the net cast position because they're expected to be cast in more than a year.

Okay, so we move on to the, on next slide. I will pass on the microphone to Ignacio to discuss this transaction.

[Ignacio Madridejos, CEO]

Yeah, thank you Ernesto. I move to comment about the corporate organization to align our corporate structure with our international profile. We're an international corporation with most of our business outside the Spain. Last year, 82% of our revenue was generated outside the Spain and 90% of our value is international. According to research analysts, in most of our future opportunities and growth will come from international markets.

In particular, the U.S and international institutional shareholders represent 93% of our international is investor base. Listen in. [indiscernible] enhances our internalization while maintaining our Spanish roots. The Netherlands is the country of choice for companies with a strong presence both in Europe and the U.S. In that listed company may facilitate future listings in the U.S The Netherlands is AAA rated with a stable and trusted regulation and a sound corporate governance framework. It will the factor become a enhancing our European and international profile brand awareness and access to international talent.

A later U.S listing application is a natural step for us, consistent with our portfolio and our pipeline and RIN regional benefits. US and Canada are one of the largest transportation infrastructure markets worldwide. We are currently a leading player in the region with a phenomenal track record of value creation. U.S and Canada are the markets with the highest growth potential for us. Listing in the U.S will give access to the largest investor base globally, and we soon benefit from a scarcity of public companies with U.S. infra assets linked to inflation exposure to and growth.

U.S listing will also contribute to further attract U.S talent and enhance our brand awareness in the U.S helping to extend the pipeline. Nothing will in Spain or other countries. We'll continue with our investment plan in Spain. We'll continue hiring a Spanish talent to support our Spanish and international operations will continue be enlisted in Spain.

Now Ernesto will explain in the tele transaction to be approved at the shareholders meeting.

[Ernesto Lopez Mozo, CFO]

Thanks, Ignacio So, basically this reverse merger of SA into Serbial International that is European society is based in the neural se. This company already holds 86% of the assets therefore international. The new al se will become the whole of the group and it will be exchanged one for one. There's no dilution whatsoever. Also, this entails a change in corporate domicile from Spain to the Netherlands, dual listing in the Netherlands and Spain and will apply for listing in the United States at a later stage.

I mean, this is ordinary third and the Netherlands allow for the possibility of connecting in the future with a potential Jewish. Listen. This fact that we have ordinary shares also allows for a, a potential inclusion in the future in indices in the U.S. we don't expect impact on business and a strategy or investment plan organization or day-to-day operations.

This is the same company. Spain is expected to remain key source for developing talent, but of course we also plan to add international talent. Along the way, the transaction is subject to shareholders' approval. If shareholders vote against the transaction, the ones voting can exercise a separation, right?

So the completion of the merger is conditional to total separation rises. Exercise not exceeding EUR 500 million, as well as of course having reasonable experience of dual leasing in the Netherlands and Spain. Corporate governance in the is in line with current practices, say for changes driven by local statutory law or market practice. But there's no changes in voting rights contemplated no change in the board. If we move to the following slide we basically don't change the shareholder remuneration policy. If ion rise were to be exercised, the shares repurchase this way could be used for shareholder remuneration.

Investment grade rating remains a priority and the part of the transaction, if the merger goes ahead. The standing 500 million hybrid loan bond is expected to be repurchased. A replacement for this hybrid would be sold in the future when market conditions are more stable and more favorable financial in terms are achievable. We don't expect any other financing refinancing need because of this transaction except for the eventual separation rights.

In terms of timetable, well, we announced today the approval by the board and the timeline is expected to happen only in the second quarter, but we, it could go slip into the third quarter. So we expect to have the AGM and the merger completion in the second quarter. As I said, it could slip into the third quarter after the merger will apply for listing in the US post merger completion. And after bidding for the server 400 and I mean if successful listen happens, we plan to have a capital market days after all these events.

Okay, so this is the description of the Remerge merger that we will subject into approval in the adm. And now let me hand it back to Rafael. Thank you, Ernesto. So finally, after re review of the year, we remain confident on the significant growth to come when looking ahead on the back of the following pillars. First, a significant cash generation to come from increasing dividends from a strong asset portfolio with new Toll roads distributed.

Second value creation through pricing, flexibility in long-term infra assets located in growth areas, and third attractive investments opportunity opportunities ahead focused on our core market, which is now the U.S. Also the corporate reorganization and US listing application will allow the to top a broader pool of capital.

And last, the company is advancing on the decarbonization roadmap. Looking at 2023 shareholder reation, the board has approved two script dividends, which as a reference could imply for $71.50 cents per share in total to be distributed in two payments. Both are expected to take place after the execution of the reverse merger.

We'll continue with our share buyback seeking approval for a program of up to a maximum of EUR 500 million of 34 million shares. If some shareholders exercise their separation rights, the amount used for that purpose will be considered as being part of the share buyback program. Thank you very much. And now we open the floor to questions.

[Silvia Ruiz, IR]

[Audio Gap]

Okay, let's start with the Q&A session. First question coming from settle of question, sorry. Coming from Nicola Pasina from [indiscernible].

First question, could you provide an update on 470 traffic for January and February?

[Ernesto Lopez Mozo, CFO]

Yeah, we don't give as you know, I mean updates of the traffic for previous month, but I think as commented during the presentation some of the things that we have seen in some seasonality and during the holiday periods and also the winter storms, what we see is lower mobility, but the trends have been continued to be the same.

[Silvia Ruiz, IR]

Wouldn't make any sense to increase tariffs in 407 ETR before traffic has fully recovered in 2019 level, or the risk in re reactivating. Schedule '22 is too high?

[Ernesto Lopez Mozo, CFO]

No, the, we don't need to to be back to the traffic of 2019 to increase the tariffs in the 407. By the way, this is a decision by the board of the, the 407, but the way we are thinking about it is to calculate the net revenues, considering the additional revenues increasing tariffs at the same time, the schedule '22 payments and just a net value of these net revenues that we are considering in order to decide when to increase studies.

[Silvia Ruiz, IR]

Next question. Would you expect average three lengths to decline 407 ETR once traffic recovers? And maybe there are more commuters that today use other roads? Or estimates? Is that this average trip length increase last months? Mainly thanks to the eliminations of the tall tolls in the four 12 and four 18, but this is something that probably will stabilize in the future and will be closer to the previous savings. And how much would you expect for seven e r interest charges to grow in 2023?

[Ernesto Lopez Mozo, CFO]

Well, we have long term debt in 407 with fixed interest rates. There is no a bond repayment in 2023 for that reason. Only new could be affected by current interest rates.

[Silvia Ruiz, IR]

Next question coming from Karan Sangavi from Santander. Has Management, decided what they're going to do with their upcoming hybrid call?

[Rafael del Pino, Chairman]

Well, as I mentioned Karen, when, as I mentioned when I was describing the transaction, the reverse merger, we will be proposing to the AGM. If this transaction is successful, we expect to be repurchasing the hybrid bond so we would be economically equivalent to, to a hybrid call. I mean if I mean barring this transaction, I mean, we would not be exercising the call right now. We will be waiting for an opportunity down the road maybe next year looking for more stable markets and better economic terms. But I mean, our expectation is the transaction to be successful and therefore with the transaction to repurchase the hybrid bond.

[Silvia Ruiz, IR]

Next set of questions coming from [indiscernible] from JP Morgan. First question on LBA, please. Could you remind when construction works WIll finish?

[Rafael del Pino, Chairman]

It will finish in 2024.

[Silvia Ruiz, IR]

I-66, what revenue and EBITDA contribution could we expect in 23?

[Ignacio Madridejos, CEO]

We are not we are not giving information until the first quarter of traffic and tariffs and revenue in the I-66. So we have to wait until the first quarter to give, to have some information. The only thing that we are committed is the ramp up is according to what the expectations are. We'll see how it continues it's too early, but with the first quarter we'll give additional information.

[Silvia Ruiz, IR]

Next set of questions coming from Luis Pieto from Caper Chare. First question, would you be able to shed some light on when it would be sensible to expect the reactivation of tariff growth at the 470 ETR in this context? Would we be a reasonable expectation of the amount of time you'd expect to have to pay penalties?

[Ignacio Madridejos, CEO]

Well, the decision has commented, previous decision taken that will be taken by the board of the, of the 407. And what we are doing right now, a decision has, decision has not been taken so far. And what we are doing right now, decision has, decision has not been taken so far. And what we are doing is following the evolution of the traffic in, at the beginning of the year and the, the, and the first months of the year. It's a pure economic decision based on the ased previously on the net present value of the, of the net revenues. And we think that once the 407 decides to increase tariff, there will, should be a fast catch up with inflation. And having that, I think we have a long, a very, very confident about the long-term value of the asset.

[Silvia Ruiz, IR]

[Audio Gap]

Could you please comment on your perception of users willingness to pay your key high complexity assets? Is it something that we should expect to last for a good number of years after they fully recover from the pandemic impact?

[Ignacio Madridejos, CEO]

As, as commented, we are we are very positive about the long-term value of the, the asset. And what we see is that the urban centers that they have are very active and very dynamic with the population growth, employment growth. A lot of additional activity is the case for or main assets of course including Toronto here, and they are going to be very congested. And within that, the value of savings of time and availability are going to be there for the long term. So we see a lot of value and as commented in the 407, we see that we can recover, recover this inflation very short after we start to increase studies.

[Silvia Ruiz, IR]

Next set of question coming from Augustine Cendre from Stifel. First question, could you please elaborate on the traffic performance on the 407 ETR in last quarter, which fell back slightly versus A3, how has traffic developed year to date?

[Ignacio Madridejos, CEO]

Well, as, as commented during the presentation, we see three main effects during the last quarter of the year. One the first one is related to a poor calendar effect because we are comparing to 2019 and we are comparing the work days in the four quarter of last year to 2019, that they have a lower number of working days. And it was exactly the opposite in the third quarter that we have more working days than 2019. So this is the first effect.

The second one is, as also commented previously, there is an effect, a seasonal effect that was increased during the pandemic in which there is less mobility in periods in which there is a winter storm or when we are close to the, to the, and data had affected during the last quarter of the year.

And finally also the finalization of some construction in the 401 with increase of capacity that also affected the traffic since November for the beginning of the year as commented. I, I will, I'm not we given any forecast information and we have to wait till the first quarter to get additional information.

[Silvia Ruiz, IR]

Next question from Stifel. Could you please elaborate on the FRA construction laws at the EBI level? How much of the laws can be attributed to the I-66 and I-285 contracts with the I-66 PRO being completed? What is the remaining risk coming from the I-285?

[Ignacio Madridejos, CEO]

Okay. Well, thanks. I mean, we don't provide a specific disclosure on these on these projects. So it is true that the risk has been I mean diminished substantially, but still there is some printing works and finalization to do and some discussion on, on potential compensation. So it's finalization of these works. We don't provide a specific detail of this specific projects, but definitely looking into 2023 the impact from this projects is, is substantially gone.

[Silvia Ruiz, IR]

Last question from Stifel. Could you please provide some details on the new energy infrastructure and mobility division, which was added?

[Ignacio Madridejos, CEO]

Well, as previously, we are increasing order, order book both in energy solutions with the different type of projects related to energy transition and also whatever projects in the case of energy infrastructures. As, as the only things that we have invested so far are this transmission line to transmission line and plant in Spain. Idea is not to be a utility. What we want to do is to develop the infrastructure. We are developers there and rotate the asset as fast as we can. And the mobility has not been any, any changes or additions compared to what we have done before, and we are concentrating more on things that are related to our own infrastructure.

[Silvia Ruiz, IR]

Next set of questions coming from [indiscernible] from Jefferies.

First question, how do you see fros competitive position for bidding on the SR-400 project? Can you provide some color on what could set you apart versus your competitor bids in Georgia?

[Ignacio Madridejos, CEO]

What we are working to prepare the best offer for the SR 400 in Atlanta. At the same time, we have other two competitors that I'm sure that they will do the same and so, and have to compete with them, and we'll try to represent the best offer that that we can at the same time is is profitable and make extra returns for the, for shareholders of the company. But different from us, probably we have more experience of construction in Atlanta and the Georgia area. I think that could be a negative or a positive

We can self-perform and have we more knowledge of the market, but at the same time it is a, a very complex market and if you underestimate the complexity of this, maybe, I mean, you can present a lower offer if you don't estimate properly in the cost of construction in Atlanta, but I think we have the capabilities to develop this project that is difficult and is a, a market that is not very easy to, to develop these type of projects.

Hopefully this is an advantage, but it could be that from foreigners, there are, there are an estimated difficulties and the complexities of large construction projects in this market.

[Silvia Ruiz, IR]

Next question from Jeffrey. Also, any update on theA-77 unsolicited proposal process?

[Ignacio Madridejos, CEO]

Yeah, we presented an unsolicited proposal for the A-77 south of our concession. This was discuss at the, at the North Carolina Transportation panel, and they accepted to study the feasibility of this project and environmental project. So it'll take a period of time until they decide to go ahead or not. After that, they will be a procurement process in which it will be open for, for, and we expect to be one of the companies leading for this project. At the end, they decide to approve it and go ahead with the procurement.

[Silvia Ruiz, IR]

Next set of questions coming from Phillip AG from BPI Deutsche Bank. First question regarding dividends. Do you expect in 2023 higher dividends from 470 ETR than the dividends collected in 2022?

[Ignacio Madridejos, CEO]

They're respecting a, a better year in 2023 compared to to previous year, and that's the case. I think that the dividends will follow, but of course we have to wait to understand the conditions and the situation of the year.

[Silvia Ruiz, IR]

And next question, can you confirm that NT 35 West will pay its first dividend this year after the opening of NT three C in September?

[Ignacio Madridejos, CEO]

Yeah, I can confirm that after the opening of the three C, we'll pay dividends in the 35 west.

[Silvia Ruiz, IR]

Next set of questions coming from Navil Ed from Barclays. First question, we see a continuous improvement in Toronto, return to the office rates in the second half, but not real momentum behind four 70 ETR traffic. Could you please explain why this is the case? Do you believe there are drivers other than return to the office, which could drive the traffic going forward?

[Ignacio Madridejos, CEO]

Yeah, we're seeing a positive development not only in Toronto, but also in in other North American cities that people returning to, to the office, the case of Toronto, they are between one year and one year and a half, eh, compared to other places because of they started later to opening and lifting the, the restrictions. So I think the progress is, is moving in the same direction, but later than the, than the rest. And in other cities, we are seeing similar congestion and even more activity like the case of Dallas than before the, the pandemic. As a i we don't see any, any other drivers that may affect in the short term. And I think that it is not a question of capture rates for the 407, its.question of mobility in general in the area. And the mobility will continue improving in the following months with the people going back to the office

[Silvia Ruiz, IR]

On the new listing, could you please confirm the intention to be listed in Spain, Netherlands, and the US at the same time, or you will withdraw one of the listings later given the strongly North American profile? We can understand the US rational, but what about the Netherlands? Any tax reason or benefits we should be aware of? What is the total cost of the transaction?

[Ignacio Madridejos, CEO]

So many questions here. Well, the first thing is that we want to list ordinary shares. Ordinary shares are key to eventually end up in the US indices. What the Netherlands provide is the possibility of listing ordinary sources in Spain, in the Netherlands and the US and that is a great enabler.

Of course, we expect liquidity to be in Spain at this point in time initially. A long time, we should enjoy increased liquidity in the US given the profile of our assets, the growth, and the new assets that will be coming into the portfolio. So growth in the US being such landmark assets should attract liquidity. Okay. A long time, we would have to discuss liquid in the different markets, but right now it's just about growing awareness, of successful infrastructure story in the US -- to US investors and growing liquidity in that market. The Netherlands shouldn't have much weighting in terms of, of liquidity.

In terms of the estimated cost of the transaction, the ballpark number should be around €20 million and there's no specific tax reason for this. The Netherlands and Spain have very similar tax regimes, tax in the Netherlands from foreign companies and from investments are tax exempt.

Next question. What is the group CapEx budget for 2023, 2024, and 2025? We don't provide that kind detail or guidance except for a specific project like, we would have commented the type of investment expected.

[Silvia Ruiz, IR]

Next question coming from Christian [ph]. Does the corporate restructuring obligated of the corporate hybrid at par or 101 or can it be done at market levels?

[Ernesto Lopez Mozo, CFO]

Okay. So basically, as I mentioned before, the transaction is successful. We expect to repurchase the hybrid bond and that we would be equivalent to a call or let's say a par and we purchase, right? We plan to have a call for bond holders and hybrid holders to explain more about the transaction. But as I said, the economics would be similar to call or par.

[Silvia Ruiz, IR]

Next set of questions coming from [indiscernible] from Bank of America. First question regarding the reverse merger, will any of the headquarters and management functions be moved out of Spain and in the Netherlands and the US? When specifically does the company intend to apply for US listing?

[Ernesto Lopez Mozo, CFO]

What we are doing is taking the management decisions from the Netherlands, but as commented previously, nothing will change in Spain. And regarding the US listing, it will happen after we are listing in the Netherlands, and we expect to do that in the second half of the year.

[Silvia Ruiz, IR]

Next question from [indiscernible]. Can you indicate where traffic [ph] was in last quarter, relative to calls relevant for the Schedule 22 penalty calculation?

[Ernesto Lopez Mozo, CFO]

Unfortunately, we are not given that information. Sorry about that.

[Silvia Ruiz, IR]

Next set of questions coming from Stéphanie D'Ath from RBC. First question, can you comment on [indiscernible] primary charges and risk?

[Ernesto Lopez Mozo, CFO]

So we'll probably comment that is not a [indiscernible] and we don't know if it's bribery or what it is. The only thing that we know is that the three employees who belongs to FB [ph] were investigated by police. Of course, for us in the company, we do not tolerate any commission of criminal have, of course, zero tolerance against bribery. What we have done is corporate, of course, with the police, and -- is also launching an internal investigation.

[Silvia Ruiz, IR]

Next question. Can you comment on 2023? Outlook for construction in particular margins?

[Ernesto Lopez Mozo, CFO]

As commented that we are given is that the 2024, we continue to be committed with the 3.5% EBIT margins. And in that path, I think we expect to improve during 2023 compared to previous year.

[Silvia Ruiz, IR]

Last question from Stephanie. Could you update us on JFK Terminal one project progress?

[Ernesto Lopez Mozo, CFO]

Yes, it's going well. I think it's progressing according to the schedule. First steps are mainly about the designs and are well advanced and almost heading to be finished and approved, but the demolition of the green garage, and also we have access to the Terminal 2. And I mean, foundations are going according to the schedule, and so the progress is, is okay, and we are happy about that. But of course, as commented is very early. So still opening is 2026. A lot of work to be done, but so far we are happy about the progress.

[Silvia Ruiz, IR]

Next set of questions coming from from Banco Santander. First question on NT's extension, what is the length in mice of the two new minute lanes that will be added? What disruption may the construction of the minute lane bring?

[Ernesto Lopez Mozo, CFO]

No, but as commented, this is the ultimate. I understand you mean about the NT ultimate configuration. And this is the whole length of NT and for one of the segments is one additional general purpose lane. And for the other segment is one original man lane, what is will be added. In terms of the disruptions, what we are trying to avoid, that there will be any traffic disruptions for this war construction work will work mainly during nighttime, and it will be -- that's why it's taken a longer period of time that initially could be considered.

But in general, this is bringing additional capacity. So it's a positive thing in the future to get additional traffic with the same revenues. So additional revenues, but with the same tariffs that we have right now. But with the growth that we expect in, in dollar forward and additional population and employment, I think we'll see a lot of activity and this increasing capacity will benefit the NT in the future

[Silvia Ruiz, IR]

On I-66, I-77 minutes lanes, when will these two total start paying dividends?

[Ernesto Lopez Mozo, CFO]

I-77 in 2024 and the I 66 just 12 months after we pay fia ph. So it means that also it'll be in 2024. Of course, according to the traffic expectations are the relatives according to the expectations that we have for this asset. But we expect that in 2024, both assets will have dividends, will pay dividends.

[Silvia Ruiz, IR]

Last question from Manuel 407 ETI[ph] why did 407 ETI keep the quarterly dividend in the last quarter of 2022?

[Ernesto Lopez Mozo, CFO]

Well, the 407 is CAD150 million. is CAD150 million more than previous year. All of that was paid since July. So July to December was paid the full amount. So I think that that's okay. As as commented previously, we are positive and the 407 management team is positive about the better performance of the traffic for the asset in this year '23. So that will follow with dividends during the year, but it may be more concentrated similar to last year in the last months of 2023.

[Silvia Ruiz, IR]

Next set of questions coming from Antonio Rodriguez from Odo [ph]. First question, has the cash outflow from losses already provisioned in US construction been presented within the working capital in the cash flow statement ex infrastructure that you provide?

[Ernesto Lopez Mozo, CFO]

Yes, the working capital number in the bars graph include the cash outflow from these provisions.

[Silvia Ruiz, IR]

Next question from Antonio. What cash outflows do you expect in the US construction division for the coming years?

[Ernesto Lopez Mozo, CFO]

Basically, we have the finalization of ICC 285 [ph] that will rain cast, particularly in the first half of this year. Going forward, we expect to have more balanced margins. So I wouldn't be looking to cash flow on a regular -- cash outflow on a regular basis. The finalization of this works, yes, but in the first half of the year will be more marked.

[Silvia Ruiz, IR]

Next set of questions coming from Nicolas [ph] from Morgan Stanley. First question, can you explain why the number of transponders in circulation at 47 ETI [ph] a proxy for user based traffic did not grow in the last quarter of 2022? Can you give us color as to how much heavy users of 47 ETI have cut their tall road usage

[Ernesto Lopez Mozo, CFO]

About the transponders? We can say that we have seen a higher number of users over the last year, having transponder or not, is not a condition to use the road. And as we , most of the user are not that are heavy users of the 407. They use it two, three times a month maximum.

[Silvia Ruiz, IR]

Next question from Nicolas [ph]. Can you help us on construction? Can you help us understand how much cash you consume at US legacy periods in the last quarter of 2022? This works continuing into 2023. Should we expect more cash consumption, at least in the first half of 2023?

[Ernesto Lopez Mozo, CFO]

Well, we don't provide detail on these numbers, and this links to a prior question where I mentioned that yes, we expect in these projects to have cash consumption in the first half of 2023. Beyond that, it should be pretty much over for this project.

[Silvia Ruiz, IR]

Last question from Nicola NTO, you've been boosting the management team of late, should we expect announcements on new airlines come into new Terminal 1 in 2023 status of works?

[Ernesto Lopez Mozo, CFO]

Yeah, the management team, yes, we of course we are a building a very strong management team and in NTO that of course. They need to start to review the project and the maintenance and the commissioning, and also to make sure that we have a state of the art terminal and very good project and everything, and the systems and procedures are in place. So I think that this strong team will deliver that.

And of course we are working with different airlines and whenever we have any, any news, we'll communicate those. And our intention is not to have a 100% of the, the capacity committed, but at least a percentage and then later we have some airlines that will move directly to Terminal 1 when it's closed. And of course we'll prefer to negotiate probably at the end with others. So it'll be more following a strategy of how we maximize the revenues from terminal one.

[Silvia Ruiz, IR]

Next set of questions coming from Charles May from campaign First question, understanding that you reiterate a 3.5 construction on EBIT margin for 2024, but could you give us some color on the path to this recovery? Should we expect most of the improvement to come in 2024 and the marginal progression in 2023?

[Ernesto Lopez Mozo, CFO]

Well, we course, we have not disclosing any information or given any focus, but of course, we'll work to improve as fast as possible.

[Silvia Ruiz, IR]

And could you give an update on the current pipeline and opportunities you see?

Well, in terms of manage lanes what we are beating is this year R 400 in Atlanta. That that will happen in in August at the end of August with a decision at the, at the end of the year the announcers in Atlanta that they will follow with another two man lanes later in, in the, in, in following years. We commented also previously about the 77 South, but we presented solicited and they're was approved to study the feasibility project.

[Ernesto Lopez Mozo, CFO]

We are working in many other places, but we are not disclosing the information that is confidential or in which places we are working to develop things, other projects that we are in the short term and the, the I-10 in Louisiana, that is a traffic risk project that we will, we'll beat that in in a couple of months. And and these are the main projects that we have in the, in the U.S.

[Silvia Ruiz, IR]

Next set of questions coming from [indiscernible] Warner, from Stifel. First question [inaudible] infrastructure partners. Are there any other listed infrastructure entities in the U.S.?

[Ernesto Lopez Mozo, CFO]

Well you have some rail companies that are listed, but anything that has to do with road transportation or airports, I mean, there's pretty much nothing listed over there.

[Silvia Ruiz, IR]

Will dual listing satisfy eVic ex index investors?

[Ernesto Lopez Mozo, CFO]

Yes. we expect to remain part of the of the iex. We expect liquidity to remain basically in Spain, Bisa Ireland Airlines.

[Silvia Ruiz, IR]

And last question from stifle. What other US releases have you reviewed Ferguson? Are there any others you have considered?

[Ernesto Lopez Mozo, CFO]

Okay. We have looked at a variety of listings in the U.S. and also the Netherlands the companies from Italy, France, and there's a variety that we can discuss outside of this of this call. This is a path that other people have followed.

[Silvia Ruiz, IR]

Next question. Coming from Marcine module from Bank of America, you indicated dividend to shareholders for calendar year 2023 will be 0.715 euros per share, which is in line with 2022 dividend. Why is there no increase in dividends year on year, despite the earnings recovery in the main infr assets?

[Ernesto Lopez Mozo, CFO]

Okay, we always look to different opportunities for growth. We have a substantial buyback program as well that could he help to tweak this amount, this stable dividend because we are in a growing an investment mode. But as I said, this could be tweaked with the buyback if opportunities arise.

[Silvia Ruiz, IR]

Next question From Andy Jones from HSBBC, will the company be changing reporting currency to match US listing?

[Ernesto Lopez Mozo, CFO]

No. We will remain in Euros a a long time that could change part of the success of growing in the U.S.. But I mean, we are expecting to be filing IFRS accounts and listed and, and sorry, the reports in euros, of course, the direct listing would be direct listing in dollars for people that buy the share in the U.S..

[Silvia Ruiz, IR]

Next question from Nicola Smo from Morgan Stanley, can you please explain why cost shut up in the last quarter of 2022 at at L B and NT 35 West? Any specific chart profit sharing?

[Ernesto Lopez Mozo, CFO]

On NT 35 West, we have the revenue share with Texas DOT due to over performance of of the asset, an LBA higher NTT, a fees in conjunction with improvement traffic.

[Silvia Ruiz, IR]

Okay. So, there is no further questions.

[Ernesto Lopez Mozo, CFO]

Okay, well, thank you very much for attending this presentation and for your questions. I look forward to the next meeting. Good bye.