Annual Report 2005


The infrastructure business is one of Ferrovial's key growth engines, supported by an expanding market that demands companies with experience, know-how and investment capacity so as to respond to a growing number of privately-financed infrastructure development projects (construction, finance and operation) worldwide.


With nearly 40 years' experience and a growth strategy in this field, Ferrovial currently manages 18 toll roads (2,000 kilometres) in Spain, Portugal, Ireland, Italy, Chile, Canada and the United States and is pending final approval of three other concessions. In the US, the company is also a strategic partner of the State of Texas for 50 years in designing one of the most ambitious infrastructure projects ever undertaken there: the Trans-Texas Corridor.

Competitive situation

The number of new projects continued to increase in 2005, mainly in OECD countries, Cintra's investment target.

This trend was due to governments' decisions to use the private sector to fund infrastructure projects, not just because of the need to contain public spending but also because of a growing acknowledgement of the private sector's efficiency in this area. This is evident in the recommendations by European Commissioner Van Miert and the definition of Spain's new Strategic Transport Infrastructure Plan 2005-2020, with a budget of 248.892 billion euro, which envisages private-sector participation in at least 20% of the investments.

In Europe, some private toll road programmes were reactivated and other new ones were launched. The market continues to be segmented between projects with concession formulae based on low risk and lower value creation (payments for availability) and conventional toll road projects; the latter, the priority of Cintra's value creation strategy, grew considerably in 2005:

• after awarding its first two concessions in 2003, Ireland expanded its Toll Road Plan by inviting bids for the M3 Clonee-Kells project. Two other new projects in which Cintra has been shortlisted are expected to be awarded in 2006, representing a total investment of 1 billion euro;

• in Italy, bids were invited for two projects: the Asti-Cuneo and Mantua-Cremona toll roads; Cintra has been provisionally awarded the latter, which would be the first concession project in Italy to be managed by a foreign-led consortium;

• in Greece, the government implemented an ambitious concession programme: over 4 billion euro to be invested in six projects. The first bids were delivered early in 2006 and the process is expected to be completed during the year. Cintra will bid for three concession projects worth 2.6 billion euro;

• in Spain, local governments implemented an intense concession programme, mainly using the shadow toll road formula. The only explicit toll road project in 2005 was the M-203 toll road in the Madrid region, awarded to Cintra;
The central government reactivated its toll road programme, which may be put to tender in 2006: bids for the first one, the Málaga-Las Pedrizas toll road, were presented in February;

• in Portugal, the government reactivated the Azores shadow toll road project, for which Cintra was selected to present a best and final offer early in 2006;

• in France, the country's largest-ever concession privatisation process commenced: the government is selling stakes in the ASF, APRR and Sanef toll roads, worth over 14 billion euro. In just five months, the three assets (mature concessions) were awarded to two French consortia and one Spanish-led consortium. Cintra bid for two of the three toll roads in a consortium with financial investors but, despite presenting the best offer for one of the roads, it did not obtain the concession.

The US infrastructure development market, which has traditionally been closed to private initiative, has been favoured in the last two years by public administrations' growing interest in the added value of private ownership and management of concession assets and the private sector's ability to generate funds for other projects:

• state and local administrations are moving towards privatisation of existing assets: this trend, which commenced with the privatisation of the Chicago Skyway, continued in January 2006, with the Indiana Toll Road; both projects were awarded to Cintra-led consortia. Numerous US administrations are currently assessing privatisation projects that may be awarded in coming years;

• administrations are also fostering initiatives for greater participation by private concession companies in new projects, a trend that commenced when the State of Texas selected Cintra as its strategic partner in the design and planning of the Trans-Texas Corridor. That trend may be boosted in the coming years, after a legislative initiative is implemented that will enable projects promoted by the private sector to raise finance via tax-free bonds.

The debt market was also favoured in 2005 due to the possibility of optimising gearing of toll road projects mainly as a result of:

• interest rate performance;

• investors' growing interest in the transport infrastructure sector since it is perceived as having low risk;

• the markets' willingness to accept longer financing terms and structures that delay debt servicing (bullets, zero coupons), providing a better fit to the projects' cash flow profile.

The operation that epitomises this trend was the refinancing of the Chicago Skyway in August 2005, which was hailed as "North American Project Bond Deal of the Year 2005" by Project Finance International. The deal included placing a 1.4 billion USD bond issue in the US, the largest-ever toll road bond issue in that country.

Strategic positioning

Ferrovial's toll road division's priority goal is value creation through the appreciation of its project portfolio; this strategy is underpinned by two key factors: growth and active management of its portfolio with the goal of optimising cash flow.
Cintra's investments focus on:

• concentrating commercial presence and bidding in OECD countries in order to minimise political, legal and financing risks (finance is arranged long term in the local currency);

• controlling stakes in projects, enabling the Group to apply active management in order to maximise value and cash flow. Cintra's average stake in its concession projects is 63.7%;

• focusing investment on projects with future value creation potential: new projects where management over the full term makes it possible to reduce risks and, therefore, increase returns and leverage;

• projects where it is possible to optimise the volume of debt and minimise the financial risks using project finance (i.e. without recourse to the shareholders) in local currency;

• projects with a size (at least 20 million euro in equity) that justifies the allocated funds and allows value creation; and project terms that are long enough (20 years) to offset the risks of the economic cycle.

Significant events

There were three significant events in 2005 in the toll road business: Cintra reinforced its presence in the US, a priority market in the group's expansion plans; it presented numerous bids and obtained a large number of them; and it continued to win legal battles in the dispute with the Province of Ontario in Canada.

In 2005, Cintra analysed 55 investment opportunities, of which only 22 passed the internal analysis phase. A total of 15 bids worth 2.95 billion euro were presented in the US, Poland, Italy, Spain, Finland and Ireland, and 7 other bids are being prepared. Cintra is also short-listed for 9 projects worth 7 billion euro in Ireland, Greece and the US.

As a result of this intense bidding, Cintra obtained four new projects; the concession agreement has already been signed for one of them (the M-203 toll road) while the other three are being processed.

One year after Cintra obtained the Chicago Skyway contract, the Indiana Finance Authority (IFA) selected the consortium in which Cintra has a 50% stake as preferred bidder for a 75-year concession to maintain and operate the Indiana Toll Road (ITR). The project will cost 3.85 billion dollars and must be approved by the Indiana Legislative Assembly (foreseeably in the first half of 2006).

Operational since 1956, the ITR is a 157-mile (253 kilometres) toll road that has two sections: the West section, along the line between Indiana and Illinois (23 miles or 37 kilometres) under a barrier system (flat tolls depending on type of journey); and the East section, along the line between Indiana and Ohio (134 miles or 216 kilometres) under a ticket system (payment on the basis of distance travelled).

ITR links Chicago with the largest cities on the eastern seaboard and it is the main route between the principal logistics hubs in the US: Chicago, New York-New Jersey. The connection route with the Chicago Skyway is used every day by many users as the entrance route to Chicago and reduces journey time and distance with respect to other alternative routes, which are mostly very congested and have highly variable traffic. The road has an attractive toll plan.

Durante el ejercicio, se sucedieron además las firmas de los contratos de concesión de Chicago Skyway –gestionada por Cintra desde el 24 de enero de 2005– y el proyecto TTC-35 High Priority Trans-Texas Corridor.

The Chicago Skyway (managed by Cintra since 24 January 2005) and the TTC-35 High Priority Trans-Texas Corridor contracts were also signed in 2005
In its first concession year, the Chicago Skyway made significant advances:

• on 2 February 2005, tolls for passenger vehicles were increased by 25% to 2.5 US dollars;

• in June, a new electronic toll system (I-PASS) was implemented and is now used by 30% of drivers. Nearly three million drivers in the state of Illinois use I-PASS;

• in August, the concession company's 1.55 billion dollar refinancing was completed. This enabled Cintra to recoup 44% of its initial investment in the project: 206 million dollars.

In Spain, Cintra obtained the M-203, the only explicit toll road project awarded in 2005. The project comprises the construction and operation of a 12.3-kilometre toll road in the Madrid region between the R-3 in Mejorada del Campo and the A-2 in Alcalá de Henares. The road will cost an estimated 78.5 million euro and the concession runs for 30 years, with the possibility of a one-year extension based on road safety. Cintra signed the concession agreement in September 2005 and began construction work in December. The road is expected to be operational in the first quarter of 2008.

In Italy, Cintra was provisionally awarded its first toll road concession, between Cremona and Mantua in northern Italy. The 59.3-kilometre road, under a 55-year concession, represents an investment of 943.8 million euro. Phase I (36.1 kilometres) will become operational in 2011 while phases II and III (23.2 kilometres) will do so ten months later. The project allows an additional 20% and 25% toll increase in phases II and III, respectively, with respect to the year prior to their entry to service. The contract is expected to be finally awarded and signed in the early months of 2006.

n Ireland, a consortium led by Cintra was selected to negotiate a concession for the M3, a 50-kilometre toll road between Clonee and North of Kells, to the northwest of Dublin. It also includes the construction of a road between Kells and Carnaross (10 kilometres), the Kells bypass (3.5 kilometres) and related link roads. The project is estimated to cost approximately 600 million euro and the concession will run for 45 years.

On 12 December 2005, ten months ahead of schedule, Cintra opened the N4/N6 Kinnegad-Kilcock Motorway, its first toll road concession in Ireland, which runs for 30 years.

Also in 2005, some sections of the Norte Litoral toll road between Porto (Portugal) and the Spanish border became operational, and 66% of the Ocaña-La Roda toll road project was completed. In Spain, the R-4 toll road celebrated its first year, having registered its highest traffic in August and a record ADT (29,137 vehicles) on 29 April. There was a sharp increase in the use of automatic payment means on this road, reaching 45% in 2005. Moreover, the Burgos-Armiñón toll road (Europistas) obtained a 15-month extension of the concession contract to November 2018 in exchange for adding a third lane each way between Armiñón and Ameyugo.

In 2005, the 407 ETR concession company in Toronto (Canada) won a number of legal rulings, which confirm the rights established in the concession contract:

• on 6 January, the Ontario Superior Court ratified that 407 ETR was entitled to raise tolls without needing prior authorisation from the Ontario Government;

• on 16 August, an arbitration tribunal confirmed that 2002 was the base year, i.e. from when tolls could be increased freely;

• on 7 November, the Ontario Divisional Court ordered the Ontario Registrar of Motor Vehicles to comply with its obligation to deny license plates to vehicles which refuse to pay 407 ETR tolls.


Since entering this market five years ago, Ferrovial has positioned itself as one of the leading private-sector airport developers in terms of both the volume of committed investment and the quality and diversification of the assets it manages. The company is currently involved in managing four airports – in the UK, Australia and Chile – which are used by over 36 million passengers per year.

In February 2006, Ferrovial announced that it was considering an offer for the entire share capital, issued and to be issued, of BAA plc (BAA) although, at that date, there was no certainty that an offer would actually be made. BAA is the world's largest airport operator: it operates seven airports in the UK and has airport holdings in the US, Australia and Hungary.

Competitive situation

The finance needed for heavy investment in airport infrastructure, the search for improved management and the lack of specialised capital have accelerated privatisation in the airport sector in recent years.

This market appeals to private-sector investment for a number of reasons:

• air traffic is expected to grow around 5.1% in the next 20 years;

• fast long-term growth, boosted by increased demand for commercial flights;

• revenue diversification through development of non-aviation revenues;

• less competition;

• value creation when projects mature: improved non-aviation revenues and optimisation of financial and operating costs and investments.

In 2005, the world aviation industry confirmed the growth trend, registering the highest levels of air travel ever, with a 7.6% increase in international traffic. According to IATA (International Air Transport Association), international air traffic grew worldwide, except the countries along the Pacific and Indian Oceans, which suffered the impact of the tsunami at the end of 2004, although they recovered rapidly (around 2.5% growth) immediately afterwards. Traffic grew by more than 10% in Latin America (+11.4%) and the Middle East (+13.1%). IATA expects passenger and freight traffic to increase by 5%-6% in 2006.

In tandem with the recovery in traffic, the industry has shown great resilience and an ability to adapt in order to restore stability and growth. Relationships between airports and airlines are now much more dynamic, and low-cost carriers have expanded rapidly. In general, airports have cut costs and diversified revenue sources. The latest economic study by Airports Council International (ACI) shows that 50% of an airport's total revenues currently come from non-aviation sources and management is more commercially-geared than ever.

Strategic positioning

In 2005, Ferrovial reinforced its airport management strategy, focused mainly on seeking opportunities with the potential to add considerable value to its portfolio, either as a result of solid growth projections or through their position in markets with an acceptable level of risk.

Ferrovial's objective is to become one of the world's leading airport operators. Accordingly, it participates in all strategic decisions that affect the airport business's viability and profitability and compliance with concession contract commitments: definition and approval of business plans, budgets, investment plans, airport development programmes and negotiations with major customers.

As a result of the transactions in recent years, Ferrovial has attained a significant presence in the airport privatisation market, in terms of both the volume of capital invested (201.6 million euro) and the soundness of its investments. Its portfolio has good examples of profitability and diversification: one of the world's largest hubs (Sydney, Australia); and regional airports in the EU (Bristol and Belfast City).

Significant events

In its 75th year, Bristol International Airport had exceptional performance in terms of both quantitative growth (traffic +11.9% to 5.2 million passengers) and the number of projects, making it Europe's leading regional airport.

In May 2005, Continental Airlines began to operate a daily flight to New York; in Spain, only Madrid and Barcelona have daily connections to New York.

Low-cost traffic (60% of Bristol airport's total) grew by 17.3% while full-service traffic (14% of the total) increased by 11.4%, despite lower frequency by most of the companies that operate this type of service. For the second year running, charter traffic (a sector hurt by competition from budget airlines in the UK) beat expectations in Bristol and was higher than at the other UK airports.

Easyjet, the main airline operating at Bristol, extended its network (to include Pisa, Grenoble, Hamburg and Inverness, among others), enabling it to add an eighth aircraft at Bristol and carry passenger number 7 million. Other airlines, such as Air Southwest, also extended their network to include Newquay, Leeds, Bradford and Norwich, while British Airways extended its network to include Zurich and Milan.

There are currently 52 regular destinations and 53 available charter flights from Bristol airport.

In 2005, the airport commenced public consultation on a Master Plan. The airport also continued with the necessary investments to adapt its terminal to growth in passenger numbers: in April, it began to expand the check-in area (16 additional desks); in June, it opened the pick-up car park; and in November, it commenced a 7 million pound project to develop the commercial areas.

In May, refinancing of Bristol airport was completed by raising 515 million pounds, in tandem with ownership restructuring. That process enabled a special distribution of 88 million euro to Ferrovial. In the last four years, Ferrovial has collected 100 million euro from Bristol airport, i.e. 180% of the investment made in 2001.

In Northern Ireland, Belfast City Airport increased traffic by 7.1% to 2.2 million passengers in 2005. The main growth driver was Flybe (nearly 60% of passenger traffic), which increased traffic by 16% due mainly to new routes (Liverpool, Norwich and Aberdeen) and positive performance by other routes (especially Glasgow and Edinburgh). Flybe has announced that it will start operating a route to Manchester in 2006, while Aer Arann will begin a Belfast-Cardiff service in March.

In 2005, the airport improved infrastructure by expanding the long stay car park and creating a noise management system. It is also working with Aviance to improve the quality of ground handling operations.

In the first half of 2005, applications commenced to review the limits on the airport's operations, focusing on the cap on the number of seats that can be offered (1.5 million arrival passengers). In October, the UK's Department of the Environment issued a communiqué recommending that such a cap should not form part of the airport's operational limits, commencing a six-month period for consultation.

In Australia, Sydney airport reached 28.6 million passengers in 2005 (4% more than in 2004 and 17% more than in 2003).

In 2005, new routes were opened, including four weekly routes to Nandi (Fiji) and two to Tonga (offered by Pacific Blue). Qantas is preparing a route to San Francisco for 2006 and will increase the number of weekly flights to Beijing to three. Jet Star has launched three weekly flights to Fraser Island (Queensland) while Air Tahiti now offers two weekly flights to Papeete (Tahiti).

Some infrastructure was also improved: the T1 building was refurbished (a Downtown Duty Free area was established); a 1,700-space car park is under construction; the check-in service was improved; the T2 building's commercial premises will be restructured (the design phase has been completed); and the installations were adapted for the A380. Car park management was outsourced in October.

In July 2005, 202 million Australian dollars (AUD) of B debt were refinanced by issuing 205 million AUD in CIBs (capital indexed bonds), which completed the refinancing undertaken at the end of 2004 with which the airport obtained 3.8 million AUD under better financial conditions.


Through subsidiary Cintra Aparcamientos, Ferrovial is one of Spain's largest private-sector car park development companies and currently manages 238,200 spaces in more than 132 cities in Spain, Andorra and Puerto Rico.

It is present in all areas of the business: development and operation of off-street car parks; control and management of restricted on-street car parks; and construction and transfer of resident car parks; as well as other additional services, such as supply and maintenance of control equipment.

Competitive situation

The privately-owned car park business is well established; there are few large nationwide operators and a large number of small local and family firms with no plans to expand. This explains the difficulty in making large acquisitions and the need to focus expansion in this sector on organic growth, by bidding for new projects or management contracts and occasionally buying small firms or individual assets.

In 2005, there was a large number of new municipal projects and a sharp increase in the business volume commissioned by AENA (the Spanish airports authority).

In the last year, there has been increasing interest in car park development on the part of large industrial groups. However, this competition has not hampered growth by Cintra, an established player with an extensive range of end-to-end solutions.

Strategic positioning

Ferrovial's strategy in the car park sector is based on:

• expanding project management in Spain; considering opportunities in other countries if they are above a critical size and lend themselves to a standardised management model;

• reinforcing our leading position in the municipal car park market;

• developing and managing car parks outside the municipal market: tenders by public administrations and agencies to develop and manage their own car parks (airports, railway stations, ports, hospitals, etc.) or contracts from large private companies not related to the sector that manage car parks for their activity (shopping centres, hotel chains, etc.); and

• implementing new technologies in car park management: access control systems; license plate recognition systems in off-street car parks; centralised operation; and new technologies in restricted on-street parking services.

Significant events

In 2005, Ferrovial's car park division strengthened its growth strategy by attaining over 238,200 parking spaces in 132 cities in Spain, Andorra and Puerto Rico, i.e. a 14.8% increase on 2004 and a 12.1% rate of annual growth in the last 5 years.

During the year, the company analysed 97 investment projects and made 67 bids. Of those, 55 contracts were awarded and Cintra obtained 33, i.e. a 60% success rate.

Cintra was awarded the contract to manage the new Terminal 4 and south car parks at Madrid Barajas airport, with over 14,000 new parking spaces, a contract which, combined with the contracts to operate the airport car parks in Granada, Almería, Madrid, Palma de Mallorca and Vigo, reinforces its position as Spain's largest airport car park operator.

Cintra also obtained four off-street and fourteen private car park contracts directly or via municipal-private partnerships, including two car parks in Madrid with a total of 1,547 spaces, which account for 78% of the total private parking spaces tendered by the Madrid city government.

Cintra also obtained on-street car park concessions in Toledo, Pamplona, Fuengirola, San Fernando, Villanueva de la Serena, Chinchón and Barco de Valdeorras, and the car towing concession in Palencia. | Descargar PDF | ©2006 Ferrovial