Throughout 2020, the Province of Ontario went through various stages of stay-at-home orders, state of emergency, lockdowns, and phased reopenings. While the 407 ETR experienced significant declines in traffic since the onset of COVID-19, there were gradual improvements in traffic volumes with each stage of the reopening. During the second lockdown (December 26th 2020) traffic volumes have not been as negatively impacted as compared to the initial close last March 2020.
Despite the impact of lower revenues due to the COVID-19 pandemic, 407 ETR maintained sufficient liquidity to satisfy all of its financial obligations in 2020 and expects to maintain sufficient liquidity in 2021.
407 ETR management continues to analyze the extent of the financial impact of COVID-19. While the full duration and scope of the pandemic continues to remain unknown, Management does not believe it will have a long-term impact on the financial condition of 407 ETR. In addition, 407 ETR continues to review potential reductions to opex and capex.
VKT (Vehicle kilometers travelled)
In 2020, VKTs fell by -45.3%, impacted by the changing mobility restriction measures adopted by Ontario Province to combat the spread of COVID-19 since March.
Traffic reached its lowest levels in early April, to then increase gradually during the phased economy reopening. COVID-19 cases increased significantly from mid-August lows and until year-end. The Province implemented increasingly restrictive social distancing measures in 4Q, including prohibiting indoor dining services and closing indoor gyms, cinemas and venues with high risk of personal contact.
On November 23rd, Toronto and Peel entered the Grey-Lockdown zone, where the most severe restrictions on social gatherings and indoor operations are in place and on December 26th, the entire Province of Ontario entered a more stringent province-wide lockdown, to be in-place for a minimum of 28 days.
Results for 100% of 407 ETR
Revenues were down -39.6% in 2020, reaching CAD909mn.
OPEX -14.0%, mainly due to lower customer operations costs from lower billing, bank charges and collection costs, coupled with lower staffing costs and lower provision for doubtful accounts. These decreases were offset by higher general and admin. expenses mainly on higher COVID-19-related charitable donations and higher system operations costs and support costs.
EBITDA -43.5%, as a result of lower traffic and revenues, partially offset by lower operating expenses. EBITDA margin was 81.4% vs 87.0% in 2019.
Dividends: In 2020, 407 ETR distributed CAD562.5mn (CAD1,050mn in 2019). Dividends for Ferrovial amounted to EUR160mn. 407 ETR Board will continue to monitor the current pandemic situation and will review any further potential dividend distribution to Shareholders, as appropriate.
Net debt at end of December: CAD8,323mn (average cost of 4.50%). 54% of debt matures in more than 15 years’ time. Upcoming bond maturity dates are CAD18mn in 2021, CAD318mn in 2022 and CAD20mn in 2023.
In March, 407 ETR issued a CAD700mn Senior Notes, Series 20- A1, due March 2050 (aggregate principal amount of 2.84%).
In May, 407 ETR issued CAD750mn of Medium-Term Notes:
In addition, 407 ETR announced the early payment of:
On 31 December 2019, 407 ETR announced an increase in tariffs, along with the introduction of seasonal toll rates, which came into effect on 1 February 2020. Given the impact of COVID-19, 407 ETR did not implement the changes included in the seasonal toll rates aside from the increase in February 2020.
Due to the COVID-19 pandemic and stay-at-home orders, traffic on Highway 407 ETR has been significantly lower and minimum traffic thresholds for 2020 were not achieved as prescribed under Schedule 22. It is 407 ETR’s position that due to the adverse traffic impacts of the pandemic and the force majeure provisions of the Concession Agreement, no Schedule 22 payments apply since the pandemic was declared. Following legal counsel interpretation of the contract no provision has been booked since the pandemic started.
Managed Lanes (MLs) traffic was significantly impacted during the COVID-19 outbreak due to the mobility restrictions and the sequential shut downs, although positively reacting to reopening.
Traffic reached its lowest point in early April following the shelter-in-place orders and closure of schools, but recovered since then at different rates on each Managed Lane. The region shifted from quick re-opening on May to increased restrictions following upswing in cases in June. Restrictions slowly lifted since then until early November, when Texas suffered a spike in COVID-19 cases. Texas government announced on December 3rd that restaurants would have to return to service at 50% capacity, and bars were required to close. Schools remained with the two options, in person and online. Traffic has softened across December, especially during the winter break.
Although Toll Rates in the Texas MLs are dynamically adjusted with traffic, a set of minimum toll rates by time of day predefined by the operator is applied. The traffic fall in the Texas MLs has been partially offset by the positive performance in toll rates and the higher proportion of heavy vehicles.
The average toll rate per transaction reached USD4.9 vs. USD4.5 in 2019 (+10.3%).
Revenues reached USD125mn (-18.4% vs. 2019) on the back the impact of lower traffic although mitigated by the impact of traffic mix and higher toll rates.
EBITDA reached USD106mn (-18.1% vs. 2019). EBITDA margin of 84.9% (+31 basis points vs. 2019).
Dividend: NTE distributed a USD46mn dividend in 2020. Ferrovial received EUR25mn.
NTE net debt reached USD1,232mn in December 2020 (USD1,234mn in December 2019), at an average cost of 3.74%.
In 2020, traffic decreased by -37.6%, as COVID-19 induced reduction in traffic since March offsetting strong growth in January and February (+11.6% aggregated). Construction of the 635E project continued during the pandemic, which will introduce one ML in each direction for 10 miles from the eastern terminus of LBJ project.
The average revenue per transaction reached USD3.4 in 2020 vs. USD3.2 in 2019 (+8.5%).
Revenues reached USD104mn (-31.8% vs. 2019) due to higher toll rates, offset by the declining of traffic due to COVID-19 pandemic.
EBITDA reached USD72mn (-43.5% vs. 2019) with an EBITDA margin of 69.1% (83.3% in 2019).
Dividend: LBJ toll road distributed its first dividend (USD229mn), after five years of operations (contractually the asset could not pay dividends until it had been operational for 5 years). Ferrovial received c.EUR109mn.
Refinancing: In September 2020, Ferrovial, via Cintra, completed the refinancing of LBJ’s Private Equity Bonds (PABs) with the issuance of new bonds (USD622mn proceeds). This PABs’ refinancing agreement has led to a lower cost of debt (new PABs 2.92% “yield to maturity” vs previous 7-7.5% old PABs’ coupon).
LBJ net debt amounted to USD1,660mn in December 2020 (USD1,407mn in December 2019), at an average cost of 5.73%, including old debt’s deferred financing costs write-offs from previous PABs.
In 2020, NTE 35W traffic decreased by -14.3%. The decrease in traffic caused by COVID-19 was partially offset by positive effects of ramp-up (the toll road opened fully in 2018) and higher exposure to heavy vehicles, resulting in NTE 35W having the lowest decrease in traffic of the three Texas MLs assets.
The average revenue per transaction reached USD3.5 in 2020 up from USD2.7 in 2019 (+26.1%) positively impacted by higher proportion of heavy vehicles (toll multiplier 2x – 5x).
Revenues reached USD98mn (+8.1% vs. 2019) due to higher toll rates, partially offset by the stay-at-home measures due to COVID-19 pandemic.
EBITDA reached USD82mn (+49.9% vs. 2019) with an EBITDA margin of 83.4% (vs 60.1% in 2019). NTE35W EBITDA in 2019 was negatively impacted by NTE3C success fee payment (USD20mn).
NTE 35W net debt reached USD915mn in December 2020, at an average cost of 4.50%, including NTE 3C.
Development, design, construction and operation of Seg. 3C:
Duration: Concession term ends 2061.
Operation & Maintenance (O&M) and toll collection: exclusive right and obligation to operate, maintain, repair and collect tolls.
The northern portion of I-77 Express opened on June 1st, 2019, and the southern portion opened November 16th, 2019. COVID-19 breakout has negatively impacted the traffic, especially since the week of March 22, when Charlotte area shelter-in-place orders were issued by the authorities.
Traffic on I-77 reached its lowest point in early April, but recovered as restrictions slowly rolled back since early May. However, due to an upswing in cases in Autumn, Phase 3 of the Governor’s Safer-at-Home orders went into effect in October. This order was revised on December 8, imposing a statewide curfew between 10pm to 5am.
On November 2020, Ferrovial, through Cintra, agreed with one of the existing shareholders to acquire an additional 15%, increasing its stake to 65.1%. The operation is valued at USD78mn (EUR68mn) plus a deferred payment based on the asset’s performance in June 2024 estimated at USD2.7mn (c. EUR2.3mn).
Ferrovial’s portfolio includes a number of toll roads which are, mainly, availability projects located in countries with low government bond yields (Spain, Portugal and Ireland) and long duration. Among the availability projects with no traffic risk or equivalent to availability projects held by Ferrovial are: A-66, Algarve (until sale completion), Norte Litoral (until sale completion) and M3.
On 19th October 2020, the Spanish Supreme Court communicated it did not admit the appeal against the High Court of Catalonia’s judgement which ratified the changes introduced in the concession regime by the Catalonian Regional Government (the Grantor) in 2015.
The 2015 changes implied moving from a regime with no traffic risk (the Grantor paid the operator the difference between tolls collected and operating surplus established in the Economic and Financial Plan), to one with traffic risk (with the Grantor subsidizing a portion of the tolls).
This resolution is final in terms of Spanish courts.
As a result of this resolution, Autema has been classified as an “intangible asset” (vs. a “financial asset” before). This change, in 2020 results, has no impact on cash generation nor cash position, but at P&L level, it implies a positive impact of EUR10mn (pre-tax), EUR6mn (post-tax), as a result of:
Additionally, operational results of Autema for 2020 have been restated applying the new concession regime (intangible asset model). Revenues and EBITDA for 2020 result in EUR51mn and EUR43mn, respectively, vs EUR113mn and EUR105mn for 2019 (when the financial model still applied).
|EUR (million)||INVESTED CAPITAL||PENDING COMMITED CAPITAL||NET DEBT 100%||CINTRA SHARE|
|Ruta del Cacao||-54||-147||30.0%|
(*) Capital invested & committed refers to Seg. 3C. Net debt 100%: includes all 3 seg.
In the US, we continue to pay close attention to private initiatives:
Cintra continues active in other markets such as UK, Chile, Peru and Australia (Queensland and New South Wales).