6.5 CONTINGENT LIABILITIES, CONTINGENT ASSETS, OBLIGATIONS AND COMMITMENTS

6.5.1. Litigation

In carrying on its activities, the Group is exposed to possible contingent liabilities of varying kinds. These contingent liabilities lead to lawsuits or litigation in relation to which a provision is recognised based on the best estimate of the foreseeable disbursements required to settle the obligation. These provisions are detailed in Note 6.3.

Therefore, no significant liabilities that might have a material adverse effect are expected to arise, other than those for which provisions have already been recognised.

The detail of the most significant litigation, in terms of amount, in the Group’s various business divisions is as follows:

a) Litigation relating to the Toll Road business

Autopista Terrasa Manresa (Autema):

On 14 July 2015, the Catalonia Autonomous Community Government officially published Decree 161/2015 which included the amendment of the toll road concession arrangement, whereby the regime changed from a regime under which the Catalonia Autonomous Community Government undertook to pay the concession operator the difference between the tolls collected and the operating surplus established in the Economic and Financial Plan to a system whereby the remuneration earned by the concession operator will depend on the number of the infrastructure’s users, with the Catalonia Autonomous Community Government subsidising a portion of the toll paid by the users.

After filing the claim in the proceeding against Decree 161/2015 in October 2016, in December 2016 Decree 337/2016, partially amending Decree 161/2015, was published. Consequently, Autema also challenged Decree 337/2016 and requested the joinder of the two claims into one proceeding given the direct connection between the two decrees challenged. In this connection, the company considers that there are sound arguments to conclude that the Catalonia Autonomous Community Government clearly exceeded the limits of the power to amend the arrangements. Accordingly, the company filed an appeal against the aforementioned Decrees at the High Court of Catalonia.

The joint defendants (the Autonomous Community Government of Catalonia and the Regional Council of Bages) and the phase to propose and take evidence has commenced, with a hearing in which the experts of both parties will reaffirm their reports set for 15 March 2018.

As a result of the amendment to the concession regime and taking into consideration the solid legal position against this amendment, classification of this concession as a financial asset has been maintained. However, the test for impairment on goodwill allocated to this asset has been revised and an impairment loss of EUR 29 million was recognised in 2017 (2016: EUR 21 million) on the basis of the assumptions described in Note 3.1.

M-203 toll road:

On 24 April 2014, the concession operator instigated a proceeding at the Madrid High Court of Justice requesting the termination of the concession arrangement due to a breach by the grantor and the annulment of the penalties imposed on the concession operator due to the halting of the construction work. On 12 February 2015, the concession operator was notified of the judgment handed down by the Madrid High Court of Justice upholding in full the appeal for judicial review. A cassation appeal against this judgment was filed at the Supreme Court by the Autonomous Community Government of Madrid and, lastly, on 22 December 2016, the Supreme Court’s decision was handed down, which dismissed the Autonomous Community Government of Madrid’s cassation appeal.

Following the decision in the concession operator’s favour, it has requested through various channels that the Autonomous Community Government of Madrid issue a formal administrative decision terminating the concession arrangement and initiating a procedure to settle the arrangement.

Lastly, by means of the Order of the Regional Minister for Transport, Infrastructure and Housing of the Autonomous Community Government of Madrid, the Autonomous Community Government of Madrid terminated the concession arrangement. The company is waiting for the Autonomous Community Government of Madrid to: (i) take possession of the construction work; (ii) return the bank guarantees provided as a definitive guarantee; (iii) be subrogated to the compulsory purchase proceedings; and (iv) pay the compensation for the investments made and the damage and losses suffered. This should take place within six months of the date of the aforementioned Order.

As a result of the termination of the concession arrangement, at 31 December 2017 the company reclassified the carrying amount of the asset (EUR 61 million) as an account receivable from the grantor (see Note 3.6).

AP 36 Ocaña – La Roda and Radial 4 toll roads

With respect to the insolvency proceeding of the AP 36 toll road, the company is currently being liquidated. On 14 December 2017, the insolvent parties were served the liquidation plans submitted by the insolvency managers to the judge overseeing the insolvency proceeding, which have not yet been approved.

The insolvency proceeding of the Radial 4 toll road has been in the liquidation phase since 10 May 2017. In September 2017 the insolvency managers filed the liquidation plans, which were approved in an order handed down on 24 October 2017. At the end of 2017 the grantor (Ministry of Public Works) commenced proceedings to terminate the two concession arrangements in relation to which both the insolvency managers and various creditors made submissions. With respect to the Radial 4 toll road, while the Ministry of Public Works is yet to issue a decision in relation to these submissions and definitively terminate the concession arrangement, provisional measures have been adopted that enabled SEITTSA, the public company that will take control of various toll road concession arrangements, to take control of the asset on 21 February 2018.

Furthermore, in relation to the Radial 4 toll road, the decision is yet to be handed down in a lawsuit at the Supreme Court brought by the lenders of the company against its shareholders relating to a guarantee amounting to EUR 14.9 million (in the portion attributable to Ferrovial). Although the decisions handed down previously at first instance and on appeal ruled in the shareholders’ favour, a provision has been recognised for this contingency at 31 December 2017.

These companies were excluded from the scope of consolidation in 2015, since the circumstances indicating loss of control were evident: there is no exposure to variable returns from the involvement with the investees and there is no ability to direct the relevant activities of the investees. The performance since then has confirmed the policy applied at that time.

b) Litigation relating to the Construction business

The Group’s Construction Division is involved in various lawsuits relating primarily to possible defects in the construction of completed projects and claims for third-party liability.

The provisions recognised in relation to these risks at 31 December 2017 totalled EUR 94 million (2016: EUR 121 million) and relate to a total of approximately 110 lawsuits. The most significant litigation, in terms of amount, in this business area is as follows:

  • Muelle del Prat: this corresponds to a claim relating to the construction project for the new container terminal at the Port of Barcelona. The work was performed by Ferrovial Agroman as part of an unincorporated temporary joint venture (UTE) with other companies. The claim -for an amount of EUR 97 million- was lodged by the Port of Barcelona in September 2011 against all the companies involved in the performance of the project and arose as a result of the damage caused by an accident during construction work. A judgment was handed down in 2013 partially upholding the claim filed by the customer, ordering the defendants jointly and severally to pay EUR 20.9 million plus interest. In the first six months of 2014 the insurance companies partially covered the payment of the aforementioned judgment. On 16 March 2016, the Barcelona Provincial Appellate Court handed down a decision ruling in favour of the defendants and dismissing in full the claim lodged by the Barcelona Port Authority; the Port Authority has lodged a cassation appeal against this ruling, in relation to which a decision has not yet been handed down.
  • Arbitration in relation to the construction project for Warsaw airport: This corresponds to a claim filed against the UTE formed by Ferrovial Agroman and Budimex in relation to the termination of the contract to construct Terminal 2 of Warsaw Airport. In 2007 the customer enforced a guarantee amounting to EUR 13.5 million and brought a claim against the construction joint venture. In turn, the construction joint venture brought a counterclaim against the customer in relation to the illegal enforcement of the guarantee and uncollected amounts; the net amount of these mutually submitted claims is EUR 18.9 million in favour of the construction joint venture. In September 2012, after the favourable award of the Arbitration Court (confirmed in 2013 by the Supreme Court), the customer returned the enforced guarantee and paid the interest accrued from when the guarantee was enforced.

    The deadline established by the Arbitration Court for each party to submit pleadings to defend their claims and to assess the evidence taken to continue with the arbitration is February 2018. In this regard, the expert evidence taken addressed, on the one side, the technical grounds for the customer’s -Poland Port Authority- unilateral termination of the contract and, on the other, the evidence supporting the amounts claimed as amounts outstanding for work performed and damage and losses, which has yet to be taken.

    The company expects the arbitration to be resolved in 2019, but does not rule out a partial arbitral award being issued in the interim. In any event, the account receivable has not been written down since the company considers that the resolution of the arbitration proceeding will include its recovery in full, despite the parties’ mutually submitted claims.
  • Construction work relating to the SH-130 toll road in Texas: The company operating segments 5 and 6 of the SH-130 toll road located between Austin and San Antonio in Texas (US) brought a claim to submit to arbitration a dispute with the Ferrovial Agroman investee Central Texas Highway Contractors, LLC, which built the toll road, and with Zachry Industrial, INC. and Ferrovial Agroman, S.A. as several guarantors on a pro rata basis of the former. The arbitration claim is related to the contract for the design and construction of segments 5 and 6 of the SH-130 toll road entered into in 2007. The concession operator’s general and succinct argument is that there are construction faults and defects, mainly in the toll road’s surface, which it considers to amount to at least USD 130 million, of which 50% (USD 65 million) would be attributable to the ownership interest of Ferrovial Agroman, which would not be jointly and severally liable for the ownership interest of the other shareholder.

    Although the process is in an initial phase and the company has not had access to the arguments used by the claimant, the company’s legal advisers 0consider that the construction work on the toll road was performed in accordance with the provisions of the contract and industry best practices and that, in any case, any potential liability arising from the litigation’s resolution could be reduced by various facts, such as:
    • The construction company is covered by an insurance contract;
    • The liability for the alleged defects should fall to the companies subcontracted by the construction company for both the design and construction of the road surface; and
    • The Texas Department of Transportation and the concession operator appear to have reached an agreement to perform the work to repair the defects for USD 60 million, which is less than 50% of the amount claimed.

      Based on the foregoing, it was concluded that at year-end it was not necessary to recognise a provision in addition to the USD 10 million that the company has already recognised in connection with deferred expenses relating to the guarantee of the construction work performed in this project.
  • Arbitration relating to the Cerrejón project in Colombia: On 24 July 2017, Ferrovial Agroman was served notice of the arbitral award relating to a dispute concerning the construction work of a port for the mining company Cerrejón. The construction consortium in which Ferrovial Agroman held an ownership interest of 50% was ordered to pay compensation of EUR 31 million. Since the consortium was jointly and severally liable and the Colombian partner with which Ferrovial Agroman participated therein was involved in insolvency proceedings, Ferrovial Agroman had to pay all of the compensation and recognised a loss for the aforementioned amount that ultimately gave rise to an outflow of cash.

    The arbitration was instigated as a result of the termination of the contract requested by the construction consortium in February 2013 due to losses arising because of a strike at the mine’s facilities. Based on the legal reports available, it was initially considered that the construction consortium had a very sound case and, therefore, no provision was recognised in relation to the arbitration.

    In the arbitral award, one of the arbitrators expressed a dissenting opinion and argued that the decision contravened Colombian law and the evidence submitted during the process. The construction consortium brought an appeal to set aside the arbitral award at the Supreme Court of Colombia in relation to which a decision has not yet been handed down.

c) Litigation relating to the Services business

The provisions relating to the Services division totalled EUR 91 million at 2017 year-end (2016 year-end: EUR 42 million). The main lawsuits in progress are as follows:

Regarding the Services business in the UK:

  • The main lawsuit in which the company was involved at 31 December 2017 related to the long-term contract entered into by Amey and Birmingham City Council for the rehabilitation and subsequent maintenance and replacement of certain infrastructure in the city up to 2035. On 5 September 2016 a court decision was handed down ruling in Amey’s favour with respect to all the matters disputed by the parties, although the other party requested permission for the case to be heard at the appeal court.

    The disputed matters refer to the scope (Project Network Model and Pavement Management Model) of the construction work performed in the contract’s initial investment phase and the assessment of the achievement of milestones 6 to 9 in the performance of the aforementioned work, which were initially approved by the City Council’s independent adviser and which involved the collection of certain amounts of consideration for achieving the aforementioned milestones.

    During 2017 the company was involved in negotiations with Birmingham City Council to reach an out-of-court settlement, although the Council filed an appeal at the appeal court and the negotiations were finally suspended. On 22 February 2018, the appeal court found against Amey in relation to all the matters and the company intends to appeal against the decision at the Supreme Court.

    At the reporting date the company was assessing the impact that might arise from the outcome of the judgment and had recognised provisions to cover the contingency of the project amounting to GBP 74.4 million, of which GBP 37.9 million relate to the provision recognised in relation to this lawsuit in 2016 and GBP 36.5 million to the portion of the adjustment due to first-time application of IFRS 15 as a result of considering that certain amounts relating to the achievement of milestones 6 to 9 (initially recognised as revenue) did not meet the requirements of that standard at 31 December 2016 since recognition was dependent on the appeal by Birmingham City Council against the judgment of September 2016.
  • The Services business in the UK also received notification of claims by Aggregate Industries, the subcontractor in the Sheffield contract, amounting to GBP 32 million. Of this amount, GBP 21 million relate mainly to claims for delays and additional costs due to the sequence in which the works were executed, and GBP 11 million relate to the new estimates of the work performed. The Group considers that a significant portion of the claim made by the subcontractor, particularly in relation to the first items, has not been proven by Aggregate Industries, which has suspended the claim because it is recalculating the amounts, and it may reactivate it in the coming months. The Group considers that this contingency has been correctly provided for at year-end.

Regarding the Services business in Spain:

  • The Group was involved in a lawsuit in December 2017 in relation to a resolution of the Spanish National Markets and Competition Commission (CNMC) imposing a penalty on the Group companies Cespa, S.A. and Cespa, G.R. and other companies from the waste management and urban cleaning industry for participating in a market share agreement. The penalty imposed on Cespa, S.A. and Cespa, G.R. amounted to EUR 14 million.

    The National Appellate Court announced the judgment on 27 February which upheld in full the appeal lodged by Cespa, considering that there were no grounds for accusing it of participating in a cartel of this type. Since the appeal was upheld in full, the judgment imposed costs on the authorities. The judgment is not final and the Spanish government lawyers may prepare a cassation appeal against it within 30 days. The Group had decided not to recognise any type of provision in this connection since the company’s legal advisers considered that there were robust arguments to challenge the resolution by the CNMC.
  • In addition, through the company Empresa de Mantenimiento y Explotación M-30, S.A. (Emesa) in which it holds a 50% ownership interest, the Group executes the maintenance contract for the M-30 infrastructure and holds a 20% ownership interest in the semi-private company, Madrid Calle 30, the concession operator for that infrastructure. In 2017 Madrid City Council, another shareholder of Madrid Calle 30, set up a municipal investigation committee, whose main recommendations affecting the Group are to reverse the management model of Madrid Calle 30 to the original model of a 100% municipal company, and request the competent Council bodies to study who should be responsible for paying the electricity supply, which to date has been paid by Madrid Calle 30. In the legal advisers’ opinion, there are arguments to justify that the electricity supply should be paid by Madrid Calle 30 and not by Emesa. In addition, if the concession arrangement is terminated early, under the arrangement’s specifications, Emesa’s shareholders would recover the value of the participating loans granted to this company and Emesa would recover the value of the ownership interest in Madrid Calle 30, together with the subordinated loan granted to this company. It should also be noted that Emesa has filed an appeal for judicial review against the resolution by the City Council that approved the investigation committee’s report, and the appeal has been admitted for consideration. Accordingly, the Group has not recognised a provision in this connection.
  • Also, through Ecoparc de Can Mata, S.L.U., the Group has a contract for the construction and operation of a waste treatment centre. In 2017 notification was received from the granting body of the initiation of a proceeding to claim EUR 15.6 million in payments and penalties due to discrepancies regarding the waste recovery percentages and refuse dumping and in relation to the regularisation of the payments made on the basis of the remuneration formulas provided for in the contract. The granting body has also issued a resolution that the billing method to be used from now on should meet the requirements used by it in the proceeding. The Group has filed an appeal against the payments and penalties as well as against the resolution obliging billing to be performed in accordance with the imposed criteria. In the opinion of the company’s legal advisers, the possibility that the requested amounts will have to be paid is considered to be remote and, therefore, the Group decided not to recognise a provision in this connection.

d) Tax litigation

Ferrovial is involved in various tax-related claims, mainly in relation to tax audits in Spain. The most significant claims relate to income tax and VAT for 2002 to 2013 and amount to EUR 311 million. Although the company considers that it has sound arguments to defend its position, it has recognised provisions to partially cover the contingencies in this connection amounting to EUR 254 million, as indicated in Note 6.3.

These claims include the claim relating to the amortisation for tax purposes of financial goodwill arising on the acquisition of foreign companies. Ferrovial has lodged an appeal against the European Commission’s decision of 2014 (“Third Decision”) classifying this tax measure as state aid. Although the core issue has yet to be resolved, in 2017 the tax authorities ordered the recovery of the amortisation recognised between 2006 and 2015, and requested the payment of EUR 37 million which included EUR 8 million of late-payment interest. An account receivable from the tax authorities was recognised as a balancing entry to this payment since it was considered that these amounts will be recovered once a decision in the Group’s favour has been handed down in relation to the appeal. It is important to note that the company has recognised deferred tax liabilities in relation to the goodwill forming the subject-matter of this lawsuit in order to pay a possible refund of the amounts deducted in this regard amounting to EUR 114 million (see Note 2.8.3).

e) Other litigation

In addition to the litigation discussed above, of particular note is the Group continuing to maintain its contractual position vis-à-vis certain tax claims that had been filed by Promociones Habitat, S.A., which was sold by Ferrovial Fisa, S.L. in 2016. These claims are currently pending resolution or payment and a provision for the amount thereof has been duly recognised in the consolidated financial statements.

6.5.2. Guarantees

a) Bank guarantees and other guarantees provided by insurance companies

In carrying on its activities the Group is subject to possible contingent liabilities -uncertain by nature- relating to the liability arising from the performance of the various contracts that constitute the activity of its business divisions.

In order to cover the aforementioned liability, the Group has bank guarantees and other guarantees issued by insurance companies. At 31 December 2017, the balance amounted to EUR 7,472 million (2016: EUR 5,944 million).

The following table contains a breakdown of the risk covered in each business area.

(Millions of euros)

2017

2016

Construction

4,848

4,006

Toll roads

1,165

498

Services

1,109

1,180

Airports

90

7

Other

261

253

TOTAL

7,472

5,944

The increase in these guarantees is due mainly to the guarantees to cover the capital commitments relating to the 166 toll road and to the guarantees granted by bonding agencies in construction contracts in the US.

The EUR 7,472 million, by type of instrument, relate to: i) EUR 3,677 million of bank guarantees; ii) EUR 977 million of guarantees provided by insurance companies; and iii) EUR 2,818 million of performance bonds provided by bonding agencies.

These guarantees cover the liability to customers for correct performance in construction or services contracts involving Group companies. Thus, if a project was not performed the customer would enforce the guarantee.

Despite the significant amount of these guarantees, the impact that might arise on the consolidated financial statements is very low, since the Group companies perform contracts in accordance with the terms and conditions agreed upon with the customers and recognise provisions within the results of each contract for risks that might arise from performance thereof (see Note 6.3).

Lastly, of the total amount of the Group’s bank guarantees listed in the above table, EUR 948 million (see Note 6.5.3) secure its commitments to invest in the capital of infrastructure projects.

b) Guarantees provided by Group companies for other companies in the Group

As mentioned previously, in general there are guarantees provided among Group companies to cover third-party liability claims arising from contractual, commercial or financial relationships.

Although these guarantees do not have any effect at consolidated Group level, there are certain guarantees provided by non-infrastructure project companies to infrastructure project companies (see Note 1.1.2) which, due to the classification of project borrowings as being without recourse, it is relevant to disclose (see b.1. on Contingent capital guarantees).

Other noteworthy guarantees have also been provided to companies accounted for using the equity method (see b.2. below).

b.1) Guarantees provided by non-infrastructure projects to infrastructure projects related to these projects’ debt that could give rise to future additional capital disbursements if the events guaranteed take place (contingent capital guarantees)

Guarantees provided by non-infrastructure projects to infrastructure projects could be divided into the following two categories:

  • Guarantees that address the correct performance in construction and service contracts which have been mentioned in Note 6.5.2-a).
  • Guarantees related to risks other than the correct performance of construction and service contracts, which could give rise to future additional capital disbursements if the events guaranteed take place.

The latter guarantees are the ones that are going to be explained in further detail in this section since, as mentioned in Note 5.2., Net cash position, the borrowings for infrastructure projects are without recourse to the shareholders or with limited recourse to the guarantees provided and, therefore, it is relevant to distinguish those guarantees that if the guaranteed event occurs, could be executed and could result in disbursements to the infrastructure projects or holders of their debt other than the committed capital or investment mentioned in Note 6.5.3. Such guarantees are called contingent capital guarantees.

The detail, by beneficiary company, purpose and maximum amount, of the outstanding guarantees of this nature at 31 December 2017 relating to fully consolidated infrastructure project companies is as follows. It should be noted that the amounts below relate to Ferrovial:

BENEFICIARY COMPANY (PROJECT)

GUARANTEE PURPOSE

AMOUNT

Ausol

Guarantee limited to covering compulsory purchase proceedings for 11 lots in Mijas (EUR 20 million) and the investment to bring tunnels into line with European legislation (EUR 13.7 million).

34

Subtotal guarantees - Cintra projects

 

34

Conc. Prisiones Lledoners

Technical guarantee to repay amounts to the bank in the event of termination of the contract. Does not cover insolvency (default) or breach by the grantor

73

Conc. Prisiones Figueras

Technical guarantee for failure to repay the bank in three specific cases relating to construction permit, General Urban Zoning Plan and modifications. Does not cover insolvency (default) or breach by the grantor

62

Subtotal guarantees - Construction projects

 

134

Servicios Urbanos de Murcia

Technical guarantee to obtain the certificate relating to the permit obtained through administrative silence, activities for the environmental authorisation and grant of a security interest up to a combined limit of EUR 70 million. Technical guarantee made available for vehicles with a limit of EUR 31.9 million.

70

Subtotal guarantees - Services projects

 

70

Total guarantees – fully consolidated infrastructure projects

 

239

The detail of the amounts of the guarantees (corresponding to the Ferrovial Group’s percentage interest) in relation to the financing of the infrastructure projects accounted for using the equity method and, accordingly, the borrowings of which are not included in the Group’s consolidated financial statements is as follows:

BENEFICIARY COMPANY

GUARANTEE PURPOSE

AMOUNT

Serrano Park (Cintra)

Guarantee to cover debt repayment.

2

Auto-Estradas Norte Litoral (Cintra)

Guarantee limited to compulsory purchase overruns.

1

URBICSA (Construction)

Technical guarantee for repayment in the event of termination of the agreement or breach of certain contracts on grounds attributable to the borrower or its shareholders. Does not cover insolvency or breach by the grantor.

47

Total guarantees - infrastructure projects accounted for using the equity method

 

51

Of the aforementioned guarantees detailed by fully consolidated infrastructure projects and infrastructure projects accounted for using the equity method, only bank guarantees are provided to Ausol.

In addition, the Company has provided a guarantee amounting to EUR 14.9 million in relation to the Radial 4 toll road, which was excluded from the scope of consolidation in 2015. This amount had been provided for in full at 31 December 2017 (see Note 6.5.1.a).

b.2) Other guarantees provided to companies accounted for using the equity method other than infrastructure project companies

Certain construction and services contracts are performed by companies accounted for using the equity method often created specifically to perform contracts previously awarded to their shareholders. In these cases, the shareholders of those companies provide performance bonds relating to those contracts. The liability secured is similar to that indicated Note 6.5.2.a.

Notable in this respect are the performance bonds provided by the Services Division for various companies accounted for using the equity method totalling EUR 1,417 million, of which the most significant are those relating to contracts for the UK Ministries of Defence and Justice. It should be noted that the aforementioned amount corresponds to the annual amount of contracts not yet performed in proportion to Ferrovial’s percentage of ownership.

c) Assets pledged as collateral

The assets pledged as collateral are described in the Notes as follows:

  • Pledges of property, plant and equipment, see Note 3.4.
  • Pledges of deposits or restricted cash, see Note 5.2.

d) Guarantees received from third parties

At 31 December 2017, Ferrovial had received guarantees from third parties totalling EUR 1,049 million (31 December 2016: EUR 1,056 million), mainly in the Construction Division in the Ferrovial Agroman companies in the United States (EUR 836 million), the Budimex Group (EUR 114 million) and other construction companies (EUR 106 million).

These guarantees received from third parties relate to technical performance bonds whereby certain subcontractors or suppliers in the Construction business guarantee full performance of their contractual obligations relating to the construction work they are engaged to carry out, and cannot be sold or pledged.

6.5.3. Obligations and commitments

As described in Note 1.1, the infrastructure projects carried out by the Group are performed through long-term contracts where the concession operator is a company in which the Group has interests, either alone or together with other partners, and the borrowings necessary for financing the project are allocated to the project itself, without recourse to the shareholders or with recourse limited to the guarantees provided, under the terms set forth in Note 5.2. From the management viewpoint, therefore, Ferrovial takes into account only the investment commitments relating to the capital of the projects, since the investment in the assets is financed by the borrowings of the projects themselves.

The investment commitments of the Group in relation to the capital of its projects are as follows:

(Millions of euros)

2018

2019

2020

2021

2022

2023 AND SUBSEQUENT YEARS

TOTAL

Toll roads

146

2

0

20

0

0

168

Airports

1

0

18

0

0

30

49

Investments in fully consolidated infrastructure projects

147

2

18

20

0

30

217

Toll roads

14

7

316

237

144

0

719

Services

32

0

0

0

0

0

32

Construction

0

0

0

0

0

0

1

Investments in infrastructure projects accounted for using the equity method

46

7

316

237

144

0

751

Total investments infrastructure projects

193

10

334

256

144

30

968

At 31 December 2017, the investment commitments amounted to EUR 968 million (2016: EUR 1,074 million). This decrease is due mainly to the investments made in US toll road projects in 2017 and the reduced investment commitments relating to the I66 toll road following the financial close (the capital committed to our ownership interest of 50% amounts to EUR 633 million compared to the EUR 723 million estimated in 2016 prior to the financial close).

As indicated in 6.5.2-a), a portion of these commitments, amounting to EUR 948 million, are secured by bank guarantees. The aforementioned amount includes EUR 34 million which are also included in the guarantees mentioned in 6.5.2.b.1), Contingent capital guarantees and which relate to Ausol. It should be noted that only these EUR 34 million were included as investment commitments because an outflow of resources of the other contingent capital relating to other projects as indicated in b.1 above was considered to be unlikely.

In relation to the I-77 toll road project, Ferrovial is guaranteeing the investment commitments of another shareholder amounting to EUR 61 million. In return for providing this guarantee, if the shareholder fails to make the related disbursements, its ownership interest will be diluted in proportion to the disbursements not made.

There are also property, plant and equipment purchase commitments in the Services Division totalling EUR 102 million (2016: EUR 121 million) which relate mainly to the acquisition of machinery or the construction of treatment plants, and EUR 15 million (2016: EUR 5 million) relating mainly to the purchase of two waste treatment companies in Poland and a logistics company in Spain. The schedule of the commitments of the Services Division is as follows:

(Millions of euros)

2017

2018

2019

2020

2021

2022 AND SUBSEQUENT YEARS

TOTAL

Acquisition of property, plant and equipment

38

18

3

35

3

5

102

Acquisition of companies

4

2

3

1

0

6

15

Total services

42

20

6

36

3

11

118

It should be noted that the foregoing commitments of the Services Division are not secured by bank guarantees.

b) Obligations under operating and finance leases

The expense recognised in relation to operating leases in the consolidated statement of profit or loss for 2017 totals EUR 523 million (2016: EUR 412 million).

The future total minimum lease payments for non-cancellable operating leases are shown below:

2017
(Millions of euros)

CORPORATE

CON­STRUCTION

TOLL ROADS

SERVICES

AIRPORTS

TOTAL

Within one year

4

32

3

62

0

100

Between one and five years

17

47

3

114

0

181

After five years

0

4

0

13

0

17

Lessee

21

83

6

189

0

298

2016
(Millions of euros)

CORPORATE

CONSTRUCTION

TOLL ROADS

SERVICES

AIRPORTS

TOTAL

Within one year

4

35

3

97

0

138

Between one and five years

21

47

4

176

0

247

After five years

0

10

0

40

0

50

Lessee

25

92

7

312

0

435

The Group does not have any significant commitments as a lessor under operating leases.

c) Environmental commitments

Any operation designed mainly to prevent, reduce or repair damage to the environment is treated as an environmental activity.

Costs incurred to protect and improve the environment are taken to profit or loss in the year in which they are incurred, irrespective of when the resulting monetary or financial flow takes place.

Provisions for probable or certain environmental liability, litigation in progress and indemnities or other outstanding obligations of undetermined amount not covered by insurance policies are recorded when the liability or obligation giving rise to the indemnity or payment arises. These provisions include most notably the provisions for landfill closure discussed in Note 6.3, the balance of which at 31 December 2017 was EUR 130 million (31 December 2016: EUR 124 million).

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