2.6 FINANCIAL RESULT

The table below shows the detail of the changes in the financial result from 2015 to 2016. The result of infrastructure projects is presented separately from the result of non-infrastructure project companies and in each of them a further distinction is made between the financial result on financing -which includes the finance costs on bank borrowings and bonds, and the returns on financial assets and loans granted- and the financial result on derivatives and other items, which includes the impact of the fair value measurement of ineffective hedges and other income and expenses not related to financing.

1. The financial result on the financing of the infrastructure project companies: amounted to EUR -305 million in 2016 (31 December 2015: EUR -463 million). Of this net result, EUR -306 million relate to these companies’ borrowing costs, which were offset slightly by the interest earned on cash and cash equivalent and non-current financial asset balances (mainly restricted cash) amounting to EUR 1 million. The financial result on financing also includes the effect of capitalised borrowing costs relating to construction projects, the detail being as follows:

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   Financial result on financing of infrastructure projects
   (Millions of euros)	2016	2015
   Accrued finance income and costs	-341	-523
   Borrowing costs capitalised during the construction period	36	60
   Finance costs and income recognised in profit or loss	-305	-463

   The improved financial result on financing is due mainly to the sale of the Chicago Skyway toll road in February 2016 (see Note 1.1.3). In 2015 this company contributed a result on financing of EUR -114 million, compared to the EUR -20 million recognised in 2016 until the date of disposal.

2. Other financial results of infrastructure projects: include the result on derivatives and other fair value adjustments, primarily as a result of ineffective derivatives, most notably Autopista del Sol (EUR -11 million) (see Note 5.5, Derivatives). The other financial results include exchange differences and other results considered to be of a financial nature but not directly related to financing.

   It must be noted that in 2015 the impacts of the discontinuation of the hedges qualifying for hedge accounting of the SH-130 toll road (EUR -139 million) were recognised under this heading and, as in 2016, those of Autopista del Sol (EUR -48 million).

3. The financial result on financing excluding infrastructure projects in 2016 amounted to EUR -49 million (31 December 2015: EUR -35 million), corresponding to borrowing costs (EUR -92 million) net of the interest obtained mainly from financial investments (EUR 43 million). The worsening vis-à-vis 2015 is related mainly to the borrowings to fund the purchase of the Australian company Broadspectrum (see Note 5.2.2).

4. Other financial results excluding infrastructure projects include the impact of derivatives and other fair value adjustments relating mainly to the impact of the derivatives considered to be ineffective, including most notably the equity swaps arranged by the Group to hedge the impact on equity of the share option plans (see Note 6.7), with a negative impact in 2016 of EUR -18 million due to the decrease in the share price.

   Excluding the impact of derivatives, the detail of other financial results excluding infrastructure projects is as follows:

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   Other financial results excluding infrastructure projects
   (Millions of euros)	2016	2015	Change 16/15
   Cost of guarantees	-30	-34	4
   Late-payment interest	12	20	-8
   Interest on loans to companies accounted for using the equity method	24	25	-1
   Other	-11	1	-12
   TOTAL	-4	12	-16

5. Impact on cash flows

   As can be observed in the following table, the difference between the financial result due to financing and the interest cash flows reported in the statement of cash flows is not significant.

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   (Millions of euros)	Financial result due to financing	Interest cash flows	Difference
   Infrastructure projects	-305	-303	-2
   Excluding infrastructure projects	-49	-48	-1
   TOTAL	-354	-351	-3

   However, it must be borne in mind that opposite sign effects are offset at infrastructure project level, since although borrowing costs of EUR 36 million incurred on projects under construction were capitalised, giving rise to a reduction in the result compared to the amount recognised, this is offset by the accrual of certain borrowings on which interest is added to the principal in the first few years.