5.2 CONSOLIDATED NET DEBT

a) Cash and cash equivalents and restricted cash

Infrastructure project financing agreements occasionally impose the obligation to arrange certain restricted accounts to cover short-term or long-term obligations relating to the payment of the principal or interest on the borrowings and to infrastructure maintenance and operation.

Restricted cash is classified as short-term or long-term depending on whether it must remain restricted for less than or more than one year. In any event, these funds are invested in highly-liquid financial products earning floating interest. The type of financial product in which the funds may be invested is also restricted by the financing agreements or, where no restrictions are stipulated, the decision is made on the basis of the Group’s policy for the placement of cash surpluses.

Short-term balances, which amount to EUR 58 million (31 December 2016: EUR 62 million), are recognised under “Cash and Cash Equivalents” in the consolidated statement of financial position whereas long-term balances, of EUR 285 million (31 December 2016: EUR 249 million), are classified as financial assets. Therefore, the restricted cash at 31 December 2017 amounted to EUR 343 million (December 2016: EUR 311 million), including both long- and short-term amounts. Accordingly, there was a net change of EUR 32 million, due to:

• An increase therein of EUR 63 million (excluding the exchange rate effect), mainly at the NTE and LBJ toll roads (EUR 35 million and EUR 22 million, respectively), as a result of the business’ operations, and at Autopistas del Sol C.E.A.S.A., amounting to EUR 7 million, in relation to debt servicing and future investments.
• The exchange rate effect, which had a negative impact of EUR -31 million, arose mainly due to fluctuations in the US dollar (see Note 1.4).

The other cash and cash equivalents relate to bank accounts and highly-liquid investments subject to interest rate risk.

b) Infrastructure project borrowings

b.1) Breakdown by project, significant changes in the year and main characteristics of the borrowings

Following is a breakdown of the borrowings by project, distinguishing between bonds and bank borrowings, short- and long-term, and of the changes in the year.

Following is a detail of the changes in gross debt of the infrastructure projects, detailing the changes in borrowings with a balancing entry in cash flow, the exchange rate effect and changes in the scope of consolidation, together with the changes in debt due to the accrual of interest, which do not give rise to changes in cash flows in the year.

Infrastructure project borrowings increased by EUR 61 million with respect to December 2016, due mainly to the following:

• Exchange rate effect amounting to EUR -441 million, mainly due to the decline in value of the US dollar (EUR -433 million).
• Additional drawdowns against the borrowings already arranged at the end of 2016 and interest accrual and addition of interest to debt principal, for a net amount of EUR 501 million, of which:
  • Issue of a bond amounting to USD 189 million by Denver Great Hall, the company awarded the project to design, construct and operate Denver International Airport’s main terminal.
  • As regards the US toll roads, EUR 149 million relate to the NTE-Segment 3 toll road, EUR 127 million to I-77 Mobility Partners LLC, EUR 38 million to the LBJ toll road and EUR 31 million to the NTE toll road.
  • EUR -17 million relate to the Spanish toll roads, including most notably Autopista del Sol (EUR -17 million), mainly due to the repayment of borrowings (EUR -11 million).
  • A decrease of EUR 17 million in the Services Division, mainly in Spain due to debt repayments, including most notably Ecoparc de Can Mata.

US toll roads:

North Tarrant Express Managed Lanes – NTE

This project is financed through a USD 400 million issue of Private Activity Bonds (PABs) with final maturity in 2039 (USD 60 million bearing fixed interest at 7.50% of which EUR 29 million mature in 2030 and EUR 31 million in 2031 and USD 340 million bearing fixed interest at 6.875% with final maturity in 2039). It also has a TIFIA loan of USD 794 million bearing fixed interest at 4.52% (USD 650.0 million of principal and USD 144 million of interest added to the principal) granted by the US Federal Government, which was drawn down in full at 31 December 2017 and has a repayment profile from 2035 to final maturity in 2050.

NTE Mobility Partners Seg 3 LLC

The borrowings for this project were structured through the issue of USD 274 million of Private Activity Bonds (PABs), maturing at 25 and 30 years (7.00% fixed interest on USD 128 million and 6.75% fixed interest on USD 146 million), and a TIFIA loan of USD 531 million bearing a fixed rate of 3.84%, against which USD 452.2 million had been drawn down at 31 December 2017 (USD 430.5 million of principal and USD 21.7 million of interest added to the principal), with final maturity in 2054.

LBJ

This concession operator is financed through a USD 615 million issue of PABs with final maturity in 2040 (7.00% fixed interest on USD 473.5 million, of which USD 419 million have final maturity in 2040 and USD 54.5 million in 2034; and 7.50% fixed interest on USD 142 million, of which USD 91 million have final maturity in 2032 and USD 51 million in 2033). LBJ also has a TIFIA loan of USD 850 million granted by the US Federal Government with a repayment profile from 2036 to 2050, against which USD 1,034.4 million had been drawn down at 31 December 2017 (USD 850 million of principal and USD 184.4 million of interest added to the principal). This loan bears interest at a fixed rate of 4.22% and has final maturity in 2050.

I-77 Mobility Partners

This concession operator is financed through a USD 100 million issue of PABs (5.00% fixed interest), of which USD 7 million have final maturity between 2026 and 2030, USD 13 million have final maturity in 2037 and EUR 80 million have final maturity in 2054. It also has a TIFIA loan of USD 189 million against which USD 192.8 million had been drawn down at 31 December 2017 (USD 189.0 million of principal and USD 3.8 million of interest added to the principal). This loan bears interest at a fixed rate of 3.04% and has final maturity in 2053.

Spanish toll roads:

Ausol I and II

The borrowings are structured in the form of senior bonds and debentures for EUR 507 million maturing in 30 years with a coupon of 3.75% (EUR 351.5 million for AUSOL I and EUR 155.5 million for AUSOL II) and a junior loan of EUR 50.8 million maturing in 10 years with a fixed interest rate of 7% (EUR 35.2 million for AUSOL I and EUR 15.6 million for AUSOL II).

The outstanding borrowings at 31 December 2017 amounted to EUR 499.2 million of senior bonds and EUR 29.4 million of the junior loan.

Cintra Inversora Autopistas de Cataluña / A. Terrasa Manresa

The company is now financed through a credit facility with a tranche A and a tranche B with limits of EUR 300 million and EUR 316 million, respectively, both bearing interest at 6-month EURIBOR of -0.271%+1.50%. Both tranches have been drawn down in full and have final maturity in 2035. The company has also been granted a liquidity line of EUR 80 million, against which it has drawn down EUR 42.8 million (bearing interest at 6-month EURIBOR of -0.271%+1.50%). It should also be noted that this company has a derivative with a notional amount of EUR 604 million, a guaranteed interest rate of 5.132% and maturity in 2035. The fair value of the derivative arranged (recognised under “Derivative Financial Instruments at Fair Value”, see Note 5.5) was EUR -277.5 million at year-end.

Portuguese toll roads:

Euroscut Azores

Syndicated bank financing with final maturity in 2033, against which EUR 332.6 million had been drawn down at 31 December 2017 (bearing interest at 6-month EURIBOR of -0.27%+0.85%). In relation to these borrowings, the concession operator has arranged a derivative with a notional amount of EUR 287.0 million, a guaranteed fixed interest rate of 4.115% and maturity in 2033. The fair value of the derivative arranged (recognised under “Derivative Financial Instruments at Fair Value”, see Note 5.5) was EUR -79.4 million at year-end.

Detail of other projects:

Other infrastructure project borrowings increased by EUR 153 million with respect to December 2016 due mainly to the financing of the project for the remodelling and commercial operation of the Jeppesen Terminal of Denver airport (see Note 1.1.3). This financing was realised through the issue, on 21 December 2017, of a bond for USD 189 million with 5% fixed interest and final maturity in 2049.

b.2) Maturities by currency and fair value of infrastructure project borrowings

The differences between the total maturities of the bank borrowings (EUR 5,615 million) and the carrying amounts thereof at 31 December 2017 (EUR 5,570 million) are explained mainly by the difference between the nominal values and carrying amounts of the debts, as certain adjustments are made in accordance with applicable accounting legislation. Thus, the accrued interest payable and the application of the amortised cost method represent an impact of EUR 45 million, taking into account that the maturities of the borrowings do not include interest.

The fair value reflected in the table above is calculated as follows:

• For fixed-rate bonds, subject to changes in value due to fluctuations in market interest rates: since they are quoted in an active market, the related market value is used.
• For fixed-interest bank borrowings, also subject to changes in value due to fluctuations in rates: future cash flows are discounted using a market interest rate, calculated using an internal valuation model.
• Lastly, for floating-rate bank borrowings: no significant differences are deemed to exist between the fair value of the borrowings and their carrying amount and, therefore, the carrying amount is used.

b.3) Information on credit limits and credit drawable for infrastructure projects

Set forth below is a comparative analysis of borrowings not drawn down at year-end:

The differences between the total bank borrowings drawn down and the carrying amount of the related debt at 31 December 2017 are explained mainly by the difference between the nominal values and carrying amounts of the debts, as certain adjustments are made in accordance with applicable accounting legislation (basically accrued interest payable and the application of the amortised cost method, which are detailed in point b.2 above).

Of the EUR 116 million drawable (31 December 2016: EUR 430 million), EUR 84 million relate mainly to amounts not drawn down against borrowings that were obtained to finance toll roads under construction in the US. It should be noted that this drawable amount is associated exclusively with the projects, based on the nature and performance thereof, as discussed below.

b.4) Guarantees and covenants for project borrowings

The borrowings classified as project borrowings are without recourse to the shareholders of the projects or with recourse limited to the guarantees provided. The guarantees provided by subsidiaries of Ferrovial in connection with the borrowings of these projects are described in Note 6.5, Contingent liabilities.

At 31 December 2017, all the concession operators were achieving the significant covenants in force. However, it should be noted that at AmeyCespa (MK) SPV Limited, concession operator of a waste plant in the United Kingdom, there was a delay in the repayment of the debt (EUR 145 million at the end of 2017) due to the delay in collection by the client. It is estimated that the debt will finally be repaid in March 2018.

a) Borrowings of non-infrastructure project companies

a.1) Breakdown between current and non-current borrowings, changes in the year and main characteristics

Following is a detail of the changes in the gross debt of non-infrastructure projects, detailing the changes in borrowings with a balancing entry in cash flow, the exchange rate effect and changes in the scope of consolidation, together with the changes in debt due to the accrual of interest, which do not give rise to changes in cash flows in the year.

a.1.1) Corporate debt:

The corporate debt comprises the following debt instruments:

• On the one hand, the debt consists of five corporate bonds the carrying amount of which totals EUR 2,323 million at 31 December 2017 (31 December 2016: EUR 1,824 million). The characteristics of these bonds are as follows:

The bonds issued in 2013 are traded on the secondary market of the London Stock Exchange, while those issued in 2014, 2016 and 2017 are admitted to trading on the Spanish AIAF fixed-income market. All these issues are guaranteed by Ferrovial S.A., the Parent of the Group. It should be noted that the Group has interest rate derivatives associated with the corporate bonds, with a notional amount of EUR 250 million; these derivatives convert the fixed interest rate into a floating one, see Note 5.5.

• On the other hand, the Group has a liquidity facility, negotiated in 2014 with a series of creditor banks, with a current limit of EUR 1,250 million (31 December 2016: EUR 1,250 million), against which EUR 232 million have been drawn down, which matures in March 2022. The foreign currency and interest rate risks on these borrowings were hedged using the cross currency swaps described in Note 5.5, guaranteeing a hedged notional amount of EUR 250 million at a fixed interest rate of -0.4390%, thus giving rise to income for the Group.

Also, the Group has other facilities negotiated in 2017 with a current limit of EUR 175 million (31 December 2016: EUR 20 million) against which EUR 18 million have been drawn down.

The interest rate negotiated is tied to EURIBOR plus a spread based on the average rating assigned to the borrowings of Ferrovial S.A., the Parent of the Group.

Information on the credit limits and credit drawable of the corporate debt

The detail of the limits and the amounts drawable of the corporate debt at 31 December 2017 and at 31 December 2016 is as follows:

Corporate credit rating

The credit rating agencies Standard & Poor’s and Fitch maintained their opinions on the credit rating of Ferrovial’s corporate debt at December 2017, which was assigned ratings of BBB and BBB with a stable outlook, respectively, and, therefore, came under the “investment grade” category.

a.1.2) Broadspectrum borrowings

Broadspectrum’s borrowings in 2017 amount to EUR 123 million (2016: EUR 475 million). This decrease is due to the partial repayment in 2017 of the debt assumed in the purchase of Broadspectrum in 2016. In particular, in May the Company repaid its high yield bonds amounting to USD 325 million (net amount of the cross-currency swap). This transaction helped to optimise the company’s financial position by repaying borrowings with an annual coupon of 8.375%.

a.1.3) Other borrowings

“Other Borrowings” of EUR 102 million (31 December 2016: EUR 103 million) include mainly the bank loans and finance leases of the Construction and Services Divisions (excluding Broadspectrum, see point a.1.2. above). Thus, the non-infrastructure project companies have finance leases of EUR 54 million (31 December 2016: EUR 41 million), mainly in the Services and Construction Divisions.

Information on limits and amounts drawable – Other borrowings:

The detail of the limits and the amounts drawable of the other borrowings at 31 December 2017 and at 31 December 2016 is as follows:

The differences between total bank borrowings and the carrying amount thereof at 31 December 2017 are explained mainly by the difference between the nominal values and carrying amounts of the debts, as certain adjustments are made in accordance with applicable accounting legislation.

a.2) Maturities by currency and fair value of borrowings excluding infrastructure projects

The differences between the total maturities of borrowings and the carrying amounts of the debt at 31 December 2017 are explained mainly by the difference between the nominal values and carrying amounts of the debts, as certain adjustments are made in accordance with applicable accounting legislation (basically accrued interest payable and the application of the amortised cost method).

The fair value of bank borrowings excluding infrastructure projects coincides with the related carrying amount because the borrowings are tied to floating market interest rates and, therefore, changes in the benchmark interest rates do not affect their fair value.

As regards corporate bonds: since they are quoted in an active market, the related market value is used.

Based on the aforementioned criteria, the estimated total fair value of bank borrowings and bonds excluding infrastructure projects was EUR 2,632 million at 31 December 2017 (31 December 2016: EUR 2,735 million).

The 2018 maturities amount to EUR 541 million and relate mainly to the maturity of the first corporate bond for EUR 500 million and borrowings associated with Broadspectrum, of EUR 34 million, and Inagra, S.A., totalling EUR 6 million. The debt maturities do not include interest.

b) Cash and cash equivalents of other companies

Although in general the method used to classify the cash and cash equivalents at short- and long-term coincides with that used in the preparation of the consolidated financial statements for 2016, in 2017 certain Canadian dollar and US dollar forwards hedging deposits in those currencies, which are recognised under “Current Derivative Financial Instruments at Fair Value”, were included as an addition to the net cash position.

Also, at 31 December there were certain restricted accounts totalling EUR 31 million (31 December 2016: EUR 37 million) associated mainly with the developments in progress of Budimex.