Notes to the consolidated financial statements

Notes to the consolidated financial statements

The Company's business and scope of consolidation

Companies comprising the Group and their business operations 

Grupo Ferrovial (hereinafter the Ferrovial Group or Ferrovial) comprises the parent company Grupo Ferrovial, S.A. and its subsidiaries, which are detailed in Exhibit I. Its registered office is at Príncipe de Vergara 135, Madrid.

Through these companies, the Group engages in the following lines of business, which are its primary reporting segments under IAS 14:

  1. Construction and execution of all types of public and private works in Spain and abroad, operating basically through Ferrovial Agromán, S.A., the company that heads this business division. The international business carried out in Poland through Budimex, S.A. and subsidiaries, the leading construction group in that market, which is listed on the Warsaw stock market and in which the Ferrovial Group holds a 59.06% interest, is notable, as is the business carried out in the United States (Texas) through the Webber Group, which is wholly owned by Ferrovial.

  2. Toll roads and Car parks. This activity consists of developing, financing, executing and operating toll road and car park projects through Cintra, S.A., a company listed on the Madrid Stock Exchange in which Grupo Ferrovial, S.A. holds a total direct and indirect interest of 65.03%.

  3. Airports. This activity consists of developing, financing and operating airports, basically through BAA plc, a British company that operates, through its investees, seven airports in the United Kingdom and other airport assets; Grupo Ferrovial, S.A. indirectly holds 61.06% of BAA plc.

  4. Services. This division is headed by Ferrovial Servicios, S.A. and is divided into the following activities: a) Repair and maintenance of infrastructures, buildings and facilities (through Amey, Plc and Tube Lines, Ltd in the UK, and Grupisa, S.A. and Ferrovial Servicios, S.A. in Spain); b) Municipal services and waste treatment (basically through Cespa, S.A.); and c) Airport handling (through the Swissport Group).

In addition to the description of the Group's activities, it is important to note, for the purpose of understanding these financial statements, that a significant part of the business carried out by the Toll roads and Car parks, Airports and Services Divisions consists of infrastructure project development.

These projects are conducted under long-term contracts where the concession holder, in which the Group generally participates together with other partners, finances the construction or rehabilitation of public infrastructures, or acquires the right to operate a pre-existing infrastructure, and subsequently operates and maintains the infrastructure, recovering the investment by collecting a toll or price regulated by a public entity (Toll roads and car parks and Infrastructure Divisions), or maintains the infrastructure and renders related services, in accordance with the requirements of the granting authority, and recovers the investment through fixed and variable payments based on the services rendered, the quality of these services and the availability of the asset for use (Services Division).

In some cases, these contracts are subject to concession contracts and therefore have a limited term (basically in the toll road business); the assets revert to the administration when the contract expires.

Unlike the toll road business, the majority of airport business licenses have an indefinite term.

Airport contracts may be divided into regulated airports and unregulated airports.

As regards regulated airports, although the indefinite nature of the projects distinguishes them from ordinary concession arrangement, the contracts are similar to concession contracts:

  • Prices are fixed by a regulator based on the yield from the assets directly used in airport operations. The value of the assets used to calculate the yield and determine the prices is referred to as the RAB (Regulated Assets Base) in the case of the UK's regulated airports.

  • The regulator stipulates the main operating criteria in connection with the assets.

  • The regulator also establishes the investment that must be made.

  • Even for residual value purposes, the fact that certain assets used in the business may be sold to third parties affects the calculation of the yield to be recognised by the regulator on the remaining assets.

In the case of unregulated airports, the prices are not fixed by a regulator.

One final point to be considered in relation to infrastructure projects is the fact that they are largely financed by means of specific debt, which is generally secured only by the project's own flows. 

Accordingly, and in order to clarify the Group's financial evolution, these financial statements present separately the impact of this type of projects on both non-financial assets (the item "Investments in infrastructure projects" includes property, plant and equipment, intangible assets and investment properties allocated to these projects) and on non-current financial assets, debt and cash flows.

The following consolidation scope changes took place during 2007:

Airports business:

In February 2007, Ferrovial Aeropuertos, S.A. sold its 20.9% shareholding in the company holding the rights to Sydney Airport.

BAA plc, a subsidiary of Ferrovial Infraestructuras, S.A., sold its 75% interest in Budapest Airport in June 2007 and certain minority interests in Australian airports in November 2007.

Toll roads and Car parks business:

The company SH-130 Concession Company LLC was formed, Cintra S.A. (Ferrovial Group's subsidiary) having acquired a 65% interest. This company will manage the project awarded Cintra, S.A. to operate a toll road in Texas (USA), which will entail an investment of approximately 1,300 million USD.

The company Eurolink Motorway Operation (M3) Ltd was formed and is 95% owned by Cintra S.A. This company will manage the project to operate the M3 toll road in Ireland.

In December 2006, a concession contract was signed to build and operate the Nea Odos, S.A. toll road in Greece; Cintra, S.A. has a 33.34% interest in this company. Nea Odos, S.A. was included in the consolidation scope in August 2007 on a proportionate basis.

During December 2007, Grupo Ferrovial, S.A. acquired a 3% interest in its subsidiary Cintra, S.A. to hold a total direct and indirect interest of 65.03%.

Other activities:

In September 2007, the sum of 125 million euro was invested to acquire a 20% shareholding in Promociones Hábitat, S.A. This investment is the result of the commitments acquired by Ferrovial when its real estate division was sold to Promociones Hábitat in December 2006.