Ferrovial (owns 25% of Heathrow) halts future UK investment over Brexit – but will keep on with Heathrow

The Spanish company that owns 25% of Heathrow has said that uncertainty over the UK’s exit from the EU has put a halt on future UK investment deals.  It is not investing more, but it is not divesting either. Ferrovial’s Chairman Rafael del Pino said that though investment in Heathrow is not in doubt, he saw “no opportunities” in the UK in terms future merger and acquisition deals.  However, Ferrovial hopes Brexit would have “positive side effects”, including “a more favourable view of Heathrow expansion” – in fact the current government is so panicked by Brexit that it is desperate to try to show the world Britain is “open for business” by building a new runway, largely as a symbolic gesture.  As well as a 25% stake in Heathrow, Ferrovial also owns stakes in Glasgow, Aberdeen and Southampton airports. Those help make the UK one of Ferrovial’s most important markets, with about 30% of its revenue generated here.  Del Pino said Ferrovial viewed the Brexit process “prudently”, not just because of its effect on the UK “but also throughout Europe”, as nobody knows what the consequences will be.  Last month, Heathrow’s investors said they would invest £650 million in Heathrow. Not a lot seeing they have taken £2.1 billion in dividends since 2012, and paid hardly any corporation tax.
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Heathrow owner halts future UK investment over Brexit

6.4.2017 (BBC)

The Spanish owner of Heathrow airport has said that uncertainty over the UK’s exit from the EU has put a halt on future UK investment deals.

Although investment in Heathrow is not in doubt, Ferrovial chairman Rafael del Pino said he saw “no opportunities” in the UK, Spain’s ABC newspaper reported.

Brexit may even have “positive side effects”, including a more favourable view of Heathrow expansion, he added.

The comments referred to future merger and acquisition deals, Ferrovial said.

A public consultation on a third runway at Heathrow ends on 25 May.

Later this year or early next year, MPs are expected to be asked to vote on the runway. It would end decades of debate over how to expand airport capacity in south-eastern England.

Ferrovial also owns stakes in Glasgow, Aberdeen and Southampton airports.

Those businesses help make the UK one of Ferrovial’s most important markets, with about 30% of its revenue generated in the country.

However, Mr del Pino is taking a “prudent” attitude to the UK.

“Nobody, not even the UK, knows how the process and consequences will be carried out,” he said.

http://www.bbc.co.uk/news/business-39512027

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“We do not invest more in the UK, but we do not divest either,” he said at the group’s general meeting of shareholders.

Del Pino said the company viewed the process “prudently”, not just because of its effect on the UK “but also throughout Europe”, as nobody knows how Brexit will unfold and the consequences it will have.

Ferrovial, which also owns stakes in Glasgow, Aberdeen and Southampton airports, makes around 30% of its revenue in the country.

He did though, add that Britain leaving the European Union may have “positive side effects”, including the “most favourable attitude” of the government to expand London Heathrow Airport.

Last month, the London airport announced its shareholders, including Ferrovial, Qatar Investment Authority, GIC and the China Investment Corporation, were pressing ahead with plans to invest an additional £650m into the airport over the course of 2019.

http://www.cityam.com/262492/heathrow-owner-ferrovial-puts-brakes-uk-investment-because

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Heathrow’s ownership:

Heathrow Airport Holdings Limited is in turn owned by FGP Topco Limited, a consortium owned and led by the infrastructure specialist Ferrovial S.A. (25.00%), Qatar Investment Authority (20.00%), Caisse de dépôt et placement du Québec (CDPQ) (12.62%), GIC (11.20%), Alinda Capital Partners of the United States (11.18%), China Investment Corporation (10.00%) and Universities Superannuation Scheme (USS) (10.00%).


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In its annual report, Ferrovial said the situation “remains difficult” in the UK for its services division due to budget cuts at some of its clients – predominantly local governments – and because of the uncertainty generated by Brexit.

“In this sense Amey launched in 2016 a restructuring plan [Fit 4 Future], to adapt the company to the new environment,” Mr del Pino said.

Mr del Pino also noted that while initial estimates for the performance of the UK economy made following the referendum predicted a “considerable GDP easing” with a possible short-term slowdown, these estimates had “been tweaked toward a more optimistic outlook”.

Heathrow is Ferrovial’s largest asset in the UK but Mr del Pino believed forecasts for a potential slowdown in the British economy were “not expected to significantly affect its activity” given its size and importance, and the fact it is already running at full capacity.

The UK makes up roughly 30pc of Ferrovial’s turnover, rising to 38pc if dividends are counted. Besides Heathrow, Ferrovial has a 50pc stake in Glasgow, Aberdeen and Southampton airports, and owns infrastructure company Amey and construction firm Ferrovial Agroman UK.

In spite of Mr del Pino’s comments on further investments, in fact Heathrow’s overseas backers recently pledged £650m in investments for major projects likely to include the expansion of Terminal 2 and a new southern access tunnel for road traffic to the airport.

The Government is currently consulting on the proposed expansion of Heathrow, a process that should end on May 25. After September, the Transport Select Committee is expected to conclude its separate inquiry and the Department for Transport will finalise its national policy statement. This will be presented to Parliament and voted on.

It is expected legal challenges to the expansion of the airport could be launched at this point.

http://www.telegraph.co.uk/business/2017/04/06/heathrows-largest-shareholder-sees-positive-side-effects-brexit/

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Sunday Times reports how Heathrow has paid its owners dividends of £2.1 billion since 2012 – but just £24 million in Corporation Tax

The Sunday Times reports that Heathrow has paid its owners back £2.1 billion in dividends, starting in 2012. But it has only paid a total of £24 million in corporation tax since 2006, with that payment being last year. Heathrow’s owners are rewarded whenever the value of the airport increases. If new airport infrastructure is built, the passengers pay for it through the £20 cost on their ticket (and other spending), and the owners benefit.. The CAA calculates how much is spent on investment, and allows Heathrow’s investors to earn a return on the total. The more Heathrow spends, the more its backers can earn. If Heathrow was to spend £17.6 billion on its expansion, the value of the airport would be considered to have increased that much. Due to the huge debts Heathrow has (£12.5 billion out of the £16 billion Ferrovial paid in 2006) the airport’s banks prevented dividends to owners, until 2012. They got £240 million in 2012, which has risen to £2.1 billion. Some of the proceeds of the sale of Gatwick, Edinburgh etc has been used for dividends. The Sunday Times says: …”with a debt-to-assets ratio of about 85% is one of the most heavily indebted airports in the world.” Heathrow will have to recoup the money by high passenger charges, years before the runway is built and open, as otherwise Heathrow’s massive investors are not prepared to take the financial risk. Heathrow is no longer a company quoted on the stock exchange, but that could happen in future.

http://www.airportwatch.org.uk/2016/01/sunday-times-reports-how-heathrow-has-paid-its-owners-dividends-of-2-1-billion-since-2012-but-just-241-million-in-corporation-tax/

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