Pieces of Amey: London’s Telegraph has reported that Ferrovial, the Spanish-based infrastructure giant that owns 25 percent of London’s Heathrow Airport, is pursuing a piecewise sale of its embattled U.K. construction services contractor, Amey.
The news marks the latest leg in Ferrovial’s long offramp from support services as it seeks to focus more on transportation infrastructure assets.
In December, U.K. private equity investor Apax Partners reportedly withdrew from bidding on Ferrovial’s entire global support services arm (which would have included all of Amey). Reportedly at issue was the EUR 3 billion ($3.2 billion) asking price.
Talks to sell just Amey to Greybull, the distressed assets investor in British Steel and Monarch Airlines, fizzled in late 2018 amid a bitter legal dispute between Amey and the city council of Birmingham over the firm’s alleged failure to deliver services as promised on Birmingham’s highways.
At GBP 2.7 billion ($3.5 billion), the PFI deal to service the Birmingham highways was Europe’s biggest road contract at the time.
Fallout from the suit led Ferrovial to drastically write down Amey’s value from GBP 748 million (about $972 million) to GBP 88 million (about $114 million) last year. The Birmingham highway contract has since been taken up by U.K. contractor Kier.
Indicative offers for Amey’s loss-making utilities and environmental services divisions are expected in a matter of weeks. The Telegraph has tipped Greybull and France’s PAI Partners—the reported frontrunners to buy Amey in late 2018—as possible buyers for the two divisions. The newspaper also tipped U.K. business waste servicer Biffa and water utility Pennon Group as possible bidders for Amey’s recycling business.
Running out of runway
The U.K. market has delivered no end of challenges for Ferrovial in recent months. A plan to expand Heathrow Airport—Europe’s busiest hub, in which Ferrovial is the largest shareholder—with the addition of a third runway has been delayed by at least a year due to protests from aviation regulators over project costs.
Earlier this month, London’s City A.M. reported Ferrovial CEO Ignacio Madridejos told investors that the company might “rotate the asset” if Britain’s Civil Aviation Authority (CAA)—the regulator that sets price controls for Heathrow Airport’s licenses—did not approve a sufficient rate of return on the third runway project. Heathrow has requested a spending lift from GBP 650 million ($845 million) to GBP 2.4 billion ($3.1 billion) for the buildout.
All roads lead to…toll roads
In the meantime, Ferrovial is setting its sights on more accommodating market horizons. Earlier this month, Ferrovial unveiled details of its Horizon 24 Plan, an ambitious plan to push into new geographic markets while consistently achieving 11% annual growth in EBITDA between now and 2024. Highways—particularly the company’s North American toll road operations—are expected to drive growth during the period.
Ferrovial currently manages over 1,500 kilometers of toll roads through 25 concessions in Canada, the U.S., Europe, Australia and Colombia. Through its roads subsidiary, Cintra S.A., Ferrovial owns approximately 63% of the North Tarrant Express (NTE) toll road extension connecting Texas Interstate Highway 35Q with the Dallas-Fort Worth Airport area. Ferrovial leads the consortium—which also includes Dutch pension investor APG—that will manage the NTE toll road concession until 2061.
The company is also said to be planning to sell some mature—though as yet unidentified—infrastructure projects to institutional investors. It is thought that Ferrovial plans to reinvest the proceeds into water projects, power grids and mobility projects in new markets like Asia and Latin America.
