Earnings Transcript for HOT.DE - Q3 Fiscal Year 2024

Mike Pinkney: Good afternoon to everyone, and thanks for joining us for this HOCHTIEF Results Call for the First Nine Months of 2024. I'm Mike Pinkney, Head of Capital Markets Strategy, and I'm here with our CEO, Juan Santamaria; and our CFO, Peter Sassenfeld; as well as our Head of IR, Tobias Loskamp; and other colleagues from the senior management team at HOCHTIEF. We look forward to taking your questions later. But to kick off, our CEO is going to run us through the details of this strong set of numbers and provide you with an update on the group strategy. Juan, all yours.

Juan Santamaria: Thank you, Mike and team. Good afternoon to everyone, and thanks for joining us. HOCHTIEF has delivered a solid performance during the first nine months of 2024, marked by a firm increase in profits, sales and net operating cash flow. This growth is supported by the continued strong expansion of our order book, driven by a further significant rise in new orders, particularly in our strategic growth markets. Furthermore, the group has made important progress in its strategic development with several important transactions. Let's run through the key financial highlights of the first nine months. Group sales of €23.6 billion show a 7% increase year-on-year. HOCHTIEF's operational net profit rose by 12% to €450 million or 18% on a comparable basis. The nominal net profit of €579 million, up 61% year-on-year, was driven mainly by the strong operational profit growth and a €147 million one-off noncash gain net of provisions in the second quarter. In terms of cash generation and looking at the last 12 months, operating cash flow stands at a high level of around €1.8 billion. HOCHTIEF ended September with a net debt position driven by strategic capital allocation decisions taken during the period as well as seasonality effects year-to-date. The strong growth trend in project wins has continued with new orders up 15% year-on-year to €32.1 billion. On the cash flow front, it's worth noting the following, the last 12 months performance with operating cash flow of €1.8 billion implies an increase of over €430 million year-on-year and underlines the strong cash generation the group is delivering. If we consider just the nine months of 2024, HOCHTIEF cash flow shows a €64 million year-on-year improvement after next CapEx and leases. On the next slide, we can see the movement in net cash debt. HOCHTIEF ended the period with a net debt position of €1.66 billion, driven by the strategic investment decisions taken so far in 2024 and seasonality. The year-on-year variation, which we show in the chart is affected by several factors. The full consolidation of this following the acquisition of an additional 10% stake, the Abertis capital increase where HOCHTIEF subscribed €260 million for its 20% share, bolt-on M&A, FX effects of over €200 million and the HOCHTIEF dividend of €331 million, which we distributed in July. Adjusting for these impacts, net cash would now stand at €790 million, and this would imply a year-on-year increase of almost €860 million. Let's take a closer look at new orders, where the group's order backlog ended September 2024 at a record level of €66 billion. This represents an increase of 18% year-on-year or 10% on a comparable basis, adjusting for the consolidation impact of this. This strong growth in our order book reflects the group's success in securing a significant increase in new orders, up 15% year-on-year, particularly of advanced tech, energy transition and sustainable infrastructure projects. Strategic growth markets accounted for around 50% of the new work won during the period and continue to offer very substantial revenue growth opportunities going forward. Turning to the performance on a segment level, let me mention some of the key highlights. On sales of €13.6 billion, up 14%, Turner achieved an operational PBT of €393 million for the first nine months of the year. This level of profit represents a very impressive increase of almost 40% year-on-year or over €110 million in absolute terms. Turner has increased its operational PBT margin by 50 basis points to 2.9% in the period, compared with 2.4% in the first nine months of 2023. And during the both second and third quarters, Turner has delivered a 3% margin. Margin expansion has been driven by Turner's successful strategy on advanced technology project opportunities and SourceBlue supply chain service solutions. The company achieved very strong and sustained growth in new orders up 32% to €19.3 billion and a new record backlog of over €30 billion. At CIMIC, operational PBT of €312 million was up 4% on a comparable basis year-on-year. Operational net profit increased by 10% to €187 million, whilst nominal net profit reached €334 million, which includes the second quarter one-off noncash gain of €147 million net of provisions. And CIMIC delivered a robust order backlog progression with 6% growth year-on-year to €24.6 billion. At our Engineering & Construction segment, sales increased by 12% year-on-year to €2.75 billion. Operational PBT was stable at €61 million with some project mix effects at the margin level. The E&C order backlog of almost €11.1 billion was up slightly year-on-year with new orders of €3.2 billion solid at over 1.1x work done. During nine months 2023, two major European project wins totaling over €1 billion were secured. And looking at Abertis, average daily traffic was up 1% during the first nine months with operating revenues rising 9% and EBITDA up 10%, supported by solid tariff increases. Operational net profit pre-PPA amounted to €605 million at a similar level to last year. The nominal net profit figure incorporates the impact of the early termination of the Texas toll road. So let me move on and give you an update on the strategic front. Infrastructure sector investment is undergoing an unprecedented and multiyear transformation driven what I like to term before these, digitalization, demographics, decarbonization and legalization. HOCHTIEF has positioned itself as a leading infrastructure and services provider to meet the rising demand that is being driven by these megatrends. We're achieving this not just as a developer, but also as an equity investor and operator. And this is consistent with our overall group objective to deliver an attractive level of shareholder remuneration and create long-term value by, first, generating cash back profits whilst maintaining a low-risk profile. Second, further expanding our presence in strategic growth markets; and third, also by investing equity in greenfield infrastructure projects accompanied by selective M&A. We're delivering on our strategy and are well positioned for current and future opportunities. For example, HOCHTIEF has carried out several significant M&A transactions during the first nine months of 2024, which support our strategic growth ambitions and further consolidate our strong competitive positions in specific market segments. During the third quarter, Turner has received the approval from the European Commission for the approximately €400 million strategic acquisition we announced in July of Dornan Engineering. This rapidly growing European advanced tech engineering business headquartered in Ireland is a leading mechanical and electrical engineering company in Europe and has a €1.1 billion order book with a strong presence in the UK, Ireland, Germany, Netherlands, Denmark and Switzerland, amongst others. Dornan is expected to achieve revenues of around €700 million in 2024 and EBITDA of around €55 million. The transaction is expected to close in January 2025. Together with Dornan and using the group's existing local capabilities, Turner intends to offer full turnkey solutions to clients in Europe, applying its low-risk construction management business model to rapidly expanding advanced technology market where it has identified a potential project pipeline of over €20 billion. In July, HOCHTIEF and its main shareholder, ACS, agreed to integrate their North American businesses, Flatiron, Dragados to create the second largest civil engineering and construction player in the region. The new company will have unparalleled civil infrastructure experience, credentials, geographical reach and technical capabilities for large infrastructure projects, and the combined resources will support further growth in an expanding North American civil market. The transaction will provide meaningful annual synergies of US$30 million to US$40 million focused on procurement, shared services and the centralization of a wide range of corporate functions. This value-accretive proposition will result in HOCHTIEF holding a 38.2% equity consolidated stake in the new business. Let me continue by providing you with an overview from a sector perspective. One of the fastest-growing areas globally is the data center market, fueled by the rapid expansion in cloud computing and the exponential growth of AI. In the U.S., this market continues its unprecedented growth from US$82 billion in 2023 to a forecast of US$128 billion in 2029. The European market is on track to rapidly expanding or increasing its size by over 40% to $55 billion by 2029. And Asia-Pacific is expected to be the fastest-growing data center market in the next five years with a strong demand in highly populated countries, which have low penetration rates. We have identified a pipeline of projects worth US$120 billion in the Australasia and Southeast Asia region alone. HOCHTIEF directly and through our companies has achieved a strong position globally. Turner continues to grow its strong position in North American market with new data centers orders of US$5.3 billion booked during the first nine months of the year versus US$2 billion in the first nine months of 2023. The company’s period and data center backlog has almost doubled year-on-year to US$6.7 billion. And earlier this week, it announced it had been selected for a $2 billion data center expansion project in Ohio, which will provide a secure and reliable infrastructure for cloud technologies and AI. Europe, Turner is assessing an addressable pipeline of advanced tech projects worth over €20 billion, a big part of it in data centers, which complements the strategic acquisition of Dornan and lays the foundation for the company’s expansion in the European market. HOCHTIEF via CIMIC, it’s also well-positioned in the Asia-Pacific digital infrastructure market. During the third quarter, the company was awarded data center contracts in Malaysia, India and Melbourne and has completed or is delivering work in Hong Kong, Indonesia, Macau and the Philippines. In the first nine months of 2024, we have taken significant steps to deploy equity in the data center market. In the Asia-Pac region, CIMIC is adopting an integrated and coordinated approach to data centers aligned with the group’s approach. Pacific Partnerships is leading the data center development strategy in the region, which is focused on achieving attractive returns by harnessing group companies’ experience and expertise. And in Europe, HOCHTIEF PPPs announced in September an agreement to establish a sustainable cloud provider business, Verizon, with a leading German server and storage systems manufacturer. The company plans to build a cloud computing infrastructure based on a network of sustainable, locally integrated data centers in Europe. The first of the [indiscernible] data centers with Horizon equipment will open near Essen, Germany in summer 2025. The land for two more of these data centers has already been secured and more sites will be acquired by the end of the year with further locations planned for 2025. The group is also advancing in the semiconductor space, where strong demand for AI chips is boosting investment levels and global sector sales are expected to exceed US$600 billion in 2024, rising towards US$700 billion in 2025. Together, the reshoring trend, this is driving a rapid increase in semiconductor-related construction work. This is a strategic growth market for HOCHTIEF, where we see important opportunities and are actively analyzing a very sizable pipeline of potential projects. A lot of these are confidential in nature. But let me provide some color and mention three recent project awards. In the U.S., Turner was last month awarded a significant construction contract for the expansion of an assembly and test facility for chip lithography machines. In Malaysia, we’re working with Turner on an important semiconductor fab project. And in Europe, we’re also active in this sector with HOCHTIEF, winning an important contract for semiconductor-related construction facility in Germany using clean room technology. HOCHTIEF is also supporting the build-out of infrastructure for the global energy transition. For example, Australia’s green energy transition continues to provide the group with enormous opportunities. Federal government targets include reducing emissions by 43% by 2030 and achieving net zero by 2050, requiring a massive investment in renewable energy generation capacity by more than 9 times what exists today. UGL is playing a central role in the delivery of the country’s environmental ambitions through the construction and connection of renewable energy assets as well as via design, construction and connection of the high-voltage electricity infrastructure to connect those renewable assets to the national grid. During the third quarter, the company was selected to the project or the Phase 2 of the 270-megawatt Western Downs Battery in Queensland for Neoen. In Queensland, the CopperString 2032 project deliver 840 kilometers of new high-voltage transmission lines in the state is advancing and broke ground in July 2024. CopperString is the most significant investment in economic infrastructure in Northern Queensland in generations worth potentially several billions Aussie and will unlock affordable renewable energy for the region and support thousands of jobs. And on the equity investment front, our infrastructure development company, Pacific acquired the development right for the 700-megawatt Cobbora Solar Farm and associate the large-scale battery energy storage system in New South Wales, which will be one of the largest solar farms in Australia. Pacific will develop, invest equity in, deliver and operate the solar farm and BESS on a 3,000-hectare site with UGL carrying out digital works, developing the project solution and providing operation maintenance services upon completion. HOCHTIEF continues to deliver important social infrastructure projects around the globe. In healthcare, a CIMIC Group company joint venture has been selected by the Hong Kong Hospital Authority to undertake the €4.3 billion North District Hospital expansion project. This project, which will generate revenue of up to A€2.4 billion [indiscernible] will elevate the health infrastructure in the North District of Hong Kong and provide around 1,500 additional hospital base. New orders in the healthcare sector have increased by 70% at Turner in the first nine months of 2024. Recently, for example, the Turner joint venture celebrated the groundbreaking of the US$2.2 billion Henry Ford Hospital expansion project, the single largest healthcare investment in Detroit history. The new 1.2 million square foot hospital facility will feature a 20-floor patient tower and an expanded emergency department. In airport infrastructure, which is a sector that we’re seeing strong growth in our key markets. In Australia, for example, CIMIC continues to work for the Western Airport [ph]. In October, the company was awarded its fourth construction package for this landmark project with work, which includes warehousing, aircraft upfronts and taxiways to connect the main runways and ancillary infrastructure. The facility is designed to be scalable and will further expand and demand increase in the future. And in the North American market, sector estimates suggesting potential capital needs of over US$150 billion over the next five years. New orders year-to-date in this market at Turner are 3 times the level of the corresponding 2023 period. For instance, in San Francisco, a Turner joint venture has announced the groundbreaking of the Terminal 3 West Modernization project at the San Francisco International Airport. Turner will lead the US$2.6 billion transformation of the terminal, which will result in a modern world-class facility. When it comes to sports stadiums, Turner maintains a leading position. During Q3, the company celebrated the opening of the US$2 billion Intuit Dome in LA, along with its JV partner, AECOM Hunt and the Los Angeles Clippers. The 17,700-seat arena features five basketball courts, including the NBA Clippers Home court, training center and outdoor plaza for gathering. Rooftop solar panels and battery storage will help to operate carbon-free. HOCHTIEF has been a leader in the civil works and building sector for several decades. Let me mention a couple of recent project wins. CIMIC has been selected by both the federal and local South Australian governments to deliver the Tram Grade Separation project in Adelaide. The project is designed to improve safety, efficiency and the reliability of transport and is also made at boosting connectivity and convenience in the region. In Austria, HOCHTIEF consortium won a €50 million railway project in Austria to extend a 3.6 kilometer section of an important regional transport connection. And in California, Flatiron has secured the Heritage Road Bridge project to replace river bridge crossing and deliver road widening improvements worth around US$50 million. During the period, the group also advanced in its more traditional PPs with €100 million OC equity invested by Pacific in its existing assets. This include the Cross River Rail project, where in September, the first train used one of the newly built twin tunnels to arrive at the new underground stations. An important milestone as the project moves into its final testing and commissioning phase. And the group has also recorded other important PP project awards during the period, including during the third quarter. In Europe, the Dutch A15 highway project, where HOCHTIEF Consortium was preferred bidder has got the go-ahead from local authorities. The PV project with a total investment of over €1 billion is intended to reduce traffic congestion and will improve the transport links between Rotterdam and Germany. And in the UK, HOCHTIE PPPs was awarded a Q3 2024 multimillion euro PPP contract to design, build, finance and operate a new student village for Stafford Shire University as well as a transport infrastructure operation and maintenance contract for a 12-year period in Scotland worth at least €190 million. Critical metals are central to decarbonization megatrend, and HOCHTIEF is developing its strategic position to offer attractive value propositions to clients. In July, our natural resources company Thiess was awarded a C$205 million three-year full-service mining contract in Ontario, Canada. The site was last mined in 2017 and is ramping back up in response to the world's increasing demand for critical minerals needed to transition to zero emissions. The work will help Canada's nickel and copper industry to provide metals that are vital to North America's transition to clean energy. And during the second quarter, this completed acquisition of underground metal business, IBA, one of the largest underground hard rock mining contractors in Australia with a strong position in critical minerals and metals, including copper, gold and nickel. Another key element to support the global energy transition is lithium. We're currently assessing a number of potential lithium investment opportunities with feasibility studies being carried out for some European projects. So far this year, we have been awarded a number of contracts, including a hard rock lithium contract in Portugal and a single project in Brazil. And in Canada, we helped complete the pre-feasibility studies at the Clearwater lithium project in Alberta. Furthermore, we have been engaged in the validation early works phase as the EPCM for a lithium extraction plant in Germany. Let me briefly update you on Abertis, which continues to deliver on its growth strategy of investing in assets to extend its portfolio duration. Its subsidiary, ViasChile, the company won in August an international tender launched by the Chile's Ministry of Public Works for the Ruta 5 Santiago-Los Vilos motorway. The 223-kilometer long infrastructure links the Capital Santiago with the coast, connecting two strategic regions that account for more than half of the country's GDP. The concession has a maximum duration of 30 years and does not require an upfront payment. Abertis has committed to investments of around €1 billion within the next seven years to expand infrastructure capacity and provide innovative technological services to users. In September, Abertis subsidiary, Autopista Central was commissioned for a €370 million investment to expand the capacity of a toll road to the north of the capital Santiago, which will be compensated for by a 25 months extension to the Autopista Central concession contract. As you know, ESG remains a long-standing priority for the group. HOCHTIEF has been listed in the Dow Jones Sustainability Index for 18 consecutive years. And last year, MSCI upgraded its ESG rating for the HOCHTIEF to AAA from AA, making it the highest rated among its peers with an improved safety performance seated as one of the drivers of the upgrade. So let me briefly summarize. The nine-month results show a solid performance with 12% growth in operational net profit and an increase in net operating cash flow. We're achieving strong order book growth of 18% in the last 12 months, with particularly significant increases in areas, including data centers and health care projects. And we're also advancing in the strategic shift to invest equity in our strategic growth markets. We're delivering on our strategy at a local, regional and group level. Looking forward, we anticipate a good final quarter of the year with a strong cash generation and our current expectation is to end up towards the top end of 2024 guidance of operational net profit of €660 million to €610 million. So thank you now, and let's move on to the Q&A. Operator, we're ready for questions, please. Thanks.

Operator: Yes. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Graham Hunt from Jefferies. Please go ahead.

Graham Hunt: Yes, thanks very much. I've got three questions, I think. First question, just on the U.S. election outcome. Any thoughts on any impact on your business there? That's question one. Question two, just on data center demand, huge order intake, which you point to this year, year-to-date. How should we think about – and you referenced unprecedented demand. Are you seeing already what the order intake cadence could be like in 2025? Or would you anticipate more of a quieter year on intake and running – more running down the orders that you've won? Just trying to think about how we should think about the order book and the revenue profile kind of going into next year, given how strong 2024 has been? And then third question, maybe a bit more just technical on the Abertis SH288 impairment. Were there any offsetting impacts in there? I think it was about €82 million for HOCHTIEF level that offset the overall impairment that you put against the SH288? Just the moving parts there would be helpful. Thank you.

Juan Santamaria: Thank you, Graham. So let me start with the U.S. elections. I mean the reality is that the focus on infrastructure is very important, right? For the new President as it was for the other candidate. Different areas because obviously, Kamala Harris was very oriented into renewables and hydrogen, while President Trump is more oriented into digital transformation tech and other infrastructure. But the reality is that President Trump believes in onshoring, in essential industrial services, in everything that has to do with high tech, and we are very comfortable with the prospects in those areas. So from our perspective, we still believe that there's going to be a strong performance as it was during the previous President Trump election and the last years. So no, from our side, we're very positive. On the data center front, I mean the – so we have in the first nine months an order book of US$6.7 billion just for Turner. And then we do have for CIMIC, a very important amount as well and growing significantly. I mean what we're going to see in the case of data center expansion in Asia Pacific and Australia and Europe is unprecedented. So getting into some details about what I mean with that. The market in the U.S., and I don't want to talk about the U.S., it's growing – it was like $82 billion in 2023. And we do have a forecast of $128 billion by 2029. And that's going to be pretty much annual increase every year. But the European market is also on track to expand because it's growing by 40% from now to 2029. And I think we will achieve a $55 billion market in 2029. And in Asia Pacific, it's probably the fastest-growing market during the next five years. And right now, there's a very low penetration rates in most of the regions. There's a pipeline, an addressable pipeline by us of $120 billion, right, in the region. And bear in mind that so far, we’ve been able to build and we have experience in data centers from India to Hong Kong, including Philippines, including Indonesia, Malaysia, Macau, we are very, very strong in the region. But what we’re seeing is something that we hadn’t seen in Australia, which was the rise of data centers. I mean, we have a very important pipeline as well. So – I mean, data centers, we continue to see a very, very strong demand. We believe that that’s going to continue growing from our current backlog. And I mentioned before the Turner one, but the global one is around €7.2 billion, our backlog, up 64% year-on-year. We have new orders in the period of €5.8 billion, up 124%, but we do have an addressable pipeline just for the next year of like €50 billion. So that’s a very, very impressive market. What we have saw this year is a slowdown in the battery fabs, basically because a lot of the producers, they want to see some of the changes in technology and some of the price are posted. But some of those tenders will start growing again. So that’s an upside that we’re going to be seeing in the next years. And then the semiconductor market, which I mentioned during my speech, we have already been awarded three projects, and that’s going to be a very important market for us moving forward. So we’re optimistic about the future. The other thing, and I’m not going to talk today about it because we are still developing the strategy. But eventually, we will organize a special day just on our strategy about data centers from an equity perspective and development, and that will be throughout the next months, because we are also seeing a very, very, very potential important project for us as a developer in that space. But I prefer to finalize the strategy and the acquisition that we’re going through in terms of land and energy points, et cetera, before we communicate the details. But we are working in a very important manner in our strategy of developing data centers in the U.S., in Europe, in South America and in Asia Pacific. And we do have a significant land banking so far achieved. The third one was about Abertis. So the impact of Abertis to us was €83 million, which is pretty much equivalent to the 20% that HOCHTIEF holds on Abertis. If you remember, the loss after tax that was communicated by Abertis was €418 million, and that was net of other positive results. And 20% of that, which is the €83 million came to HOCHTIEF. And basically, HOCHTIEF has offset those €83 million by other positive one-offs. So that’s in part regard to the €288 million.

Graham Hunt: Got it. Thanks, Juan. That’s very helpful. Thank you.

Operator: The next question comes from Luis Prieto from Kepler Cheuvreux. Please go ahead.

Luis Prieto: Good afternoon, Juan and rest of the team. Thanks for, for taking the time to help us with today’s call. I had a couple of questions very quickly. The first one, as you just have commented, a key building block of your growth strategy, and we talked about this in the April CMD is the equity deployment opportunity in your Turner growth vectors. Could you please give us a rough idea of the number and economic magnitude of projects requiring equity commitments on your part in 2025 alone? Would that be mainly data centers only? Or are there any other segments that could require equity next year? And then my second question is, if you could also please update us on the timing of the Flatiron Dragados merger and the time frame for the achievement of the full synergies that you’ve been mentioning? Thank you.

Juan Santamaria: Thank you, Luis. Okay. So on the equity; I get back to the Capital Markets Day that we run at the beginning of the year. And if you remember, there were several topics, data centers – well, first, traditional; second, data centers; third, energy and then fourth, sustainable mobility. And then there were two, one was hydrogen and the critical metals that we didn’t give a lot of detail, and those are under analysis. Obviously, the two that we believe in the short-term that are going to be very important. One is the traditional one, you heard Georgia in North America and managed lanes is a very important part. There’s a pipeline of €25 billion to be spent in managed lanes in North America. Georgia is probably the biggest opportunity as a state with a managed lanes program way larger than the Texas one a few years ago. And obviously, by winning the 400, we are very well positioned for the future. And obviously, through the merger of Dragados Flatiron, so that is going to be built by both HOCHTIEF and ACS, that job, right? But there’s a big pipeline in that sense. Then we move into data center. And data centers, requires where we are landing requires a one day probably, and we will ask everyone to join in a few months for a specific analysis of where we are because we are right now looking approximately at potential opportunities for 5 gigawatts. That doesn’t mean that the 5 gigawatts, we are – I mean, that’s under analysis, that’s under negotiations. And obviously, but of the 5 gigawatts, we might have close to 1 gigawatt already with land and a path for permitting on the energy, right? So just looking at the numbers, that itself is obviously very important. So there’s a very specific equity strategy around data centers and very important because, obviously, when you look at the transactions, you go to where Navia or you go to AirTran, which was sold by Macquarie to Blackstone or you see some of the volume. When you compare these numbers with some of those platforms, I mean, you realize the magnitude of what we’re being able to develop. But again, that will require a specific day to explain what we’re doing in that area. Then we do have the energy. The energy is pretty much – our energy strategy is accompanying or supporting our growth strategy in some of the areas that we are developing like data centers or like battery storage or some of the renewable specific projects more in Australia and in the U.S., right? And there’s also specific in that area. And then we do have a lot of opportunities that still under assessment because we haven’t landed on anything yet on the critical metals and hydrogen. And let’s put them on hold because we – until we don’t see a clear path with those, we won’t. So you’re right. I mean one of the key things that we keep analyzing almost on a daily basis is the capital allocation and the strategy of uses and sources of funds, right, and the firepower that we have. So we do have a recurrent financial firepower driven by, obviously, the net operating cash flow that we have that is available. And that’s obviously considering the shareholder remuneration investments, which for us are very important. So at the nine months of 2024, for HOCHTIEF, this was €1.3 billion in the last 12 months, right? And this was – this is before a €331 million dividend. So you need to net off that. Also, we do have the leverage of the balance sheet. So – and also, we need to take into account that a lot of what I’m saying is greenfield. So there’s a profit coming out of the construction that offsets a big part of the equity needs from a cash flow perspective in our projects, right? So it’s a very important element, which all of these are greenfield projects, right? So they are not as capital intensive as a brownfield, which we would be talking about huge figures, and it’s not the case. So yes, it’s a very important strategy that we have, very important strategy for HOCHTIEF. And a very important part of our future because we want to make sure that we generate stable and recurrent EBITDAs coming from assets. This was also always our strategy, right, starting with derisking our balance sheet, continuing with diversifying our construction capabilities and engineering and then all of that driving to holding assets that we’re able to develop through greenfield. And then sorry for the long answer, but it’s a very important one and requires a specific analysis when the time comes, right? And we will go sector by sector. Then on Flatiron that you were asking, so it will be closed in January. We’re expecting, as I mentioned in the speech, important synergies on cost, but potentially in revenues as well. When – it’s a very good question. When we will start because we’re trying obviously to make sure that we understand the restructuring cost. And obviously, we are provisioning for those. And most likely 100% of that, we will see during 2026. And we will start seeing in 2025, important effects of that integration and synergies, but the full ones won’t happen until 2026 because the closing is in 2025.

Luis Prieto: And Juan, if I may, a follow-up question. Thanks for those two answers. But the €25 billion opportunity in managed lanes that you mentioned is that equity or full project value of the pipeline?

Juan Santamaria: That’s project.

Luis Prieto: Project overall. Okay, thank you.

Juan Santamaria: On a greenfield basis, right, I mean, the investment.

Luis Prieto: Understood.

Operator: The next question comes from Dario Maglione from BNP Paribas. Please go ahead.

Dario Maglione: Hi, Juan. Hi, everyone. Let’s say three questions from me. One on Abertis. Could you give us an update on the discussion with the French government around SANEF concession? Then second question on data center strategy. I mean there are lots of companies that claim they are involved in building data centers, but not many can build the 2 billion data centers that you just won. So I was wondering like what competitors do you respect most in the U.S. for building data centers? And what advantage do you think Turner has against those competitors? And maybe last question, a bit more technical. In Slide 22 of the presentation, you have the impact of the Thiess option on the balance sheet of HOCHTIEF. Can you maybe walk us through this impact and I guess the same input on ACS [ph]. Thank you.

Juan Santamaria: Okay. So let me start with the first one. Abertis, French government. So there are two things. One is the infrastructure tax and the other one is potentially the extension of the project. So I mean, in our nine months 2024 figures, the French transport tax is fully reflected. And this was following the decision by the French Constitutional Court in relation to the constitutionality of the transport infrastructure tax. So that will – I mean, that will follow its path because we will protect our rights based on the Article 32 of the concession agreement, which is the right to be fully compensated. But we are not relying on that. I mean we are fully reflected in our balance sheet. We’re not – I mean, we’re assuming that that impact is fully impacting us and it’s reflected. Again, but we will, no matter what, continue to pursue our rights. In the case of the extension, we have no news. I mean, it’s a decision of the French government. We know as much as you know. The decision, I believe that will be taken close to 2031, 2032. I mean, not so much time in advance. And anything can happen. They can extend, they can retender or they can decide anything different. So no news in that sense. I believe we need to wait more to the end of the concession before we have more clarity around that. The data center, I mean the data center, we – I mean, two years ago, when we started talking about our strategy on data centers, we were very clear on one thing, which was our strength because of our geographical presence. And at the end of the day, it’s very important for a lot of the hyperscalers and platforms in data centers to be able to rely on a contractor that can be very strong on delivery, right, especially the time to market, which is key in data centers. And – but also in someone – because the engineering of these data centers are becoming more and more and more complex, as you rightly said, you move into the high and the very big ones. And those projects, the larger it gets, the more complex it gets not just from the pretty much the refrigeration, but also from the energy, et cetera. And that engineering, what we’re seeing is that all the hyperscalers; they do not want to start talking to 500 different contractors because there’s a lot of IP around some of those. So they prefer to be able to rely on someone that can deliver in multiple regions. And that’s one of our biggest strengths. As I mentioned before, we are global leaders according to all the rankings on a global basis when it comes to data centers. But specifically, we are the number one in the U.S. with the acquisition of Dornan; we are a very important player in Europe as well. But in Asia Pacific, from India to Hong Kong and in Australia, we are the leaders. And as this gets more complex and larger, that I believe that will give us a further competitive advantage because reliance and reliability is very important. So honestly, our competition is very local. I would need to go region by region. We are not seeing any other contract – large contractor competing with us in all the areas. We’re seeing regional contractors in Spain against certain, in Germany against other ones, in the UK, in Ireland against other ones, Netherlands against different ones, U.S. different ones. And then Indonesia, Philippines, Macau, India, Malaysia, Hong Kong, different ones and in Australia again, different ones, right? So it’s very regional. And that’s another advantage when it comes to large ones because the original contractors up to now, I would like to see them how they are going to move into the €2 billion, €3 billion, €4 billion project, some of them. So I mean, I’ve been in the last two years being bullish about our strategy in data centers, and I continue being. I think we offer a very important competitive advantage in this sector. And then on this – so this – I mean, the – I think – I guess you were asking about how the put option was reflected in the balance sheet, right? And...

Dario Maglione: And equity.

Juan Santamaria: Yes. So pretty much the decline in equity on the balance sheet, I think that it goes from €1.27 billion, and that was at year end to €853 million at the nine months of 2024. And this is pure accounting. And this is because of the first-time consolidation of this. So the first time consolidation of this requires that we account for Elliott’s put option as a liability on the balance sheet. So the resulting potential liability of almost €670 million is booked against the equity and explains all of that decline in the book value of the equity. Without that, that equity impact on the balance sheet, we would have shown a strong increase.

Dario Maglione: Okay. Thank you.

Operator: The next question comes from Augustin Cendre from Stifel. Please go ahead.

Augustin Cendre: Yes. Good afternoon, and thank you taking my question. I've got three, if I may. I'd like to make a follow-up on the U.S. election results and your thoughts and implications in the region. I mean, you mentioned that there is also an important focus on infrastructure from Trump versus Harris. But it seems to me like you're quite exposed to batteries and generally energy transition activities. So I'm kind of wondering how easy it would be for you to shift from this current area of infrastructure to a new area of infrastructure and generally your thoughts on that, also maybe any thoughts in terms of tax implications at this stage? My second question would be concerning your Asia Pacific region. In H1, you took some provisions. I was wondering if you could elaborate on the risk from your legacy contracts in Asia Pacific and which contract specifically do you still see risk in? I know we previously mentioned the new Adelaide Royal Hospital, any other one to mention there. And, I was wondering if you could share the current ACS share HI? Thank you very much.

Juan Santamaria: Okay. So let me start with the U.S. Our order backlog for Turner in the U.S of – in the battery space is €1 billion, which is down 47% versus last year. So we're already seeing a slowdown in North American market. Now the slowdown that we're seeing was more because what I explained before on technology, okay, not so much on a different trend because of elections. The projected EV total market share was already trending down, right? So the 9% projected market growth versus a previous 12%. And this is also due to increased competition of plug-in hybrid electrical vehicles and slower EV adoption by the market, which, by the way, it's also happening in Europe. So the reality is in our forecast, battery market is a potential upside. It's not in our current business case. For different reasons than the U.S. elections, right? But that was already there, right? And we had to wait to see, but it was not in our business plan. It was not contemplated because there was a lot of uncertainty on demand of electric vehicles on one hand and on the other hand, because of a lot of uncertainty about the technology of the future, okay? So now the U.S. election comes and you add another layer of complexity for that that could delay potentially that upside in the U.S. However, we still see upside in Asia Pacific, Australia and Europe, in Europe, probably for the battery storage, I mean, energy storage more than EVs in the short-term. But in Australia, for example, we do have close to 2.5 gigawatts of battery storage projects where we are also developers, and that's attached to the energy. So anyway, it was an upside in any case. We are not relying on that in the business plan. It's a nice to have if the market continues but you're right. I mean, it's going to be affected by the U.S. elections, especially in the U.S. Same thing hydrogen. Hydrogen was not in our business plan. We are participating in five plants in Australia from a construction perspective. But we are not relying on a lot besides that. We're expecting more of that as a kind of an upside in Europe. And it could have been an upside in the U.S., certainly not now. But I mean, again, it was an upside. It was never in our business plan, neither on the equity, neither on the construction. And renewables was not part of our business plan either in the U.S. Yes, in Australia because there's a lot to do in Australia, and we believe that there's going to be a lot. And yes, associated to our data center strategy in Europe or in South America. On the other side, there's a big investment coming on the traditional front, traditional sector in the U.S. There's a lot of investment in onshoring, industrial onshoring. There's a lot of investment in semiconductors, and there's going to be a lot of investments in data centers, even above from our previous figures. Again, that's an upside. So that's more or less in summary, the way we see the potential impacts in the U.S. Then on the legacies, we – I mean, as you saw, we have used – we are using the – some of the, I mean, the capital gain that we got a non-cash capital gain from this as a result of the full consolidation of this in the first half of 2024. And this was because of the remeasuring of the fair market value of the CIMIC's existing 30% this stake. Against that, we reassess some, I mean, CIMIC had reassess legacy positions, and that was with a view to accelerate cash collections. And I will give you a few examples of that. So there was a non-cash project risk provision of €447 million after tax that was booked, okay? And this was relating to complete legacy projects. Now which ones? So I'll give you a couple of examples. In Indonesia, from back 2013, 2014, there were a lot of projects in arbitration or remediation that, I mean, that would continue being another five years in arbitration, so very long-term with balance sheet positions, like I'm referring to like the passenger clearance building in Hong Kong or some of the price associated to the airport in Hong Kong that we have taken the offer to go to the client saying, why don't we settle and the client accepted. So we've been able to settle, but against that, other projects like the transmission galley in New Zealand, we offer paying them to pretty much finish a project, including long-term guarantees on the one end because we thought that it was a very good idea, and that was cash out and also position the balance sheet. So we have been reassessing some of those jobs, very old jobs. I mean you need to go back to 2011 for transmission [indiscernible] and that. And I mean, if we had the state, reality is nothing, I mean, we would have continued arbitrations in the long-term or we have continued the project. I mean, but we thought that it was a good opportunity. And in the case of the ACS participation in HOCHTIEF, 76.6% or 79.1% when adjusting for treasury shares as of the end of June 2024.

Augustin Cendre: Thank you very much.

Operator: The next question comes from Miguel González from JP Capital [ph]. Please go ahead. Mr. González, your line is open. You may proceed with your question. We are not able to hear. Gentlemen, I hand back over the conference to you for any closing remarks.

Juan Santamaria: Okay. So thank you so much. As always, please feel free to follow up on any questions to us or any questions. We'll be more than happy to answer them. And I look forward to seeing you in some of the conversations we'll have during the next months on some of the topics we've been discussing. Thank you so much. Bye now.