CONTENTS
I - INTRODUCTION 3
II - CONCESSION’S CHARACTERISTICS AND CORPORATE BUSINESS 12
III - FINANCIAL REPORT 19
IV - 2018 OUTLOOK 27
V - CORPORATE GOVERNANCE 29
VI - RISK MANAGEMENT – GOALS AND POLICIES 35
VII - PROPOSAL FOR THE APPROPRIATION OF RESULTS 40
VIII - FINANCIAL STATEMENTS 42
IX - NOTES TO THE FINANCIAL STATEMENTS 47
X - LEGAL CERTIFICATION OF THE ACCOUNTS AND AUDIT REPORT 95
XI - REPORT AND OPINION OF THE SUPERVISORY BOARD 102
XII - TRAFFIC STATISTICS 106
I - INTRODUCTION
GOVERNING BODIES (2015/2017)1
The Board of Directors Chairman Vasco Maria Guimarães José de Mello Member João Pedro Stilwell Rocha e Melo Member João Pedro Ribeiro de Azevedo Coutinho Member António José Lopes Nunes de Sousa Member Daniel Alexandre Miguel Amaral Member Michael Gregory Allen Member Manuel Eduardo Henriques de Andrade Lamego* Member Fernando Aboudib Camargo Member António José Louçã Pargana Member Miguel Athayde Marques ** Member João Filipe Maia de Lima Mayer** Member Emanuel José Leandro Maranha das Neves**
* Managing Director ** Independent Directors
Board of the General Meeting Chairman of the Board Luís Rua Geraldes Company Secretary Tiago Severim de Melo
Supervisory Board Chairman Francisco Xavier Alves Members Tirso Olazábal Cavero Joaquim Patrício da Silva Alternate member Diogo da Gama Lobo Salema da Costa External Auditor Pricewaterhousecoopers & Associados, SROC S.A. Represented by Rui Jorge dos Anjos Duarte Alternate external auditor Carlos José Figueiredo Rodrigues ROC no. 1737 Company Secretary Tiago Severim de Melo
(1) New Governing Bodies for the 2018/2020 mandate will be elected in the March, 16th Annual General Meeting. More information available at www.brisaconcessao.pt
I - INTRODUCTION 2017 ANNUAL REPORT 4
Statement of Compliance
Under the terms of paragraph 1-c) of article 245 of the Securities Code, and in compliance with legal and statutory provisions, the Board of Directors hereby submits to the consideration of shareholders the condensed financial statements and management report relating to 2017, in the firm belief that, to the best of its knowledge, the information contained therein was prepared in accordance with the relevant accounting standards, providing a true and fair view of the assets and liabilities and the financial situation of the issuer and that the management report contains a faithful account of the information required.
I - INTRODUCTION 2017 ANNUAL REPORT 5
The Year in Review
February Release of 2016 results - Traffic grew by 7%
Conclusion of widening and improvement works (2X3 lanes) on A1, Carvalhos-St. March Ovídeo sub-stretch (Auto-Estrada do Norte)
Issue of new Bond in the amount of €M 300 (with a 2.375% coupon and maturity in 2027) May Extension of committed credit line until 2020 (€M 100)
June Launching of Colibrí Via Verde at Alcácer Service Area, on A2 – Auto-estrada do Sul
Release of 1st half 2017 results - Traffic grew by 6.8% July Launching of Colibrí Via Verde at Vendas Novas Service Area, on A6 – Auto-estrada Marateca - Caia
Moody's upgrades BCR's Outlook from "Stable" to "Positive" and confirms Baa3 September rating
October Extension of committed credit line until 2020 (€M 50)
Launching of Colibrí Via Verde at Barcelos Service Area, on A3 – Auto-estrada Porto November – Braga
Fitch upgrades BCR's Outlook from “Stable" to "Positive" and revises upwards December short-term rating to F2 from F3
I - INTRODUCTION 2017 ANNUAL REPORT 6
Corporate profile
Brisa Concessão Rodoviária, S.A. (BCR) was created to operate the Brisa Concession following the corporate reorganisation of the Brisa Group. The Company's business is the construction, maintenance and operation of motorways and respective service areas and the planning and development of public infrastructure, pursuant to a concession contract.
The history of the Brisa Concession dates from the foundation of the Group back in 1972. Over four decades the concession's activity has developed into the main road axis in Portugal, spanning from north to south and east to west, with two major routes providing access to Spain.
Under the terms of the Concession Contract, BCR is to operate this major network until December 2035.
BCR shares the corporate culture of the Brisa Group, based on such values as Ethics, Innovation, Excellence and People and oriented to the efficient management of road infrastructures and the promotion of mobility and interurban, inter-regional and international accessibility, resulting in important economic and social benefits for the communities involved.
The strategy of the Brisa Group is approached from a long-term perspective, aiming at creating value to the different stakeholders.
I - INTRODUCTION 2017 ANNUAL REPORT 7
Economic Environment
Economic Activity Global growth accelerated in 2017 in both developed and emerging economies. According to the IMF, Gross Domestic Product (GDP) grew by 3.7%, outperforming both initial projections and 2016's figure of 3.2%. This performance was mainly driven by recovery in investment and foreign trade, the quantitative easing policy followed by major Central Banks and the increase in consumer and investor confidence.
Economic activity in the Euro zone surprised on the upside, maintaining a strong and sustained growth. In fact, GDP grew by 2.4%, which compares to 1.8% in 2016.
In Portugal, the macroeconomic environment was also favourable. Macro indicators with the largest impact on BCR’s activity (namely, GDP, private consumption and inflation) all evolved favourably throughout 2017. National GDP grew by 2.7%, accounting for an acceleration of 1.1 p.p. over 2016. Such evolution (outperforming initial projections, which pointed to growth figures of 1.1% to 1.8%) was the result of an increase in internal demand and acceleration of investment. Net external demand stood at 2016's level, although tourism performed outstandingly well.
The Consumer Price Index (CPI) in Portugal recorded an average growth of 1.4%, increasing significantly as compared with 0.6% in 2016. Core inflation, i.e. excluding energy products and food items, stood at 1.1%. The price of energy products rose by 3.5%.
Finally, the labour market evolved favourably, as the unemployment rate fell to 8.0% as of December 2017 (less 2.2 p.p. as compared to December 2016).
Financial Markets The political instability experienced in 2016 following the unexpected events witnessed that year, such as United Kingdom´s decision to leave the European Union (commonly known as “Brexit”) or the result of the US Presidential elections, decreased in 2017. Nonetheless, a couple of relevant circumstances in 2017 are worth noting, such as nuclear escalation in North Korea, the turmoil caused by the independence movement in Catalonia and the US decision to abandon the Paris Climate Agreement. Against this increasingly stable background, equity markets performed quite well, recording historical a valuations high and historical low volatility.
In 2017 The European Central Bank kept its reference rate at 0.0% and continued its monetary stimulus, which it adjusted throughout the year: in April 2017 it reduced the monthly amount of its asset purchases to €bn 60
I - INTRODUCTION 2017 ANNUAL REPORT 8
from €bn 80 and in October 2017 it extended the length of time that its stimulus programme runs to September 2018 from December 2017, and reduced monthly asset purchases to €bn 30 (as from January 2018).
Meanwhile, in the US, the Federal Reserve (FED) continued the gradual process of monetary policy normalisation, and rose the FED Funds rate further three times, which presently ranges between 1.25% and 1.5%. The market is still expecting further hikes this year.
In this environment, swap rates recorded a slight rise across all available maturities in Europe, with the 10-year swap rate reaching 0.89% at year-end (25 bps above end-2016 level). Also worthy of note is the significant decrease in the risk premium associated with the Portuguese sovereign debt: 10-year bond yields dropped from 3.75% at the end of 2016 to 1.94% at the end of 2017 and 5-year Credit Default Swaps (CDS) narrowed by 188 bps (from 2.83% at end of 2016 to 0.95% one year later).
Brisa Concessão Rodoviária (BCR) is one of the largest bond issuers in Portugal. Throughout 2017 BCR's risk premium decreased considerably, reflecting not only the favourable performance of financial markets but also the Company’s strong operating and financial performance as well as the recognition of the credit protective nature of BCR’s financial structure. The spread of BCR 2025’s bonds narrowed by 92 bps throughout the year, from 1.61% to 0.68%.
BCR Spread Curve (%)
2.0%
1.5%
1.0%
0.5%
0.0% 2Y 3Y 4Y 5Y 6Y 7Y 8Y 9Y 10Y
31/12/2016 31/12/2017
I - INTRODUCTION 2017 ANNUAL REPORT 9
Fuel prices at the pump Along with the macroeconomic situation, road fuel prices also bear significant influence on BCR's activity. Throughout 2017 the weighted average annual fuel price at the pump (gasoline and diesel) rose by 9.5%, reversing the downward trend recorded from 2013 to 2016. The annual average price of gasoline and diesel increased by 5.9% and +10.9%, respectively.
In Portugal fuel price is strongly influenced by the price of Brent crude per barrel, which is expected to increase in 2018. However, the expected rise in the final price of fuel at the pump is likely to be mitigated, since taxes on fuel products in Portugal correspond to absolute figures per litre, which do not vary significantly and have a relevant weight in the formation of the final price.
Monthly evolution of Portuguese pump prices, 2016-2017
Source: DGEG, Direção Geral de Energia e Geologia
Annual average pump prices, Portugal, 2016-2017
2016 2017 AGR
Gasoline 1.42 € 1.50 € 5.9%
Diesel 1.12 € 1.24 € 10.9%
Average 1.19 € 1.31 € 9.5%
Average Growth Rate (AGR)
I - INTRODUCTION 2017 ANNUAL REPORT 10
Despite the increase in price, fuel sales volume in 2017 registered a positive growth (+1.4%). In fact, total sales of gasoline declined 2.0%, with the 2.3% growth in diesel sales accounted for the positive balance in global fuel sales.
Road fuel sales, Portugal, 2016-2017
2.3%
1.4%
-2.0% Gasoline Diesel Total
Source: DGEG, Direção Geral de Energia e Geologia
The car market According to ACAP, the Portuguese car market continued to recover in 2017, with sales volume increasing by 7.7% over 2016. Following a sharp increase by 24.0% in 2015 and 15.8% in 2016, the number of cars sold in Portugal reached almost 270 thousand, throughout 2017. Sales of heavy vehicles performed slightly better than light vehicle sales (10.7% vs. 7.6%).
Cumulative monthly evolution of new car sales in Portugal, 2016-2017
15.0% 10.7% 10.0% 7.7% 5.0% 7.6%
0.0%
-5.0% Light Vehicles Heavy Vehicles -10.0% Total Vehicles -15.0% Jan Fev Mar Abr Mai Jun Jul Ago Set Out Nov Dez
Source: ACAP, Associação Automóvel de Portugal. Note: The line showing the cumulative sale of light vehicles almost overlaps the line of total vehicles sales, since the number of heavy vehicles sold is comparatively low.
I - INTRODUCTION 2017 ANNUAL REPORT 11
II - CONCESSION’S CHARACTERISTICS AND CORPORATE BUSINESS
II - CONCESSION’S CHARACTERISTICS AND CORPORATE BUSINESS 2017 ANNUAL REPORT 12
Brisa Concession
Main economic indicators (2017)
Operating Revenues €M 570.7
EBITDA1 €M 441.1 M€
EBITDA1 Margin 77.3%
Number of employees 11
1 EBITDA = Operating Results + Provisions, Amortisation, Depreciation, Adjustments and Reversals.
Figure does not include income associated with the construction service
Concession's characteristics BCR's concession totals 1 124 km, comprising 12 motorways including the future access to the New Lisbon Airport. The network subject to concession is almost entirely built. BCR presently operates 11 motorways, covering a total length of 1 100.1 km, of which 1 014.0 km are tolled.
The network will be fully completed following the construction of access to the New Lisbon Airport, which is currently on hold.
The network runs from North to South and East to West. It includes the country's main road axes, such as the coastal corridor and the Lisbon-Madrid link. It further includes important circular roads around the metropolitan areas of Lisbon and Oporto.
According to the Concession Contract concluded with the Portuguese Government, the concession will end in December 2035.
II - CONCESSION’S CHARACTERISTICS AND CORPORATE BUSINESS 2017 ANNUAL REPORT 13
Characteristics of the Concession in 2017
Length in km Motorway 2x1 2x2 2x3 2x4 Tolled Toll-free Total lane lanes lanes lanes
A1 – Autoestrada do Norte 279.0 17.4 296.4 1.3 160.5 127.3 7.3
A2 - Autoestrada do Sul 225.2 9.6 234.8 0.0 202.8 32.0 0.0
A3 - Autoestrada Porto - Valença 101.3 11.5 112.8 0.0 91.6 12.8 8.4
A4 - Autoestrada Porto - Amarante 48.3 3.0 51.3 0.0 51.3 0.0 0.0
A5 - Autoestrada da Costa do Estoril 16.9 8.1 25.0 0.0 2.3 22.7 0.0
A6 - Autoestrada Marateca - Elvas 138.8 19.1 157.9 0.0 157.9 0.0 0.0
A9 - Circular Regional Externa de Lisboa 34.4 0.0 34.4 0.0 0.0 34.4 0.0
A10 - Autoestrada Bucelas - Carregado - IC3 39.8 0.0 39.8 0.0 7.4 32.4 0.0
A12 - Autoestrada Setúbal - Montijo 24.8 4.3 29.1 4.3 5.2 19.6 0.0
A13 - Autoestrada Almeirim - Marateca 78.7 0.0 78.7 0.0 78.7 0.0 0.0
A14 - Autoestrada Figueira da Foz - Coimbra (Norte) 26.8 13.1 39.9 0.0 39.9 0.0 0.0
Total 1 014.0 86.1 1 100.1 5.6 797.6 281.2 15.7
Capital Expenditure (CAPEX) Although provided in the concession agreement, the project concerning the link to the Poceirão logistics platform remains on hold, as construction of the platform itself did not go ahead.
In 2017 the widening (2x3 lanes) and improvement works in the Carvalhos / Santo Ovídeo sub-stretch on A1 and the design / construction of the New North Tunnel of Águas Santas, included in the widening of the Águas Santas / Ermesinde sub-stretch on A4 were finally completed. Meanwhile, decision concerning the lawsuit brought by a bidder in the tender for the widening and improvement works (2x4 lanes) of this sub-stretch and renovation of the Águas Santas Tunnel (tender launched in January 2016) is still pending.
At road maintenance level, in addition to various specific works undertaken, the following improvement and pavement works were completed, totalling 39 km in length:
- On A2, A2/A12 Junction – Marateca – A2/A6/A13 Junction and S. B. de Messines – Paderne (A22) sub- stretches.
II - CONCESSION’S CHARACTERISTICS AND CORPORATE BUSINESS 2017 ANNUAL REPORT 14
- On A1, Alverca, Santarém and Torres Novas junctions - On A14, Montemor-o-Velho – EN 335 sub-stretch
The following improvement and pavement works are ongoing, totalling 36 km in length:
- Grândola Sul / Aljustrel sub-stretch, on A2 - Pinhal Novo – A2/A12 Junction sub-stretch, on A12
In what concerns slope maintenance, works were carried out on A1 and A9.
In 2017 BCR inspected its road infrastructure on a regular basis, monitoring pavements, slopes and containment structures and other works. The resulting information will be used in improvement, reinforcement and stabilisation projects.
Moreover, renovation and structure reinforcement works were carried out on the viaduct over Rio de Mouros, in several hydraulic crossings on A1, A3, A4, A5, A9 and A14. The covering of Coina’s toll plaza, on A2, was replaced.
As regards noise mitigation measures, acoustic barriers are under construction on Carvalhos – Jaca – Sto.- Ovídeo, sub-stretches, on A1 and tenders for the construction of acoustic barriers are under way concerning the sub- stretches of Leiria – Pombal, Soure – Condeixa and Coimbra Norte – Mealhada, on A1, Almada – Fogueteiro, on A2 and Baltar – Paredes e Penafiel – Castelões - Amarante, on A4.
Capital expenditure (CAPEX) in 2017 totalled €M 47.7, mostly incurred on lane widening and pavement improvement/reinforcement works. This figure includes €M 27.0 relating to major repairs (pavements, engineering works and slopes), which are treated as provisions in accounting terms, according to IFRIC 12. The amount of the widening works in progress in the network (Carvalhos/Sto. Ovídio on the A1, and Águas Santas/Ermesinde on the A4) totalled €M 9.5.
Capital Expenditure (CAPEX)
€M 2016 2017 % Change Widening works 15.9 9.5 -40.2% Major repairs 25.0 27.0 8.2% Other (equipment, etc) 10.5 11.1 6.0% Total 51.4 47.7 -7.3%
II - CONCESSION’S CHARACTERISTICS AND CORPORATE BUSINESS 2017 ANNUAL REPORT 15
Traffic on the network Traffic registered sustained growth across all BCR’s network, driven by the favourable macroeconomic conditions in 2017. In fact, GDP had a very positive evolution during the year, recording a higher growth rate than in 2016. Average Daily Traffic (ADT) in the concession totalled 19 847 vehicles, increasing by 7.1% as compared to the same period last year. Vehicles per Km (V/km) growth was slightly lower (standing at 6.8%), as 2016 was a leap year.
Breakdown of annual traffic change
2016 2017 Vehicles/km 7.0% 6.8% Breakdown: ...Organic growth 6.2% 7.3% ...Calendar effect(*) 0.7% -0.5% …Others 0.1% 0.0% ADT 18 534 19 847 Like-for-like 6.7% 7.1%
(*) Includes leap year effect
Quarterly traffic growth (year-on-year)
9.8%
7.6% 6.8% 6.2%
3.3%
1Q 2Q 3Q 4Q Year 2017
II - CONCESSION’S CHARACTERISTICS AND CORPORATE BUSINESS 2017 ANNUAL REPORT 16
Analysis per motorway As was the case in 2016, all motorways continued to post very positive growth figures. Traffic on the A9 motorway registered the highest growth (+10.6%), benefiting from the increasing saturation of IC17/CRIL. The A4 motorway recorded the lowest annual growth (+4.9%).
Change in annual traffic per motorway (V/km)
10.6% 9.6% 8.6% 8.6% 8.2% 8.1% 7.8% 7.1% 6.8% 6.1% 4.9% 5.2%
A1 A2 A3 A4 A5 A6 A9 A10 A12 A13 A14 BCR
Analysis per class of vehicle The breakdown of traffic per class of vehicle shows a positive trend both in light as in heavy vehicles, with the latter posting higher growth rates driven by the increase in the country’s economic activity (+6.6% and +9.3%, respectively).
Traffic structure per toll class Class 2016 2017 Cl 1 84.7% 84.6% Cl 2 9.9% 9.9% Cl 3 0.6% 0.6% Cl 4 4.8% 4.9% Total 100% 100%
II - CONCESSION’S CHARACTERISTICS AND CORPORATE BUSINESS 2017 ANNUAL REPORT 17
Traffic structure by type of vehicle
2017 94.5% 5.5%
2016 94.6% 5.4%
Light Vehicles Heavy Vehivles
II - CONCESSION’S CHARACTERISTICS AND CORPORATE BUSINESS 2017 ANNUAL REPORT 18
III - FINANCIAL REPORT
III - FINANCIAL REPORT 2017 ANNUAL REPORT 19
Income and Loss Statement
Operating Income Operating Income in 2017 (not including revenue associated to construction servicing) increased by 8.2% to €M 570.7, distributed as follows:
€M 2016 2017 % Change
Toll revenues 515.3 557.2 8.1%
Service areas 7.8 8.1 2.9%
Other 4.3 5.4 25.6%
Total 527.4 570.7 8.2%
Increase in toll revenues (+8.1%) is mainly explaned by the above-mentioned traffic growth in BCR’s network (+7.1%) and by 0.84% annual revision in toll rates. Over 75% of toll revenues were collected through the Via Verde automated toll collection system, confirming the growing usage of this payment method.
The favourable performance posted by traffic had a positive impact on the revenues of Service Areas, where average consumption per client also rose in relation to 2016. Increase in Other Income is the result of compulsory collection procedures introduced to recover unpaid toll rates.
The Statement of Profit and Loss and Other Comprehensive Income includes an equal amount (€M 13.3 in 2017) recorded under operating income and costs, reflecting the recognition of income and expenses relating to construction services within the scope of the concession. This was recorded so as to comply with IAS 11 standard and paragraph 14 of IFRIC 12. From a substantive and economic perspective, total operating income and costs to determine EBITDA and operating margins do not include income and expenses recognized pursuant to IAS 11.
III - FINANCIAL REPORT 2017 ANNUAL REPORT 20
Operating costs Operating costs, excluding Amortisation, Depreciation, Adjustments and Provisions, rose by 3.1% in 2017 (totalling €M 129.6), reflecting significant increase in activity. This amount includes €M 1.2 related to major repairs outside the scope of IFRIC 12.
€M 2016 2017 % Change
External services and supplies 122,7 126,6 3,2% Staff costs 1,7 1,7 2,4%
Other costs 1,3 1,2 -2.6%
Sub-total 125,7 129,6 3,1%
Amortization and Provisions 169,1 173,2 2,4%
Total 294,7 302,7 2,7%
External Supplies and Services, which mainly comprises the operating and maintenance contract on the motorway network under concession as well as the costs associated with electronic toll collection, increased 3.2% over the previous year, totalling €M 126.6.
As of 31 December 2017, BCR had 11 employees, as compared to 14 in 2016. Personnel costs totalled €M 1.7 in 2017.
Amortization, Depreciation, Adjustments and Provisions totalled €M 173.2 (+2.4% over 2016), including provisions in the amount of €M 44.1 (net of reversals in the amount of €M 4.8, in accordance with IFRIC 12) concerning future costs to be incurred for the replacement of infrastructure, specifically major repairs in the network that BCR will support in the coming years.
Operating Results and Margins EBITDA in 2017 totalled €M 441.1, increasing by 9.8% YoY (+€M 39.4 over 2016). The sharp rise in operating income combined with cost control, led to a significant increase in EBITDA margin, which reached 77.3% (+1.1 p.p. in year on year terms).
EBIT totalled €M 267.9 and the EBIT margin stood at 47%, representing an increase of 15.1% and 2.8 p.p. as compared to 2016.
III - FINANCIAL REPORT 2017 ANNUAL REPORT 21
Financial results In 2017 BCR recorded net financial expenses of €M 81.7, improving by €M 22.7 in relation to the previous year.
€M 2016 2017 % Change
Financial income 0.3 0.0 -89.2%
Interest Expenses 81.8 64.7 -20.8%
Other Financial Expenses 23.0 17.0 -25.8%
Financial expenses 104.7 81.8 -21.9%
Financial Results -104.4 -81.7 -21.7%
Financial income deriving entirely from interest earned, totalled €M 0.04, reflecting the low rates offered by bank deposits.
Financial costs decreased significantly by €M 23.0 (from €M 104.7 down to €M 81.8), as a result of:
i) Redemption December 2016 of a €M 407.3 Bond, which had a 4.5% coupon; ii) one-off costs related to the exercise by BCR of the call option and respective early repayment of a €M 120 Bond due in June 2020; iii) Lower loan-related cost, as compared to 2016.
Net Profit Net Profit grew by 48.4% (or €M 44.4) over 2016, totalling €M 136.1, determined by reference to Profit Before Tax of €M 186.2 and considering income tax expenses of €M 50.1.
€M 2016 2017 % Change
Earnings before taxes 128.3 186.2 45.1%
Taxes 36.6 50.1 36.9%
Net Income 91.7 136.1 48.4%
III - FINANCIAL REPORT 2017 ANNUAL REPORT 22
Statement of Financial Position
Financial debt and liquidity
As of 31 December 2017, BCR’s gross debt totalled €M 2 419, increasing by €M 218 in relation to the end of 2016 (in nominal terms, as of 31 December 2017 gross debt totalled €M 2 426). Liquidity at the end of the year stood at €M 446 (which compares with €M 118 as of 31 December 2016), of which €M 112 were placed in reserve accounts to be used for CAPEX and debt service purposes. As a result, at the end of 2017, from an accounting point of view, BCR's net debt was €M 1 973, having decreased by €M 109 over the year (in nominal terms, it fell by €M 116). The breakdown of gross debt according to instrument was as follows:
Breakdown of gross debt €M 2016 2017 Ch. Bonds 1 428 1 734 306
EIB 521 486 -36 8%
Other loans 252 200 -52 20%
Gross Debt (a) 2 201 2 419 218 72% Cash Resources 118 446 328
Net Debt 2 083 1 973 -109
(*) This amount corresponds to the nominal value of debt, which totalled €M 2 216 and €M 2 426 in 2016 and 2017, respectively, net of accrued interest and expenses with loan Bonds EIB Others issuing and placing, recognized according to the effective interest method throughout the life of the loans.
Bonds
BCR has kept a prudent financial management during the period under review. In May the company issued a new bond in the amount of €M 300 (2.375% coupon and maturity in 2027), which enabled it to extend its average debt maturity and reduce the average cost of debt.
III - FINANCIAL REPORT 2017 ANNUAL REPORT 23
Following this transaction, at the end of 2017, BCR had 7 bond issues with a total nominal value of €M 1 720, with the following main features:
€M Nominal Coupon Maturity
Bond 2018 300 6.875% 2018
Bond 2021 300 3.875% 2021
Bond 2022 120 Eur6M + 2.4% 2022
Bond 2023 300 2.000% 2023
Bond 2025 300 1.875% 2025
Bond 2027 300 2.375% 2027
Bond 2032 100 Inflation + 4.5%* 2032
* Fixed interest rate of 6% for the first five years and inflation linked from the sixth year to maturity ( underlying is the consumer price index except housing plus a 4.5% spread)
EIB and Other Loans
At the end of the year BCR had one loan with the European Investment Bank (EIB), which has a floating interest rate indexed to the 6-month Euribor rate. This loan is subject to fixed principal repayments every half-year until December 2030. At 31 December 2017 the amount outstanding under this loan totalled €M 486.
Additionally, at the end of 2017 BCR had committed credit lines and commercial paper programmes totalling €M 475, of which €M 200 were drawn and €M 275 remain undrawn and available. In May 2017 BCR extended the maturity of one committed credit line until 2020 (in the amount of €M 100) and in October it extended to 2020 the maturity of a different committed credit line (in the amount of €M 50).
III - FINANCIAL REPORT 2017 ANNUAL REPORT 24
Debt Profile
As result of a proactive management of refinancing risk, the debt repayment of BCR is well balanced: the maximum amount due in a year is €M 339 (corresponding to the repayment of a €M 300 bond and the annual repayment of the EIB loan in the amount of €M 39).
Debt repayment profile (€M)
400 Other Bonds EIB 300
200
100
0 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
At the end of the year, approximately 70% of BCR’s debt was subject to fixed interest rates and the remaining 30% had floating interest rates. The weighted average cost of debt during 2017 (including the impact of derivative instruments) was 3.0%, corresponding to a 30 bps decrease compared to 2016. Note that as of 31 December 2017 the weighted average rate of debt was 2.8%, anticipating a favourable evolution in financial expenses in forthcoming years.
Financial Position
At the end of 2017 BCR’s Net Assets totalled €M 2 937, comprising mostly intangible assets associated with concession rights and bank deposits.
Total liabilities amounted to €M 2 752, having increased by €M 244 as a result of the financial operations referred to above.
Equity fell by €M 24 (down to €M 185), mainly as a result of the distributions in the amount of €M 161 made to shareholder BCR SGPS, S.A., through dividends, distribution of free reserves and decrease in share capital.
III - FINANCIAL REPORT 2017 ANNUAL REPORT 25
Covenants and Rating
In addition to its contractual and financial structure, which grants creditors high protection, BCR follows principles of prudent and conservative financial management. The four covenants in the form of financial ratios (namely Net Senior Debt/EBITDA, Historic ICR, Forward Looking ICR and CLCR) to which BCR is subject stood within established thresholds as of 31 December 2017.
The Net Senior Debt / EBITDA ratio stood at 4.51x, i.e. significantly below the level posted at the end of 2016 (5.25x) and the maximum level of 5.75x considered as a trigger event level at which point distribution can not be made. In 2017 BCR reinforced its deleveraging path, as a result of the increase in EBITDA and decrease in net debt.
Historic ICR ratio as of 31 December 2017 stood at 5.68x, over and above the minimum trigger event threshold of 2.25x. This ratio has evolved favourably compared to the 4.84x in 2016, reaching its highest level since the setting up of BCR´s contractual structure (end 2010).
BCR’s rating evolved favourably throughout 2017, reflecting the company’s strong operational and financial performance. In September 2017 Moody’s upgraded BCR's Outlook from ‘Stable’ to ‘Positive’, following the upward revision of Portugal's Outlook. The company’s long term rating was reaffirmed at ‘Baa3’.
In December 2017 Fitch confirmed its long-term ‘BBB’ rating of BCR and upgraded its Outlook from ‘Stable’ to ‘Positive’. The short-term rating was also revised upwards from ‘F3’ to ‘F2’. Subsequently, in January 2018 Fitch revised its long-term rating upwards to ‘BBB+’ from ‘BBB’, with ‘Stable’ Outlook. Short-term rating was confirmed at ‘F2’.
Agencies Rating Outlook
Moody’s Baa3 Positive Outlook
Fitch Ratings BBB+ Stable Outlook
III - FINANCIAL REPORT 2017 ANNUAL REPORT 26
IV - 2018 OUTLOOK
2018 Outlook
In 2018 the BCR network should continue to see increasing levels of demand, maintaining a trend in the last three years. Notwithstanding, taking into account economic growth prospects and a likely increase in fuel prices, traffic growth may slowdown. Considering this environment and a 1.42% increase in toll rates, BCR estimates an increase in toll revenues above 4%.
Operating expenses should evolve in line with revenues, reflecting the increase in activity.
Capital expenditure, which is expected to increase compared to 2017's levels, will be directed fowards widening works and several major repairs in road surfacing and structures to be carried out throughout the network.
BCR will maintain its strong financial position, assessing and implementing the most efficient funding solutions in light of the current and future situation.
IV - 2018 OUTLOOK 2017 ANNUAL REPORT 28
V - CORPORATE GOVERNANCE
Corporate Governance
With a view to ensuring the separation within the Brisa Group of those rights, obligations, assets and liabilities relating to the concession established according to Council of Ministers' resolution no. 198-B/2008 of 31 December, which is operated by BCR, the Company adopted a governance structure reflecting such independence.
Capital structure The Company's share capital is € 75 000 000 (seventy five million Euro) fully subscribed and paid up, divided into 15 000 000 (fifteen million) shares with a nominal value of € 5 (five Euro) each. There are no different classes of shares or rights.
Each share corresponds to one vote and there are no voting restrictions.
Shares are 100% held by Brisa Concessão Rodoviária, SGPS, S.A., where Brisa Auto-Estradas de Portugal, S.A. holds a 70% stake and the remaining 30% is held by Global Roads Investimentos, SGPS, Lda.
Limitations as to the transferability or ownership of the shares representing the share capital of BCR are those deriving from its concession contract.
Under the terms of article 16, only the General Meeting has the powers to change the Company's Articles of Association.
Composition of the Board of Directors The board of directors is comprised of 12 (twelve) members, three of whom are independent, subject to the following requirements:
(a) they shall not hold any executive duties in the Company;
(b) They are not within any of the incompatibility situations provided in paragraph one of Article 414-A of the Companies Code, except for the one provided in respective sub-paragraph b); and
(c) They shall not exercise nor have exercised any managing function (whether or not of executive nature) in any related party.
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Special requirements of independent directors Paragraph 1 of article 414-A of the Companies Code establishes the incompatibility regime applicable to supervising bodies, which is particularly demanding.
Accordingly, in addition to those exercising or having exercised executive or non executive positions in companies directly or indirectly holding over 30% of the share capital of BCR, Independent Directors cannot:
(a) benefit from private advantages provided by the company;
(b) Not applicable.
(c) be members of the managing boards of any company under a parent-subsidiary or group relationship with the supervised company;
(d) be members of any corporation holding control over the supervised company;
(e) directly or indirectly, provide services or hold a material commercial relationship with the supervised company or any company holding a control or group relationship with the latter;
(f) hold office in a competing company or exercise competing activity on behalf of the latter or be bound in any way to the interests of a competing company;
(g) be spouses, relatives and kin in direct lineage up to and including the third lineage, in the collateral line, of persons prevented under the terms of paragraphs a), c), d) and f) above, as well as spouses of the persons covered by provisions in paragraph e);
(h) perform management or supervising functions in five companies other than in law firms, statutory auditing firms and statutory auditors, the latter being subject to provisions in article 76 of Decree-law 487/99 of 16 November;
(i) be statutory auditors presenting other incompatibilities according to the relevant legislation;
(j) be persons who are banned, incapacitated, insolvent, bankrupt or sentenced to penalties involving the prohibition, even if temporary, of performing public functions.
Specific Powers Financing contracts entered by BCR provide that:
(k) All contracts with related parties which BCR may enter, renew, revoke or alter, whatever their respective amount, shall be approved by at least 2 of the 3 independent directors;
(l) Only dividend payment proposals that were previously approved by at least 2 of the 3 independent directors referred to above may be submitted to the approval of the General Meeting of BCR;
The Board of Directors has no powers to decide on any share capital increase.
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Functioning of the Board of Directors In addition to requiring at least 3 independent directors as mentioned above, the composition of the Board of Directors is not subject to any other requirement; respective members are appointed as provided in the Companies Code. Member Manuel Eduardo Henriques de Andrade Lamego is the managing director with powers to manage the current affairs of BCR, within the scope of the general policies approved by the Board of Directors.
The powers delegated to the managing director are as follows:
(ii) Jointly with another director or attorney-in-fact duly mandated for the purpose:
(a) Open, operate and close bank accounts;
(b) Accept, draw, endorse and pay bills of exchange, cheques and invoice statements of accounts held by BCR;
(c) Deposit cash in bank accounts held by BCR with banks and other credit institutions;
(d) Under the terms specifically established by the BoD, take out and repay loans with banks and other credit institutions in Portugal and/or abroad.
(e) Enter, revoke, terminate, rescind or cease, in any way and at any time, insurance, leasing or long term rental contracts.
(iii) Separately:
(a) Within the limits of his/her financial powers, authorise payments, correct and settle accounts with debtors and creditors;
(b) Sign, dispatch and receive correspondence;
(c) Pay taxes and duties, namely to the Treasury (Direcção Geral do Tesouro e Finanças) and Social Security (Instituto de Gestão Financeira da Segurança Social), claim undue payments and receive cancellation letters and respective amounts;
(d) Issue receipts and give discharge;
(e) See to the performance of any relevant registrations with respective land, commercial and industrial registrar offices, requesting annotations and cancellations;
(f) Sign any document that may be required to retrieve from postal office or railway office or any other any postal order or registered mail or any other mail addressed to BCR;
(g) Hire and exercise disciplinary, managing and supervision authority over BCR personnel and represent BCR in its relations with its employees;
(h) Prepare and submit to the Board of Directors, in a timely manner, all elements required for the resolutions to be taken by the Board, according to the Agenda of respective meeting;
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(i) Inform the Board of Directors of matters requiring technical studies or special services;
(j) Act on behalf of BCR before any Ministry, General Directorate, Government department, municipal council and any other public or private office or entity;
(k) Carry out the financial, operational, business, administrative, advertising and promotional management of BCR; and
(l) Represent BCR in court or otherwise, as plaintiff or defendant, bring and keep abreast of legal proceedings, accept responsibility and withdraw from or compromise such lawsuits, and enter into arbitration agreements.
Under the terms of the Companies Code, companies with BCR's governance model (board of directors and audit board), it falls to shareholders assembled in general meeting to submit proposals for the appointment and replacement of members of the board of directors and the audit board. There is no statutory restriction to the submittal of proposals and election of these two bodies. In case of resignation or definitive impediment of a director during the course of his mandate, the Board of Directors will co-opt a new member, subject to the approval of the first general meeting occurring after the co-option concerned.
Remuneration In 2017 remuneration of the members of BCR Board of Directors was as follows:
Fixed Variable Other Name Total Remuneration Remuneration Benefits Vasco Maria Guimarães José de Mello - - - - João Pedro Stilwell Rocha e Melo - - - - João Pedro Ribeiro de Azevedo Coutinho - - - - António José Lopes Nunes de Sousa - - - - Daniel Alexandre Miguel Amaral - - - - Michael Gregory Allen - - - - António José Louçã Pargana - - - - Fernando Aboudib Camargo - - - - Manuel Eduardo Henriques de Andrade Lamego* 194 509 92 192 12 608 299 309 Miguel Athayde Marques** 56 000 56 000 João Filipe Maia de Lima Mayer** 56 000 56 000 Emanuel José Leandro Maranha das Neves** 56 000 56 000 Total (in €) 362 509 92 192 12 608 467 309
* Managing Director ** Independent Directors
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In addition to the non executive directors, remaining non executive officials do not earn any remuneration for carrying out their duties and responsibilities.
Audit Board At the General Meeting held on the 26th November 2013 shareholders decided to change the audit body by appointing an Audit Board to replace the existing Sole Auditor structure.
In 2017 remuneration of the members of BCR's Board of Directors was as follows:
Name Fixed Remuneration
Francisco Xavier Alves 43 200
Joaquim Patrício Silva 26 400
Tirso Olazabal Cavero 26 400
Total (in €) 96 000
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VI - RISK MANAGEMENT – GOALS AND POLICIES
Risk Management – Goals and Policies
The Risk Management Policy is established at Group level, involving directly the governing bodies of the various companies of the Brisa Group, as well as all remaining corporate structures.
Risk Management aims at ensuring a sustainable business, safeguarding the Group's values, based on best practices, leveraging on internal know-how to efficiently manage the risks to which the Group is exposed, namely in the environmental, legal, financial and operational fields.
Risk management is a cornerstone of corporate governance. As such, it is part of Brisa Group’s culture and management processes; therefore employees have the responsibility to mitigate risks, minimize their impact and identify improvement and/or return opportunities, where possible.
In this context, BCR's risk management policy is an intrinsic part of the integrated risk management system of the Brisa Group, which is based on an integrated, structured, systematised and transversal model designed according to the internationally recognised method COSO (Committee of Sponsorship Organizations of the Treadway Commission), which views to ensure the use of the best Corporate Governance practices at the following levels:
- Fixing of strategic goals in terms of risk taking;
- Aligning of the risks effectively incurred with the group's strategic options;
- Identification of the main risks associated with the group's activities and respective causes;
- Analysis and measuring of the impact and likelihood of occurrence of each potential risk;
- Establishing of mechanisms to implement the risk management measures adopted and follow their efficiency;
- Adoption of internal information and communication mechanisms for the various components of the system, as well as risk alerts;
- Regular assessment of the system implemented and adoption of changes deemed necessary.
To this end, the Group implemented an integrated risk management tool based on the aspects referred to above, in order ensure the convergence of risk management with strategic planning.
This integrated risk management system allows to identify and assess, on an annual basis, the main risks faced by Brisa Group businesses, and determine respective control and/or mitigation measures. In accordance with the governance model adopted by BCR - consisting of a board of directors and an audit board, these two bodies play a crucial role in the creation and monitoring of internal control and risk management systems, assessing their operation and adjusting them to corporate needs.
VI - RISK MANAGEMENT – GOALS AND POLICIES 2017 ANNUAL REPORT 36
BCR internal control system is designed to ensure a financial reporting of high quality standard. To this end, the preparation and disclosure of the company's financial information follows specific rules; the financial information is reviewed in a regular and systematic basis by BCR's management, under the control of the Audit Board.
Following the risk assessment carried out pursuant to the system described above, the following major risk groups likely to affect BCR's normal business development were identified:
Operational Risks BCR is a leading company in the road and transport sector; as such, risk management is a crucial tool for a sustainable development of its operations.
As part of its strategy, the Group strives to identify operating risks and define management measures and good practices to mitigate them, so as to face the challenges of a continuously changing and increasingly demanding and globalised world, where prevention is crucial. These activities help to establish mitigating measures in line with current business needs, and to act ahead to prevent potentially risky situations.
In terms of Health and Safety at Work, the Brisa Group has a specialised structure which monitors and ensures the central and local coordination of the health and safety plans associated to risk activities, whether they are internally developed or outsourced.
Regulation & Compliance Risks Road concession and operation are subject to very specific and comprehensive regulations. The risk stemming from regulatory changes is therefore, particularly relevant.
The Legal Department at Group level follows the regulatory evolution of BCR's activities closely, suggesting legal steps and solutions deemed suited to the normal development of the company's operations, in accordance with the legal framework in force at any time.
We point out the work developed over the last few years viewing the convergence of procedures and practices with new requirements meant to attest of the compliance with relevant safety rules in concession motorways and the existence of road safety conditions.
Environmental Risks Environmental management throughout design, construction and operation phases is a crucial element of the risk management system at Group level. Measures to identify environmental risk situations have long been carried out to allow taking preventive actions and mitigate impacts, in the light of the environmental policy followed by BCR and the Brisa Group at all levels. This environmental risk management includes eco-efficiency
VI - RISK MANAGEMENT – GOALS AND POLICIES 2017 ANNUAL REPORT 37
measures, which is a way of integrating environmental risk management throughout the value chain, i.e. in terms of impacts on the environment and the management of related costs and benefits.
The existence within the Brisa Group of environmentally certified companies according to ISO 14001 standards, which are internationally recognized as guidelines for corporate environmental management, and the adoption of own specific guidelines (Environmental Policy), eco-efficiency criteria, quantitative goals for environmentally critical indicators, plus a Sustainability Management Information System, all strengthen the Group's strict standards as it continuously seeks improvement and a sustainable business performance.
Information systems risk The Information Systems area at the Brisa Group level is a crucial instrument for sustained growth, given the continuous technological innovation and its contribution to improving efficacy and efficiency in business processes.
The definition of a medium/long-term risk management strategy in information systems, including a Disaster Recovery solution, which by definition, is closely related to business processes, allows to significantly reduce the risk of operating losses in those circumstances. At the same time, it ensures the efficacy of investments made and permits a quick reaction in the event of sudden changes in business environment.
The systematic and parallel development of activities in multiple areas, including areas relating to safety of information and resilience to failures in infrastructures, has also provided greater efficiency in handling this type of risks.
With respect to internal controls and information supporting processes, the organisation is reinforcing its structure, through consistent and continuous reassessment, based on the best practices in this area, namely the ITIL framework .
Amongst the activities developed in 2017 with a relevant influence in the mitigation of these risks, the Company continued to strengthen its corporate policy in terms of information systems. As result, following a critical assessment of the systems and applications which support the Group's business processes - known as Business Impact Analysis (BIA), tests to the implementation of the Disaster Recovery Solution were carried out, thus ensuring that in the event of Disaster, the Group will have all the information means required to continue operating.
VI - RISK MANAGEMENT – GOALS AND POLICIES 2017 ANNUAL REPORT 38
Financial Risks As with the majority of companies, BCR is exposed to a number of financial risks deriving from its business activity. These include: liquidity, refinancing and interest rate risk deriving from its financial liabilities; and, counterparty risk to which the Company is exposed as it contracts interest rate risk hedging operations and manages its treasury surpluses.
Following the spin-off and ring-fencing of BCR, the financial risks to which the company is subject were strongly mitigated thanks to the implementation of an innovative financial structure.
Note that BCR financial structure follows a risk hedging policy with its own risk management requirements and guidelines, including, for instance, a minimum percentage of fixed rate debt, non existence of significant non- hedged foreign exchange exposure, as well as a minimum financial solidity (according to ratings) required from counterparties to enter into financial operations.
BCR continues to show strong capacity to secure access to credit, reinforcing its liquidity position and mitigating its refinancing risk.
VI - RISK MANAGEMENT – GOALS AND POLICIES 2017 ANNUAL REPORT 39
VII - PROPOSAL FOR THE APPROPRIATION OF RESULTS
Proposal for the Appropriation of Results
Considering that an amount of € 45 148 218.97 out of the 2017's total net profit of € 136 083 794.98 was already distributed to shareholders by way of interim dividends, the Board of Directors proposes to distribute the remaining amount of € 90 935 576.01 as dividend, since the legal reserve is already fully established.
São Domingos de Rana, 14 March 2018.
BOARD OF DIRECTORS
Vasco Maria Guimarães José de Mello (chairman)
João Pedro Stilwell Rocha e Melo
João Pedro Ribeiro de Azevedo Coutinho
António José Lopes Nunes de Sousa
Daniel Alexandre Miguel Amaral
Michael Gregory Allen
Manuel Eduardo Henriques de Andrade Lamego
Fernando Aboudib Camargo
António José Louçã Pargana
Miguel José Pereira Athayde Marques
João Filipe Maia de Lima Mayer
Emanuel José Leandro Maranha das Neves
VII - PROPOSAL FOR THE APPROPRIATION OF RESULTS 2017 ANNUAL REPORT 41
VIII - FINANCIAL STATEMENTS
Statement of Financial Position as of 31 December 2016 and 2017 (amounts in Euro)
Notes 2017 2016
Non current assets Tangible fixed assets 10 8 987 484 8 293 622 Intangible assets 11 2 380 277 595 2 496 453 116 Advances to be forwarded as tangible fixed assets 10 30 150 3 379 Deferred tax assets 12 66 381 756 57 889 565 Total non-current assets 2 455 676 985 2 562 639 682
Current assets Inventories 1 868 1 715 Trade and other receivables 13 33 221 161 33 050 416 Other current assets 14 2 144 833 2 158 772 Cash and cash equivalent 15 445 811 111 118 312 185 Total current assets 481 178 973 153 523 088
Total assets 2 936 855 958 2 716 162 770
Shareholders' equity: Share capital 16 75 000 000 75 000 000 Share premiums 17 - 26 544 809 Legal reserve 18 15 000 000 12 928 675 Other reserves 18 3 677 079 1 976 339 Net profit for the year 136 083 795 91 683 102 Interim dividends 9 ( 45 148 219) - Total shareholders' equity 184 612 655 208 132 925
Non-current liabilities: Loans 19 1 994 019 296 2 028 422 773 Provisions 21 190 796 680 167 643 914 Other non current liabilities 22 42 284 335 47 366 742 Total non-current liabilities 2 227 100 311 2 243 433 429
Current liabilities: Provisions 21 17 219 791 23 073 083 Trade payables 23 25 357 343 24 525 208 Loans 19 425 221 493 172 643 681 Suppliers of investment 23 16 534 697 15 369 509 Other accounts payable 1 979 482 1 596 287 Current tax liabilities 7 21 991 554 11 144 533 Other current liabilities 24 16 838 632 16 244 115 Total current liabilities 525 142 992 264 596 416
Total liabilities and equity 2 936 855 958 2 716 162 770
The accompanying notes form an integral part of the statement of financial position for the period ended 31 December 2017.
THE CERTIFIED ACCOUNTANT NO. 62018 THE BOARD OF DIRECTORS
VIII - FINANCIAL STATEMENTS 2016 ANNUAL REPORT 43
Statement of profit and loss and other comprehensive income as of 31 December 2016 and 2017 (amounts in Euro)
Notes 2017 2016
Operating income: Rendered Services 3 565 274 547 523 120 452 Other operating income 3 5 392 227 4 270 360 Operating subsidies 3 - 23 279 Reversal of amortisation, depreciation, adjustments and provisions 3 4 789 651 3 043 047 Income associated to construction service 3 13 323 675 21 401 129 Total operating income 588 780 100 551 858 267
Operating expenses: External supplies and services 4 ( 126 607 697) ( 122 721 646) Personnel costs ( 1 723 852) ( 1 683 724) Amortisation, depreciation and adjustments 10, 11 and 20 ( 133 869 757) ( 132 682 328) Provisions 21 ( 44 086 988) ( 39 419 665) Tax ( 1 145 849) ( 1 088 804) Other operating expenses ( 88 391) ( 178 055) Expenses associated to construction service 3 ( 13 323 675) ( 21 401 129) Total operating expenses ( 320 846 209) ( 319 175 351)
Operating Results 267 933 891 232 682 916
Financial expenses 6 ( 81 767 296) ( 104 727 531) Financial income 6 35 518 329 479 Profit before tax 186 202 113 128 284 864
Income tax 7 ( 50 118 318) ( 36 601 762) Net profit for the year 136 083 795 91 683 102
Other income and expenses recognised under Shareholders' Equity which will be reclassified to results: Increase/(decrease) in the fair value of financial instruments, net of tax effect 12 and 25 1 857 711 1 627 546 Income recognised directly in shareholders' equity 1 857 711 1 627 546
Total net profit and loss and other comprehensive income for the year 137 941 506 93 310 648
Earnings per share: Basic 8 9,07 6,11 Diluted 8 9,07 6,11
The accompanying notes form an integral part of the results and other comprehensive income for the year ended 31 December 2017.
THE CERTIFIED ACCOUNTANT NO. 62018 THE BOARD OF DIRECTORS
VIII - FINANCIAL STATEMENTS 2016 ANNUAL REPORT 44
Statement of changes in shareholders' equity as of 31 December 2016 and 2017 (amounts in Euro)
Net Share issue Legal Other Result Interim Notes Share capital premium reserve Reserves for the year dividends Total
Balance at 01 January 2016 75 000 000 309 444 809 8 954 599 1 941 347 79 481 522 - 474 822 277
Net profit for 2016 - - - - 91 683 102 - 91 683 102 Increase/(decrease) in the fair value of financial hedging instruments net of tax effect 12 and 25 - - - 1 627 546 - - 1 627 546 Total net profit and loss and other comprehensive income for the year - - - 1 627 546 91 683 102 - 93 310 648
Appropriation of net profit for 2015: Transferred to legal reserve - - 3 974 076 - ( 3 974 076) - - Dividends 9 - - - - ( 75 507 446) - ( 75 507 446) Distribution of free reserves 9 - - - ( 1 592 554) - - ( 1 592 554) Share capital increase 16 and 17 282 900 000 ( 282 900 000) - - - - - Share capital decrease 16 ( 282 900 000) - - - - - ( 282 900 000) Balance at 31 December 2016 75 000 000 26 544 809 12 928 675 1 976 339 91 683 102 - 208 132 925
Balance at 01 January 2017 75 000 000 26 544 809 12 928 675 1 976 339 91 683 102 - 208 132 925
Net profit for 2017 - - - - 136 083 795 - 136 083 795 Increase/(decrease) in the fair value of financial hedging instruments net of tax effect 12, 18 and 25 - - - 1 857 711 - - 1 857 711 Total net profit and loss and other comprehensive income for the year - - - 1 857 711 136 083 795 - 137 941 506
Appropriation of net profit for 2016: Transferred to legal reserve 18 - - 2 071 325 - ( 2 071 325) - - Dividends 9 - - - - ( 89 611 777) - ( 89 611 777) Distribution of free reserves 9 - - - ( 151 780) - - ( 151 780) Share capital increase 16 and 17 26 550 000 ( 26 544 809) - ( 5 191) - - - Share capital decrease 16 ( 26 550 000) - - - - - ( 26 550 000) Interim dividends 9 - - - - - ( 45 148 219) ( 45 148 219) Balance at 31 December 2017 75 000 000 - 15 000 000 3 677 079 136 083 795 ( 45 148 219) 184 612 655
The accompanying notes form an integral part of the statement of changes in shareholders' equity for the year ended 31 December 2017.
THE CERTIFIED ACCOUNTANT NO. 62018 THE BOARD OF DIRECTORS
VIII - FINANCIAL STATEMENTS 2016 ANNUAL REPORT 45
Cash Flow Statement as of 31 December 2016 and 2017 (amounts in Euro)
Notes 2017 2016 OPERATING ACTIVITIES: Cash receipts from clients 564 922 763 520 078 340 Cash paid to suppliers ( 129 912 178) ( 123 236 249) Cash paid to personnel ( 1 709 491) ( 1 667 656) Flows generated by operations 433 301 094 395 174 435
Income tax paid ( 46 517 791) ( 40 695 274) Payments for the replacement of infrastructures ( 27 609 366) ( 24 230 144) Other receipts/(payments) relating to operating activities 5 922 917 1 025 790 Net cash from operating activities (1) 365 096 854 331 274 807
INVESTMENT ACTIVITIES Cash receipts relating to: Tangible and intangible fixed assets 352 508 536 610 Interest and similar income 5 571 597 741 358 079 1 134 351 Cash payments relating to: Tangible and intangible fixed assets ( 19 171 637) ( 26 509 264) Net cash from investing activities (2) ( 18 813 558) ( 25 374 913)
FINANCING ACTIVITIES Cash receipts relating to: Borrowings 1 113 500 000 902 500 000
Cash payments relating to: Borrowings ( 902 485 409) ( 874 625 409) Share capital decreases 16 and 17 ( 26 550 000) ( 282 900 000) Interest and similar costs ( 65 295 047) ( 79 134 246) Dividends 9 ( 134 911 776) ( 77 100 000) Derivative financial instruments ( 3 042 119) ( 3 944 324) ( 1 132 284 351) ( 1 317 703 979) Net cash from financing activities (3) ( 18 784 351) ( 415 203 979)
Foreign exchange effect (4) ( 19) 2 686 Variation in cash and cash equivalents (5) = (1) + (2) + (3) + (4) 327 498 926 ( 109 301 399) Cash and cash equivalents at the beginning of the year 15 118 312 185 227 613 584 Cash and cash equivalents at the end of the period 15 445 811 111 118 312 185
The accompanying notes form an integral part of the cash flow statement for the year ended 31 December 2017.
THE CERTIFIED ACCOUNTANT NO. 62018 THE BOARD OF DIRECTORS
VIII - FINANCIAL STATEMENTS 2016 ANNUAL REPORT 46
IX - NOTES TO THE FINANCIAL STATEMENTS
Notes to the Financial Statements
As of 31 December 2017 (Amounts in Euro) 1. INTRODUCTION Brisa – Concessão Rodoviária, S.A. (“Company” or “BCR”), formerly MCall – Serviços de Telecomunicações, S.A., is a private company with debt securities listed on Bourse de Luxembourg (“LuxSE”) and Euronext Lisbon. It was set up in 2001. On 30 April 2010, following the spin off of the call centre business into a new company and subsequent amendment of the company's articles of association, BCR's main object became the construction, maintenance and operation of motorways and respective service areas pursuant to a concession contract, and the planning and development of social equipment infrastructures.
The above mentioned spin off was carried out in April 2010, with accounting effect as of 1 January 2010, following the separation of the call centre services assets.
On 22 December 2010 the Company, which is included in the consolidation perimeter of the Brisa Group, was assigned by Brisa - Auto-Estradas de Portugal, S.A. (“BAE”) the latter's position in the concession contract approved by Council of Ministers Resolution no. 198-B/2008, of 31 December (“Brisa Concession”). This operation was followed by the assignment by BAE of a set of assets and liabilities allocated to Brisa Concession, by means of contributions in kind for the purposes of a share capital increase that took place on 22 December 2010.
The bases of Brisa Concession were established pursuant to Decree-law 467/72 of 22 November, namely the construction, maintenance and operation of motorways. Since then, the concession bases were revised on several occasions, following amendments to the concession contract.
Decree-Law 294/97 of 24 October, Decree-Law 287/99, of 28 July, Decree-Law 314 A/2002, of 26 December, and Decree-Law 247-C/2008, of 30 December approved the bases of the concession currently in force; these bases are as described below, having relevant impact on the Company's financial and economic situation:
• The total length of the motorway network operated under concession was fixed at 1124 kilometres. Except for the access to the new airport, the length of which will depend on the location of the future airport, the remaining is fully operational. Of the 1100 kilometres currently opened to traffic, only 86 kilometres are not tolled. • The term of the concession was fixed at 31 December 2035 and tangible and intangible fixed assets directly related to the concession as recognized in the financial statements, will revert to the State at the end of the period. • The Company's minimum share capital is Euro 75 million. • In the last 5 years of the concession the State may terminate it against compensation payable to the Concessionaire.
IX - NOTES TO THE FINANCIAL STATEMENTS 2017 ANNUAL REPORT 48
The supervision of the concession falls to the Ministry of Finance in what concerns financial matters and to the ministry responsible for the road sector as concerns remaining issues.
2. MAIN ACCOUNTING POLICIES
2.1. Basis of presentation
The accompanying financial statements were prepared on a going concern basis from the Company's books and accounting records, restated to International Financial Reporting Standards, effective for the year beginning 01 January 2017, as adopted in the European Union. Such standards include the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”), the International Accounting Standards (“IAS”) issued by the Accounting Standards Committee (“IASC”) and the respective interpretations – SIC and IFRIC issued by the International Financial Reporting Interpretation Committee (“IFRIC”) and Standing Interpretation Committee (“SIC””). These standards and interpretations are hereinafter referred to collectively as “IFRS”.
Adoption of new standards and interpretations, amended or revised
The following standards, interpretations, amendments and revisions applicable to the Company's operations, endorsed by the European Union with mandatory application in financial years starting on or after 01 January 2017, resulting in an impact on the Group’s financial statements, were adopted for the first time in the year ended 31 December 2011:
Effective date (years beginning on or Standard/Interpretation after) IAS 7 – Cash flow Statement 01-jan-17 Reconciliation of changes in funding liabilities with cash flows of financing activities. IAS 12 – Income tax 01-jan-17 Recognition of deferred tax assets measured at fair value, the impact of deductible temporary differences on the estimate of future taxable income and the impact of restrictions on the capacity to recover deferred tax assets.
IX - NOTES TO THE FINANCIAL STATEMENTS 2017 ANNUAL REPORT 49
Non adopted new standards and interpretations, amended or revised
Until the date of approval of these financial statements, the European Union endorsed the following standards the application of which is mandatory in future financial years:
Effective date (years beginning on or Standard/Interpretation after)
IFRS 9 - Financial instruments: 01-jan-18 This standard is included in the revision of IAS 39 and establishes new requirements relating to the classification and measurement of financial assets and liabilities, the recognition of impairments on trade receivables and the recognition and classification of hedging accounting.
IFRS 15 – Revenue from contracts with 01-jan-18 This standard introduces a structure for recognising revenue when the customers contractual obligation of delivering assets or providing services is met, by applying the 5-phase method.
IFRS 16 – Leases 01-jan-19 This standard specifies the principles to recognise, measure, present and disclose leases, replacing IAS 17 - Leases. The standard defines a new definition of lease and a new accounting of leases for lease-holders. There are no changes concerning the accounting of leases by lessors.
IFRS 15 – Revenue from contracts with 01-jan-18 Identification of performance obligations, time of recognition of revenue customers from PI licences, revision of indicators for classifying the principal relation versus agent, and new regimes for the simplification of the transition.
These standards, although endorsed by the European Union, were not adopted by the Company in the year started at 31 December 2017 as their application is still not mandatory. No significant impact is expected to occur following the adoption of the said standards.
IX - NOTES TO THE FINANCIAL STATEMENTS 2017 ANNUAL REPORT 50
The following standards, interpretations, amendments and revision that could be applicable to the Company's operations, the adoption of which will be mandatory in future financial years, were not endorsed by the European Union, as of the date of these financial statements:
Effective date (years beginning on or Standard/Interpretation after)
Improvements in international financial 01-jan-17 / These improvements involve the clarification of aspects relating to: IFRS 1 - reporting standards (2014-2016 cycle) 01-jan-18 First adoption of IFRS: eliminates temporary exemptions for IFRS 7, IFRS 10 and IAS 19, as they are no longer applicable; IFRS 12 - Disclosures of interests in other entities: clarifies that its scope includes investments classified within the scope of IFRS 5, and that the only exemption refers to the disclosure of the summary of the financial information of such entities; and IAS 28 - Investments in associates and joint ventures: (i) clarifies that investments in associates or joint ventures held by a venture capital company can be measured at fair value according to IFRS 9, on an individual basis, and (ii) clarifies that an entity which is not an investment entity, but holds investments in associates and joint ventures which are investment entities can keep the measurement at fair value of the associate or joint venture in its own subsidiaries.
IFRS 2 – Share-base payment 01-jan-18 Measurement of share-based payment plans financially settled, recognition of changes, and the classification of share-based payment plans as settled in equity, where the employer is required to withhold tax.
IFRS 9 - Financial instruments: 01-jan-19 Options of accounting processing of financial assets with negative compensation.
IAS 28 - Investments in associates and 01-jan-19 Clarification as to long term investment in associates and joint ventures joint ventures which are not measured by the equity method.
Improvements in international financial 01-jan-19 These improvements involve the clarification of aspects relating to: IAS 23 - reporting standards (2015-2017 cycle) Borrowing costs: The amendments clarify that if any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalisation rate on general borrowings. IAS 12 - Income taxes: The amendments clarify that all income tax consequences of dividends (i.e. distribution of profits) should be recognised in profit or loss, regardless of how the tax arises; and IFRS 3 - Business Combinations and IFRS 11 - Joint Arrangements: clarify that (i) when an entity obtains control of a business that is a joint operation, it remeasures previously held interests in that business; and (ii) when an entity obtains joint control of a business that is a joint operation, the entity does not remeasure previously held interests in that business.
Effective date (years beginning on or Standard/Interpretation after)
IFRIC 22 – Foreign currency 01-jan-18 Interest rate to apply where the consideration is received or paid in transactions and advance consideration advance.
IFRIC 23 – Uncertainty over income tax 01-jan-19 Clarification regarding the determination of taxable profit (tax loss), tax treatment bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under IAS 12.
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No relevant effects are estimated for future financial statements from the application of these standards and interpretations, though its impact was not yet determined or quantified.
The financial statements were prepared in accordance with the historical cost convention, except in the case of financial instruments, which were recognised at fair value. The main accounting policies adopted are described below.
2.2. Segment reporting
Given that the company does not identify more than one segment in its activity according to IFRS 8 requirements, it had decided that it would not present information according to segments.
2.3. Intangible assets
Intangible assets, which comprise essentially contractual rights and costs incurred on specific projects with future economic value, are stated at cost less accumulated amortisation and impairment losses. Intangible assets are only recognised if it is likely that they will produce future economic benefits for the Company, that they are controllable by the Company and that their value can be determined reliably.
Internally generated intangible assets, namely current research and development costs, are recognised as costs when incurred.
Amortisation of such assets is provided on a straight-line basis as from the date the assets started being used, in accordance with the period the Company expects to use them.
Intangible assets directly related to Brisa Concession are amortised until the end of the concession contract, presently fixed at 31 December 2035.
Intangible assets which are expected to generate future economic benefits for an unlimited period are known as intangible assets of undefined useful life. Such assets are not amortised but are subject to annual impairment tests.
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2.4. Tangible fixed assets
Tangible fixed assets used in the rendering of services or for administrative use are stated at cost, including expenses incurred with their purchase, less accumulated depreciation and, where applicable, impairment losses.
Depreciation of tangible fixed assets is provided on a straight-line basis over their estimated useful lives, as from when the assets become available for their intended use, in accordance with the following estimated periods of useful life: Years of useful life
Buildings and other constructions 10 Basic equipment 1 to 20 Transport equipment 4 to 6 Tools and utensils 4 Administrative equipment 1 to 10
Tangible fixed assets directly related to the concession will revert to the concession grantor at the term of the concession contract. They are amortized throughout their estimated useful lives up to the end of the concession period.
2.5. Leasing
Lease contracts are classified as: (i) finance leases, if all the benefits and risks of ownership are substantially transferred pursuant to them; and (ii) operating leases, if all the benefits and risks of ownership are not substantially transferred pursuant to them.
Leases are classified as finance or operating leases based on the substance rather than the form of the contract.
Fixed assets acquired under finance lease contracts as well as the corresponding liabilities are recorded in accordance with the financial method, where fixed assets, corresponding accumulated depreciation and liabilities are recognised in accordance with the contracted financial plan. In addition, interest included in lease instalments and depreciation of tangible fixed assets are recognised as expenses in the statement of profit and loss and other comprehensive income for the year they concern.
In the case of operating leases, lease instalments are recognised as expenses in the statement of profit and loss and other comprehensive income on a straight-line basis over the period of the lease contract.
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2.6. Impairment of non-current assets
Impairment assessments are made as of the date of the statement of financial position and whenever an event or change in circumstances is identified that indicates that the book value of an asset may not be recovered. Where such indications exist, the Company will determine the recoverable value of the asset, so as to determine the possible extension of the impairment loss.
In situations in which the individual asset does not generate cash-flows independently of other assets, the estimated recoverable value is determined for the cash generating unit to which the asset belongs.
Whenever the book value of an asset exceeds its recoverable amount, an impairment loss is recognised by charge to the statement of profit and loss and other comprehensive income, under caption “Amortisation, depreciation and adjustments”.
The recoverable amount is the higher of the net selling price (selling price less costs to sell) and the usable value of the asset. Net selling price is the amount that would be obtained from selling the asset in a transaction between knowledgeable independent entities less the costs directly attributable to the sale. Usable value is the present value of the estimated future cash flows resulting from the continued use of the asset and sale thereof at the end of its useful life. Recoverable amounts are estimated for individual assets or, where this is not possible, for the cash-generating unit to which the asset belongs.
Impairment losses recognised in prior years are reversed when there are indications that such losses no longer exist or have decreased. The reversal of impairment losses is recognized in the statement of profit and loss and other comprehensive income as "Reversal of amortisation, depreciation, adjustments and provisions". However, impairment losses are reversed up to the amount that would have been recognised (net of amortisation) if the impairment loss had not been recorded in prior years.
2.7. Financing costs
Loan costs are recognised in the statement of profit and loss and other comprehensive income for the period to which they relate.
Costs incurred on loans obtained directly to finance the acquisition, construction or production of qualifying tangible and intangible fixed assets, i.e. assets which take more than one year to build, are capitalised and part of the cost of the assets. Such costs are capitalised as from the beginning of the preparation for construction or development of the assets and ends on the date such assets are available for use or when the project in question is suspended. Any financial income generated by loans obtained in advance to finance specific capital expenditure is deducted from the capital expenditure subject to capitalisation.
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2.8. Result of operations
Operating results include all operating expenses and income, whether recurring or not, including restructuring expenses, and expenses and income relating to operating assets (tangible fixed assets and intangible assets). These results do not include net financing expenses and income taxes.
2.9. Provisions
Provisions are recognised when, and only when, there is an obligation (legal or implicit) resulting from a past event, under which it is probable that there will exist an outflow of resources to resolve the obligation and the amount of the obligation can be reasonably estimated. At each the date of each statement of financial position, provisions are reviewed and adjusted to reflect the best estimate as of that date.
The amount recognised as provisions consists of the present value of the best estimate, as of reporting date, of the resources required to settle the obligation. This estimate is determined taking into account the risks and uncertainties surrounding the obligation.
In particular, the Group recognizes provisions for the reinstatement of obligations associated to the infrastructures operated under the concession agreements that require a specific level of service. These provisions are calculated based on future intervention plans, namely as concerns road resurfacing.
2.10. Financial instruments
Financial assets and liabilities are recognised when the Company becomes a party to the contractual relationship.
Cash and cash equivalent
Amounts included in caption “Cash and cash equivalents” include cash, bank deposits, term deposits and other treasury applications maturing in less than three months and which can be immediately withdrawable with insignificant risk of change.
Caption “Cash and cash equivalents” in the cash flows statement also includes bank overdrafts, reflected in the statement of financial position in the caption “Loans”.
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Held to maturity investments
Held-to-maturity investments are classified as non current assets, except if they mature in less than twelve months from the statement of financial position, including investments with a defined maturity date for which there is no intention or capacity to hold up to that date.
Held-to-maturity investments are recorded at capitalised cost based on the effective interest rate, less repayments of principal and interest income.
Financial assets and liabilities at amortised cost
Financial assets and liabilities at amortised costs, deducted of any accumulated impairment losses include: • Accounts receivable; • Loans; • Accounts payable.
The amortised cost is the amount at which a financial asset or liability is measured at initial recognition, less principal repayments, and plus or minus cumulative amortisation, using the effective interest rate method, of any difference between such original amount and the amount at maturity. The effective interest rate is the rate that discounts estimated future payments or receivables to the net amount recognized in the financial asset or liability.
Derivative financial instruments and hedge accounting
The Company may contract derivative financial instruments to hedge the financial risks to which it is exposed as a result of changes in interest rates. The Company does not contract derivative financial instruments for speculative purposes.
The Group contracts derivative financial instruments in accordance with internal policies approved by the Board of Directors.
Derivative financial instruments are measured at their fair value. The method for recognising these financial instruments will depend on the nature and purpose of the transaction.
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Hedge accounting
Derivative financial instruments are designated as hedging instruments in accordance with provisions of IAS 39, as to their documentation and effectiveness.
Changes in the fair value of derivative instruments designated as fair value hedges are recognised in the income statement for the year, together with changes in the fair value of the asset or liability subject to that risk.
Changes in the fair value of derivative financial instruments designated as cash flow hedging instruments are recorded in caption “Other reserves” as concerns their effective component, and in the income statement as concerns their non-effective component. The amounts recorded under “Other reserves” are transferred to the income statement in the same year in which the effect on the hedged item is reflected in the income statement.
Hedge accounting is discontinued when the hedging instrument matures or is sold or exercised or when the hedging relationship ceases to comply with requirements of IAS 39.
Trading instruments
Changes in the fair value of derivative financial instruments which are contracted for financial hedging purposes, in accordance with the Company's risk management policies, but do not comply with requirements of IAS 39 to qualify for hedge accounting, are recorded in the statement of profit and loss and other comprehensive income for the year in which they occur.
Fair value of financial instruments
The fair value of financial assets and liabilities is determined as follows:
• The fair value of standard financial assets and liabilities traded on active markets is determined based on their listed prices (Level 1);
• The fair value of other assets and liabilities (except derivative financial instruments) is determined in accordance with generally accepted valuation models, based on discounted cash flow analyses, considering prices on current market transactions (Level 2);
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• The fair value of derivative financial instruments is determined based on listed prices. Where listed prices are not available, fair value is determined based on analyses of discounted cash flow, which include assumptions not supported by prices or market rates (Level 3).
Impairment of financial assets
Financial assets carried at amortized cost are assessed for indicators of impairment at each reporting period, where there is evidence that these assets may be impaired. Such financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been negatively affected.
In what concerns financial assets carried at amortized cost, the amount of the impairment loss recognized is the difference between the asset’s carrying amount and the present value of the estimated future cash flows, discounted at the financial asset’s original effective interest rate.
For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the best estimate of the fair value of the financial asset.
The impairment losses are recorded in the statement of comprehensive income in the caption “Amortisation, depreciation and adjustments” in the year they are identified.
In the subsequent period, if the amount of the impairment loss decreases and the decrease can be linked objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through the income statement, to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized. The reversal of impairment losses is recorded in the statement of profit and loss and other comprehensive income in Caption "Reversal of amortisation, adjustments and provisions”.
Derecognition of financial assets and liabilities
The Company derecognises financial assets only when the contractual rights to receive the cash flows expire or when the financial assets and the risks and rewards of its ownership are transferred to another entity. The Company derecognises transferred financial assets in relation to which it still retains significant risks and benefits, insofar as their control was transferred.
The Company derecognises financial liabilities when, and only when, the corresponding obligation is either discharged or cancelled or expires.
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2.11. Share capital
Ordinary shares are classified in equity, as share capital.
Expenses directly attributed to the issuance of new shares or other equity instruments are recorded as deduction, net of tax, at the amount received resulting from the issue. Expenses directly attributed to the issuance of new shares or options for the purchase of a business are deducted at the value of the issue.
2.12. Dividend distribution
The distribution of dividends to holders of share capital is recognised as liabilities in the Company’s financial statements, in the period on which such dividends are approved by shareholders until the date of their financial settlement, or, in case of interim dividends, when approved by the Board of Directors
2.13. Contingent assets and liabilities
Contingent assets are not recognised in the financial statements, but are disclosed in the notes to the financial statements, when a future economic benefit is likely.
Contingent liabilities are not recognised in the financial statements but are disclosed in the notes to the financial statements, unless the possibility of an outflow of funds affecting future economic benefits is remote, in which case they are not subject to disclosure.
2.14. Revenue
Income relating to services rendered is recognised in the statement of profit and loss and other comprehensive income in the period they concern.
Where a reliable estimate is possible, results from construction contracts, i.e. corresponding expenses and income, are recognised in relation to the percentage of contracted work finished at the date of the report. The stage of completion is measured based on the stage of realization of the construction work in the infrastructure. Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognized up to the amount of the contract costs incurred which are likely to be recovered. Contract costs are recognized as expenses in the period in which they are incurred. When it is likely that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.
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2.15. Accrual basis
Interest and financial income are recognised on an accrual basis in accordance with the effective interest rate.
Expenses and income are recognised in the year to which they relate independently of when they are paid or received. Income and expenses for which their real amount is not known are estimated.
Expenses and income attributable to the current period, which will only be paid or received in future periods, as well as the amounts paid and received in the current period that relate to future periods and will be attributed to each of these periods, are recorded in the captions “Other current assets” and “Other current liabilities.
2.16. Income tax
Tax on income for the year is calculated based on the taxable results and takes into consideration deferred taxation.
Current income tax is determined based on the taxable income for the year. Taxable income differs from accounting results since it excludes several expenses and income which will only be deductible or taxable in subsequent years (timing differences), as well as expenses and income which will never be deductible or taxable under the terms of the tax rules in force (permanent differences).
Deferred taxes refer to temporary differences between the amounts of assets and liabilities for accounting purposes and the corresponding amounts for tax purposes, as well as those resulting from tax benefits obtained and temporary differences between tax and accounting income.
Deferred tax assets and liabilities are calculated and assessed periodically using the tax rates expected to be in force when the timing differences will reverse.
Deferred tax liabilities are recognised for all taxable temporary differences.
Deferred tax assets are only recognised when there is reasonable expectation that there will be sufficient future taxable income to utilise them. The temporary differences underlying deferred tax assets are reappraised annually in order to recognise or adjust the deferred tax assets based on the current expectation of their future recovery.
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2.17. Subsidies
State subsidies are recognised based on their fair value when there is reasonable certainty that they will be received and that the Company will comply with the conditions required for them to be granted.
Operating subsidies, namely those for employee training, are recognised in the statement of profit and loss and other comprehensive income in accordance with expenses incurred.
Investment subsidies relating to the acquisition of tangible and intangible fixed assets are deducted from the value of such fixed assets and recognised in the statement of profit and loss and other comprehensive income on a consistent straight-line basis proportionally to the depreciation and amortisation, respectively, of the subsidised fixed assets.
2.18. Critical judgements/estimates in applying the accounting standards
The preparation of financial statements in accordance with the IFRS recognition and measurement principles require the Board of Directors to make judgements, estimates and assumptions that can affect the value of the assets and liabilities, especially of deferred tax assets, intangible assets, tangible fixed assets and provisions, the disclosure of contingent assets and liabilities as of the date of the financial statements as well as income and costs.
These estimates are based on the best knowledge available at the time and on the actions planned, and they are constantly revised based on the information available. Changes in the facts and circumstances can result in revision of the estimates, and so the actual future results can differ from such estimates.
Significant estimates and assumptions made by the Board of Directors in preparing these financial statements include deferred taxes, the useful life of tangible and intangible fixed assets, impairment analyses and provisions.
2.19. Subsequent events
Events that occur after the date of the statement of financial position that provide additional information on conditions that existed as of the said date are reflected in the financial statements.
Events that occur after the date of the statement of financial position that provide additional information on conditions that existed after the said date are reflected in the notes to the financial statements.
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3. OPERATING INCOME
Operating income for the years ended as of 31 December 2017 and 2016 are made up as follows: 2017 2016 Services rendered: Tolls 557 199 180 515 273 523 Service areas 8 075 367 7 846 929 565 274 547 523 120 452
Other operating income: Compensation for operating losses (Note 22) 1 572 225 1 572 225 Recovery of revenues 1 464 451 1 035 692 Equipment rental 1 167 894 1 116 027 Toll fines 1 136 185 283 644 Gains on tangible and intangible fixed assets 47 448 81 545 Assignment of personnel - 4 381 Other 4 024 176 846 5 392 227 4 270 360
Operating subsidies - 23 279
Reversal of amortisation, depreciation and adjustments and provisions: Provisions (Note 21) 4 586 004 2 932 217 Accounts receivable (Note 20) 203 647 110 830 4 789 651 3 043 047
Income associated to construction service (a) 13 323 675 21 401 129
588 780 100 551 858 267
(a) Within the scope of BCR concession contract covered by IFRC 12, construction activity is sub- contracted to external specialised companies. As result, BCR does not have any margin in the construction of assets allocated to the concession; hence revenue and expenses associated to the construction of these assets are recorded in equal amount.
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4. SUPPLIES AND SERVICES
The Goods & Services Account for the years ended 31 December 2017 and 2016 is made up as follows:
2017 2016
Operation and Maintenance 87 737 634 84 488 954 Logistic and administrative support 20 842 735 20 688 584 Electronic toll services 10 112 715 10 108 274 Maintenance and repair Motorway stretches 3 166 298 1 851 836 Other 250 363 192 981 Insurance 1 452 521 1 469 873 Technical and administrative assistance 746 745 925 212 Advertising costs 504 454 1 257 721 Legal and tax advice 433 103 433 823 Communications 279 201 282 884 Fuel 270 312 279 431 Studies and opinions 228 897 219 563 Audit and control of accounts 126 000 46 000 Legal services and penalties 96 926 92 097 Other 359 793 384 413 126 607 697 122 721 646
In the years ended at 31 December 2017 and 2016, the Goods & Services Account included transactions with related companies in the amount of € 121,615,929 and € 118,891,831, respectively (Note 28).
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5. OPERATING LEASES
Expenses of € 45,937 and € 52,212 relating to lease instalments under operating lease contracts were recognised in the years ended 31 December 2017 and 2016, respectively.
Lease instalments payable under operating lease contracts in force as of 31 December 2017 and 2016 are as follows:
Ano 2017 2016
2017 - 33 312 2018 23 559 30 420 2019 6 974 6 974 2020 5 292 5 292 35 825 75 998
6. NET FINANCIAL RESULTS
Financial results for the years ended as of 31 December 2017 and 2016 were made up as follows: 2017 2016 Expenses and losses: Interest expense 64 724 500 81 767 634 Financial revision of provisions for replacement of infrastructures (Note 21) 7 445 141 7 576 701 Other (a) 9 597 655 15 383 196 81 767 296 104 727 531
Income and gains: Interest gained 34 932 326 471 Other 586 3 008 35 518 329 479
Financial result ( 81 731 778) ( 104 398 052)
This heading includes mainly expenses with banking services and funding, forming an integral part of the effective financing cost.
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7. INCOME TAX
The Company is subject to Corporate Income Tax ("IRC) at the normal rate of 21%, which can be increased by a municipal surcharge of up to a maximum rate of 1.5% of the taxable income.
Additionally, as of 31 December 2017, the nominal tax rate varied from 21% to 29.5%, depending on the amount of taxable income (TI) determined, which will be subject to a tax surcharge at the following rates:
- State surtax: 3% on TI if €M 1.5 < TI <= €M 7.5; 5% on TI if €M7.5 < TI <= €M35; and 7% on TI > €M 35 (a)
(a) As from the tax year of 2018, this tax rate will change to 9%; hence, the nominal tax rate for future years may vary from 21% to 31.5% (Note 12).
In accordance with current legislation, tax returns are subject to review and correction by the tax authorities during a period of four years (five years for social security), except where tax losses exist or tax benefits have been granted or inspections, claims or appeals are in progress, in which case, depending on the circumstances, the period can be extended or suspended. Therefore the Company's tax returns for the years 2014 to 2017 may still be subject to review and correction.
As of 31 December 2017 tax proceedings concerning years 2011 and 2012 (Note 26) are still pending; in line with what is stated in Tax Inspection Reports for BAE relating to years 2007 to 2010, the Tax Authority ("TA") concluded as to the inadequacy of the legal and tax framework applied to the securitization of future receivables in the amount of € 400,000 thousand, carried out in 19 December 2007 and transferred to BCR as part of the assets and liabilities allocated to Brisa Concession (Note 1). The report further established that the Company fails to comply with the legislation for the securitization of credits as provided in Decree-law 453/99 of 5 November, as amended by Decree-Law 82/02 of 5 April, and consequently the tax regime provided in Decree-Law 219/2001 of 4 August, both altered by Decree-law 303/2003 of 5 December is not applicable.
In view of the above, the Tax Authority considers that:
• Income corresponding to the services giving rise to the future receivables must be recognized, in tax and accounting terms, in the tax periods in which they are generated;
• When determining the taxable income relating to 2012 and 2011 (already inspected) an amount of Euro 80 000 thousand each year was wrongly deducted from taxable income.
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The Board of Directors, based on the opinion of its legal and accounting experts and consultants, deems that the recognition of the said operation is adequately based from the legal point of view, and therefore, it is also adequately based in accounting and tax terms. As result, the Board of Directors deems that the corrections proposed in the Tax Inspection Report relating to 2012 and 2011 are totally unfounded; therefore, as parent company within the scope of RETGS in the year concerned, BCR will use all legal means at its disposal as taxpayer to assert the accounting treatment given to this operation at all levels. In view of the above, as of 31 December 2017, no provision was recorded for this purpose.
The Board of Directors believes that any possible corrections resulting from revisions/inspections of these tax returns will not have significant impact on the financial statements as of 31 December 2017.
The deadline for the deduction of reportable tax losses (RTL) is as follows:
Tax period Deduction periods
2017 5 2016 12 2015 12 2014 12 2013 5
The deduction amount to be made in each of the tax periods is limited to 70% of respective taxable income.
Income tax recognised in the years ended 31 December 2017 and 2016 is made up as follows: 2017 2016
Current tax 59 161 865 41 776 292 Deferred taxation (Note 12) ( 8 909 260) ( 4 647 853) Taxes on previous years income ( 134 287) ( 526 677) 50 118 318 36 601 762
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Reconciliation between profit before income tax and income tax for the years ended 31 December 2017 and 2016 is as follows: 2017 2016
Profit before tax 186 202 113 128 284 864
Expected tax (22.5% rate) 41 895 475 28 864 094 Provisions 3 898 982 3 686 866 Impairment losses 137 766 163 404 Derivative financial instruments ( 141 185) ( 189 487) Other 130 182
Autonomous taxation 19 556 27 326 State surcharge 13 351 141 9 223 907 Taxes on previous years income ( 134 287) ( 526 677) (Set up)/reversal of deferred taxation (Note 12) ( 8 909 260) ( 4 647 853) Income tax 50 118 318 36 601 762
Effective tax rate 26,92% 28,53%
As of 31 December 2017 and 2016, current income tax assets and liabilities were made up as follows: 2017 2016 Current tax liabilities (Note 27) Corporate Income Tax (CIT) Tax estimate 59 161 865 41 776 292 Payment on account ( 35 394 387) ( 28 225 491) Tax withheld ( 1 775 924) ( 2 406 268) 21 991 554 11 144 533
8. EARNINGS PER SHARE:
Basic and diluted earnings per share for the years ended 31 December 2017 and 2016 were determined based on the following amounts:
2017 2016
Result for the purpose of determining the basic and diluted earning per share (net profit for the year) 136 083 795 91 683 102
Average number of shares for the purpose of determining the basic and diluted earning per share 15 000 000 15 000 000
Basic and diluted earnings per share 9.07 6.11
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At 31 December 2017 and 2016 no diluting effects have occurred; hence, basic and diluted earnings per share are identical.
Capital increases and decreases occurred during the years ended at 31 December 2017 and 2016 (Note 16) had no impact on basic and diluted earnings per share in the years ended as of the said dates.
9. DIVIDENDS
The General Shareholders Meetings held on 29 March 2017 and 30 March 2016 decided on the payment of dividends in the amounts of € 89,611,777 and €75,507,446, respectively, concerning the net profit for the years ended 31 December 2016 and 2015. At the General Shareholders Meeting held on 30 March 2016 it further was decided to distribute free reserves in the amount of € 1,492,554.
At the General Shareholders Meetings held on 12 October 2017 and 6 October 2016 it was decided to distribute free reserves in the amount of € 151,780 and € 100,000, respectively (Note 18).
At the General Shareholders Meeting held on 11 October 2017 it was decided to pay interim to the sole shareholder in the amount of € 45,148,219 on the net profit for the year ended as of 31 December 2017, which were paid on 30 October 2017.
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10. TANGIBLE FIXED ASSETS
Changes in other tangible fixed assets and corresponding accumulated depreciation and impairment losses in the years ended 31 December 2017 and 2016 are as follows:
2017 Buildings and Fixed assets Advances to be other Basic Transport Administrative Tools tangible forwarded to constructions Equipment Equipment Equipment and utensils in progress tangible fixed assets Total Gross assets: Opening balance 31 490 129 618 017 1 415 828 292 411 129 1 109 928 3 379 132 471 182 Increases - 1 227 597 405 899 1 799 - 1 608 331 26 771 3 270 397 Disposals - ( 2 381) ( 237 419) ( 1 414) - - - ( 241 214) Write-downs - ( 452 743) - ( 1 855) - - - ( 454 598) Transfers - 688 684 - - - ( 688 684) - - Closing Balance 31 490 131 079 174 1 584 308 290 941 129 2 029 575 30 150 135 045 767
Cumulative depreciation and Impairment losses: Opening balance 31 490 123 129 355 729 781 283 426 129 - - 124 174 181 Increase - 2 207 685 285 615 4 658 - - - 2 497 958 Decrease - ( 2 381) ( 186 021) ( 1 414) - - - ( 189 816) Write-downs - ( 452 334) - ( 1 856) - - - ( 454 190) Closing Balance 31 490 124 882 325 829 375 284 814 129 - - 126 028 133 Net value - 6 196 849 - 754 933 - 6 127 - - - 2 029 575 - 30 150 - 9 017 634
2016 Buildings and Fixed assets Advances to be other Basic Transport Administrative Tools tangible forwarded to constructions Equipment Equipment Equipment and utensils in progress tangible fixed assets Total Gross assets: Opening balance 31 490 128 939 921 1 457 945 290 387 129 865 939 - 131 585 811 Increases - 1 071 977 315 768 4 457 - 553 775 3 379 1 949 356 Disposals - - ( 357 885) ( 2 053) - - - ( 359 938) Write-downs - ( 703 667) - ( 380) - - - ( 704 047) Transfers - 309 786 - - - ( 309 786) - - Closing Balance 31 490 129 618 017 1 415 828 292 411 129 1 109 928 3 379 132 471 182
Cumulative depreciation and Impairment losses: Opening balance 31 490 121 374 325 768 259 281 935 129 - - 122 456 138 Increase - 2 457 890 279 974 3 924 - - - 2 741 788 Decrease - - ( 318 452) ( 2 053) - - - ( 320 505) Write-downs - ( 702 860) - ( 380) - - - ( 703 240) Closing Balance 31 490 123 129 355 729 781 283 426 129 - - 124 174 181 Net value - 6 488 662 686 047 8 985 - 1 109 928 3 379 8 297 001
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11. INTANGIBLE ASSETS
Changes in intangible fixed assets and corresponding accumulated depreciation and impairment losses in the years ended 31 December 2017 and 2016 are as follows:
2017 Licenses Intangible assets Rights and software in progress Total Gross assets: Opening balance 4 648 216 677 347 369 45 302 548 4 693 866 594 Write-downsIncreases 6 566 984- 10 423- 6 757 592- - 13 334 999- Transfers 25 467 183 - ( 25 467 183) - Capitalized financial costs - - 806 387 806 387 Closing Balance 4 680 250 844 357 792 27 399 344 4 708 007 980
Cumulative depreciation impairment losses: Opening balance 2 197 114 868 298 610 - 2 197 413 478 Increase 130 290 778 26 129 - 130 316 907 Closing Balance 2 327 405 646 324 739 - 2 327 730 385
Net value 2 352 845 198 33 053 27 399 344 2 380 277 595
2016 Licenses Intangible assets Rights and software in progress Total Gross assets: Opening balance 4 644 611 890 347 369 26 208 608 4 671 167 867 Increases 3 604 787 - 17 796 342 21 401 129 Capitalized financial costs - - 1 297 598 1 297 598 Closing Balance 4 648 216 677 347 369 45 302 548 4 693 866 594
Cumulative depreciation impairment losses: Opening balance 2 068 245 565 255 605 - 2 068 501 170 Increase 128 869 303 43 005 - 128 912 308 Closing Balance 2 197 114 868 298 610 - 2 197 413 478
Net value 2 451 101 809 48 759 45 302 548 2 496 453 116
The gross value of intangible assets at 31 December 2017 includes essentially:
Right to operate Brisa concession, obtained as consideration for motorway and related infrastructures construction services in the amount of € 4,210,504,231, of which € 244,020,777 relate to the capitalization of financial expenses.
Payment to the State (Grantor) as consideration for the right to collect tolls on the CREL motorway as from 1 January 2003, under the terms of Decree-law 314 A/2002, of 26 December – Euro 236 318 343;
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Amount deriving from the General Agreement entered with the State and Estradas de Portugal, S.A. corresponding to changes in the Concession Bases (Decree-law 247-C/2008, of 30 December) - €158,100,000 (Note 22);
Costs with the renegotiation of the concession contract in 1991, namely the extension of the concession period initially established – €101,749,989.
Intangible assets in progress concern mainly widening works in sub-stretches where such widening is deemed necessary and which are still ongoing. As of 31 December 2017, this balance included € 25,836,856 relating to widening works expected to be completed in the first half of 2018.
12. DEFERRED TAXES
Deferred tax assets and liabilities at 31 December 2017 and 31 December 2016, by underlying timing difference, are as follows: 2017 2016
Provisions for the replacement of infrastructures 65 063 787 55 827 165 Derivative financial instruments 1 121 916 1 906 852 Provisions not considered for tax purposes 196 053 155 548 66 381 756 57 889 565
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The changes in deferred tax assets and liabilities in the years ended 31 December 2017 and 2016 are as follows: 2017 2016
Opening balance 57 889 565 53 922 742
Effect on results: Change for the year: Change in provisions for the replacement of infrastructures 5 105 588 4 832 197 Increase / (decrease) of financial instruments ( 185 109) ( 248 439) Change in provisions not accepted for tax purposes 28 057 64 095 4 948 536 4 647 853
Effect of change in rate: Provisions for the replacement of infrastructures 4 131 034 - Financial instruments ( 182 758) - Provisions not considered for tax purposes 12 448 - 3 960 724 -
Sub-total (Note 7) 8 909 260 4 647 853
Effect on equity Change for the year: Increase / (decrease) of financial instruments ( 671 060) ( 681 030)
Effect of change in rate: Financial instruments 253 991 -
Sub-total ( 417 069) ( 681 030)
Closing Balance 66 381 756 57 889 565
As of 31 December 2017 and 2016 the tax rate used for determining deferred tax assets was 31.5% and 29.5%, respectively (Note 7).
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13. TRADE AND OTHER RECEIVABLES
As of 31 December 2017 and 2016 this caption was made up as follows: 2017 2016 Clients: Tolls (a) 28 798 072 27 644 162 Group companies and related parties (Note 28) 411 549 38 226 Other 1 358 751 2 208 719 Doubtful receivables 21 943 281 21 092 036 52 511 653 50 983 143 Other debtors Personnel 2 811 2 330 Group companies and related parties (Note 28) 104 559 104 541 Other 2 545 419 3 052 438 Other doubtful receivables 41 505 41 505 2 694 294 3 200 814
Cumulative impairment losses (Note 20) ( 21 984 786) ( 21 133 541) 33 221 161 33 050 416
(a) As of 31 December 2017 and 2016, this balance included the amounts of € 3,903,339 and €3,089,544, respectively, receivable from Spanish concessions concerning tolls paid through Via Verde Portugal, Gestão de Sistemas Electrónicos de Cobrança, S.A. ("Via Verde"), within the scope of an interoperability agreement.
Trade and other receivables result from operating activities and they are net of accumulated impairment losses. These are estimated based on available information and past experience (Note 27).
Given the nature of the Company's operation, there is no significant concentration of credit risk.
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14. OTHER CURRENT ASSETS
As of 31 December 2017 and 2016 this caption was made up as follows:
2017 2016 Accrued income: Service areas 493 452 484 641 Group companies and related parties (Note 28) 633 819 482 613 Interest receivable 32 075 2 714 1 159 346 969 968
Deferred costs: Insurance 810 701 886 316 Rents - 2 616 Other deferred costs 174 786 299 872 985 487 1 188 804
2 144 833 2 158 772
15. CASH AND CASH EQUIVALENT
Cash and cash equivalents at 31 December 2017 and 2016 are made up as follows:
2017 2016
Bank deposits 445 811 111 118 312 185 Cash and cash equivalent 445 811 111 118 312 185
Within the scope of the contractual obligations assumed by BCR, the balance of bank deposits as of 31 December 2017 and 2016 included the following reserve accounts: 2017 2016
Debt service reserve account 107 500 000 103 500 000 Reserve account for investment purposes 4 066 120 8 339 794 111 566 120 111 839 794
As the business the company may pursue is restricted pursuant to its bylaws and concession contract, but including loans and investments, and considering that the above mentioned reserve accounts may be used for such purposes, the Company considers the balances of these reserve accounts as cash and cash equivalents.
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16. CAPITAL
The Company’s capital at 31 December 2017 is made up of 15 000 000 fully subscribed and paid up shares with a nominal value of five Euro each.
Brisa – Concessão Rodoviária, SGPS, S.A. (BCR, SGPS) holds 15,000,000 shares, representing 100% of the share capital.
Shareholders at the General Meetings held on 29 March 2017 and 12 October 2017 decided to increase the Company's share capital from € 75,000,000 to € 86,850,000 paid up through the incorporation of part of the share premium and from Euro 75,000 to Euro 89,7000,000, paid up through the incorporation of the share premium and free reserves (Note 18), by increasing the nominal value of shares from € 5.00 each to € 5.79 each and from € 5 each to € 5.98 each.
At the said General Meetings shareholders subsequently decided to decrease the Company's share capital from € 86,850,000 to € 75,000,000 and from € 89,700,000 to € 75,000, respectively, for the purposes of releasing surplus capital, by decreasing the nominal value of shares from € 5.79 each to € 5.00 each and from € 5.98 each to € 5 each, respectively.
Shareholders at the General Meetings held on 30 March 2016 and 6 October 2016 decided to increase the Company's share capital from Euro 75,000,000 to Euro 138,000,000 and from Euro 75,000 to Euro 294,000,000, fully paid up through the incorporation of part of the share premium, by increasing the nominal value of shares from Euro 5.00 each to Euro 9.2 each and from Euro 5 each to Euro 19.66 each.
At the said General Meetings shareholders subsequently decided to decrease the Company's share capital from Euro 138,000,000 to Euro 75,000,000 and subsequently from Euro 294,000,000 to Euro 75,000, respectively, for the purposes of releasing surplus capital, by decreasing the nominal value of shares from Euro Euro 9.2 each to 5.00 each and from Euro 19.66 each to Euro 5 each, respectively.
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17. SHARE PREMIUMS
The share premium resulted from the difference between: (i) the net value of assets and liabilities transferred by BAE in the year ended on 31 December 2010 for the purposes of a capital increase by contribution in kind, and (ii) the nominal value of the issued shares. According to the relevant law, this follows provisions applicable to legal reserves.
Shareholders at the General Meetings held on 29 March 2017 and 12 October 2017 decided to incorporate as capital the remaining of the share premium, in the amounts of € 11,850,000 and € 14,694,809, respectively.
Shareholders at the General Meetings held on 30 March 2016 and 06 October 2016 decided to incorporate as capital part of the share premium, in the amounts of respectively, €63,000,000 and €219,900,000.
18. LEGAL RESERVE AND OTHER RESERVES
Legal reserve
Commercial legislation establishes that at least 5% of annual net profit must be appropriated to a legal reserve until the reserve equals at least 20% of share capital. This reserve is not available for distribution except in the event of liquidation, but it can be used to absorb losses once the other reserves have been exhausted, or to increase capital.
At 31 December 2017 and 2016 the legal reserve set up totalled € 15,000,000 and € 12,928,675, respectively.
Other reserves
As of 31 December 2017 and 2016 this caption was made up as follows: 2017 2016
Other investments (Notes 9 and 16) 5 325 129 5 482 100 Hedging derivatives (a) ( 1 648 050) ( 3 505 761) 3 677 079 1 976 339
(a) This caption includes changes in the fair value of financial hedging instruments (Notes 2.10 and 25.) net of the tax effect (Note 12).
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19. LOANS
At 31 December 2017 and 2016 loans contracted by the Company were as follows: 2017 2016 Current Non current Current Non current Bond loans 339 591 970 1 394 382 502 34 815 890 1 392 830 754 Bank loans 36 050 787 449 636 794 35 855 283 485 592 019 Commercial paper 49 578 736 150 000 000 101 972 508 150 000 000 425 221 493 1 994 019 296 172 643 681 2 028 422 773
BOND LOANS
At 31 December 2017 and 2016 non convertible bonds issued are as follows:
Nominal Value 2017 2016 Nominal Issue of the issue Current Non current Current Non current Maturity interest rate 2012 100 000 000 5 438 875 93 951 894 5 554 938 93 666 446 jan-32 Variable 2012 300 000 000 315 232 042 - 14 724 870 299 805 672 abr-18 6.875% 2014 300 000 000 8 412 692 299 137 791 8 426 015 298 791 921 abr-21 3.875% 2015 300 000 000 1 721 106 285 491 253 1 775 844 283 421 263 abr-25 1.875% 2016 120 000 000 30 699 119 449 565 31 935 119 280 264 jan-22 Variable 2016 300 000 000 4 294 078 298 256 041 4 302 288 297 865 188 mar-23 2.000% 2017 300 000 000 4 462 478 298 095 958 - - mai-27 2.375% 339 591 970 1 394 382 502 34 815 890 1 392 830 754
2012-2032 Issue
The bond issue in the amount of € 100,000,000 was carried out by BCR on 12 July 2012. This bond loan with a 19.5-year maturity, pays interest at a fixed rate of 6% in the first five years and interest indexed to the consumer price index (except housing) as from the sixth year to maturity. Repayment of principal will be made in one instalment at maturity in 12 January 2032.
2012-2018 Issue
€ 300,000,000 bond issue carried out by BCR on 02 October 2012. This bond loan with a 5.5-year maturity bears interest at a fixed rate of 6.875%. Repayment of principal will be made in one instalment at maturity in 06 April 2018.
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2014-2021 Issue
The bond issue in the amount of € 300,000,000 was carried out by BCR on 01 April 2014. This bond loan with a 7-year maturity bears interest at a fixed rate of 3.875%. Repayment of principal will be made in one instalment at maturity in 01 April 2021.
2015-2025 Issue
The bond issue in the amount of € 300,000,000 was carried out by BCR on 30 April 2015. This bond loan with a 10-year maturity bears interest at a fixed rate of 1.875%. Repayment of principal will be made in one instalment at maturity in 30 April 2025.
2016-2022 Issue
€ 120,000,000 bond issue carried out by BCR on 07 June 2016. This bond loan has a floating interest rate indexed to the 6-month Euribor. Repayment of principal will be made in one instalment at maturity in 07 January 2022.
2016-2023 Issue
The bond issue in the amount of € 300,000,000 was carried out by BCR on 22 March 2016. This bond loan with a 7-year maturity bears interest at a fixed rate of 2%. Repayment of principal will be made in one instalment at maturity in 22 March 2023.
2017-2027 Issue
The bond issue in the amount of € 300,000,000 was carried out by BCR on 10 May 2017. This bond loan with a 10-year maturity bears interest at a fixed rate of 2.375%. Repayment of principal will be made in one instalment at maturity in 10 May 2027.
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As of 31 December 2017 and 2016 bond issues concerning which it was possible to obtain a market valuation were the following:
2017 2016 Stock Issue nominal Nominal Market value (a) Market value (a) Issue Exchange value Book value Book value Maturity interest rate 2012 Lux SE 300 000 000 315 232 042 305 118 000 314 530 542 325 929 000 abr-18 6.875% 2014 Lux SE 300 000 000 307 550 483 335 376 000 307 217 936 340 491 000 abr-21 3.875% 2015 Lux SE 300 000 000 287 212 359 311 511 000 285 197 107 295 095 000 abr-25 1.875% 2016 Lux SE 300 000 000 302 550 119 318 855 000 302 167 476 307 776 000 mar-23 2.000% 2017 Lux SE 300 000 000 302 558 436 318 198 000 - - mai-27 2.375% 1 515 103 439 1 589 058 000 1 209 113 061 1 269 291 000 (a) Source: Bloomberg
The above mentioned bond issues are part of an Euro Medium Term Note Programme, which may be extended to a maximum amount of € 3,000,000,000.
BANK LOANS
Caption “Bank loans” at 31 December 2017 and 2016 was made up as follows:
2017 2016 Nominal Amount to be settled Nominal Amount to be settled amount No amount No Repayment Closing rate borrowed Current Current borrowed Current Current Maturity Periodicity Interest rate
506 810 311 36 050 787 449 636 794 545 795 720 35 855 283 485 592 019 dez-30 Half-year Variable
Within the scope of the reorganization process, the Group negotiated with the European Investment Bank (EIB) the transfer to BCR of the loans contracted by BAE with the EIB. The amount of debt transferred as of 22 December 2010 totalled 779 708 171 Euros. It was also agreed with the EIB the consolidation of 16 existing financing contracts into one sole contract, subject to floating interest rate indexed to the 6-month Euribor with extended term (this loan will be repaid in half-year instalments as from June 2011 to December 2030).
Additionally, the Company contracted derivative financial instruments associated with this loan, which are classified as hedging instruments (Note 25).
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As of 31 December 2017 and 2016 bank loans had the following repayment schedule:
2017 2016
Up to 1 year 36 050 787 35 855 283 Up to 2 years 36 180 702 35 960 243 Up to 3 years 36 400 787 36 182 738 Up to 4 years 36 636 745 36 401 956 Up to 5 years 36 867 867 36 637 160 More than 5 years 303 550 693 340 409 922 485 687 581 521 447 302
COMMERCIAL PAPER AND SHORT TERM LINES
Caption “Other loans obtained” at 31 December 2017 and 2016 is made up as follows:
2017 2016 Other loans Commercial paper 199 578 736 251 972 508
At 31 December 2017 and 31 December 2015 BCR had short term credit lines and commercial paper issues with guaranteed subscription contracted with banks in a total maximum amount of € 475,000,000, of which an amount of approximately € 200,000,000 and € 250,000,000, respectively, were placed as of this date. Of the total amount placed as of 31 December 2017, EUR150 000 thousand refer to a commercial paper programme with guaranteed subscription for a period beyond one year, thus being classified as of medium and long term.
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20. CUMULATIVE IMPAIRMENT LOSSES
Changes in cumulative impairment losses in the years ended 31 December 2017 and 2016 are as follows:
2017 Opening Decrease Closing Balance balance Increase Use (Note 3) (Note 13) Impairment losses: Accounts receivable 21 133 541 1 054 892 - ( 203 647) 21 984 786
2016 Opening Decrease Closing Balance balance Increase Use (Note 3) (Note 13) Impairment losses: Accounts receivable 20 349 729 1 028 232 ( 133 590) ( 110 830) 21 133 541
21. PROVISIONS
Changes in the provisions and accumulated impairment losses in the years ended 31 December 2017 and 2016 were as follows:
2017 Financial Opening Reversal revision Closing balance Increase Use (Note 3) (Note 6) Transfers balance Provisions: Non current: Pending legal proceedings 1 273 414 - - ( 29 337) - - 1 244 077 Replacement of infrastructures 166 171 545 24 245 877 ( 6 143 336) ( 342 030) 5 709 809 ( 309 949) 189 331 916 Other risks and charges 198 955 21 732 - - - - 220 687 167 643 914 24 267 609 ( 6 143 336) ( 371 367) 5 709 809 ( 309 949) 190 796 680
Current Replacement of infrastructures 23 073 083 19 819 379 ( 23 503 315) ( 4 214 637) 1 735 332 309 949 17 219 791 190 716 997 44 086 988 ( 29 646 651) ( 4 586 004) 7 445 141 - 208 016 471
2016 Financial Opening Reversal revision Closing balance Increase Use (Note 3) (Note 6) Transfers balance Provisions: Non current: Pending legal proceedings 1 340 715 - - ( 67 301) - - 1 273 414 Replacement of infrastructures 159 588 861 19 055 861 ( 1 098 022) ( 918 535) 5 772 280 ( 16 228 900) 166 171 545 Other risks and charges 193 211 5 744 - - - - 198 955 161 122 787 19 061 605 ( 1 098 022) ( 985 836) 5 772 280 ( 16 228 900) 167 643 914
Current Replacement of infrastructures 13 275 439 20 358 060 ( 26 647 356) ( 1 946 381) 1 804 421 16 228 900 23 073 083
174 398 226 39 419 665 ( 27 745 378) ( 2 932 217) 7 576 701 - 190 716 997
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Provisions for pending legal proceedings view to cover liabilities as estimated by the Board of Directors based on information from its lawyers, for motor accident claims, losses caused by motorway construction and labour claims. At 31 December 2017 and 2016 overall claims totalled Euro 9 236 913 and Euro 11 183 815, respectively. Provisions set up correspond to the Board of Directors’ best estimate of the amount of such liabilities.
Provisions for reinstatement of infrastructures relate to the responsibilities to replace the wear layer of the flexible pavements, slopes, engineering works and signing and is recognised, at the present value, through the period up to the date in which the intervention takes place. Provisions are subject to a financial update at each reporting date calculated at the average interest cost rate of the company and recorded as a financial expense The recorded reversals relate essentially to the reassessment of the estimates for the costs to be incurred and changes in the planned schedule of the interventions in the infrastructure.
22. OTHER NON CURRENT LIABILITIES
As of 31 December 2017 and 2016 this caption was made up as follows:
2017 2016
Compensation for operating losses (a) 26 727 824 28 300 049 Financial contributions (Note 27( (b) 11 745 957 11 745 957 Fair value of derivative instruments (Notes 25 and 27) 3 810 554 6 760 289 Advanced revenues of service areas (c) - 560 447 42 284 335 47 366 742
(a) This heading includes € 73,669,709 of compensations obtained from the State for the non collection of tolls in some motorway sub-stretches located in the metropolitan areas of Lisbon and Oporto, deducted of the amount of € 45,369,660 recognised as income by BCR and BAE (up to the transfer of Brisa Concession to BCR). This amount is to be recognised on a straight line basis until the end of the concession. Additionally, in the year ended at 31 December 2017, BCR transferred to income under caption "Other operating income and gains" the amount of € 1,572,225 (Notes 3 and 24).
(b) This caption corresponds to the difference between the amount received from the State, under the Global Agreement established with BCR (Note 11) and the balances pending settlement and recognised in the financial statements as of the date of the agreement. Pursuant to the contract in force, an inspection by IGF (tax inspection authority) is still pending, viewing to validate and confirm balances, to be settled in the amount specified.
(c) This caption comprises the amounts paid by sub concessionaires of service stations for future rents (Note 24).
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23. SUPPLIERS AND SUPPLIERS OF CAPITAL GOODS
As of 31 December 2017 and 2016 this caption was made up as follows:
2017 2016
Trade payables: Group companies and related parties (Note 28) 23 176 389 22 301 288 IP Infraestruturas de Portugal, S.A. 1 598 179 1 138 853 Fire - Comunicação, Lda. 129 150 172 200 Moody's Investors Service Limited 80 000 - Vieira de Almeida & Associados - Soc. de Advogados, R.L. 49 725 185 207 Caixa - Banco de Investimento, S.A. 46 125 46 125 Other 277 775 681 535 25 357 343 24 525 208
Suppliers of investment: Group companies and related parties (Note 28) 4 283 764 3 937 763 Mota-Engil, Engenharia e Construção, S.A. 3 494 069 3 550 566 Alves Ribeiro, S.A. 1 815 776 99 522 Arouconstrói, Engenharia e Construções, S.A. 818 089 - Other 6 122 999 7 781 658 16 534 697 15 369 509
41 892 040 39 894 717
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24. OTHER CURRENT LIABILITIES
As of 31 December 2017 and 2016 this caption was made up as follows:
2017 2016
Government and other public bodies (Note 27) Personal income tax: Income tax withheld 35 164 34 987 Value added tax 13 940 380 12 540 447 Payments to Social Security 30 949 35 324 14 006 493 12 610 758
Accrued costs (Note 27): Remuneration payable 395 002 417 638 Group companies and related parties (Note 28) 31 246 974 014 Other 230 060 65 874 656 308 1 457 526
Deferred income: Advanced revenues of service areas (Note 22) 560 447 560 447 Compensation for operating losses (Note 22) 1 572 225 1 572 225 Other 43 159 43 159 2 175 831 2 175 831
16 838 632 16 244 115
25. DERIVATIVE FINANCIAL INSTRUMENTS
The Group has contracted a series of derivative financial instruments to minimise the risk of exposure to variations in interest rates.
Such instruments are contracted considering the risks that affect its assets and liabilities, after verifying which market instruments available are the most adequate to hedge the risks.
Such operations, which are subject to the CFO's and/or Executive Board prior approval, are continuously monitored based on relevant indicators, such as evolution of their market value, projected cash flows' and market's sensitivity to changes in the key variables that affect the structures, in order to assess their financial effect.
These financial derivative instruments are recorded in accordance with the provisions of IAS 39, being measured at their fair value considering evaluations made by financial institutions based on mathematical
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models, such as option pricing models and discounted cash flow models for unlisted instruments (over-the- counter instruments). These models are based essentially on market information.
Derivative financial instruments used by the Company are interest rate swaps.
Such instruments are classified as hedge instruments or instruments held for trading, in accordance with provisions in IAS 39 (Note 2.10).
Hedge accounting is applicable to derivative financial instruments that are efficient as regards the effect of offsetting the variations in the fair value or cash flows of the underlying assets/liabilities. The efficiency of these operations is checked on a quarterly basis.
Cash flow hedge instruments are derivative financial instruments that hedge interest rate risk. The effective component of the variations in the fair value of the cash flow hedges is recognised in caption “Other Reserves”, while the non efficient part is reflected immediately in the income statement.
Cash flow hedges
At 31 December 2017 and 2016 the Company had the following interest rate derivative instruments:
2017 2016 Underlying Fair value Underlying Fair value Type of operation Maturity Counterparty amount (Notes 22 and 27) amount (Notes 22 and 27) BBVA and Fixed/var. int. rate swap 15 June 2019 BST 38 382 353 ( 1 351 328) 63 970 588 ( 3 298 638) Fixed/var. int. rate swap 15 June 2023 Caixa BI 22 916 667 ( 2 459 226) 27 083 333 ( 3 461 651) 61 299 020 ( 3 810 554) 91 053 921 ( 6 760 289)
In the years ended as of 31 December 2017 and 2016, the Company recorded changes in these derivative financial instruments in its share capital in the amounts of € 2,274,780 and € 2,308,576, respectively (Note 18).
The said derivative instruments were initially contracted by BAE. Within the scope of the corporate reorganization process of the Group, the contractual position in the said instruments was transferred to the Company on 22 December 2010, as integral part of the assets and liabilities entered as contributions in kind for the capital increase carried out on the said date (Note 19).
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26. CONTINGENT LIABILITIES
As of 31 December 2017 and 2016 BCR had the following bank guarantees given to third parties: 2017 2016 Guarantees given: Portuguese State (Base XX of BCR Concession Contract) 61 242 834 60 892 886 Other guarantees provided to third parties 523 496 523 496 61 766 331 61 416 383
Within the scope of the ring-fencing of subsidiary BCR, a set of guarantees were provided in favour of BCR's senior creditors, which include, among other, a pledge on shares held by BCR SGPS in the share capital of BCR, and in the balances of BCR's bank accounts.
Additionally, as result of the tax execution procedures brought against BAE relating to the years ended as of 31 December 2012 and 2011 (Note 7), BCR provided a guarantees to the tax authorities on September 22, 2016 and December 29, 2015 in the amounts € 30,947,514 and € 25,550,860, viewing to suspend the said proceedings.
27. MANAGEMENT OF FINANCIAL RISKS
General principles
As with the majority of companies, BCR is exposed to different financial risks stemming from its business activity, including: liquidity and interest rate risk resulting from its financial indebtedness; credit risk to which the Company is exposed as result of risk hedging operations and financial applications.
BCR has a financial risk coverage policy established in schedule attached to its Common Terms Agreement, forming part of its contractual structure. This policy, with binding effects, provides the main rules and guidelines relating to both the management of exposure and the contracting of hedging instruments.
All financial risk management operations which involve the use of derivative financial instruments are subject to the prior approval of the CFO and/or the Board of Directors.
Detailed description of the Company’s main financial risks and measures implemented to manage them is summed up below (additional considerations concerning the Company’s risk management policy can be found in the Management Report).
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Interest rate risk
The objective of interest rate risk management is to minimise the cost of debt by keeping the volatility of financial costs at a low level. BCR hedging policy requires the maintenance of a fixed rate ratio of 50% or more of total debt.
At the end of 2017, approximately 71% of financial debt had fixed interest rate (70% at the end of 2016), which, ensures that financial costs have low sensitivity to increases in interest rates and complies with the risk management policy. The remaining 29% of total debt is subject to variable interest rates (30% at the end of 2016), which enabled BCR to benefit from the historically low level of short term interest rates.
If market interest rates in the years ended 31 December 2017 and 2016 were 1% higher, the financial expenses for the year would have increased by approximately € 7,200,000 and € 6,700,000, respectively.
Interest rate hedge derivatives held by BCR correspond to part of the derivative portfolio previously contracted by BAE and assigned to BCR on 22 December 2010, following the financial close of the Group's corporate reorganization, together with hedged loans. Since some of the characteristics of the hedged loans were altered, as a consequence of the transfer process from BAE to BCR, the terms of the associated swaps were also changed in order to ensure correspondence with the characteristics of the associated hedge loan.
Exchange rate risk
At 31 December 2017 BCR had no relevant exchange rate risk exposure, as its operation is strictly national.
However, in order to safeguard any future exposure, BCR's hedging risk policy establishes that the company cannot bear any exchange rate risk relating to debt instruments denominated in currency other than the Euro, as well as in any other material purchases of foreign currency. In the event of any exposure of this kind, it must be mitigated through appropriate hedging instrument.
Credit risk
Credit risk relates to trade and other accounts receivable. Although limited, due to the nature of the Company’s main operations (i.e. motorway concessions), the risk in the various businesses is monitored on a regular basis with the objective of:
• monitoring evolution of the level of balances receivable; • reviewing the recoverability of amounts receivable on a regular basis.
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The Board of Directors deems that the estimated impairment losses on accounts receivable as of 31 December 2017 are adequately provided for in the financial statements (Note 13)
Accounts receivable at 31 December 2017 and 2016 include the following overdue balances, for which the Board of Directors has not recognised impairment losses as it believes that they will be receivable:
2017 2016 Overdue balances Up to 90 days 1 001 334 1 344 631 1 to 180 days 269 057 270 662 1 to 360 days 1 283 314 1 087 544 More than 360 days 22 431 22 966 2 576 136 2 725 803
The quality of the Company’s credit risk and liquidity as of 31 December 2017 ans 2016 specifically as concerns financial assets (cash and equivalent) the counterparties of which are financial institutions are as follows:
2017 2016
A+ 100 004 022 85 301 886 A 296 269 548 27 027 837 BBB+ 47 190 349 3 940 929 ≤ BBB 2 347 192 2 041 533 445 811 111 118 312 185
Counterparty Risk
The application of cash surpluses and the majority of operations involving derivative financial instruments expose the Company to the risk of non compliance by the counterparties in these operations. In order to mitigate this risk the Company’s Financial Management maintains permanent control of the level of exposure to each counterparty; counterparty credit limits are defined based on their rating levels, amongst other factors.
Note that in the particular case of BCR, the financial risks hedging policy determines that in treasury and hedging operations the counterparties must meet strict rating criteria (Qualifying Banks) or provide a guarantee from an entity that meets the same criteria.
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Liquidity risk
The funding and liquidity risk management policies are based on the following objectives:
• To ensure that debt maturity is scaled over time; • Continue to extend the average maturity of debt to make it more consistent with the long term assets held by BCR.
In compliance with these objectives, BCR closely monitors the financing markets, carefully selecting the most efficient alternatives at any moment.
The setting up at the end of 2010 of an innovating financial and contractual structure common to all senior creditors provided an effective ring-fencing of BCR, reducing creditors exposure to this company alone. The limitation of the financial risk provided by this contractual structure, combined with a low operational risk that results from the nature of BCR's activity, led to strong ratings at the time (A-Stable by Fitch and Baa1 Stable by Moody’s), placing the company amongst the highest rated companies in Portugal. These ratings were affected by the sharp cut in Portugal's rating, particularly in 2011, when Moody’s reduced the company's credit rating to sub-investment grade level. During 2014, Moody’s recognised the expansion in BCR network and the reduction achieved in debt (leading to financial ratios of investment grade level) improving BCR's rating to Baa3 with Stable Outlook, and then to “Positive” on 5 September 2017. Fitch’s rating of BCR debt was revised from “Negative” to “Stable” on February 25, 2015 and then to “Positive” on December 6, 2017. In January 2018 Fitch again revised upwards BCR’s rating to BBB+ with Stable Outlook, taking into account the strong operating and financial performance of BCR. Note that ratings given to BCR are above those given to the Portuguese Republic. This fact attests for BCR's financial solidity and creditor protection ensured by the company’s financial and contractual structure.
The financial and contractual structure referred to above includes a set of covenants, which provide added protection to creditors. On the other hand, BCR's creditworthiness is limited by various factors, one of which concerns the maintenance of a minimum rating of Baa3/BBB-, which the company benefited at 31 December 2017.
Four other covenants should be pointed out on account of their action range, namely Net Senior Debt/EBITDA, Historic ICR, Forward Looking ICR and CLCR), which are subject to two thresholds - one in the form of trigger event and the other in the form of event of default - implying different consequences if exceeded. At 31 December 2017 these ratios were all within the stipulated levels, though headroom increased throughout the year, specifically the Net Senior Debt/EBITDA ratio, which fell from 5.25 at the end of 2016 to 4.51 at the end of 2017, i.e. below the 5.75 trigger event ceiling, and the Historic ICR ratio, which moved from 4.38 at the end of 2016 to 5.68 one year later, i.e. above the minimum 2.25 trigger event level.
BCR has a Euro Medium-Term Notes Programme (EMTN) totalling € 3,000,000 thousand, of which € 1,720,000,000 were being used at 31 December 2017. During 2017 the Company raised an additional amount
IX - NOTES TO THE FINANCIAL STATEMENTS 2017 ANNUAL REPORT 89
of € 300,00,00 via bond issue carried out pursuant to the EMTN (previously described as “2017-2017 issue”) which enabled it to continuing its strategy viewing the extension of its debt maturity.
Viewing to ensure its financial flexibility, at the end of 2017, BCR had credit lines and commercial paper programmes with the banking sector, in the total amount of EUR 475,000,000 (Note 19).
The existence of reserve accounts to ensure compliance with the debt service and investment obligations also contributes to mitigate financing risk.
At 31 December 2017 and 2016 financial assets concerned mainly trade accounts receivable and accrued income, the fair value of which did not differ much from respective accounting value, taking into account their maturity and nature.
Maturity of financial liabilities at 31 December 2017 and 2016 is as follows:
2017 Up to 1 year 1 to 2 years 2 to 3 years More than 3 years Total
Borrowings(Note 19) 425 221 493 107 556 336 227 664 502 1 658 798 458 2 419 240 789 Financial contributions (Note 22) - - - 11 745 957 11 745 957 Derivative instruments (Notes 22 and 25) - 1 351 328 - 2 459 226 3 810 554 Suppliers (Note 23) 25 357 343 - - - 25 357 343 Suppliers of investment (Note 23) 16 534 697 - - - 16 534 697 Other accounts payable 1 979 482 - - - 1 979 482 Current tax liabilities (Note 7) 21 991 554 - - - 21 991 554 Other liabilities (Note 24) 14 662 801 - - - 14 662 801 505 747 370 108 907 664 227 664 502 1 673 003 641 2 515 323 177
2016 Up to 1 year 1 to 2 years 2 to 3 years More than 3 years Total
Borrowings(Note 19) 172 643 681 332 507 982 107 786 002 1 588 128 789 2 201 066 454 Financial contributions (Note 22) - - - 11 745 957 11 745 957 Derivative instruments (Notes 22 and 25) - - 3 298 638 3 461 651 6 760 289 Suppliers (Note 23) 24 525 208 - - - 24 525 208 Suppliers of investment (Note 23) 15 369 509 - - - 15 369 509 Other accounts payable 1 596 287 - - - 1 596 287 Current tax liabilities (Note 7) 11 144 533 - - - 11 144 533 Other liabilities (Note 24) 14 068 284 - - - 14 068 284 239 347 502 332 507 982 111 084 640 1 603 336 397 2 286 276 521
Financial liabilities within the scope of IAS 39
In its day to day operation the Company is exposed to financial risks, particularly interest rate risks, which are likely to affect its equity and results.
Financial risk is the probability of obtaining different than expected results, whether income or losses, altering the company's equity in a materially relevant and unexpected way.
IX - NOTES TO THE FINANCIAL STATEMENTS 2017 ANNUAL REPORT 90
The management of the risks referred to above, which to a large extent, derive from the unpredictability of financial markets, requires the stringent application of a set of rules and methodologies approved by the Executive Committee, the ultimate purpose of which is to minimise their potential negative impact on the Company's net worth and performance.
With this goal in mind, risk management is guided by two major concerns:
• Reduce, whenever possible, fluctuations in results and cash flows subject to risk situations;
• Limit deviations from projected results, by means of a strict financial planning, based on pluriannual budgets.
Fair value estimate - liabilities measured at fair value
The following table shows the Company's liabilities measured at fair value at 31 December 2017 and 2016 according to the following fair value levels:
• Level 1: the fair value of financial instruments is based on prices ruling on active, liquid markets at the date of the statement of financial position;
• Level 2: the fair value of financial instruments is not determined based on active market prices but according to valuation models;
• Level 3: the fair value of financial instruments is not determined based on active market prices but according to valuation models, the main inputs of which are not observable on the market.
2017 Class: Item Level 1 Level 2 Level 3 Financial assets at fair value Hedge instruments (Note 25) - 3 810 554 -
2016 Class: Item Level 1 Level 2 Level 3 Financial assets at fair value Hedge instruments (Note 25) - 6 760 289 -
In relation to bank loans, it is deemed that their book value (amortised cost) does not differ significantly from the corresponding market value.
IX - NOTES TO THE FINANCIAL STATEMENTS 2017 ANNUAL REPORT 91
28. RELATED PARTIES
At 31 December 2017 and 2016, balances with associated companies were made up as follows:
Trade payables Other current Other current Clients Trade payables Investment Other assets liabilities (Note 13) (Note 23) (Note 23) Other debtors (Note 13) creditors (Note 14) (Note 24) 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 Parent company: BAE - - 4 272 761 4 242 422 - - 104 541 104 541 - - - - - 926 978 Related parties: BRISA O&M, S.A. ("BOM") - 16 832 18 077 250 17 534 548 1 750 280 1 184 032 ------BGI - Brisa Gestão de Infraestruturas, S.A. ("BGI") - - 499 398 349 151 1 600 549 1 321 230 18 ------Brisa Inovação e Tecnologia, S.A. ("BIT") 20 281 - - - 932 935 1 426 635 ------Via Verde - 1 476 260 611 175 136 ------629 309 482 613 - - Auto-Estradas do Atlântico, S.A. ("AEA") 16 - 66 215 ------31 246 47 036 Controlauto - Controlo Técnico Automóvel, S.A. ("Controlauto") 10 285 10 378 ------Iteuve Portugal, Sociedade Unipessoal, Lda. ("Iteuve") 1 750 1 767 - 31 ------AEDL - Auto-Estradas do Douro Litoral, S.A. ("AEDL") 5 776 7 632 154 ------Mcall, S.A. ("Mcall") 947 ------Via Verde Portugal, S.A. ("VVS") 12 660 ------4 510 - - - AEBT - Auto-Estradas do Baixo Tejo, S.A. ("AEBT") ------9 9 - - - - Sicit - Sociedade de Investimento e Consultoria em Infra-estruturas de Transportes, S.A. ("Sicit") 177 141 ------Brisa - Áreas de Serviço, S.A. ("BAS") 359 657 ------José de Mello Group - - - - - 3 044 ------Efacec Group - - - - - 2 822 ------411 549 38 226 23 176 389 22 301 288 4 283 764 3 937 763 104 559 104 541 9 9 633 819 482 613 31 246 974 014
Additionally, main transactions carried out with other related entities in the years 31 December 2017 and 2016 were as follows:
Operating External Supplies and Other operating Intangible Tangible fixed income Services (Note 4) costs assets assets 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 Parent company: BAE 15 133 - 20 854 335 21 615 562 - - - - ( 1 867) - Related parties: BOM - - 87 851 365 84 642 529 - - 1 890 312 1 145 166 - 43 282 Via Verde - 6 405 10 715 154 10 998 806 ------BGI 4 381 - 1 902 646 1 566 174 4 381 - 5 011 784 5 149 606 172 079 - BAS 1 490 857 ------AEA - - 244 337 ------Controlauto 116 070 115 276 31 191 92 92 - - - - BIT - - 35 328 31 233 - - - - 2 481 390 1 653 133 AEDL 58 500 ------Via Verde Contact, S.A. 32 678 - - 633 ------VVS 28 167 ------Iteuve 23 616 22 259 - - - 31 - - - - Mcall 11 290 10 443 ------BCI - Brisa Conservação de Infra-Estruturas, S.A. - - - 11 296 - - - 4 157 - - José de Mello Group - - 12 733 25 407 - - - - - 4 457 SICIT 1 580 1 637 ------1 782 272 156 020 121 615 929 118 891 831 4 473 123 6 902 096 6 298 929 2 651 602 1 700 872
In the years ended 31 December 2017 and 2016, remuneration of the members of Brisa's corporate bodies was as follows: 2017 2016 Non-executive directors: Fixed remuneration 168 000 168 000 Supervisory Board 96 000 96 000 264 000 264 000
IX - NOTES TO THE FINANCIAL STATEMENTS 2017 ANNUAL REPORT 92
In the years ended 31 December 2017 and 2016, remuneration of key management personnel was as follows: 2017 2016 Key managing personnel Fixed remuneration 331 931 332 066 Variable remuneration: 156 997 109 038 Defined benefits 21 703 21 683 510 631 462 787
29. APPROVAL OF THE FINANCIAL STATEMENTS
Financial statements for the year ended 31 December 2017 were approved by the Board of Directors on 14 March 2018.
30. STATUTORY OFFICIAL AUDITOR FEES
In the years ended 31 December 2017 and 2016, the Statutory Auditor's fees were as follows:
2017 2016
Legal revision and audit 80 500 46 000 Other reliability enhancing services (a) 56 000 39 500 136 500 85 500
(a) Additional services provided by the Statutory Auditor concern work developed relating to the issue of comfort letters, within the scope of the EMTN and certification of the interim statement of financial position.
São Domingos de Rana, March 14, 2018
The Certified Accountant no. 62018
______
João Miguel Rodrigues
IX - NOTES TO THE FINANCIAL STATEMENTS 2017 ANNUAL REPORT 93
THE BOARD OF DIRECTORS
Vasco Maria Guimarães José de Mello
João Pedro Stilwell Rocha e Melo
João Pedro Ribeiro de Azevedo Coutinho
António José Lopes Nunes de Sousa
Daniel Alexandre Miguel Amaral
Michael Gregory Allen
Manuel Eduardo Henriques de Andrade Lamego
Fernando Aboudib Camargo
António José Louçã Pargana
Miguel José Pereira Athayde Marques
João Filipe Maia de Lima Mayer
Emanuel José Leandro Maranha das Neves
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X - LEGAL CERTIFICATION OF THE ACCOUNTS AND AUDIT REPORT
IX - NOTES TO THE FINANCIAL STATEMENTS 2017 ANNUAL REPORT 95
Legal Certification of the Accounts and Audit Report
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X - LEGAL CERTIFICATION OF THE ACCOUNTS AND AUDIT REPORT 2017 ANNUAL REPORT 97
X - LEGAL CERTIFICATION OF THE ACCOUNTS AND AUDIT REPORT 2017 ANNUAL REPORT 98
X - LEGAL CERTIFICATION OF THE ACCOUNTS AND AUDIT REPORT 2017 ANNUAL REPORT 99
X - LEGAL CERTIFICATION OF THE ACCOUNTS AND AUDIT REPORT 2017 ANNUAL REPORT 100
X - LEGAL CERTIFICATION OF THE ACCOUNTS AND AUDIT REPORT 2017 ANNUAL REPORT 101
XI - REPORT AND OPINION OF THE SUPERVISORY BOARD
X - LEGAL CERTIFICATION OF THE ACCOUNTS AND AUDIT REPORT 2017 ANNUAL REPORT 102
Report and Opinion of the Supervisory Board
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XI - REPORT AND OPINION OF THE SUPERVISORY BOARD 2017 ANNUAL REPORT 104
XI - REPORT AND OPINION OF THE SUPERVISORY BOARD 2017 ANNUAL REPORT 105
XII - TRAFFIC STATISTICS
Circulation (a) ADT Variation A1/IP1 - Auto-Estrada do Norte 2016 2017 2016 2017 Circulation ADT Alverca (A1/A9)-V. Franca de Xira II 1.6 1.7 63 079 65 394 3.4% 3.7% V. Franca de Xira II-V. Franca de Xira I 0.9 0.9 63 920 66 138 3.2% 3.5% V. Franca de Xira I-Castanheira do Ribatejo 0.7 0.8 51 909 53 902 3.6% 3.8% Castanheira do Ribatejo-A1/A10 0.2 0.2 51 421 53 342 3.5% 3.7% A1/A10-Carregado 0.2 0.2 58 674 61 583 4.7% 5.0% Carregado-Aveiras de Cima 2.5 2.6 43 321 45 720 5.2% 5.5% Aveiras de Cima-Cartaxo 1.4 1.4 33 107 35 076 5.7% 5.9% Cartaxo-Santarém 1.0 1.0 33 616 35 651 5.8% 6.1% Santarém-A1/A15 0.2 0.2 35 842 38 132 6.1% 6.4% A1/A15-Torres Novas (A1/A23) 3.3 3.5 33 643 35 767 6.0% 6.3% Torres Novas (A1/A23)-Fátima 1.8 1.9 23 937 25 549 6.4% 6.7% Fátima-Leiria 1.4 1.5 24 762 26 419 6.4% 6.7% Leiria-Pombal 2.1 2.3 24 340 25 980 6.4% 6.7% Pombal-Soure 1.3 1.4 24 442 26 011 6.1% 6.4% Soure-Condeixa 1.2 1.2 24 545 26 161 6.3% 6.6% Condeixa-Coimbra Sul 0.7 0.8 26 231 28 021 6.5% 6.8% Coimbra Sul-Coimbra Norte (A1/A14) 0.7 0.8 24 491 26 163 6.5% 6.8% Coimbra Norte (A1/A14)-Mealhada 1.1 1.2 25 841 27 519 6.2% 6.5% Mealhada-Aveiro Sul 2.2 2.3 25 317 26 927 6.1% 6.4% Aveiro Sul-Albergaria (A1/IP5) 1.2 1.3 23 082 24 553 6.1% 6.4% Albergaria (A1/IP5)-Estarreja 1.4 1.5 36 912 39 755 7.4% 7.7% Estarreja-Feira 2.1 2.3 34 133 37 010 8.1% 8.4% Feira-Espinho (IC24) 1.4 1.5 38 382 41 551 8.0% 8.3% Espinho (IC24)-Feiteira 1.1 1.1 39 407 42 367 7.2% 7.5% Castanheira do Ribatejo-PLLN (b) 0.0 0.0 1 641 1 882 14.3% 14.6%
A1 31.8 33.7 31 093 33 075 6.1% 6.4%
(a) Circulation in 108 veh.km (b) PLLN - Plataforma Logística Lisboa Norte
XII - TRAFFIC STATISTICS 2017 ANNUAL REPORT 107
Circulation (a) ADT Variation A2/IP1 - Auto-Estrada do Sul 2016 2017 2016 2017 Circulation ADT Fogueteiro-Coina 1.1 1.2 34 801 35 924 2.9% 3.2% Coina-Palmela 1.2 1.3 29 559 31 058 4.8% 5.1% Palmela-A2/A12 0.2 0.2 30 639 32 401 5.5% 5.7% A2/A12-Marateca 1.4 1.5 22 590 24 421 7.8% 8.1% Marateca-A2/A6/A13 0.2 0.2 21 221 23 038 8.3% 8.6% A2/A6/A13-Alcácer do Sal 1.6 1.7 17 530 19 066 8.5% 8.8% Alcácer do Sal-Grândola Norte 1.3 1.4 16 234 17 552 7.8% 8.1% Grândola Norte-Grândola Sul 0.7 0.7 11 968 13 070 8.9% 9.2% Grândola Sul-Aljustrel 1.1 1.2 9 292 10 281 10.3% 10.6% Aljustrel-Castro Verde 0.9 1.0 9 152 10 136 10.4% 10.8% Castro Verde-Almodôvar 0.6 0.7 9 903 10 980 10.6% 10.9% Almodôvar-S.B. Messines 1.2 1.4 10 142 11 257 10.7% 11.0% S.B. Messines-Paderne (A22) 0.4 0.5 9 758 10 861 11.0% 11.3%
A2 12.1 13.0 14 634 15 866 8.1% 8.4%
(a) Circulation in 108 veh.km
Circulation (a) ADT Variation A3/IP1 - Auto-Estrada Porto-Valença 2016 2017 2016 2017 Circulation ADT Maia-Santo Tirso 2.5 2.6 52 989 56 194 5.8% 6.0% Santo Tirso-Famalicão 0.9 1.0 45 429 48 485 6.4% 6.7% Famalicão-Cruz 0.7 0.8 23 238 24 866 6.7% 7.0% Cruz-Braga Sul 0.6 0.6 20 798 22 492 7.9% 8.1% Braga Sul-Braga Poente 0.1 0.2 8 860 9 740 9.6% 9.9% Braga Poente-EN 201 0.6 0.7 8 438 9 287 9.8% 10.1% EN201-Ponte de Lima Sul 0.3 0.4 9 327 10 272 9.8% 10.1% Ponte de Lima Sul-Ponte de Lima Norte 0.0 0.0 11 875 12 830 7.8% 8.0% Ponte de Lima Norte-EN 303 0.6 0.6 7 425 8 045 8.1% 8.3% EN 303-Valença 0.2 0.2 7 213 7 815 8.1% 8.4% Braga Sul-Celeirós 0.1 0.1 16 552 17 799 7.2% 7.5% Celeirós-EN14 0.1 0.1 26 781 28 760 7.1% 7.4%
A3 6.8 7.3 18 373 19 729 7.1% 7.4%
(a) Circulation in 108 veh.km
XII - TRAFFIC STATISTICS 2017 ANNUAL REPORT 108
Circulation (a) ADT Variation A4/IP4 - Auto-Estrada Porto-Amarante 2016 2017 2016 2017 Circulation ADT Ermesinde-Valongo 0.7 0.7 43 351 44 513 2.4% 2.7% Valongo-Campo 0.7 0.8 40 447 41 425 2.1% 2.4% Campo-Baltar 0.9 0.9 37 101 39 086 5.1% 5.4% Baltar-Paredes 0.7 0.7 32 288 34 099 5.3% 5.6% Paredes-Guilhufe 0.3 0.3 28 829 29 956 3.6% 3.9% Guilhufe-Penafiel 0.2 0.2 28 473 29 849 4.5% 4.8% Penafiel-Castelões (A4/IP9) 0.7 0.7 23 572 25 154 6.4% 6.7% Castelões (A4/IP9)-Amarante Poente 0.9 1.0 16 989 18 435 8.2% 8.5%
A4 5.0 5.3 28 476 29 965 4.9% 5.2%
(a) Circulation in 108 veh.km
Circulation (a) ADT Variation A5/IC15 - Auto-Estrada da Costa do Estoril 2016 2017 2016 2017 Circulation ADT Estádio Nacional-Oeiras 1.5 1.5 116 280 120 560 3.4% 3.7% Oeiras-Carcavelos 1.0 1.0 76 576 80 247 4.5% 4.8% Carcavelos-Estoril 0.9 0.9 50 012 53 622 6.9% 7.2% Estoril-Alcabideche 0.4 0.4 38 249 40 926 6.7% 7.0% Alcabideche-Alvide 0.1 0.1 39 823 43 290 8.4% 8.7% Alvide-Cascais 0.2 0.2 32 055 35 089 9.2% 9.5%
A5 4.0 4.2 64 916 68 454 5.2% 5.4%
(a) Circulation in 108 veh.km
Circulation (a) ADT Variation A6/IP7 - Auto-Estrada Marateca (A2)-Caia 2016 2017 2016 2017 Circulation ADT A2/A6/A13-Vendas Novas 0.6 0.7 8 406 9 191 9.0% 9.3% Vendas Novas-Montemor-o-Novo Poente 0.5 0.6 7 657 8 337 8.6% 8.9% Montemor-o-Novo Poente-Montemor-o- Novo Nascente 0.1 0.2 6 979 7 628 9.0% 9.3% Montemor-o-Novo Nascente-Évora Poente 0.3 0.4 6 143 6 699 8.8% 9.1% Évora Poente-Évora Nascente 0.2 0.2 3 071 3 317 7.7% 8.0% Évora Nascente-Estremoz 0.4 0.5 3 809 4 142 8.4% 8.7% Estremoz-Borba 0.1 0.1 2 993 3 234 7.8% 8.1% Borba-Elvas Poente 0.2 0.3 2 948 3 195 8.1% 8.4%
A6 2.6 2.8 5 062 5 510 8.6% 8.9%
(a) Circulation in 108 veh.km
XII - TRAFFIC STATISTICS 2017 ANNUAL REPORT 109
A9/IC18 - CREL - Circular Regional Exterior Circulation (a) ADT Variation de Lisboa 2016 2017 2016 2017 Circulation ADT Estádio Nacional (A5/A9)-Queluz 0.3 0.3 24 666 26 808 8.4% 8.7% Queluz-A9/A16 0.2 0.2 21 226 23 393 9.9% 10.2% A9/A16-Radial Pontinha 0.3 0.4 30 345 33 210 9.1% 9.4% Radial Pontinha-Radial Odivelas 0.5 0.5 19 498 22 015 12.6% 12.9% Radial Odivelas-A8/A9 0.3 0.3 20 216 22 756 12.3% 12.6% A8/A9-Bucelas (Zambujal) 0.2 0.3 19 628 21 801 10.8% 11.1% Bucelas (Zambujal)-A9/A10 0.4 0.4 11 996 13 329 10.8% 11.1% A9/A10-Alverca 0.1 0.1 7 116 7 681 7.6% 7.9%
A9 2.3 2.6 18 328 20 322 10.6% 10.9%
(a) Circulation in 108 veh.km
A10/IC2 - Auto-Estrada Bucelas (CREL)- Circulation (a) ADT Variation Carregado-IC3 2016 2017 2016 2017 Circulation ADT A9/A10-Arruda dos Vinhos 0.3 0.3 10 063 11 120 10.2% 10.5% Arruda dos Vinhos-Carregado 0.3 0.3 6 851 7 673 11.7% 12.0% Carregado-Benavente 0.3 0.3 5 225 5 574 6.4% 6.7% Benavente-A10/A13 0.1 0.1 2 104 2 373 12.5% 12.8%
A10 0.9 0.9 5 933 6 520 9.6% 9.9%
(a) Circulation in 108 veh.km
Circulation (a) ADT Variation A12/IC3 - Auto-Estrada Setúbal-Montijo 2016 2017 2016 2017 Circulation ADT Montijo-Pinhal Novo 0.7 0.7 17 555 19 124 8.6% 8.9% Pinhal Novo-A2/A12 0.6 0.6 17 196 18 707 8.5% 8.8% A2/A12-Setúbal 0.5 0.5 26 788 28 412 5.8% 6.1%
A12 1.8 1.9 19 355 20 913 7.8% 8.1%
(a) Circulation in 108 veh.km
XII - TRAFFIC STATISTICS 2017 ANNUAL REPORT 110
A13/IC3/IC11 - Auto-Estrada Almeirim- Circulation (a) ADT Variation Marateca 2016 2017 2016 2017 Circulation ADT Almeirim-Salvaterra Magos 0.3 0.3 3 422 3 669 6.9% 7.2% Salvaterra Magos-A13/A10 0.2 0.2 3 435 3 677 6.7% 7.0% A13/A10-Sto. Estevão 0.2 0.2 4 924 5 420 9.8% 10.1% Sto. Estevão-Pegões 0.3 0.4 4 703 5 174 9.7% 10.0% Pegões-Marateca 0.2 0.2 4 696 5 167 9.7% 10.0%
A13 1.2 1.3 4 111 4 476 8.6% 8.9%
(a) Circulation in 108 veh.km
A14/IP3 - Auto-estrada Figueira da Foz-Co- Circulation (a) ADT Variation imbra (Norte) 2016 2017 2016 2017 Circulation ADT Santa Eulália-Montemor-o-Velho 0.1 0.1 3 523 3 936 11.4% 11.7% Montemor-o-Velho-EN335 0.1 0.1 3 724 4 092 9.6% 9.9% EN335-Ançã 0.1 0.2 4 016 4 318 7.2% 7.5% Ançã-Coimbra Norte (A14/A1) 0.1 0.1 6 861 7 322 6.4% 6.7%
A14 0.4 0.5 4 308 4 675 8.2% 8.5%
(a) Circulation in 108 veh.km
Circulation (a) ADT Variation Sublanço 2016 2017 2016 2017 Circulation ADT BCR 68.8 73.5 18 534 19 847 6.8% 7.1%
(a) Circulação em 108 veic.km
XII - TRAFFIC STATISTICS 2017 ANNUAL REPORT 111
XII - TRAFFIC STATISTICS 2017 ANNUAL REPORT 112