Annual Report 4

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%).

Load more