TABLE OF CONTENTS PART I – CONSOLIDATED MANAGEMENT REPORT 1ST HALF 2019 1. CHAIRMAN'S STATEMENT 07 2. ABOUT US 08 2.1 THE IP GROUP 09 2.2 MISSION, VISION AND VALUES 11 2.3 GOVERNANCE MODEL 12 2.4 IP GROUP STRUCTURE: ORGANISATIONAL MODEL 14 2.5 OUR NETWORKS 15 3. PERFORMANCE IN 1ST HALF 18 3.1 SOME RELEVANT INDICATORS 18 3.2 HIGHLIGHTS OF THE HALF-YEAR 22 4. MAIN BUSINESS AREAS 28 4.1 NETWORK MAINTENANCE 28 4.2 INVESTMENT IN ROAD AND RAIL INFRASTRUCTURE 35 4.3 USE OF THE ROAD AND RAILWAY NETWORK 44 4.4 PUBLIC-PRIVATE PARTNERSHIPS 47 4.5 TELECOMMUNICATIONS AND BUSINESS CLOUD 52 4.6 ENGINEERING SERVICES 53 4.7 REAL ESTATE AND COMMERCIAL REAL ESTATE MANAGEMENT 53 5. ECONOMIC AND FINANCIAL PERFORMANCE 54 5.1 OPERATING INCOME 54 5.2 OPERATING EXPENSES 61 5.3 ASSET STRUCTURE 67 6. FINANCIAL MANAGEMENT AND DEBT 68 6.1 FINANCIAL MANAGEMENT 68 6.2 CAPITAL INCREASE OPERATIONS 70 6.3 FINANCIAL DEBT STRUCTURE 70 6.4 ANALYSIS OF FINANCIAL RESULTS 73 7. SUBSEQUENT EVENTS 75 PART II – CONSOLIDATED FINANCIAL STATEMENTS AND CONDENSED NOTES CONSOLIDATED FINANCIAL STATEMENTS AND CONDENSED NOTES 80 STATEMENT OF COMPLIANCE 81 CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 83 NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS FOR THE FIRST HALF OF 2019 89 1. INTRODUCTORY NOTE 90 1.1 PARENT COMPANY ACTIVITY 90 1.2 ACTIVITIES OF THE IP GROUP COMPANIES 90 1.3 OTHER EQUITY HOLDINGS 91 2. BASES OF PRESENTATION AND ACCOUNTING POLICIES 92 2.1 BASES OF PRESENTATION 92 2.2 CONSOLIDATION BASIS AND ACCOUNTING POLICIES 92 2.3 COMPARABILITY 93 2.4 MAIN ESTIMATES USED IN THE FINANCIAL STATEMENTS 95 2 | INFRAESTRUTURAS DE PORTUGAL GROUP - ELECTRONICALLY SIGNED DOCUMENT 3. FINANCIAL RISK MANAGEMENT POLICIES 97 4. COMPANIES INCLUDED IN THE CONSOLIDATION 100 5. SEGMENT REPORTING 101 6. TANGIBLE FIXED ASSETS 104 7. INTANGIBLE ASSETS 106 8. DEFERRED TAX ASSETS AND LIABILITIES 108 9. DEFERRALS 111 9.1 INVESTMENT GRANTS - ROAD CONCESSION RIGHT 112 10. TRADE RECEIVABLES (CLIENTS) AND OTHER ACCOUNTS RECEIVABLE 113 10.1 TRADE RECEIVABLES (CLIENTS) 113 10.2 OTHER ACCOUNTS RECEIVABLE 113 11. GRANTOR - STATE - ACCOUNT RECEIVABLE 114 12. GOVERNMENT AND OTHER PUBLIC BODIES 115 13. NON-CURRENT ASSETS HELD FOR SALE 117 14. CASH AND CASH EQUIVALENTS 117 15. SHARE CAPITAL AND RESERVES 118 16. PROVISIONS 119 17. BORROWINGS 120 17.1 BORROWINGS 120 17.2 SHAREHOLDER FUNDING / SHAREHOLDER LOANS 122 18. CHANGES IN LIABILITIES ARISING FROM FINANCING ACTIVITY 126 19. TRADE PAYABLES (SUPPLIERS) AND OTHER ACCOUNTS PAYABLE 127 19.1 TRADE PAYABLES (SUPPLIERS) 127 19.2 OTHER ACCOUNTS PAYABLE 127 20. SALES AND SERVICES 128 21. COMPENSATORY ALLOWANCES 129 22. COST OF GOODS SOLD AND MATERIALS CONSUMED 130 23. EXTERNAL SUPPLIES AND SERVICES 131 24. PERSONNEL EXPENSES 132 25. OTHER INCOME AND GAINS 133 26. FINANCIAL LOSSES AND GAINS 134 27. INCOME TA X 135 28. DISCLOSURES ABOUT RELATED PARTIES 137 28.1 SUMMARY OF RELATED PARTIES 137 28.2 SIGNIFICANT BALANCES AND TRANSACTIONS WITH PUBLIC BODIES 138 28.3 BALANCES AND TRANSACTIONS WITH RAILWAY OPERATORS 140 28.4 JOINT VENTURES 140 28.5 REMUNERATION OF CORPORATE OFFICERS 141 29. RECENTLY ISSUED ACCOUNTING STANDARDS AND INTERPRETATIONS 143 30. GUARANTEES AND SURETIES 145 31. CONTINGENCIES 146 32. COMMITMENTS 147 33. INFORMATION REQUIRED BY LAW 148 34. OTHER RELEVANT EVENTS 148 35. SUBSEQUENT EVENTS 151 PART III – AUDITOR REPORT CONSOLIDATED MANAGEMENT REPORT 1ST HALF 2019 | 3 Part I CONSOLIDATED MANAGEMENT REPORT first half 2019 6 | INFRAESTRUTURAS DE PORTUGAL GROUP - ELECTRONICALLY SIGNED DOCUMENT 1. CHAIRMAN'S STATEMENT One of the IP Group's strategic objectives is Sus- Of this, EUR 39.7 million related to the reimbur- tainable Mobility. This also involves ensuring the sements and rebalances heading, due to the pay- Group's financial sustainability within a framework ment in the first half of 2018 of compensation to of compliance with the service levels established the Douro Interior Concession, on behalf of the with the Portuguese State for the operation of the Portuguese State, in the amount of EUR 43 million. road and railway networks, and for the integrated and rational development of the network. The decrease in multiannual charges compared to 2018 is further justified by the reduction in pay- It is therefore essential, for this purpose, not only to ments to the Beira Interior Concession (EUR -31.7 develop adequate planning and execution of net- million), in line with the forecast in the respective work maintenance and conservation activities, but contracted financial model. also of investment activities with a view to their modernisation. Only in this way will it be possible The Financial Result for the first half of 2019 amou- to ensure the existence of an efficient, modern and nted to EUR -101.4 million, representing a reduc- safe road network that meets the mobility needs of tion of EUR 14.2 million compared to the same pe- its users and contributes significantly to the econo- riod of the previous year. mic and social development of the country. The share capital increase operations carried out Notwithstanding the difficulties of context, both by IP, by the end of June 2019, totalled EUR 1,061 internal and external, ranging from the insufficient million. The company's share capital amounted to renewal of staff in recent years to the demanding EUR 6,872,510,000 at the end of the first half of management standards to which companies of the year. These operations were intended to cover the State Public Business Sector are held, or to a financing needs related to Investment and Debt certain lack of market responsiveness after several Service. years of low investment, the results of the first half This made it possible to reduce the Group's finan- of 2019 showed the clear evolution of the activity, cial debt, which at the end of the first half of 2019 especially in the maintenance, upkeep and moder- stood at EUR 5,208 million, which means a de- nisation interventions on the rail and road network. crease of EUR 537 million compared with the EUR This increase in activity is reflected in an 18% in- 5,745 million of December 2018. crease in network maintenance and upkeep, which One of the most relevant achievements of the first amounted to EUR 77.0 million, and a 44% increase half of 2019 should also be noted - the conclusion in the investment made, reaching EUR 58.8 million, of the new Collective Bargaining Agreement, whi- EUR 41.4 million of which relates to the Ferrovia ch is a fundamental instrument for the harmonisa- 2020 Investment Programme. tion of different employment rules. It is based on a These are positive signs that the growth trend al- policy of valuing work that promotes equality and ready seen in 2018 has been consolidated. These equilibrium in the teams. In this context, we can signs allow us to say that the effort made in recent say with great satisfaction that 99.7% of the uni- years is paying off. verse of employees eligible for the new Collective Bargaining Agreement have already signed up to This is against a backdrop of clearly positive eco- it. nomic and financial results, with net income for the year amounting to EUR 35.0 million. Compared to A final word of thanks to all our employees for their 2018, there was a decrease of EUR 12.4 million, work and dedication, as well as to the Shareholder, essentially due to the abovementioned increase in Supervisory Body and other Stakeholders for their road maintenance expenses. continued support and trust in our work. Another highlight is the positive evolution of toll revenues, which grew by EUR 6.4 million compa- red to the same period of 2018, despite the intro- duction of a new discounts scheme at the begin- ning of the year for goods vehicles. Payments for road concessions and sub-conces- sions amounted to EUR 636.5 million in the first half of 2019 (excluding VAT). Charges fell by EUR 89.6 million compared to the same period of 2018. CONSOLIDATED MANAGEMENT REPORT 1ST HALF 2019 | 7 2. ABOUT US Infraestruturas de Portugal, S.A. (IP) is a public com- pany that results from the merger between Rede Ferroviária Nacional - REFER, E.P.E. (REFER) and EP - Estradas de Portugal, S.A. (EP). The merger entered into force on 1 June 2015, following the publication of Decree-Law 91/2015 of 29 May. IP is responsible for the management of road infras- tructures, in accordance with the General Concession Contract for the national road network concluded with the State. IP also provides the public service for the management of the infrastructure of the National Railway Network (RFN), under a system of delegated powers from the Portuguese State, through the im- plementation of a Programme Contract for the railway sector. We are the largest Portuguese group in the mana- gement of transport infrastructure and aim to provide a safe, efficient and sustainable multimodal mobility service. In this context, IP is a reference company at national and international level, which combines unique kno- w-how, through the experience and skills of its staff, with a keen appetite for and openness to innovation, a decisive factor in the current context of continuous evolution of mobility services. 8 | INFRAESTRUTURAS DE PORTUGAL GROUP - ELECTRONICALLY SIGNED DOCUMENT 2.1 THE IP GROUP The subsidiaries aim to set up profit centres for the purpose of optimising the IP Group's non-core re- venue, making the excess capacity of assets not The IP Group incorporates the technical know-how used in the main activities profitable.