Unidentified

Company Representative: Good morning and thank you for much for attending this video conference for earnings presentation for ACS 2021. I really hope that next year we'll be able to hold this event with a live audience and that we will have a chance to meet up with so many of you who usually attend our presentations at our headquarters. I'm here with our Corporate General Manager, Mr. Ángel García Altozano, and as usual at the end of the presentation will open a Q&A in order to respond many queries that you might send us through the system that we've established for that on our website. Through my introduction, I will go into the five basic themes that have defined the Group's performance in 2021, and which will determine ACS's future in coming years.

First of all, I'd like to underline the excellent performance of our businesses and an environment which is still hard hit by the COVID-19 pandemic, which we hope is soon going to come to an end. And the first part of the presentation, I will analyze the main financial operational metrics, the Group, which as you know, has obtained the biggest net profit ever with €3.045 billion. Net profit, which includes capital gains obtained from the divestment of our industrial business to the French group VINCI. I'd like to point out however that this transaction, which I will describe later is part of a broader agreement with VINCI, which includes the establishment of a joint venture for the development of renewable energy assets all over the world which we are particularly excited about. Finally, also the revenue teams through the sale of our industrial services business, the €5 billion will be allocating as always said, essentially to investing in infrastructure concession projects.

I'll talk in more detail about this later as well. I'd also like to spend a few minutes on our corporate simplification plan, which we're currently implementing, including the -- that we published yesterday for 21.4% of some CIMIC's shares. We know that a well managed dynamic organization is essential for value creation, and that's why we have made these decisions and why we will be making changes in our corporate governance structure. Finally, I'll focus on our boost towards sustainability where we want to become a global model in our sector. After this introduction, let me just sum up the most relevant aspects of 2021 earnings.

As I've explained, both our construction and our concessions and services businesses have had excellent net performance with €1.6 billion EBITDA, which is 16% up on 2019 or 2021. Net ordinary profit including the contribution of industrial services in the year with €720 million, that is 33% higher in like-for-like terms. I'd also like to underscore the strong recovery of new contracts up 41% after the very difficult 2020 due to the impact of the pandemic. As a result, our backlog is currently at a record high of over €67 billion. Thirdly, I'd like to mention the Group's excellent financial position, which enables us to undertake major investments for our Group's strategic development.

As you know, with the income generated to the sale of our industrial business, the Group has a net cash position of €2 billion. Our main operational metrics in 2021 with

a following: Turnover was €27.83 billion that's a number is similar to the previous years in like-for-like terms that is without considering industrial services in either year and adjusting last year for the sale of 50% of these and the impact of the Gorgon project in Australia. Total production increased by 2.5% demonstrating the recovery that we had predicted a year ago, production includes 50% Thiess plus the joint venture that we do not consolidate essentially in America. Our backlog is at €67.262 billion that's 11.3% higher than in 2020 in like-for-like term, and back to the activity levels before the pandemic. Our EBITDA is at €1.598 billion that's up 16%.

Also our EBIT, ordinary EBIT has reached €1.084 billion that's up 15%. And finally, net cash flow from operations before the capital being variations in working capital investments is that €1.017 billion, that’s up 75% in like-for-like terms that is without the contributions of industrial services or Thiess in either year. On the other hand, the evolutions of our main financial metrics in 2021 are

as follows: Net attributable profit €3.045 billion. As I mentioned, 2021 included one-off positive impacts for a total of €2.325 billion mostly due to net capital gains obtained through the divestment of industrial services. Without these impacts, net profit was €720 million that's 33% higher than the previous year.

Thanks to the recovery of the Thiess. Group's financial position which was €2 billion net cash and our net accretive about €7 billion with a substantial increase after the closing of the industrial services divestments. We've also reduced our factory balance by €426 million to €1 billion, which is equivalent to 3.6% of the Group's total turnover, which means that in the last two years, we've reduced our Group's factory balance by approximately €1.2 billion. Going into a bit more detail. Our turnover, I'd like to point out that our revenue sources are highly diversified by businesses and countries with a strong presence in the most developed economies.

Regions where the Group is generating earnings are the U.S. and Canada with turnover representing for 53% and 6% respectively of total production, Australia with 19%, Spain with 11%, on the rest of Europe with 7%. And the remaining 4% includes Asia with 3% and Latin America with 1%. On the chart, you can see the evolution of each market in like-for-like terms that is adjusting for the impact of the exchange rate, which overall has had an impact of 3% to 5% on our turnover. Our backlog at the end of 2021 was at €67.262 billion with breakdown, which is similar to that of our sales.

I think it's important to point out that approximately 97% of our backlog comes from developed economies, particularly the U.S. with 45% of our backlog are 4% in local currency, Canada 4%, Australia with 29% of the total and up 12% in like-for-like terms, considering the adjustments with the divestment of 50% of Thiess and the exchange rate impact. And our backlog in Europe is 18% of the total and up 11%. European backlog 8%, Spain up 12%, and the remaining 10% is in Germany, the UK, and Poland mostly. This excellent evolution of our backlog in 2021 confirms the growth trends we have seen in the last few years, which were interrupted by the global COVID-19 pandemic in 2020, where contracts or contract flows slowed down.

In 2021 contract -- new contract levels have gone back to normal and we expect strong growth in 2022, 2023 in the Group's strategic markets, mostly North America and Australia. The main new awards of the Group were in Australia construction and operation of two tunnels in Melbourne for €2.465 billion, development of the first section of the M6 Sydney HIGHWAY in new South Wales for €1.234 billion, and the corporate stream 2.0 project for the construction of a high voltage transmission line in Queensland for €1.092 billion. Operational maintenance of the regional railway lines of the country for 10 years in New South Wales for €958 million, designing construction of 9.8 kilometers of tunnels -- tunneling for stations at the Sydney Metro and the West Sydney airport station for €957 million. In North America, consultancy services prior to the construction of the physics and engineering building Yale University in New Haven for €306 million, extension and refurbishment of the I-95 in North Carolina for €243 million. And in Europe, I point out the design and construction of the new high speed railway station in Birmingham, UK for €313 million.

And here in Spain, the building of in Amazon's logistic warehouse in Asturias for €161 million, as well as of course, various service contracts in Spain for €702 million. Into construction, our turnover was €25.879 billion. In Australia, CIMIC's contribution has recovered strongly after the delays caused by the pandemic and about 36%. U.S. and Canada represent together about 64% of this business area turnover and have shown a solid recovery in the second semester of the year of 8.6% versus Q1.

Sales in Spain, which are 6% of our construction business are up 2.8% whilst in Germany with 4% of our turnover -- are up 8%. Our EBITDA from construction was up 1% up to €1.275 billion, and net quarterly profit excluding the one-off impacts in HOCHTIEF through the arbitrage of the Alto Maipó contract in Chile, which is €273 million that 3.8% more than the previous year. The positive outlook we have for our main markets and the large backlog of awarded projects in the last quarter makes us be very optimistic on the evolution of our construction business in 2022. We expect growth to exceed 5% and this is showing solid recovery with average traffic growth of 21% with positive traffic volume trends at levels equal or higher than those of 2019. As a result, contribution 2021 to ACS net profit was €117 million and it was minus €35 million the previous year.

Also, this recovery in mean daily traffic together with incorporation of our new toll highways in the U.S. Elizabeth River Crossing and Mexico RCO where traffic is higher than before the pandemic have allowed our to achieve revenues of €4.8 billion up 20% and then EBITDA of €3.351 billion up 28%. In October 2021, Abertis signed a new contract with the Chilean Government to build a tunnel to improve mobility in one of the most congested areas of Santiago. Total investment in the project we have over €300 million in exchange for an extension on the EBITDA Alienor concession for an additional 20 months. We've also reached an agreement to take over Alienor's stake 35%, and financial activity, which is a 100% to Eiffage for a total amount of €222 million.

These two transactions are quite offset. Abertis' strategy is divesting of minority states in order to use the revenues to invest in new projects in order to continue replacing the Group's cash flows. Iridium has brought in €50 million in net profit posted by greater contributions of new concessions and the divestment of various assets such as the Toledo Hospital or the Baixo Alentejo highway. Moving on now to social services turnover in 2021 were €1.643 billion, up 1.5% with respect to the previous year and back to normal levels after the impact of COVID on its business during the previous year. Contribution by national market is 92% of our turnover that's up 18% while the European market mainly the UK 8% and grew 4.6% in a year.

We're very proud to have Thiess within or Group because of the social services, it provides regardless of different circumstances like now with the pandemic and also because of its contribution to a fair society in those markets where it operates. In 2021, the ACS Group's activities generated this is before working capital variations and operating investments a total of €1.073 billion in growth operating cash flows. The split was approximately 70% of the four construction services activities and 30% came from the concessions business. Operating cash flows after the deduction for operating investments and the working capital variation amounted to €558 million. This figure is 50% higher than the figure recorded in 2020 despite the fact that is dividend fell by 32%, and that confirms the trend in recovery for the construction activity especially in Australia where the impact has been greater.

As you already know, the Group's net profit in 2021 amounted to €3.045 billion, out of that figure €2.325 billion correspond to extraordinary impacts. Mainly the net coupled gain for this sale of our industrial services business. That means that the ordinary net profit totaled €720 million, 33% up on the ordinary net profit figure recorded the previous year. You can see in this chart. Now this increase is largely due to Abertis' recovery, but this is a contribution increased by €152 million.

The contribution of each activity to the ordinary net profit figures as follows. Construction made an ordinary net profit of €273 million, 3.8% up on the previous year, concessions generated €167 million and net profit €117 million out of that figure corresponds to Abertis, which in 2020 made a negative contribution to our profit of €35 million, industrial services obtained an ordering net profit figure of €328 million, that's up 5.1%. Lastly, services that made a net profit of €29 million, so that 64.5% higher than the previous year following the impact of the pandemic in 2020. Let me, if I could give you some details of the impact from the sale of industrial services on our 2021 financial results, as well as other non-recurring results booked during the year. The net capital gain for the sale of industrial services amounted to €2.909 billion.

After the accounting elimination of tax credits that we had registered on our balance sheet without any cash out impact. Now, after the sale of industrial service, it's now no longer our accounting scope. We have felt it was appropriate to cancel in accounting terms those credits although still started and will be valid from a tax point of view as we move forward. Other non-recurring results include the provisions that were booked for the reassessment of operating risk amounting to €479 million and the losses incurred by Abertis for the unfavorable arbitration claim in Chile that was for a value of €102 million. The ACS group close of 2021 had a net cash position of €2.009 billion.

This major improvement in the Group's financial position is essentially due to the closure of the industrial services business, which had a net impact of more than €4.1 billion. Specifically, we are the proceeds of the transaction with €4.98 billion, and at the start of the year, we deconsolidated the activity which had a cash figure of €859 million. The ACS Group has earmarked €879 million to remuneration for shareholders and minorities. And now out of that figure, €488 million have been reserved to pay out dividends for ACS, €204 million to the buyback Abertis’ stock and €187 million for minorities. You may already be familiar with the details of the agreement reached with VINCI, but that means if I could just remind you of some of the key elements so of that agreement, which entail a major transformation in our strategy in the Group.

First of all, the sale of our industrial activity for a total figure of €5.58 billion can be broken down as from a €4.902 billion cash payment received on the 30th, December on the signing of the transaction €78 million that were collected during the year in dividends and €600 million as an out link to the renewable energy portfolio that toll road has identified all over the world. We're talking about €40 million per GW. This agreement also includes the creation of a joint venture to develop the renewables portfolio at ACS and VINCI are going to develop over the next few years. That means a major investment opportunity with a 49% stake in a company that will be developing. And as I said, the renewable energy assets in the portfolio of 15 GW during this decade, we will be reserving for this project some of the funds that were earned through the divestment.

I also want to point out the value of the assets that we are retaining. Over €1 billion is the value, and they correspond to several wind farms in Latin America with an historic capacity of more than 300 MW, three CSP plants. We’ve talked about future 50 to 60 MW that's in Spain, United States of America and South Africa. And there's also the Kincardine offshore wind project in Scotland 50 MW and a number of desalination plants, water treatment plants, and gas storage facilities. All in all then, this transaction has allowed us to and not the value of a for industrial services business €6.6 billion in total, and to address with a robust financial position, the challenges of investment and growth in the infrastructure sector moving forward.

The first strategic goal is the investment in the develop operation of infrastructure concession assets, which will allow us to increase the weight of our assets with more recurring cash flow, and strike a balance between different sources of generation of funds between construction concessions without giving up either of them. We believe both in construction and in our concessions business and this will give us greater visibility on a future results and dividends in the Group. And to do that, we're going to use the two drivers for growth and investments that we have. We have budget for the mid-tier projects for brownfield projects in Iridium for new or greenfield projects focusing on strategic markets in the Group. And I mentioned that before in time and North America, Australia, Europe, including Spain and Germany, where we are a leading reference player in the sector.

Turning now to the simplification are of the Group's corporate structure. And we have taken already the first step, but towards that integration with the recent tender offer on the remaining 21.4% of CIMIC, with an investment opposed to AUD1.5 billion, €950 million approximately in equivalent terms that we are planning to totally integrate CIMIC in the organization to promote its growth in a very attractive future with a great upside. So the conditions of the offer were detailed about last Wednesday by the CEO of HOCHTIEF in the annual results presentation, but I'd like to remind you of some of the key points in that, the final price of AUD22 per share and no -- with no possibility to modify that. The tender offer is on 21.4% of the capital. There's not control by HOCHTIEF for the moment as equivalent to 66.6 million shares.

And it's unconditional, in other way, there's no limit with regard to acceptance of the offer. The period we're talking about is six weeks that as up until the deadline of 9th of April. We believe that these conditions are highly attractive for CIMIC's minority shareholders. Likewise, in this corporate simplification or streamlining process, we are going to bring our corporate governance into line with the new stage of the Group and also make sure we're fully aligned with international best practices with regard to governance sustainability. That is why the next annual general shareholders meeting said to be held in May.

We will be proposing to increase that independence and diversity of the Board of Directors. The appointment of a new CEO for the Group and to reinforce our audit committee with regard to sustainability, it will actually be -- the name will be changed so audit and sustainability committee. This determined commitment to sustainability has always been a part and parcel of the history of our group. Environmental aspects health and safety at work, social integration, corporate ethics, have always all played a key role in ACS' culture. We're very much aware of the responsibilities that we have.

These are the different stakeholders that form part of our community. That is why we have launched our new 2025 master plan with three fundamental themes and a clear goal to drive global sustainability of the infrastructures as a leading company in the sector. In fact, the ACS group is the leading construction company in the U.S. Australia, Germany, and Spain. It's also a benchmark company in the concessions business who are Abertis and Iridium.

These three themes are promoting the global transition to sustainable infrastructures to be a key partner in economic development, but then to integrate into the Company specialize and diverse talent, and to also be a key player in business practices, good business practices with committed governance, and commitment to sustainability. That is why we want to give importance. The policy deserves the sustainable development in the Group. To continue to align our interest with society's interest and to drive forward with the measures that will make us more efficient and more environmentally friendly and reinforce our social factor and with regard security, diversity better human resources to make sure that that we can continue to promote an ethically responsible business culture. The detailed aims of the sustainability plan that we have in the Group, you can read those on our website that they're already posted.

But let me just summarize the 17 priority goals for you here. The reduction of greenhouse gas affect emissions that are aim is to reach a climate, the neutral position in our operations by 2045. And we've committed to reduce the in 2025 or 50% of our scope 1 emission, 30% of our scope 2 emissions. And this is compared to 2019. We're also committed to increasing diversity in our workforce especially in post responsibility.

Specifically, we are expecting to increase by 25% the number of women in our senior management post in the whole group. And we also have a commitment to training with regard to governance, sustainability and compliance, so that we can reinforce our corporate culture and the corporate culture of our suppliers in such key areas. All-in-all, essentially then we are a global leader in the infrastructure sector with a large backlog of projects and strategic markets combining our proven operation efficiency and strong financial position that responds to the global challenges of the sector with a dynamic competitive and sustainable model led by 120,000 people in more than 35 countries. And they will allow us to continue to grow profitably in the future. Thank you very much.

It's now time for our Q&A session. A - Unidentified

Company Representative: Good morning, we have several questions, essentially on two topics, one on the strategy. And the first question is from Luis Prieto from Kepler. Who's asking, what other simplification measures might you consider as well as that bid on CIMIC minority stakes?
Ángel

García Altozano: Well, as I said before, the divestment of our industrial activity will definitely enable us to simplify the Group structure, which as we all know, we have a listed company, which owns another listed company, which in turn owns another listed company. And they all have construction and some concession businesses.

And so this first step. For simplification, we will no longer have three different listed companies, but just two. And also we're working, as I said, many times to see what we might do with these billions in revenue that we've obtained from the divestment of our industrial business, as I've said, of course we strongly believe in construction, but we also want to focus on concessions. And so we're working to see which infrastructure projects, particularly concession projects we should invest in. And all I can say is that, we're working on it.

We've identified some opportunities already. And well, I think that towards the end of this month, when I think we will be publishing the call, the general shareholders meeting, we'll have more information on these decisions and we'll be able to share them basically it's saying along the same lines. And of course, we're always working to see how we might be able to merge our or concentrate our construction businesses and our concession businesses on the other hand. And very soon you may hear of some moves in that direction. Unidentified

Company Representative: Well, I think that's also answered next question from Bosco Ojeda from UBS.

Who's saying that, and over the last few years, you've sold a lot of businesses, services, these concessions you're selling zero -- you've sold all. Aren't you divesting too much or too quickly? Can you make guarantee that you will be able to continue growing your business by making new investments in the last two or three years. What we asking about new investments, you're saying that you've been divesting a lot. Well, as I said, this transaction will help us to simplify. We've already started to simplify our structure and will continue to do so.

And of course, what we will do is to invest in opportunity between 4 billion and 5 billion in infrastructures, and if possible in concessions. Okay. And I think all these questions about strategy are essentially the same questions. So, all the 10 questions that have come in about the strategy are basically the same. But about the earnings, there's several questions, one which is asking for more detail on the provisions for operating in risks of 479 million this year.

Angel, you want answer that?
Ángel

García Altozano: Okay. I'm sorry. I think you couldn't hear that my microphone was off. I'll repeat, basically of the 480 million, but there's two groups. There's one 300 million provision, a portfolio provision for Working capital and litigation risks, different projects and contracts and litigation that's pending, and then one for 165 million provisioning for the Tonopah asset in Nevada, which will have a capacity lower than the design capacity, and so we've provisioned that because we will not be reaching the design capacity.

So that's the two main items we have for risk provisions. Unidentified

Company Representative: Another question it's coming by from a Fernando Lafuente from Alantra. He's asking what are you trying to achieve with CIMIC. Are we going to restructure it? Are we going to sell it here? And he's also asking how we're going to finance or how deep we’ll be actually financing the purchase of CIMIC?
Ángel

García Altozano: CIMIC has its activities and it will continue to develop those business activities as before, but it will be integrated in the future in HOCHTIEF, but at the moment we have not planned anything more than that. And that in itself is a major thing application regard to overhead et cetera, because it will be part of HOCHTIEF activity.

How will it be funded? The HOCHTIEF CEO said himself in different ways. It could be financed for instance with a hybrid bond with a credit by putting selling off an asset for instance, that might be a good option for that 20% of Abertis and HOCHTIEF might actually come over to ACS. In other words, we could bring all the concession activities under the umbrella of ACS. We're working on that option two. So as I said, it's going to allow us to reorganize the Group in between concessions and construction.

That's what the money will be useful. And of course there will be the, these infrastructure projects that we will have the 4 billion there. Fernando's also asking about whether there are, will be any impact on a construction business, because of increases in construction materials or wages. And if there are additional costs there, are you managing to pass them on to your clients, your customers? Can you give us an overall picture? Well, there is yes, a general trend in the sector to identify concrete project risks and to share them with clients. This is done differently in different parts of the world.

You can have alliance or contracts, the progressive guaranteed price there. Essentially what all of these are trying to do is to identify the risk, put them together and share them with the clients so that the contracts doesn't have to totally take on those. It has two effects. So, one, advances are reduced, and two that the gross margin might be slightly lower. Although you would expect perhaps of the net margin wouldn't be the same or better because risks would be reduced quite significantly.

We don't see that there will be the major downturn there for us because there will be -- there was always few risk in the projects that we're taking on. Unidentified

Company Representative: Another question, actually come in several times on dividend policy, on the pay politics. Some are asking specifically about the dividend for this year, but many others are asking whether we will be changing our pay out policy thereafter if we have a long-term strategy. And could you give more color on that?
Ángel

García Altozano: Well, with this divestment and with our current ability to invest, we are working on a payout policy that we want to be as stable as possible. And so, I'm speaking to the directors and we had board the directors meeting yesterday, by the way.

And our aim is to propose to the general shareholders meeting a dividend of about years per share, and that we maintain that level for the following years. Unidentified

Company Representative: Other questions, more technical questions, for example, Filipe Leite from CaixaBank is asking, whether we could give some add explanation on the compensations for the AP7, at Abertis this is currently negotiating with the government?
Ángel

García Altozano: Well, the AP7, as you know, there were two types in the agreement. There were two types of remuneration. One for the capital invested in the extension was just over a billion. And that's been recognized by the government and we expect to be paid that this next month.

And then, there was another compensation for the fall in traffic volume as a result of the works because of… And so we are waiting to see the response to our claim. It hasn't been resolved yet. It's net 3 billion approximately after taxes. And we -- first court ruled in our favor. Then there was an appeal.

So, it's going to take a few months, but we hope to be able to receive a significant part of that. Unidentified

Company Representative: The Nicolas Mora from Morgan Stanley is asking us about . The question is whether there is any intention to integrate in HOCHTIEF, whether there is any possibility of combining it or coordinate with us. And there's also a question about possible investment and concessions and what are our strategic markets that we are looking towards?
Ángel

García Altozano: Let me answer that second part of the question, the strategic markets that we are identifying our markets, where there are highways, toll roads concessions, such as the U.S. There are lots of different highways then we're competing there against investment funds or pension funds, but anyway, there are lots and of different toll roads, highways there that we are examining.

And we will of course go for those projects where there is a certainty there we are. We have the best guarantees, that in Abertis, we have invested in two toll roads, one is in Mexico, one is in the U.S. and we are still looking around. We're still seeking others and some will be for burdensome for us. And that first question, what was the first question?
Unidentified

Company Representative: Yes.

The first question was about was a suggestion. Ángel

García Altozano: Yes, you're right. It's for concessions. We have 30% Abertis and 20% is HOCHTIEF. We're starting to work to look at whether we can actually bring these parts together, and when we have our construction company in the states as well and to other states too.

So yes, we're also working on that element of certification, the activities to see what we can do together in a unified fashion. Unidentified

Company Representative: Before I move on to the next questions, there are some investors and analysts for asking about the 479 million in provisions. We already explained that 300 for operating businesses, essentially construction, whether we expect that to be released or whether it's going to be an outlay eventually. Well, there's a bit of everything most of it are costs that have already been incurred. And so perhaps in some litigation we might receive some compensation, but most of that amount we don't expect to -- for it to become a cash outlay.

Okay. Another question that we've been asked for the suggestion that you might for instance acquire 20% of HOCHTIEF, there's a very specific question from CaixaBank about whether you would need authorization from Atlantia for that transaction. Ángel

García Altozano: Well, whatever we do in HOCHTIEF of course, we will do together with our partner Atlantia and in agreement with them. In general, there's also a few technical questions that we will answer directly via email from investor relations, but there's really nothing else to answer now. Well in our case, if there's nothing else, thank you very much for your questions, and for attending this earnings presentation.

And I hope that all of these goals that we have defined for this year, which are very ambitious will be achieved as a result of this major divestment that we've made. And that if they will enable us to continue with our client pay our policy and to keep growing and to simplify the Group structure and to have governance policy as I've just described. Thank you very much everyone.