Ferrovial

Company Update:
Ferrovial has won its second multibillion-dollar US express-lane project since summer. Georgia selected its consortium on 15 October to build and operate express lanes on Atlanta’s I-285, following the Nashville I-24 award in August. The 50-year concession carries an $8.9bn construction budget, with no public funding, plus a $23.6bn concession fee payable to Georgia in annual instalments. Ferrovial will also negotiate the remaining phases exclusively with the state, with completion expected by 2041.

We have several concerns.

First, traffic is hardly secured. I-285 carries 250,000 vehicles a day, suffers eight hours of congestion and is expected to see 25% traffic growth over 15 years. The problem is pricing. Georgia caps tolls at $2.06 per mile, limiting the surge pricing that has made Ferrovial’s Texas roads so profitable. Tennessee allows higher tolls but takes 50–90% of incremental revenue in the upper pricing bands. Ferrovial is taking on two enormous projects without the same pricing upside as its existing roads.

Both projects are due to open in 2034 (the first phase), concentrating construction spending over the same eight years. Management expects to fund them through existing concession distributions and borrowing, without issuing shares. Atlanta’s ownership structure remains undisclosed, with Tikehau Star Infra the only partner named and Transurban absent. Assuming Ferrovial takes 65%, as in Nashville, and equity finances 40% of construction, its share could reach €2bn per project, or €4bn combined. That is roughly €500m annually over eight years, equivalent to 76% of the €657m returned to shareholders in 2025. Cash committed to construction is cash unavailable for buybacks or dividends.

Expert Opinion:
We're concerned about the balance sheet, shareholder return and governance of the group. Furthermore, despite the sharp drop in share price, valuation is far from compelling. While concession assets are inherently defensive, they are also exposed to taxation risk.  No reason to jump back aboard this ship. 


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