European Infrastructure Finance Yearbook - Investing In Bonds ...

TRANSPORTATION INFRASTRUCTURE
64 ■ NOVEMBER 2007
The treasury function is not permitted to
speculate in financial instruments. An interim
dividend of £165 million was proposed for the
year ended March 31, 2006, and was paid during
the nine-month period to Dec. 31, 2006. Further,
an interim dividend of £78 million was paid to
ADIL out of postacquisition profits on Nov. 11,
2006. Also, BAA made a £114 million loan to
ADIL in 2006.
Cash flow adequacy
The high operating margins and the relatively
stable and predictable cash flows produced by
BAA’s diversified airports are a significant
credit strength.
The £9 billion-plus 2007-2018 investment
program for the three southeast England airports
STANDARD & POOR’S EUROPEAN INFRASTRUCTURE FINANCE YEARBOOK
will continue to drive BAA’s financial risk profile
for the next 10 years. Standard & Poor’s expects
free cash flow generation to be negative during
this period. From a credit perspective, the ability
to recover the cost of investment in the course of
construction is positive as it allows BAA to collect
revenues associated with long-term projects before
completion, boosting operating cash flow and,
therefore, reducing the impact of the long-term
investment plan on the company’s financial
profile. BAA has publicly stated that investments
contemplated in the White Paper will only be
made if future regulatory determinations are
supportive, and if there are appropriate levels of
demand to support the investment without
putting the group’s financial robustness at risk.
Adjusted FFO coverage of interest and debt in
--12 months to Dec. 31, 2006-- --Fiscal year ended Dec. 31, 2006--
BAA Ltd.¶ N.V. Luchthaven Schiphol Aeroports de Paris
Rating as of Aug. 13, 2007 BBB+/Watch Neg/NR AA-/Negative/-- AA-/Stable/--
(Mil. mixed currency) GBP EUR EUR
Revenues 2,564.0 1,036.7 2,076.8
EBITDA 1,065.8 440.4 665.1
Net income from continuing operations 463.0 526.9 152.1
Funds from operations (FFO) 810.3 348.6 537.7
Cash flow from operations 763.3 359.3 464.0
Capital expenditures 1,521.9 241.4 712.5
Free operating cash flow (758.6) 117.9 (248.5)
Discretionary cash flow (1,001.6) 62.5 (311.7)
Cash and investments 93.0 257.1 509.2
Debt 7,641.9 1,075.0 2,682.1
Common equity 6,339.0 2,702.8 2,794.6
Adjusted ratios
EBITDA/sales (%) 41.6 42.5 32.0
Operating income/sales (%) 42.1 42.8 32.0
EBIT interest coverage (x) 1.9 5.1 3.7
EBITDA interest coverage (x) 2.7 7.3 5.6
Return on capital (%) 5.0 8.5 8.2
FFO/debt (%) 10.6 32.4 20.0
Cash flow from operations/debt (%) 10.0 33.4 17.3
Free operating cash flow/debt (%) (9.9) 11.0 (9.3)
Debt/EBITDA (x) 7.2 2.4 4.0
Debt/total capital (%) 54.6 28.3 49.0
Ratios before adjustments for postretirement obligations
Table 2 - BAA Ltd. Peer Comparison*
Operating income/sales (before D&A) (%) 41.9 42.9 30.8
EBIT interest coverage (x) 1.9 5.3 4.0
FFO/debt (%) 10.9 33.8 22.3
Debt/EBITDA (x) 7.0 2.3 3.8
Debt/total capital (%) 54.1 27.6 46.5
*Fully adjusted (including postretirement obligations). ¶Excess cash and investments netted against debt.