Abertis Motorways BPI EQUITY RESEARCH. Neutral. Spain. Priced-in optionality still on. Low-Risk. 15th October Abertis vs IBEX vs DJ Stoxx 600

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1 BPI EQUITY RESEARCH Abertis Motorways Priced-in optionality still on (YE14 Price Target set at 15.0 (+1% LfL); Neutral Recommendation maintained) 4 Domestic Traffic rebounding: Spanish traffic drop in Q should have decelerated significantly, which may raise renewed hopes that Domestic traffic recession is beginning to tail off. The high visibility of ABE's strategy and evidence of early economic recovery should explain the recent stock outperformance (since Ago1 +1% vs. Stoxx 00 and +8% vs. Ibex). 4 Neutral recommendation maintained: We have rolled forward our valuation by one year setting a YE14 Price target of 15.0/sh, +1% on a LfL basis, primarily driven by : (1) a 90bps cut in Spanish CRP to 0.85% (+4%); (2) Motorways: through the recognition of a stronger and extended ramp up period of traffic growth in Spanish motorways and Sanef-France and the inclusion of the value accretive "Plan de Relance" partly offset by the M2M of Arteris (Brazil) and () valuation upgrade of Telecoms at EV level (incorporation of the recent towers acquisition and stake increase in Hispasat) although mostly offset through the recognition of higher capex and full consolidation of Hispasat (vs. proportional). Our consolidated DDM exercise arrives at a fair value of 14.77, below that of the SoP though proving that there is enough dividend/ cash generation visibility to support a valuation ballpark close to 15/sh. 4./sh (+21%) optionality value: ABE is in a quest for new investments (Motorways+Telcos) around the world with a 2.1bn equity fire power that can create a reinvestment value between /sh assuming a value added spread (IRR-Re) of between 2% and 7% (minimum 12% hurdle rate). The company also targeted an aggressive efficiency program that is partly priced in our SoP, although if full implemented should represent an additional 1.2/sh. The expected extension of concessions maturity (in Spain, France, Brazil ) should widen the still limited portfolio duration and consequently increase the valuation sensitivity to traffic ramp up and the decline in cost of capital. Asset rotation in airports is almost finished and potential deals at minorities levels in motorways (Chile?) should not be game changers. Neutral Low-Risk 15th October 201 Spain Abertis vs IBEX vs DJ Stoxx 00 Source: Bloomberg. Stock data Price (10 th Oct.): Price Target: 15.0 No. of shares (mn): Market Cap ( mn): Reuters/Bloomberg: ABE.MC /ABE SM Free-Float: 42% NET DEBT/EBITDA'14: 4.2 ROE'14: n.s. EPS Growth ('12-'15): n.s. Avg. Daily Vol. [ '000]: Major Shareholders: La Caixa (2.1%); OHL (18.9%) and CVC (15.%) Estimates F 2014 F 2015 F 201 F EPS Adj. ( ) PE Adj Dividend yield 9.5% 4.2% 4.2% 4.% 5.1% 5.8% FCF yield 9.1% 5.%.%.9% 7.9% 8.5% EV/EBITDA Historical Recommendation Recommendation 02-Feb-11 Accumulate 17-Jan-1 Neutral Source: BPI Equity Research. Analysts Bruno Silva, CFA bruno.miguel.silva@bpi.pt Phone Filipe Leite, CFA filipe.martins.leite@bpi.pt Phone Available on our website: BPI Online, and Bloomberg at NH BPD

2 Equity Research 4 Abertis 4 October 201 BPI vs. Consensus Stock Momentum Company: Sector: Abertis DJ Euro Stoxx Indus Gd Pr Price Performance Forward P/E and PBV Valuation monitor Relative Valuation EV/EBITDA BPI Consensus Sector P/E BPI Consensus Sector PBV BPI... Consensus.5.4. Sector Dividend yield BPI 4.2% 4.% 5.1% Consensus 4.% 4.% 4.5% Sector.1%.4%.4% PL and B\S monitor BPI estimates/consensus Revenues -5% -4% -4% EBITDA -1% 1% 1% EBIT 1% 7% 8% Net Profit -2% 15% 14% Net Debt -1% 2% 2% Profitability monitor EBITDA Margin BPI 4.0% 5.%.% Consensus 1.4% 2.4%.0% EBIT margin BPI 8.5% 41.% 42.8% Consensus.0% 7.1% 8.2% Net Profit margin BPI 1.1% 1.2% 17.7% Consensus 12.7% 1.% 14.8% Key leverage ratios Net Debt/EV BPI 47% 48% 4% Consensus 5% 52% 51% Net Debt/EBITDA BPI Consensus Source: Factset, Bloomberg and BPI Equity Research. 1 Y M YTD 0% 20% 40% 0% Market Price Rating ( ) Abertis DJES Indus Gd Market Recommendations Fair Value Comparison ( ) CAGR Sep-12 Jan-1 M ay-1 Sep-1 Net Profit Consensus ( mn) EPS Consensus ( ) Price Target Consensus Price P/E FY14 FY1 FY PBVConsensus BPI Current M arket Price M ay-11 Feb-12 Nov-12 Aug Forward P/E EV/EBITDA Nov-0 M ar-07 Jun-10 Oct-1 Adj. EPS EBIT EBITDA Revenues Neutral % Positive 27% -5% 5% 15% 25% BPI Consensus FY15 FY1 Negative 7% FY14 M ay-11 Feb-12 Nov-12 Aug-1 2

3 Equity Research 4 Abertis 4 October 201 Abertis at a Glance 201 F EBITDA mg by business Abertis: EBITDA weight Telecoms 49.1% GCO (Argentina) 2.1% Brazil 51.8% Sanef (France) 5.% Chile 7.% Spain 7.7% 0% 20% 40% 0% 80% 100% Source: BPI Equity Research.!"#$ GCO (Argentina) 1% 1% Airports 4% 0% 2012 Chile % 8% 2015F Telecoms 8% 11% Brazil 1% 14% Sanef (France) 2% 9% Spain 41% 4% 0% 10% 20% 0% 40% 50% 0% 70% Source: Abertis and BPI Equity Research. Abertis: Traffic evolution Traffic Forecast 10% 5% 0% -5% -10%,!-.!))!)*!+ 0-2 /0*1!+ ADT (yoy) F 2014 F Spain -.5% -10.5% -.9% 2.9% France (Sanef) 1.2% -2.9% 0.0% 1.9% Argentina (GCO) 4.8% 0.1% 2.0% 1.5% Chile 5.7% 7.% 7.0% 5.1% Brazil - 4.1% 4.%.7% Source: Abertis and BPI Equity Research. -15% % ' ( % ' ( % ' ( % ' ( Source: Abertis and BPI Equity Research. DPS Evolution ( ) -Payment Year (1) 2.0 EBITDA1 F breakdown F 201F 2014F Final Interim Extraordinary (1) The DPS increase every year due to the 5% Bonus issue made every year. Source: Abertis and BPI Equity Research. Debt Refinancing Schedule ( mn) !- *(+ 45! )!# Source: Abertis. ( Source: BPI Equity Research. Financial Struture 1H1 Net Debt ( bn) 1.8 Avg Maturity (years) 5.9 Non recourse 0% Avg cost of debt 5.1% % Fixed 84% Rating(SP/Fitch) BBB/BBB+ Source: Abertis.

4 Equity Research 4 Abertis 4 October 201 CONTENTS 5 Investment case 7 Traffic Prospects: Spanish traffic is bottoming out 8 French Traffic could also raise some eyebrows in 2H 9 Extending the portfolio duration 11 Efficiency program 1.2/sh upside on our SoP bn fire power for new investments 1 Solid balance sheet and gradual transition into a "ring-fenced" capital structure 14 The business portfolio 14 Toll roads 14 Spanish motorways 14 France - SANEF 15 Arteris: Brazilian venture 17 Chile 17 Telecoms 19 Airports - Exit of the airports business almost completed 20 Shareholder Structure 21 Valuation Recommendation 4

5 Equity Research 4 Abertis 4 October 201 INVESTMENT CASE Great visibility: priced to perfection Our YE14 Price Target of 15.0 suggests there is not much left on the table. The visibility provided by Abertis (ABE) on its strategy as well as the stock's label as a proxy to domestic value (Spain and France) with a touch of EM flavour, styles which have been outperforming in equity markets lately are partly blamed for the strong rally. Evidence of early economic recovery and a good insight that traffic in Spain recovered sharply in Q1 reinforced the appetite for ABE along with a trend down in cost of capital. Finally, the completion of the offer for Arteris in Brazil not only triggered the need for ABE and Brookfield cover a short position with La Caixa (1.7%), that lent ABE shares to deliver in the offer, but also opened the way for ABE to start building treasury stock. ABE had previously assumed it would consider a buyback plan post offer, but we believe the plan will not be formally assumed for a number of reasons including perhaps the strong price performance. Not much left on the table considering the price of execution risk ABE price performance Arteris in Eur ABE Euro Stoxx 00 Atlantia Source: Bloomberg. Our consolidated DDM exercise arrives at a fair value of below that of the SoP. The most important message, though, is that there is enough dividend/cash generation visibility to support a valuation ballpark close to 15/share. Besides, the optionality value we detail in this report is not captured in the DDM exercise. Using the Gordon model we can argue that the current stock price implies a DPS growth of.7% departing from a Rf in Spain of 4.1%. In our consolidated DDM exercise we get an implicit.7% perpetuity dividend growth based on an equivalent annuity of the projected total dividend stream through 2045, which shows internal consistency of the DDM and the derivations of the Gordon model base on the current stock price. Change in Valuation ( /sh) Optionality value!"#$%!%!'($ ) $! "#%$!('* * +,--$$ %#% + #.! /'! (1) adj by 1x20 bonus share. Source: BPI Equity Research. 5

6 Equity Research 4 Abertis 4 October 201 Potential triggers and the unlikelihood of a ST delivery The thesis that the stock is fairly valued has been outpaced by reality, we must admit. At this point however, we would expect a string of big news to justify another re-rating. (1) Assuming further de-risking to a country risk premium in Spain of 0%, i.e., a Rf of.25%, our SoP would step up to 1.75 and our DDM to 1.0. Is this what the market is already anticipating? It seems a bit too early to assume full convergence on the downside, though (2) Traffic ramp up: Traffic numbers in Q should be surprisingly good, but it's a quarter. Besides, the expectations of economic recovery should be the most powerful driver behind the recent rally. In any case, a 1pp traffic estimate increase since 2014 (including +1pp spread over GDP in LT traffic for Spanish and French concessions) would boost our valuation by 7.5% to 1.8 or by.4% to 1.15 assuming it for Spain only. In the case of Spanish motorways, it would imply reaching in 2020 traffic levels similar to those in on the way up or 2007 in the declining stage. In our base-case scenario, though, 2020 traffic would be similar to that back in For the sake of completeness and looking at Spain alone, where traffic has been more penalized, if we assume traffic volumes in 2020 will be back to historical peak (200), by assuming a 2pp spread to our yearly estimates through 2020 (and not beyond, keeping a 0.% GDP spread thereafter as in our base-case), our fair value would jump by 4.% to 1.. () The Efficiency plan ( 1.2/sh potential upside) is partly priced in our SoP and upside to it would require more execution visibility in our opinion. (4) Reinvestment value: ABE's track record is paramount for immediate monetization. We find it difficult to see the market being bullish on value creation from day 1, but in any case, looking at the group's fire power and assuming a value added spread (IRR-Re) of between 2% and 7% would add per share to our SoP. (5) Further restructuring: On a possible entry of a new partner on the telecom business, it really seems too early to see material advances until Hispasat shareholding structure is clarified and more visibility is gained with the current plan. Asset rotation in airports is almost finished and potential deals at minorities levels in motorways should not be game changers (Chile?). () Dividends: A further step up in dividends should not be ruled out but the stock price trend seems to be already assuming a superior visibility in shareholders remuneration as we mentioned along the report and is actually considered in our estimates. (7) CVC potential exit has been a driving force to the investment case restructuring and a source of pressure for a sound trade off between dividends and return on new investments and extraction of efficiencies. For the reasons enumerated above, and despite recognizing the optionality value and the potential of a ramp up in traffic, we maintain our Neutral rating on the stock with a 15.0 Price Target.

7 Equity Research 4 Abertis 4 October 201 TRAFFIC PROSPECTS: SPANISH TRAFFIC IS BOTTOMING OUT There are some early signs which could indicate that the fall in Spanish traffic is beginning to tail off. Apart from the recent small upgrade in GDP forecasted for 2014 made by the Spanish Government (from +0.5% to +0.7%), the average daily traffic (ADT) of Spanish tolled motorways (highly correlated to ABE's Spanish tolled motorways) and Petroleum products consumption in Spain (leading indicator for traffic) are both currently very close to the lowest levels posted in the 90s. In fact, both have embarked upon some timid signs of recovery. Spanish State tolled traffic registered a very good performance in the first two months of Q (-2.4% yoy vs % in Q2 and -7.8% in Q1) while the consumption of Petroleum products in Spain dropped less in July (-7% yoy) than in Q2 (-11%) and Q1 (-15%). If we look at the 12 month moving average yoy evolution of the State tolled motorways traffic, we can see some recovery in traffic (in July12/Aug1: -8% yoy) from the bottom reached in April12/May1 (-10.2% yoy). Spanish State tolled motorways Spanish State tolled motorways traffic (1) - traffic vs. ABE traffic in Spain (yoy) yoy of the 12M Moving Avg $ #$ $ $ #$ *+ #$ #$""2"71=# #$'!5 #$' $ #$ $ $ $ #$ *+ #$ *+ #$ #$ $ #$ ' ' ' ' ' '! ' ' ' ' ' %. #$!! ;=, 1 (1) July+Ago1; (2) until Ago1; () until June1; (1) Km. Source: Min Fomento and ABE; Source: Min Fomento. Spanish State tolled motorways traffic (1) - Petroleum products consumption in Spain - 12M Moving Avg (ADT) 12M Moving Average (Tones)??????!2=1!=!1! 2=2!2=1!=!1 <$!=>2=2????????!! ;=, 1 (1) Km; Source: Min Fomento Source: Cores. 7

8 Equity Research 4 Abertis 4 October 201 Still, we are projecting a conservative 7% average traffic drop for FY1, implicitly assuming a 4.7% traffic drop in 2H (vs. -9.0% in 1H). ABE forecasted a traffic drop of between 5%-% at the beginning of the year. All in all, we see the bottom being reached in 201, with traffic reaching levels last seen in the early 90s. For the long term, our estimates could also be considered as conservative. We are projecting a CAGR14-20F traffic growth of 5% with 2020 average traffic reaching the level seen back in 2000, although still 11% below the peak levels recorded in 200. Spanish traffic forecast Traffic CAGR 90-02: +4.8% Traffic CAGR 02-1F: -4.4% Traffic CAGR F : +5.0% Source: BPI Equity Research. FRENCH TRAFFIC COULD ALSO RAISE SOME EYEBROWS IN 2H We recall that both ABE's main competitors in France (Vinci with ASF concession and Eiffage with APRR) confirmed that toll road traffic improved in July and August in both light and heavy traffic. For France (Sanef), we upgraded our FY1 traffic forecast from the previous -1% yoy to flat, implying a meagre 0.7% traffic recovery in 2H (vs. +0.% in 2Q1). We believe that here the risk is on the upside and given the importance of Sanef (22% of targeted Equity), it would be important to monitor the evolution of its traffic. A 100bp increase in LT traffic of Sanef until the end of the concession in 205 has a 0./sh (+4%) impact in ABE's valuation. Forecasted Traffic for 201 1H1 2H1 F FY1 F Spain -9.0% -4.7% -.9% France -0.7% 0.7% 0.0% Argentina 2.1% 1.9% 2.0% Chile 8.1% 5.9% 7.0% Brazil 4.% 4.% 4.% Source: ABE and BPI equity Research. 8

9 Equity Research 4 Abertis 4 October 201 EXTENDING THE PORTFOLIO DURATION ABE's portfolio has a relatively short duration with the average time to maturity of the portfolio (duration-based calculation) reaching 8. years. The acquisition of the Brazilian and Chilean portfolio from OHL improved the ratio that previously stood at 7. years and more importantly, the prospects of extension of maturities within the Brazilian portfolio. In any case, this is an issue when it comes to evaluate the positive impact of a trend down in the cost of capital in Spain and rebound of traffic in Spain and France in particular. The limited duration limits the potential present value from these two drivers. The Spanish portfolio has an average adjusted time to maturity of years with the three main Spanish assets - Acesa, Aumar and Avasa - maturing in 2021, 2019 and 202 respectively. Without surprise, if we assume a 1pp hike in Spanish traffic (+1pp in each of the years post 2014), our SoP would increase by +.4% or + 0.5/sh, also limited by the compensation agreement of Acesa (5% of the Spanish motorways equity value) that enjoys a traffic protection scheme. An increase in traffic implies a reduction in Acesa's traffic compensation account, thereby mitigating the sensitivity to traffic assumptions. French Sanef has 1 years to maturity pre concession extension (Plan de Relance) and a 1pp hike in traffic from 2015 would raise our SoP by 4% (+ 0./sh). In aggregate terms, the 1pp hike would imply a.5% upgrade to fair value. Maturity of main assets,!! Acesa Aucat Aumar Iberpistas Avasa Castellana Aulesa Sanef 1! GCO 0-2 Autopista Central rutas del pacifico elqui libertadores sol andes The case for yield shifts is similar to that of traffic. A 1pp drop of the yield curve (for purposes of the WACC calculation only), would increase our fair value by 1.9%. Assuming a 1pp drop for Spanish assets and Spanish motorways, our fair value would increase by 8.7% and 4.2% respectively.!@2 autovias centrovias intervias via norte fluminense POSSIBLE CONCESSION MATURITY EXTENSION We view the potential extension of the concessions maturity as a key trigger for the investment case in the mid term. The target assets should be those in Brazil (the state-owned concessions that mature between 2018 and 2019, Acesa in Spain (2021) and Sanef (2029). The extension should generate value due to a combination of the consequent higher asset duration in a context of expected rebound of traffic growth and the gradual drop of the required cost of capital particularly in Spanish assets, and the usual positive trade-off of higher capex/lower tariffs vs. NPV in concession extensions. fernao dias regis bittencourt litoral sul planalto sul Source: ABE Sanef potential extension of the concession assumed in our base-case 0.5/sh Plan de Relance is an ongoing project in negotiation phase with the French government. An agreement should be signed during the semester and encompass mn additional capex in in exchange for toll tariff increases and an extension of the concession. We have included in our base-case scenario the impact of the Plan assuming (1) 750mn capex (schedule guided by Abertis) and (2) a 2Y and Y extension of Sanef and SAPN concessions, respectively, as proposed by Sanef to the French government. Our scenario points to a 11.5% real project IRR adding 0.4bn to our SoP or 0.5/share. 9

10 Equity Research 4 Abertis 4 October 201 Brazil - Contractual amendments to result in extension of state concessions Arteris, now 9.% controlled by Participes Brasil (51% held by ABE), is in the process of entering into a series of contractual amendments in order to solve roads bottlenecks through investment remunerated according to a framework set by ARTESP at the State level and ANTT at the federal level. The federal concessions have a pipeline of up to BRL 1.2bn ( 0.4bn) that could be remunerated at a.%-8.0% real unleveraged IRR, with 5 year revisions without traffic risk and compensation through tariff increases. The State concessions could agree on a BRL 120mn ( 40mn) investment in Autovias and Vianorte with a 8.2% real unleveraged IRR annually revised, no traffic risk and compensated through extension of the concession maturities. In the case of the State concessions, the capex estimated is not big enough to see a relevant extension of the concessions maturities. We believe that there should be further initiatives ongoing in order to effectively increase the portfolio duration. According to our estimates the c.brl 1.bn ( 420mn) projected investment to be made by Arteris in these concessions and the subsequent extension and tariff increase could have a 0.02/sh (1%) positive impact at ABE level (5% direct stake in Arteris through Participes) assuming an 8% real unleveraged equity IRR in Brazilian reais. Spain: Long awaited extension of Acesa (AP-7) We are valuing Acesa at 5.2bn (EV) o.w. 2.4bn is the present value of the AP- 7 compensation agreement, equivalent to 2.8/sh (18% of target Equity value). In 2011, the Spanish ministry raised some doubts regarding the amounts owed to Acesa under this agreement, but all the doubts were clarified during last year. The political twists make the possible extension of the concession difficult to predict. The case still seems to be a strong one as the compensation owed ( 1.bn at YE1 F ) is piling up quickly and with our current forecast pointing to.9bn by the expiration date in The most likely way to settle it would be through a concession extension as opposed to cash. 10

11 Equity Research 4 Abertis 4 October 201 EFFICIENCY PROGRAM 1.2/SH UPSIDE ON OUR SOP In its Sept1 Investor Day in Brazil, Abertis updated and upgraded efficiency targets for from a cumulative > 400mn (inc. 00mn Opex and 100mn capex) to 44mn. This is equivalent to.8% of the market cap or 5.8% of F "EBITDA-Capex". For 2014 ABE previously forecasted annual savings of 220mn ( 150mn in opex and 70mn in capex) vs. the now announced 2mn and growing to an annual basis of 294mn in We are rather more conservative assuming 112mn annual opex savings ex-airports, implying (Opex: - 0.1% CAGR10-14 F ). On the flip side, we are already recognizing some of the savings in Brazil assuming the previous guidance given after Abertis purchased Arteris. Target Efficiencies ( mn) $ $ $ $ $ In order to assess the PV of the savings (ex-capex and ex related costs to implement it), we have to take into consideration the underlying assets' years to expiration in the case of concessions. Assuming a WACC of 7.5%, the PV of the savings would reach 1.9bn or 2.2/share without capex savings, equivalent to 15% of the current market cap. On a back-of-the-envelope calculation, we estimate ABE's own projections could imply total savings of above.8bn or 4.4/sh equivalent to 1% of the market cap including capex savings. Excluding capex, as we assume ABE's capex guidance, we estimate the potential upside on our numbers could reach 1.2/share or 1.0bn. Source: Abertis and BPI Equity Research. 0A#))!, $25!5,70!, $ Finally, ABE stated it is working on the definition of the third plan incorporating Brazil and Chilean motorways expected to generate an additional cumulative savings of 144mn in 2017 bringing total cumulative savings to 1.7bn. Evolution of personnel expenses (1) Evolution of manageable operating expenses (1) A* -09? A+ A* -09? A+ 8 (1) Perimeter of 2010 operative at 2014, Arteris and (1) Perimeter of 2010 operative at 2014, Arteris and New Chilean not included New Chilean not included. Source: ABE. Source: ABE. 11

12 Equity Research 4 Abertis 4 October BN FIREPOWER FOR NEW INVESTMENTS At its Investor day ABE identified an equity firepower for new projects of 2.1bn during ( 2.bn of available cash + 2.2bn organic cash generation - 2.4bn from cash constrains o.w. 500mn are debt repayments, 420mn interest and 1.5bn dividends). The company also added that a 2-.5bn additional cash potential exists from other sources (including the above-mentioned sale of minority stakes and re-leverage of some subsidiaries). Growth Strategy: Pipeline ( ) Source: Abertis. Potential value creation up to 2.1/sh (or +15%) from new projects In our valuation we are not assuming any value for future (and unknown) investments, although we reckon that this is a further "optionality" value that ABE could create if it uncovers interesting (and profitable) projects. If we assume that ABE invests all of the 2.1bn equity fire power during 2014/15 in projects with an average 0 year maturity, a minimum equity IRR of 12% (minimum requested for the company) and assuming the average cost of equity that we use for each of the targeted markets (c.10% average), the value creation is c. 0.5/sh (+% in ABE FV). If we assume for the same scenario a 15% equity IRR and a 8% average cost of equity, the potential value creation rises to 2.1/sh( +15%). Impact of 2.1bn investment Equity IRR Equity IRR /sh 12% 1% 14% 15% % FV 12% 1% 14% 15% 8.0% % 8% 11% 1% 15% 9.0% % % 8% 10% 12% Re 10.0% Re 10.0% % 5% 7% 9% 11.0% % 2% % 5% % 12.0% % 0% 1% % 4% Source: BPI Equity Research. 12

13 Equity Research 4 Abertis 4 October 201 Moreover, ABE believes in the re-leverage upside potential of some of its low leveraged units (ABE telecoms, Hispasat and Latam motorways) and even in the potential monetization of some businesses with the opening of minority capital positions to new partners in ABE telecoms, Toll roads in Spain and in Chile. Together, these should increase the company's financial flexibility and increase the available firepower for new projects. Net Debt geographical allocation ( bn) SOLID BALANCE SHEET AND GRADUAL TRANSITION INTO A "RING-FENCED" CAPITAL STRUCTURE ABE is not really a leveraged company (4.5x Consolidated ND/EBITDA1 F ), has a manageable debt maturity schedule (only c. 500mn corporate debt maturing during ) and adequate liquidity position ( 5.8bn o.w. 2.2bn of cash - 1.5bn at holding level) covering the refinancing needs up to 201. One of the company's main financial objectives is to protect its current investment credit rating (BBB by SP and BBB by Fitch) which has been enabling the company to access the market with a highly degree of success and replace the weight of bank debt (from 1% in 2010 to 17% in 1H1) with bonds (from 4% to %). The strategy to allocate debt previously at the corporate level into the subsidiary level should gradually improve the financial flexibility of the holding and adequate financing terms to the specific business as well as improve, all else constant, the investment decision process. Source: ABE. Avg Cost of Debt vs. Avg life vs. Debt amount (ball size) - (ABE Avg. 5.9y / 5.1%) =10) $ Cost wise, ABE placed 00mn 10-Y bonds at a.75% coupon in June1 and Sanef placed in July12 00mn Y bonds with a 2.50% coupon. The average cost of debt of ABE stood at 5.1% in 1H1 vs. BPI average for of 4.7%. $ $!@2,! 0-2 Debt Refinancing Schedule ( mn) $! $ =12)*"!+ Source: ABE. 0!-*(+ 45! )!#*(+ (251-7 Source: ABE. 1

14 Equity Research 4 Abertis 4 October 201 THE BUSINESS PORTFOLIO TOLL ROADS: 1. Spanish motorways ABE has over 1500 km under management, covering 59% of all the country's toll roads. The network encompass the main traffic corridors across the country namely in the Madrid and Catalonia region. For that reason the portfolio works well as a proxy to play Spanish economy recovery. The most "problematic" routes are the R- 5 Madrid-Navalcarnero and R- Madrid Arganda (Accesos de Madrid). Both concessions have already filed for credit protection (pre-bankruptcy process) and, according to press reports, should have a combined debt of c. 50mn. ABE has fully provisioned both concessions and we assume zero value in our SoP. The Spanish Government maintains negotiations with the concessionaire companies (mainly in the Madrid area) to proceed with a bailout by YE through a state-owned company (similar to Sareb - a "bad bank" created to group troubled real estate assets), leaving current concessionaire companies with a stake of 20% in the newco. We are valuing the most important Spanish motorways through APV (Adjusted present value) and the remaining smaller assets, as T-45 and Aulesa, at 1x BV. Spanish Motorways valuation represents 0% of ABE EV and 5% of group EBITDA with Acesa grabbing the lion's share (17% of total EV) benefiting from a traffic protection scheme worth alone 15% of ABE's EV. Spanish Toll Roads Operator Stake Km Expiry Sales 1 F EBITDA1 F Acesa Invicat 100% Aumar 100% Avasa 100% Iberpista Castellana 100% Aucat 100% Aulesa 100% n.a. n.a. T-45 50% n.a. n.a. Autema 24% n.a. n.a. Acessos Madrid 5% 1 n.a. n.a. Source: ABE and BPI Equity Research. 2 - France - SANEF Sanef is controlled by HIT, which in turn is controlled by Abertis (52.55%), Caisse des Depots (15%), CAA (12.42%), Axa (9.9%), FFP (5.1%) and CNP Assurances (5%). Sanef holds 2 concessions expiring in 2029 totalling 1,785Km, o.w. 1,40Km from Sanef concession and 79Km from SAPN. The group is ABE's main asset representing 1/ of its EBITDA and 8% of the EV target in our SoP. 14

15 Equity Research 4 Abertis 4 October 201 Conservative approach to traffic recovery 4Y ramp up to add 0.4/sh to SoP Traffic has been very resilient, benefiting from the strong implantation with 5 toll roads linking to Paris. Light traffic rose 2% since 2008 and heavy traffic dropped by 10% since the peak in Our estimates assume a recovery of traffic with an average 2.% ADT growth through We expect the historical peak registered in 2007 to be beat in 201. A faster recovery assuming an additional 2pp growth in would add 0.4/sh to our SoP or + 2.8%. Optimization partly priced in our SoP Optimization initiatives captured 1% of income and 11% of Opex since 2011 and a new programme spanning into 2017 is expected to deliver 9% savings in operating investments and manageable expenses vs. 201 levels. In absolute terms it should mean a stabilization of manageable expenses until Our estimates already cover an important part of the mentioned plan. - Arteris: Brazilian venture ABE has ratcheted up its exposure to Latam (from % of EBITDA in 2009 to 24% of EBITDA1) after acquiring the three OHL Chilean motorways and launching a joint bid with Brookfield to acquire OHL's 0% interest in OHL Brazil (now called Arteris). Just recently, ABE and Brookfield executed a mandatory tender offer over Arteris minorities with Partícipes (ABE-51% and Brookfield-49%) attaining a 9.2% stake in Arteris (prev. 0%) and another Brookfield fund (Brookfield Aylesbury) reaching 14.90%. The minority's tender offer was made under the same conditions as the deal made with OHL (cash portion and a swap for ABE shares) and given the acceptance level (24.1% stake acquired representing c.40% of the target), ABE and Brookfield had to deliver the equivalent of c.4% of ABE shares, o.w. 2.4% lent by Criteria (owned by La Caixa - ABE's main shareholder with a 2% stake). As a result, there is still a 1.7% position (0.19% from ABE) to be bought in the market to close the lending agreement, equivalent to c.5 days of the average daily volume (c.mn shares/day). Arteris Shareholders (1) ABE 51% and Brookfield 49%. Source: ABE and BPI Equity Research. The Brazilian market demands a minimum 25% free float for the companies listed in "Novo Mercado" and after the above mentioned takeover bid and the 15% stake acquisition by another Brookfield fund (Brookfield Aylesbury) some questions was raised if Arteris is in compliance with the free float requirement. If we considered the 14.90% stake of Brookfield Aylesbury as "free float" the requirement is fulfilled (1% free float), although if the stake of Brookfield Aylesbury is considered as a "qualified participation" the minimum free float is not fulfilled (1% free foat). We recall that Brookfield Aylesbury is a different fund than the one with a direct stake in Participes - the vehicle with 9% stake in ABE. The Brazilian regulator should decide on this issue soon. ABE considered that the free float of Arteris is 1% (not considering the stake of Brookfield Aylesbury as qualified stake since it is not present in the shareholder agreement of Participes). On a "worst" case scenario, if the Brazilian regulator decides that the free float if effectively 1% ABE and Brookfield can: (1) change from the "Novo Mercado" to an OTC market (it is not clear if under this scenario ABE and Brookfield would be force to guarantee an exit mechanism to the current minorities that, at tender offer implicit price (c.brl2/sh),could represent a c.brl 1.2bn (c. 40mn) combined investment); (2) Brookfield Aylesbury can sell at least 9.2% stake to comply with the 25% minimum free float or () a dilutive capital increase could be undertaken. In this case, Arteris would have to issue at least c42mn new shares fully subscribed by other investor in order to dilute Participes (ABE+Brookfield) and Brookfield Aylesbury combined stake to <75%. 15

16 Equity Research 4 Abertis 4 October 201 Highly leveraged on economic growth and roads debottlenecking Both State and Federal concessions should absorb BRL 5.2bn ( 2.2bn) in and BRL 7.1bn ( 2.4bn) by 20 including maintenance, in line with our estimates. These investments primarily aim at debottlenecking roads with a consequent impact in traffic potential. As a result of underlying traffic potential, ABE considers consensus traffic estimates are conservative. On our side, we forecast a 5.5% traffic growth for state concessions (vs. 5.5% in 1H1) and +4.2% for Federal concessions (+.2% in 1H1). The GDP multiplier implicit in our estimates is well below the historical average. For the period we are assuming a traffic elasticity of 1.75x for Federal concessions dropping to 1.5x thereafter vs 2.9x historical average in In the more mature State concession portfolio, we anticipate 1.5x multiplier in falling to 1.x on the short period left to expiry vs an historical average of 1.28x since The former expected effects from debottlenecking in federal concessions and the underlying economic growth pushed by a series of infrastructure investments and sport events over the coming years could produce a ramp up period of traffic growth above historical levels. Arteris: Forecasted Capex (BRL mn) (! 5!2 Arteris: Traffic growth and elasticity.!))%% #$ #$ #$ #$ #$ #$!*.!))""B(+ 5!2*.!))""B(+!*2!"/9:(+ 5!2*2!"/9:(+ 2!"/9 # # # # # Source: ABE and BPI Equity Research. The efficiency plan already identified potential cash cost savings of at least BRL 0mn (c. 20mn) per year, that represent.7% of FY1 F cash EBITDA or % of Opex. We are currently including the Arteris stake in ABE's SoP at market value vs. our base-case DDM valuation (ex- cost savings and growth optionality) of BRL 18.1/sh vs consensus average valuation of BRL 2.2/sh. If we assume our own valuation for Arteris, our ABE SoP would drop by 0.08/sh (-0.5%) while if instead we assume the average consensus, ABE's valuation would jump to 0.17/sh (+1.1%) Outside the current toll road portfolio, ABE assumed the interest in new toll road tenders and mobile towers with a 9%-11% equity IRR hurdle rate. Brookfield should continue to be an active partner of ABE in this region of the globe. 1

17 Equity Research 4 Abertis 4 October Chile After the incorporation of the three assets acquired to OHL (A. del Sol, A. Los Libertadores and A. Los Andes) the weight of Chile in the overall group increases from % of consolidated EBITDA in 2009 to 8% of EBITDA1. The legal framework is stable with toll adjustments varying in each concession from CPI to CPI+.5%. We fine tuned our estimates of Chilean concession and we are now well in line with company's guidance provided in its ID. Chile: ABE estimates vs. BPI IMD Traffic ABE BPI Dif % % % % % mn EBITDA ABE BPI Dif % % % % % Source: ABE and BPI Equity Research. ABE expects to reach agreements to undertake new investments (c. 570mn identified) that would be remunerated through concession extensions, toll increases and/or direct payments. The company is also focused in Chilean secondary market of brownfield concessions. We believe that the impossibility of using the proportional consolidation of assets from 2014 onwards should trigger some deals in this region, namely Autopista Central (proportional consolidated as ABE controls 57.7% of Grupo Invin, which in turn has a 50% stake in Autopista Central). In the last presentation to investors, ABE added that it could open the capital of Chilean motorways to a minority shareholder/partner. We are valuing Chilean concessions through APV (Adjusted present value) at 2.2bn (EV), representing 7% of the group's EV target. TELECOMS We had previously stated in our research reports that the telcos unit would probably be a key driver of the investment case and one showing the most upside to the street's valuations. The MA within the unit has been intense with the gradual exit from Eutelsat and stake building in Hispasat along with acquisition of mobile towers to reinforce the presence in a business that goes well with ABE profile and serves well the seller's objective to outsource the service. ABE may become a leading player in mobile towers and without surprise it has been one of the highlights of its recent Investor Day in Brazil. 17

18 Equity Research 4 Abertis 4 October 201 ABE retains a 5% stake in the listed French satellite company, Eutelsat worth 242mn (2% ABE Mcap). It sold down from 1.2% at YE11 achieving c 1.5bn proceeds to date. The recent deal with a Spanish State-owned agency to buy its 1.4% stake allows ABE to reach 57.05% of Hispasat and consequently control, despite the State maintaining special rights with the remaining 7.4% (Sepi). ABE has invested 240mn in the stake building. Eutelsat has raised its stake to.7% by exercising a right of first refusal over the TEF stake sale to ABE. A dispute between ABE and Eutelsat over a tender in Mexico could eventually trigger competition protection clauses due to the potential conflict of interests arising from Eutelsat presence in Hispasat board. As such, we believe that further moves could take place including the exit of Eutelsat from Hispasat and ABE exercising a right of first refusal. On the mobile tower business, ABE invested recently 85mn to purchase towers from TEF and Yoigo and another 90mn in 2012 (1000 towers from TEF). Further deals could be announced in the months to come. ABE aims at consolidating its position in Spain and Europe (Spain, Italy, Switzerland, UK) along with Brazil. Whereas the intention to consolidate in South Europe seems feasible, the dispute for assets in Brazil has taken MA valuations too high. Transactions in Brazil have averaged 125K/tower vs ABE deals in Spain for 90K/tower. The pipeline mentioned 2bn potential investments (EV), which using a 100K multiple would imply buying 20K towers. The potential deals could be of a similar size to previous ones, implying a long process to close it. Earnings wise, it could add 00mn to topline and over 120mn to EBITDA in our estimates or +1/ of FY14 telco unit EBITDA. Mobile tower deals in Brazil C=D/9 =A D.2)!!5%1 C= % D C=D.2)E! DA!. C=D. >D Source: Company, mergermarket and BPI Equity Research. From the seller point of view, the consolidation of the sector, optimization of infrastructures use and balance sheet deleverage is a no brainer. This marked industry trend will likely evolve positively serving ABE interests. Excluding MA, the telco business could absorb 1.1bn capex in 201-1, mostly channelled into the satellite business related to the scheduled launches, and generate 1.4bn EBITDA, slightly over 10% of the group's total. 18

19 Equity Research 4 Abertis 4 October 201 Valuation wise, we split the unit into its two main businesses: Terrestrial, where mobile towers and broadcast is included, and the satellite business - Hispasat. The first business is valued at 2.5bn for YE14 implying a 1.0x EBITDA multiple using a 7.% WACC, equivalent to 8% of our EV target for ABE. As for Hispasat, we value ABE's stake at 1.1bn (4% EV), an 11.5x EBITDA multiple implicit that compares to 9.7x implicit in recent MA. In defence of our valuation, we call attention to the growth estimated (10% EBITDA CAGR 14-18) with the upcoming satellite launches that biases the implicit multiple in our valuation. Possible new partner in Telecoms? The possibility of ABE opening the capital of its telco unit is not new. Aside from the valuation benchmark, it could boost the fire power of the unit to gain scale in the playground. The low risk profile of the business could be attractive for investors looking for yield. In any case, we do not see it as a ST trigger considering, among others, the higher visibility required from the tower business and the shared position with Eutelsat in Hispasat. AIRPORTS - EXIT OF THE AIRPORTS BUSINESS ALMOST COMPLETED Structure of ABE airports ABE sold almost all of its airport assets at an attractive implicit multiple - 12.x EV/EBITDA (average disposable multiple to date) in line with our previous valuation of 12.4x (20% discount to the average transaction multiple of Stansted, Edinburgh and ANA's privatization in Portugal). In any case, the deals were done well above consensus 10.4x average (according to the company). ABE still retains small interests in the business encompassing (1) an 85% stake in CODAD (Aeropuerto Internacional Eldorado in Bogotá, Colombia) which is fully consolidated with a 0.mn EBITDA contribution in 1H1, (2) a 100% stake in DCA which holds a 74.5% stake in MBJ in Jamaica, fully consolidated with a 15mn EBITDA contribution in 1H1 and () other minority stakes including GAP (12 Mexican airports equity consolidated). ABE (90%) and AENA (10%) also held three airports in Bolivia that were expropriated on alleged insufficient investment (El Alto - La Paz, Viru Viru - Santa Cruz and J. Wilstermann - Cochabamba). ABE claimed a c. USD 90mn ( 7mn) compensation but we assume the process will be a dead end and hence exclude it from our SoP. CODAD in Colombia and MBJ in Jamaica are valued at an 8x EV/EBITDA due to their lower strategic and scale relevance when compared to the airports already sold. For the remaining assets (accounted under the equity method), we assumed 1xBV. The completion of the exit from the business should not take long, already implying the deconsolidation of the unit this year (in our 201 forecasted Revenues and EBITDA we are not incorporating any contribution from the airports division). Source:BPI Equity Research and ABE. 19

20 Equity Research 4 Abertis 4 October 201 Shareholder Structure ABE Shareholders structure ABE's investment case continues to require a close analysis to its shareholder structure, where punctuates the largest savings bank in Spain, the builder/ concession group OHL and private equity CVC. La Caixa (2.1%): An historical and solid shareholder that should continue to remain the reference shareholder of the company. OHL (18.9%): OHL is the 2nd largest shareholder after La Caixa and ahead of CVC. In April12 acquired a 10% stake to ACS (at 11.2/sh) and 5% through an equity swap ( 11.2/sh) and then bought in the market an additional 1.2% stake between April12 and March1 (at an average price of c. 12.5/sh). In April1 acquired a further % to La Caixa (at 14/sh) and reached its current stake of 18.9%. According to our estimates the average acquisition price of OHL stake stands at 11./sh. OHL's stake building in the market (1.2% between April12 and March1) raised speculation about the group's final goal. The company said that is comfortable with the current position and after overcoming CVC's stake, we believe the incentive to continue to build up its stake has diminished. Moreover, we see as unlikely a possible new deal between ABE and OHL (similar to that with OHL Brasil/Arteris) in the short term. OHL Mexico was often rumoured as a target sale by OHL but the fact that the Mexican portfolio is still at a growth stage and, primarily, the lack of CF visibility in the ST make it harder to reach an agreement, in our view. Source: ABE. CVC - Trebol Holdings (15.55%): CVC joined ABE shareholder structure in 2010, after acquiring its stake from ACS for 1.7bn or 15/share ( 12.1 adjusting for dividends received in the meantime). Without surprise, MA intensified since CVC stepped in, crystallizing value, deleveraging the B/S and increasing dividends to shareholders. To our knowledge, CVC's acquisition debt matures in By that time, CVC will likely consider the two obvious options: (1) refinancing the loan and continuing to participate in the project or (2) exit. Under the exit option CVC can sell its stake to a third party (new or existing shareholder) or arrange an asset swap for some of ABE's assets. In the first option, CVC would likely seek to sell its stake to the strategic shareholders in order to maximize the potential premium. Its 15.5% stake could be acquired by La Caixa and OHL (proportionally) with both keeping its controlling position in ABE without having to launch a full takeover (La Caixa would reach a 2% stake and OHL 2%). The second option could accelerate the portfolio rotation of ABE and at the same time grant an exit to CVC through a spin off of one of the business/assets. For illustration purposes, on a back of the envelope calculations and departing from our fair value for ABE, CVC would get an equity IRR of 14.1% at end If we assume that the exit is made at a premium to current market price (lets say 10%), the IRR would jump to 1.%. 20

21 Equity Research 4 Abertis 4 October 201 VALUATION RECOMMENDATION % LfL average increase in Sales and EBITDA between F Our sales forecasts were cut by an average of 4% in 1-1 and EBITDA1-1 by 1% due to the deconsolidation of the airport unit (we expect ABE to fully deconsolidate the unit until YE). Adjusting for airports deconsolidation, Revenues and EBITDA1-1 rose by an average of %. On the negative side we highlight: (1) the worse traffic expected for domestic concessions in FY1 (-7.1% vs. -5.0% prev.) despite the strong trend recovery in Q and (2) the FX update in Brazilian motorways responsible for an 11% average cut in Arteris revenues (in Eur) in On the positive side we highlight: (1) the expected better traffic performance in France (0% vs. -1% prev.) and (2) the contribution from the newly acquired mobile towers from Telefonica and Yoigo ( 85mn) and the stake increase in Hispasat (we expect ABE to fully consolidate Hispasat from 2014 onwards). Change in Estimates LfL 1 F 14 F 15 F Sales (1) 2.2%.1%.1% EBITDA (1) 2.2%.0%.7% EBITDA mg (1) -0.1pp -0.1pp 0.4pp EBIT (1) 2.% 4.8% 5.% Net Profit 0% 5% 2% Net Debt -% 1% 1% (1) LfL Ex Airports. Source: BPI Equity Research. In terms of "EBITDA - capex", the strong addition of capex in telecoms and the FX devaluation in Brazil hit significantly our ST estimates with a 20% cut in FY14 and 10% in FY15, rising thereafter on higher contribution from telecoms (new satellite launches and mobile towers) and Brazil. Net profit estimates have not changed markedly, being almost unchanged in FY1, +4% in FY14 and unchanged in FY15, implying a 1% CAGR on a recurrent basis, giving support to our estimate of a 7% dividend CAGR in the same period. YE14 Price Target set at 15.0/sh (+1% LFL) We have rolled forward our valuation horizon into YE14 setting a YE14 Price target of 15.0/sh. The 2.1/sh (+1%) LfL upgrade was primarily driven by : (1) a 90bps cut to Spanish CRP from 1.75% to 0.85% (4% or + 0.5/sh positive impact) implying a risk-free rate for Spain of 4.1%, (2) Motorways: through higher traffic forecast in the mid term for Sanef-France and the inclusion of the value accretive "Plan de Relance", higher mid term traffic for domestic concessions assuming a stronger ramp up post depression and higher efficiencies recognized in Spanish and French portfolio, partly offset by the M2M of Arteris and () valuation upgrade of Telecoms at EV level (incorporation of the recent towers acquisition and stake increase in Hispasat) although mostly offset through the recognition of higher capex and full consolidation of Hispasat (vs proportional) as the terrestrial business valuation was actually downgraded on a LfL basis. Change in Valuation ( /sh) # # # 7# 7# 7# 7# # 7# # # # Optionality value 7# # 7# # *+!",!!"!!"0-2,!-0:9 :22!5 ; 9. ))",2! ;,< 220! (1) adj by 1x20 bonus share. Source: BPI Equity Research. 21

22 Equity Research 4 Abertis 4 October 201 SoP Valuation Assumptions ( mn) EV % EV Method Motorways % Spain % APV and BV France (Sanef/HIT) % APV Argentina (GCO) 0 0% APV Chile % APV Puerto Rico 475 2% IRR 15% and BV Other motorways 247 1% 1x BV Brazil (Arteris) % MV Telecoms % Satellite (Hispasat) % DCF Terrestrial (Tradia, Retevision and Towers) % DCF Eutelsat (MV) 242 1% MV Others 5 0% IRR 15% Airports 201 1% 8x EV/EBITDA, 1x BV Holding costs -9 0% 5x EBIT(1-t) 1 EV % Net debt adjusted 1 09 Minorities 52 Provisions, derivatives pensions 217 Equity value (YE14) 1 2 # shares (mn) 85 YE14 Price Target ( ) 15.0 Source: BPI Equity Research Acesa Sanef Terrestrial Rf.25%.25%.25% Rm.0%.0%.0% CRP 0.85% 0.00% 0.85% Asset beta Ru.7%.9% 7.7% Leverage beta Re 9.1% 10.% 9.0% Credit spread 0.9% 1.9% 0.9% Tax rate 0% 0% 0% Rd 4.1% 5.1% 2.9% CPI assumed 1.4% 1.4% 2.2% Real Ra 4.1% 5.2% 4.7% Source: BPI Equity Research. Key triggers of Abertis equity story: Upside to our Base-case: optionality counts Throughout this report we call attention to the optionality value embedded in the investment case (but not in our base-case scenario) that may gradually be recognized by the market and sell-side: The efficiency plan (+ 1.2/sh potential), return on reinvestment in the core business either through new projects (+ 2.1/sh) or a set of contractual amendments leading to an extension of concessions maturity (Acesa, Brazil and France) and further restructuring upside (asset rotation). From this perspective, our valuation could top per share, implying an upside of over 20%. 1 - Efficiency program 1.2/sh upside to our SoP ABE upgraded the efficiency targets for from a cumulative > 400mn (inc. 00mn Opex and 100mn capex) to 44mn. For 2014 ABE previously forecasted annual savings of 220mn ( 150mn in opex and 70mn in capex) vs. the now announced 2mn and growing to an annual basis of 294mn in We are rather more conservative assuming 112mn annual opex savings ex-airports, implying (Opex: -0.1% CAGR10-14 F ). On a back-of-the-envelope calculation, we estimate ABE's own projections could imply total savings of above.8bn or 4.4/sh equivalent to 1% of the market cap including capex savings. Excluding capex, as we assume ABE's capex guidance, we estimate the potential upside on our numbers could reach 1.2/share or 1.0bn. 22