October 22, 2013 8:29 pm

Ferrovial sells Heathrow stake to UK pension fund

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Ferrovial, the Spanish infrastructure and construction group, on Tuesday unveiled plans to sell a further stake in the holding company that controls London’s Heathrow airport to a UK university pension scheme for £392m.

Inigo Meiras, Ferrovial’s chief executive, said the deal was not prompted by the company’s objections to the proposed new regulatory regime for Heathrow – under which the airport would no longer secure inflation-busting increases in the landing charges paid by airlines for using its facilities.

Ferrovial, Heathrow’s largest shareholder, has agreed to sell an 8.65 per cent stake in FGP Topco, the holding company for Heathrow Airport Holdings, to the UK Universities Superannuation Scheme.

Ferrovial plans to remain the largest shareholder at FGP Topco, with a 25 per cent stake, after the planned deal.

“Following this deal, we reiterate our role in [Heathrow Airport Holdings] as the main shareholder and industrial partner in the long term,” said Mr Meiras.

He added that the deal with the UK Universities Superannuation Scheme implied an enterprise value for Heathrow that represented a 13 per cent premium to the airport’s regulated asset base.

The Ferrovial-led consortium that in 2006 bought BAA, Heathrow’s then owner, paid a hefty premium – and was subsequently required by competition regulators to break-up the airport group by selling Gatwick, Edinburgh and Stansted airports.

This month, the aviation regulator angered Heathrow by proposing that its landing charges paid by airlines should only rise in line with inflation over the next five years – in stark contrast to substantial real terms increases in these fees over the past decade.

Colin Matthews, Heathrow’s chief executive, also objected to the CAA’s proposed 5.6 per cent cost of capital for the airport, saying it did not provide an incentive for its shareholders to invest.

Heathrow originally said it would spend £3bn improving Heathrow’s facilities between 2014 and 2019 but subsequently warned that it could reduce this figure to £2bn because of the regulator’s proposals.

Mr Meiras said Ferrovial was leaning towards supporting spending of closer to £2bn than £3bn, although no final decisions had been taken by Heathrow’s board.

He also said the decision of the UK Universities Superannuation Scheme to buy a stake in Heathrow would not make it harder to try to persuade the CAA to provide a more generous regulatory settlement over the next five years.

This is the university pension scheme’s largest investment in UK infrastructure to date.

Michael Powell of USS Investment Management, the scheme’s investment adviser, said the CAA’s proposals were “very challenging” but the stake purchase at Heathrow was for the long term.

“We have confidence that the right incentives will be set in place to encourage the investment that Heathrow and the UK needs,” he added.

Ferrovial has been progressively reducing what was once a stake of more than 50 per cent in Heathrow’s holding company.

Heathrow’s other shareholders are Chinese, Qatari and Singaporean sovereign wealth funds, plus Alinda Capital Partners, the US infrastructure investment firm, and Caisse de dépôt et placement du Québec, the Canadian pension scheme manager.

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