Portuguese Securities Market Commission · IP Engenharia, on the other hand, focuses most of its...

FIRST-HALF 2020

CONSOLIDATEDREPORT ANDACCOUNTS

Infraestruturas de Portugal, S.A.Campus do Pragal, Praça da Portagem2809-013 ALMADA · PortugalPhone: +(351) 212 879 000e-mail: [email protected] Capital: 7 558 020 000,00€VAT: 503 933 813www.infraestruturasdeportugal.pt

PART II – CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES · FIRST-HALF 2020

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES

STATEMENT OF COMPLIANCE

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE FIRST HALF OF 2020

TABLE OF CONTENTS

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3535455659656566

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PART I – CONSOLIDATED MANAGEMENT REPORT · FIRST-HALF 2020

1. CHAIRMAN'S MESSAGE

2. WHO WE ARE2.1 The IP Group2.2 Mission, Vision and Values2.3 Governance Model2.4 Structure of the IP Group: Organisational Model 2.5 Our Networks

3. PERFORMANCE IN THE 1st HALF OF 2020 3.1 Key Indicators3.2 Highlights of the Period

4. MAIN AREAS OF ACTIVITY 4.1 Network Maintenance 4.2 Investment in the Road and Railway Infrastructure 4.3 Use of the Road and Rail Network4.4 Public-Private Partnerships4.5 Telecommunications and Business Cloud4.6 Engineering Services4.7 Property and Commercial Real Estate Management

5. ECONOMIC AND FINANCIAL PERFORMANCE5.1 Operating Income5.2 Operating Expenses 5.3 Equity Structure

6. FINANCIAL MANAGEMENT AND DEBT6.1 Financial Management6.2 Share Capital Increase Operations6.3 Financial Debt Structure6.4 Analysis of Financial Results

7. COVID-19 IMPACT

8. SUBSEQUENT EVENTS

101

103

7

97

2 | INFRAESTRUTURAS DE PORTUGAL GROUP

1. CORPORATE INFORMATION 1.1 IP Activity 1.2 Activity of the IP Group companies1.3 Other Equity Holdings

2. MAIN ACCOUNTING POLICIES 2.1 Bases of presentation 2.2 Consolidation basis2.3 Accounting policies2.4 Main judgements and estimates and assumptions used in the prepa-

ration of the financial statements

3. GROUP

4. SEGMENT REPORTING

5. INTANGIBLE ASSETS

6. GOVERNMENT AND OTHER PUBLIC BODIES (ASSETS AND LIABILITIES)

7. DEFERRALS7.1 Deferred assets7.2 Deferred liabilities

8. FINANCIAL ASSETS AND LIABILITIES8.1 Categories according to IFRS 9 8.2 Financial assets8.3 Financial liabilities8.4 Financial risk management policies8.5 Changes in liabilities deriving from financing activity

9. PROVISIONS

10. SHARE CAPITAL AND RESERVES

11. SALES AND SERVICES

12. COST OF GOODS SOLD AND MATERIALS CONSUMED

13. EXTERNAL SUPPLIES AND SERVICES

14. FINANCIAL LOSSES AND GAINS

15. INCOME TAX

16. RELATED ENTITIES16.1 Summary of related parties16.2 Significant balances and transactions with public entities16.3 Balances and transactions with railway operators16.4 Joint Ventures16.5 Remuneration of corporate officers

17. RECENTLY ISSUED ACCOUNTING STANDARDS AND INTERPRETATIONS

109109110110

112112112113114

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121

124

126

128128128

130130131134141148

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151

152

154

155

156

157

159159160162162163

165

CONSOLIDATED REPORT AND ACCOUNTS · FIRST-HALF 2020 | 3

18. GUARANTEES AND SURETIES

19. CONTINGENCIES

20. COMMITMENTS

21. INFORMATION REQUIRED BY LAW

22. OTHER RELEVANT FACTS


PART III – DIGITAL SIGNATURE

PART IV – REPORT ON REVIEW OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS · 30 JUNE 2020

Inclusive Language

Given the length of the document we have not used gender-inclusive language.The only reason for this decision is to make the report easier to read; this does not jeopardises our belief in combating all forms of sexist communication.

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Part IConsolidatedManagementReportFirst-half 2020

2020 will be for ever marked by the social, eco-nomic and political situation caused by the SARS-CoV-2 (COVID-19) pandemic, which is deeply af-fecting society across the board, at both national and international levels.

We have lived through an extraordinary situation throughout the first half of the year, following the declaration of nationwide state of emergency by the President of the Republic on 18 March, which lasted until 2 May, followed by situations of calami-ty, contingency and alert, as declared by the Coun-cil of Ministers.

COVID-19 altered the way we work and socialise, not only during the confinement period in force during the state of emergency, but in the present and for the future, an uncertain and unpredictable future.

Notwithstanding this extraordinary situation, IP ended the first half of 2020 with operating results (before financial expenses and tax) of EUR 81.0 million, which is largely positive.

However, consolidated results for the first half of 2020 were negative by EUR 48.5 million, contrast-ing with positive net profit of EUR 35.0 million in the same period of 2019.

This negative result, which we believe will be re-versed in 2021, stems from losses in revenues by EUR 104 million, due to decrease in road traffic (Road Service Contribution and Tolls) and railway traffic.

Despite the impact on results of the present pan-demic situation, I am pleased to say that IP's road and railway infrastructures remained fully opera-tional, having increased the level of works (both investment and maintenance) carried out on the network as compared to the first half of 2019.

As a matter of fact, investment carried out in the first half of 2020 totalled EUR 75.7 million, includ-ing EUR 54.5 million relating to the Ferrovia 2020 Investment Programme, increasing by 29% over the same period of 2019.

A relevant part of the investment in Ferrovia 2020 concerns the works for the International South Corridor, specifically the construction of 80km of new railway - a situation which had not been seen for over 100 years. This investment is comprised in Portugal’s Economic Recovery Plan and attests for IP's banking on the Iberian hinterland.

During the first semester of 2020 the company launched a significant number of procedures for the award of public works contracts within the scope of the Ferrovia 2020 programme, amongst which the contracts relating to the modernisation of the Beira Alta Line, comprised in the Internation-al North Corridor, which are crucial to improve our freight transport.

During the period under review approximately 75% (in terms of amount) of the works comprised in this ambitious Investment Programme were ei-ther completed, in progress or under contracting phase, which will translate in significant increase of both physical and financial implementation over the next few years.

As far as road and railway maintenance activities are concerned, the amount implemented totalled EUR 85.1 million in the first half of 2020, which is 11% more than in the same period of the previous year.

All this happened against a background of pan-demic, which required putting the health safety and protection of our workers first, developing an efficient Contingency Plan, which included, amongst other preventive actions, virus prevention

1. CHAIRMAN'S MESSAGE



and contention measures and the implementation of new forms of work organisation and employment, in-cluding teleworking.

The company could thus continue operating, main-taining critical services, whilst only a residual number of employees were affected by the pandemic.

In terms of human capital, it should be noted that we were authorised to hire a significant number of new employees. This reinforcement of our teams views to ensure that we maintain our expertise, which is crucial to succeed in our mission, but also to ensure that we meet our commitments with regard to present and future investment in transport infrastructures, whilst recovering adequate levels of public investment.

This strengthening and rejuvenation of IP’s workforce is imperative to improve the productive capacity of the company’s operating structures, as required to complete the investments projected in PETI 3+/Fer-rovia 2020, but also to use the funds coming from the Recovery and Resilience Instrument and develop PNI 2030 projects, whilst continuing our maintenance and conservation activity to ensure the highest qual-ity and safety standards in our road and railway net-works.

Finally, I take this opportunity to thank all our employ-ees for their work and dedication, and the Sharehold-er, Supervisory Bodies and remaining stakeholders for their continued support and trust in our work.

Infraestruturas de Portugal, S.A. (IP) is the state-owned company that results from the merger of Rede Ferroviária Nacional – REFER, E.P.E. (REFER) and EP - Estradas de Portugal, S.A. (EP). The merger entered into force on 1 June 2015, as provided in Decree-law 91/2015 of 29 May.

IP is responsible for the management of road infra-structures, as provided in the General Concession Contract for the national road network entered into with the State. IP also provides public services as manager of the National Railway Network (RFN), un-der a system of delegated powers from the Portu-guese State, through the implementation of a Pro-gramme Contract for the railway sector.

Road Concession Contract:

The State entered with EP, S.A. (now integrated in IP) a concession contract, the bases of which were ap-proved in annex to Decree-Law 380/2007 of 13 No-vember, amended by Law 13/2008 of 29 February, Decree-Law 110/2009 of 18 May, and Decree-Law 44-A/2010 of 5 May.

One of the more relevant changes concerned the in-troduction of the concept of availability, consisting of assessing the quality of the service provided to users and measuring road accident levels and levels of ex-ternalities generated therefrom, translated in perfor-mance indicators.

The National Road Network gets its financing from tolls charged in tolled roads, from other operating in-come and from the road service contribution (RSC), as defined in Law no. 55/2007, of 31 August.

Railway Programme Contract:

On 11 March 2016 the State and IP signed a 5-year Framework Contract for the National Railway Net-work, as provided in Decree-Law no. 217/2015, of 7 October. A new Framework Programme for 2021-2025 is currently being prepared.

2. WHO WE ARE



The State's main obligation is to finance the manage-ment of the infrastructures, whilst IP is required to meet user-oriented performance targets, specifically quality indicators and criteria covering such aspects as train performance (line speed and reliability, and customer satisfaction), network capacity, asset man-agement, activity volumes, safety levels, and envi-ronmental protection. The contract also establishes financial efficiency objectives for IP in the form of rev-enue and expenditure indicators.

The National Railway Network is financed through the tariff revenues charged to railway operators; sur-pluses resulting from ancillary activities associated with the operation of the railway infrastructure; and compensatory allowances to cover the costs of fulfill-ing public service obligations that are not covered by such revenues.

In this context, IP is a reference company at national and international level, combining unique know-how from the experience and skills of its staff with a keen appetite for and openness to innovation, which are decisive factors against a context of fast evolving mo-bility services.

2.1 The IP Group

The IP Group gathers the technical know-how re-quired for the good performance of road and rail infrastructures, in the areas of design, construction, financing, maintenance, operation, redevelopment, extension and modernisation of the national road and rail networks, which includes, in relation to the latter, the command and control of traffic.

IP currently holds stakes in the share capital of three companies: IP Engenharia, IP Património and IP Telecom.

These subsidiaries are profit centres aimed to op-timise the non-core revenue of the Group, making the best possible use of existing surplus capacity in assets not used in main activities.

IP Engenharia, on the other hand, focuses most of its activity in the achievement of the 2020 Railway Programme.

Additionally, IP holds a stake in the share capital of Atlantic Corridor and AVEP – Alta Velocidade Espanha/Portugal, entities formed with peer Eu-ropean companies, to respectively, promote the competitiveness of rail freight transport and con-duct preliminary studies of the Porto-Vigo and Ma-drid-Lisbon-Porto corridors.

Shares representing the total capital stock of IP belong to the State and are held by the Direc-torate-General for the Treasury and Finance. The company’s share capital is currently of EUR 7,558,020,000.

Subsidiary Compagnies Joint Operation

AVEPAlta Velocidade de Espanha e Portugal, AEIEshareholders Infraestruturas de Portugal 50% ADIF (Espanha) 50%

Corredor AtlânticoCorredor Atlântico, AEIE

members Infraestruturas de Portugal 25% ADIF (Espanha) 25% SNCF Réseau (França) 25% DEB Netz AG (Alemanha) 25%

shareholders

Infraestruturas de Portugal, SA99,9968%IP Engenharia, SA0,0032%

shareholders

Infraestruturas de Portugal, SA98,43%IP Património, SA1,57%

shareholders

Infraestruturas de Portugal, SA100%



2.2 Mission, Vision and Values

MISSION The corporate object of IP is the design, planning, construction, financing, maintenance, exploration, re-habilitation, enlargement and modernisation of the national road and rail networks, including within the latter traffic command and control.

VISION Position Infraestruturas de Portugal as manager of multimodal mobility, enhancing asset management and ensuring the provision of a safe, efficient and sus-tainable service, with added value from the profitabil-ity of complementary assets.

VALUESETHICS

Act with respect for ethical principles, namely trans-parency, good faith and honesty.

SAFETY

Act with respect for people's lives and their physical integrity, the attribute that most marks our service.

SUSTAINABILITY

Act oriented towards economic, social and environ-mental sustainability.

DEFINING HOWWE GET THERE

VALUES AND MANAGEMENTCOMMITMENT

DEFINING DESTINATION

VISION

IP takes the form of a state-owned enterprise set up as a public limited company and it is governed by Decree-Law 91/2015 of 29 May, which created it; its bylaws, as approved in annex to said law; the legal scheme for the state-owned business sector, as approved by Decree-Law 133/2013 of 3 October; the good practices of corporate govern-ance applicable to the sector; the provisions of the Portuguese Commercial Companies Code, as well as internal regulations and national and European legal norms underlying its business activity.

IP adopted a two-tier corporate governance mod-el, allowing the effective separation of supervision from management in the pursuit of the objectives and interests of the company, its shareholder, em-ployees and other stakeholders, in order to achieve the degree of trust and transparency necessary for its adequate functioning and optimisation.

IP is subject to the supervision of the Ministry of Infrastructures and Housing and, under the terms of the legal scheme of the state-owned business sector, to the jurisdiction and control exercised by the Audit Court, as well as to the supervision of the General Inspectorate of Finance, pursuant to law.

CORPORATE BODIES

IP's corporate bodies are the General Meeting, the Executive Board of Directors, the General and Su-pervisory Board, including the Financial Matters Committee, and the Statutory Auditor.

GENERAL MEETING

The General Meeting is made up of shareholders. The Board of the General Meeting consists of a Vice-Chairman and Secretary.

2.3 Governance Model

GENERAL MEETING

CHAIRMAN VICE-CHAIRMAN SECRETARY

NOT YET APPOINTED * PAULO MIGUELGARÇÊS VENTURA

MARIA ISABELLOURO CARIA ALCOBIA

* The former Chairman resigned on 24 January 2020



GENERAL AND SUPERVISORY BOARD

The General and Supervisory Board (GSB) is made up of six to nine members, ap-pointed at a General Meeting, which also designates who from among them holds the position of chairman.

Three members are currently assigned to the General and Supervisory Board, who integrate the Financial Matters Committee, as follows:

EXECUTIVE BOARD OF DIRECTORS

The Executive Board of Directors is made up of the Chairman, two Vice-Chairmen and three Directors, as follows:


CHAIRMAN

ANTÓNIO CARLOSLARANJO DA SILVA

VICE-CHAIRMAN

CARLOS ALBERTOJOÃO FERNANDES

MEMBER

ALEXANDRA SOFIA VIEIRA NOGUEIRA

BARBOSA

MEMBER

VANDA CRISTINALOUREIRO SOARES

NOGUEIRA

MEMBER

ALBERTO MANUELDE ALMEIDA DIOGO

VICE-CHAIRMAN

JOSÉ SATURNINO SUL SERRANO

GORDO

CHAIRMAN MEMBER MEMBER

JOSÉ CASTEL-BRANCO DUARTE PITTA FERRAZ ISSUF AHMAD


FINANTIAL MATTERS COMMITTEE

STATUTORY AUDITOR

On 13 April 2017 the Shareholder appointed firm Vítor Almeida e Associados, SROC, Lda (SROC no. 191, registered with the CMVM under no. 20161491), rep-resented by its partner Vítor Manuel Batista de Almeida (ROC no. 691, registered with the CMVM under no. 20160331) as Statutory Auditor.

2.4 Structure of the IP Group: Organisational Model The macro structure of the IP Group was defined taking into account the mission, vision and values mentioned above, in order to allow for the generation/creation of value in view of the needs and expectations of stakeholders, whilst optimising efficiency in the different areas and companies of the IP Group.

Executive Boardof Directors

IP Telecom

IP Património

IP Engenharia

Procurement and Logistics

Information Systems

Finance and Markets

Organizational Development

Academy

Human Resources

Image and Communication

Partnerships and Network Services

Planning and Control

Legal Affairs and Compliance

CORPORATE CENTRE

INFRASTRUCTURE MANAGEMENT

Road Network Railway Network

MOBILITY MANAGEMENT

Accessibilities, Telematics and ITS

Safety

Railway Tra�c

Strategic Planning

Undertakings

Concessions

Asset Management

Engineering and Environment

Information Systems Committee

ASSET RETURN

International Affairs

Studies and Innovation

General Secretariat

Internal Audit

Thus, the macro structure of the IP Group is made up of:

• Areas to directly assist the Executive Board of Directors (EBD);• Corporate Centre, in order to obtain gains of scale and know-how, integrating supporting

functions; • Business areas;• Information Systems Committee (ISC): connecting and interface management instrument,

with representation of the EBD and the Divisions.

Business areas are organic units dedicated to:• Managing mobility, ensuring that the integrated planning of networks is implemented and

managing road and rail mobility, in accordance with principles of safety, sustainability and core revenue optimisation;



• Managing the infrastructure, with efficiency gains expected to materialise, based on asset management principles;

• Achieving return on assets as subsidiaries are geared to optimise non-core revenues, as follows:· They view to optimise non core revenues

of the IP Group, taking advantage of the excess capacity of assets not used in core activities and non-core assets;

· Their Boards of Directors are made up of a member of the EBD of IP, who is the chair-man, and two executive members.

· The organic structure of subsidiaries com-prises a General-Directorate and several hierarchic levels: Divisions (such as at IP Engenharia), Departments, Units and even Functions (whether shown or not in the Or-ganisation Chart).

· IP's Corporate Centre provides support and a framework to the activity of subsidiaries, which can thus focus on their core activities.

2.5 Our Networks

2.5.1 Road Network

The total length of the network operated by IP is currently 15,076 km, of which 14,063 km directly managed and 1,013 km under concession.

The 14 063 km of network under direct manage-ment of IP are distributed as follows:

• IP (Main Itinerary) = 322 km;• EDIP (Declassified Roads ensuring IP corridors)

= 157 km;• IC (Complementary Itinerary) = 610 km;• EDIC (Declassified Roads ensuring IC corridors)

= 1,182 km;• EN (National Road) = 4,690 km;• ER (Regional Road) = 3,345 km;• ED (Declassified Road) = 3,756 km.



2.5.2 Railway Network

The lines and branches of the national railway network (in operation and not in operation) have a total length of 3,621 km

Seventy percent of the network is in operation, corresponding to 2,526 km, of which 1,916 km of single track and 610 km multitrack.

The length of the electrified network (1,696 km) accounts for 67% of the overall network in oper-ation.

The Convel speed control system associated with electrical or electronic signalling systems is in-stalled on approximately 67% of the network in operation (1,695 km). The Solo-Train Radio sup-plementary safety system is implemented on 59% of the network in operation (1,510 km).

The Solo-Train Radio is undergoing modernisation, evolving towards a digital GSM-R (Global System for Mobile Communications – Railways) technol-ogy, in line with European Interoperability Direc-tives. It is implemented on 25 km of the network. There are 116 km of network in operation with GSM-P (the letter "P" signifies that the communi-cations are made over the Public Network).

In the first half of 2020, there were 467 railway stations in operation, of which 425 were exclusive-ly for passenger service, 10 exclusively for freight service and 32 for combined services.

VilarFormoso

Setil

Ourique

Guarda

Castelo Branco

BadajozMérida

Tunes

Faro

Lagos Vila RealSto António

Mangualde

Fuentes de Oñoro

Régua Tua

Pocinho

Valença

Caminha

Viana do Castelo

PORTO DEAVEIRO

Sernada

Aveiro

Covilhã

Entroncamento

Pampilhosa

Abrantes

Santarém

Tomar

Pombal

ALFARELOS

Louriçal

Coimbra BCoimbra

Sta Comba DãoFig

ueira

da Foz

Leiria

LamarosaCaldasda Rainha

Portalegre

Torre dasVargens

PORTO DELEIXÕES

Leixões

Lousado

Nine

PortoCampanhã

Ovar

Gaia

Ermesinde Caíde

Braga

Guimarães

Espinho

PinhalNovo

Lisboa

Sintra

TorresVedras

CascaisMeleças

Beja

Funcheira

Grândola

Águas de Moura

Ermidas–sadoSines

Neves-corvo

PORTO DESETÚBAL

PORTO DELISBOA

PORTO DAFIGUEIRA DA FOZ

ÉvoraCasa Branca

Pinheiro

Alcácer do Sal

Setúbal

Pocei

rãoBom

bel

Vendas novas

PORTODE SINES

ElvasElvas·Caia

(Vigo)

2.5.3 Trans-European Transport Network

Part of the national road and rail network is integrated into the Trans-European transport network, with the aim of strengthening the social, economic and territorial cohesion of the Union and create an efficient and sustainable single European transport area.

The European Union’s goal is to provide more ben-efits to users and ensure inclusive growth, focusing on modal integration, interoperability and coordi-

nated development of infrastructure, especially for cross-border sections and at bottlenecks.

The network comprises two levels: the global net-work to be completed by the end of 2050, and the main network, integrated into the Atlantic Corridor, to be completed by the end of 2030 and compris-ing the strategically most important parts of the global network to achieve the development goals of TEN-T.

Approximately 1800 km of the national rail net-work is comprised in the overall network, of which approximately 900 km form the main network. As for the road network, the main network comprises 800 km.

Global and Main Road Network Global and Main Railway Network


3.1 Key Indicators

3.1.1 Economic and Financial Indicators

3. PERFORMANCE IN THE 1ST HALF OF 2020

TURNOVER[EUR million]

1ST HALF 2018

900

600

0

300

1ST HALF 2019 1ST HALF 2020

577 575473

FINANCIAL RESULTS[EUR million]

1ST HALF 2018

-20

-70

-120

-170


-116 -101-125

EBITDA[EUR million]

1ST HALF 2018

400

200


325 294

200

OPERATING EXPENSES[EUR million]

1ST HALF 2018

400

0

200


467496

460



NET PROFIT[EUR million]

1ST HALF 2018

50

40

20

10

-10

-20

-30

-40

-50

-60

30

0


35

-49

47DEBT

[EUR million]

1ST HALF 2018

6 000

3 000


5 7455 208 4 982

LEVEL OF NETWORK SAFETY[Significant accidents per MTK]

1ST HALF 2018

1,4

1,6

1,8

1,0

1,2

0,8

0,0

0,2

0,6

0,4


1,81

1,156

1,663

RAILWAY NETWORK AVAILABILITY[%]

1ST HALF 2018

100,0%

80,0%

60,0%

40,0%

0,0%

20,0%


87,50%90,3% 87,70%

3.1.2 Operating Indicators

TRAIN km[million]

1ST HALF 2018

20,0

15,0

10,0

0,0

5,0


18,015,9

17,9

PUNCTUALITY INDEX[%]

1ST HALF 2018

100%

80%

60%

0

20%

40%


88%85,9%91,6%89,8%



3.1.3 Investment Indicators 3.1.4 Average workforce of the IP Group

RAILWAY INVESTMENT[EUR million]

1ST HALF 2018

60,0

70,0

40,0

50,0

30,0

10,0

20,0

0,01ST HALF 2019 1ST HALF 2020

37

49,3

62,7

ROAD INVESTMENT[EUR million]

1ST HALF 2018

12,0

0,0

4,0

8,0


2,4

11,6

9,1

Note: As of the date of this Report there are no indicators available relating to road service and road accident levels.

0

1 000

2 000

3 000

4 000

IP GROUP AVERAGE WORKFORCE[No.]

1ST HALF 2018 1ST HALF 2019 1ST HALF 2020

3 6043 678 3 628

3.2 Highlights Of The Period

JANUARY

IPP SIGNS SUB-CONCESSION CONTRACTS WITH TROFA MUNICIPALITY

On 10 January IPP and the Municipal Council of Tro-fa entered three contracts for the sub-concession of land and building for private use. This will allow the Municipality to manage the property for the benefit of its citizens.

According to the mayor of Trofa, the contracts signed between the Municipality and IPP have a «common goal: to improve the quality of life of Trofa residents».

MODERNISATION OF THE BEIRA ALTA LINE

As published on 20 January in the Official Gazette, the contract for the Modernisation of the Pampilhosa – Santa Comba Dão section and construction of Junc-tion of Mealhada has a base price of EUR 80 million, adjusted to available market offer.

COMPLETION OF WORKS IN SECTION BETWEEN ELVAS AND CAIA - EAST LINE

Inspections were started of the works carried out within the scope of the modernisation of section of the East Line between Elvas and Caia (Spanish bor-der) comprised in the International South Corridor.

These inspections view to check and analyse the works carried out and their compliance with the law and respective contracts.

Investment of EUR 20.4 million in the modernisation of the East Line (11 km) was carried out within the scope of the renovation and modernisation of the Na-tional Railway Network - Ferrovia 2020.



BEGINNING OF CONSTRUCTION OF THE NEW ÉVO-RA NORTE/FREIXO SECTION

On 21 January IP signed the work assignment order for the construction of a new railway section with 20.5 km in length, between Évora Norte and Freixo, included in the future International South Corridor.

The works are part of the modernisation of the National Railway Network programme - Ferrovia 2020, with an investment of EUR 46.6 million.

FEBRUARY

COMPLETION OF WORKS ON EDGAR CARDOSO BRIDGE

The contract works for “EN109 - Edgar Cardoso Bridge over River Mondego – cleaning and maintenance of ca-ble systems” at Figueira da Foz, Coimbra were complet-ed on 17 February.

MARCH

FULL RENOVATION OF TRACK ON ESPINHO - VILA NOVA DE GAIA SECTION

The contract for the modernisation of the North Line - Espinho – Vila Nova de Gaia section, was awarded to joint-venture between DST, S.A. and AZVI, S.A. for EUR 55.3 million. The works to be carried out in 660 days, view the modernisation of a railway section with ap-proximately 14.2 km in length, to improve the capacity of freight trains, as well as their operating safety and flexibility. The works are part of the National Railway Network - Ferrovia 2020 Modernisation Programme.

BEIRA ALTA LINE • CELORICO DA BEIRA – GUARDA

On 6 March IP launched the tender for the construc-tion of the Celorico da Beira – Guarda section comprised in the modernisation of the Beira Alta Line, within the scope of Ferrovia 2020. With a performance period of 760 days and investment of EUR 90.4 million, the works will contemplate the modernisation of approximately 46 km of railway on the current channel of the Beira Alta Line, with layout corrections between Celorico da Beira and Guarda. The works are part of the National Railway Network Modernisation Programme – Ferrovia 2020.

TENDER FOR THE BEIRA ALTA LINE • SANTA COMBA DÃO – MANGUALDE SECTION WORKS

The Official Gazette of 19 March published the tender tor the works in the Beira Alta Line, with 40 km in length, between Santa Comba Dão and Mangualde, corresponding to an investment of EUR 103 million. The works are part of the National Railway Network Modernisation Programme – Ferrovia 2020.

TENDER FOR THE BEIRA ALTA LINE • MANGUAL-DE – CELORICO DA BEIRA SECTION WORKS

The Official Gazette of 30 March published the tender tor the modernisation works in the Beira Alta Line, between Mangualde and Celorico da Beira, With an estimated investment of EUR 103 million, the works are part of the National Railway Network Modernisa-tion Programme – Ferrovia 2020.

AWARDING OF CONTRACT FOR THE MODERNI-SATION OF THE WEST LINE

The contract for the modernisation of section of the West Line between Mira Sintra – Meleças and Torres Vedras was awarded for EUR 61.5 million. The works, which are part of the Ferrovia 2020 Programme, view the electrification and track renovation of a 43 km-long railway section.

APRIL

IP COLLABORATES WITH AUTHORITIES IN BOR-DER CHECK POINTS

The control of border points between Portugal and Spain is being carried out by police authorities since 11 p.m. of 23 March , date when the rail connections between the two countries were suspended.

This decision was made to mitigate the spreading of COVID19 pandemic, and remained in force until 15 May.



Within the scope of its duties, IP, working in collabo-ration with the police authorities (GNR and SEF), has provided teams to install traffic restraining signalling in authorised crossing levels and closed crossing levels.

ANNUAL RESULTS OF INFRAESTRUTURAS DE PORTUGAL

Infraestruturas de Portugal, S.A. (IP) posted positive Net Profit of EUR 20 million.

EBITDA remained positive at close to EUR 600 mil-lion (EUR 590 million), notwithstanding the recogni-tion in 2019 of an increase in underlying expenses to sub-concession contracts, following the completion of respective renegotiation proceedings, the net impact of which, in terms of operating and financial results, totalled EUR -31 million.

ANNUAL RESULTS OF IP TELECOM

IP Telecom published its 2019 Annual Report and Accounts.

The company recorded Net Profit of EUR 1.2 mil-lion, increasing by 20% over the previous year, with a turnover of EUR 17 million.

ANNUAL RESULTS OF IP ENGENHARIA

IP Engenharia published its 2019 Annual Report and Accounts.

The company recorded Net Profit of EUR 480 thou-sand, increasing by EUR 303 thousand over the pre-vious year, having maintained its operational balance.

ANNUAL RESULTS OF IP PATRIMÓNIO

IP Património published its 2019 Annual Report and Accounts.

The company recorded Net Profit of EUR 3.1 million, increasing by 7% over the previous year. Such per-formance was driven by business growth and a de-crease in operating expenses.

MAY

CORROSION PROTECTION OF JAMOR BRIDGE - CASCAIS LINE

In line with IP’s bridge maintenance plan for 2020, the company started the anti-corrosion works on Jamor bridge, at km 9.671 of Cascais Line.

The contract was awarded to Montaco – Tratamentos Anticorrosivos e Construção Civil, S.A. for EUR 372 thousand, to be carried out in 180 calendar days.

COMPLETION OF SLOPE STABILISATION WORKS ON THE DOURO LINE

IP completed three relevant slope stabilisation works on the Douro Line, accounting for an overall invest-ment of approximately EUR 4 million.

The works were carried out between km 56,550 and km 56,960 in Municipality of Marco de Canaveses; at km 89,500, in Municipality of Mesão Frio and be-tween km 119,540 and 145,800, in Municipalities of Sabrosa, Alijó and Carrazeda de Ansiães.

OPENING TO TRAFFIC OF 1ST PHASE OF LINK ROAD TO EN210

The 1st phase of Link Road to EN210, at Celorico de Basto was opened to traffic on 29 May. The new link to Mondim de Basto is already partly ready to receive traffic. Investment in these works totalled EUR 7.6 million.

JUNE

IMPROVEMENT OF SAFETY CONDITIONS ON EN109

The contract for the “EN109 - Improvement of Safety Conditions between km 122+150 and km 137+700” works, located in municipalities of Figueira da Foz and Pombal, districts of Coimbra and Leiria, in the amount of EUR 3,079,710 was assigned on 1 June.



REPAIR AND MAINTENANCE OF LIGHTING EQUIPMENT

The contract for the works "Repair and maintenance of lighting equipment - 2020” works, on six stretches of the road network was assigned on 1 June, with overall investment of EUR 408,376.62.

NEW ROAD LINK TO THE BUSINESS PARK OF ES-CARIZ

The construction works of the new road link to the Business Park of Escariz in Arouca started on 3 June. With an investment of EUR 30.4 million, the link will have 7.1 km in length, linking Escariz roundabout to Pigeiros junction on the A32.

These works form part of the Corporate Areas En-hancement Programme (PVAE).

NEW ROAD LINK TO THE BUSINESS PARK OF FORMARIZ ON THE A3

IP assigned on 16 June the contract for the construc-tion of the new road link to the Business Park of For-mariz on the A3, in Municipality of Paredes de Coura. The works with total investment of EUR 9 million view to improve the access, mobility and safety conditions of the road link to the Business Park of Formariz with Junction of Sapardos on the A3.

OPENING TO TRAFFIC OF NEW SECTION OF THE A26

The new stretch of the A26/IP8, between Grândola Sul (A2) and Santa Margarida do Sado was opened to traffic on 26 June.

The design, construction and funding of these works fell to sub-concessionaire SPER - Sociedade Portu-guesa para a Construção e Exploração Rodoviária, S.A., within the scope of the Baixo Alentejo Sub-con-cession.

The operation and maintenance of this new infra-structure are carried out directly by IP.

MONDEGO MOBILITY SYSTEM

Launching of stretch Portagem - Alto de São João – Adaptation of Infrastructure to BRT, water supply of Boa Vista and rain water drainage at Vale da Ar-regaça.

The tender published on 24 June on the Official Ga-zette has a base price of EUR 31,765 thousand (thirty one million seven hundred and sixty five thousand EUR), amount to be adjusted to available market offer.

MODERNISATION OF THE RAILWAY LINK BE-TWEEN SINES AND THE SOUTH LINE

IP launched on 29 June the tender for the modernisa-tion of the railway link between Sines and the South Line.

This tender is part of the International South Corridor; it has an implementation period of 720 days and a base price of EUR 33.6 million. This investment is part of the renovation and modernisation of the National Railway Network - Ferrovia 2020.


34 | INFRAESTRUTURAS DE PORTUGAL


4.1 Network Maintenance

4.1.1 Railway Network

Safety, availability, reliability and sustainability are the basic pillars of the railway maintenance activity.

To ensure that the strategy pursued incorporates these references IP has human resources and state-of-the-art equipment allowing a thorough knowledge of the state of the infrastructure. It can thus prioritise its investments and sustain the maintenance and renovation actions required on the 2,526 km-length network under its operation and management.

Based on the experience gained in diverse techni-cal areas: Track and Geotechnics; Catenary and Traction Energy; Signalling; Low Voltage; Civil Construction and Bridges and Tunnels, IP carries out the maintenance and renovation of the railway infrastructure following the best international prac-tices and complying with demanding requirements and safety standards.

Railway maintenance develops the different activ-ities in a continuous cycle from inspection to ex-ecution, taking into account the characteristics of the infrastructure, the type of operation and the service objectives of each line.

Holding an exclusive and unique know-how, IP keeps its inspection and supervision functions in-house, outsourcing execution activities.

Railway maintenance and renovation interventions are supported by two management tools:

Maintenance contracts

Maintenance is foreseen in IP's operating budget under multi-annual contracts in the various speci-alities, and comprise three components:

• Systematic Preventive Maintenance (SPM), car-ried out according to previously defined roadm-ap;

RAILWAYMAINTENANCE

Implem

entation Inspection

Supervision

Programming

Diagno

sis

• Condition-based Preventive Maintenance (CPM), carried out at IP's express request as a result of an inspection and diagnosis of the in-frastructure;

• Corrective Maintenance (CM), to correct anom-alies.

In the first semester of 2020 the amount associ-ated with this type of works stood at EUR 31.4 million, increasing by 14% over the previous year.

Investment in renovation of Long Duration Infrastruc-ture (LDI)

Investment in the renovation of Long Duration In-frastructure (LDI) (not comprised in Ferrovia 2020 Investment Programme) totalled EUR 8.2 million in the first half of the year, increasing by 3% over the same period of 2019.

4. MAIN AREAS OF ACTIVITY

The main function of the Mobile Inspection and Support Units (UMIA) is to systematically and contin-uously monitor roads, collecting and recording information on deficiencies or occurrences arising from unexpected events that do not result from the normal wear and tear and their components, which require urgent intervention and signalling for endangering traffic conditions and/or the immediate safety of users.

CURRENT MAINTENANCE

Current Conservation Management is a systematic process of inspection and preventive and reactive in-tervention, to ensure the maintenance, repair and replacement, in appropriate conditions of functionality, of all components of the road. The purpose is to ensure traffic safety and comfort to users and to prevent the deterioration of the roads and service conditions.

4.1.2 Road Network

NETWORK SUPERVISION

The supervision of the road network is an oper-ational activity required under the Concession Contract with the Portuguese State. These con-tractual obligations include complying with duties of vigilance to protect the road public domain; pa-trolling, exercising the public authority over road administration; surveillance, as provided Nation-al Road Network Regulations; and assistance to road users.

The Network Supervision activity translates into the operational need to patrol roads on a regular basis, in line with a stratification of the network based on specific criteria, such as Annual Average

Daily Traffic (AADT), commercial activity (licences), existing resources and service levels compliance requirements.

This activity is performed by the Mobile Inspection and Support Units (UMIA) based on road-maps comprising the road stretches to be supervised, and road links, including the direction to take and the situations to be assessed.

In the first semester of 2020 the UMIA travelled over 696,000 km of roads throughout the coun-try (18 districts), corresponding to approximately 348,000 km of road.



Routine Inspections are performed using IP's own resources, and cover around 50% of the network every year.

The operational activity is anchored in current maintenance contracts of a multi-year nature, and its intervention is complemented by the Inter-vention Brigades (BIs).

Current Maintenance Contracts

The current road maintenance is ensured by cur-rent maintenance contracts, allowing the compa-ny to carry out road maintenance works to ensure user comfort and safety and prevent the deteriora-tion of the infrastructure.

In the case of the High Performance Network (RAP), these contracts, which also comprise op-eration of these tracks, are called current mainte-nance and operation contracts (CCO).

Intervention Brigades

The intervention brigades perform activities with one-off nature, namely "Emergency", "Preven-tive or Corrective" and "non-core” situations, i.e. which do fit into the current and systematic pre-ventive maintenance framework.

ROUTINEINSPECTION

CURRENTMAINTENANCECONTRACT

INTERVENTIONCREW

INTERVENTION

TECHNICALINSPECTIONS

38 | INFRAESTRUTURAS DE PORTUGAL


UrgentInterventions

Clearing of drainage systems

Signalling of damaged safety rails

Road cleaning after adverse weather conditions

Cleaning of oil on pavement

Cleaning of snow and ice

Removal of obstacles

Road clearing

Elimination of loopholes

Reinstatement of vertical signing and placement of temporary danger signing

Preventive or Corrective interventions

Removal of advertising

Clearing of pavement

Maintenance and clearing of drainage elements and water lines in areas of the road

Maintenance of vertical signalling

Plant cutting, deforestation and vegetation control

Preventive treatment of snow and ice

Non CoreInterventions

Repair and assembly of signs

Stockage of materials

Support to routine inspections

Cleaning of leftover plots

Support to the DAMB for noise monitoring at night

Support to the pilgrims on the roads

Support to the Technical Channel

Maintenance works on the machinery and other company facilities

Support in signalling large scale works (IP or other)

Regular Maintenance

Regular maintenance consists of the performance of highly technically complex works, carried out according to timetable based on technical criteria issued by the Management Systems, taking into account the economic rationale and the optimi-sation of human, operating and opportunity resources. It views to renovate compo-nents of road whilst keeping its initial characteristics, restoring a satisfactory level of service and extending the useful life of a existing structure.

Regular maintenance is organised into a series of roadside intervention programmes, including pavements, geotechnical aspects, engineering structures and road safety.

The most relevant regular maintenance works completed in the first half of 2020 are the following:

• IC2 (EN1) – RENOVATION BETWEEN LEIRIA (km 126+536) AND BOA VISTA NORTE (km 131+000). These works were completed on 8 May 2020; they were carried out by Mota-Engil Engenharia e

Construções, SA, for EUR 3,997 thousand on 4.5 km of the IC2 close to Leiria.

Crossing at km 128+300. Before the works | After the works

• EN362 ALCANEDE (km 31+025) AND SANTARÉM (km 51+713). RENOVATION These works were completed on 16 March 2020; they were carried out by Construções JJR & Filhos,

S.A., for EUR 2,534,517.33 on 20.6 km of the EN362 Santarém.

ENEN362 Before the works | After the works



IPV 2018 PROGRAMME - PREVENTIVE WORKS ON PAVEMENTS

The IPV 2019 Programme was completed in the 1st half of 2020. The purpose of the programme was to improve road traffic conditions on the national road net-work; it involved 23 works contracts, covering a total length of 238 km, with a total expenditure of EUR 18 million.

• EN18. IP2 BEJA (km 360+429) AND PENEDO GORDO (km 365+940). IPV 2019 IMPROVEMENT The most relevant regular maintenance works completed in the first half of 2020 are the following:

EN18 Before the works | After the works

• EN234. NELAS (km 93+750) AND MANGUALDE (km 105+400). IMPROVEMENT of IPV 2019

EN234 Before the works | After the works

COGP

COCS

COGL

CON

COCN

COS

EN223 - IC2 (ARRIFANA JUNCTION AT KM 16+620) AND A1 (IP1) FEIRA (KM 22+700) - RENOVATION

Term: 400 days

Contract amount: € 2,065,265.13

Contractor: CONSTRUÇÕES CARLOS PINHO, LDA.

Consignment: 2018-06-29

Completion: 2020-06-06

IC2 (EN1). LEIRIA (KM 126+536)AND BOA VISTA NORTE (KM 131+000)

EN9-2, KM 0+500. STABILISATION OF EXCAVATION SLOPE

Term: 150 days

Contract amount: € 3,997,000.00

Contractor: MOTA-ENGIL, ENGENHARIA E CONSTRUÇÃO, S.A.



Term: 90 days

Contract amount: € 46,000.00

Contractor: GRANIMARANTE GRANITOS E CONSTRUÇÕES LDA.





COGP

COCS

COGL

CON

COCN

COS

EN206. RIBEIRA DE PENA (KM 102+250) AND VILA POUCADE AGUIAR (KM 114+500). IMPROVEMENT IPV 2019 - NORTE

EN112, KM27+450. STABILISATION OF LANDFILL SLOPE

ENd383 - MONTES VELHOS (KM 57+000)AND ALJUSTREL (KM 63+635). IMPROVEMENT IPV II 2018

Term: 60 days


Contractor: ANTEROS EMPREITADAS SOCIEDADE DE CONSTRUÇÕES E OBRAS PÚBLICAS, S.A.



Term: 90 days


Contractor: WINDPARK, LDA.



Term: 60 days


Contractor: CONSTRUÇÕES JJR& FILHOS, S.A.



ROAD SAFETY

This action plan targeting Road Safety, comprises two types of activities:• One-off interventions, to eliminate black spots, protect urban crossings and ge-

ometric redesigning of junctions.• Interventions on the network with the purpose of ensuring the renovation of

equipment, involving contracts for vertical signalling, road marking, guardrails, traffic lights and public lighting.

4.1.3 25 de Abril Bridge

The management of the 25 de Abril bridge is governed by specific law; in this con-text, IP operates in close cooperation with Lusoponte, whose management duties specifically focus the road component.

A set of actions involving inspections, surveys, maintenance, conservation and im-provement works and the safety of the operation are regularly carried out on an integrated management basis.

For matters relating to operational safety, the work carried out by the 25 de Abril Bridge Safety Board, which is chaired by IP, is particularly important. The board members also include the Instituto da Mobilidade e dos Transportes (IMT), the security forces through the Security Coordination Office, and the emergency ser-vices, represented by the National Civil Protection Authority (ANPC).

The current contract for the Maintenance of the 25 de Abril Bridge started at end of 2018 is in progress. Implementation in the first semester of 2020 totalled EUR 0.8 million.

In overall terms, expenses with the maintenance of the road network in the first half of 2020 amounted to EUR 53.7 million, increasing by EUR 4.4 million over the same period of 2019.



4.2 Investment In The Road And Railway InfrastructureThe amount of investment in the rail and road networks under the direct manage-ment of IP, excluding investment in Public-Private Partnerships, totalled EUR 75.7 million, increasing by 29% in relation to the same period of 2019 (EUR 58.8 million).

INVESTMENTS

IP GROUP

EFFECTIVE 2019

EFFECTIVE2020

Δ%20/19

Railway Investment 41,4 54,5 32%

Road investment PETI3+ 0,4 5,8 1217%

Investments PETI3+ 41,8 60,3 44%

Other railway investments 7,9 8,2 3%

Other road investments 6,5 4,2 -56%

Investment PVAE 2,1 1,7 38%

Other investments 16,6 14,0 -16%

Management supporting investments 0,3 1,4 329%

Total 58,8 75,7 29%

Unit: Euro million

4.2.1 Investment in the Railway Network

Investment in the railway infrastructure consists of the construction, installation and renewal of infrastructure, an activity developed on behalf of the State (assets that are part of the public railway domain) and considered as Long-Duration Invest-ments (LDI).

FERROVIA 2020

The “Ferrovia 2020" Investment Plan is anchored in PETI3+. It aims to strengthen internal and international connectivity (at national and Iberian levels) and competi-tiveness, and encourage private investment and job creation.

Amongst the priorities identified by a broad set of stakeholders, the following are worth mentioning:

• International commitments, including bilateral agreements with Spain and those resulting from the Atlantic Corridor;

• Promote freight transport, particularly of exports;• Set up links between Portuguese ports and the main land borders with Spain.

The plan foresees the development and construction of the main links to Spain and Europe, the modernisation of approximately 1,000 km of existing network, the ren-ovation of part of the northern line and the electrification of more than 400 km of existing lines. These investments will include the beginning of the installation of the European Railway Traffic Management System (ERTMS/ETCS), the extension of the crossing length of trains to 750m and the preparation of migration to the standard rail gauge. The objective is to ensure an increase in rail transport efficiency, namely freight transport, in terms of:

• Increase in capacity, in terms of both loads and number of trains;• Reduction of transport costs;• Decrease in travel time and distances; and • Improvement of safety and reliability conditions.

The Ferrovia 2020 Plan is currently at a critical development stage, moving from pro-ject design phase to works phase (83% is already completed and the remaining is being developed), translating significant increase in financial implementation.

At the end of the first half of 2020, the evolution graph showed significant physical development, with 75% of the works either in progress, or contracted or completed.

Some of the major works comprised in the Ferrovia 2020 Plan are going full swing, namely:

• The largest railway construction of this century, between Évora and Elvas, which has already started;

• Works in Beira Baixa Line between Covilhã and Guarda, which will allow reopening this line;

• Works in the North Line, the main railway line in Portugal;• Electrification of the Minho Line, between Viana do Castelo and Valença.

The financial implementation of the Ferrovia 2020 Plan in the first half of 2020 totalled EUR 54.5 million, increasing by 32% over the same period of 2019. In cumulative terms, the financial implementation of this investment plan at 30 June 2020 totalled EUR 322.3 million.

The current amount of projected investment associated with the Ferrovia 2020 Plan hovers around EUR 2,184 million, of which EUR 189.1 million in 2020. This sum covers everything, from design to works, including expropriation of property, materials and supervision.


International North Corridor

Investment carried out in this Corridor in the 1st half of 2020 totalled EUR 21.2 million, correspond-ing to an implementation rate of approximately 88%. During the period under review this corridor accounted for 39% of overall implementation of the Ferrovia 2020 programme. We point out the in-vestments made in the Beira Baixa Line relating to the modernisation of the Covilhã-Guarda section and the Beira Baixa line concordance link with the Beira Alta Line, in the amount of EUR 14.7 million

The finalisation of these investments foreseen for end 2020 will allow reopening railway travel on the Covilhã-Guarda section of the Beira Baixa Line, which is closed since 2009. These works will also restore the regional and long-distance mobility of the Beira Baixa and Beira Interior Lines, providing easier access to/from the region, and connecting the Beira Alta Line to international rail links.

Investment in the modernisation of the Beira Alta Line in the first semester of 2020 totalled EUR 6.3 million, including the Contract of the Full Track Renovation of the Guarda-Cerdeira section (imple-mentation of EUR 4.5 million).

The overall amount to be invested in this corridor in 2020 is EUR 59.8 million.

VILARFORMOSO

SETIL

Ourique

GUARDA

Castelo Branco

TUNES

FARO

LAGOS VILA REALSTO ANTÓNIO

MANGUALDE

RÉGUA Tua

Pocinho

VALENÇA

Caminha

VIANA DO CASTELO

PORTO DEAVEIRO

SernadaAveiro

PLATAFORMA LOGÍSITCADE CACIA

COVILHÃ

ENTRONCAMENTO

PAMPILHOSA

Abrantes

Santarém

Tomar

Pombal

ALFARELOS

Louriçal

Coimbra BCoimbra

Sta Comba DãoFig

ueira

da Foz

Marujal

Verride

Leiria

LamarosaCALDASDA RAINHA

Portalegre

Torre dasVargens

PORTO DELEIXÕES

Leixões

Lousado

NINE

Porto Campanhã

OVAR

GAIA

Ermesinde CAÍDE

Braga

Guimarães

Espinho

CONTUMIL

PinhalNovo

LISBOA

Sintra

TorresVedras

CASCAISMELEÇAS

Beja

Évora Norte

Funcheira

GRÂNDOLACANAL CAVEIRA

Águas de Moura

ERMIDAS–SADOSINES

Neves-corvo

PORTO DESETÚBAL

PORTO DELISBOA


ÉVORACasa Branca

Pinheiro

Alcácer do Sal

SETÚBAL

Pocei

rãoBom

bel

Vendas novas

PORTODE SINES

ELVASELVAS·CAIA

MATO MIRANDA

TERMINAL DEMERCADORIASDA BOBADELA

(Vigo)



International South Corridor

The International South Corridor connects Lisbon’s metropolitan beltway (including the ports of Sines, Setúbal and Lisbon, the Lisbon airport and logistics platform) to Madrid and the rest of Europe.

Major projects within the scope of this corridor view to ensure the rail link between the South of Portugal and Europe, in order to provide an effi-cient transport of goods by railway, linking ports in the south of the country to Caia border in Spain.

Implementation of the works for the construction of the International South Corridor in the first half of 2020 totalled EUR 19.3 million, of which EUR 16.7 million concern the three construction contracts for the new railway line between Évora Norte and the East Line, including supervision works.

The general contract for the modernisation of the East Line on the Elvas (inclusive) - Fronteira sec-tion was completed in March 2020.

The amount of expenditure in this corridor in 2020 is estimated at EUR 69.8 million.

VILARFORMOSO

SETIL

Ourique

GUARDA

Castelo Branco

TUNES

FARO


MANGUALDE

RÉGUA Tua

Pocinho

VALENÇA

Caminha

VIANA DO CASTELO

PORTO DEAVEIRO

SernadaAveiro


COVILHÃ

ENTRONCAMENTO

PAMPILHOSA

Abrantes

Santarém

Tomar

Pombal

ALFARELOS

Louriçal

Coimbra BCoimbra

Sta Comba DãoFig

ueira

da Foz

Marujal

Verride

Leiria


Portalegre

Torre dasVargens

PORTO DELEIXÕES

Leixões

Lousado

NINE

Porto Campanhã

OVAR

GAIA

Ermesinde CAÍDE

Braga

Guimarães

Espinho

CONTUMIL

PinhalNovo

LISBOA

Sintra

TorresVedras

CASCAISMELEÇAS

Beja

Évora Norte

Funcheira


Águas de Moura

ERMIDAS–SADOSINES

Neves-corvo

PORTO DESETÚBAL

PORTO DELISBOA


ÉVORACasa Branca

Pinheiro

Alcácer do Sal

SETÚBAL

Pocei

rãoBom

bel

Vendas novas

PORTODE SINES

ELVASELVAS·CAIA

MATO MIRANDA


(Vigo)

VILARFORMOSO

SETIL

Ourique

GUARDA

Castelo Branco

TUNES

FARO


MANGUALDE

RÉGUA Tua

Pocinho

VALENÇA

Caminha

VIANA DO CASTELO

PORTO DEAVEIRO

SernadaAveiro


COVILHÃ

ENTRONCAMENTO

PAMPILHOSA

Abrantes

Santarém

Tomar

Pombal

ALFARELOS

Louriçal

Coimbra BCoimbra

Sta Comba DãoFig

ueira

da Foz

Marujal

Verride

Leiria


Portalegre

Torre dasVargens

PORTO DELEIXÕES

Leixões

Lousado

NINE

Porto Campanhã

OVAR

GAIA

Ermesinde CAÍDE

Braga

Guimarães

Espinho

CONTUMIL

PinhalNovo

LISBOA

Sintra

TorresVedras

CASCAISMELEÇAS

Beja

Évora Norte

Funcheira


Águas de Moura

ERMIDAS–SADOSINES

Neves-corvo

PORTO DESETÚBAL

PORTO DELISBOA


ÉVORACasa Branca

Pinheiro

Alcácer do Sal

SETÚBAL

Pocei

rãoBom

bel

Vendas novas

PORTODE SINES

ELVASELVAS·CAIA

MATO MIRANDA


(Vigo)

North-South Corridor

Up to June 2020 EUR 11.2 million had been imple-mented in this corridor, out of an overall estimated investment of EUR 43.0.

We point out the contract for the Electrification of the Minho Line between Viana do Castelo and Va-lença-Fronteira, including technical stations, with an implementation rate of 96%, corresponding to EUR 7.9 million out of a overall expenditure of EUR 8.2 million.

The completion of the electrification will allow operators to benefit from the investment made in this line for the use of electric traction materi-al according to defined schedules, permitting the optimisation of operating models and generating competitiveness conditions for railway operation. The amount of expenditure in Minho Line in 2020 is estimated at EUR 18.4 million.

As for the North Line, its renovation will provide stable operating conditions, eliminating constraints and improving safety and reliability levels.

Moreover, it will prevent the deterioration of the infrastructure and allow resuming speed levels to 140 km/h in average. An increase in maximum speed will not be possible, however, as there will be no changes in track layout. The works will allow eliminating complementary margins currently pro-vided in the Network Directory.

Expenditure in the Ovar-Gaia section in the first half of 2020 totalled EUR 1.4 million (19% of es-timated expenditure), due to a delay in the as-signment of the works for the renovation of the Espinho-Gaia section, which only occurred in July 2020.

Expenditure in the Vale de Santarém-Entronca-mento section totalled EUR 1.2 million in the first half of 2020. Overall investment on the North Line in 2020 is estimated at EUR 24.7 million.



Secondary Corridors

Works in secondary corridors include the modern-isation of the Douro, Oeste, Algarve and Cascais lines.

The amount to be invested in 2020 is EUR 16.3 million

In the first half of 2020 the amount implemented totalled EUR 2.8 million, including EUR 1.5 million in the electrification of Caíde/Marco stretch on the Douro Line.

The West Line recorded an implementation of EUR 0.7 million; the assignment of the modernisation works on the stretch between Meleças and Torres Vedras should occur in the second half of the cur-rent year.

The Algarve Line recorded an implementation of EUR 0.6 million up to June 2020.

OTHER INVESTMENTS

Other investments in the rail infrastructure aim to reinforce safety conditions and improve the reli-ability and quality of the service provided to the clients. These interventions also aim to improve the integration of the rail infrastructure in the sur-rounding territory, enhancing the positive exter-nalities and mitigating the negative ones.

In the first half of 2020 expenditure totalled EUR 8.2 million, in line with the same period of the pre-vious year. The most relevant investments were made on the Beira Baixa Line (EUR 1,270 thou-sand), North Line (EUR 1,263 thousand), Alentejo Line (EUR 1,348 thousand) and South Line (EUR 597 thousand).

On the North Line, the most relevant works relate to the implementation of final RCT+TP (traction re-turn current) measures, in the amount of EUR 1 million, slope stabilisation on the Beira Baixa Line at km 35,520-69, in the amount of EUR 859 thou-sand; on the Alentejo Line an amount of EUR 1.3 million was invested in contract for Alentejo Line Poceirão - Pegões, Subst.-Fixings.

VILARFORMOSO

SETIL

Ourique

GUARDA

Castelo Branco

TUNES

FARO


MANGUALDE

RÉGUA Tua

Pocinho

VALENÇA

Caminha

VIANA DO CASTELO

PORTO DEAVEIRO

SernadaAveiro


COVILHÃ

ENTRONCAMENTO

PAMPILHOSA

Abrantes

Santarém

Tomar

Pombal

ALFARELOS

Louriçal

Coimbra BCoimbra

Sta Comba DãoFig

ueira

da Foz

Marujal

Verride

Leiria


Portalegre

Torre dasVargens

PORTO DELEIXÕES

Leixões

Lousado

NINE

Porto Campanhã

OVAR

GAIA

Ermesinde CAÍDE

Braga

Guimarães

Espinho

CONTUMIL

PinhalNovo

LISBOA

Sintra

TorresVedras

CASCAISMELEÇAS

Beja

Évora Norte

Funcheira


Águas de Moura

ERMIDAS–SADOSINES

Neves-corvo

PORTO DESETÚBAL

PORTO DELISBOA


ÉVORACasa Branca

Pinheiro

Alcácer do Sal

SETÚBAL

Pocei

rãoBom

bel

Vendas novas

PORTODE SINES

ELVASELVAS·CAIA

MATO MIRANDA


(Vigo)

BUSINESS AREAS ENHANCEMENT PROGRAMME (PVAE)

In February 2017, the Government presented the Business Areas Enhancement Programme, which aims to strengthen the competitiveness of companies, foster job creation and increase exports.

As far as road links are concerned, the programme aims at achieving the following objectives:i. Increase road accesses to the Business Areas

already consolidated and deemed relevant at regional and national levels;

ii. Eliminate/minimize local disconnections, en-suring a supporting network with adequate performance standards;

iii. Ensure that the road infrastructures foreseen are the most adequate considering the char-acteristics and estimated traffic volumes, pro-viding optimal solutions in technical and finan-cial terms;

iv. Reduce travel time from the main road (IP and IC) to the Business Areas, thus contributing to reduce context costs;

v. Enhance the competitiveness of the Business Areas, thus contributing to:• Improve the performance of production

units already installed;• Attract new private investment;

vi. Improve road and pedestrian circulation, di-verting heavy vehicle traffic in:• Consolidated urban areas;• Roads the profile of which is not compatible

with heavy vehicle traffic;vii. Boost the business fabric of the municipalities

where the Business Areas are located, spur-ring the country's economy and international-isation, from a broader perspective;

viii. Mitigate situations of traffic jams, thus contrib-uting to reduce pollutant emissions.

The programme views the enhancement of 12 Business Areas: 8 in the Northern Region, 2 in the Centre Region and 2 in the South Region, covering 63 km overall and projected investment of around EUR 140 million.

This investment is mostly based on the budget of Infraestruturas de Portugal. The remaining part is supported by the municipalities involved, namely the payment of the land expropriation required and a percentage of the cost of the works. No Eu-ropean funding is available.

NORTH REGION

1 Link of Escariz (Arouca) Business Park to A32 (Sta. Maria da Feira) – in contracting stage

2 Link to the Industrial Area of Fontiscos | Santo Tirso

3 Link of Industrial Area of Cabeça de Porca | Fel-gueiras to the A11

6 Link of Business Park of Formariz (Paredes de Coura) to the A3 (Sapardos junction) – in con-tracting stage

8 Link of Business Park of Lanheses to ER305 (Viana do Castelo) – works completed in 2019

9 Road access to Avepark in Guimarães - Parque de Ciência e Tecnologia das Taipas (Gandra In-dustrial Areas) – Contract for the construction of Access Road to Avepark – ER206” award-ed in February 2020

4.2.2 Investment in the Road Network



10 Improvement of road accesses to business ar-eas of Famalicão Sul | Ribeirão and Lousado - works completed in 2019

11 Improvement of road accesses to Business Area of Lavagueiras (Castelo de Paiva)

CENTRE REGION15 Accesses to the Industrial Area of Riachos (En-

troncamento/Golegã/Torres Novas16 Accesses to the Industrial Park of Mundão (Vi-

seu/Sátão)

ALENTEJO

17 Improvement of accesses to the Industrial Area of Campo Maior

18 Link of the Industrial Area of Rio Maior to EN114

The amount implemented in this programme in the first half of 2020 totalled EUR 1.7 million, including contract for EN326 - Feira (IC2/A23)/Escariz (km 0+000 at km 7+441), with an implementation of EUR 680 thousand.

PETI3+ ROAD

The amount of investment in this Programme in the first half of 2020 totalled EUR 10.5 million, including EUR 4.7 million with the works on IP3 (between Penacova and Bridge over Dão River), which were recognised for accounting purposes as maintenance works.

In terms of implementation in the first half of 2020, we point out the IP3 Coimbra/Viseu project, in-cluding works on a stretch between Penacova and Bridge over river Rio Dão, which are in progress, and the development of studies for the remaining layout. Overall implementation in the first half of 2020 totalled EUR 4.9 million, of which EUR 4.7 million relate to the ongoing works.

The contract for the completion of the cross border link at Vilar Formoso on IP5 (Vilar Formoso/Fron-teira), which extends into Spanish territory, is also worth noting. In the first half of 2020 the amount implemented totalled EUR 3.7 million.

Also in progress is the contract for the EN14-Maia (Jumbo Node), with an implemented amount of EUR 1.9 million in the first semester of 2020.

It should be noted that two of the undertakings initially allocated to PETI3+ are under development within the framework of the Business Areas En-hancement Programme, namely the improvement of EN14 – Santana/Vitória and widening between Vitória and Famalicão, already completed.

OTHER INVESTMENTS

In what concerns Other Road Investments, imple-mentation in the first half of 2020 totalled EUR 4.2 million, including construction of link Mondim de Basto-EN210.

INVESTMENT IN MANAGEMENT SUPPORT STRUCTURES

The amount of investment in management support structures totalled EUR 1.4 million in the first half of 2020, i.e. 25% of the amount foreseen in the budget.

This investment comprised the purchase of ma-chinery and equipment (EUR 969 thousand), in-cluding EUR 466 thousand in laptops, as needed to implement the IP Group’s COVID19 contingency plan and allow the teleworking of approximately 50% of the workforce.

Expenses in software in the first half of 2020 to-talled EUR 247 thousand.


4.3 Use of the Road and Rail Network

4.3.1 Use of the Railway Network (Train.km)

The Network Directory is an annual document list-ing the characteristics of the national rail network (RFN), the general conditions of access, and other services related to the railway activity provided by IP to railway operators. This document also ex-plains the principles governing the fixing of fees and tariffs, including methodology and rules to be followed.

In the first half of 2020 a total of 15.9 million train-kilometre (TK) were travelled by rail opera-tors, of which 83% were passenger traffic and 17% from the freight segment.

USE OFINFRASTRUCTURE

20191ST HALF

20201ST HALF Δ% 20/19

Passenger 15 014 13 285 -11,5%

Freight 2 927 2 630 -10,2%

Total 17 941 15 915 -11,3%

Unit: million of TK

Demand decreased by 11.3% in the first half of 2020 in relation to the same period of the previous year (corresponding to 2.0 million train kilometre). This decrease in the use of the railway infrastruc-ture was mainly due to a decline in passengers (-11,5%) motivated by the COVID19 pandemic.

The rail operators operating on the RFN are CP and Fertagus for passenger transport and Medway, Takargo and Captrain for freight transport, the lat-ter holding a minor market share (0.01%).

CP continues to be the operator with the highest impact on IP's turnover, with a market share of nearly 78%.

13%

6%

78%

3% 0%

TKS MARKET SHARES 2020

CP

FERTAGUS

MEDWAY

CAPTRAIN

TAKARGO

4.3.2 Railway Infrastructure Management - Programme Contract

In 2016 the State and IP signed a 5-year Pro-gramme Contract for the National Railway Net-work, in compliance with Decree-Law 217/2015, of 7 October.

The Contract provides the State's obligations to fi-nance the management of the infrastructures and IP’s requirements to meet user-oriented perfor-mance targets, in the form of quality indicators and criteria covering such aspects as train performance, network capacity, asset management, activity vol-umes, safety levels, and environmental protection. The contract also sets financial efficiency objec-tives for IP in the form of revenue and expenditure indicators.

The structure of service level indicators, including financial indicators, is shown below:

1. Additional Margins correspond to the travel times added to planned time tables to reflect the speed limitations imposed on the infra-structure by scheduled works;



2. Railway Punctuality corresponds to the aggre-gate indicator representative of annual punctu-ality recorded on the entire railway network in operation, as measured by the delay of trains on arrival;

3. Railway Customer Satisfaction is the level of satisfaction obtained in the satisfaction sur-veys sent to the Railway Operators and other users of the rail network in operation;

4. Network Availability reflects the percentage of time the infrastructure was available for opera-tions;

5. Railway Assets Management aims to assess the state of repair of the railway infrastructure;

6. Activity Volumes corresponds to the sum of train-km travelled on the national rail network in the year;

7. Safety Level is determined by the ratio of the number of significant accidents to the total train-km, and seeks to assess railway safety according to actual train traffic.

8. Environmental Protection is the percentage re-duction of the number of people exposed to noise levels higher than the limits imposed in

the General Noise Regulation, in relation to the total number of people exposed to those noise levels;

9. Rail revenue evaluates IP's success in obtain-ing core revenue;

10. Other Revenue, which evaluates the evolu-tion of non-core revenue from supplementary activities associated with the operation of the railway infrastructure;

11. Maintenance Expenses evaluates the evolu-tion of expenditure on maintenance;

12. Expenditure with other ESS assesses the de-velopment of expenditure on External Sup-plies and Services;

13. Personnel Expenses evaluates the evolution of expenditure on staff.

Calculation formulas and performance targets have been defined for each of these performance indi-cators. The following results were obtained in first half of 2020:

INDICATOR GOAL FOR 2020 RESULTS1ST HALF 2020

DEVIATION1ST HALF 2020

1 Additional margins 32 67 109,38%

2 Railway punctuality ≥ 90,00% 91,60% 1,60 p.p.

3 Railway customer satisfaction ≥ 56,00% n.d.*1 n.d.*1

4 Network Availability ≥ 88,40% 86,95% -1,45 p.p.

5 Management of Railway Assets ≥ 61,30% 60,95% -0,35 p.p.

6 Business volumes ≥ 37 366 349 15 807 589 TK -14,93%*2

7 Safety Levels ≤ 0,942 1,810 92,13%

8 Environment protection 3,00% 0,00% -3,00 p.p.

9 Railway income 100,00% 83,68% -16,32 p.p.

10 Other income 5,60% 6,09% 0,49 p.p.

11 Maintenance Expenses 1,00% 9,87% 8,87 p.p.

12 Expenses with other external supplies and services 0,00% -12,13% -12,13 p.p.

13 Personnel Expenses -3,00% 6,06% 9,06 p.p.

*1 Annual indicator, to be determined at the end of 2020.*2 Determined deviation, according to half-year target for this indicator.

4.3.3 Traffic on the road network (Average Daily Traffic for the Semester - SADT)

Traffic on IP’s road network in the first half of 2020 evolved downwards, dropping by 25.6 % on the whole IP network (-25.8% on motorways).

IP NETWORK

HALF-YEARLY AVERAGE DAILY TRAFFIC (AADT) Change

2020/20191ST HALF 2019 1ST HALF 2020

National Road Network (IP and Sub-concessions) 5 884 4 401 -25,2%

National Motorway Network (IP and Sub-concessions) 24 155 17 914 -25,8%

Weighted Total 11 549 8 591 -25,6%

NATIONAL MOTORWAY NETWORK

HALF-YEARLY AVERAGE DAILY TRAFFIC (AADT) Change

2020/20191ST HALF 2019 1ST HALF 2020

National Motorway Network - Sub-concessions 10 200 7 756 -24,0%

National Motorway Network - IP 46 142 33 918 -26,5%

Weighted Total 24 155 17 914 -25,8%

Note: Traffic relating to the metered network and sub-stretches with full information in both periods under review

With regard to Annual Average Daily (AADT), available data concern 2019, showing an upward trend started in 2014, as can be seen in the following graph on the evolution of average Daily Traffic on IP’s qualified road network.

5 4125 354

5 4925 557

5 621

5 7795 895

5 956

TMDA2012

TMDA2013

TMDA2014

TMDA2015

TMDA2016

TMDA2019

IP QUALIFIED NETWORK

TMDA2017

TMDA2018*



4.3.4 Service levels on the road networkThe concession contract that IP - Infraestruturas de Portugal, SA has with the Por-tuguese State, entered into on 23 November 2007 and published on the same date through Resolution of the Council of Ministers 174-A/2007, later amended by De-cree-Law 110/2009 of 18 May, provides that the road sections on the national road network must comply with service levels in accordance with the PRN2000: Level B for the Core Network and Level C for the Supplementary Network

The latest figures available concern the compliance level of service levels in 2019, which are shown in the following graph:

TYPE

COMPLIANCE NON COMPLIANCE

LENGTHTOTAL(km)

WITHOUTRESTRICTIONS

WITHRESTRICTIONS TOTAL

%AMOUNT

%

(km) (km) (km) (km)

IP 489,7 96 585,7 100 0 0 585,7

EDIP 224,7 47,3 272 100 0 0 272

IC 947,8 55,1 1 002,9 100 0 0 1 002,9

EDIC 1039 93,1 1 132,1 100 0 0 1 132,1

EN/ER 7 727,3 496,7 8 224 98,95 87,5 1,05 8 311,5

Total 10 428,5 788,2 11 216,7 99,2 87,5 0,8 11 304,2

4.4 Public-Private PartnershipsIP’s road activity includes all roads managed pursuant to public-private partnership (PPP), namely Sub-concessions.

Also according to the terms of the Concession Contract established between the Grantor State and former EP, Infraestruturas de Portugal (IP) is contractually re-sponsible for making the State's payments and for receiving the amounts to be collected by the State, pursuant to the State Concession contracts, this, notwith-standing IMT being, according to Decree-Law 77/2014, of 14 May, the relevant entity to represent the Grantor State in matters of road infrastructure.

4.4.1 Renegotiation of the Concession and Sub-Concession Contracts

The negotiation process concerning all State Concession Contracts was conclud-ed during 2015, with the signature of nine contracts corresponding to the Norte, Costa de Prata, Beira Litoral/Beira Alta, Grande Porto, Grande Lisboa, Interior Norte, Beira Interior, Algarve and Norte Litoral concessions.

These nine contracts were submitted to the Audit Court for appreciation, this Court having returned them with the indication that they were not sub-ject to prior supervision thus being already in full effect.

With regard to the negotiation process of the sub-concession contracts, the situation is as de-scribed below.

ALGARVE LITORAL SUB-CONCESSION

The Amended Sub-concession Contract (CSA) of Algarve Litoral, signed on 23 October 2017, was submitted to the prior auditing by the Audit Court, but taking into account the decision of the Court dated December 2017, IP communicated to the Sub-concessionaire that the contract would have to undergo, once again, the prior supervision of the Audit Court. After examining the case, the Au-dit Court refused to grant its approval on 20 June 2018, pursuant to ruling 29/2018.

The Audit Court, through ruling 13/2019 of 28 May, kept its initial refusal to approve the Contract for Algarve Litoral Sub-concession. The Board of Di-rectors: thus decided to appeal from this decision to the Constitutional Court, and it re-submitted the Amended Contracts for Baixo Alentejo, Autoestra-da Transmontana and Pinhal Interior Sub-conces-sions to the prior audit of the Audit Court.

According to summary decision 418-2020, dated 1 September 2020, the Constitutional Court re-jected the admission of the said appeal, which IP challenged, by entering claim against such decision on 14 September 2020 with the full Constitutional Court.

Meanwhile, on 17 July 2019, the Sub-concession-aire asked IP to accept its termination of the con-cession contract, under the terms of the relevant law. On 4 September 2019, in the light of the exist-ing conflict with the sub-concessionaire, RAL (ro-tas do Algarve) triggered arbitration proceedings against IP, which are ongoing.

From an operational standpoint, the Sub-conces-sionaire suspended all operation and maintenance activities as from 11 midnight of 6 July 2018.

Against this background, within the scope of its supervision powers provided in the said sub-con-cession agreement, IP took all necessary steps to ensure safety conditions for people and goods, while triggering the mechanisms provided in the contract to deal with the sub-concessionaire’s fail-ure to comply with its operation and maintenance obligations under the contract.

Subsequently, the sub-concessionaire resumed the activities defined in the Amended Sub-con-cession Contract (CSA), on the grounds that it is in force since 27 December 2017, refusing any inter-vention in roads which will fall under IP’s direct ju-risdiction under the said contract. This situation has forced IP to intervene in this Sub-concession net-work in emergency situations and to ensure road safety conditions, taking into account the express breach by the Sub-concessionaire.

BAIXO TEJO AND LITORAL OESTE SUB-CONCESSIONS

Given the refusal of the Audit Court to approve the Algarve Litoral Sub-concession contract, the Baixo Tejo and Litoral Oeste Sub-concessionaires considered that the negotiation process was not feasible in the exact terms of the Memorandums of Understanding (MoU) established with the Nego-tiations Committee, which were not extended. This led to the expiry of the MoUs, and the reinstate-ment of the rights and obligations of IP and the sub-concessionaires, which they held on the date of signature of the MoU; in other words, the Re-formed Sub-concession Contracts were resumed.

Both sub-concessionaires deemed that the negoti-ations should not proceed. AEBT, the sub-conces-sionaire for Baixo Tejo communicated this fact to IP, adding that the (formal) permanence of ER377-2 within the object of the sub-concession, on a par with the inability of AEBT to continue its construc-tion and operation (due to the annulment of the DIA), financially imbalance the sub-concession Contract, depriving the project of absolutely es-sential revenue to cover, among other things, the widening works and major repairs foreseen in the Work Plan.



Following on from this, IP, on 07/02/19 under De-cree-Law 111/2012, of 23 May, requested from SEI the establishment of a negotiation committee, based on the objective necessity of having the contract reflect the impossibility of constructing the ER377-2. This committee was set up on 22 July 2019 by order of UTAP. At the date of this report, the negotiation process between the nego-tiating committee and AEBT is still ongoing.

BAIXO ALENTEJO, PINHAL INTERIOR AND AUTOESTRADA TRANSMONTANA SUB-CONCESSIONS

The Amended Sub-concession Contracts (CSA) of Baixo Alentejo, Pinhal Interior and AE Transmon-tana are effective since 3 April 2017, 21 December 2017 and 24 May 2018, respectively.

However, following the Audit Court's refusal to approve the CSA for Algarve Litoral, issued on 22 June 2018, IP decided to suspend payments to these 3 sub-concessionaires at the end of August 2018. In the light of the continued absence of reply by the Audit Court about the appeal submitted, in November 2018 IP decided to resume payments (but only part) due to the three sub-concession-aires, a situation which remained valid in the first semester of 2019.

In June 2019, in the light of the Audit Court's Rul-ing 13/2019, IP re-submitted the CSA for Baixo Alentejo, Pinhal Interior and AE Transmontana to the prior supervision of the Audit Court.

The Court has already decided, having notified, in the case of Baixo Alentejo CSA, that “the plea in objection of res judicata is accepted, not knowing the merit of the claim for the granting of approv-al concerning the proceedings...” and in relation to Autoestrada Transmontana and Pinhal Interior CSA “it decided to return the contracts to the proceed-ings referred to above, as they are not subject to prior supervision”.

In view of the above, in 2019 IP resumed pay-ments to sub-concessionaires in accordance with respective CSA and settled the amounts due.

DOURO INTERIOR SUB-CONCESSION

On the Douro Interior sub-concession, the rene-gotiations are finished, and the final negotiation minutes were signed on 15 February 2018. The government approval process is under way.

Again it should be noted the Audit Court’s refusal to approve the renegotiation of the Algarve Lit-oral sub-concession, in accordance with Ruling 29/2018, as amended by Ruling 13/2019 of 28 May, from which IP appealed to the Constitutional Court, due to the doubts arising from the said Rul-ings, is affecting the approval of the Negotiation Committee's report by the relevant authorities, and therefore the signature of the CSA.

4.4.2 Completion of the sub-concession network

The seven sub-concession contracts in force cover a total length of approximately 1,028 km, of which 911 km are operating (finished work), as summa-rised in the following table.

Given the problems surrounding the Algarve Lit-oral Sub-concession contract, there are 82 km of new road/renovation to be completed and 26 km of works suspended.

On the Baixo Tejo sub-concession, negotiation is ongoing (as mentioned in point 4.4.1) concerning the construction of 9km, which related to ER337-1.

The sections of the Pinhal Interior, Transmontana and Baixo Alentejo sub-concessions are no longer being considered as part of the total length, which, according to the Amended sub-concession Con-tracts, have come under the direct jurisdiction of IP.

On 26 June 2020 the newly built A26/IP8 – Grân-dola Sul/Santa Margarida do Sado stretch by Baixo Alentejo sub-concessionaire was opened to traffic; the operation and maintenance is to be ensured directly by IP as provided in respective traffic.

Table below shows the extension of the sub-concessioned network, according to sub-concession contracts in force (as men-tioned in 4.1.1).

SUB-CONCESSION IN OPERATION (*)BEING BUILT

NOT BUILT TOTALNEW CONSTRUCTION RENOVATED

Douro Interior 241 0 241

AE Transmontana (CSA) 136 0 136

Baixo Alentejo (CSA) 113 0 113

Baixo Tejo 60 9 69

Algarve Litoral 165 82 26 273

Litoral Oeste 102 0 102

Pinhal Interior (CSA) 93 0 93

Total 911 82 35 1 028

(*) Includes stretches which are under operation though they were still not renovated.Unit: km

4.4.3 2020 Charges

Payments made during the first half of 2020 relating to road concessions and sub-concessions totalled EUR 678.6 million (excluding VAT), increasing by EUR 42.1 million in relation to the same period of 2019.

Payments of Availability and Availability B of road concessions totalled EUR 356.1 million, in line with the same period of 2019.

With regard to sub-concessions there was an in-crease by EUR 29.2 million as compared to the same period of 2019, explained by the partial payments made in the first half of 2019 concern-ing SC Transmontana, Pinhal Interior and Baixo

Alentejo, and finally settled in the second half of 2019.

Payments relating to contributions and rebal-ances totalled EUR 23.3 million in the first half of 2020, increasing by EUR 15.7 million over 2019. This rise was mainly due to two factors:

• Payment of EUR 6.9 million to Brisal, budg-eted in 2019 but forwarded to 2020, which added to payment due to Brisal relating to 2020;

• Payment of EUR 7.8 million relating to legal costs with Douro Litoral SC.

Payments relating to major repairs totalled EUR 0.6 million, i.e. EUR 1.5 million less than in the same period of 2019 and EUR 31.1 million less than the amount budgeted for the first half of 2020.



It should be noted that the budget implemen-tation concerning major repairs is dependent on a number of external factors, which are be-yond IP's responsibility, namely the approval by IMT of the scope and amount of the inter-ventions, the development by concessionaires of contract procedures and the performance of the works, which is also the responsibility of concessionaires. The amount foreseen in the budget annually is also identified by IMT.

In the first half of 2020 the rate of implemen-tation of the amounts foreseen in the budget stood at 88% as a result of two factors: no payment made to Algarve Litoral SC and re-duced number of major repairs carried out.

CONCESSIONS AND SUB-CONCESSIONS EFFECTIVE JUNE 2019

CUMULATIVE JUNE 2020

EFFECTIVE BUDGET IMPLEMENTATION %

Concessions - Availability + Availability B 357,4 356,1 364,2 98%

Algarve 28,0 26,0 25,7 101%

Beira Interior 32,7 23,0 22,7 101%

Beira Litoral e Alta 60,6 66,0 66,8 99%

Costa de Prata 27,2 28,4 29,6 96%

Grande Lisboa 16,1 15,6 16,4 95%

Grande Porto 40,3 41,4 42,9 96%

Interior Norte 45,5 42,0 43,0 98%

Norte 72,8 82,3 84,3 98%

Norte Litoral 34,1 31,4 32,8 96%

Sub-concessions - Availability+Service 269,4 298,6 367,2 81%

AE Transmontana 22,4 31,1 30,9 101%

Algarve Litoral 0,0 0,0 70,0

Baixo Alentejo 21,6 26,0 25,4 102%

Baixo Tejo 40,4 44,2 44,3 100%

Douro Interior 48,4 48,9 49,3 99%

Litoral Oeste 75,2 76,3 75,3 101%

Pinhal Interior 61,3 72,1 71,9 100%

Contributions and Rebalances 7,6 23,3 6,7 346%

Major Repairs 2,1 0,6 31,7 2%

Total 636,5 678,6 769,9 88%

Unit: Euro million (without VAT)


4.5 Telecommunications and Business Cloud

Within the IP Group, it falls to IP Telecom to manage the surplus capacity of the telecommunications infrastructure and data processing centres (CPD/Datacen-tres), translated into the provision to the market of Information and Communica-tion Systems and Technology services, in addition to ensuring the provision of such base services to the IP Group.

IP Telecom is a Telecommunications Operator li-censed by ANACOM as provider of telecommu-nication services available to the public (public networks) and specialised in telecommunications infrastructure networks.

Its activity is anchored in the major national tel-ecommunications infrastructure, based on optical fibre installed along the national railway network and the road technical channel, deployed on the road network managed by IP, providing a unique nation-wide grid of high speed networks. Addi-tionally, the company offers a wide range of in-formation systems and cloud computing solutions, particularly as Infrastructure as a Service (IaaS) supplier, based on its 3 cutting-edge datacentres.

IP Telecom has a strong market presence in the tel-ecommunications market as supplier of high speed fibre services for telecom operators and a grow-ing number of ITC services to the private business market and the public administration.

In the first half of 2020 IP Telecom continued to strengthen its portfolio of products and services with new corporate solutions, particularly in the cyber security field, seeking to deepen the resil-ience levels required to ensure the security of its clients’ information.

The provision of high quality services is a core aspect of IP Telecom’s activity. In the first half of 2020 the company reached availability levels of over 99.98%.

In the period under review the monitoring audit was carried out within the scope of ISO9001 - Corporate Management System (CMS) focused on the “development, management and operation of information systems, network infrastructures and telecommunications and hosting”, which was free of “non compliances”.

In the first half of 2020 revenues (including the technical road channel) totalled EUR 5.9 million, in line with the same period of the previous year.

It is worth noting that the contingency plans de-ployed against the Covid19 background allowed to maintain the service quality and turnover.

4.6 Engineering Services

IP Engenharia's mission is to carry out transport engineering studies and projects, managing, coordinating and supervising works in this field and promoting the Group's international business.

IPE provides specialised railway engineering ser-vices, from the preparation of studies, projects to the supervision of works, particularly in the con-text of the investments under the responsibility of IP. The company's activity is driven, therefore, by the investments and respective orders of IP, with which it works closely, in order to maximise the production capacity of the available resources.

In the period under review adjustments were car-ried out in the Organisation of the IP Group, effec-tive as of 1 June 2020. This reorganisation views the evolution of the company towards a special-ised project engineering company with the same

operating standards of private peer companies, its vast know-how providing a differentiated strategic reserve. In this light, with a view to this speciali-sation and the instrumental nature of IPE as sub-sidiary, the Management and Supervision Depart-ment was extinguished, giving rise to the Works Coordination Division. The Contract Management and Planning team, which formed part of the said department, was integrated into IP.

In the first half of 2020 the company focused its activity on the preparation and revision of engi-neering projects and respective technical coor-dination, amongst which we point out: Ermidas/Sines Project comprised in the Ferrovia 2020 In-vestment Plan; completion of the Layout Project for Coimbra B Station; development of electrifica-tion project for the Marco/Régua section on the Douro Line (International South Corridor); consul-tancy to IP within the scope of the Cascais Line project (macro phase out scenario for the works vs. operating conditions).

Additionally the company is providing manage-ment and supervision services to IP concern on Minho Line and the North Line (RCT+TP Alberga-ria/Alfarelos) (completed in June).

Within the scope of its strategic approach to the in-ternational market, from a strictly institutional and proactive logic, the company continues to provide technical assistance viewing the improvement of strategic planning to the Ministry of Transports and Communications of the Republic of Mozambique in partnership with China Tiesiju Civil Engineering, under the technical coordination of IPE.

(Extra group) revenues in the first half of 2020 amounted to EUR 13 thousand, reflecting the stra-tegic line of the IP Group of allocating IP Engenha-ria’s resources to intra-group services, to meet IP’s Ferrovia 2020 Investment Programme.

4.7 Property and Commercial Real Estate Management

IP Património (IPP) is responsible for managing the real estate assets of the IP Group, holding experience in the commercial operation of the network of stations and transport interfaces, ensuring its efficient use, enhancement, renovation and maintenance.

IPP business activity was strongly affected by the Covid-19 pandemic. On 18 March the President of Portugal declared the State of Emergency (Decree 14-A/2020) to be enforced by the Portuguese Government, against a background of public ca-lamity and public health emergency caused by the disease. This state of emergency was effective until 2 May 2020. The Government subsequently and consecutively declared situations of calamity, contingency and alert.

The situation emerging from COVID19 pandem-ic is severely affecting and will continue to affect the operation of IPP’s sub-concessionaires and re-quired the adoption of measures to mitigate such impacts. As a result, in accordance with article 11 of Law 4-C/2020 of 6 April and subsequent amendments, in addition to the moratoria granted concerning invoicing relating to March, payment exemption measures were taken concerning 374 contracts relating to April, May and June invoicing, totalling EUR 922 thousand, as well as compensa-tion reduction measures affecting 21 contracts in April and May and 368 in June, totalling EUR 244 thousand.



Despite the unfavourable financial and economic context motivated by the pandemic, in the first half of 2020 IPP kept 195 sub-concession leases (75 of which are newly entered) in a total amount of EUR 0.49 million/year. Disposals (15 properties) cashed in EUR 1.38 million in the period under review.

Amongst the leases entered we point out the fol-lowing:

• Sub-concession of three houses and adjoining land on the Douro Line;

• Sub-concession of office at Empreendimento Centro Campanhã;

• Sub-concession of plot of land close to Porto--Alfândega railway station for car park.

• Sub-concession of plot of land close to Cascais railway station for Road Terminal;

• Sub-concession of discontinued railway channel at Alfândega branch for the creation of Ecopis-ta-Porto.

Revenues from the real estate property business (extra Group) in the first half of 2020 totalled EUR 6.4 million, falling by 19% in relation to 2019.

The economic and financial performance of the IP Group in the first half of 2020 was seriously affected by the COVID19 pandemic, which drove a sharp reduction in the use of the road and rail network resulting in decreasing income.

The loss in income in the first half of 2020 vs. the same period of the previous year totalled EUR 104 million, namely income from the road service contribution, tolls and rail services.

As a result, Net Losses totalled EUR 48.5 million which compares to Net Profit of EUR 35.0 million in the same period of 2019.

Operating Results dropped by EUR 69.9 million over 2019, standing nevertheless at EUR +81.0 million.

The impact of the pandemic context experienced in the first half of 2020 at the level of the core activity developed by IP was reduced or null according to the contingency plants implemented.

This translated in an increase in road and railway maintenance expenses (+11%), as foreseen in the Business Plan, and in Expenditure, which totalled EUR 75.7 mil-lion in the first half of 2020, increasing by 29% over the same period of 2019.

Financial Results at 30 June 2020 deteriorated by approximately EUR 23 mil-lion (-23%), following completion of the renegotiation processes of sub-concession contracts in the second half of 2019, which translated in an increase by EUR 26 million in interest allocated to sub-concessions over the same period of 2019, partly offset by net interest borne by the railway grantor of approximately EUR 3 million.

PROFIT AND LOSS STATEMENT IP GROUP1ST HALF 2019

IP GROUP 1ST HALF 2020 Δ% 20/19

Operating Income 647 109 540 956 -16%

Operating expenses -496 166 -459 917 -7%

Operating profit/(loss) 150 944 81 024 -46%

Financial Result -101 449 -124 916 -23%

Profit before tax 49 495 -43 893 -189%

Net Profit 34 953 -48 510 -139%

Unit: thousand Euro

5. ECONOMIC AND FINANCIAL PERFORMANCE



5.1 Operating Income Operating Income totalled EUR 541.0 million, dropping by EUR 106.2 million (16%) as compared to the same period of the previous year.

OPERATING INCOMEIP GROUP1ST HALF

2019

IP GROUP1ST HALF

2020Δ% 20/19

Sales and services 575 335 472 959 -18%

Road Service Contribution (RSC) 331 670 268 787 -19%

Tolls 155 873 119 436 -23%

Rail Services 40 198 35 463 -12%

State Grantor - Revenue LDI 12 458 15 298 23%

Construction contracts 18 094 18 675 3%

Other rendered services 17 042 15 301 -10%

Compensatory Allowances 29 874 27 528 -8%

Other Income and gains 41 900 40 469 -3%

Total Operating Income 647 109 540 956 -16%

Unit: thousand Euro

5.1.1 Sales and services

Total revenue from Sales and Services was EUR 473.0 million, i.e. EUR 102.4 million less than in 2019.

ROAD SERVICE CONTRIBUTION (RSC)

The Road Service Contribution (RSC) created by Law no. 55/2007 of 31 August is the consideration paid by users for using the national road network. It is levied on gasoline, road diesel and LPG subject to oil and energy products tax (ISP) where not exempt.

The unit values of the Road Service Contribution for 2020 remained unchanged as compared to those set for 2019, standing at EUR 87/1,000 litres for petrol, EUR 111/1,000 litres for diesel and 63 EUR/1,000 litres for LPG.

The RSC remains the main source of income of IP, totalling EUR 268.8 million in the first semester of 2020, dropping by 19% over the same period of the previous year. This negative change is explained the COVID19 pandemic situation, which required strong contention measures, resulting in sharp decrease in road traffic and fuel consumption.

TOLLS

Toll income fell by EUR 36.4 million (-23%) over the same period of the previous year, totalling EUR 119.4 million.

In line with what happened with the RSC, this per-formance is explained by the COVID19 pandemic situation and the strong contention measures re-quired, resulting in sharp decrease in road traffic, specifically on tolled roads.

TOLLSIP GROUP 1ST HALF

2019

IP GROUP 1ST HALF

2020Δ% 20/19

Concessions 128 854 95 818 -26%

Sub-concessions 13 088 10 297 -21%

Other IP roads 14 204 11 270 -21%

Other toll services -272 2 050 854%

Total 155 873 119 436 -23%

Unit: thousand Euro

The largest slice of toll income stems from tolls col-lected in State concessions, which reached EUR 95.8 million, falling by 26% over the same period of 2019.

In IP sub-concessions toll revenues totalled EUR 10.3 million, dropping by 21% over the same pe-riod of 2019.

The amount of tolls collected in direct operations on IP network (specifically on the A21, A23 and Marão Tunnel) totalled EUR 11.3 million in 2019, i.e. 21% less than in 2019.

In overall terms, traffic of light vehicles fell by 30% in the first half of 2020. Heavy vehicle traffic only fell by 7% as road freight transport did not stop during the pandemic.

RAIL SERVICES

Revenues from the Railway Services, which in-clude the use of channels (minimum access pack-age), the recovery of capacity requested but not

used (cancelled by the operator), the use of service facilities, the provision of the auxiliary services, totalled EUR 35.5 million in the first half of 2020, dropping by 12% over the 2019.

This decrease was mainly due to a decrease in traf-fic on the railway infrastructure during the second quarter of the year. The decrease in train-kilometre (Tk) was 11% over the same period of the previous year (15.9 million Tk). Such performance was driv-en by the 105 days of National Emergency/Calam-ity Situation declared by the Government, which triggered the contingency plans of operators.

In the freight segment, the variation combines two effects: decrease in activity experienced from Jan-uary to May (translating a massive decrease in coal trains vs. 2019) and impact caused by the pan-demic, which was nevertheless lower than in the passenger segment.

USER FEE REVENUES IP GROUP1ST HALF 2019

IP GROUP1ST HALF 2020 Δ% 20/19

Passenger 30 102 26 410 -12%

Freight 4 000 3 479 -13%

Total Fee for Use of Infra-structure 34 102 29 889 -12%

TARIFF TUI/CK 1,90 € 1,88 € -1%

Capacity requested and not used 273 62 -77%

Total 34 375 29 952 -13%

Unit: thousand Euro

Income from user fees (minimum access package) totalled EUR 29.9 million in the first half of 2020, which is EUR 4.2 million (-12.4%) less than in 2019.

Income from the passenger train segment de-creased by 12.3% in relation to the same period of 2019. This segment accounts for 88% of total infrastructure user fees. Income from freight traffic fell by 13% over the same period of 2019.

Operating income associated to capacity request-ed and not used in the first half of 2020 totalled EUR 62 thousand falling by 77% over 2019, which explained by changes in respective tariff model



that became effective with the 1st Addendum to the 2019 Network Directory. This amendment viewed to encourage a timely planning of capacity, eliminating the re-cording of cancellation requests made with over 14 days prior notice and penalising channel requests made with less than 4 days notice, thus increasing the quality of the channels provided to operators.

OTHER RAILWAY SERVICES IP GROUP1ST HALF 2019


PS-Emergency services

Subtotal Emergency services 0 0 0

IS - Use of Stations 1 231 1 213 -2%

IS - Use of energy 207 207 0%

IS - Areas in Stations 130 110 -16%

IS - Use of water 28 29 1%

Customer Service 0 2 3387%

Subtotal Service facilities 1 597 1 560 -2%

Traction Power 3 194 2 886 -10%

Parking of Rolling Stock 862 913 6%

Shunting 78 63 -19%

Other services 38 39 3%

Subtotal Additional Services 4 172 3 901 -6%

Supply of water/fuel for Rolling Stock 18 13 -27%

Aux. Serv - Other Serv. Telecommunications and Telematics 33 33 0%

Other auxiliary services 2 3 58%

Subtotal auxiliary services 54 50 -7%

Total 5 823 5 511 -5%

Unit: thousand Euro

Station and Stops Use Service correspond to the availability in stations or stops. Its valuation accounted for income of EUR 1.2 million in the first half of 2020, in line with the same period of 2019.

Income from Service Facilities comprises the use of stations and stops (in areas allocated to passenger service, e.g. visualizing of travel information and passen-ger access to platforms and equipment existing in platforms), and other services available (occupied areas and respective water and energy consumption), supply of energy to operators in stations (e.g. automatic ticket vending machines and ac-cess gates) and advertising information. Cumulatively, in the first half of 2020 these

services accounted for a total income of EUR 1.6 million, in line with the amount recorded in the first half of 2019.

Income from additional Services, which account for revenues of EUR 3.9 million, decreased by 6% over the same period of 2019, mainly due to lesser train travel during the emergency/calamity period.

The provision of Ancillary Services, associated with telematics and telecommunica-tions, studies, request of human resources for the supply of water and fuel to trains, and other small services, the decrease stems from the fact that such services are increasingly being performed directly by agents of the operators.

STATE GRANTOR - REVENUE LDI

The amounts recorded under Caption State Grantor (LDI Revenue) correspond to internal works charged to investment in long duration infrastructure, namely mate-rials and labour for investment and respective charges, under the terms of IFRIC12.

In the first half of 2020 this revenue amounted to EUR 15.3 million, growing by 23% over the same period of 2019, driven by increasing expenditure.

CONSTRUCTION CONTRACTS

Construction contracts represent income obtained by IP from the construction of the National Road Network (NRN) as provided in the Concession Contract, includ-ing all road construction activities carried out directly or via sub-concessions.

CONSTRUCTION CONTRACTS IP GROUP1ST HALF 2019


Contracts Construction of new infrastructures 9 302 11 767 27%

Accumulation Interest Expenses 8 792 6 907 -21%

Total 18 094 18 675 3%

Unit: thousand Euro

The amounts corresponding to the construction of New Infrastructure concern construction activities under IP’s direct management, and are calculated based on monthly monitoring reports stating the state of progress of the works and the ex-penses directly attributable to preparing the asset for its intended use.

In the first half of 2020 income from construction contracts rose by 27% over the same period of the previous year.

The construction of the Sub-concessioned Network is determined based on the construction values contracted for each sub-concession and the percentage of



completion reported to IP by each sub-concessionaire. It therefore reflects the physical evolution of the works and is independent from the billing flow. In the first half of 2020 construction of the sub-concessioned network did not record any evolution, as expected, there being therefore no income to consider.

The capitalized financial expenses correspond to the financial expenses incurred by IP during the road construction phase and consist of the financial expenses used to finance the acquisition of the State Concession Network.

OTHER SERVICES RENDERED

Total revenues from these services in the first half of 2020 totalled EUR 15.3 million, decreasing by 10% (EUR 1.7 million) over the same period of 2019.

OTHER RENDERED SERVICES IP GROUP1ST HALF 2019


Property and Commercial Real Estate Management 7 943 6 431 -19%

Telecommunications and Cloud Solutions 4 472 4 256 -5%

Technical road channel 1 441 1 653 15%

Engineering and transportation services 320 13 -96%

Transport of goods 1 281 1 269 -1%

Licensing 364 364 0%

Service Areas Operation Right 623 655 5%

Other services 598 661 11%

Total 17 042 15 301 -10%

Unit: thousand Euro

A. Property and Commercial Real Estate Management

This income derives from the renting of spaces, sub-concessions, parking, manage-ment of undertakings and advertising. In the first half of 2020 it amounted to EUR 6.4 million, dropping by 19% over the same period of the previous year.

This decrease was caused by the COVID19 pandemic, as explained in chapter 4.7.

B. Telecommunications

This segment comprises the provision of telecommunication services to the market, including the lease, maintenance and other services associated with optical fibre; it further comprises the development of technological solutions in application areas such as ERP, CRM, Service Management, Cyber Defence, Cyber Security and other.

In the first half of 2020 the segment's turnover totalled EUR 4.3 million, decreas-ing over the same period of the previous year, mainly as a result of a drop in the cloud solutions segment, which was partly offset by an increase in the transmission business.

C. Technical road channel

Turnover with the Technical Road Channel in the first half of 2020 amounted to EUR 1.7 million, increasing by 15% over the same period of 2019, as a result of new use licences granted to operators.

D. Engineering and transportation services

This segment covers activities associated with transport engineering services in road and/or rail multidisciplinary projects and respective mobility solutions, at na-tional and international levels.

This segment’s turnover in the first half of 2020 was merely EUR 13 thousand, translating the strategic guidance of the IP Group of allocating nearly all resources of IP Engenharia to the Intervention Plan on IP ‘s network, specifically the Ferrovia 2020 Investment Programme, i.e. to the provision of intra group services.

E. Transport of goods

The operation of the Railway Terminals translated into revenues of EUR 1.3 million in the first half of 2020, in line with the same period of 2019.

F. Licensing

The changes introduced by the new legal scheme of the Public Road Domain, in particular with regard to its private use and the procedure for regularisation of access, had some impact on citizens and companies, leading the Portuguese Par-liament to decide, through the State Budget Law for 2017, to suspend the access regularisation procedure in accordance with article 4 of Law 34/2015, as well as to suspend the procedures for application and collection of the fees provided for in Ordinance 57/2015. As a result, a significant part of the revenue from road licensing was lost until the said ordinance is suspended.

Revenues in the first half of 2020 totalled EUR 364 thousand, the same as in 2019.

G. Service areas

In the first half of 2020 revenues with Service Areas totalled EUR 655 thousand, increasing by 5% over the same period of 2019.

5.1.2 Compensatory Allowances

INCOME IP GROUP1ST HALF 2019


Compensatory Allowances 29 874 27 528 -8%

Unit: thousand Euro

Income from compensatory allowances in the first half of 2020 totalled EUR 27.5 million, falling by 8% over the same period of the previous year, which is in line with provisions in the Framework Programme established between IP and the State in March 2019, for the provision of public railway services.



5.1.3 Other Income and Gains

The amount other Income and Gains on the first half of 2020 totalled EUR 40.4 million, dropping by 3% over the same period of the previous year.

OTHER INCOME AND GAINS IP GROUP1ST HALF 2019


Investment subsidies 31 589 29 274 -7%

Disposal of Property 222 1 318 493%

Sale of waste 613 1 186 93%

Damage to property 1 338 1 746 31%

Other income 8 138 6 946 -15%

Total 41 900 40 469 -3%

Unit: thousand Euro

INVESTMENT SUBSIDIES

Subsidies received from the Portuguese State and the European Union for the road component are recognised at fair value when there is reasonable certainty that the terms for receiving the subsidy will be complied with.

Non-refundable subsidies obtained for investment in tangible and intangible fixed assets are recognised as deferred income. These subsidies are subsequently cred-ited in the statement of comprehensive income, under "Other income and gains", pro-rata to the depreciation/amortisation of the subsidized assets.

The amount of investment subsidies recorded at 30 June 2020 totalled EUR 29.3 million, i.e. 7% less than in the same period of 2019.

DISPOSAL OF PROPERTY

Income from the disposal of property in the first half of 2020 totalled EUR 1.3 mil-lion, increasing by EUR 1.1. million over the same period of 2019.

SALE OF WASTE

Income from the sale of waste in the first half of 2020 totalled EUR 1.2 million, in-creasing by 93% over the same period of 2019.

DAMAGE TO PROPERTY

In the first half of 2020 the amount of recovery if damages to road property totalled EUR 1.7 million, increasing by 31% over the same period of 2019.

5.2 Operating Expenses

In the first half of 2020 operating expenses of the IP Group totalled EUR 459.9 million, falling by 7.3% over the same period of the previous year.

OPERATING EXPENSES IP GROUP1ST HALF 2019


Cost of goods sold and materials consumed 138 174 112 949 -18%

Change in production inventories 0 15 100%

External supplies and services 130 977 140 902 8%

Maintenance, Repair and Safety of the Road Network 49 265 53 684 9%

Maintenance, Repair and Safety of the Railway Network 27 687 31 431 14%

Other supplies and services 54 025 55 787 3%

Personnel expenses 67 704 68 093 1%

Impairments (losses/reversals) -52 237 558%

Expenses/reversals of depreciation and amortisation 142 588 118 664 -17%

Provisions (Increase/Decrease) 13 341 15 308 15%

Other expenses and losses 3 433 3 763 10%

Total Operating Expenses 496 166 459 932 -7,3%

Unit: thousand Euro



5.2.1 Cost of Goods Sold

In the period under review overall expenses with the cost of goods sold and materials consumed totalled EUR 112.9 million, decreasing by 18.3% over the same period of 2019.

COST OF GOODS SOLD AND MATERIALS CONSUMED IP GROUP1ST HALF 2019


Network under sub-concession - -

New road infrastructures 9 302 11 767 27%

Tolls - State Concessions 121 816 90 643 -26%

Rail Maintenance Material Consumption 3 587 4 660 30%

Rail Investment Material Consumption 3 409 5 839 71%

Other 60 39 -34%

Total 138 174 112 949 -18,3%

Unit: thousand Euro

The decrease in relation to 2019 in the amount of EUR 25.2 million is mainly explained by the performance of caption Tolls in State Concessions, as the net revenue from tolls fell due to COVID19.

NETWORK UNDER SUB-CONCESSION

The construction of the Sub-Concessioned Network is determined based on the con-struction values contracted for each sub-concession and the percentage of completion reported to IP by each sub-concessionaire. It reflects, therefore, the physical evolution of the works and it is independent from the turnover flow. In the first half of 2020 con-struction of the sub-concessioned network did not record any evolution, as expected.

NEW ROAD INFRASTRUCTURES

The amounts stemming from the construction of New Road Infrastructures concern construction activities under IP’s direct management, and are calculated based on monthly monitoring reports stating the state of progress of the works.

Implementation in the first half of 2020 stood 27% above the same period of last year.

TOLLS IN STATE CONCESSIONS

Amounts received by IP relative to tolls in State concessions (net of collection costs) are deducted to IP's investment in the acquisition of rights over this concessioned network. This deduction is offset in this item, which decreased 26% over the same period of 2019, in line with the negative evolution of income from toll revenues.

MATERIALS FOR MAINTENANCE AND INVESTMENT IN RAILWAY INFRASTRUCTURES

This caption records the amount of consumptions with different types of materials which are integrated in the National Railway Network, within the scope of mainte-nance and investment actions.

In the first half of 2020 there was an increase in consumption of these materials (relating to both maintenance and investment), respectively by 30% and 71%, in line with the overall rise in interventions in the rail network (but also in the road network) in the first semester of 2020.

5.2.2 Supplies and Services

ROAD MAINTENANCE, REPAIR AND SAFETY

Overall expenses with the maintenance, repair and safety of the road network in the first half of 2020 amounted to EUR 53.7 million, increasing by EUR 4.4 million (9%) over the same period of 2019.

MAINTENANCE, REPAIR AND SAFETY OF THE

ROAD NETWORKIP GROUP

1ST HALF 2019IP GROUP

1ST HALF 2020 Δ% 20/19

Regular road maintenance 26 500 27 833 5%

Road safety 1 692 2 373 40%

Current road maintenance 21 074 23 479 11%

Total 49 265 53 684 9%

Unit: thousand EUR

Regular Maintenance of Roads corresponds to the recognition of the increase in IP's responsibility for the expenditure required to maintain the service level in roads and engineering structures imposed by the Concession Contract. The annualised cost of the programmed maintenance works required to maintain the network’s average quality



index at the same level as when the network was received is determined based on technical assessments of repair needs and an index of the average quality of road and engineering structures.

The amount recorded in the first half of 2020 was EUR 27.8 million, increasing by EUR 1.3 million over the same period of 2019. This increase derived from the revision in the second half of 2019 of the estimated annual expense in programmed maintenance, un-der the terms mentioned above.

Road Safety activities are as included in the Road Safety Plan, and consist of vertical and horizontal signing, safety barriers, and any other works associated with road safety and the prevention of accidents.

The Road Safety Plan establishes priority goals, assesses all accident indicators (black spots, number of accidents with injuries, serious injuries and fatal casualties), Annual Average Daily Traffic (AADT), pedestrian traffic in urban crossings and the type and function of roads.

Expenses with road safety in the first half of 2020 totalled EUR 2.4 million, increasing by 40% over the same period of the previous year.

Current Maintenance corresponds to expenses for the year with current maintenance of roads and road related structures to maintain traffic comfort conditions and prevent deterioration in roads and services.

These contracts involve the performance of works such as pavement repair and im-provement, improvement of drainage systems, maintenance of bridges and viaducts, replacement of road signs and marking and other road safety and protection equipment, stabilisation of slopes, cleaning of ditches and adjacent land. Maintenance expenses fur-ther comprise expenses with maintaining the strips along roads and railway lines clean to protect forests from fire, which is an obligation of IP.

Current maintenance by contract covers the high capacity motorway network of the Greater Lisbon area and assistance to road users. Current maintenance of the motorway network of the Greater Porto Region is ensured subject to an outsourcing contract.

Implementation in the period under review totalled EUR 23.5 million, increasing by 11% over the same period of 2019.

RAILWAY MAINTENANCE, REPAIR AND SAFETY

IP has several service contracts in force to ensure the maintenance and repair of the National Railway Network.

Most of these contracts are multi-annual and cover intervention works in the fields of systematic preventive maintenance (SPM), Condition-based Preventive Main-tenance (CPM) and Corrective Maintenance (CM), of tracks, signalling, overhead lines, low voltage, substations, civil works, level crossings, lifts and escalators.

These contracts for maintenance services comprise:

• Contracts for maintenance services at national level, covering more than one regional organisational unit;

• Contracts for maintenance services, developed centrally and divided into several batches, circumscribed to the regional organisational units;

• Contracts of regional/local scope.

Overall expenses with railway maintenance, repair and safety in the first half of 2020 totalled EUR 31.4 million, increasing by 14% over 2019, as shown in the fol-lowing table.

MAINTENANCE, REPAIR AND SAFETY

OF THE RAILWAY NETWORKIP GROUP

1ST HALF 2019IP GROUP

1ST HALF 2020 Δ% 20/19

Carriageway 11 955 15 139 27%

Signalling 6 638 5 503 -17%

Telecommunications 1 553 1 584 2%

Overhead line 2 644 2 591 -2%

Low tension 860 731 -15%

Sub-stations 327 282 -14%

Civil works 1 745 1 217 -30%

Engineering works 30 24 -22%

Level Crossings 278 294 6%

Recovery of materials 178 152 -15%

Emergency train 450 83 -81%

Lifts and escalators 288 350 22%

Rail Services 286 398 39%

Deforestation - 2 554 100%

Other 454 530 17%

Total 27 687 31 431 14%

Unit: thousand Euro

The most significant deviations by speciality were as follows:

The increase in expenses occurred in the first half of 2020 in “Tracks” is explained by some maintenance deficit recorded in previous years, namely delay in the be-ginning of the multi annual contract, a situation which is being corrected this year.

The decrease in expenses with Signalling is explained as follows:

• Delay in the submittal of proposal by supplier for the “Provision of Technical Assistance Services for ATPN (Convel and EBILink) technologies”;

• Decision to not acquire in 2020 “spare parts for SSI and Westlock technologies”;• Delay in the start of contract for the “Renovation of Half-barrier Mechanisms -

Revision/Repair” (EUR -174 thousand).



In what concerns the Civil Works speciality, the decrease by EUR 528 thousand is explained by the fact that in the first half of 2019 some deforestation and vegetation control works were still recorded under the Civil Construction item, whilst in 2020 they are recorded as Deforestation activities, a newly created speciality.

OTHER SUPPLIES AND SERVICES

Other Supplies and Services totalled EUR 55.8 million in the first half of 2020, increas-ing by 3% over the same period of the previous year.

OTHER SUPPLIES AND SERVICES IP GROUP1ST HALF 2019


O&M EP Sub-concessions 15 312 20 313 33%

Toll collection costs 9 819 8 596 -12%

RSC Collection costs 6 633 5 376 -19%

Electric power 4 645 4 446 -4%

Traction Power 2 996 2 791 -7%

Fees and related expenses Special. Works 1 360 1 351 -1%

Car fleet 2 581 2 668 3%

Surveillance 4 025 3 711 -8%

IT 1 121 1 422 27%

Cleaning 1 411 1 343 -5%

Travelling and accommodation 208 106 -49%

Transport of personnel 279 186 -33%

Communications 116 109 -5%

Other supplies and services 3 521 3 369 -4%

Total 54 025 55 787 3%

Unit: thousand Euro

O&M - SUB-CONCESSIONS

Expenses with the operation and maintenance of sub-concessions translate the rec-ognition in the accounts of expenses with the operation and maintenance carried out by the sub-concessionaires within the scope of the sub-concession contracts in force.

The growth of this expenditure in the period under review as compared to the same period of 2019 (+33%) reflects the end of the renegotiation of sub-concession con-tracts in the second half of 2019, resulting in changes in estimates of expenses relating to these contracts, with direct impact on the evolution of O&M expenditures with O&M Sub-concessions.

TOLL COLLECTION COSTS

This caption includes the payment of a variable fee and the monthly adjustment of accounts (cost off-setting) of the tolled network. In the first half of 2020 these costs decreased by 12% over the same of the previous year as a result of the drop in traffic on the tolled network due to COVID-19.

EXPENSES RELATING TO THE COLLECTION OF THE ROAD SERVICE CONTRIBUTION (RSC)

RSC collection costs correspond to 2% of the RSC which is withheld by the Tax Authorities for pro-viding the service of calculating and collecting this contribution. Collection expenses are a share of the amount charged, hence they evolve in line with the RSC.

ELECTRIC POWER AND TRACTION POWER

These captions comprise the amount relating to electric power and traction electricity of the rolling stock, to be supplied to railway operators. Ener-gy consumption during the period under review reached EUR 7.2 million, decreased by 5% over the same period of 2019, mainly due to lesser train travel during the emergency/Calamity period.

CAR FLEET

Expenses with the car fleet in the first half of 2020 totalled EUR 2.7 million, increasing by 3% over the same period of the previous year.

SURVEILLANCE AND SAFETY

Surveillance and security costs comprise mainly expenses with surveillance services contracted for IP’ administrative facilities and operating centres, and other related expenses such as access con-trols, maintenance of fire extinguishers and other equipment and services.

Expenses with surveillance and safety in the first half of 2020 totalled EUR 3.7 million, decreasing by 8% over the same period of 2019.

FEES, CONSULTANCY SERVICES AND OTHER SPECIALISED WORKS

The amount recorded in this caption in the first half of 2020 totalled EUR 1.4 million, in line with the same period of the previous year.

IT SERVICES

In the first half of 2020 the amount of EUR 1.4 million was spent in IT services, increasing by EUR 0.3 million over the same period of 2019. This change is mainly due to an increase in expenses with software licences and increase in market licence prices.

CLEANING

The amount of expenses with hygiene and clean-ing services recorded under this caption fell by 5% over the same period of the previous year.

TRAVELLING AND ACCOMMODATION

This caption comprises travelling and lodging ex-penses at home and abroad. It should be noted that part of the travel and accommodation expens-es abroad is associated with innovation projects co-funded by the European Union, which are part-ly reimbursed.

In the 1st semester of 2020 the amount record-ed under this caption totalled EUR 106 thousand, dropping by EUR 102 thousand over the same period of the previous year. This decrease is ex-plained by the pandemic situation experienced in our country and the rest of the world.

COMMUNICATIONS

Communication expenses in the first half of 2020 totalled EUR 109 thousand, falling by 5% over the same period of the previous year.



5.2.3 Staff Expenses

In the first semester of 2020, staff expenses at Group level totalled EUR 68.1 mil-lion, increasing by +1% over the same period of the previous year.

PERSONNEL EXPENSES IP GROUP1ST HALF 2019


Wages 53 057 53 274 0%

Wage expenses 11 874 11 914 0%

Indemnities 173 0 -100%

Other 2 600 2 906 12%

Total 67 704 68 093 1%

Unit: thousand Euro

Notwithstanding the decrease in the average workforce in the first half of 2020 vs. the first half of 2019 (3,628 vs. 3,604), there was a slight increase in these expens-es driven by wage revisions stemming from the Collective Bargaining Agreement in force.

At 30 June 2020 the IP Group had 3,588 employees.

The structure of IP Group’s workforce broken down by Group companies is as follows:

3%2%

94%

1%

INFRAESTRUTURAS DE PORTUGAL (IP)

IP TELECOM

IP PATRIMÓNIO

IP ENGENHARIA

5.2.4 Impairment (Losses/Reversals)

In the first half of 2020 changes in impairment amounted to EUR 237 thousand in overall terms, i.e. EUR 289 thousand more than in the same period of the previous year. This rise is associated with client impairments in the real estate segment of the Group (IPP), which increased in relation to 2019 as a result of the pandemic, having increased the credit risk associated with these balances.

5.2.5 Provisions (Increase/Decrease)

In the first half of 2020 the total amount of expenses with provisions amounted to EUR 15.3 million, increasing by 15% over the same period of the previous year. This rise was due to an increase in provisions for the VAT proceedings associated with the RSC.

5.2.6 Other Expenses and Losses

Other expenses and losses in the first half of 2020 totalled EUR 3.8 million, increasing by 10% over the same period of 2019.

5.2.7 Expenses/Reversals of Depreciation and Amortization

The amount recorded with depreciation and amortisation expenses totalled EUR 118.7 million in the first half of 2020, falling by EUR 23.9 million over the same period of the previous year.

This change derives mainly from the reduction in the depreciation rate of the road con-cession right, which is determined based on economic/financial flows during the period of the contract, the latter being affected by the drop in directly attributed revenues (RCR and tolls).



5.3 Equity Structure At the end of 2020 total assets amounted to EUR 27,075 million, mainly made up of the intangible assets related to the right provided by the Road Concession Contract.

At 30 June 2020 Equity totalled EUR 7,838 million (29% of Assets) and Total Liabil-ities amounted to EUR 19,237 million (71% of assets).

ASSET STRUCTURE

LIABILITIES

EQUITY

28%

72%

2019

29%

71%

30-06-2020

As regards Assets, there was an increase of EUR 209 million over 31 December 2019 (+1%). In Non-current Assets, we highlight the increase of EUR 190 million in intangible assets (essentially the right resulting from the Road Concession Con-tract). In what concerns Current Assets we point out the increase by EUR 97 million in Caption State and other public entities, corresponding to the balance of VAT to be received.

Liabilities at 30 June 2020 fell by EUR 97 million over 2019, mainly as a result of a decrease by EUR 245 million in other accounts payable (non current liabilities).

In the first half of 2020 the company carried out increases in statutory capital by a total amount EUR 354.6 million. The Company's share capital at the end of the first half of 2020 totalled EUR 7,558 million.


6. FINANCIAL MANAGEMENT AND DEBT

6.1 Financial ManagementIP GROUP

During 2020 the financial management of subsidiar-ies remained in the sphere of the Finance and Mar-kets Department of IP.

The main objective of this framework is the integrat-ed management of the Group's financial resources, in order to optimise flows between subsidiaries and the parent company. Each subsidiary must manage the financial resources required for its own operation, however, these have to be maximised so as to con-tribute to the economic and financial stability of the parent company.

Moreover, the centralisation allows the standardi-zation of practices and procedures relating treasury management and production of management in-formation to support decision-making. On the oth-er hand, the financial management of the IP Group must comply with the legal framework applicable to the corporate state sector (Decree-law 133/2013), namely the obligation to apply the principle of Unity of the State Treasury (article 28) and restrictions in financing operations (article 29).

The IP Group ended the first half of 2020 with total cash and liquid assets of EUR 176 million.

CASH RESOURCES

IP 163

IPE 2

IPP 5

IPT 6

Total 176

Unit: EUR million

IP

Following the inclusion of IP (former REFER and EP) into the universe of reclassified public entities in 2012, in accordance with the Basic Law for the Budget, IP was included in the State Budget as from that year, as Services and Autonomous Funds, which required compliance with specific laws and the redesigning and re-definition of financial and

budget and management control processes.

The 2020 State Budget (OE2020), approved by Law 2/2020, of 31 March determined IP’s overall financing needs to be of EUR 1,054.1 million.

IP implemented its budget in accordance with Law 8/2012 (Law on Commitments and Payments in Arrears) and related legislation, which requires that any expense must be committed prior to its real-isation, having the appropriations assigned to the different budget captions in the 2020 State Budget.

In the light of IP’s budget proposal for 2020 (sub-mitted to the Budget Directorate), expenses were reduced by EUR 440 million, with significant im-pact on the company's core business. As far as revenues are concerned, they were overvalued by EUR 114.5 million, having forced, in practice, to an additional and indirect adjustment to budgeted ex-penses by EUR 114.5 million, with impact on the investment programme implementation levels and on the levels of service and safety of the infrastruc-ture managed by IP. IP asked to be clarified about this, and informed about the consequences arising out these changes, but as of the date of this report it still had not received any reply from the relevant ministries.

In addition to the above, IP again saw the applica-tion of bound appropriations, as provided in Law no. 2/2020 (3) dated 31 March (OE 2020), which restrains the company's activity; this year the amount of bound appropriations totalled EUR 80.4 million, i,e, EUR 22 million more than expected.

IP requested the unblocking of funds in this amount in May but did not get any answer as of this date.

Moreover, during the first half of the year IP found it difficult to collect from its main funding sources, driving the need to apply for specific approvals to overcome financial constraints such as the advance of available funds, partial use of cash balance and capital increases.

Adding to the above, as a result of COVID19, main revenues, namely Tolls and User Fee, suffered sig-nificant falls.

The following measures were approved in the first half of 2020 to overcome budget constraints:

• Increase in RSC available funds in the amount of EUR 492.3 million;

• Exclusively for treasury management purposes, without changing the budgeted amount, the use of EUR 147.2 million from the previous cash balance to pay for PPP;

• Increase in budgeted expenses by EUR 132.8 million, to pay for PPP exclusively, against the use of cash balance.

• Increase in funds available from January to June relating to financial assets of Chapter 60 of DGTF up to the amount of EUR 354.6 million, to allocate to IP to pay for PPPs and debt service.

This was the backdrop against which IP managed its activity whilst seeking to minimise the risks of fiscal implementation. Figures with relevant impact on both expenses and revenues were as follows:

REVENUE 1 048,6

Share capital increase 354,6

Road Service Contribution* 472,3

Tolls* 137,7

Compensatory Allowances 33,9

EU Funds 10,5

Other 39,6

Unit: EUR million* Deducted of collection costs

EXPENSES 1 148,8

Payment of investment in PPP 833,4

Other Expenditure Payments ** 79,1

Repayment of EIB loans + Eurobonds 37,4

Financial Expenses*** 9,2

Other 189,7

Unit: EUR million** Including Ferrovia 2020, PETI3+ Road and Proximity Plan (road and railway)*** Does not include interest on State Loans

6.2 Share Capital Increase OperationsAt 30 June 2020 the company’s share capital amounted to EUR 7,558 million. During the first half of 2020 capital increase were carried out totalling EUR 354.6 million on the following dates:

DATE IP

Share Capital (DL91/2015) 01/jun/15 2 555 835 000

Increases: 2015 539 540 000

2016 950 000 000

2017 880 000 000

2018 886 135 000

2019 1 391 870 000

mar/20 300 145 000

mai/20 31 000 000

jun/20 23 495 000

Share Capital 30-06-2020 7 558 020 000

EUR

These operations aimed to meet the following bor-rowing requirements (note that the debt service does not include loans with the Portuguese State):

INVESTMENT DEBT SERVICE

46,0

308,6

CAPITAL INJECTIONS[Million Euro]

The amount of capital allocated to investment was fully used to pay State concessions.



6.3 Financial Debt Structure

Under the terms of Order 381 of 26 July 2020 the Secretary of State for the Treasury granted an addi-tional moratorium on State loans, which postpones the payment of the debt service from 31 May to 30 November 2020, both as concerns the road and the railway segments. Deferrals granted in this context are not subject to the payment of interest.

IP Group's financial debt at the end of June 2020 stood at EUR 4,981.9 million, corresponding to a de-crease of EUR 37.4 million from EUR 5.019.3 million in December 2019, as shown in the following graph:

YEARS

EVOLUTION OF FINANCIAL DEBT[Million Euro]

8 266 8 153 8 040

5 745

5 019 4 982

2015 2016 2017 2018 2019 JUN/20

4 000

5 000

6 000

7 000

8 000

9 000

3 000

2 000

0

1 000

The decrease in debt mentioned above concerns the repayment of loans contracted with the EIB.

Table below shows the total amount of debt by type of loan:

TYPE OF LOAN[Million Euro]

8 000

6 000

4 000

2 000

02017

1 100

2 225

4 716

8 040

2018

1 004

2 225

2 516

5 745

2019

923

1 725

2 371

5 019

JUN/2020

886

1 725

2 371

4 982

STATE LOANS

BOND LOANS (NOMINAL VALUE)

EIB

The share of IP’s debt guaranteed by the Portu-guese State was of 40% of total debt. This universe includes all EIB loans and two bond issues, totalling EUR 1.6 billion. If we exclude the State loans com-ponent, the share of debt benefiting from State guarantee stands at 87%.

Loans entered with the State since 2011 with ma-turity in 2016, 2017, 2020 and 2021 have an inter-est grace period of 12 months and a repayment plan consisting of 8 to 12 equal and consecutive principal instalments. These loans are subject to fixed interest rate.

EIB loans benefit from a repayment plan consist-ing of equal or different but consecutive principal instalments, thus allowing for a flatter debt repay-ment profile.

Bond loans are subject to fixed rate and repayment is to be made in one principal instalment at due date (bullet). The repayment of these loans will oc-cur in 2021, 2024, 2026 and 2030, implying their refinancing in those years.

As can be seen in the following chart, the amount to be repaid in 2020 is quite high (EUR 2,450 mil-lion), comprising the repayment of the State Loans (roads: EUR 2,215 million; railway: EUR 144.7 mil-lion). The remaining amount of EUR 89.7 million concerns EIB loans, of which EUR 37.4 million were repaid in the first half of the year.

640

2021

2 450

2020

129

2022

159

2023

68

2025

573

2024

753

2026

247

>=2027

2 500

2 000

1 500

500

1 000

0

REPAYMENT[EUR million]

At the end of June 2020, the Group's debt portfolio broken down by inter-est rate regime was as follows:

91%

9%

FIXE RATE

FLOATING RATEJUN/2020

At 30 June 2020 Group IP had no risk hedging instrument. However, given the composition of the portfolio, the level of interest rate risk to which the IP Group is exposed is considered to be very low.

On 20 August 2020 Moody’s Investors Service kept its credit rating of IP‘s at Ba1 with Positive Outlook, on account of the following:

• key role that IP plays in the management of Portugal’s road and rail networks;

• effective Government supervision, since IP is included in the State’s budget consolidation scope;

• expectations that the State will ensure timely financial support when-ever necessary;

• maintenance of high indebtedness level and insufficient cash flow gen-erating capacity.

6.4 Analysis of Financial Results Our analysis of financial results is made from the standpoint of the Global Financial Results, based on the financial results shown in the Statement of Comprehensive Income and ignoring accounting movements (revenues) with impact on the Statement of Financial Position relating to i) debit of interest to the Grantor (in the railway business case), and ii) capitalisation of interest relating to PPPs (in the road business case). This approach gives a true view of the company’s debt and risk management performance.



Table below shows the financial performance at 30 June 2020.

FINANCIAL RESULT

JUNE

EFFECTIVE 2019 EFFECTIVE 2020 % CHANGE 2020/2019

Financial Results from Investment Activity -34,9 -30,4 4,5

Financial gains 0,0 0,0 0,0

Financial losses* -34,9 -30,4 4,5

Financial Results from Infrastructure Management Activity -14,0 -12,6 1,5


Financial losses -14,0 -12,6 1,5

High Performance Financial Results -86,5 -111,5 -25,0


Financial losses - sub-concessions -78,2 -104,7 -26,5

Financial losses - State concessions -8,3 -6,8 1,5

Financial results - Management of Road Network -0,9 -0,9 0,0


Financial losses -0,9 -0,9 0,0

Overall Financial Result -136,4 -155,3 -18,9

Allocated amount - State Grantor* 34,9 30,4 -4,5

Financial result (Comprehensive Income Statement) -101,4 -124,9 -23,5

Global direct management -58,1 -50,6 7,5

Unit: EUR million

In the first half of 2020 overall Financial Results amounted to EUR -155.3 million, deteriorating by EUR 18.9 million over the same period of the pre-vious year.

This negative performance was mainly driven by increasing financial expenses underlying to the sub-concessions’ debt in the High Performance segment, in the amount of approximately EUR 25 million, which was partly offset by the decrease in financial losses by the Investment activity in the amount of EUR 4.5 million.

The finalisation in 2019 of the renegotiation of the sub-concession agreements led to a reassessment of the base cases, resulting in an increase in in-terest vis-à-vis both the budget and the previous year.

The decrease in financial losses in investment ac-tivity results from the refinancing through capital of the debt service on loans allocated to such activity, thus translating in a decrease in financial expenses charged to the Grantor.

If we withdraw from the Overall Financial Re-sults the part associated with sub-concessions which concerns amounts due to these companies for works/services (and which will be invoiced in the future, under the terms agreed in respective sub-concession contracts), therefore, not included in the financing contracts entered by former EP, such Overall Financial Results would amount to EUR -50.6 million as against EUR -58.1 million as of June 2020, translating an improvement by EUR 7.5 million.

7. COVID-19 IMPACT

The emergence of the Covid19 pandemic is having sharp impact on the Portuguese economy and IP's activity as well.

The company implemented a global contingency plan, divided into several sector contingency plans, covering the business and corporate areas, taking into consideration the specificity and risk associat-ed with the activity developed.

IP is ensuring the normal operation of the road and railway infrastructures and developing its invest-ment plan, in line with respective programmes. This is easily seen in the evolution of investment (own network) and conservation activities vis-à-vis the same period of 2019. Implementation of in-vestment activities stood at 29% (EUR 75.7 million vs. EUR 58.7 million) whilst the implementation of conservation activities stood at 11% (EUR 85.1 mil-lion vs. EUR 77.0 million).

The protection of employees is ensured, in line with the directives of the National Health Authority (DGS).

Whilst the impact in operational terms may be deemed reduced or practically null, in economic terms the impact is significant, namely with regard to income deriving from the use of the road and rail networks, given the drop in demand, which reached its lowest point during the nationwide state of emergency issued by Portugal’s President on 18 March, lasting until 2 May.

Utilization levels on the railway network have al-ready recovered to levels of January/February 2020, however, on the road network, they are still below normal, with significant impact on income generated by the RSC and tolls.

Until the end of the first half of 2020 the loss of core income totalled EUR 104 million as compared to the same period of the previous year: EUR 62.9 million in RSC (-23%), EUR 36.4 million in tolls (-31%) and EUR 4.7 million (-13%) in railway ser-vices.

The loss of core income projected for year-end hovers around EUR 170 million, as compared to the previous year. This is an estimated figure based on latest available data, though it will depend on how the pandemic will evolve in the 4th quarter of the year.

It should be mentioned that IP maintains close co-operation with the State shareholder, in order to implement the most adequate solutions to meet additional funding requirements and thus safe-guard the company’s financial sustainability.

Likewise, the real estate and commercial areas business under the management of IP Patrimó-nio was seriously affected by COVID-19 pandem-ic, requiring the adoption of measures to mitigate the impact on the business and financial situation of some of the company's sub-concessionaires. As a result, in accordance with article 11 of Law 4-C/2020 of 6 April and subsequent amendments, in addition to the moratoria granted concerning invoicing relating to March, payment exemption measures were taken concerning 374 contracts relating to April, May and June invoicing, totalling EUR 922 thousand, in addition to other payment reduction measures affecting 21 contracts in April and May and 368 in June, which total EUR 244 thousand. The impact of this reduction in revenues is partly offset by a decrease in the concession rent as it is indexed to operating income.

Notwithstanding the above, the measures which are being adopted by the management of IP Pat-rimónio jointly with the shareholder ensure the continuity of the activity of IP Património.

Extraordinary expenses motivated by COVID19 are expected to reach EUR 1.7 million in 2020. These extraordinary expenses are broken down as follows: cleaning, disinfection and sanitation of fa-cilities; purchase of PPEs; purchase of equipment, laptops and software.



In what concerns the road Public-Private Part-nerships, following the declaration of the state of emergency, several sub-concessionaires and toll collection service providers have notified IP that the pandemic declared by the WHO constitutes a case of force majeure triggering the effects provid-ed in respective contracts.

Such notices are required under the contracts. Whenever an event occurs that private partners consider to be of force majeure, they must notify IP thereon.

On the other hand, as they comply with this re-quirement, private partners are also required to communicate which obligations can be complied with and which cannot, for how long, and what are the mitigation measures that were adopted. It should be added that as of this date no request for the reinstatement of financial equilibrium (REF) was made.


Joint Order of the Secretary of State to the Treasury and the Secretary of State to Infra-structures - 25 July 2020

The order authorised the hiring in 2020 of 100 ad-ditional employees to ensure the compliance with commitments relating to the planned investment in infrastructures and the follow-up of respective pro-jects and viewed to meet the requirements arising from the works to be developed in the railway and road networks, as provided in national investment plans.

The order further approves the replacement of em-ployees who terminated or will terminate their em-ployment in 2020 on grounds not attributable to the employer.

Accident in the North Line with Alfa Pendular Train - 31 July 2020

On 31 July a railway accident occurred on the North Line, near Soure station, due to the collision between an Alfa Pendular train and a catenary maintenance vehicle. Regretfully, two employees from IP's work-force died as a result of this accident.

The investigation of the accident is being carried out by the Office for the Prevention and Investigation of Air and Railway Accidents; the final report is not yet issued at this date.

Capital increases - 25 August and 28 August 2020

Pursuant to unanimous written corporate resolutions dated 25 August 2020 and 28 August 2020, the share capital of IP was increased by EUR 190,005 thousand, through the issue of 38,001 shares with the nominal value of EUR 5,000 per share, subscribed and paid up by the Portuguese State, as shareholder.

Rejection by the Constitutional Court of Appeal submitted by IP relating to the refusal of ap-proval by the Audit Court of the Algarve Litoral Sub-concession contract – 1 September 2020

According to summary decision 418-2020, dated 1 September 2020, the Constitutional Court reject-ed the admission of the said appeal, which IP chal-lenged, by entering claim against such decision on 14 September 2020 with the full Constitutional Court.



Almada, 17 September 2020 The Executive Board of Directors

Chairman, ANTÓNIO CARLOS LARANJO DA SILVADigitally signed document

Vice-Chairman , JOSÉ SATURNINO SUL SERRANO GORDODigitally signed document

Vice-Chairman , CARLOS ALBERTO JOÃO FERNANDESDigitally signed document

Member, ALBERTO MANUEL DE ALMEIDA DIOGODigitally signed document

Member, VANDA CRISTINA LOUREIRO SOARES NOGUEIRADigitally signed document

Member, ALEXANDRA SOFIA VIEIRA NOGUEIRA BARBOSADigitally signed document

Part IICondensed Consolidated Financial Statements and NotesFirst Half 2020

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES | 97

PART II – CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES · FIRST-HALF 2020

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES

STATEMENT OF COMPLIANCE

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1. CORPORATE INFORMATION1.1 IP Activity1.2 Activity of the IP Group companies

1.2.1 Telecommunications operations activity1.2.2 Integrated management and improvement of the Group's and public railway

property (commercial spaces)1.2.3 Provision of engineering and transport services

1.3 Other Equity Holdings1.3.1 Improvement of the Atlantic Corridor Front - CFM 41.3.2 High-Speed Spain - Portugal Link - AVEP

2. MAIN ACCOUNTING POLICIES2.1 Bases of presentation 2.2 Consolidation basis 2.3 Accounting policies 2.4 Main judgements and estimates and assumptions used in the preparation of

the financial statements

3. GROUP




7. DEFERRALS7.1 Deferred assets7.2 Deferred liabilities

7.2.1 Investment grants - Road Concession Right

8. FINANCIAL ASSETS AND LIABILITIES8.1 Categories according to IFRS 9 8.2 Financial assets

8.2.1 Grantor - State - Account Receivable8.2.2 Clients8.2.3 Other accounts receivable8.2.4 Cash and cash equivalents

101

103

109109110110110

111112112112

113114120121124

120

121

124

126

128128128129

130130131131132132133

TABLE OF CONTENTS


8.3 Financial liabilities8.3.1 Borrowings8.3.2 Shareholder funding/Shareholder loans8.3.3 Trade payables (Suppliers) 8.3.4 Other accounts payable

8.4 Financial risk management policies8.4.1 Credit risk8.4.2 Liquidity risk8.4.3 Interest rate risk8.4.4 Capital risk

8.5 Changes in liabilities deriving from financing activity

9. PROVISIONS






15. INCOME TAX

16. RELATED ENTITIES16.1 Summary of related parties16.2 Significant balances and transactions with public entities16.3 Balances and transactions with railway operators16.4 Joint Ventures16.5 Remuneration of corporate officers



19. CONTINGENCIES

20. COMMITMENTS




134134136140141141142145146146148

149

151

152

154

155

156

157

159159160162162163

165

168

169

170

171

172

175


CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES(Amounts in EUR thousand - €th)


STATEMENT OF COMPLIANCEPursuant to and for the purposes of provisions in Ar-ticle 246 (1) (c) of the Portuguese Securities Code, each member of the Executive Board of Directors of Infraestruturas de Portugal, S.A., identified below, signed the following statement:

“I hereby declare, pursuant to and for the purposes of provisions in Article 245 (1) (c) of the Portuguese Securities Code, that to the best of my knowledge, acting in the capacity and scope of the functions as-signed to me and on the basis of the information pro-vided through the Executive Board of Directors, the

condensed consolidated financial statements for the first semester of 2020 were prepared in accordance with the applicable accounting standards. I further declare that they provide a true and fair view of the assets and liabilities, the cash flows, the financial situ-ation and the profit/loss of Infraestruturas de Portugal, S.A., and that the management report for first half of 2020 faithfully details the important events that oc-curred in that period and the impact on respective separate financial statements, and also describes the main risks and uncertainties.”

The Executive Board of Directors








ASSETS NOTES 30-06-2020 31-12-2019

Non current

Goodwill 21 687 21 687

Financial investments 32 32

Intangible assets 5 20 776 672 20 586 467

Tangible fixed assets 65 158 59 930

Investment properties 3 169 3 199

Clients 157 472

Deferrals 7.1 614 164

Deferred tax assets 274 984 272 044

21 142 472 20 943 994

Current

Inventories 82 059 83 621

Grantor .- State - Accounts Receivable 8.2.1 3 931 281 3 834 542

Clients 8.2.2 94 808 75 464

Current tax assets 3 212 2 445

Government and other public bodies 6 1 571 584 1 452 828

Other accounts receivable 8.2.3 72 739 183 420

Deferrals 7.1 1 153 2 116

Cash and cash equivalents 8.2.4 175 539 287 092

Non-current assets held for sale 4 4

5 932 379 5 921 531

Total assets 27 074 851 26 865 524

To be read jointly with the notes to the Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED FINANCIAL STATEMENTSCONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2020 AND 31 DECEMBER 2019


EQUITY AND LIABILITIES NOTES 30-06-2020 31-12-2019

CAPITAL AND RESERVES ATTRIBUTABLE TO EQUITY HOLDERS

Paid-up capital 10 7 558 020 7 203 380

Reserves 10 259 593 155 967

Cumulative results 68 438 153 599

7 886 051 7 512 946

Net profit or loss for the period - 48 510 18 465

Total equity 7 837 541 7 531 411

LIABILITIES

Non current

Provisions 9 921 250 903 525

Borrowings 8.3.1 2 515 385 2 561 036

Shareholder funding/Shareholder loans 8.3.2 5 333 10 667

Other accounts payable 8.3.4 1 714 368 1 959 310

Deferrals 7.2 10 279 249 10 311 078

Deferred tax liabilities 136 79

15 435 721 15 745 695

Current

Trade payables (Suppliers) 8.3.3 30 968 43 308

Cash advances of trade receivables (clients) 469 485

Government and other public bodies 6 10 314 17 980

Current tax liabilities 6 7 412 0

Loans 8.3.1 146 554 99 750

Shareholder funding/Shareholder loans 8.3.2 2 483 983 2 475 895

Other accounts payable 8.3.4 1 010 986 940 406

Deferrals 7.2 110 903 10 594

3 801 589 3 588 418

Total Liabilities 19 237 310 19 334 113

Total equity and liabilities 27 074 851 26 865 524


CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2020 AND 31 DECEMBER 2019 (CONTINUED)


CONDENSED CONSOLIDATED PROFIT AND LOSS STATEMENT FROM 1 JANUARY 2020 TO 30 JUNE 2020 AND FROM 1 JANUARY 2019 TO 30 JUNE 2019

NOTES 2020 2019

Sales and services 11 472 959 575 335

Compensatory Allowances 27 528 29 874

Cost of goods sold and materials consumed 12 - 112 949 - 138 174

Variation in production inventories - 15 0

External supplies and services 13 - 140 902 - 130 977

Maintenance, Repair and Safety of the Road Network 13 - 53 684 - 49 265

Maintenance, Repair and Safety of the Railway Network 13 - 31 431 - 27 687

Other ESS 13 - 55 787 - 54 025

Personnel expenses - 68 093 - 67 704

Impairments (losses)/reversals - 237 52

Provisions (Increase/Decrease) 9 - 15 308 - 13 341

Other Income and gains 40 469 41 900

Other expenses and losses - 3 763 - 3 433

Earnings before depreciation, financial expenses and taxes 199 687 293 531

Depreciation and amortisation expenses/reversals - 118 664 - 142 588

Operating profit (before financing and tax expenses) 81 024 150 944

Interest and similar income 14 30 403 34 934

Interest and similar costs 14 - 155 319 - 136 382

Profit before tax - 43 893 49 495

Income tax for the period 15 - 4 617 - 14 542

Net profit for the year - 48 510 34 953

To be read jointly with the the Condensed Consolidated Financial Statements


CONDENSED CONSOLIDATED STATEMENT OF CHANGES TO SHAREHOLDERS EQUITY FROM 1 JANUARY 2020 TO 30 JUNE 2020 AND FROM 1 JANUARY 2019 TO 30 JUNE 2019

NOTES SHARECAPITAL RESERVES CUMULATIVE

RESULTSPROFIT FOR THE YEAR TOTAL

Balance at 31 December 2019 7 203 380 155 967 153 599 18 465 7 531 411

Appropriation of results for 2018: - 102 635 - 102 635 - -

Appropriation of results for 2019: 991 17 474 - 18 465 -

Share capital increase 10 354 640 - - - 354 640

Comprehensive income for the year - - - - 48 510 - 48 510

Balance at 30 June 2020 7 558 020 259 593 68 438 - 48 510 7 837 541


NOTES SHARECAPITAL RESERVES CUMULATIVE

RESULTSPROFIT FOR THE YEAR TOTAL

Balance at 31 December 2018 5 811 510 33 730 190 130 85 707 6 121 076

Appropriation of previous year's results - 5 465 80 243 - 85 707 -

Share capital increase 1 061 000 - - - 1 061 000

Comprehensive income for the year - - - 34 953 34 953

Balance at 30 June 2019 6 872 510 39 194 270 372 34 953 7 217 030



CONDENSED CONSOLIDATED CASH FLOW STATEMENT FROM 1 JANUARY 2020 TO 30 JUNE 2020 AND FROM 1 JANUARY 2019 TO 30 JUNE 2019

NOTES 2020 2019

Operating Activities

Cash receipts from clients 663 642 493 770

Cash paid to suppliers - 527 622 - 442 573

Cash paid to personnel - 62 565 - 62 324

Flows generated by operations 73 455 - 11 128

Income tax (paid)/received - - 24 157

Other receipts/(payments) relating to operating activities 30 033 31 524

Net cash from operating activities (1) 103 488 - 3 761

Investing activities

Cash receipts relating to:

Investment subsidies 10 769 16 657

Tangible fixed assets 1 221 404

Interest and similar income 2 9

11 992 17 069

Cash payments relating to:

Investment subsidies - 280 -

Tangible fixed assets - 69 121 - 39 864

Intangible assets - 465 453 - 448 085

- 534 854 - 487 948

Net cash from investing activities (2) - 522 862 - 470 879

Financing activities

Cash receipts relating to:

Capital contribution 10 354 640 1 061 000

354 640 1 061 000

Cash payments relating to:

Borrowings - 37 395 - 537 395

Finance leases - 150 - 151

Interest and similar costs - 9 261 - 40 839

- 46 806 - 578 385

Net cash from financing activities (3) 307 834 482 615

Change in cash and cash equivalents (4) = (1) + (2) + (3) - 111 540 7 975

Cash and cash equivalents at the end of the period 8.2.4 175 539 322 822

Cash and cash equivalents at the beginning of the year 287 079 314 846

Variation in cash and cash equivalents - 111 540 7 975




Financial Director

MARIA DO CARMO DUARTE FERREIRA

Certified Accountant

DIOGO MENDONÇA LOPES MONTEIRO



Digitally signed document







1. CORPORATE INFORMATION

Infraestruturas de Portugal, S.A. is the state-owned company resulting from the merger of Rede Fer-roviária Nacional – REFER, E.P.E. (REFER) and EP - Estradas de Portugal, S.A. (EP, S.A.) through which REFER merged into EP, becoming a public limited company named Infraestruturas de Portugal, S.A. (hereinafter IP). The merger entered into force on 1 June 2015, as provided in Decree-law 91/2015 of 29 May.

The immediate consequence of the merger deter-mined that road and railway infrastructures are to be managed by as single company, in accordance with a joint, integrated and complementary strat-egy.

The Infraestruturas de Portugal Group, hereinafter referred to as IP or the Group, includes the follow-ing subsidiaries: IP Telecom – Serviços de Teleco-municações, S.A. (IP Telecom), which is a telecom-munications operator and provider of specialised information technology systems and services; IP Património – Administração e Gestão Imobiliária, S.A. (IP Património), which manages and improves the real estate property of the Group; IP Engenha-ria, S.A. (IP Engenharia), whose activity is the pro-vision of engineering and transportation services.

Additionally, the IP Group holds stakes in two joint undertakings, AVEP – Alta Velocidade de Espanha e Portugal A.E.I.E., in partnership with ADIF – Ad-ministrador de Infraestruturas Ferroviárias (Span-ish company), to study the Madrid-Lisboa-Por-to and Porto-Vigo railway links and CORREDOR FERROVÁRIO DE MERCADORIAS N.º4 (A.E.I.E, CFM4), in partnership with ADIF - Administrador de Infraestruturas Ferroviárias and RFF – Réseau Ferré de France (French entity) and DB Netz AG (German entity); the object of this joint-venture is to promote measures among its members to im-prove freight transport competitiveness in the rail-way corridor. The corridor consists of existing and planned sections of the railway infrastructure in-cluding: Sines-Setúbal-Lisboa-Aveiro-Leixões/Al-geciras – Madrid – Bilbao – Saragoça/Bordéus-La Rochelle–Nantes-Paris – Le Havre – Metz-Stras-

bourg and Mannheim, crossing the borders at Vilar Formoso/Fuentes de Oñoro, Elvas/Badajoz, Irun/Hendaye and Forbach/Saarbrücken.

1.1. IP ActivityAccording to Decree-Law No. 91/2015, the cor-porate object of IP is “the design, construction, fi-nancing, maintenance, operation, restoration, wid-ening and modernisation of the national road and rail networks, including the command and control of movements of traffic movements.”

In order to carry out its activity IP takes the po-sition of infrastructure manager, under the terms of the overall concession contract for the national road network (NRN) and the national railway net-work (NRN) programme both concluded with the Portuguese State.

In the development of its business and in order to ensure high level of efficiency and effectiveness, IP employs additional services in business areas that are not included in its core business but are carried out by its subsidiaries.


1.2. Activity of the IP Group companies

The activities of IP Group companies are detailed below.

1.2.1. Telecommunications operations activity

IP Telecom with registered office in Lisbon, was set up on 9 November 2000; its business activity is the establishment, management and operation of telecommunications infrastructures and systems, as well as the performance of any complementa-ry, alternative or ancillary activities, directly or by establishing or taking on shareholdings in other companies.

The activity of IP Telecom is to ensure the sup-ply and provision of information and communica-tions systems and technology, based on innova-tive solutions with a focus on cloud and security technology and the main national telecommunica-tions infrastructure, based on optical fibre and road technical channel, for the business market and public entities.

1.2.2. Integrated management and improvement of the Group's and public railway property (commercial spaces)

The mission of IP Património encompasses the acquisition, expropriation, register updating and disposal of real estate assets or creation of liens thereon, the profitable use of the assets allocated to the concession or the autonomous estate of the IP Group, and also the management and explo-ration of stations and associated assets, including their operational management.

On 27 June 2018 IP Património began to integrate the management, maintenance, upkeep and clean-ing of the Intermodal Transport Complex, designat-ed Estação do Oriente (Oriente Station), providing maintenance, cleaning and surveillance services to IP and Metropolitano de Lisboa, in the respective

components, leasing commercial units, operation of the car park, supply of goods and services to the tenants of the commercial units and leasing spac-es and provision of services for the organisation of events.

1.2.3. Provision of engineering and transport services

IP Engenharia provides transport engineering ser-vices to support the activity of IP and in road and/or rail multidisciplinary projects, providing mobility solutions with a high level of integration at both national and international levels. It carries out map-ping and topography activities, and provides inte-grated management services of undertakings and supervision, as well as in the quality, environment and safety management field.

1.3. Other Equity Holdings

1.3.1. Improvement of the Atlantic Corridor Front - CFM 4

In November 2013 the infrastructure managers of Portugal (REFER), Spain (ADIF) and France (Ré-seau Ferré de France – RFF, currently SNCF Ré-seau) set up CFM4 with the goal of developing an internal rail market, in particular with regard to the transport of goods, through the creation of dedi-cated corridors.

The CFM4 then covered the existing and planned railway lines on the routes of Sines/Setúbal/Lis-boa/Aveiro/Leixões – Algeciras/Madrid/Bilbao – Bordeaux/Paris/Le Havre/Metz/Strasbourg - Manheim crossing the borders at Vilar Formoso/Fuentes de Oñoro, Elvas/Badajoz and Irún/Hen-daya and Forbach/Saarbrucken.

On 1 January 2016, with the extension of the rail freight corridor to Mannheim, crossing the France/Germany border at Forbach/Saarbrucken, Germa-


ny joined Portugal, Spain and France as a partner of AEIE – the Atlantic Corridor. The new Atlantic-corri-dor configuration also encompasses another link to the river port of Strasbourg.

The role of CFM4 is, firstly, the management and revenue generation from existing infrastructures, without additional investments, through the cen-tralised management of capacity allocation and cus-tomer relations.

Subsequently, through CFM4, these neighbouring countries will be able to articulate investment in rail-way infrastructures, overcoming operational, techni-cal and interoperability barriers to improve competi-tiveness of rail freight transport.

1.3.2. High-Speed Spain - Portugal Link - AVEPIn January 2001, a partnership was set up by Por-tugal and Spain to carry out preliminary studies of the Porto-Vigo and Madrid-Lisboa-Porto corridors in the form of a European Grouping of Economic In-terests (EGEI). The mission of the said EGEI is to:

• Conduct a number of economic and financial technical studies, undertake surveys and other work needed to define and implement the Por-to-Vigo and Madrid –Lisboa – Porto corridors.

• Ensure coherence and coordination of the techni-cal studies carried out for each of the corridors.

• On the basis of these technical studies, to car-ry out the economic, financial and legal studies required by government bodies, which are nec-essary to define the appropriate financing, con-struction and operating structures of both the corridors.

• Study the safety specifications and materials ca-pable for use in the corridors.

• Proceed with the construction and operation of the corridors if this mission is entrusted to it by the infrastructure managers of both members of the Grouping.

• Carry out any other mission entrusted to it by the players of the Grouping or by the respective Gov-ernments.


2. MAIN ACCOUNTING POLICIES

2.1. Bases of presentationThe financial statements presented herein reflect the financial position, the results of the operations and the cash flows of the IP Group for the periods ending on 30 June 2020, 31 December 2019 and 30 June 2019, forming the condensed consolidated financial statements of the IP Group.

These condensed consolidated financial statements were prepared according to IAS 34 - Interim Fi-nancial Reporting. (IAS 34) Therefore, they do not include all the information required by IFRS and should be read jointly wit the consolidated finan-cial statements for the period ended 31 December 2019.

These financial statements were approved by the Executive Board of Directors in meeting held on 17 September 2020. The Executive Board of Directors is of the opinion that these financial statements give a true and fair view of Group IP's operations, as well as its condensed consolidated financial position, re-sults and cash flows.

The IP Group’s financial statements were prepared on the basis of ongoing operations, in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU), is-sued and in force on 30 June 2020.

IFRS include accounting standards issued by the In-ternational Accounting Standards Board (IASB) and the interpretations issued by the International Fi-nancial Reporting Interpretations Committee (IFRIC) and respective bodies that preceded them.

In the condensed consolidated financial statements presented, we preferred to measure by historical cost.

All figures are expressed in thousands of Euro (EUR thousand), without any rounding up or down, un-less otherwise stated. This way, sub-totals and to-tals in tables presented in these condensed consol-idated financial statements may not be equal to the sum of the figures presented, due to rounding up or down. Additionally, initials €M are used for millions of Euro, where necessary.

The preparation of financial statements in accord-ance with IFRS requires the Group to exercise

judgements, estimates and assumptions that af-fect the application of accounting policies and the amounts of income, expenses, assets and liabili-ties. The estimates and associated assumptions are based on historical experience and other factors deemed applicable and they form the basis for the judgements about the values of assets and liabilities that could not possibly be valued from other sourc-es. Issues requiring a higher degree of judgement or complexity, or for which the assumptions and es-timates are considered significant, are presented in Note 2.4.

2.2. Consolidation basisThe condensed consolidated financial statements of the IP Group include, with reference to 30 June 2020, 31 December 2019 and 30 June 2019, the financial statements of IP (parent company of the Group) and its subsidiaries (note 3), as from the moment they fell under the control of IP.

For controlling purposes, it is considered that IP controls a subsidiary if and only if it has cumula-tively:

• control over the subsidiary;

• exposure or rights to variable results via its rela-tionship with the subsidiary; and

• The capacity to use its control over the subsid-iary to affect the value of the results for inves-tors.

IP (directly or indirectly) holds 100% of the share capital of its subsidiaries (hence there are “non controlling interests” in the Group) and does not have any agreement with any external company whereby it waives its rights. Consequently, no fur-ther considerations about the effectiveness of the Group’s control over its subsidiaries are necessary.

Consolidation of a subsidiary starts from the mo-ment the control is obtained by the parent and ends when such control ceases.

Accordingly, accounting policies of the various en-tities comprised in the consolidation perimeter are standardised; assets, liabilities, equity holdings,


revenues, expenses and cash flow statements of the parent company are combined with equivalent components of its subsidiaries.

Additionally, the carrying amounts of the parent's investment in each subsidiary and the parent’s portion of equity of each subsidiary are eliminated, according to IFRS 3 - Business Combinations, as explained in note 2.3.1. of the consolidated report and accounts for the Group as of 31 December 2019.

Intra group balances and transactions are eliminat-ed in full. Profits and Losses resulting from intra group transactions that are recognised in assets (such as inventories and fixed assets) are elimi-nated in full. The reconciliation of transactions may give rise to temporary differences, which are dealt with in accordance with to IAS 12 - Income tax (Note 2.3.8) of the consolidated report and ac-counts for the Group as of 31 December 2019.

A parent can lose control of a subsidiary for several reasons, with or without a change in absolute or relative ownership levels, or as a result of a con-tractual agreement.

In such situations, IP derecognises the assets (in-cluding any goodwill) and liabilities of the subsid-iary at their carrying amounts at the date when control is lost and recognises:

i. the fair value of the consideration received, if any, from the transaction, event or circumstanc-es that resulted in the loss of control; and

ii. if the transaction that resulted in the loss of con-trol involves a distribution of shares of the sub-sidiary to owners in their capacity as owners, that distribution, and any investment retained in the former subsidiary at its fair value at the date when control is lost;

iii. reclassifies to profit or loss, or transfers direct-ly to retained earnings if required in accordance with other IFRSs, the amounts recognised as other comprehensive income.

FINANCIAL INVESTMENTS IN JOINT ARRANGEMENTS

A joint arrangement is, according to IFRS 11 – Joint Arrangements, an arrangement whereby two or more parties have joint control.

The joint arrangements have the following char-acteristics.

• The parties are bound by a contractual agree-ment; and

• The contractual agreement confers on two or more parties joint control of the arrangement.

According to that standard, a joint arrangement is a joint operation or joint venture.

A joint operation is a joint arrangement whereby the parties holding joint control of the arrangement have rights to the assets and obligations on the li-abilities related to that arrangement. These parties are designated as joint operators.

A joint operator recognises, in relation to its inter-est in a joint operation:• its assets, including its share of any assets held

jointly;• its liabilities, including its share of any liabilities

incurred jointly;• its income from the sale of its share of the out-

put of the joint operation;• its share of the revenue from the sale of the out-

put by the joint operation; and• its expenses, including its share of any expens-

es incurred jointly.

A joint venture is a joint arrangement whereby the parties holding joint control of the arrangement have rights over the net assets of the arrangement. These parties are designated as joint venturers.

2.3. Accounting policiesThe accounting policies adopted are consistent with those used in the preparation of the Group's financial statements for the year ended at 31 De-cember 2019 and described in respective notes, with no changes recorded in the period in relation to the policies in force at the said date.


2.4. Main judgements and estimates and assumptions used in the preparation of the financial statements

In preparing the condensed consolidated financial statements in accordance with IFRS, the Executive Board of Directors of IP is required make judge-ments, estimates and assumptions that affect the amounts of assets, liabilities, income, financial flows as well as the disclosure of contingent lia-bilities. Judgements, estimates and assumptions are assessed continuously and are based on past events and other factors, including expectations for future events likely to be probable given the circumstances on which the estimates are based.

The estimates were determined based on the best information available at the date of preparation of the consolidated financial statements. However situations may occur in subsequent periods that are not foreseeable at the time and were not con-sidered in these estimates, and may result in rele-vant changes in the future financial position, per-formance and cash flows of the Group, which will be considered prospectively in the profit or loss for the year.

Additionally, note 8.4 discloses a set of risks to which the Group is exposed.

The most significant accounting estimates reflect-ed in the financial statements are:

INVESTMENT PROPERTIES

The IP Group opted to recognise investment prop-erties using the cost method, notwithstanding dis-closing their fair value.

INTANGIBLE ASSETS - CONCESSION RIGHT

The IP Group amortises its Road Concession Right by the equivalent production unit meth-od. This amortisation is based on: i) the esti-mate of total income generated by the con-cession until its end and on ii) the recovery of total investments to be made by the Group.

These two parameters are defined in accord-ance with the best judgement of the Executive Board of Directors for the assets and businesses in question, also considering practices adopted by companies of the sector at international level.

GRANTOR - STATE - ACCOUNT RECEIVABLE

It is shown in the condensed consolidated state-ment of financial position as current balance as there is no defined maturity, as a result of the ab-sence of a formalised concession contract; there-fore,it is assumed that the amounts receivable are due on the moment of the debit. Consequently, from that date, the interest on the outstanding amount is deemed to be payable to the conces-sionaire (IP). The form of calculating that interest is based on the same terms of financing obtained to directly fund this activity. Interest and other finan-cial expenses incurred with borrowings for financ-ing the concession are therefore debited.

GRANTS

Rail and road activities have been financed by means of investment grants. Accordingly, con-cessioned rail assets are shown in the condensed consolidated financial statements net of respective grants, this being the model which best represents how these investments are expected to be reim-bursed.

On the other hand, grants associated with the road concession right are shown in the condensed con-solidated financial statements as deferred income, under deferred liabilities.

TANGIBLE, INTANGIBLE ASSETS AND INVESTMENT PROPERTIES - USEFUL LIVES

The determination of useful lives of the assets as well as the depreciation/amortisation method to be applied is essential to determine the amount of depreciation/amortisation to be recognised in the condensed consolidated income statement for each year.


These two parameters are defined in accordance with the best estimate of the Executive Board of Directors for the assets and businesses in ques-tion, while also considering the practices adopted by the companies of the sector.

INVESTMENT PROPERTIES - DETERMINATION OF FAIR VALUE

Investment properties are subject to external evaluations made by qualified evaluators for the purposes of disclosure in the consolidated annu-al report. Such evaluation is only made in case of evidence justifying it (see in this chapter - impair-ment of non monetary assets/investment prop-erties), according to the income method, where the potential unit rent is estimated based on local market rental values. Rents practised are assumed as perpetual; the yield is determined based on the market risk of the property concerned.

JOINT VENTURES

The two European Groupings of Economic Interest of which the IP Group is member are considered joint arrangements as provided in IFRS 11.

The determination of the typology of agreement is based on the judgement made by the entities involved, taking into account the rights and obli-gations arising from the agreements, taking into account:

• Structure and legal form of the agreement – Both agreements concerned are structured un-der separate vehicles. In these circumstances, according to the applicable standard (IFRS 11), a joint arrangement is where the legal form of the said instrument does not allow separation between the parties and the separated vehi-cle, which is the case here, since the by-laws of both Groupings mention the existence of unlimited and joint liability of the partners in the agreement, which makes them responsible for credits claimed by third parties, as well as the fact that, in the event of losses, the gen-eral meeting has to right to ask the parties to contribute proportionately, e.g. in proportion to their respective share to the settlement of the Grouping’s debts, which seems to confer to the

parties obligations for the liabilities originated by the agreement.

• The terms agreed by the parties - both agree-ments provide that the projects will be deemed as undivided assets of members.

ESTIMATED REVENUE PATTERN

The amount and timing of future earnings are es-sential to determine the equivalent units method on which the calculation of the amortisation of the Road Concession Right is based.

This pattern is estimated based on performance in the recent past and on the Executive Board of Directors' best outlook for the future, having the same calculation base of the revenues intro-duced in the multi-annual financial model, with the changes considered in the following paragraphs.

A sensitivity analysis was also carried out on the development of IP’s revenues throughout the life of the contract and its impact on amortisation for the year. The analyses were based on the follow-ing scenarios:

a) Real growth in toll revenues after the initial end of the concession contracts would be 0% and the real growth of RSC would be in accordance with the plan of activities and budget for 2020 and 2021 and after 2022 it would be 0%, with growth remaining in line with the CPI.

b) Real growth in toll revenues after the initial end of the concession agreements would be 1% up to 2039 and 0% after 2040 and the real growth of RSC would be in accordance with the plan of activities and budget for 2020 and 2021, and after 2022 it would be 0.5%, with growth re-maining in line with the CPI.

c) It was considered that the real growth in toll revenues after the initial end of the concession contracts would be 1% and the real growth of RSC would be in accordance with the plan of activities and budget for 2020 and 2021 and af-ter 2022 it would be 1%, with growth remaining in line with the CPI.


The results of these different analyses in the first half of 2020 are shown in the table below:

SENSITIVITY ANALYSIS OF GROWTH OF RSC AND ROLL REVENUE

SCENARIO A)

SCENARIO B)

SCENARIO C)

Amortisation for the year 115,0 104,5 83,4

Amortisation of grants (29,3) (27,2) (23,0)

85,7 77,4 60,5

Difference -8,4 -25,2

For the purposes of preparing its condensed con-solidated financial statements the Group adopted scenario a), in accordance with its multi annual fi-nancial model.

AMORTISABLE VALUE OF CONCESSION RIGHT

The value taken as the amortisable value of the Concession Right must take into account the val-ue of works and maintenance scheduled up to the term of the concession.

Changes in planned, contracted and executed amounts may vary due to factors outside the com-pany’s control with an impact on the amortisable value recorded in the future.

REGULAR MAINTENANCE OF ROADS AND ENGINEERING STRUCTURES

The annualised cost of scheduled works required to maintain the network’s average quality index at the same level as when the network was received (a stipulation of IP’s Concession Contract) is cal-culated based on technical assessments of repair needs and an index of the average quality of road and engineering structures.

RAILWAY CONCESSION

As there is no formal concession agreement for the Investment Activity in Long-Duration Infrastruc-tures, the IP Group makes the following assump-tions to determine the value of the concession, based on the principle of substance over form and the existing legislation, namely:

• The General Land Transportation Law Infra-structure Maintenance and Supervision Law 10/90 - which establishes in number 3 of article 11 the compensation payable by the State for shouldering in full the infrastructure construc-tion, maintenance and supervision costs, in ac-cordance with rules to be approved by the Gov-ernment.

• In the The Strategic Transport Plan (RCM 45/2011):

The investment necessary for the construction of transport infrastructure, as goods and assets in the public domain, is the responsibility of the State as set out in the General Land Transportation Law. Nevertheless, over the past decades, state-owned enterprises operating in the land transport and rail-way sectors have carried the burden of having to register in their financial statements - via the issu-ing of debt - the costs of this investment made on behalf of the State,” and

"The historic debt of state-owned enterprises op-erating in the public railway transport and infra-structures sector, results in part from the develop-ment of investment projects which are the State's responsibility, (…)”.

• PETI3+ - Strategic Plan for Transports and Infra-structures (2014-2020 horizon).

PETI3+ “…is a revision of PET 2011-2015, including a second phase of structural reforms to be made in this sector, as well as a set of investments in transport to be carried out until the end of this decade. It is estimated that 61% of priority railway projects can be financed through community funds and 39% through public funds. "Where any assets are withdrawn from the public railway domain, the profit or loss will be allocated to this activity, as established in each withdrawal order.

Therefore, the costs borne with LDIs assume the form of "accounts receivable" (financial assets) charged to the "State grantor", being initially rec-ognised at fair value.

Financial assets correspond to the investment in the assets under concession, which include pub-lic railway domain property, to which IP only has access to provide "Infrastructure Management” services, less the return on assets and any grants


received plus the interest of loans contracted, deb-ited to the concession and not settled by the Gran-tor. As there is no defined maturity, as a result of the absence of a formalised concession contract, the amounts receivable are assumed to become due on the debit date. Consequently, from that date, the interest on the outstanding amount is deemed to be payable to the concessionaire (IP). The form of calculating that interest is based on the same terms of financing obtained to directly fund this activity. Interest and other financial expenses incurred with borrowings for financing the conces-sion are therefore debited.

LONG DURATION INFRASTRUCTURES (LDI)

Tangible fixed assets classified as long-duration in-frastructures belong to the public railway domain, and IP only has access to them so as to provide the services associated with the Railway Infrastructure Management Accordingly, they are recorded un-der the statement of contingent financial position Grantor - State - Account receivable item, as they constitute an unconditional right to receive money from the State for the investments made. These assets, in addition to acquisitions and buildings af-ter the spin-off of the CP assets, include the assets of the former divisions, freight terminals and prop-erty transferred from that company, which have the nature of "public domain goods".

CONSTRUCTION BY MEANS OF SUB-CONCES-SIONS

Construction through Sub-Concessions is rec-ognised to reflect the effective evolution of the works, based on the percentage of completion data obtained from the sub-concessionaires and validated by the IP Group.

PROVISIONS

The IP Group regularly analyses any obligations arising from past events and which must be recog-nised or disclosed.

The subjectivity inherent in determining the likeli-hood and amount of future internal resources re-

quired for the payment of the obligations may lead to significant adjustments, either due to changes in the assumptions used or the future recognition of provisions previously disclosed as contingent li-abilities.

Provisions resulting from ongoing legal proceed-ings are periodically assessed by the internal and external lawyers of the IP Group responsible for the cases in question.

With regard to the provision for disqualified roads, the IP Group makes a comprehensive survey of the disqualified roads still under its responsibility and checks, on the basis of technical analyses of the cost of preparing them for hand over to the mu-nicipalities, if the recorded value of this provision is appropriate.

As a result of the evolution of the VAT proceed-ing described in note 6, a provision was set up for the VAT proceeding, which is estimated to be the impact of a potential negative decision against the former EP, which corresponds to the total VAT de-ducted by the IP Group in activities financed by the RSC (Note 9).

IMPAIRMENT OF NON MONETARY ASSETS

Goodwill - the recoverable amounts from the cash-generating units to which goodwill is al-located are determined internally based on the calculation of values in use, using the discounted cash flows methodology. The cash flows used in the calculation stem from the company’s budget for a period of 3 years with an additional project of 2 further years, excluding any effect of future restructurings which were not approved by the Executive Board of Directors. The said cash flows are discounted using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset con-cerned, using the Weighted Average Cost of Capi-tal (WACC) model.

Tangible and intangible assets with defined useful life - any indication of impairment losses is verified, namely through the discontinuing/destruction of assets.

Investment properties - at the end of each finan-cial year, the Executive Board of Directors assess-


es any existence of indications entailing changes in the value of investment properties by analysing internal and external data, including the following:

• Sales earnings of the year and respective mar-gins;

• Relationship between the type of units sold, compared to those in portfolio;

• Specific characteristics of the units under evalu-ation;

• Promissory purchase and sale contracts for the following year;

• Rents existing in the market in the lease zones;

• Purchase and sale contracts undergoing negoti-ation.

If further evaluations are necessary, they will be carried out by qualified external evaluators.

Inventories of the ‘Railway Infrastructure Invest-ment Activity’ segment - they will not be reduced below cost as since they are integrated in the infra-structure, they will be debited to the Grantor at ac-quisition price. The only exception to this concerns materials that are obsolete or technically depre-ciated and which cannot be used for the activity, which will notwithstanding be adjusted taking into account their recoverable value from their sale as waste.

Inventories held to be used in production - these are annually subject to impairment test, based on the analysis of the price of last purchases made and if there are products that are obsolete by car-rying out a physical stock of the assets.

Inventories of the real estate management seg-ment - these are annually subject to impairment test. Evaluations are undertaken externally by independent evaluators, in accordance with the income method, which is to plan the future cash flows associated with the various projects and dis-count them at a rate that reflects their risk. In the future cash flow projection, future returns are esti-

mated using the market-based comparative meth-od, which consists of determining the current val-ue of the properties compared with similar ones, of which their price on the real estate market and their relevant characteristics are known. Expenses are projected in accordance with the constructive reality of the real estate properties and the area concerned. With regard to the discounted cash flow discount rate, it is the result of the use of a risk-free return rate, based on government bonds with a maturity similar to the time horizon of pro-jects, associated with a risk premium.

IMPAIRMENT OF FINANCIAL ASSETS

Other accounts receivable miscellaneous - based on the evaluation by the Executive Board of Direc-tors of the probability of recovering such receiva-bles, the seniority of the balances, cancellation of debts and other factors. Other circumstances and facts are also considered that may alter estimat-ed impairment losses of receivables in the face of considered assumptions, including changes in the economic climate and sector trends, the creditor position of main clients and significant defaults.

This evaluation process is subject to various es-timates and judgements. Changes in these esti-mates may imply different levels of impairment; consequently, they may have different impacts on income.

Trade receivable from clients of the Infrastructure Management and High Performance segments - in general, they have not been subject to impairment given the specific characteristics of the clients (rail-way operators through the State domain and Ea-sytoll payment system).

Trade receivable from clients of the real estate sec-tor - a historic matrix of irrecoverable debt is used to determine expected losses for the whole life cy-cle of the claims, based on the following criteria:

• Historic of losses over the last 3 years

• Trade receivables above 1 year are fully adjust-ed;



• Trade payables are deducted of:

- Debts in favour of clients;

- Surety bonds;

- Debts of public entities;

- Debts of clients with payment plans, where the financing component of the operation is assessed;

- Moratoria granted within the scope of Cov-id19.

Trade receivable (clients) (remaining business seg-ments - recognised based on the counterparty credit risk profile, its financial situation and historic seniority of the balances.

INCOME TAX

Deferred tax assets are recognised only when there is strong certainty that there will be profit and future taxable income available for the use of temporary differences, or when there are deferred tax liabilities, the reversal of which is expected in the same period in which deferred tax assets are reversed. The assessment of deferred tax assets is made by the Executive Board of Directors at the end of each reporting period, taking into account the expected future performance of the IP Group. Deferred taxes are determined based on current tax legislation or legislation published for future ap-plication. Changes in tax legislation can influence the value of deferred taxes and these are analysed carefully by management.

3. GROUP

The companies included in the consolidation, their head offices, main activity and the proportion of capital held in them at 30 June 2020 and 31 December 2019 are as follows:

COMPANYREGIS-TERED OFFICE

PERCENTAGE OF CAPITAL HELD MAIN ACTIVITY

30-06-2020 31-12-2019

PARENT COMPANY

Infraestruturas de Portugal, S.A. Almada - -

Design, construction, financing, maintenance and operation, renovation, widening and mod-ernisation of the national road and rail networks, including in the latter the command and control of traffics.

SUBSIDIARIES

IP Telecom, Serviços de Telecomunicações, S.A. Lisbon 100.00 % 100.00 %

Ensure the supply and provision of information and communications systems and technology, based on innovative solutions with a focus on cloud and security technology and the main na-tional telecommunications infrastructure, based on optical fibre and the road technical channel, for the business market and public entities.

IP Património - Administração e Gestão imo-biliária, S.A. Lisbon 100.00 % 100.00 %

Carry out the acquisition, expropriation, reg-istration update and sale of real estate or the constitution of rights over the same, as well as the profitability of the assets assigned to the concession or the autonomous assets of the IP Group and the management and operation of stations and associated facilities, including their operational management.

IP Engenharia, S.A. Lisbon 100.00 % 100.00 %

Provide transport engineering services for the activity of the IP and in road and/or rail multi-disciplinary projects, providing mobility solutions with a high level of integration at both national and international levels.

JOINT OPERATIONS

AVEP - Alta Velocidade de Espanha e Portugal, A.E.I.E. (a) Madrid 50.00 % 50.00 % Conducting studies required for the Madrid-Lis-

bon-Porto and Porto-Vigo connections.

AEIE - CMF4 (b) Paris 25.00 % 25.00 %

Promotion of measures aimed at improving the competitiveness of the rail transport of freight in the rail corridor Sines - Lisbon/Leixões | Sines - Elvas/Algeciras - Madrid - Medina del Campo - Bilbao - Irun/Bordeaux - Paris-Le Havre - Metz | Vilar Formoso/Fuentes Onõro, Elvas/Badajoz, Irun/Hendaye and Fornack/Saarbrucken.

a) Entity jointly controlled by IP and ADIF, in the form of European Economic Interest Grouping (E.E.I.G.).b) Entity jointly controlled by IP, ADIF, SNCF - Réseau and DB NETZ (the latter since the 1st of January 2016), in the form of European Economic

Interest Grouping (E.E.I.G.), established in 2013, with no share capital.



The Group has the following business segments:

• High Performance;

• Road Infrastructure Management Activity;

• Railway Infrastructure Investment Activity;

• Railway Infrastructure Management Activity;

• Telecommunications;

• Commercial Real Estate Management; and

• Engineering and Transport Services.

The ‘High Performance’ segment corresponds to the entire activity related to Road High Perfor-mance and includes all currently managed Pub-lic-Private Partnerships (PPP), including conces-sions of the State and sub-concessions, and the other high-performance routes currently directly managed by the Group.

The ‘Road Infrastructure Management Activi-ty’ segment includes management of the whole National Road Network not included in the pre-vious segment. It comprises both the activities of building and upgrading the routes and engineer-ing structures and the activities of management, maintenance and improvement of network safety.

The ‘Railway Infrastructure Investment Activity’ segment includes the set of investments associ-ated with new infrastructure and/or expansion of the network; modernisation and rehabilitation, with the introduction of new technologies in the mode of operation; and infrastructure replacement, which comprises interventions that introduce im-provements of a lasting nature or which can in-crease the value and/or useful life of the asset without changing operating conditions;

The contracting of the funding needed for the in-vestments described above is made by the Group and is in the form of credit from financial and capital market institutions, shareholder loans and obtain-ing grants.

The ‘Railway Infrastructure Management Activity’ segment corresponds to the provision of a public service, including functions such as maintenance and repair of infrastructures, capacity manage-ment, management of regulatory and safety con-trol, command and control of traffic, and including other activities supplementary to the infrastructure management.

The 'Telecommunications' segment refers to the provision of Information Systems and Technologies and Communications services.

The ‘Commercial Real Estate Management’ seg-ment covers the management and operation of its own and others’ property and real estate devel-opments, acquisition, expropriation, registry office updating and sale of real estate or the establish-ment of rights on these assets.

The ‘Engineering and Transport Services’ segment includes the provision of transport engineering services in road and/or rail multidisciplinary pro-jects and the respective mobility solutions both nationally and internationally.

The revenues and expenses of the Telecommuni-cations, Real estate management, and Engineering and transport services segments were calculated from the perspective of generating revenue from the Group’s excess capacity, arising from the man-datory public service of management of the inte-grated infrastructure of the national rail network (provided for in the Programme Contract signed with the Portuguese State) and the national road network that promotes efficiency in the Group.

The information relating to the results from 1 Jan-uary 2020 to 30 June 2020 and from 1 January 2019 to 31 December 2019, assets and liabilities for the periods ended 30 June 2020 and 31 December 2019 of the identified segments is as follows:

See accounting policy 2.3.2 of the annual report at 31 December 2019


2020 TELECOMMUNICA-TIONS

COMMERCIAL REAL ESTATE

MANAGEMENT

ENGINEER-ING AND

TRANSPORT SERVICES

INV. ACTIV.RAILWAY

INFRASTRUCTURE

MANAGEMENT ACTIVI.

RAILWAY INFRASTRUCTURE

HIGH PERFOR-MANCE

MANAGEMENT ACTIVI.

ROAD INFRASTTOTAL

Sales and services 5 782 6 473 13 15 298 37 323 127 033 281 038 472 959

Impairment - - 222 - - - 20 - 5 - 237

Provisions - - 154 - - - 2 536 - - 12 618 - 15 308

Other income 8 660 - - 29 176 4 466 33 688 67 997

Other expenses - 3 103 - 3 343 - 15 - 14 865 - 92 911 - 123 903 - 87 583 - 325 723

EBITDA 2 687 3 414 - 2 433 - 28 969 7 596 214 530 199 687

Amortisation and depreciation - 825 - 48 - - 433 - 1 789 - 115 568 - 118 664

EBIT 1 862 3 365 - 2 0 - 30 759 106 558 81 024

Financial expenses - 6 - 4 - - 30 401 - 12 603 - 112 306 - 155 319

Financial income - - - 30 401 - 2 30 403

EBT 1 855 3 361 - 2 0 - 43 361 - 5 746 - 43 893

Income tax for the period - 4 617 - 4 617

Net Income - 48 510 - 48 510

2019 TELECOMMUNICA-TIONS

COMMERCIAL REAL ESTATE

MANAGEMENT

ENGINEER-ING AND

TRANSPORT SERVICES

INV. ACTIV.RAILWAY

INFRASTRUCTURE

MANAGEMENT ACTIVI.

RAILWAY INFRASTRUCTURE

HIGH PERFOR-MANCE

MANAGEMENT ACTIVI.

ROAD INFRASTTOTAL

Sales and services 5 911 7 943 320 10 350 43 934 164 802 342 074 575 335

Impairment 11 52 0 - - 21 - 10 52

Provisions - 68 - 7 5 - - 405 - 1 692 - 11 174 - 13 341

Other income - 978 - - 30 686 4 466 35 644 71 774

Other expenses - 2 947 - 3 260 - 292 - 9 830 - 91 028 - 149 152 - 83 780 - 340 288

EBITDA 2 908 5 707 33 521 - 16 834 18 424 282 773 293 531

Amortisation and depreciation - 562 - 43 - - 521 - 1 575 - 139 888 - 142 588

EBIT 2 346 5 664 33 0 - 18 409 161 309 150 944

Financial expenses - - - - 34 922 - 14 043 - 87 418 - 136 382

Financial income - - - 34 922 - - 34 934

EBT 2 346 5 664 33 0 - 32 451 73 903 49 495

Income tax for the period - 14 542 - 14 542

Net Income 34 953 34 953


30-06-2020 TELECOMMUNICA-TIONS

COMMERCIAL REAL ESTATE MANAGEMENT

ENGINEERING AND TRANSPORT SERVICES

INV. ACTIVITY RAILWAY

INFRASTRUCTURE

MANAGEMENT ACTIVITY

RAILWAY INFRAST

HIGH PERFORMANCE

MANAGEMENT ACTIVITY

INFRASTRUC-TURE ROAD

TOTAL

Assets

Concession right - - - - - 20 772 257 20 772 257

Grantor - - - 3 931 281 - - - 3 931 281

Other assets 16 946 23 740 5 668 36 795 185 401 28 023 2 074 739 2 371 313

Total assets 16 946 23 740 5 668 3 968 077 185 401 22 875 019 27 074 851

Liabilities

Borrowings - - - 1 863 941 705 552 2 581 762 - 5 151 256

Grants - - - - - 10 004 606 10 004 606

Other liabilities 6 045 4 607 1 672 2 071 98 291 2 612 325 1 356 436 4 081 448

Total Liabilities 6 045 4 607 1 672 1 866 012 803 843 16 555 130 19 237 310

31-12-2019 TELECOMMUNICA-TIONS

COMMERCIAL REAL ESTATE MANAGEMENT

ENGINEERING AND TRANSPORT SERVICES

INV. ACTIVITY RAILWAY INFRA-

STRUCTURE

MANAGEMENT ACTIVITY ALTA PRESTAÇÃO ATIV. INV. INF.

RODOVIÁRIA TOTAL

Assets

Concession right - - - - - 20 583 724 20 583 724

Grantor - - - 3 834 542 - - - 3 834 542

Other assets 15 214 30 472 7 429 38 468 167 959 28 190 2 159 527 2 447 258

Total assets 15 214 30 472 7 429 3 873 010 167 959 22 771 441 26 865 524

Liabilities

Borrowings - - - 1 894 582 669 688 2 583 077 - 5 147 347

Grants - - - - - 10 031 880 10 031 880

Other liabilities 4 014 13 210 1 885 1 770 98 180 2 800 715 1 235 111 4 154 886

Total Liabilities 4 014 13 210 1 885 1 896 353 767 868 16 650 783 19 334 113



At the end of the first semester 2020 and in the year ended at 31 December 2019, the change in the value of intangible assets, as well as in accumulated amortisation, was as follows:

CONCESSION RIGHT OTHER TOTAL

Gross assets

1 January 2019 22 912 579 32 850 22 945 430

Acquisitions 535 352 514 535 865

Transfers - 190 190

31-12-2019 23 447 931 33 554 23 481 485

Acquisitions 305 066 340 305 407

Transfers - - -

30-06-2020 23 752 997 33 894 23 786 891

Amortization and Impairment

1 January 2019 -2 587 206 -28 805 -2 616 010

Amortisation for the year -278 551 -457 -279 009

31-12-2019 -2 865 757 -29 264 -2 895 020

Amortisation for the year -114 983 -218 -115 202

30-06-2020 -2 980 740 -29 483 -3 010 222

Net value

31-12-2019 20 582 174 4 292 20 586 467

30-06-2020 20 772 257 4 414 20 776 672


The value of intangible assets refers essentially to the right resulting from the Road Concession Con-tract. The value of this right is increased through investments made under the contract, as men-tioned in note 2.3.5., as mentioned in note 2.3.5. of the Group's consolidated financial statements at 31 December 2019.

Assets are calculated according to the percentage of completion of each works, regardless of wheth-er this construction is directly carried out by the IP Group or under Public-Private Partnerships (PPP).

From the EUR 305 million invested in 2020, EUR 291 million correspond to net payments from State concessions.

These figures include capitalised financial expens-es in the amount of EUR 7 million in 2020.

Amortisation for the year is calculated under IFRIC 12 by the equivalent unit method and refers to the value of the total investment that has already been made or will be made in the future, in the context of the concession between IP and the State, based on the economic and financial flows for the con-cession period. These figures have the same basis as the multi-annual financial model of IP with the changes mentioned in note 2.4.

The estimated total investment of the concession was based on the following main assumptions:

• The annual costs with the formerly toll-free mo-torways (former SCUT) are effective until 2032 and represent the best estimate based on the renegotiated contracts between the Negotiation Committee and the Concessionaires;


• Expenses with construction present in Sub-con-cession contracts in force valued at cost of each base case;

• The costs of modernising and maintaining IP’s own network;

• The remaining investments consist of instal-lation and improvement of assets and studies, projects, supervision and assistance;

• Expenses with regular maintenance reflect the revision of study made in 2019, based in the im-plementation of the business plan;

• The National Road Plan 2000 is implemented until 2052.

The total investment is amortised according with the best estimate of the revenue to be generated during the concession period.

The estimated annual revenue was based on the following main assumptions:

• The Road Service Contribution (RSC) until 2022 is the best management estimate for those years. From 2023, the RSC evolves on the basis of an assumption of annual growth in petrol and diesel consumption of 0% and the evolution of unit values per litre consumed, according to the CPI (2%/year);

• Receipts from the tolls of sub-concessions are based on the baseline cases or on more recent traffic studies conducted by specialised consult-ants, available on the date of the review and approval of the economic and financial flows for the concession period.. Following the reverting of the sub-concessions to IP, growth is consid-ered according to the CPI, based on the latest year of these studies and baseline cases;

• After the formerly toll-free motorways revert to IP, growth is considered according to the CPI, based on traffic studies carried out by special-ised technicians of the IP Group;

In the State Concessions under the actual toll scheme, after the concessions revert to IP, growth is considered according to the CPI, based on the latest year of the respective base cases or traffic studies by specialised technicians of the IP Group;

Overall, the remaining operating income (revenue from service areas, telematics and others) was estimated in 2020, as part of the revision of the economic and financial model for the concession period.

On the basis of these assumptions, the amortisa-tion recorded in the first half of 2020 amounted to EUR 115 million.

The remaining intangible assets concern, mostly, contractual rights on computer software (licences).


At 30 June 2020 and 31 December 2019 this item is detailed as follows:


30-06-2020 31-12-2019

DEBIT BALANCES

CIT 3 212 2 445

Current tax assets 3 212 2 445

VAT 1 571 116 1 452 509

Other taxes and levies 468 319

Government and other public bodies 1 571 584 1 452 828

CREDIT BALANCE

CIT 7 412 -

Current tax liabilities 7 412 0

Contributions to SS, CGA and ADSE health systems 7 943 6 408

Personal Income Tax – Withholdings 2 275 1 674

VAT 77 9 884

Other taxes and levies 18 14

Government and other public bodies 10 314 17 980

The IRS - Withholdings and Contributions for SS, CGA and ADSE balances correspond to the process-ing of the maturities of June 2020, already settled in July 2020.

In the Government and other public bodies item, the VAT receivable corresponds to the amount of EUR 1,570.612 thousand to be received by IP, of which repayment requests of EUR 227.562 thousand have already been made in 2009 and for the period from January 2008 to October 2009. This balance is es-sentially the result of the VAT deducted by former EP and IP in its road activity. The company considers it is entitled to this deduction since the State col-lected VAT on a revenue of IP - the Road Service Contribution -, which in accordance with the legally established mechanisms for its settlement and col-lection, was paid to the company by the fuel dis-tributors.

IP has eight proceedings under way, five of which are under appeal phase. Concerning the latter, we point out those having recorded developments, namely the one claiming the reimbursement of VAT up to June 2009 and the other relating to a claim for

the reimbursement of VAT from July to September and the deduction of October 2009.

The first case, concerning the request for reim-bursement of VAT up to June 2009, was refused by the Tax and Customs Authority which issued no-tifications of additional VAT payments and interest in the amount of EUR 277.124 thousand and EUR 11.697 thousand, respectively.

Not agreeing with these demands for payment due to the fact that it considered them unfounded, on 30 November 2010 the former EP filed a challenge in Almada Administrative and Tax Court to the rejec-tion of the hierarchical appeal. The challenge by the former EP was considered inadmissible by the court of first instance, in January 2013. The former EP did not agree with the decision, and filed its appeal on 6 March 2013.

The second case, with respect to the request for the refund of VAT for July to September and deduction of October 2009, which was also rejected by the Tax Authority, also resulted in the issue of addition-al demands for VAT and interest payments of EUR


64,506 thousand and EUR 763,000 respectively. On 29 July 2011, the former EP filed a challenge in Almada Administrative and Tax Court to the ruling out of a hierarchical appeal. The challenge by the former EP was considered inadmissible in the court of first instance, in January 2013. The former EP did not agree with the decision, and filed its appeal on 11 March 2013.

In this second case, the appeal was filed and IP was notified on 17 October 2017 of the Ruling repeal-ing the appealed decision and considered the legal challenge of EP to be wholly valid, and it annuls in full all the additional demands for VAT issued by the Tax Authority. About this Decision:

• The Treasury appealed, claiming various errors in that ruling. These were considered wholly inad-missible on 26 January 2018.

• An appeal was filed by the Tax Authority on 1 March 2018, to the Supreme Administrative

Court, and the appeal was accepted for consid-eration. This is a review appeal of an exceptional nature, which envisages that the decision taken by the court may be reviewed whenever the analysis of an issue which, due to its legal or so-cial importance, is of fundamental importance or when the review is necessary for better applica-tion of the law. This appeal was rejected by the TCAS on 18 October 2018.

• An appeal filed by the Treasury was also admit-ted by the Supreme Administrative Court. We are currently waiting for the decision.

In the course of the usual annual tax inspection process, the Tax and Customs Authority has been making corrections on the same basis as those de-scribed for the above proceedings. IP has followed the complaints process, maintaining its position also in the terms described above. The situation of the proceedings for each year inspected are as follows:

YEAR PROCEEDINGS PHASE PHASE DATE ADDITIONAL TAX SETTLEMENTS INTEREST

01/2008 to 06/2009 Appeal to Court of Appeal (2nd court of appeal) 06-03-2013 277 124 11 697

07/2009 to 10/2009 Appeal to STA 01-03-2018 64 507 763

2011 Judicial challenge of the rejection of the hierarchical appeal 22-05-2018 195 514 29 412



2014 Hierarchical appeal refused Period for judicial review in progress 30-07-2020 248 308 12 475

2015 (January to May) a) Hierarchical appeal refused Period for judicial review in progress 10-08-2020 121 043 4 164

2015 (June to December) b) Hierarchical Appeal 31-07-2020 139 415 9 484

a) Regarding the period prior to the merger (NIF, formerly EP)b) Regarding the post merger period

Additionally, it should be mentioned that on 10 Sep-tember the company received the Tax Inspection Draft Report relating to 2016; the period for exercis-ing the right of defence is under way.

As a result of the evolution of the VAT case as de-scribed, in the first half of 2019 the IP Group in-creased the provision by EUR 14,500 thousand, taking its cumulative value at 30 June 2020 to EUR 406,195 thousand, which corresponds to the VAT which the IP Group estimates it will cease to receive from the Tax Authority if it is considered that the RSC is not income liable for VAT (note 9).

Values of the Tax Authority and not provisioned for by the Group mainly result from the value of VAT deducted from the State concessioned network, so that, if the Tax Authority’s interpretation is backed by the Court, the consideration of the additional ex-pense for the Group will always be an increase of its intangible assets, without a direct impact on the profit or loss of the year, only impacting on future years by an increase in the amortisation of that as-set.


7. DEFERRALS

30-06-2020 31-12-2019

Non current expenses to recognise

Other services 614 164

614 164

Current expenses to recognise

Other services 1 153 2 116

1 153 2 116

7.1. Deferred assetsAt 30 June 2020 and 31 December 2019 the Group has registered the following balances under deferrals:

7.2. Deferred liabilitiesAt 30 June 2020 and 31 December 2019 the Group has registered the following balances under deferrals:

NOTES 30-06-2020 31-12-2019

Non current income to recognise

Investment Subsidies - Road Concession Right 7.2.1 10 004 606 10 031 880

Term Sale - Brisa Concession 152 300 152 300

Douro Litoral Concession Fee 103 780 107 624

Greater Lisbon Concession Fee 18 083 18 666

Optical Fibre contracts 479 608

10 279 249 10 311 078

Current income to recognise

Road Service Contribution (RSC) 98 139 -

Fee Douro Litoral Concession 7 687 7 687

Greater Lisbon Concession Fee 1 167 1 167

Optical Fibre contracts 2 042 681

Technical road channel 1 243 209

Other income 625 850

110 903 10 594



31-12-2018 10 094 906

Increases 152

Write-offs -

Imputation to income - 63 179

31-12-2019 10 031 880

Increases 2 000

Write-offs -

Imputation to income (Note 2.2.12) - 29 274

30-06-2020 10 004 606

7.2.1. Investment grants - Road Concession Right

This item incorporates the investment grants re-ceived by IP to finance the intangible assets rel-ative to the Concession Right and not yet recog-nised through profit or loss. Changes occurred during the first half of 2020 and year ended as of 31 December 2019 are as follows:

Income to recognise result mainly from investment subsidies in the amount of EUR 10,005 million (see note 7.2.1) and advanced payments from conces-sions in the amount of EUR 283 million to be rec-ognised as income throughout the period of re-spective concession.

Regarding the RCR, in February 2020 the Secre-tariat of State for the Budget approved the grant-ing of Available Funds, which allowed receiving in advance the amounts to be charged by the TA; as of June 2020 the balance of early RCR totals around EUR 98 million.

The change in captions Optical Fibre and Technical Road Channel is explained by the fact that most annual invoicing occurs in January.

8. FINANCIAL ASSETS AND LIABILITIES

30-06-2020 AMORTISED COST

FAIR VALUE THROUGH OTHER COMPREHENSIVE

INCOME

NON FINANCIAL AS-SETS AND LIABILITIES TOTAL

Assets

Financial investments - 32 - 32

Clients 94 965 - - 94 965

Grantor .- State - Accounts Receivable 3 931 281 - - 3 931 281

Other accounts receivable 28 487 - 44 252 72 739

Cash and cash equivalents 175 539 - - 175 539

4 230 272 32 44 252 4 274 556

Liabilities

Borrowings 2 661 939 - - 2 661 939

Shareholder funding/loans 2 489 316 - - 2 489 316

Other accounts payable 2 675 083 - 50 270 2 725 353

Trade payables (Suppliers) 30 968 - - 30 968

7 857 306 0 50 270 7 907 576


8.1. Categories according to IFRS 9The breakdown of financial assets and liabilities by category according to IFRS 9 at 30 June 2020 and 31 December 2019 is as follows:

Non-financial assets mainly relate to surety bonds (approximately EUR 31 million) and advances from suppliers (EUR 5 million).

Non-financial liabilities include debts from employment benefits (approximately EUR 18.7 million) and advances on sales (approximately EUR 21 million).


8.2. Financial assets

8.2.1. Grantor - State - Account Receivable

The breakdown of the financial asset underlying to the railway concession at 30 June 2020 and 31 December 2019 is as follows:

30-06-2020 31-12-2019

Concessioned assets (LDI) 9 577 059 9 502 179

Interest charged 1 732 357 1 701 957

Grants -4 598 934 -4 590 467

Impairment - 305 200 - 305 200

Return on assets - 8 287 - 8 213

Receipts -2 465 714 -2 465 714

3 931 281 3 834 542

31-12-2019 AMORTISED COST

FAIR VALUE THROUGH OTHER COMPREHENSIVE

INCOME

NON FINANCIAL AS-SETS AND LIABILITIES TOTAL

Assets

Financial investments - 32 - 32

Clients 75 935 - - 75 935

Grantor - State - Accounts Receivable 3 834 542 - - 3 834 542

Other accounts receivable 141 417 - 42 003 183 420

Cash and cash equivalents 287 092 - - 287 092

4 338 986 32 42 003 4 381 021

Liabilities

Borrowings 2 660 786 - - 2 660 786

Shareholder funding/loans 2 486 561 - - 2 486 561

Other accounts payable 2 853 489 - 46 227 2 899 716

Trade payables (Suppliers) 43 308 - - 43 308

8 044 144 0 46 227 8 090 372


NOTES 30-06-2020 31-12-2019

Non current

Sundry 157 472

157 472

Current

Other related parties 42 146 22 428

Sundry 38 546 39 168

Tolls 17 086 16 792

97 777 78 389

Cumulative impairment - 2 969 - 2 925

94 808 75 464

94 965 75 935

The debits charged to other related parties (CP) and Sundry – (the railway operators Fertagus, Takargo

and Medway), essentially include the tariff for the use of the infrastructure invoiced to operators and also the debits paid to operators for other services rendered related to the rail operations: manoeu-vres, capacity demanded and not used, parking of rolling stock and other services.

In relation to the probability of collection, we con-sider that the amounts due from municipalities, lo-

cal authorities and other public entities or in which the State has a direct or indirect stake are likely to be recovered in full despite their arrears, since they are debts duly recognised by those entities. Exposure of these balances to credit risk is shown in note 8.4.1.

8.2.3. Other accounts receivable

The breakdown of this caption at 30 June 2020 and 31 December 2019 is as follows: Heading Accrued income – Road Service Contribution, which, as a

8.2.2. Clients

NOTES 30-06-2020 31-12-2019

Accounts receivable for accrued income 6 326 119 660

Road Service Contribution - 113 026

Other 6 326 6 634

Surety deposits 31 295 31 007

Other accounts receivable 41 704 39 373

Sundry 40 161 38 024

Railway Operators 16.3 1 543 1 349

Cumulative impairment - 6 586 - 6 620

72 739 183 420



rule, corresponds to the recognition of revenue charged by the TA and not yet delivered to the IP Group, does not record any sum as of June 2020 due to the grant-ing by the Secretary of State for the Budget in February of Available Funds, allowing receiving in sums advance; as of June 2020 the balance of RSC in advance totalled nearly EUR 98 million (see Note 7.2).

Item Deposits of surety bond concerns mainly the pro-vision of guarantee in the amount of EUR 28,126,000 re-lating to proceedings brought by the Tax Authority con-cerning 2012 VAT.

Other accounts receivable include protocols with several municipalities regarding the construction and redevelop-ment of various infrastructure, of which we highlight, Vi-ana do Castelo, Cascais, Fundão, Lisbon and Coimbra in the amount of EUR 11,663 thousand (2019: EUR 12,094 thousand).

8.2.4. Cash and cash equivalents

The cash and cash equivalents shown in the cash flow statement at 30 June 2020 and 31 December 2019 are reconciled with the amounts shown in the headings of the condensed consolidated statement of financial posi-tion, as follows:

Accounting overdrafts in the condensed consolidated statement of financial position are shown in liabilities un-der the borrowings item.

At 30 June 2020 there was no restriction on the move-ment of these amounts.

30-06-2020 31-12-2019

Bank deposits 175 422 66 964

Other investments - 220 000

Cash 117 128

Cash and cash equivalent in the Condensed Consolidated Statement of Financial Position 175 539 287 092

Accounting overdrafts - 0 - 13

Cash and cash equivalent in the Condensed Consolidated Cash Flow Statement 175 539 287 079

8.3. Financial liabilities

8.3.1. Borrowings

The breakdown of current and non current borrowings as of 30 June 2020 and 31 December 2019 is as follows:

DESCRIPTION 30-06-2020 31-12-2019

Non current loans

Borrowings 2 515 385 2 561 036

Current loans

Borrowings 146 554 99 750

2 661 939 2 660 786

ACTIVITY NAME DATE OF SIGNATURE

AMOUNT CONTRACTED

PRINCIPAL DUE

REPAYMENTINTEREST RATE

SCHEMEINTEREST

RATEPERIODIC-

ITYOPENING DATE

CLOSING DATE PERIODICITY

Railway CP III Linha do Norte-B 14-07-1997 49 880 6 651 15-06-2008 15-06-2022 Annual

EIB variable, cannot exceed Euribor 3M+0.15%

0,000%

15-mar15/Jun15/Sep15/Dec

Railway CP III Linha do Norte-D 10-11-2000 25 937 10 375 15-09-2011 15-09-2020 Annual


0,000%


Railway Connection to Algarve-A 08-10-2001 90 000 42 000 15-09-2012 15-09-2021 Annual


0,000%


Railway Minho Line-B 08-10-2001 59 856 27 933 15-09-2012 15-09-2021 Annual


0,000%


Railway CPIII/2 L. Norte-A 02-10-2002 100 000 60 000 15-03-2013 15-03-2022 Annual


0,000%


Railway CPIII/2 L. Norte-B 02-06-2004 200 000 140 000 15-12-2014 15-12-2023 Annual


0,000%


To be forwarded 525 673 286 958

The terms and timing of repayment are as follows:



AMOUNT CONTRACTED

PRINCIPAL DUE

REPAYMENTINTEREST RATE

SCHEMEINTEREST

RATEPERIODIC-

ITYOPENING DATE

CLOSING DATE PERIODICITY

transportation 525 673 286 958

Railway Suburban 28-10-2004 100 000 42 857 15-06-2009 15-06-2024 Annual


0,000%


Railway Suburban B 14-12-2005 100 000 52 381 15-09-2010 15-09-2025 Annual Revisable rate 3,615% 15/Sep

Railway Suburban C 12-10-2006 55 000 28 810 15-03-2011 15-03-2026 Annual Revisable rate 4,247% 15-mar

Railway Connection to Algarve-B 02-10-2002 30 000 14 000 15-03-2013 15-03-2022 Annual


0,000%


Railway CP III 2 Linha do Norte-C 11-12-2006 100 000 80 000 15-06-2017 15-06-2026 Annual Revisable rate 1,887% 15/jun

Railway CP III Linha do Norte-D 12-07-2007 100 000 85 000 15-12-2017 15-12-2026 Annual Euribor

3M+0,108% 0,000%


Road EIB- Estradas 2009-2019 17-12-2009 200 659 120 395 15-06-2014 15-06-2029 Half-year Fixed Rate 2,189% 15/jun

15/Dec

Railway Refer V 04-08-2008 160 000 104 000 15-03-2014 15-03-2033 Annual Revisable rate 2,653% 15/Mar

Railway Refer VI 10-09-2009 110 000 71 500 15-09-2013 15-09-2032 Annual Revisable rate 2,271% 15/Sep

Railway Eurobond 06/26 10-11-2006 600 000 599 417 16-11-2026 Bullet Fixed Rate 4,047% 16/Nov

Railway Eurobond 09/24 16-10-2009 500 000 499 018 16-10-2024 Bullet Fixed Rate 4,675% 16/Oct

Railway Eurobond 06/21 11-12-2006 500 000 499 383 13-12-2021 Bullet Fixed Rate 4,250% 13/Dec

Road Eurobond 10/30 09-07-2010 125 000 121 377 13-07-2030 Bullet Fixed Rate 6,450% 13/Jul

External Loans TOTAL 3 206 332 2 605 096

Accrued interest 56 843

Accounting overdrafts 0

TOTAL 2 661 939


Interest on these loans is paid in arrears on a quar-terly, half year or annual basis.

In what concerns the EIB loans, the principal will be repaid on a regular basis following the grace period. Remaining loans (Eurobonds) will be fully repaid at maturity (bullet).

At 30 June 2020 loans secured by State guarantee totalled EUR 1,985 million, in nominal value.

8.3.2. Shareholder funding/Shareholder loans

At 30 June 2020 and 31 December 2019, the shareholder funding/shareholder loans item is bro-ken down as follows:

30-06-2020 31-12-2019

Non current loans

State Loan 5 333 10 667

Current loans

State Loan 2 483 983 2 475 895

Total 2 489 316 2 486 562

The purpose of these shareholder loans is meeting the borrowing requirements of companies (REFER and EP) between 2011 and 2014.

In the first half of 2020 the shareholder did not grant new loans to IP, having provided for its re-quirements through capital increases (Note 10).

These loans pay interest at various fixed annual nominal rates, as agreed with the DGTF according to the amount and dates of the disbursements. The breakdown is as follows:



AMOUNT CONTRACTED

PRINCIPAL DUE

REPAYMENT INTER-EST RATE SCHEME

INTEREST RATE

PERIO-DICITYOPENING

DATECLOSING

DATE PERIODICITY

Railway State Loan 24-05-2013 282 937 47 156 31-05-2015 30-11-2020 Half-year Fixed Rate 2,100 % 31/May30/Nov

Railway State Loan 24-05-2013 21 723 3 620 31-05-2015 30-11-2020 Half-year Fixed Rate 2,270 %31/May30/Nov

Railway State Loan 24-05-2013 23 394 3 899 31-05-2015 30-11-2020 Half-year Fixed Rate 2,350 % 31/May30/Nov

Railway State Loan 24-05-2013 102 488 17 081 31-05-2015 30-11-2020 Half-year Fixed Rate 2,440% 31/May30/Nov









Road State Loan 30-12-2011 1 705 000 852 500 31-05-2013 30-11-2016 Half-year Fixed Rate 2,770% 31/May30/Nov

Road State Loan 27-01-2012 204 000 153 000 31-05-2014 30-11-2017 Half-year Fixed Rate 3,690% 31/May30/Nov




To be forwarded 3 110 542 1 410 673



AMOUNT CONTRACTED

PRINCIPAL DUE

REPAYMENT INTER-EST RATE SCHEME

INTEREST RATE

PERIO-DICITYOPENING

DATECLOSING

DATE PERIODICITY

Forwarded: 3 110 542 1 410 673



















Total shareholder financing 2 371 002

Accrued interest 118 315

TOTAL 2 489 316


FLAT-RATE FINANCING

As of 30 June 2020 the fair value of the fixed rate debt was as follows:

NAME NOMINAL VALUE PRINCIPAL DUE FAIR VALUE INTEREST RATE

EIB - Suburbans B 100 000 52 381 53 810 3,62%

EIB - Suburbans C 55 000 28 810 34 030 4247%

EIB - REFER V 160 000 104 000 114 317 2,65%

EIB - REFER VI 110 000 71 500 75 697 2,27%

EIB - CPIII2 Northern Line C 100 000 80 000 82 371 1,89%

EIB- Estradas 2009-2019 200 659 120 395 126 490 2,19%

Eurobond 06/26 600 000 600 000 743 608 4,05%

Eurobond 09/24 500 000 500 000 600 206 4,68%

Eurobond 06/21 500 000 500 000 528 427 4,250%

Eurobond 10/30 125 000 125 000 140 165 6,450%

State Loan 282 937 47 156 48 068 2,100%

State Loan 21 723 3 620 3 695 2,270%

State Loan 23 394 3 899 3 982 2,350%

State Loan 102 488 17 081 17 456 2,440%

State Loan 20 000 3 333 3 399 2,150%

State Loan 37 000 6 167 6 275 1,860%

State Loan 293 000 48 833 49 695 1,880%

State Loan 24 000 4 000 4 073 1,960%

State Loan 15 000 5 000 5 183 2,430%

State Loan 15 000 5 000 5 177 2,330%

State Loan 20 000 6 667 6 845 2,220%

State Loan 14 000 4 667 4 813 2,010%

State Loan 1 705 000 852 500 885 328 2,770%

State Loan 204 000 153 000 163 557 3,690%

To be forwarded: 5 228 201 3 343 009 3 706 667


NAME NOMINAL VALUE PRINCIPAL DUE FAIR VALUE INTEREST RATE

Transport 5 228 201 3 343 009 3 706 667

State Loan 230 000 172 500 183 634 3,440%

State Loan 75 000 56 250 59 370 2,930%

State Loan 28 000 21 000 22 075 2,690%

State Loan 44 000 33 000 34 689 2,690%

State Loan 80 000 60 000 63 082 2,700%

State Loan 33 500 25 125 26 093 1,980%

State Loan 156 800 117 600 121 776 1,810%

State Loan 16 000 12 000 12 405 1,710%

State Loan 13 300 9 975 10 290 1,590%

State Loan 85 000 85 000 93 010 2,750%

State Loan 135 600 135 600 146 898 2,420%

State Loan 17 400 17 400 18 694 2,150%

State Loan 25 654 25 654 27 562 2,150%

State Loan 266 405 266 405 286 487 2,180%

State Loan 28 042 28 042 30 555 2,610%

State Loan 26 202 26 202 28 185 2,190%

State Loan 25 000 25 000 26 885 2,180%

State Loan 17 943 17 943 19 230 2,070%

State Loan 3 688 3 688 3 956 2,100%

State Loan 21 805 21 805 23 225 1,870%

State Loan 49 891 49 891 53 305 1,970%

TOTAL 6 607 431 4 553 089 4 998 073

8.3.3. Trade payables (Suppliers)

As of 30 June 2020 and 31 December 2019 this caption was made up as follows:

NOTES 30-06-2020 31-12-2019

General suppliers 30 374 43 155

Other related parties 16.3 593 153

30 968 43 308

The change occurred in Trade Payables (Suppliers) is the result of the effort made by the IP Group to fuel liquidity into the economy, which gained particular relevance in the current economic scenario.


8.3.4. Other accounts payable

At 30 June 2020 and 31 December 2019, the de-tails of this item are as follows:

NOTES 30-06-2020 31-12-2019

Non current

Accounts payable for accrued expenses 1 714 368 1 959 310

Sub-concessions 1 709 984 1 959 132

Right of use 4 384 178

1 714 368 1 959 310

Current

Accounts payable for accrued expenses 936 616 867 842

Sub-concessions 578 479 503 039

Regular road mainte-nance 317 943 319 118

Other 40 194 44 506

Other related parties 16.3 1 242 1 179

Investment Suppliers 20 273 23 817

Advances to be forward-ed to Sales 20 983 20 991

Remuneration payable 18 292 15 978

Other creditors 14 821 11 778

1 010 986 940 406

2 725 353 2 899 716

This item includes the liability of the IP Group to sub-concessionaires for construction, operation and maintenance services carried out by these companies and not yet invoiced, in the amount of EUR 2,288,463 thousand, bearing interest in ac-counts at rates between 5% and 14% (weighted average rate of 9.3%), of which EUR 578,479 thou-sand are payable within twelve months.

This liability is assessed annually and represents the best estimate of the Executive Board of Direc-tors of the valuation of the services already ren-dered by sub-concessionaires determined based on the estimate of future financial flows from these contracts, regardless of their nature, including those resulting from contingencies and legal pro-ceedings.

The Regular Road Maintenance item includes the IP group's responsibility for maintaining or restor-ing certain service levels in the infrastructure, and it is set up throughout the period up to the sched-uled date for performance of the works.

Item Others comprises the amounts payable by the IP Group relating to its Concession Contract with the State, in the amount of EUR 24 million, as well as the recognition of sums relating to the Rail-way Activity Regulation Fees for the years 2013 to 2020, totalling EUR 12 million.

The Investment Suppliers item refers mainly to the amounts billed for the execution of own works and the amount payable for the State Concessions and Sub-concessions.

8.4. Financial risk management policies

The Group's financial assets concern mainly ac-counts receivable for multiple reasons, namely the balances receivable from the railway conces-sion and several clients of the Group, and several deposit accounts with banks and the IGPC. The Group has other investments, though quite resid-ual, in equity instruments and does not have any derivative financial instruments.

With regard to the Group’s financial liabilities, these include mainly: loans obtained with the financial system (bank loans and leases), shareholder loans, accounts payable to suppliers and other entities, their main goal being to finance the Group’s op-erations.

With regard to loans obtained with the finan-cial system, Decree-Law 133/2013 of 3 October changed the autonomy of reclassified public en-tities (EPR) with regard to access to finance from the financial system and risk management through derivative financial instruments.

In article 29 therein, the access of the EPR to fi-nancing from the credit institutions is established as not possible, except for those of a multilateral nature (e.g. European Investment Bank), while arti-cle 72 established the transfer of these companies’ derivatives portfolios to the Public Debt and Treas-ury Management Agency (Agência de Gestão da Tesouraria e da Dívida Pública – IGCP, EPE) (IGCP).


30-06-2020 TOLLS [> 1 000 m[ [999 m < 10 m[ [10m>0] TOTAL

Number of clients - 29 147 1 550 1 726

Railway - 4 - 18 22

Road Various 10 47 877 934

Real estate management - 7 58 517 582

Engineering - 1 1 3 5

Telecommunications - 7 41 135 183

Debt 17 086 74 127 4 521 2 200 97 934

Railway - 60 142 - 16 60 158

Non tolled roads - 6 385 1 186 1 008 8 579

Tolls 17 086 - - - 17 086

Real estate management - 3 282 1 954 875 6 110

Engineering - 396 63 16 475

Telecommunications - 3 922 1 319 286 5 527

Stemming from its assets and liabilities, the Group is exposed to financial risk factors, such as credit risk, liquidity risk, interest rate risk associated with cash flows arising from financing obtained and capital risk.

These risks are managed by the Finance and Mar-kets Division according to the risk mitigation poli-cies defined by the Executive Board of Directors.

8.4.1. Credit risk

The credit risk associated with the Group's oper-ating activities is managed on a separate basis ac-cording to the specific characteristics of each busi-ness segment and specific clients.

In order to minimize exposure to this risk, the Group obtains credit guarantees from clients in the form of surety bonds or bank guarantees. Note 8.1 details the maximum exposure of the Group to credit risk.

Table below provides a brief characterisation of accounts receivable (clients), according invoicing intervals and respective segments for the periods ended at 30 June 2020 and 31 December 2019:

The evolution of the Group's client portfolio re-mained stable in the first half of 2020 vis-à-vis 31 December 2019 in terms of number of clients.

At 30 June 2020 the IP Group had a portfolio of 1,726 clients (31 December 2019: 1,738 clients), of which 29 (31 December 2019: 6) have balances above EUR 1000 thousand accounting for approxi-mately 76% (31 December 2019: 64%) of amounts due.

Additionally, the weight of debts from tolls as against the total balance of clients is 17% (31 De-cember 2019: 21%).

In relation to the evolution of gross debt (without the effect of impairment) in the first half of 2010 there was an increase by EUR 19,073 thousand (+24%, as against 31 December 2019), mostly as a result of the Covid19 pandemic which adversely affected all businesses.

Analysis of tables above shows a general increase in amounts due across all segments of the Group, in particular in the road segment where amounts due increased by EUR 15,444 thousand, account-ing for 81% of overall impact.


30-06-2020 ]0-30[ [30-60[ [60-90[ [90-360[ [360[ TOTAL

Tolls 17 086 - - - - 17 086

Railway Operators 14 949 4 982 6 075 18 191 15 982 60 180

Public entities 267 125 15 142 2 809 3 359

Other debtors 2 320 232 362 3 119 10 331 16 365

Clients with payment plans 9 3 29 3 42 85

Clients with negotiated Covid19 moratoria 217 83 34 2 5 342

Surety bonds provided by clients - - - - - 519

34 849 5 425 6 515 21 458 29 170 97 934

Impairment - 51 - 1 - 25 - 187 - 2 705 - 2 969

34 798 5 424 6 489 21 271 26 464 94 965

Average rate -0,15% -0,02% -0,39% -0,87% -9,28% -3,03%

31-12-2019 TOLLS [> 1 000 m[ [999 m < 10 m[ [10m>0] TOTAL

Number of clients - 6 69 1 663 1 738

Railway - 4 14 14 32

Road Various 1 43 897 941

Real estate management - 1 4 569 574

Engineering - - 1 4 5

Telecommunications - - 7 179 186

Debt 16 792 50 208 6 533 5 328 78 861

Debt - 43 526 1 179 9 44 714

Non tolled roads - 4 622 2 186 1 006 7 815

Tolls 16 792 - - 16 792

Real estate management - 2 060 627 2 784 5 472

Engineering - - 396 109 506

Telecommunications - - 2 144 1 419 3 563

The following table shows the seniority of the bal-ances of Group clients by category/type:


From the previous analysis of evolution of debt, it stands out that the biggest change occurred in rail-way operators.

The credit risk associated with debts of Group cli-ents has the following characteristics:

In the first half of 2020, in what concerns cred-it risk, the Group had to deal with the pandemic crisis, which brought major challenges in terms of debt management in all segments concerned.

ROAD ACTIVITY - accounts receivable (clients) concern mainly tolls which have a diversified cus-tomer base and comprises low-value transactions, and are collected by the Tax Authority if not paid, so they do not have significant associated credit risk.

RAILWAY ACTIVITY - The credit risk arising from the railway activity is essentially related to the non-compliance by railway operators with their responsibilities. CP – Comboios de Portugal, EPE is the main counterparty as the exclusive passen-ger operator across the entire network, with the exception of the crossing of the 25 de Abril bridge, which is operated by Fertagus. Thus, despite the credit risk being heavily concentrated on CP, it is mitigated by the legal nature of that entity, since it is 100% owned by the Portuguese State and, as of 2015, by the fact it is an EPR. In the first half of 2020 there was a significant increase in this

segment as a result of the problems caused by Covid-19, however, it should be noted that in July the Group recorded relevant inflows (EUR 21,270 thousand), which brought debt levels down to usual levels.

COMMERCIAL REAL ESTATE MANAGEMENT AC-TIVITY – This is the most relevant segment for this type of risk, being associated with the possibility of non compliance with payment obligations taken by the concessionaires concerning leases and sub concessions of commercial areas belonging to the IP Group. In order to mitigate this risk, the com-pany adopts the following policies, among others:

• provision by clients of credit guarantees, in the form of surety bonds or bank guarantees; addi-tionally,

• since 2017 this segment clients can pay invoices by ATM (using a reference number provided for the purpose), this procedure having had consid-erable success; and,

• in 2019, the direct debit system was implement-ed allowing to ensure the receipt of invoices on respective due dates, with clear advantages in the efficacy of collections.

• In the first half of 2020 the Group granted debt moratoria to clients affected by Covid-19 to help them remain sustainable.

31-12-2019 ]0-30[ [30-60[ [60-90[ [90-360[ [360[ TOTAL

Tolls 16 792 - - - - 16 792

Railway Operators 8 129 7 584 5 812 4 908 18 006 44 440

Public entities 55 15 21 19 2 482 2 591

Other debtors 1 673 924 216 1 218 10 432 14 461

Clients with payment plans 25 6 1 12 70 116

Surety bonds provided by clients - - - - - 461

26 674 8 529 6 049 6 157 30 990 78 861

Impairment - 14 - 0 - 5 - 134 - 2 772 - 2 925

26 660 8 529 6 044 6 023 28 218 75 935

Average rate -0,05% 0,00% -0,08% -2,18% -8,94% -3,71%


TELECOMMUNICATIONS ACTIVITY – Credit risk in this segment is considered low, as the Group’s cli-ent portfolio has remained stable over the years. Moreover, it is current practice the provision of credit guarantees in the form of surety bonds or bank guarantees.

ENGINEERING AND TRANSPORT SERVICES AC-TIVITY – this segment has no credit risk for the IP Group.

Impairment recognised concern clients included in table above as other accounts receivables (cli-ents), according to the calculation criteria disclosed in note 2.5 (impairment of main judgements, esti-mates and assumptions - financial assets impair-ment in the Annual Report and Accounts of the IP Group). This balance includes a sum receivable from a former State concessionaire, in the amount of EUR 4.6 million, jointly with several other bal-ances with no relevant in the Group’s client portfo-lio. The Executive Board of Directors thus believes that the impairment recognised is appropriate.

In what concerns credit risk associated with oth-er accounts receivable and respective evolution in the first half of the year, it is worth noting the debt of Municipalities, the credit risk of which is not deemed relevant given the public nature of these entities; the evolution of this heading is disclosed in Note 8.2.3.

Regarding credit risk associated with the financial activity, IP is exposed to the national banking sec-tor through the balances in current accounts. This exposure is reduced due to the application of the legal scheme of the Treasury Unit of the State Prin-ciple to public companies, which provides for the concentration of cash assets and investments with IGCP. Currently, IP holds 99.3% of its cash assets with IGCP.

To date, IP has not incurred any impairment result-ing from non-compliance with contractual obliga-tions entered into with financial entities.

The following table summarises the credit quality of the company's deposits at 30 June 2020:

30-06-2020 31-12-2019

>= A- 61 150

<= BBB+ 175 052 286 314

No rating 308 114

175 422 286 578

Note: The ratings used are those awarded by Standard and Poor's.

8.4.2. Liquidity risk

Group IP is subject to liquidity risk.

This type of risk is measured by the capacity to ob-tain financial resources to meet obligations to the different economic agents with whom the compa-ny interacts, such as suppliers, banks, the capital market, etc. This risk is measured by the liquidity which companies have available to meet such lia-bilities and their capacity to generate cash-flows from their operations.

The IP Group seeks to minimise the likelihood of non-compliance with its commitments through rigorous and planned management of its business. Prudent management of liquidity risk requires the maintenance of an appropriate level of cash and cash equivalents to meet the liabilities assumed. IP is included in the State's budget consolidation perimeter; therefore, its liquidity risk is reduced as the company is directly funded by the Portuguese State.

Table below shows the liabilities of the IP Group by intervals of contracted maturity. The amounts pre-sented represent non discounted future cash flows as of 30 June 2020.


8.4.3. Interest rate risk

The IP Group is subject to interest rate risk as long as it holds loans contracted with the (national and international) financial system and the State to fi-nance its activity.The main objective of interest rate risk management is to provide protection against interest rate rises, insofar as the companies’ revenues are immune to this variable and, thereby, make a natural hedge in-feasible.The Group does not use interest rate hedging in-struments.Presently, the purpose of the interest rate risk man-agement is basically to monitor interest rates affect-ing Euribor-based financial liabilities.

Sensitivity test to change in interest rate

IP Group uses periodic sensitivity analyses to meas-ure the impact on profit or loss of changes in in-terest rates on fair value of loans. These analyses have helped decision-making in interest rate risk management. The sensitivity test is based on the following assumptions:

i. At 30 June 2020 Group IP had not recognised any loan obtained at a fair value;

ii. Changes in the fair value of financial loans and liabilities are estimated discounting future cash flows using market rates at the time of reporting;

iii. On the basis of these assumptions, at 30 June 2020, a 0.5% increase or decrease in the Euro interest rate curves would result in the following changes in the fair value of loans with a conse-quent direct impact on profits:

Euro thousand

INCREASE/(DECREASE) IN THE FAIR VALUE OF LOANS

Change in the Interest rate curve

-0,50% 0,50%

EUR 65.976 -65.541

Net effect on results

-0,50% 0,50%

EUR -65.976 65.541

8.4.4. Capital risk

The IP Group's objective with regard to capital risk management, which is a broader concept than the capital shown in the condensed consolidated state-ment of financial position, is to safeguard the ongo-ing nature of the Group’s operations.

The key instrument to manage this risk is the fund-ing plan (or financial plan) of the IP Group whereby funding sources are identified and monitored. Of note, since 2014, is the policy of strengthening the capital structure by the shareholder, achieved by capital increases in cash or by the conversion into capital of the bank loans/shareholder’s loans grant-ed by the shareholder.

LESS THAN1 YEAR 1 TO 5 YEARS + THAN

5 YEARS

Borrowings 2 667 595 1 930 450 1 008 074

- Repayment of loans 89 711 1 590 844 930 346

- Interest on loans 88 541 319 216 75 574

- Repayment of shareholder funding/Shareholder's loans 2 365 668 5 333 -

- Interest on shareholder funding/Shareholder's loans 119 744 61 -

- Surety 3 931 14 996 2 154

Trade payable and other accounts payable 967 646 1 738 406 -

Total 3 635 241 3 668 856 1 008 074


IP was set up with a share capital of EUR 2,555,835,000 represented by 511,167 shares, with a nominal value of EUR 5,000 each At 30 June 2020, the share capital amounted to EUR 7,558,020 thousand represented by 1,511,604 shares, with a nominal value of EUR 5000 each.

In the first half of 2020 capital increases amounting to EUR 354,640 thousand (note 10) were made, all as cash, corresponding to 70,928 shares (Note 10), as set out in the table below:

30-06-2020 31-12-2019

Share capital increases 354 640 1 391 870

Investment 308 609 685 887

Debt Service 46 031 705 983

Under the terms of Order 381 of 26 July 2020 the Secretary of State for the Treasury granted an additional moratorium, which postpones the pay-ment of the debt service relating to partners' loans granted by the State due to 31 May to 30 Novem-ber 2020, both as concerns the road and the rail-way segments, with no added costs.

In what concerns the road component, the amount due in November totals EUR 2,232 million (princi-pal: EUR 2,215 million and interest: EUR 115 mil-lion). The amount corresponding to the railway component due in November totals EUR 147.3 mil-lion (principal: EUR 144.8 million and interest: EUR 2.5 million).


8.5. Changes in liabilities deriving from financing activity

The reconciliation of liabilities whose flows affect financing activities for the periods ended at 30 June 2020 and 30 June 2019 is as follows:

LOANS SHAREHOLD-ER'S LOANS LEASING TOTAL

31 December 2019 (1) 2 660 786 2 486 561 485 5 147 832

Cash

Interest - 7 301 - - 17 - 7 318

Amortisation (2) - 37 395 - - 150 - 37 545

Other financial expenses - 1 944 - - 1 944

Non Cash

Effective Rate (3) 390 - 390

Specialised interest (4) 37 184 2 755 - 85 39 854

Other financial expenses (5) 988 - 988

Other changes (6) - 13 - 6 319 6 306

30 June 2020 (1) + (2) + (3) + (4) + (5) + (6) 2 661 939 2 489 316 6 569 5 157 824

LOANS SHAREHOLD-ER'S LOANS

FINANCE LEASES TOTAL

Balance at 31 December 2018 (1) 3 274 876 2 627 065 824 5 902 765

Cash

Interest and similar costs - 40 818 - - 21 - 40 839

Amortisation (2) - 537 395 - - 151 - 537 546

Non Cash

Effective Rate (3) 434 - - 434

Specialised interest (4) 11 652 5 593 - 17 245

Other financial expenses (5) 112 - - 112

Other changes (6) - 7 008 - - - 7 008

Balance at 30 June 2019 (1) + (2) + (3) + (4) + (5) + (6) 2 742 671 2 632 658 673 5 376 002


The evolution of provisions for risks and charges in the semester ended at 30 June 2020 and the year ended at 31 December 2019 is as follows:

9. PROVISIONS

PROVISIONS FOR ONGOING LEGAL PROCEEDINGS

GENERAL RISKS:

The Legal Affairs Department admitted a risk of EUR 45,072 thousand as of 30 June 2020 relating to the potential liabilities of general litigation pro-ceedings unconnected to work contracts.

LAND EXPROPRIATIONS:

This provision was set up to deal with the risk of the IP Group having to make additional payments relating to the road expropriation processes that are in litigation. This is the result of the consulta-tions conducted by the Legal Department of the external and internal lawyers of the cases.

It should be noted that, by its nature, the total in-creases and reductions in this provision are offset by intangible assets in progress.

CONTRACTS:

In the case of general litigation connected with road contract works, the analysis of the cases made by external and internal lawyers produced an estimate of EUR 43,111 thousand. This figure is influenced by the net increase of the provision in 2020 by around EUR 729 thousand corresponding to the risk associated with ongoing proceedings. It should be noted that, by its nature, the total in-creases and reductions of this provision are offset by intangible assets.

VAT PROCEEDINGS

For conservative reasons, and in light of the devel-opments in the VAT proceedings described in Note 6, it was decided in 2010 to set up a provision for the estimated impact of an unfavourable decision to the IP Group.

GENERAL RISKS

LAND EXPROPRI-

ATIONS

CONTRACT WORKS

EMPLOYEE BENEFITS

DISQUAL-IFIED

ROADS

VAT PROCEED-

INGSTOTAL

31-12-2018 39 830 21 945 52 805 1 061 408 752 366 479 890 872

Increase/Reinforcement 8 283 3 042 952 121 - 25 216 37 615

Reduction/Use - 6 168 - 6 911 - 11 374 - 158 - 350 - - 24 962

31-12-2019 41 945 18 075 42 383 1 024 408 402 391 695 903 525

Increase/Reinforcement 3 521 - 1 310 - - 14 500 19 330

Reduction/Use - 394 - 547 - 581 - 84 - - - 1 606

30-06-2020 45 072 17 528 43 111 940 408 402 406 195 921 250


Since the issue giving rise to the dispute between the former EP and the Tax Authority was the ac-ceptance or not of the RSC as income liable for VAT, a provision was set up which is equivalent to the amount of VAT deducted by the former EP and by IP in activities financed by the RSC. It should also be noted that the consideration of this pro-vision was based on the accounting classification of the expenditure that resulted in the deductible VAT, i.e. VAT deducted from the financial year’s ex-penses was provisioned against costs (EUR 12,181 thousand) and VAT deducted from the acquisition or construction of assets was provisioned by being offset against intangible assets (EUR 2,318 thou-sand).

PROVISIONS FOR OTHER NON LITIGATION SITUATIONS

PROVISION FOR DISQUALIFIED ROADS:

Group IP is required to transfer disqualified roads within the National Road Plan to the responsibility of municipalities, having set up a provision which reflects the best estimate to fulfil the obligations of renovating disqualified roads still under the com-pany’s responsibility. Failure to sign the protocols of transfer with the Municipalities led to the non utilisation of this provision in the first half of 2020.

EMPLOYEE BENEFITS:

The IP Group grants temporary early retirement benefits and retirement and survival pension ben-efits to its employees, which at 30 June 2020 to-talled EUR 940 thousand.

The complementary retirement and survival pen-sion benefits attributed to the employees consti-tute a defined benefit plan under which IP pays early retirement pensions to a closed group of employees covered by the plan until such time as they retire under the Caixa Geral de Aposentações system.

This provision refers to liabilities for benefits attrib-uted to an already reduced group of beneficiaries (30) for a limited period of time. It was therefore the Executive Board of Directors' opinion that it was not necessary to have the annual liabilities as-sessed by a specialised firm, as this is performed internally, every year.



i) SHARE CAPITALThe share capital is represented by nominative shares in book-entered form, owned by the Por-tuguese State and held by the Directorate-General for Treasury and Finance.

At 31 December 2019, the share capital was EUR 7,203,380 thousand fully subscribed and paid up by its shareholder, corresponding to 1,440,676 shares with a nominal value of EUR 5,000 each.

During the first half of 2020 the share capital was strengthened in March, May and June in the amount of EUR 300.145 thousand, EUR 131,000 thousand and EUR 23,495 thousand, by issuing 60,029, 6,200 and 4,699 new shares respectively, to make up the amount of EUR 7,558,020 thou-sand corresponding to 1,511,604 fully subscribed and paid-up shares.

The basic/diluted earnings per share are as follows:

30-06-2020 31-12-2019

Profit allocated to shareholders (in Euro) - 4 494 278 19 827 915

Average number of shares in the period 1 494 583 1 377 519

Average number of diluted shares in the period 1 494 583 1 377 519

Basic earnings per share (in Euro) -3,01 14,39

Diluted earnings per share (in Euro) -3,01 14,39

The basic and diluted earnings per share is EUR -3.01 as there are no dilution factors.

Group IP calculates its basic and diluted earnings per share using the weighted average of the shares issued during the reporting period, as follows:

(NO. OF SHARES)

January 2020 1 440 676

March 2020 1 500 705

May 2020 1 506 905

June 2020 1 511 604

Average number of outstanding shares 1 494 583

ii) ReservesReserves are made up as follows:

30-06-2020 31-12-2019

Legal reserve 259 684 156 058

Other changes - 95 - 95

Donations 4 4

259 593 155 967

Commercial legislation establishes that at least 5% of the annual net profit is allocated to increase the legal reserve until it represents at least 20% of the share capital. This reserve is not distributed unless the Group is liquidated, but it can be used to ab-sorb losses after the other reserves are exhausted, or incorporated into capital.

Note that IP’s Financial Statements at 31 Decem-ber 2019 are still pending the approval of the Shareholder; hence, although the Board of Direc-tors proposed to allocate the whole net profit for the year to Legal Reserve, as of the date of this half-year report only the amount corresponding to the legal limit was considered.



From 1 January 2020 to 30 June 2020 and from 1 January 2019 to 30 June 2019, sales and services are detailed as follows:

The unit values of the Road Service Contribution (fee paid by users for use of the road network) for 2020 remained in line with those established for the 2019 financial year, at EUR 87/1,000 litres for petrol, EUR 111/1,000 litres for road diesel and EUR 63/1,000 litres for LPG vehicles.

The negative change recorded in 2020 vis-à-vis the previous year stems from the COVID19 pan-demic, which had negative impact at national level and naturally on IP's activity, translated in a de-creasing demand for fuel as a result of a decrease in traffic.

This evolution in traffic also explains the decrease in the Tolls heading by EUR 36.4 million on the en-tire tolled network.

The largest slice of income from tolls results of the use of the network of State Concessions, where the IP Group is holder of the revenues from toll collection fees, reaching EUR 98 million.

The use of slots (Tariffs) item refers mainly to income from the Infrastructure Use Tariffs (IUT). The most important are: in terms of volume of Passengers (EUR 25.9 million) and Freight (EUR 3.4 million). Both recorded a decrease of 11.7% and 13.1% respectively over the same period of 2019.

Construction contracts reflect IP Group's income from its NRN construction activity as established in the Concession Contract. This includes all the IP Group’s construction activities by direct contract-ing or sub-concession.

The values corresponding to the construction of New Infrastructures are the direct management of the Group and are calculated on the basis of the monitoring process for the monthly works and re-flecting the physical evolution of the works in pro-gress, plus costs directly attributable to the prepa-ration of the asset for its intended use.

2020 2019

Road Service Contribution 268 787 331 670

Tolls 119 436 155 873

Use of slots (fees) 29 952 34 375

Construction contracts 18 675 18 094

Capitalized financial expenses 6 907 8 792

Construction of new infrastructures 11 767 9 302

State Grantor - Revenue LDI 15 298 12 458

Other 20 812 22 865

472 959 575 335




The construction of the Sub-concessioned net-work is calculated based on the construction val-ues contracted for each sub-concession and the percentage of completion reported to the Group for each sub-concession. It reflects the physical evolution of the works and is therefore independ-ent of the billing flow.

Capitalized financial expenses correspond to the financial expenses incurred by the IP Group during the road construction phase and consist of the fi-nancial expenses used to finance the acquisition of the State Concession Network.

Others mainly comprises the services rendered with respect to the Road Technical Channel, the space sub-concessions and parking.


From 1 January 2020 to 30 June 2020 and 1 Jan-uary 2019 to 30 June 2019, the detail of this item is as follows:

2020 2019

Capitalization Concession Tolls 90 643 121 816

Construction of new infrastructures 11 767 9 302

Railway equipment 10 538 7 056

112 949 138 174

As mentioned in note 2.3.14 (revenue) of the An-nual Report and Accounts for the year ended at 31 December 2019 the amounts received by the IP Group from tolls on government concessions (net of collection costs) are deducted from the IP Group investment in the acquisition of rights over that same concessioned network. This deduction is offset in this item.

The amounts corresponding to the construction of New Road Infrastructures concern construction activities under the direct management of the IP Group, and are calculated based on monthly mon-itoring reports stating the state of progress of the works.

Expenses with railway materials concern mainly various types of materials included in investment and maintenance of railway infrastructures.





From 1 January 2020 to 30 June 2020 and from 1 January 2019 to 30 June 2019, external supplies and services are detailed as follows:

The relevant increase in heading railway mainte-nance in the first half of 2020 as against the same period of the previous year is explained mainly by an increase in the subcontracting of railway mainte-nance services by EUR 15,139 thousand (2019: EUR 11,955 thousand).

The change recorded in Current Maintenance and Road Safety is mainly due to an increase in the im-plementation of current maintenance.

The deterioration in the Operation and Maintenance Sub-concessions Heading in relation to 2019 re-sults from the reassessment made to base cases following the renegotiation proceedings completed in 2019.

2020 2019

Railway maintenance 31 431 27 687

Current Maintenance and Road Safety 25 852 22 765

Regular road maintenance 27 833 26 500

Operation and Maintenance Sub-concessions 20 313 15 312

Toll collection costs 8 596 9 819

Electricity 7 237 7 640

Collection costs RSC 5 376 6 633

Surveillance and Safety 3 711 4 025

Specialised works 1 544 1 725

Maintenance and repair 1 116 1 300

Cleaning, Hygiene and comfort 1 350 1 418

Rents and rentals 1 363 1 031

Software licences 1 193 -

Other 3 987 5 122

140 902 130 977


From 1 January 2020 to 30 June 2020 and from 1 January 2019 to 30 June 2019, financial losses and gains are detailed as follows:

Interest paid on loans relates to interest incurred with the debt contracted for the High Performance Road, Railway Infrastructure Investment Activity and Railway Infrastructure Management Activity business segments.

The deterioration in relation to 2019 results from the increase in interest of Sub-concessions, follow-ing a reassessment made to the base cases sub-sequently to the renegotiations completed in 2019.

The expenses of the financial update of the debt to the sub-concessionaires for the works/services provided are recorded in the Sub-concessions in-terests paid, which will be billed in the future, in ac-cordance with the terms stipulated in the respec-tive Sub-concession contract. This amount is the result of the Group’s liability to the sub-conces-sionaires for the road construction and operation and maintenance services already provided but

not yet paid, in the amount of EUR 2,288 million (indirect management debt), which bears interest in accounts at rates between 5% and 14%.

Other financial losses relate to the charges incurred with the fees for the guarantee stood by the Por-tuguese government, bank commissions and the accrual of charges associated with bond issues.

Caption interest earned includes interest charged to the Grantor (Note 8.2.1). Interest charged to the Grantor State is calculated based on the same fi-nancing terms as investing in long-duration infra-structure.

DESCRIPTION NOTES 2020 2019

Financial losses 155 319 136 382

Interest paid:

Loans 47 240 54 485

Sub-concessions 104 696 78 223

Finance leases 101 21

Other financial losses 3 282 3 653

Financial gains 30 403 34 934

Interest earned:

State Grantor 8.2.1 30 401 34 922

Other interest earned 2 12

Financial results 124 916 101 449



15. INCOME TAX

The breakdown of the tax amount for the year recognised in the condensed con-solidated comprehensive income statement for the first half of 2020 and 2019 is as follows:

The tax rate adopted in determining the tax amount for the year in the condensed consolidated financial statements is as follows:

2020 2019

Current income tax 7 500 30 256

Deferred income tax - 2 883 - 15 714

Tax (income) expense 4 617 14 542

2020 2019

Nominal tax rate 21,00% 21,00%

Municipal surcharge 1,25% 1,25%

State surcharge (1) 9,00% 9,00%

Current income tax 31,25% 31,25%

Taxable temporary differences (2) 26,71% 26,71%

Deductible temporary differences other than tax losses 26,49% 31,20%

Tax applicable to tax losses 21,00% 21,00%

(1) 3% on taxable income between EUR 1.5 million and EUR 7.5 million/5% son taxable income between EUR 7,5 million and EUR 35 million/9% when taxable income exceeds EUR 35 million.

(2) The rate applied to taxable temporary differences corresponds to the average rate at which the Group expects to reverse these differences in relation to their specific nature, taking into account that entities included the IP Group consolidation perimeter is not applied when the amounts concerned remain within the first scale (EUR 1.5 million and EUR 7.5 million).



% 2020 % 2019

Profit before tax - 43 893 49 495

Nominal tax rate 31,25 - 13 716 31,25 15 467

State surcharge - Amount to be deducted/added 2,88 - 1 265 -3,73 - 1 845

Deductible permanent tax differences -43,53 19 109 1,13 559

Temporary differences - Revision of estimates 0,00 - -4,13 - 2 045

Temporary differences - Other -0,15 64 4,17 2 062

Tax losses and tax benefits -0,12 55 0,03 17

Excess/(insufficient estimate) 0,00 - -0,03 - 15

Autonomous taxation -0,85 372 0,69 342

Tax expense/(income) for the year -10,52 4 617 29,38 14 542

The reconciliation of the effective tax rate for the periods under review is shown below:

The change in the effective rate in relation to the nominal tax rate is mainly explained by the “Permanent tax differences”, particularly expenses with the sub capitalisation of financial expenses and expenses with social activities amounting to EUR 18,822 thousand and EUR 184 thousand, respectively.


16. RELATED ENTITIES

16.1. Summary of related partiesThe entities identified as related parties of the IP Group at 30 June 2020 and 31 December 2019, under the provisions of IAS 24 – Related parties, are as follows:

RELATIONSHIP % HOLDING 30 -06-2020

% HOLDING 31-12-2019

Joint Ventures

AVEP - 50,00% 50,00%

AEIE CFM4 - 25,00% 25,00%

Other related entities

AMT Regulatory entity - -

Portuguese State Shareholder/Grantor - -

CP Control relationship - State (Railway operator) - -

Members of governing bodies - -



16.2. Significant balances and transactions with public entitiesThe IP Group is fully owned by the Portuguese State. The shareholder functions are carried out by the Directorate-General of the Treasury; the company is under the joint authority of the Ministry of Planning and Infrastructures and the Ministry of Finance.

The following table shows the main balances (at 30 June 2020 and 31 December 2019) and transactions (relating to the first semesters of 2020 and 2019) between the IP Group and Public Entities:

NATURE ACCOUNTING CAPTION NOTES

30-06-2020

ASSETS LIABILITIESINVEST-MENT INCOME EXPENSES

CURRENT NON CURRENT CURRENT NON

CURRENT

Tariff - Op. Rail Transports Clients/Suppliers 8.2.2/8.3.3 42 146 - 593 - 456 28 657 1 216

Tariff - Op. Rail Transports Other accounts receivable/payable 8.2.3/8.3.4 1 543 - 1 242 - - - -

Compensatory Allowance Compensatory Allowance - - - - - 27 528 -

State Grantor - LDI Grantor State Accounts receivable 8.2.1 3 931 281 - - - - - -

State Grantor - LDI Sales and services - - - - - 15 298 -

State Grantor - LDI Interest earned - State Grantor - - - - - 30 401 -

TRIR Other expenses and losses - - - - - - 2 190

RSC Rendered Services - - - - - 268 787 -

Accrued income RSC Other accounts receivable - - - - - - -

Deferrals Deferred liabilities 7.2 - - 98 139 - - - -

Collection costs RSC Supplies and Services - - - - - - 5 376

Accrued expenses RSC Other accounts payable - - - - - - -

Shareholder's loans Shareholder funding/loans 8.3.2 - - 2 483 983 5 333 - - -

Financial expenses - Shareholder's loans Interest paid - loans - - - - - - 2 755

3 974 971 - 2 583 957 5 333 456 370 669 11 537


NATURE ACCOUNTING CAPTION NOTES

31-12-2019 30-06-2019

ASSETS LIABILITIESINVEST-MENT INCOME EXPENSES

CURRENT NON CURRENT CURRENT NON

CURRENT

Tariff - Op. Rail Transports Clients/Suppliers 8.2.2/8.3.3 22 428 - 153 - 68 32 782 2 713

Tariff - Op. Rail Transports Other accounts receivable/payable 8.2.3/8.3.4 1 349 - 1 179 - - - -

Compensatory Allowance Compensatory Allowance - - - - - 29 874 -

State Grantor - LDI Grantor Accounts receivable 8.2.1 3 834 542 - - - - - -

State Grantor - LDI Sales and services - - - - - 12 458 -

State Grantor - LDI Interest earned - State Grantor - - - - - 34 922 -

TRIR Other expenses and losses - - - - - - 2 146

RSC Rendered Services - - - - - 331 670 -

Accrued income RSC Other accounts receivable 113 026 - - - - - -

Collection costs RSC Supplies and Services - - - - - - 6 633

Accrued expenses RSC Other accounts payable - - 2 261 - - - -

Shareholder's loans Shareholder funding/loans 8.3.2 - - 2 475 895 10 667 - - -

Financial expenses - Shareholder's loans Interest paid - loans - - - - - - 5 593

3 971 329 - 2 479 487 10 667 68 441 706 17 086


16.3. Balances and transactions with railway operatorsThe breakdown of balances with railway operators at 30 June 2020 and 31 December 2019 is as follows:

30-06-2020 31-12-2019

Balances receivable

Clients 42 146 22 428

Other accounts receivable 1 543 1 349

Balances payable

Suppliers 593 153

Other accounts payable 1 242 1 179

RAILWAY OPERATORS (TRANSACTIONS) 30-06-2020 30-06-2019

Investment 456 68

456 68

External supplies and services 591 1 980

Other expenses 186 26

Personnel expenses 440 708

1 216 2 713

Sales and services 28 422 32 737

Other income 235 45

28 657 32 782

The breakdown of transactions with railway operators recorded in the first se-mesters of 2020 and 2019 is as follows:

16.4. Joint VenturesThe following are the impacts of jointly controlled ventures on the IP Group's condensed financial statements at 30 June 2020 and 31 December 2019:

BALANCES 30-06-2020 31-12-2019

Assets 577 774

Liabilities - 198

TRANSACTIONS 2020 2019

Revenue - 273

Profit/(Loss) for the period/year - 75


16.5. Remuneration of corporate officersBOARD OF THE GENERAL MEETING

Chairman: PAULO MANUEL MARQUES FERNANDES i)

Vice-Chairman: PAULO MIGUEL GARCÊS VENTURA

Secretary: MARIA ISABEL LOURO CARLA ALCOBIA

i) Resigned from office in 24 January 2020

The annual remuneration of the members is as follows:

TERM OF OFFICE POSITION NAME FIXED ATTEND-ANCE FEE

2020 2019

GROSS AMOUNT EARNED

GROSS AMOUNT EARNED

2018-2020 Chairman Paulo Manuel Marques Fernandes 650,00 0 0

2018-2020 Vice-Chairman Paulo Miguel Garcês Ventura 525,00 1.050,00 0.

2018-2020 Secretary Maria Isabel Louro Caria Alcobia 400,00 0 0.

1.050,00 0,00

Figures in EUR

Figures paid are in line with attendance recorded in meetings of the Board of the General Meeting held.


Chairman: ANTÓNIO CARLOS LARANJO DA SILVA

Vice-chairman: JOSÉ SATURNINO SUL SERRANO GORDO E CARLOS ALBERTO JOÃO FERNANDES

Members: ALBERTO MANUEL DE ALMEIDA DIOGO, VANDA CRISTINA LOUREIRO SOARES NOGUEIRA E

ALEXANDRA SOFIA VIEIRA NOGUEIRA BARBOSA

The terms of the mandate and the remuneration scheme associated with the exercise of the positions were established at the general meeting of 29 March 2018.

Since the remuneration is defined, the 5% reduction provided for in article 12 of Law 12-A/2010 of 30 June was applied to the calculated gross amounts.

Likewise, directors did not receive management bonuses, in compliance with provisions in article 27 (1) of Law 71-B/2018 of 31 December.


THE EXECUTIVE BOARD OF DIRECTORS

2020 2019

REMUNERATIONEMPLOYER’S

WELFARE CONTRIBUTIONS



António Carlos Laranjo da Silva 51 104 12 137 51 104 12 137

Carlos Alberto João Fernandes 45 994 10 924 45 994 10 924

José Saturnino Sul Serrano Gordo 45 994 10 924 45 994 10 924

Alberto Manuel de Almeida Diogo 40 883 9 710 40 883 9 710

Vanda Cristina Loureiro Soares Nogueira 40 883 9 710 40 883 9 710

Alexandra Sofia Vieira Nogueira Barbosa 40 883 9 710 40 883 9 819

265 742 63 114 265 742 63 222

Figures in EUR


The remuneration of the members of the General and Supervisory Board, which comprises a Com-mittee for Financial Matters, was defined at the General Meeting of 28 August 2015.

After requesting such, the members of the General and Supervisory Board identified below carried out their roles unpaid:

• José Emílio Coutinho Garrido Castel-Branco, because he was appointed public manager of another entity in the State-owned enterprises sector, since the start of 2017;

• Duarte Manuel Ivens Pita Ferraz, because he re-tired under Decree-Law 1-A/2011 of 3 January, since July 2017.

• Issuf Ahmad, following retirement effective as of 1 December 2019, by order dated 25 March

2020 issued by Direção da Caixa Geral de Apo-sentações, which was only available in April 2020.

As a result, following official acknowledgement of retirement, Mr. Issuf Ahmad returned in full the amounts earned from December 2019 to March 2020, still holding his office though without pay.

In accordance with article 391 (4) of the Compa-nies Code, approved by Decree Law 262/86, of 2 September, by reference to article 435 (2) of the same Code, the members of the General and Su-pervisory Board will remain in office until such time as they are replaced. Since no new members were elected when members of remaining corporate bodies were elected, the members of the General and Supervisory Board did not change.

The following is the annual remuneration paid to the remunerated members:

The annual remuneration of the members is as follows:

CONSELHO GERALE DE SUPERVISÃO

2020 2019





Issuf Ahmad - - 10 682 2 169

- - 10 682 2 169

Figures in EUR

STATUTORY AUDITOR

The remuneration of the Statutory Auditor was fixed at the General Meeting of 19 March 2019 (Minutes 03/2019 of the General Meeting), as maximum amount for this office an amount equivalent to 35% of the overall remuneration of the Chairman of the Executive Board of Directors, added of VAT at the legal rate in force.

ENTIDADE 2020 2019

Vítor Almeida & Associados, SROC, Lda. 17 886 15 218

Figures in EUR



New standards, interpretations and amendments effective from 1 January 2020, which the Company adopted in the preparation of its financial state-ments:Amendments to references to the (revised) Conceptual Framework (Regulation 2019/2075 of 29 November)

In March 2018 IASB revised the Conceptual Frame-work of the IFRS. In the case of entities using the Conceptual Framework to develop accounting pol-icies where no IFRS applies to a specific transaction in particular, the revised Conceptual Framework is effective for annual financial periods beginning on or after 1 January 2020.

Adoption of this amendment did not have any im-pact on the financial statements of the Group.

Amendments to IAS 1 and IAS 8: Definition of Material (Regulation 2019/2104, of 29 Novem-ber)

Amendments to IAS 1 and IAS 8 clarify the defini-tion of “material”, to make it easier for companies to make materiality judgements. The definition of material, an important accounting concept in IFRS Standards, helps companies decide whether infor-mation should be included in their financial state-ments. The amendments clarify the definition of material and how it should be applied by including in the definition guidance that until now has fea-tured elsewhere in IFRS Standards. In addition, the explanations accompanying the definition have been improved. Finally, the amendments ensure that the definition of material is consistent across all IFRS Standards. The amendments are effective from 1 January 2020.

Adoption of this amendment did not have any im-pact on the financial statements of the Group.

Amendments to IFRS 9, IAS 39 and IFRS 7: In-terest Rate Benchmark Reform (Commission Regulation 2020/34 of 15 January)

These amendments to IFRS 39, IFRS 9 and IFRS 7 aim to respond to uncertainties arising from the future discontinuation of interest rate benchmarks, such as the interbank interest rates (IBORs) and change the requirements relating to hedging accounting in order to provide some relief against potential con-sequences of the IBORs reform. Additionally, these standards were amended so as to require addition-al disclosures, explaining how an entity's hedging relationships are affected by existing uncertainties relating to the IBORs reform. These amendments correspond to Phase 1 of the IASB project relating to the IBORs reform. IASB is currently working on Phase 2, which will consider additional implications to financial reporting. The amendments are effective from 1 January 2020.

Adoption of this standard did not have any impact on the financial statements of the Group.

Amendments to IFRS 3 – Business Combina-tions (Commission Regulation 2020/551 of 21 April)

These amendments to IFRS 3 aim to improve the definition of business combination, helping compa-nies determine whether an acquisition made is of a business or a group of assets. In addition to changing the definition, the amendment provides additional guidance. The amendments are effective from 1 January 2020.

Adoption of this standard did not have any impact on the financial statements of the Group.

New standards, amendments and interpre-tations issued by IASB and IFRIC but not yet adopted by the European Union

Sale or Contribution of Assets between an Investor and its Associate or Joint Venture -


Amendments to IFRS 10 and IAS 28 (issued by IASB on 11sep14)

The amendment clarifies the accounting treat-ment for transactions when a parent company loses control over a subsidiary by selling all or part of its interest in such subsidiary to an associate or joint undertaking accounted for by the equity method. The date of application of these amend-ments was not defined yet and the endorsement process by the European Union will only be start-ed after confirmation of the date of application of the amendments by IASB.

No significant effects with impact on the Group’s financial statements are expected to occur as a re-sult of the adoption of this standard.

IFRS 14: Regulatory Deferral Accounts (issued by IASB on 30Jan14)

This standard permits an entity which is a first-time adopter of IFRS to continue to account for 'regula-tory deferral account balances' in accordance with its previous standards. However, to allow compar-ison with entities already adopting IFRS and not recognising regulatory assets/liabilities, the said amounts must be presented separately in the fi-nancial statements. Applicable to financial years from 1 January 2016; the European Commission decided not to start the endorsement process of this transitory standard and wait for IASB to issue the final standard.


IFRS 17: Insurance Contracts (issued by IASB on 18May17, including amendments issued by IASB on 25Jun20)

IFRS 17 solves the comparison issue created by IFRS 4 requiring all insurance contracts to be ac-

counted for in a consistent manner, thus benefit-ing both investors and insurance companies. In-surance obligations are now accounted for using current values instead of historic cost. Information is updated on a regular basis, providing useful information to users of the financial statements. Applicable to financial years from 1 January 2023, subject to the endorsement by the European Un-ion.


Amendments to IAS 1 – Presentation of Finan-cial Statements (issued by IASB on 23Jan20)

These amendments to IAS 1 – Presentation of Financial Statements clarify the requirements for classifying liabilities as current or non-current. These amendments, in nature, only aim to reduce the scope, clarifying the requirements of IAS 1, rather than altering the underlying principles. Ap-plicable to financial years from 1 January 2022, subject to the endorsement by the European Un-ion.


Amendments to IFRS 3, IAS 16, IAS 37 and An-nual Improvements (issued by IASB on 14 May 2020)

This set of small amendments made to the IFRS will be effective for annual financial years starting from 1 January 2022.

• Amendments to IFRS 3: Updating of reference in IFRS 3 for the Conceptual Framework of Finan-cial Reporting without changing the accounting requirements of business combinations;


• Amendments to IAS 16: It prohibits an enti-ty from deducting from the cost of a tangible fixed asset any proceeds from selling items produced while the entity is preparing the as-set for its intended use. Instead, an entity rec-ognises the proceeds from selling such items, and the cost of producing those items, in profit or loss.

• Amendments to IAS 37: It clarifies what costs an entity considers in assessing whether a con-tract is onerous.

• Annual improvements with minor amend-ments to IFRS 1, IFRS 9 e IAS 41, and illustrat-ing examples of IFRS 16.

Applicable to financial years from 1 January 2022, subject to the endorsement by the Euro-pean Union.

No significant effects with impact on the Group’s financial statements are expected to occur as a result of the adoption of this standard.

Amendments to IFRS 16 – Leases (issued by IASB on 28May20)

These amendments to IFRS 16 concern the treat-ment for rent concessions by lessees as a result of COVID-19. The amendments change the require-ments of IFRS 16 to provide lessees with a practical expedient so that they do not need to determine whether rent concessions occurring as a direct con-sequence of the covid-19 pandemic are lease modi-fications and may account for such rent concessions as if they were not lease modifications. Applicable to financial years from 1 June 2020, subject to the endorsement by the European Union.

No significant effects with impact on the Group’s fi-nancial statements are expected to occur as a result of the adoption of this standard.

Amendments to IFRS 4 – Insurance Contracts (issued by IASB on 25Jun20)

Currently, according to IFRS 4 – Insurance Contracts, the effective date for applying IFRS 9, following the temporary exemption, is 1 January 2021. In order to align the term of this temporary exemption with the effective date for the application of IFRS 17 Insur-ance contracts, following the amendments made on 25 June 2020, IASB extended the period of applica-tion of IFRS 9 and IFRS 4 until 1 January 2023. This standard is still subject to the endorsement process by the European Union.

No significant effects with impact on the Group’s fi-nancial statements are expected to occur as a result of the adoption of this standard.

Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16: Reform of benchmark interest rates - Phase 2 (issued by IASB on 27Aug20)

IASB finalised its reply to the ongoing reform of in-terbank interest rates (IBOR) and other benchmark interest rates by issuing a package of amendments to the IFRS. These amendments aim to help entities to provide useful information to investors about the effects of this reform on their financial statements.

The amendments complement those issued in 2019 and address issues that might affect financial reporting when an existing interest rate bench-mark is actually replaced.


The amendments are effective for annual periods beginning on or after 1 January 2021, and are still subject to the endorsement process by the Euro-pean Union.



The liabilities for bank guarantees contracted on 30 June 2020 totalled EUR 545.6 million (2019: EUR 546.6 million), including the following:

• Guarantees in the amount of EUR 539.8 million (2019: EUR 539.8 million) provided in favour of the Tax Author-ity arising from the VAT proceedings (note 6);


19. CONTINGENCIES

In accordance with current legislation, tax returns are subject to review and correction by the tax au-thorities for a period of four years (five years for Social Security) except when there has been tax losses, tax benefits have been granted or inspec-tions, complaints or challenges are in progress, in which case, depending on the circumstances, the time limits are extended or suspended The Exec-utive Board of Directors, supported by the infor-mation from its tax advisers, considers that any tax contingencies should not have a significant effect on the condensed consolidated financial state-ments at 30 June 2020, taking into account the provisions set up and expectations that existed on that date, including the situation of the judicial ap-peal in the VAT case.

PENDING LAWSUITSAs at 30 June 2020, the pending lawsuits relating to railway expropriations totalled EUR 5,167 thou-sand (2019: EUR 5,167 thousand). This amount is not reflected in the condensed consolidated state-ment of financial position. In these cases, deposits are made in the name of the court where the pro-ceedings are being heard. The deposits are equiv-alent to the value of the case and are in the cus-tody of the Caixa Geral de Depósitos bank. Their resolution does not result in an expense for the Company, rather for the Grantor of the railway in-frastructures.

There are also other lawsuits related to accidents in the railway infrastructure that the Company is responsible for, and also damage caused to neigh-bouring property and imputable to the IP Group. These lawsuits are covered by the business insur-ance of the IP Group.

The contingencies that may arise from the cases in the Labour Court have been provisioned, as stated in note 9.

VAT PROCEEDINGSAs of the date of its financial statements the IP Group discloses the following VAT proceedings:

• Following the final decision by the Tax Admin-istration concerning the VAT correction for 2006 involving the amount of EUR 2,816 thousand (see note 8.2.3), accepted in part by the Tax Au-thority, IP Património submitted its judicial chal-lenge based on the opinion of a tax expert. Not-withstanding the rejection of the said appeal, tax experts’ opinions on the subject support the Group’s conviction that there are grounds for the refund of this amount, since there was no tax default by IP Património in the assessment of tax and processing of the operation according to the VAT code. In a worst-case scenario, if the case is not won, the amount already deposited and payable to the Tax Authority (note 8.2.3), plus any interest on late payment and compen-satory interest, must be recognised as expense. On 25 May 2015, the company was notified of the challenge by the Tax Authority and it is awaiting the scheduling of the hearing.

GRANTSThe grants assigned to the concession were grant-ed in accordance with the eligibility conditions ap-plicable to the respective applications. They are, however, subject to audits and possible correction by the relevant authorities. In the case of applica-tions for Community grants, these corrections may occur over a period of five years from payment of the balance. In the case of grants assigned to the railway investment business on behalf of the grantor, the refund only has an impact on the State Grantor – Accounts receivable item.

See accounting policy 2.3.13. of the annual report at 31 December 2019


20. COMMITMENTS

IP’s commitments result primarily of its obliga-tion to meet the commitments made in the Road Sub-concession Contracts and the substitution of the State in its payments to and receipts from the concessioned road network.

The IP Group's net costs with the State's Road Con-cessions and Sub-concessions including the toll revenues after the end of the State's Concession Contracts with its private partners, which are the

IP Group revenues in accordance with the Conces-sion Contract, at constant prices and including VAT, as per the figures sent to the Directorate-General for the Treasury and Finance and used as a basis for the corresponding table in the Report on the State Budget for 2019, are summarised in the table below:

EXPENSES OF CONCESSIONS AND SUB-CONCESSIONS (€M) 2021 2022 2023 2024 2025 2026 2027 2028

Gross expenses 1 534 1 448 1 278 1 192 1 073 930 845 766

Revenues - 391 - 395 - 429 - 436 - 709 - 585 - 596 - 596

Net expenses 1 144 1 053 849 756 364 345 248 170

EXPENSES OF CONCESSIONS AND SUB-CONCESSIONS (€M) 2029 2030 2031 2032 2033 2034 2035 2036

Gross expenses 674 575 497 350 276 266 213 144

Revenues - 603 - 452 - 333 - 265 - 230 - 233 - 237 - 186

Net expenses 71 123 164 85 47 33 - 25 - 41

According to the 2020 State Budget Report:

“In what concerns the amounts relating to the road partnerships shown in table above, they have ceased to consider, conversely to the previous year, any expectations of results of ongoing negotiation processes. Therefore, the projection of multi annual expenses with PPPs in this sector is no longer ex-posed to the risks of the implementation of nego-tiated solutions but not yet implemented. Accord-ingly, in what concerns sub-concessions Algarve Litoral, Douro Interior, Litoral Oeste and Baixo Tejo, respective projected net expenses shown in table above now consider the amounts stipulated in the

financial models annexed to the contracts in force, and do not include “contingent compensations” - the payment of which will not occur, in line with the Audit Court’s position in this regard. This justifies, to a large extent, the decrease in net expenses in table above, as compared to estimated expenses in the previous budget.”

EXPENSES OF CONCESSIONS AND SUB-CONCESSIONS (€M) 2037 2038 2039 2040 2041 2042

Gross expenses 122 138 32 6 - -

Revenues - 157 - 167 - 24 - 7 - -

Net expenses - 34 - 29 8 - 1 0 0

Source: 2020 State Budget Report



a) Under article 21(1) of Decree-Law 411/91 of 17 October, the Group confirms that it does not have any Social Security payments in arrears. It also informs that it does not have any debts with the Tax Administration.

b) Impact of the Activity of the IP Group on National Accounts and Public Accounts (Base 12, para-graph 3 c) of Decree-Law 110/2009 of 18 May).

i. National accounts:

After consultation with the National Statisti-cal Institute (INE), it is considered that all the IP Group accounting items have a direct im-pact on the national accounts The flows that the Group establishes with units outside the perimeter of general government will have a direct effect on the general government ag-gregates (deficit and/or debt), impact whose effect and magnitude will depend on the op-erations in question. Thus, when the IP Group receives interest from financial applications outside the general government perimeter, it positively contributes to the balance of gen-eral government. When the IP Group pays for services provided by companies outside the general government perimeter it is increasing public spending and, consequently, the deficit. If the IP Group contracts financing from the financial sector or the rest of the world, it is increasing public debt.

Due to the nature of the national accounts system, the estimate of the impact of a sin-gle unit should only be taken as indicative. In so far as this is an integrated system, in order to demonstrate the underlying economic re-lations in a more explicit way, the national ac-counts methodology establishes that the op-erations of a unit or set of units are sometimes subject to transformations and the analytical effect of which only makes sense within the broader scope of the accounts.

ii. Public accounts:

Financial reporting on a public accounts basis uses the so-called cash basis where financial flows - payments and receipts - are registered The IP Group is included in the Reclassified public bodies and is deemed equivalent to the Autonomous services and funds; therefore, it is integrated into the state budget.

c) Forward-looking financial information - commit-ments assumed and multi-annual forward-looking information for the concession period concerning the concessionaire's activity, namely in terms of results, funding needs, dividends payable to the shareholder and income tax (Base 12, paragraph 4(b) of Decree-Law 110/2009 of 18 May).



COMPENSATION, RESERVE OF RIGHTS, REQUESTS FOR REINSTATEMENT OF FINANCIAL EQUILIBRIUM (REF) AND APPEALS OF FINES IN SUB-CONCESSIONS AND SERVICE CONTRACTS.

Under the terms of the Sub-concession Contracts still prior to submission of any specific application for the reinstatement of financial equilibrium (REF), the IP Group’s consideration is called the “reserve of right”, i.e. it has to inform the IP Group that a particular fact is eligible for the purposes of REF.

Only following such reserve of right REF applica-tion requests are or can be submitted. It should also be noted that if the right of reserve is not for-mulated within 30 days of the occurrence of the event, any putative right to REF expires.

The following REF requests were submitted up to 30 June 2020:

SUB-CONCESSION TYPE OF REQUEST MADE FACT GENERATING REQUEST STOCK OF THE SITUATION

Autoestrada Transmontana (AEXXI)

Interest on late payment of remuneration

Interest on arrears due to late payment of remuneration

The IP Group's Executive Board of Directors suspended payments, at least until the Court of Auditors decision on AL's CSA appeal; payments were resumed but only partially.

Baixo Alentejo Interest on late payment of remuneration



Baixo Tejo (AEBT) Reinstatement of financial balance Impossibility of construction of ER377, including Avenida do Mar

IP requested to the SEI the set up of a negotiation committee on 7 February 2019 (see article 21 of DL 111/2012, of 23 May); NC set up and works in progress.

Baixo Tejo (AEBT) Non compliance with payment of remuneration due

Non compliance with payment of remuneration due

AEBT triggered the arbitration proceedings; Arbitration court set up (18/11/19); arbitration proceedings in progress

Litoral Oeste (AELO)Reinstatement of financial equilibrium (based on unilateral change in Reformed SCC)

IC9-Alburitel/Carregueiros e IC9 - Carregueiros/Tomar stretches; repair of pathologies in slopes transferred to AELO

Unilateral change in Reformed SCC, IP decision There is consensus between IP/AELO about the REF and amount required; IP triggered proceedings provided in DL 111/2012, of 23 May, letter SET dated 24.10.2019; pending Government decision.

Pinhal Interior (Ascendi PI)

Interest on late payment of remuneration



Algarve Litoral Compensation lawsuit Lawsuit proposed by financing banks In progress

Algarve Litoral Termination of Reformed Sub-Concession Contract

Termination of Reformed Sub-Concession Contract, for reason attributable to IP

Arbitration Court set up, Dr. Luis Laureano appointed Chairman by the President of the Portuguese Bar Association, Prof. Paulo Otero, indicated by IP, Prof. Pedro Costa Gonçalves, indicated by RAL; ongoing

SERVICE PROVIDER AGREEMENT

TYPE OF REQUEST MADE FACT GENERATING REQUEST STOCK OF THE SITUATION

Vialivre - Norte Litoral Reinstatement of financial balance

Specific change in the law: Amendment to Law no. 25/2006 pursuant to approval of Law 64-B/2011, of 30 December

Former EP accepted the expenses presented as eligible, and these will be approved or rejected on a case-by-case basis.


“COMPENSATIONS, RESERVE OF RIGHTS AND REQUESTS FOR THE REINSTATEMENT OF THE FINANCIAL EQUILIBRIUM IN STATE CONCESSIONS”

These concessions are State Concessions, negotiated by the State with Concessionaires; accordingly, IP is not a party in these contracts and is only informed of the situations through the State's representative, IMT. As part of its Concession Contract with the State, the IP Group may possibly be called upon to pay the REF if the Grantor so decides.In the first half of 2020 the IP Group recorded expens-es of EUR 20.1 million in co-payments, compensation and rebalancing, the most important of which were:

i. Compensation to concessionaire AEDL – Auto-es-tradas do Douro Litoral, in the amount of EUR 4.9 million, pursuant to decision of the Arbitration Court dated 7 February 2017.

ii. Legal expenses with Proceeding 82/17.6BCLSB re-lating to Douro Litoral Concession, in the amount of EUR 7.8 million;

iii. Compensation to concessionaire Brisal - Auto-Es-tradas do Litoral, in the amount of EUR 8.5 million, in accordance with decision of the Arbitration Court dated 15 April 2015 (amount due in December 2019, but only paid in January 2020);

iv. Implementation of Financial Rebalancing Agree-ment with Lusoponte, resulting in a balance of EUR 1.4 million in favour of IP.

APPROVAL OF IP ACCOUNTS RELATING TO 2019

As of the date of approval of these financial state-ments the shareholder had not yet approved the sep-arate and consolidated financial statements and corre-sponding management reports of the Executive Board of Directors relating to 2019.

COVID-19 IMPACT

The emergence of the Covid19 pandemic is having sharp impact on the Portuguese economy and IP's ac-tivity as well.

The company implemented a global contingency plan, divided into several sector contingency plans, cover-ing the business and corporate areas, taking into con-sideration the specificity and risk associated with the activity concerned.

IP is ensuring the normal operation of the road and railway infrastructures and developing its investment plan, in line with respective programmes.

The protection of employees is ensured, in line with the directives of the National Health Authority (DGS).

By the end of the first half of 2020 the loss of core income totalled EUR 104 million as compared to the same period of the previous year: EUR 62.9 million in RSC (-23%), EUR 36.4 million in tolls (-31%) and EUR 4.7 million (-13%) in railway services.

Projections for loss of core income at the end of the year hover around EUR 170 million, as compared to the previous year. This is an estimated figure based on latest data available, though it will depend on how the pandemic will evolve in the 4th quarter of the year.

It should be mentioned that IP maintains close coop-eration with the State shareholder, in order to imple-ment the most adequate solutions to meet additional funding requirements and thus safeguard the compa-ny’s financial sustainability.

Likewise, the real estate and commercial areas busi-ness under the management of IP Património was se-riously affected by COVID-19 pandemic, requiring the adoption of measures to mitigate the impact on the business and financial situation of some of the com-pany's sub concessionaires. As a result, in accord-ance with article 11 of Law 4-C/2020 of 6 April and subsequent amendments, in addition to the moratoria granted concerning invoicing relating to March, pay-ment exemption measures were taken concerning 374 contracts relating to April, May and June invoicing, totalling EUR 922 thousand as well as compensation reduction measures affecting 21 contracts in April and May and 368 in June, totalling EUR 244 thousand. The impact of this reduction in revenues is partly offset by a decrease in the concession rent as it is indexed to operating income.

Notwithstanding the above, the measures which are being adopted by the management of IP Património in coordination with the shareholder ensure the continu-ity of the activity of IP Património.


In what concerns the road Public-Private Part-nerships, following the declaration of the state of emergency, several sub-concessionaires and toll collection service providers have notified IP that the pandemic declared by the WHO constitutes a case of force majeure triggering the effects provid-ed in respective contracts.

Such notices are required under the contracts. Whenever an event occurs that private partners consider to be of force majeure, they must notify IP thereon.

On the other hand, as they comply with this re-quirement, private partners are also required to communicate which obligations can be complied with and which cannot, for how long, and what are the mitigation measures that were adopted.

It should be added that as of this date no request for the reinstatement of financial equilibrium (REF) was made.




I) JOINT ORDER OF THE SECRETARY OF STATE TO THE TREASURY AND THE SECRETARY OF STATE TO INFRASTRUCTURES - 25 JULY 2020

The order authorised the hiring in 2020 of 100 ad-ditional employees to ensure the compliance with commitments relating to the planned investment in infrastructures and follow-up of respective pro-jects and to meet the requirements arising from the works to be developed in the railway and road networks, as provided in national investment plans.

The order further approves the replacement of employees who terminated or will terminate their employment in 2020 on grounds not attributable to the employer.

II) ACCIDENT IN THE NORTH LINE WITH ALFA PENDULAR TRAIN - 31 JULY 2020

On 31 July a railway accident occurred on the North Line, near Soure station, due to the collision between an Alfa Pendular train and a catenary maintenance vehicle . Regretfully, two employees from IP's workforce died as a result of this acci-dent.

The investigation of the accident is being carried out by the Office for the Prevention and Investiga-tion of Air and Railway Accidents; the final report is not yet issued at this date.

III) CAPITAL INCREASES - 25 AUGUST AND 28 AUGUST 2020

Pursuant to unanimous written corporate res-olutions dated 25 August 2020 and 28 August 2020, the share capital of IP was increased by EUR 190,005 million, through the issue of 38,001 shares with the nominal value of EUR 5,000 per share, subscribed and paid up by the Portuguese State, as shareholder.

IV) REJECTION BY THE CONSTITUTIONAL COURT OF APPEAL SUBMITTED BY IP RELATING TO THE REFUSAL OF APPROVAL BY THE AUDIT COURT OF THE ALGARVE LITORAL SUB-CONCESSION CONTRACT – 1 SEPTEMBER 2020

According to summary decision 418-2020, dated 1 September 2020, the Constitutional Court re-jected the admission of the said appeal, which IP challenged, by entering claim against such deci-sion on 14 September 2020 with the full Consti-tutional Court.



Financial Director













Part IIIDigital Signature


Financial Director














Part IVReport on Review of Condensed Consolidated FinancialStatements30 June 2020

Tel: +351 217 990 420 Fax: +351 217 990 439 www.bdo.pt

Av. da República, 50 - 10º 1069-211 Lisboa

BDO & Associados, SROC, Lda., Sociedade por quotas, Sede Av. da República, 50 - 10º, 1069-211 Lisboa, Registada na Conservatória do Registo Comercial de Lisboa, NIPC 501 340 467, Capital 100 000 euros. Sociedade de Revisores Oficiais de Contas inscrita na OROC sob o número 29 e na CMVM sob o número 20161384. A BDO & Associados, SROC, Lda., sociedade por quotas registada em Portugal, é membro da BDO International Limited, sociedade inglesa limitada por garantia, e faz parte da rede internacional BDO de firmas independentes.

REPORT ON REVIEW OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Free translation from a report originally issued in Portuguese language. In case of doubt the Portuguese version will always prevail) Introduction We have reviewed the accompanying condensed consolidated financial statements of Infraestruturas de Portugal, SA (hereinafter referred by IP or Company), which comprise the condensed consolidated statement of financial position as of June 30, 2020 (that presents a total of 27 074 851 thousand euros and a total net equity of 7 837 541 thousand euros, including a net loss of 48 510 thousand euros), the condensed consolidated of comprehensive income, the condensed consolidated statement of changes in equity and the condensed consolidated statement of cash flows for six month period then ended, and the explanatory notes to these condensed consolidated financial statements. Executive Board of Directors’ responsibilities The Executive Board of Directors is responsible for the preparation of these condensed consolidated financial statements in accordance with International Accounting Standard 34 – Interim Financial Reporting as adopted by the European Union, and for the implementation and maintenance of an appropriate internal control system to enable the preparation of condensed consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ responsibilities Our responsibility is to express a conclusion on the accompanying condensed consolidated financial statements. Our work was performed in accordance with ISRE 2410 – Review of Interim Financial Information Performed by the Independent Auditor of the Entity and further technical and ethical standards and guidelines issued by the Portuguese Institute of Statutory Auditors (Ordem dos Revisores Oficiais de Contas). These standards require that we conduct the review to conclude whether something has come to our attention that causes us to believe that the condensed consolidated financial statements are not prepared in all material respects in accordance with the International Accounting Standard 34 – Interim Financial Reporting as adopted by the European Union. A limited review of condensed consolidated financial statements is a limited assurance engagement. The procedures that we performed consist mainly of making inquiries and applying analytical procedures and subsequent assessment of the evidence obtained. The procedures performed in a limited review are substantially less that those performed in an audit conducted in accordance with International Standards on Auditing (ISA). Accordingly, we do not express an audit opinion on these condensed consolidated financial statements.

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Conclusion Based on the work performed, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated financial statements of Infraestruturas de Portugal, SA, as at June 30, 2020, are not prepared in all material respects, in accordance with the International Accounting Standard 34 – Interim Financial Reporting as adopted by the European Union. Emphasis of matter Without modifying our conclusion, we draw your attention for the following matters: 1. As disclosed in paragraph 4.4.1 of the Management Report and in note 22 to the condensed consolidated financial statements, the Court of Auditors, confirmed through Judgment decision No. 13/2019, of May 31, following an appeal filed by the Group against the decision contained in Judgment decision No. 29/2018, the refusal to grant a visa to the Algarve Litoral amended sub-concession contract, agreed with the sub-concessionaire, as part of a renegotiation process. IP filed an appeal against the decision to the Constitutional Court, which, in September 2020, was object of rejection, and IP, as disclosed in note 23, filed a complaint to the Plenary of the Constitutional Court. On July 17, 2019, the sub-concessionaire submitted a request for the termination of the sub-concession agreement, under the terms of the applicable law, which was not accepted, which led the sub-concessionaire to initiate in the begin of September 2019 an arbitration process against IP, whose Arbitration Court was formally established in 2020. In addition, the financing entities filed a legal action for damages, as disclosed in note 22, which is in progress. As a result of the understanding expressed in the first decision of the Court of Auditors, the ongoing negotiation process regarding the Baixo Tejo and Litoral Oeste sub-concessions, whose Memorandums of Understanding, already signed and which allowed for lower remuneration payments although the negotiations were not concluded, were not renewed by the sub-concessionaires implying the return to the signed contracts in force. As a consequence, the Baixo Tejo sub-concessionaire calls on the existence of financial imbalances resulting from the obligations provided for in the respective reformed contract, due to the impossibility of construction and operation of ER 377-2, having been requested and already established a Negotiating Committee based on the need to reflect contractually the impossibility of building the aforementioned route, being the respective negotiation process ongoing. On the other hand, an arbitration process is in progress resulting from remunerations that the sub-concessionaire believes are due, as disclosed in note 22. Regarding the Douro Interior sub-concession, the negotiations were concluded with the Negotiating Committee’s report pending by a Government decision. With regard to the amended sub-concession contracts of Baixo Alentejo, Pinhal Interior and Transmontana, they were again submitted to the Court of Auditors by IP, following the aforementioned Judgment 13/2019, for the purposes of prior surveillance, having been notified that they are not subject to it, so they are implemented under the agreed terms.

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2. As disclosed in note 6 to the condensed consolidated financial statements, current assets recorded under the heading State and Other Public Entities corresponds, practically in its entirety to the VAT calculated under the road concession by the extinct company EP - Estradas de Portugal, SA (EP) and by the IP since the merger with REFER, in the total amount of 1 571 116 thousand euros. Due to the framework given by Tax Authority for the activity carried out by the IP, particularly the Road Service Contribution (CSR), additional VAT assessments have been made, the amount of which for the years inspected up to 2015 is 1 405 879 thousand euros plus interest up to the same date, amounting to 84 162 thousand euros, which were subject to judicial claim (process related to the years 2009 (two), 2011, 2012 and 2013) or administrative complaint (years 2014 and 2015). As also disclosed in the same note 6, IP was notified, in October 2017, of the judicial decision that calls off the appealed decision of one of the judicial processes (tax of 64 506 thousand euros) and that considers the judicial claim of EP and cancels the additional assessments issued by the Tax Authority, which appealed to the Supreme Administrative Court. In September 2020, IP received the tax inspection draft report for the year 2016, being under way the period for exercising the right of defence. As disclosed in note 9, IP has booked annually provisions corresponding to the total VAT deducted in activities financed by CSR, which as at June 30, 2020 shows a total amount of 406 195 thousand euros. It is emphasized that any risk associated with VAT deducted but not provided for, will have essentially an accounting impact on the cost of the concession right of the national road network. 3. According to the information disclosed in note 8.3.2 to the condensed consolidated financial statements, a significant part of the Group`s financing has been provided by the shareholder State, with a total financing, as of June 30, 2020 amounting to 2 489 316 thousand euros, including interests. The amount disclosed under current liabilities (2 483 983 thousand euros) includes 2 157 026 thousand euros of financing related to the road segment, with maturity already reached, for which a moratorium with interest suspension has been granted. Also, and as mentioned in note 8.2.1 current assets include 3 931 281 thousand euros of investments made by the Group on behalf of the State, in long term railway infrastructures. 4. As disclosed in notes 2.4 and 5 to the condensed consolidated financial statements, the accounting recognition of the Intangible Assets - Road Concession Right, has underlying assumptions and estimates of great relevance, such as the total amount of the investments and the expected income until the end of the concession (December 31, 2082), which are included in the business plan prepared and reviewed annually by IP. As often future events may not occur as expected, namely due to factors exogenous to the IP, such as the evolution of macroeconomic variables, political decisions and socioeconomic mutations, the financial and economic performance of the Concession may be significantly affected if the assumptions change, as demonstrated in the sensitivity analysis disclosed in note 2.4 to the consolidated financial statements. 5. The report and accounts for the year ended December 31, 2019 are still awaiting approval by State shareholder, as disclosed in note 22 to the consolidated condensed financial statements.

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6. In the Management Report and note 22 to the consolidated condensed financial statements, the impacts of COVID-19 pandemic and the measures implemented by the Executive Board of Directors to minimize the risks resulting from the development of the pandemic, which activated the contingency plan, considering the Management that the impact in operational terms is small, although significant in economic terms, namely in terms of income from the use of road and rail networks due to reduced demand. The Group, in conjunction with the State shareholder, is monitoring the situation with a view to implementing the most appropriate solutions to cover additional financing needs, thus maintaining the Group's financial sustainability and continuity. On the other hand, within the scope of the respective contractual obligations, there are sub-concessionaires and toll collection service providers who have notified the Group considering that the determination of the state of emergency constitutes a case of force majeure for the purposes provided for in the respective contracts, and until to date, no request for economic and financial rebalancing has been requested. Our conclusion is not modified in relation to these matters. Lisbon, September 24, 2020 SIGNED ON THE ORIGINAL António José Carvalho Barros, on behalf of BDO & Associados, SROC, Lda. (registered with the Comissão do Mercado de Valores Mobiliários under number 20161384)

FIRST-HALF 2020

CONSOLIDATEDREPORT ANDACCOUNTS

Infraestruturas de Portugal, S.A.Campus do Pragal, Praça da Portagem2809-013 ALMADA · PortugalPhone: +(351) 212 879 000e-mail: [email protected] Capital: 7 558 020 000,00€VAT: 503 933 813www.infraestruturasdeportugal.pt

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