From the terrace of the Four Seasons hotel in Madrid, one of the emblems of the so-called Canalejas Center that OHL, now renamed OHLA, has built, its CEO, José Antonio Fernández Gallar, reveals the company’s strategy after recently sealing a complex restructuring financial and capital.
Under the shareholding command of the brothers Luis and Mauricio Amodio , who have taken the baton from Juan Miguel Villar Mir, OHLA aspires to return to black numbers this year and promote a path of growth in operating results and double-digit contracting in the next years. A stage in which the focus will also be on reducing its debt below 350 million in two or three years – 250 million less than at present – via business, sales and the collection of some lawsuits.
“We are going to fight to open the Mexican market and to regain position in Spain”
Why did OHL change the brand to OHLA?
Because it is an aging brand. Although it is very recognized, very prestigious, that has done great works throughout history, progress is progress and it is a brand that certainly needed a refreshment. OHLA is a brand that tries to combine respect for the past with the future.
After completing the financial and capital restructuring, do you consider the company healthy?
The company already has adequate debt maturities and with the time necessary for us to debit it. We do not consider it healthy from the point of view that it still has more debt than it should. But there are some important collection alternatives for the company that must produce insurance before the first maturity of the bonds, which is in 2025. The intention is, as soon as these collections occur, to amortize a part of the debt to leave it already in a proportion reasonable .
What is that reasonable level?
The reasonable thing should be a maximum of 3.5 times ebitda (gross operating profit). By 2023-2024 we should be in that ratio. And we would like OHLA to have a debt of less than 350 million euros.
That would give an ebitda of around 100 million euros.
Yes, that would be an ebitda of around 100 million that we will start to reach in a couple of years.
And in five years, when the current bonds mature, what will it be?
I am not a clairvoyant and five years is an eternity. I can express a wish to you: we should be in ebitda above 150 million.
When will OHLA return to net profit?
We aspire this year to be in profit after taxes.
The targets for 2021 are public. And in the longer term?
We have a long-term plan that is for 2021, 2022 and 2023. We have a production target of between 2,800 and 3,000 million for this year, an EBITDA of 80 million and a contract of 3,000 million.
And for 2022 and 2023?
We aspire to double-digit growth in production, ebitda and contracting.
Are the pending charges to which you refer the arbitrations and the sale of 49% of the Canalejas Center?
They are certain arbitrations and, basically, Cemonasa -Móstoles-Navalcarnero train-. Canalejas is not currently in our head to sell it.
Neither in the short, nor in the medium nor in the long term?
I don’t know that, life is very long. Certainly not right now. Canalejas is a very emblematic asset that we are very proud of and that we believe has a lot of ramp up left in terms of value gain, not only to the hotel but even to the shopping center. We believe that in the next two or three years it will have an exceptional evolution and we want to capture all that value.
To sell it later?
No. We have no plans to sell it.
And what value can the Canalejas Center achieve?
Canalejas should be in a very short time well above the 1,100 or 1,200 million euros of valuation.
How are you going to reduce the debt to 350 million from the current almost 600 million -488 million bonds and 92 million from ICO credit-?
The ICO was not a proper loan to aid the pandemic, but rather, as a consequence of it, it was a bridge loan to a divestment process. That is why it has gone from 140 million to the current 92, which will be repaid with the sales receipts. To begin with, from the Old War Office, 50% of all payments will be reduced; they are just under 50 million.
In addition, we are in the process of closing the sale of Aguas de Navarra , with which we would reduce another 14-15 million. We would already be in less than 30 million, which is an amount that we can progressively pay with recurring income. We practically amortize the ICO in 2021 and 2022. And the rest are the 488 million of the bonds, which we will reduce as soon as we charge for Cemonasa, hopefully in 2022 and if not in 2023.
Do those 14-15 million for Aguas de Navarra represent half of the total operation as they have done with the Old War Office?
More or less, but the sales agreement is confidential.
When do you expect to close the sale?
We are requesting authorization to transfer the concession and before the end of September it should be closed.
A divestiture on the horizon is that of the Montreal Hospital (CHUM). Is it already released?
No. It is under evaluation, but we have not made any decisions. You will have to take her advice.
Is its value similar to that of Aguas de Navarra?
No, it is far superior. The CHUM is worth considerably more money than those 30-35 million.
And they also have other concessions with lower valuations. Will they also be sold?
There is no decision about it.
He was referring earlier to the Cemonasa dispute. How much do you expect to charge?
We are claiming a total of 350 million euros. Cemonasa is an arbitration in which we are certain that the recognized cost is paid by the Administration and we aspire to collect it plus the damage caused to the company.
We are claiming basically two things from the Community of Madrid: a guarantee that was improperly executed and there is a final judgment and adds more than 17 million euros to their interests that must be collected; and there is another one that is the recovery of the investment in the contract, where we have a disparity with the community regarding the volume of the investment, but there is a floor that is what has recognized us, which is 123 million euros and From the date the contract has been settled, it has an accountant with the Delinquency Law at 8% interest. The sooner that meter is cut the better for everyone.
When do you estimate to charge?
The more than 17 million we should collect before the end of the year.
And the rest?
They – the Community of Madrid – recognize 123 million and we demand more. If we go until the end of the trial, I don’t know when the time will come, but we may be in the next year. But if we can shake hands first and stop the counter, that would be great.
Apart from the Cemonasa lawsuit, OHLA has arbitrations in Qatar, Kuwait or Algeria. Is there any news? What balance do you expect as a whole?
There has been no news, nor do we expect in the short term. We expect the balance to be positive, but the figure is uncertain.
“We are asking the banks for guarantees for an additional 150 million and I am optimistic”
In the framework of the restructuring, the G-6 banks have also renewed the guarantee line of 313 million euros for one year. Are you already asking for more guarantees?
Yes. They are in the internal approval process and I am optimistic. In general, they attach great importance to the world of bank guarantees, which it does, but in the universe of OHLA guarantees it is a small percentage.
For example, we have 3 billion dollars in securities and performance bonds in the United States and another almost 800 million euros with insurance companies. OHLA is gradually returning to the path of having the necessary guarantees to grow in hiring.
What is the volume of guarantees that OHLA needs to meet the contracting objectives?
The guarantees of insurance companies and Americans we would always like to have more, but today we are served. And the volume of bank guarantees that we would like to obtain is an additional 150 million euros. Now we have 313 million euros in the WFTU (Syndicated Multiproduct Financing) plus 300 million in bilaterals.
Do you plan to end the syndication and start another in the future?
The WFTU is extended until June 2022 and at that time we will decide. What OHLA aspires is that there is already a normalization of relations with banks on a bilateral one-to-one basis.
Are they asking for those additional guarantees from other banks beyond the G-6?
We are talking with all the banks because we must increase the banking pool in OHLA. Also the banking pool in Spain has been reduced because there has been a lot of concentration.
OHLA is committed to construction and concessions. What will its weight be?
In the future we would like construction revenue from concessions to be between 25% and 30%.
The objective is to achieve two concession projects per year. What size and with what participation?
We want to aspire to medium-sized concessions of between 300 and 500 million euros. At the time of entering the concession, we would go to win it and then we would look for a partner to enter the equity (capital). For us the equity would have to be a range of between 10% and 20% at most.
Are they considering going to macro-projects like the ‘managed lanes’ in the United States or are they out of their volumes?
It is out of our volumes and prudence tells me that we should not even approach. Another thing is that we could participate in a small percentage because we had classifications or experience that helped the consortium, but in general it is not our objective.
After winning the Biobío hospitals in Chile, do you have any other projects in an advanced phase? Where do you expect to get the second award this year?
We are analyzing new hospitals in Chile. This year we hope to get the second in Latin America. I cannot specify the country because it will depend on those that are tendered in the second semester.
Will OHLA participate in the new Colombian highway program?
Yes. We recently came close to winning a highway concession in Colombia.
After the arrival of the Amodio, do you plan to grow in Mexico? In what other countries?
We would very much like to recover Mexico because it was very important for OHL and for OHLA it has to be so again. Slowly but surely we are going to fight to open the Mexican market and grow in terms of concession and bidding for work. And we would very much like to regain our position in Spain.
Would an eventual merger with Caabsa be profitable for OHLA?
Mexico, star role, would you see an eventual merger with Caabsa -the Mexican construction company owned by the Amodio brothers as advantageous or profitable for OHLA?
For the moment OHLA is fine as it is. OHLA has already had too many movements and right now its turn is to stabilize, organic growth and do what it knows how to do, which is to hire and build.
Spain is the second market for OHLA in the world with a turnover of around 400 million euros and is committed to strengthening its position. What goal do you set?
In Spain, OHLA wants to be above 500 or 600 million euros in turnover, but for this the public bidding has to be accelerated, which is still low.
In Spain, in the field of concessions, the opportunity for the road plan now arises again, but the Deindexation Law limits profitability. Will OHLA concur?
Not for the moment.
And could they be interested in other concession projects in Spain?
Yes we would be delighted, for example in hospitals.
But profitability is also limited.
Yes. I trust and hope that the Government will address that limitation. It is a brake on growth via concessions.
And will the United States always be the first, even more so with the new infrastructure plan?
Yes Yes. The United States is very large and the infrastructure investment program is huge. And we have a lot of presence, we know the country, we have the teams, the trajectory, the classifications, we have everything. We are going to pamper you.
What is the OHLA project pipeline in the United States?
We have identified some 6,000 million dollars of projects that are very ours, where we would feel very comfortable, because they are in New York, California, Florida …, and that also have the size and fit our classifications and our ‘expertise’ .
And do they have a global figure?
No, because each country is a world.
A few months ago, they reached an agreement with the Villar Mir Group to settle the debt it had with OHL and there were conditional pending payments. Has there been any progress?
Not because the ‘triggers’ that trigger that payment have not yet occurred, but we are hopeful and almost convinced that it will occur.
It is not a question of time, but of certain sales being fulfilled on your part.
One of OHL’s workhorses in recent years has been the destruction of cash as a result of the so-called ‘legacy’ projects. When will they be fully liquidated?
We gave a cost estimate figure for the ‘legacy’ of 330 million when this team arrived at OHL in 2018. It is going to be fulfilled. Of cash, 100 million remained to leave the company at the end of December 2020, which does not mean a loss because the ebitda was already fully provisioned. That will come out between 2021 and 2022.The company is generating cash, but destroying it because of the ‘legacy’. To the extent that we finish paying them, the company will return to the normal path of generating positive cash.
Do you think that after the restructuring, the necessary shareholder stability has been achieved or could there be more movements?
We have a stable shareholding with the exception of the funds that have just over 15% and are sovereign in their decisions. Experience tells me that they are birds of passage and when they have a profitability that they can provide to their depositors, they will gradually leave the company. But it is an idea that I have as you can have it.
How will the board of directors be composed? Will the Villar Mir family keep two seats? Will the number of members be expanded?
It is not decided. The normal thing is that it is proportional to their participation. The council is made up of 10 members and the change of number is not foreseen. With 10 if you have more than 5% you give for a position.
What they are committed to is that there are more independents than proprietary.
Yes. Five independents, plus the executive, and four dominical.
The CEO Manuel Álvarez has just left the company. Is it planned to be replaced or for the Amodio brothers to appoint new members to the steering committee?
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