January 28, 2020 - 7:10pm EST by
2020 2021
Price: 22.33 EPS 1.75 1.65
Shares Out. (in M): 826 P/E 12.76 13.53
Market Cap (in $M): 20,300 P/FCF 4.8 5.1
Net Debt (in $M): 47,177 EBIT 5,071 4,696
TEV (in $M): 75,442 TEV/EBIT 14.88 16.10

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Atlantia is a holding company for a number of quality infrastructure assets including motorways, airports and transport services across Europe and South America. A breakdown of Atlantia’s subsidiaries and investments looks as follows:
  • Italian motorways business, primarily Autostrade per l’Italia which operates ~3,000km worth of motorway networks in Italy
    • accounts for ~41% of the group’s 2020E EBITDA
  • 50% stake in Abertis a Spanish toll road manager with assets in Spain, France and South America
    • accounts for ~32% of 2020E EBITDA
  • Airports including a 98.6% stake in Aeroporti di Roma (Italy), a 40% stake in Aeroports de la Cote d’Azur (France) and a ~30% stake in Bologna Airport (Italy)
    • accounts for ~11% of 2020E EBITDA
  • 15% stake in Getlink, 18% stake in Hochtief and 100% of Telepass
    • accounts for ~10% of 2020E EBITDA
  • Stakes in Brazilian and Chilean motorway operators
    • accounts for ~6% of 2020E EBITDA
A tragic bridge collapse in August of 2018 has left the shares of Atlantia depressed against the backdrop of infrastructure sector that has performed particularly well (~23% increase since August of 2018), creating a particularly attractive investment opportunity with an imminent catalyst in the form of the soon expected resolution with the Italian government of the question of its ASPI motorway concession which operated the collapsed bridge.
Morandi Bridge collapse and aftermath:
On the 14th of August, 2018 the Morandi Bridge in Genoa, Italy managed by Autostrade per l’Italia (ASPI), a subsidiary of Atlantia SpA (a company where Edizione the holding company controlled by the Benetton family – owns the largest stake, at 30.25%), collapsed killing 43 people. Atlantia’s stock price plummeted ~27% over the following 2 days as the Italian government began threatening to revoke the concession (the Single Concession Agreement signed in October 2007) that granted management of the bridge, as part of a ~3,000km toll motorway network, to ASPI.
What ensued was more than a year of back-and-forthing between the government and ASPI/Atlantia, with continuous threats of revocation from the government and simultaneous attempts by Atlantia to offer up potential solutions in the form of lump sums to compensate the victims and the Genoa region as well as an offer to reconstruct the bridge in an attempt to appease the grantors of the concession. What at the time and still to this day makes this public conversation particularly heated and adversarial, is the presence in government, both then and now, of the Five Star Movement (M5S) a populist political party which stands for everything anti- establishment, like the political elite or large corporations. The presence in government of the likes of Luigi Di Maio (the Deputy Prime Minister of Italy and Minister of Economic Development in the Conte I coalition government with M5S and the Lega Nord, and currently the Minister of Foreign Affairs in the Conte II coalition government with M5S and the Democratic Party (DP)) and Danilo Toninelli (Minister of Infrastructure and Transport during the Conte I coalition government with M5S and the Lega Nord) both members of M5S has continued to fuel the fire of this antagonistic rhetoric and has prevented the achievement of an atmosphere constructive to the resolution of the situation.
Potential outcome scenarios:
Here we set out an analysis of all the potential outcomes of the situation, basing our analysis and the likelihood attributed to each of the outcomes on legal bounds defined by the Single Concession Agreement, relevant precedents as well as the financial and practical consequences of each one of the outcomes and what it implies for their practicability.
There are 3 outcome scenarios:
  1. Revocation
  2. Partial revocation
  3. No revocation (negotiated settlement)
However, before we delve into analysis of the technicalities and likelihood of each of the above, we first go on to examine the Single Concession Contract as well as the chain of events since the collapse of the Morandi Bridge.
- The Single Concession Contract
The concession agreement between ASPI and ANAS (Azienda Nazionale Autonoma delle Strade) sets out the circumstances which could allow for a revocation of the concession in Articles 8 and 9 (as paraphrased in subsequent Atlantia bond prospectuses
“The Single Concession Contract sets out procedures for early termination of the concession in the event of material and continuing non-performance by Autostrade Italia of the material terms of the concession. … In the event that ANAS finds material and continuing non-performance by Autostrade Italia of material terms of the concession, it must issue a notice to Autostrade Italia requiring it to rectify such non-performance within a specified and reasonable timeframe or provide the reasons for the non-performance. If the reasons provided are
not acceptable or the non-performance is not rectified within the specified timeframe, then ANAS may, following confirmation of the continuing material breach, commence proceedings to terminate the concession.”
“Such proceedings are a preliminary phase in which Autostrade Italia is given notice of the breach and formally requested to cure the breach within a set time period, which cannot be less than 90 days. During this time, Autostrade Italia can present its position and objections. At the end of such time period, if the breach continues or in the event that ANAS rejects the concessionaire’s objections, ANAS is required to set out another time period of not less than 60 days within which the concessionaire must cure the breach. If Autostrade Italia does not cure the breach within this 60 day period, ANAS may request that the Ministry of Infrastructure and Transport, jointly with the Ministry of Economy and Finance, issue a decree declaring the termination of the concession. In such an event,
the concessionaire is obliged to continue managing the concession until management of the concession is transferred.”
- Events since collapse of Morandi Bridge
The Ministry of Infrastructure and Transport (MIT) sent ASPI a letter on the 16th of August, 2018, claiming that ASPI had breached its obligations of routine and extraordinary maintenance and requiring that ASPI present a “defence of its conduct”. Despite the fact that the determination by MIT that ASPI had breached the concession wasn’t grounded in any concrete facts and analysis, which may lead one to doubt whether this letter can actually constitute the beginning of the process of revoking the concession or if it should be treated as extralegal communication (especially that initially ASPI was only given 15 days to respond), we will treat the ensuing formal exchanges between MIT and ASPI as part of the procedure of revocation. ASPI was subsequently granted an additional 120 days to provide further explanations and information regarding the bridge in question, and in relation to the suitability and adequacy of the control and monitoring systems used, the state of the infrastructure operated under concession, including with reference to the applicable technical
standards, and the precautionary measures adopted in relation to the work being carried out on the bridge
(, which was then extended to the 3rd of May 2019. In its response, ASPI sets out its belief that it has acted properly and reiterates its reservations and objections with regard to the procedure initiated” while also stating its availability “for carrying-out any further in-depth analysis if requested to do so (
This period of exchanges between the government and ASPI/Atlantia was followed by the partial release through the press of a report put together by a committee appointed by MIT which found serious inadequacies in the maintenance and management of the bridge by ASPI. To this ASPI responded with another letter, claiming that “from those excerpts no dangerous infringements of the duties of maintenance provided by the concession contract seems to arise” ( Furthermore, on the 15th of September, 2019 ASPI released an overview of its past expenditure as part of the Concession Agreement ( controlPanelCategory=portlet_comunicati_WAR_comunicatiportl et):
“the Company would like to point out that it has always spent more than what is envisaged in the financial plan: the actual maintenance expenditure for the period 2000-2018 actually amounts to €5.43Bn, i.e. approximately €196M more than the expenditure envisaged in the Agreement. … Autostrade per l’Italia’s maintenance expenditure per kilometer of infrastructure is approximately €108,000 per year (2013-2017), five times more than ANAS’s expenditure on its network (€19,000 per year between 2013 and 2016) and three times higher than its French and Spanish counterparts”.
While no concrete evidence has yet been published (even the ministerial committee report), there is continuing commentary about a serious breach, with Giuseppe Conte (the Prime Minister) saying in January 2020:
“It is now clear that serious defaults in the management of motorway infrastructures have emerged.”
In addition, in December 2019 an Italian court in Genoa found that ASPI applied pressure on the maintenance firm SPEA also owned by the Atlantia group to falsify safety reports for several bridges to save money for both ASPI and Atlantia.
Thus, we’d like to stress that in no way does our thesis - when it comes to the over-discounting of ASPI by the market - rely on an assumption that ASPI complied by the concession terms and that it undertook sufficient expenditure on maintenance capex. Rather, as will be set out below, our analysis relies on a purely legal analysis of the routes open to the government and an analysis of the practicability of each of these.
However, it must also be noted that all commentary on potential breaches of the concession terms by ASPI have so far come from government bodies or government-linked groups. Yet the government itself being a party to the concession is simply not in a position to unilaterally decide whether a breach has or hasn’t taken place. Rather, it is up to the judiciary to rule on such a topic. Therefore, regardless of the amount of evidence that the government publishes or releases through the press about material breaches by ASPI of terms of the Single Concession Agreement, the existence of behavior that constitutes material breach of the contract is an issue solely for the examination of a judicial body.
  1. Revocation:
The concentration of political rhetoric around the option of revoking the Italian motorway concession leads us to carry out an extensive legal analysis of the circumstances which would allow for such a move on the part of the Ministry of Infrastructure and Transport (MIT or the “Grantor”) as well as the inevitable consequences of such a decision.
As noted above, the establishment by a judiciary body of a “material breach” is required for the government to be able to revoke the concession. However, since we refrain from taking an opinion on this question, our thesis is largely based on the inevitable consequences of a revocation of the concession by the government.
As the Single Concession Agreement states (as paraphrased in subsequent Atlantia bond prospectuses :
“In the event of early termination of the Autostrade Italia Concession, ANAS would step into the shoes of Autostrade Italia, assuming all its obligations and receiving all of its benefits under the Autostrade Italia Concession. In return, Autostrade Italia is entitled to receive a cash payment equal to the net present value of the expected cash flows until the end of the term of the concession, net of costs, liabilities, investments and projected taxes, less the outstanding net financial debt ANAS assumes from Autostrade Italia. In the event that the early termination is due to Autostrade Italia’s failure to meet its obligations, such as payment is reduced by
10% plus any damages.
It is important to note that this formula of indemnification applies for all cases of breach of the contract, no matter how reprehensible or unlawful the conduct of the concessionaire (i.e. ASPI). In fact, the very spirit of this concession agreement reflects the intention of preventing any unilateral changes to the agreement, as these clauses are the result of a dispute between ASPI and the Italian government regarding concession terms in 2006.
As is noted in Article 9 bis of the Single Concession Agreement (
“the Concessionaire will have the right, in compliance with the principle of reliance, to receive an
indemnification/compensation from the Grantor in any event of withdrawing, revocation and rescission of the
Therefore, it is blatantly clear that there simply aren’t any circumstances under which the government can revoke the concession without paying indemnification as set out in the formula above.
We take the worst possible assumptions to set a floor for the value of Atlantia’s 88% stake in ASPI, including:
  • Valuing ASPI’s current equity value according to the 12% stake sale back in April, 2017 to China’s Silk Road Fund and a consortium comprising Allianz Capital Partners, EDF Investment and DIF Infrastructure, which valued ASPI’s total equity value at €14.8Bn – a conservative assumption given the 200bps drop in 10-year Italian bond yields and generally positive outlook for infrastructure assets in the current low yield environment
  • Assuming that the early termination is in fact due to ASPI’s failure to meet its obligations and that the maximum penalty of 10% is applied
  • That this 10% penalty is calculated on the enterprise value of ASPI rather than its equity value, resulting in a higher absolute sum of penalties deducted from the indemnification sum
These assumptions lead us to the following calculation of the worst-case scenario payout to ASPI in case of a revocation:
  Total ASPI Atlantia Share
M 100%   88%
ASPI Equity Value 14,800   13,033
Net debt, 2020E 9,000   7,925
Enterprise Value 23,800   20,958
Penalty for concession breach 10%   10%
Monetary Value of Penalty -2,380   -2,096
ASPI Indemnification 21,420   18,862
Net debt, 2020E 9,000   7,925
Revocation Scenario Equity Value 12,420   10,937
Even the worst-case revocation scenario, therefore, would result in an equity value for Atlantia’s share of ASPI of ~€11Bn, which given a share count of ~820M amounts to €9.64 per share. Given a valuation of ~€22 for the rest of Atlantia’s assets, this worst-case revocation scenario results in a target price of ~€31.5 and an upside of ~51%.
While the equity valuation floor set by this exercise gives us immense comfort, our thesis relies on the near-impossibility of a revocation scenario to begin with. This is because the €21.4Bn total indemnification sum calculated above (the press refers to more than €20Bn in indemnification if the government revokes the concession) creates a situation whereby the government is simply unable to undertake this action without shooting itself in the foot.
Italy’s budget deficit and its non-compliance with European budget rules has been widely covered by the press. EU rules dictate that members of the EU limit deficit spending to 3% of GDP and overall debt to 60% of GDPWith Italy’s debt to GDP at ~136%, the government struggles with having to balance the need to stabilize/reduce the debt as a % of GDP and keep within EU budgetary rules, while also appeasing voters by fulfilling promises of increased spending. A lump-sum payment of ~€20Bn as indemnification for the revocation of the concession would constitute a substantial addition to Italy’s annual spending of ~€800Bn, making Italy’s choice of this option highly problematic and therefore unlikely.
- Milleproroghe Decree
It must be noted, however, that at the end of December 2019 the Italian cabinet drafted the “Milleproroghe” decree law which primarily aimed to:
  • Reduce the total indemnification sum due, from the initial formula calculating the net present value of the future cash flows net of costs, liabilities, investments and projected taxes, less outstanding net financial debt that the grantor may wish to assume, to a calculation of the value of investments completed plus ancillary charges net of depreciation
    • This is expected to bring the total indemnification sum down to ~€6-8Bn
  • Remove the right granted by Article 9 bis of the Single Concession Agreement to the concessionaire (ASPI) to receive compensation as calculated by the Single Concession Agreement in the event of “substantial changes to the legislative or regulatory framework” (
“the Concessionaire will have the right, in compliance with the principle of reliance, to receive an indemnification/compensation from the Grantor in any event of withdrawing, revocation and rescission of the Agreement, including because of the Grantor’s breach and/or early termination of the agreement, even if unwillingly caused by the Grantor’s actions, including of an extraordinary and not predictable nature, such as substantial changes to the legislative or regulatory framework.”
This decree law, therefore, amounts to nothing less than a unilateral amendment of the Single Concession Agreement. This is something against which the position of the legal system is crystal clear as such unilateramodification of the terms of the Single Concession Agreement is:
  • unconstitutional according to the Italian constitution and against the very basis of contract law (
“the recent decision of the Regional Administrative Court for Liguria to refer the provision of the Genoa Decree to the Italian Constitutional Court, validates the legal strength of ASPI’s concession contract in the context of the application of the rule of law.”

The Genoa decree aimed to exclude ASPI from the work required to demolished what remained of the Morandi Bridge a case now being considered by Italy’s Constitutional Court

  • against EU law, for which there is clear precedent stemming from this very relationship between ASPI and the Italian government
    • The Single Concession Agreement between ASPI and ANAS of 2007 was the result of a dispute between ASPI and the Italian government in 2006, when the Italian government attempted to unilaterally alter the terms of the contract by retroactively changing the compensation structure applied to investments
    • The EU Commissioner for the Internal Market began infringement proceedings against Italy following the publication of the decree law unilaterally modifying the existing concession at the time, and established that concession arrangements cannot be modified unilaterally
  • against international law, as seen from numerous precedents from the ICSID (the International Center for the Settlement of Investment Disputes) an international arbitration institute that’s part of the World Bank in Washington D.C.
    • An example is the Metalclad v Mexico case where the Mexican government unilaterally revoked a concession granted to Metalclad a Canadian company after deciding that its hazardous waste landfill was polluting, and where ICSID arbitrated in favour of the concessionaire – Metalclad
- ANAS as new (temporary) manager of motorway network
The other factor that must be assessed as part of a revocation scenario analysis, is the viability of ANAS even if temporarily becoming the manager of the 3,000km of motorway network currently operated by ASPI. A recent article in the Corrierre della Sera painted a damning picture of ANAS and its ability to cope with its existing maintenance obligations of the Italian motorway networks (
“inspections recorded up to December 2019 … on the main and critical bridges stopped at not even a third of the amount due … According to the latest update, the bridges to be monitored in 2019 were 4,991. Theses are mandatory inspections by law to be carried out by qualified engineers on the main viaducts, and critical. In the year just ended, 1,419 were made, 28%. In 2018 it was 56%. A de facto halved activity compared to the previous year. It means that today ANAS may not know the conditions in which 72% of its most delicate structures are found.”
Conclusion on Revocation Scenario: The legal position is very clear, therefore, that there is no route available to the Italian government for revoking the concession and not simultaneously incurring ~€20Bn in expenses as set out by the Single Concession Agreement, short of outright nationalization and expropriation of the motorway network, which would present the Italian government with a whole host of other issues such as the costs associated with running a 3,000km network and finding an alternative operator, as well as the consequences of an expropriation from an investor confidence point of view.
2. Partial revocation:
Since the collapse of the bridge there have been occasional comments by politicians and analysts of the possibility of only a partial revocation taking place. The Morandi Bridge is part of the A10 Autostrada (~158km of motorway), part of which (~46km) is operated by ASPI with the rest run by Autostrada dei Fiori.
While there is no mechanism for such a partial revocation within the Single Concession Agreement, this could be the form that a negotiated settlement takes. Given the negligible length of motorway that the A10 comprises for ASPI, this solution wouldn’t have a significant effect on our valuation of ASPI (which we deal with at greater length below), as this stretch of motorway amounts to as little as ~1% of the motorway network operated by ASPI.
3. No revocation:
Given the greatly impracticable nature of a revocation scenario from the government’s point of view, the outcome that we view as most likely is a negotiated settlement which doesn’t involve any form of revocation of the concession. It appears that revocation has been used as a threatening negotiating tactic in the negotiations that have been ongoing for some time through the press. Particularly over the past month there appear to be more and more comments coming out from both sides with concrete suggestions allowing us to glean what such an agreement could look like.
- Fine
A negotiated settlement is highly likely to include a certain upfront fine that would be in the range of ~€1.5-3BnOne specific proposal by Atlantia has amounted to €2.1Bn and included:
  • €600M for reconstruction of the Morandi Bridge (note that a €509M provision has already been taken in 2018 for this purpose)
  • €800M to compensate people harmed by the bridge collapse
  • €700M to the government as a penalty (instead of the 5% toll cut discussed below)
- Commitments to certain minimum maintenance capex levels
Atlantia has pre-empted government demands for increased maintenance capex by announcing a new 2020-23 business plan as part of which it will spend:
  • €7.5Bn over the 4 years of the business plan, including:
    • €1.6Bn on maintenance capex (a 40% increase from what would’ve previously been spent)
    • €5.4Bn on expansion investments (which amounted to €2.1Bn over the past 4 years)
- Toll cut
There has been a shift in mood in Italy when it comes to concession operators with a general consensus having emerged that concession agreements are heavily weighted in concessionaire’s favour, allowing them to generate excess profits at the expense of the public. We can’t shy away from the fact that a negotiated settlement is likely to include some form of a tariff cut.
So far the suggestion by certain members of the government of a 5% toll cut appears to be referring to a single- year one-off 5% cut to tariffs charged by ASPI, applied on top of the compensation formula outlined by the Single Concession Agreement, which would amount to a re-setting of profits so as to delay the increase in the revenue schedule of ASPI, so that it would take 2 years for ASPI’s toll revenues to recover to where they would’ve been in the year of the toll cut.
Outline of political views on ASPI concession:
Before moving on to an analysis of the financial implications of such a negotiated settlement, we try to further ascertain the likelihood of the government agreeing to choose this route to resolution of the conflict by analysing the views and true motivations of the decision-makers (the coalition government) and their true motivations.
Five Star Movement (M5S): M5S sprung to prominence in the years following the Great Financial Crisis as a populist movement mobilizing the opposition of the general populace to the establishment and the political elites. It works from the assumption that the Italian political system is rotten to its very core. It is this starting point that explains M5S’s categoric and combative approach to resolving the “conflict”. As M5S put it in a blog post in September, 2018 (
“There is a system of power that has defended Atlantia and the Benettons after the collapse of the Morandi bridge. An interweaving of relationships that passes through the board of directors and union boards and reflects a clear image of the so-called relationship capitalism, a metastasis that in the last 30 years has spread also to politics.
The system of power guarantees media and political support to those who have been enriched by managing a public service with the sole logic of profit, as shown by data on maintenance and the pitiful state of infrastructure. No support, however, for the 43 victims, their families and a whole city physically and psychologically affected. If it is no longer a surprise to know that PD and Forza Italia are on the side of the lobbies, it is interesting to know how that system of power that intersects with Atlantia stratified.”
This public battle over the motorway concessions, therefore, presents the perfect opportunity for M5S to showcase their continued commitment to dismantling the corrupt system of power despite having become part of a coalition government with partners who aren’t particularly ideologically aligned with its own belief systema particularly useful tool of garnering support at a time when its public support is plummeting.
Moreover, M5S’s anti-establishment ideology allows it to function beyond the realms of economic and financial realities which normally constrain political action. This is especially the case given that M5S is in a coalition government with the PD and can comfortably push its position on revocation as it can rely on the PD to bring the conversation back within the field of what’s financially viable, allowing M5S’s position to remain uncorrupted by such considerations and allowing for any ultimate blame for a decision short of revoking the concession to fall on the PD. Therefore, we believe that the M5S continues to pursue the rhetoric of revocation while knowing very well that the ultimate outcome will fall significantly short of this.
Democratic Party (PD): The PD the coalition partner of M5S in the current government a centre-left party seen as the moderating force to M5S in the current government - on the other hand, is much more measured in its approach to the resolution of the question of the concession. Outwardly, the PD has also occasionally taken the position of supporting a decision to revoke if the facts warrant such a move - a narrative led by Giuseppe Conte (current Prime Minister and member of PD) and Paula De Micheli (Minister of Infrastructure and Transportation and member of PD). Their support for a revocation decision, however, is qualified by their acceptance of the need to follow the legal procedures needed to make such a decision legitimate. As Conte himself put it (
“On Autostrade the government’s decision will come soon and will be based on a solid technical-legal basis.” 
This stance is explained by the fact that PD very much a party of the establishment, and while it will occasionally come out with rhetoric on the likelihood of revocation to appease the victims and public, it is ultimately highly unlikely to take the financially disastrous route of revocation given the above-discussed consequences and realities.
Italia Viva: Italia Viva is a faction led by ex-PM Matteo Renzi that broke off from the PD in September of 2019, and also forms part of the current coalition government. With a stance that reflects a strong centrist and moderate agenda, Italia Viva is the loudest anti-revocation voice within the coalition government and is ready to fight against any attempt to revoke the concession on the grounds of the impracticable nature of such a decision, the large cost that would result for the Italian government, the implications of the decision for international investors’ trust in Italy’s legal system and the lack of a legal basis in current calls for a revocation.
With the current coalition government having a majority of only 3 in the parliament, Italia Viva can easily deride government efforts to pass the Milleproroghe law through parliament by the 3rd of March, for example, making it an important voice to consider in the ongoing conversation.
Lega Nord: The Lega Nord is a far-right radical party (not currently part of the coalition government) which has voiced conflicting views on the motorway concession throughout the past 1.5 years most likely a reflection of the public pressure to take a pro-revocation stance. However, despite the fact that it is also far from the establishment and Italy’s political elite, Lega Nord always played the role of a strong counterweight to M5S’s strong prorevocation stance during the Conte I coalition government between M5S and Lega Nord.
There have also been recent reports that the Lega Nord would want to make the revocation conditional on an opinion by the European Commission which, given the above set-out legal analysis, is a position that is clearly more anti-revocation.
While Lega Nord’s presence in government would be a welcome addition from Atlantia’s viewpoint, they lost their  position in the coalition government after Salvini’s (the Deputy Prime Minister alongside Di Maio and Minister of the Interior under the Conte I coalition government between M5S and the Lega Nord) gamble to become PM by calling a vote of no confidence in the government backfired by resulting in a new coalition between M5S and PD.
- Recent developments: The 26th of January saw 2 regional elections take place in Italy’s regions of Emilia-Romagna and Calabria. Emilia-Romagna a traditionally left-leaning region - had the Democratic Party member, Stefano Bonaccini, as the incumbent, who managed to defend his seat despite the surging popularity of the Lega Nord. Alongside the reinforcement of the PD’s position of relative strength given the region’s history as a left-wing stronghold, these elections more importantly – significantly weakened M5S by showing the extent of the decline in their popularity. M5S gained a meagre 3.5% of the vote in the Emilia-Romagna region and merely 6.3% of the vote in Calabria.
Luigi Di Maio’s recent resignation as leader of the M5S was a premonition of what was to come in these elections, signaling the party’s greatly weakened position. This is a significant positive for the development of the situation around the ASPI concession, as without the M5S pushing so vocally for revocation, the PD has no incentive to pursue this course of action. In fact, the Deputy Minister for Infrastructure and Transport Giancarlo Cancellieri – commented on the 28th of January, 2020 that while M5S continued to support a revocation of the concession the most likely outcome was something more “serious”:
“I push for the revocation of the concessions, but belief matters little in politics, we must fight to give the citizens a serious answer. The government is still sitting at the table and no decision has yet been made.”
- ASPI (negotiated settlement scenario i.e. no revocation)
ASPI accounts for ~40% of the EBITDA of the group (after assumptions of increased maintenance capex from this year onwards), meaning that a determination of its value will have significant implications for the valuation of the group. Having quantified the downside by looking at what ASPI would be left with in a worst-case revocation scenario (€9.64 a share), we now look at what ASPI would be worth in the more likely scenario of a negotiated
We make the following assumptions in our model:
  • Toll prices increase 1.5% this and next year and continue to grow at an average annual rate of 1.77% for the rest of the life of the concession
  • Traffic grows at an average of 0.6% per annum for the rest of the life of the concession
  • SG&A as a % of costs increases to 44% over the next 5 years to allow for the increased maintenance capex schedule of €1.6Bn over the 2020-23 period (as Atlantia expenses maintenance capex through the P&L) after which it falls to an average of 40% for the remaining life of the concession
  • An expansion capex schedule of €6.5Bn, slightly in excess of what has been outlined by management, the majority of which will be earning a real post-tax IRR of 7.2% as outlined by the X factor component of the toll increases as part of compensation for the 2002 Investment Plan
  • An increase in net debt throughout the period 2020-25 to a maximum of ~€13Bn, and a gradual repayment of debt until the end of the life of the concession
  • A cost of equity of 7.3%
This gives us an equity value of ~€17.6Bn for ASPI and ~€15.5Bn for Atlantia’s 88.1% stake is ASPI or €15.61 per share.
Assessing the valuation impact of a negotiated settlement that includes a ~€1.5Bn fine and a one-off 5% tariff cut in 2021 (resulting in a 3.5% decline in tolls in 2021 after the 1.5% assumed growth dictated by the remuneration formula), we conclude that if we were to attribute the share price decline since the date of the Morandi bridge collapse to ASPI alone (a decline from a share price implied valuation of ~€11Bn to €9Bn) given that Atlantia’s share price has largely been driven by news about the potential revocation of the ASPI’s concession, we find that there is upside of ~30% from the removal of concession revocation risks and the achievement of a negotiated settlement, alone. This equates to a per share equity value of 15.61 for ASPI in a negotiated settlement scenario.
Settlement Value
DCF - Equity Valuation of ASPI: 17,647
Equity Value of ASPI (88% owned by ATL): 15,540
Total upfront fine: (1,500)
Reduction in value due to tariff cut:  (1,238)
Resulting Equity Value of ASPI (88% owned by ATL): 12,801
ASPI implied value by share price: 9,016
Remaining value to be captured: 3,785
% of ASPI value (owned by ATL): 29.6%
- Atlantia ex-ASPI
Atlantia’s depressed share price which is down ~13% since the collapse of the Morandi Bridge must be looked at in the context of its wider sector (infrastructure assets) which is up ~23% since August 2018.
In addition, there are many Atlantia-specific factors which have changed since the collapse of the Morandi Bridge on the 14th of August, 2018 which means that shares are highly likely to re-rate to levels significantly above what would be implied by a mere repricing of the ASPI asset. This is particularly the case given the context of a real scarcity of quality European publicly listed infrastructure assets in an environment where money is increasingly looking for safety and where bonds are failing to play their traditional role as such safe havens.
  • Atlantia completed its acquisition of a 50% stake in Abertis - an asset that provides it with
    • FCF complementarity given the run-off of its capex schedule as its concessions run out in ~9 years
      • with ASPI having the majority of its expansion capex planned for the next ~5years, Abertis is a highly complementary asset toown, as its FCF generation is heavily weighted to the next 5 years as capex comes down significantly in the lead-up to the expiry of its concessions, with distributions of on average €600M until 2026
    • greater geographic diversity with concessions in Spain, France and South America
  • Atlantia’s new CEO, Carlo Bertazzo, has also revealed intentions of making Atlantia more of a strategic holding company by inviting outside investors to take significant (the possibility of the sale of majority stakes wasn’t excluded) stakes in its subsidiaries, which would not only allow Atlantia to monetize its stakes and thereby set a price-tag on many of its subsidiaries which are undervalued by the market, but would also allow Atlantia to deleverage or increase its stake in attractive assets like Getlink
    • Atlantia announced its willingness to reduce its stake in ASPI to 50% (from its current 88%) which would allow more transparent pricing of the asset as well as reduced concentration in Italian motorways
    • Telepass was being looked at by a number of private equity firms in 2019 and there have been rumours as of January 2020 that the sale process for up to a 49% stake is being revived
      • Bids in 2019 valued the total business at more than €2Bn
    • ADR (Aeroporti di Roma) has also been subject of rumours of a potential sale of a 49% stake
  • Italian 10-year government bond yields have fallen ~200bps from ~3% to ~1% significantly lifting the value of Atlantia’s collection of assets
  • This increased diversification of its sources of cash flow means that Atlantia will be able to fund a significantly higher dividend in the near term
    • While over the past 17 years Atlantia’s dividend yield has averaged 4.3%, it is currently trading on a 2020E dividend yield of as high as 6% which rises to 7.5% for 2021E and 15% for 2026E, a reflection of the fact that the fundamental and cash generation story has largely been overshadowed by public discussions about the ASPI motorway concession
    • This is in stark contrast to 2020E dividend yields for toll road operators such as PINFRA, Transurban, Bangkok Expressway of 3.5%, 4.1%, and 1.3% respectively, for concessionaires such as Eiffage and Vinci of 2.8% and 3.2% respectively, and infrastructure companies such as Ferrovial of 2.8%
  • These significant distributions to shareholders, however, still leave Atlantia with the ability to significantly de-lever from the 2019E level of 5.1x EBITDA to 4.2x by 2022E and 3.5x by 2023E
We value Atlantia ex-ASPI at ~€22 per share with
  • ~37% of this value accounted for by Atlantia’s stakes in the airports including Aeroporti di Roma (ADR), Aeroports de la Cote d’Azur and Bologna, with ADR accounting for the majority of this value
  • ~27% of this value being accounted for by Atlantia’s 50% stake in Abertis
  • ~24% of this value being accounted by the combination of Atlantia’s 15.5% stake in Getlink, 18% in Hochtief and the fully-owned Telepass
  • With the rest of the value being accounted for by Atlantia’s Chilean and Brazilian assets as well as its corporate overhead and minorities
- Valuing Atlantia as a whole
Our DCF-based valuation analysis above results in a price target of ~€37.60 (15.61 for ASPI + 22 Atlantia ex-ASPI = 37.61) and a long-term downside case of ~€31.60 and a nearer-term downside case of ~20 in the case of further uncertainty regarding ASPI and more news-flow about its revocation.
Alternatively, we consider Atlantia’s valuation on a FCF yield basis (after maintenance capex but before expansionary capex). Atlantia is currently trading on 2020E, 2021E and 2022E FCF yields of 20.7%, 19.8% and 23.5% respectively. This is in stark contrast to the FCF yields of some of its peers such as
  • PINFRA which is trading on 2020E and 2021E FCF yields of 8.5% and 8.8%
  • Grupo CCR which is trading on 2020E and 2021E FCF yields of 10.4% and 7.5%
  • Vinci which is trading on 2020E and 2021E FCF yields of 9.1% and 9.7%
  • Eiffage which is trading on 2020E and 2021E FCF yields of 10.4% and 11.4%
 Legal Disclaimer: This research report expresses my research opinions, which I have based upon certain facts, all of which are based upon publicly available information. Any investment involves substantial risks, including complete loss of capital. Any forecasts or estimates are for illustrative purposes only and should not be taken as limitations of the maximum possible loss or gain. Any information contained in this report may include forward-looking statements, expectations, and projections. You should assume these types of statements, expectations, and projections may turn out to be incorrect. This is not investment advice nor should it be construed as such. You should do your own research and due diligence before making any investment decision with respect to securities covered herein. The author has a position in this stock and may trade this stock.


I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise hold a material investment in the issuer's securities.


  • Imminent resolution of conflict between Atlantia and the Italian government over the ASPI motorway network concession (most likely through a negotiated settlement)
    • strong performance by Democratic Party in regional elections on 26th of January, 2020 and very weak performance by the Five Star Movement creates a better balance of power within the coalition government, with a strengthened Democratic Party and considerably weakened Five Star Movement, for the adoption of a more constructive approach to the resolution of the issue
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