Intermoney | Ferrovial (FER), through its listed subsidiary Budimex, has been awarded the construction of a high-speed railway line in Latvia, as part of the Rail Baltica project. The contract, which involves an investment of €3.7 billion, is a consortium between Budimex (30%) and two other companies, France’s Eiffage and Italy’s Rizzani. It is Latvia’s largest international contract for the construction of the high-speed main line included in the high-speed rail project that will link the three Baltic countries (Lithuania, Estonia and Latvia) through 870 kilometres of railway tracks, initially from 2027. The construction works in Latvia are scheduled to take 96 months and the first works are expected to start this year in the surroundings of Riga. The first phase of construction will cost €230 million.
Assessment: Good news for Ferrovial, which, however, derives most of its EBITDA from its toll road business. The construction business has been affected for years by the poor margins of the Ferrovial Construction unit, due to contracts in the United States. Budimex, consolidated globally within Ferrovial, has performed much better, increasing its EBITDA by 13% to €73m in the first half of this year. The backlog in this unit, some €3,100m as of June, will increase by approximately 30% due to the weight of this new contract. The Group’s total construction backlog was €14.9 billion in H1 23.