Aeroports de Paris: ADP‘s updated ERA proposal

Research evidence excerpt

Aeroports de Paris: ADP‘s updated ERA proposal

T will issue the final and binding opinion on ERA III. We see two 12/26E 5.53 5.79

potential areas of downside risk to the 5.8% and note that for a 10bps change in 12/27E 7.34 7.13

WACC, the impact on the tariff is 0.7%. For example, all else equal, at a 5.7% WACC 12/28E 8.36 8.13

the average tariff would move to CPI + 1.4% (vs. ADP proposal CPI + 2.1%).

Cristian Nedelcu, CFA

Analyst

Firstly, one areas of risk comes from ART's views on the adjustments that ADP made on cristian.nedelcu@ubs.com

the risk-sharing levers. ART conditioned a WACC at the higher end of the range to +44-20-7568 4375

ADP taking more risks. ADP addressed some of the concerns raised by ART in its April

Amal Patel

opinion, but it remains difficult to assess if the changes will be sufficient. On the traffic

risk, ADP has increased the traffic forecast (seen as cautious by ART in the past), it has amal.patel@ubs.com

narrowed the traffic bands as per ART's request, and proposed to share 75% of the risks +44-20-7568 3973

within the buffer band vs. no adjustment in ADP's first proposal and full sharing in the

ART recommendation. ADP has also increased the service quality penalties and

increased the risk assumed under the investment capex program. It is unclear to us if

ART will find all of this sufficient to justify the WACC of 5.8%.

The second area of risk is from marking to market the WACC. ART will mark to market

the WACC based on September parameters. Marking to market the upper limit of

ART's WACC range, ADP calculates a 5.9% WACC vs. ART's upper limit of 5.6%, with

the increase driven by 10 bps in Rfr, 10bps in beta and 10bps in Market risk premium. In

the April ART decision, the regulator acknowledged a 15bps increase in the WACC to