Good day, ladies and gentlemen, and welcome to the ASUR Third Quarter 2017 Results Conference Call. My name is Shannon and I will be your operator. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of today's conference. [Operator Instructions] As a reminder, today's call is being recorded. For opening remarks and introductions, I'd like to turn this call over to Mr. Adolfo Castro, Chief Executive Officer. Please go ahead, sir.

Thank you, Shannon, and good morning, everybody. Thank you for joining us on our conference call to discuss our third quarter results. Allow me to remind you that certain statements made during the course of our discussion today may constitute forward-looking statements, which are based on current management expectations and beliefs, and are subject to a number of risks and uncertainties that could cause actual results to differ materially, including those factors that may be beyond our company's control. For an explanation of these risks, please refer to our filings with the Securities and Exchange Commission and the Mexican Stock Exchange. As announced yesterday, we concluded the acquisition of a controlling stake of approximately 92.42% in Airplan, for a purchase price of approximately MXN3.7 billion. The acquisition was financed through a MXN4 billion syndicated loan facility contracted with BBVA Bancomer, Grupo Financiero BBVA Bancomer. In 2016, 6 airports operated by Airplan in Colombia, including the international airport in Medellín, the second biggest in Colombia, have a total of 10.4 million passengers. These represented of 37% of the 28.4 million that traveled through our Mexican airports last year. We expect to consolidate results from these operations into ASUR's financial statements as of October 19. The acquisition process of Oriente, the other airport group in Colombia, we seek to acquire, is delayed and we have not yet received all necessary regulatory approvals required to close this transaction. Therefore, we have agreed with the sellers to make commercially reasonable efforts to obtain the pending approvals and if successful to negotiate in good faith, the purchase price. Remember, our original agreement contemplated a total purchase price for Airplan and Oriente of approximately MXN4.9 billion or $262 million, subject to a series of price adjustments. You can find more information of these transactions in the…

Thank you, Mr. Castro. [Operator Instructions] First question comes from Leandro Fontanesi with Bradesco.

Hi, thanks, Adolfo, for the call. On my side, if you could provide some clarification on Airplan financials. So the first question that I have is regarding the cost. So there is a big situation with - if you compare the cost, both in terms of cost of services and SG&A in 2016 compared to the first half of 2017. So if you could provide some color and if there is any nonrecurring cost that we should consider in our analysis? And the second point, in the - if you consider the revenue from construction, the cost from construction you had close to MXN520 million of profit related to construction, so as you consolidate Airplan, starting October and going forward, is it fair to assume that your revenue for construction and cost will be matched as you do for ASUR and you no longer have these profit on construction? Thank you.

Leandro, I said, during the initial remarks I cannot comment on resource previous to our acquisition of that. Yes, you're absolutely right, the numbers we presented in the pro forma have an MXN800 million expense in administration during the second half of the year that is making the difference. Also in the case of construction profit, you're absolutely right, there is some construction profit that is not normal in the case of ASUR, where we basically present the same revenue - the same figure for costs as it is for revenue. In terms of construction in the case of Airplan, it should be a non-recurrent situation because most of the construction has to be done during this year and the year after. That's what I can share with you.

Okay. Thank you. And if I may, one more question is, so you plan to open the Terminal 4 for Cancun in the fourth quarter, should we expect, maybe in fact in terms of margins as you ramp up this new terminal in the following quarters?

That's a good question, Leandro. As I have said before, our cost to operate Terminal 4 is also presented in our third quarter results because as I said in the initial remarks, we started hiring people to be trained and to be ready for the opening of Terminal 4. I would say, Terminal 4 opening should occur before this month is over, so we're expecting this to be open the last day of this month of October. Going forward, of course, our cost will increase as a result of these opening. Just to give you an idea the size of this building. This building is able to operate between 8 million to 9 million passengers which is what Montreal itself is operating; other way to see this, this will increase the capacity of Cancun Airport by almost 40%, so this is a major building. It's another 70,000 square meters, plus 120 in terms of the apron, plus another 150 in terms of the runway, the connector between the two runways. So, yes, you will see an increase in our cost as from the third quarter because of these new build that should be in operation, the last day of October.

Perfect, thank you very much, Adolfo.

Thank you.

Next question comes from Stephen Trent with Citi.

Good morning, Adolfo. And thanks very much for taking my questions. Just a few quick ones for me. I think you mentioned San Juan is up to 70 daily flights if I heard you correctly. And any color as to what is normal peak-hour air traffic movements at the airport?

Hi, good morning, Steve. As I said before, more or less today we are operating the same as what we were operating last year. The difference we have today is the load factor in arrivals that is not the same. It's lower than how it was a year ago.

Okay, got it, very helpful. And in terms of the Colombian initiative here, can you refresh my memory as to the regulation there? Is it a periodic mandatory regulatory review as it is in Mexico? And if so, any color on what the calendar is for that?

Yeah, good question. No, we have complete different regulatory regime there. There is no review of the Master Development Plan every five years as we have in Mexico. The way that it is there is that we have a commitment today of certain works that we have to do. Those numbers are being presented in the document we file with the Securities and Exchange Commission and the Mexican Stock Exchange. There is no review. Nevertheless, this can be reviewed by the parties. I would say that today this company has around 20 amendments of its original document, so they have reviewed these 20 times. But it has to be done in agreement between the parties. So the document, it is today states a certain words that have to be done by the company. In terms of rates, the companies, the one that fixes the rates for the regulated activities, so those [economical activities] [ph]. So we do not have anything to say there. And the other major difference is the terminal agreement. As I said, during the first press release published in April, they move - the terminal agreement is moving. It's moving in accordance of the moment when the company recuperates the regulated assets, and that is one - the government needs the one that is in charge of the regulated rates. So if I don't remember wrong, the period we mentioned for this specific company was, as from the year 2033 up to the year 2048. So it has a minimum and it has a maximum, and between this period of minimum and maximum, the concession will be over once. The company recuperates fully with regulated assets.

Very helpful, Adolfo. And in that, is there any - I guess, one, is there any chance to renew once it expires? And two, on Airplan just a follow-up from the - with the gentlemen from Bradesco's question. Any view as to why Airplan's equity capital base is so low, or if there something going on with team's earnings? And I'll leave it there.

Okay. In terms of the possibility of renewing the case of the expiration, and the contract doesn't say anything about it. I believe, we don't have the same chance as it is in writing in the case of Mexico. So that is, what I can say for the moment. In terms of the equity, yes, you're absolutely, right. This company presents at completely different level of debt in comparison with what we have in Mexico. Comment in terms of the debt they have that. I can say that, what I can see is being negotiated in good terms from a financial perspective.

Okay. I'll let someone else ask a question. Thanks for the color, Adolfo.

Thank you.

Next question comes from Natalia Zamora with GBM.

Hi, thank you for taking my question. My question is, could you provide an estimate of - and how much where maintenance work regarding the damage to the airport in Puerto Rico will amount you? Thank you.

Hi, good morning. Well, we do not have yet an official number of the real damage that we suffered in Puerto Rico, because of the Hurricane Maria. The best guess that I have today to share with you is close to $60 million. Of course, as I said during the initial remarks, we are insured and the maximum deductible for a catastrophic event is $10 million.

Okay, perfect. Thank you. Very helpful.

Next question comes from Marco Montanez with Vector.

Hi, Adolfo. And thank you for the call. Two questions, if I may. The first one, could you share with us to implied transaction multiple of the acquisition of Airplan? And the second, how to get any estimate for the committed investments for Airplan in the next year? Thanks a lot.

Hi, good morning. Well, you have - in terms of your second question, you have the numbers in the document we presented. In terms of the first one, it's hard to say, an exact number, because many people have different views on this, but something between 5 to 6 could be the number.

Okay. Thank you, Adolfo.

You're welcome.

Next question comes from Pedro Pascual [ph] with JP Morgan.

Adolfo, good morning. Thanks for taking my question. I guess, the answer is probably, no. But could we see as we're engaging more expansion or M&A activities? We still lack to the bidding documents, but the Brazilian government already announced new airport destinations [ph] maybe on a standalone basis or with a partner. Could you see, you guys are showing some interest, I think that's for the moment? Thanks.

Hi, good morning. We are seeing, we are analyzing those opportunities. This will have to be shared with my board during our next session, particularly the board have not been very happy with investments there after what we saw during the first round of the privatization process. I don't know what the outcome is going to be, but I'm not too optimistic about it.

Okay. That's very helpful. Thank you.

You're welcome.

Next question comes from Gilberto Garcia with Barclays.

Hi, good morning. Thank you for the call. You had a pretty significant decrease in accounts receivable. Are you restricting credit to any of your airline customers? Thank you.

Hi, good morning. The reduction you are seeing is because of the seasonality, we do not have changed anything in relation with our policy - our credit policy to customers. So everything, I would say, is normal. In terms of that, my final comment will be that all the airlines are paying us on time. So we do not have any trouble there.

Thank you very much.

You're welcome.

I'll take our next question from Luis Prieto with Nau Securities.

Adolfo, hi. Luis Prieto. I have two very short clarification questions. The first one is regarding the damage reconstruction work you mentioned in Puerto Rico. You said between $50 million - $60 million, and regarding the $10 million I wanted to clarify whether that's the maximum coverage of your policy, or that is the excess above which the policy covers your expenses? And my second question is you talked about submission of your proposal for the new entity by the end of the year. When would the government come back to you and what sort of steps and when would we have a final decision? Thank you.

Hi, good morning. Yes, to be clear on the $60 million and the $10 million, $60 million is the best guess in terms of a number or the reconstruction processes. That is for the moment, our best guess of how much we will have to spend. To be construct the damages at the infrastructure of San Juan, Puerto Rico because of Hurricane Maria. In terms of the $10 million that is the maximum deductible in the case of catastrophic event. I believe that we will not reach the $10 million, but of course I cannot share with you an exact or precise or accurate number of how much this will cost to the company. But that of course is the maximum amount of the company will have to pay in terms of a catastrophic event. In terms of the MDP yes, we should deliver our proposal before the year is over, and the government have one year to come back with those in terms of the approval for CapEx and the maximum rate.

And when they come back to you, that's the final decision. There is no back and forth, and then between with public documents. It's your submission and they come back within a year or too?

Well, of course it's not just one meeting to decide all of these…

But on the public side, that we will know…

No, well, basically have these works is - it's a very close cooperative process, because of first thing that they have to review is the passenger traffic projection. Then they will have to go and visit every single one of the airports we have to see the inventory of the airport, but in terms of the way the assets - how the assets are today. Then they review every single project we present to them normally an MDP for the nine airports should represent around 300 projects. And finally, they make the calculations in accordance with approval of the CapEx and the passenger traffic and the discount rate to fix the proposal of the maximum rate.

Excellent. Thank you.

Thank you.

Next question comes from Ricardo Alvez with Morgan Stanley.

Hi, Adolfo. Thanks for the question. Actually very questions, one is actually a clarification. You mentioned the five to six times multiple. It was not clear to me what kind of multiple you're talking about, if you could clarify that please. And the other one, again, related to the Terminal 4, if you could talk a little bit more about this transition period. I mean, you're going to open the terminal now in - by the end of October. So maybe if you could give a little bit of color, when you're planning to close the Terminal 1? How can we see the mix of traffic between international and domestic in the new terminal, any kind of color on how you're going to be operating, how you're going to do the transition? That would be helpful. Thank you.

Well, in terms of the multiple, it's EBITDA terms. In terms of Terminal 4, yes, we really expect to open that the October 31 this year. Of course, we will not expect to open - well, not to open, to expect to move or transfer all the airlines from Terminal 2 to Terminal 4 the same day. So the outcome is to be able to move 14 airlines. We will be moving them one by one I would say with a ramp up during three weeks more or less. Then what we expect is to normalize the operation in Terminal 4 and probably during the first quarter next year we will move the airlines that are operating in Terminal 1 today to Terminal 2.

Okay. That's clear. Thank you.

You're welcome.

[Operator Instructions] We next move to Josh Milberg with Morgan Stanley.

Hey, Adolfo. Thanks for the question. You touched on this already, but I just wanted to get a little more clarity on the duration of Airplan. In the document that you guys released last night, I think it indicates that this will depend on the sum of the revenues generated by the relevant airports. And I was just hoping if you could give us an idea of what the revenue thresholds are or what kind of growth you need to come out at the low-end of that range, 2032?

Okay, Josh, hi, good morning. Hey, what I said is the term is variable in terms of when the company recuperates the regulated asset. The company recuperates the regulated asset with the regulated returns, sorry, the regulated revenues. Regulated revenues are basically airport activity, okay. So it's hard to say when these may be recovered, because you have a lot of variables into the equation. As you are mentioning one of them, of course, has to do with the growth in passenger traffic. The other one could be the U.S. dollar against the Colombian peso, because of the international traffic. And of course, most of the traffic we have in those airports, it's domestic, but a piece of that is - it has to do with international traffic where it's related to U.S. dollars. And finally, of course, it has to do with inflation there. For the moment, what you can use is the lowest part of the thing, which could be 2032.

Okay. Thanks for that. It's very helpful.

And of course, this will be adjusted in the case, there is a review on the document, okay. As I said before, this company has been able to review 20 times the document and the period has been extended because of this situation in the past.

But you think it makes sense to be conservative to assume 2032?

That's exactly what I'm saying with the correct conditions.

Got it, thanks so much.

You're welcome.

[Operator Instructions] And, sir, there appears no further questions. I'd like to turn it back to you for closing remarks.

Thank you, Shannon. And thank you, everybody, for joining us today on this conference call for the third quarter results. Have a great weekend. Goodbye.

Thank you, ladies and gentlemen. That does conclude our conference call for today. Have a great weekend. You may now disconnect.