articles Ratings /ratings/en/research/articles/200211-esg-industry-report-card-transportation-infrastructure-10991098 content
Log in to other products

Login to Market Intelligence Platform


Looking for more?

Request a Demo

You're one step closer to unlocking our suite of comprehensive and robust tools.

Fill out the form so we can connect you to the right person.

If your company has a current subscription with S&P Global Market Intelligence, you can register as a new user for access to the platform(s) covered by your license at Market Intelligence platform or S&P Capital IQ.

  • First Name*
  • Last Name*
  • Business Email *
  • Phone *
  • Company Name *
  • City *
  • We generated a verification code for you

  • Enter verification Code here*

* Required

Thank you for your interest in S&P Global Market Intelligence! We noticed you've identified yourself as a student. Through existing partnerships with academic institutions around the globe, it's likely you already have access to our resources. Please contact your professors, library, or administrative staff to receive your student login.

At this time we are unable to offer free trials or product demonstrations directly to students. If you discover that our solutions are not available to you, we encourage you to advocate at your university for a best-in-class learning experience that will help you long after you've completed your degree. We apologize for any inconvenience this may cause.

In This List

ESG Industry Report Card: Transportation Infrastructure


How Diverging Energy Policies In The U.S. Presidential Election May Affect Credit Quality


European Rail Operators Are On A Slow Train To Recovery


Recent Cases In Ohio And Illinois Underscore The Importance Of Effective Governance For North American Regulated Utilities


Norwegian Electricity Distribution And Transmission Regulatory Framework: Supportive

ESG Industry Report Card: Transportation Infrastructure

Analytic Approach

Environmental, social, and governance (ESG) risks and opportunities can affect an entity's capacity to meet its financial commitments in many ways. S&P Global Ratings incorporates these considerations into its ratings methodology and analytics, which enables analysts to factor in short-, medium-, and long-term impacts--both qualitative and quantitative--to multiple steps of their credit analysis. Strong ESG credentials do not necessarily indicate strong creditworthiness (see "The Role Of Environmental, Social, And Governance Credit Factors In Our Ratings Analysis," published Sept. 12, 2019).

Our ESG report cards qualitatively explore the relative exposures (average, below, above average) of sectors to environmental and social credit factors over the short, medium, and long term. For environmental exposures, chart 1 shows a more granular listing of key sectors and (in some cases) subsectors reflecting the qualitative views of our analytical rating teams. This sector comparison is not an input to our credit ratings and not a component of our credit rating methodologies; it is based on our current qualitative, forward-looking opinion of credit risks across sectors.

In addition to our sector views, this report card lists ESG insights for individual companies, including how and why ESG factors may have had a more positive or negative influence on an entity's credit quality compared to sector peers or the broader sector. These comparative views of environmental and social risks are qualitative and established by analysts during industry portfolio discussions, with the goal of providing more insight and transparency.

Environmental risks we considered include greenhouse gas (GHG) emissions, including carbon dioxide, pollution, and waste, water and land usage, and natural conditions (physical climate, including extreme and changing weather conditions, though these tend to be more geographic/entity-specific than a sector feature). Social risks include human capital management, safety management, community impacts, and consumer-related impacts from customer service and changing behavior to the extent influenced by environmental, health, human rights, and privacy (but excluding changes resulting from broader demographic, technological, or other disruptive industry trends). Our views on governance are directly embedded in our rating methodology as part of the management and governance assessment score.

Chart 1


The list of entities covered in this report is not exhaustive. We may provide additional ESG insights in individual company analyses throughout the year as they change or develop, with companies expected to increasingly focus on ESG in their communication and strategy updates.


Environmental exposure

Environmental risks for airports are average, in our view, and mainly indirect because airports themselves produce about 2% of total emissions in the aviation sector. As homes to airlines, airports also need to consider air quality (e.g. sulfur and nitrogen oxides, and particulate matters) in the operational and surrounding area. An airport's environmental exposure also extends to the substantial road traffic they attract. Some airports are more vulnerable than others to rising sea levels, flooding, and hurricanes arising from climate change and particularly bearing in mind the long-term nature (50 years or more) of airport operations. Extreme weather events, insurable or not, can disrupt airport operations, typically for shorter time frames. However, the severity of major weather events is increasing. Land use (environmental permits and studies) can be a key risk factor for expansions, extensions, and new developments.

Social exposure

Social risks for airports are, in our view, somewhat above average compared to other industries. Airports usually operate under concession because this business is generally monopolistic and highly related to public mobility, as well as economic development. We believe the most important social risk stems from communities' increasing opposition to congestion, noise, and air quality, especially since airports are often close to populous urban areas and facilitate mobility. These issues have been gaining the attention of the media, businesses, investors, governments, and regulators, and approvals for developments requiring new land can be hard to achieve in some jurisdictions where the government responds to vocal communities. Airports cannot focus solely on their airline customers, but need to skillfully manage a range of stakeholders, for instance by involving governments and communities in planning, as well as in balancing economic versus environmental and lifestyle benefits (such as penalizing tariffs for polluting aircraft and limiting flight slots during nights and weekends). Proactive policies, in our view, can lessen community and regulatory discord. A more remote social risk involving communities includes geopolitical risks and health concerns (such as the recent outbreak of the coronavirus, which started in China, or the SARS pandemic in 2003) can dramatically reduce air travel. In addition, social demonstrations are a relevant risk factor, because airports are seen as focal points given their strategic location and high-profile role.

A key medium- to long-term risk factor relates to changing customer behavior as travelers become increasingly environmentally conscious and because of the difficulty decarbonizing air traffic. These risks are partly offset by strong industry fundamentals, with air traffic growing 4% per year (fueled by mobility trends and the lower cost of flying) and forecast to double by 2037. That said, social pressures can be disruptive, as seen in mature markets (for example "flygskam," or flight-shaming, in Sweden). A key area to monitor is whether governments increase environmental or fuel taxes, in turn raising flight prices. This is particularly important for airlines, but also for airports building major capacity extensions to cope with projected long-term growth.

Finally, safety management is also a risk since passenger and cargo security is essential to performance, including reducing the risk of terrorist attacks. Airports typically have prescriptive policies and procedures governing employees and contractors, and are increasingly engaged in customer and user education.

Table 1

Entity/Rating/Comments Analyst
Aéroports de Paris (ADP)(A+/Stable/--)  
We see environmental and social risks for ADP as comparable to the industry. On social factors, we believe ADP is less exposed to additional noise restrictions or opposition in our view, compared with other European airports. This is evidenced by a long operational track record and that its main airport, Charles de Gaulle, is relatively far (about 25 kms) from the city center. Charles de Gaulle airport has expanded capacities significantly over the past 10 years to accommodate traffic growth to 76 million in 2019 from 58 million in 2010, and could accommodate a fourth terminal project (€7 billion-€9 billion envisaged by 2037, adding another 35 million-40 million passenger capacity). By contrast, Orly airport-- which is closer to the city center--has dealt with long-established air traffic movement restrictions (capped at 250,000), which could limit future air traffic movements. In addition, we see ADP operating and financial performance more exposed to the effects of the social unrests compared to other European airport peers. Last year's social movements in France resulted in a traffic decline of 0.3%. Environmental risks are lesser in our view, as Paris Aeroports are responsible directly for only 4% of the total CO2 emissions of its platform. The group has made significant progress in reducing CO2 emissions by 70% per passenger compared with 2009 levels. From 2016-2020, ADP had about €44 million investment plans in sustainable development measures. Amongst other initiatives, ADP increased its car fleet to add electric and hybrid vehicles. Juliana Gallo
Brisbane Airport Corp. Pty Ltd. (BBB/Stable/--)  
Brisbane Airport Corp.'s (BAC) exposure to environmental and social factors is broadly in line with its Australian and global industry peers. Similar to other airports, BAC must manage noise and disturbances to the wider community and stakeholders. Regarding environmental issues, BAC is looking to reduce its carbon footprint like many peers. The airport has undertaken several initiatives to improve its sustainability, including installing solar panels and recently acquiring a fleet of electric shuttle buses. The airport has also set aside 285 hectares of land for biodiversity zones to help manage its impact on the local environment. Alexander Dunn
Gatwick Funding Ltd.(BBB+/Negative/-- (class A))  
We believe environmental and social risks influence Gatwick's credit quality comparable to other airports. Gatwick has strong environmental credentials, as it reduced its carbon emissions by 50% compared to 1990 despite the number of passengers tripling. As one of few European airports Gatwick has the highest carbon accreditation, it has achieved carbon neutrality by purchasing 100% of renewable electricity and offsetting remaining emissions with a wind farm in Turkey. On social factors, we see Gatwick as having less social resistance against expansion (so far as it relates to the conversion of an existing standby runway), thanks to its location at the outskirts of London, extensive public draft masterplan consultation and ongoing environmental surveys. Lastly, given 57% of Gatwick employees come from the local area, this would be seen by the local communicates as an economic driver for the local economy, rather than a hindrance. As most airports, Gatwick is however exposed to the risk of terrorism, labour actions and, most recently, drones. In December 2018 a drone attack halted 1,000 flights at Gatwick, the impact of which was limited to three days of interruption and £1.4 million in related costs. Beata Sperling-Tyler
Heathrow Funding Ltd.(A-/Negative/-- (class A); BBB/Negative/-- (class B))  
We believe Heathrow has somewhat higher exposure than peers to social risks, given its location in a densely populated urban area and the planned construction of a third runway, which will add 40 million (about 50%) passenger capacity by 2030. Although Parliament approved the expansion project in 2018, it does not have support across all political parties. Local communities oppose the prospect of increased noise pollution and gas emissions by additional flights against the potential positive impact in terms of boosting the U.K. economy thanks to increased global connectivity, trade, and job creation. Political or community opposition could also increase in the case of cost overruns given the project's complexity and size (£14 billion in real 2014 prices). Environmental risks are lesser. Heathrow has proactive policies encouraging airlines to use cleaner and quieter aircraft by applying differentiating aeronautical charges. The airport is investing in sustainable innovations, including encouraging the production of sustainable alternative flues. The airport is promoting public transport, with a goal for 50% of airport passenger journeys to be made by public transport. Beata Sperling-Tyler
Royal Schiphol Group N.V.(A+/Stable/--)  
We believe Dutch airport hub Amsterdam Airport Schiphol is comparatively more exposed to social risks than European rated peers with regards to noise pollution. This is because Schiphol is located in a highly dense area, with growth constrained by noise regulations that limit the number of air traffic management (ATM) to 500,000 (already reached in 2018). This limitation, along with temporary a terminal capacity shortage, is pressuring service levels and causing extra operational costs. That said, we understand the government decided that a moderate and controlled growth of Schiphol's ATM is possible starting in 2020 under the condition that the number of severely hindered local residents decreases. However, Schiphol and the relevant government authorities have not agreed on long-term solution for this yet. Due to the ceiling of ATMs, airlines are deploying larger aircraft as alternatives to smaller models to accommodate growing demand. In our review, Royal Schiphol Group's exposure to environmental factors is broadly in line with global peers. The group has an ambitious target of becoming the most sustainable airport group in the world, targeting zero emissions and waste free by 2030. Management's strategy also involves investing in energy efficiency and clean transportation infrastructure (such as for electric vehicles). Although we do not expect these investments to materially affect the group's cash flow metrics, we see it as part of management's focus on ESG and reputation as a responsible operator. Stefania Belisario
Southern Cross Airports Corp. Holdings Ltd.(BBB+/Stable/--)  
We see Sydney Airport's ESG-related exposures as similar to its peers and to the broader industry. Similar to Australian peers (Melbourne Airport, Brisbane Airport, and Perth Airport), Sydney Airport is not explicitly regulated and sets its tariffs based on commercial agreements with airlines that seek to operate there (economic regulation). Earlier in 2019, the Productivity Commission published its draft report on the economic regulation of airports stating that regulation benefits the community and remains appropriate. This is a supportive social factor, underpinning our view of the stability and predictability of the aeronautical revenues at Sydney Airport. Another social factor relates to noise restrictions because Sydney Airport is near the city's central business district and in the middle of residential areas. Despite the restrictions, the airport has performed well operationally and we don't expect any change due to challenges with community engagement. The airport's location is, however, a constraint for any major expansion or developments as Sydney continues to grow, which is not a risk for the airport for at least the next decade, notwithstanding the development of a second airport in western Sydney. Regarding environmental efforts, Sydney Airport is also looking to reduce its carbon footprint, aiming to be carbon neutral by 2025. One way to achieve this is via a power purchase agreement, contracting up to 75% of its electricity requirement from renewable sources. Meet N. Vora
Ratings as of Feb. 11, 2020.


Environmental exposure

Environmental risks for ports and waterways are average, albeit among the highest for transportation infrastructure assets, stemming from vulnerability to rising sea levels, flooding, and hurricanes arising from climate change and particularly bearing in mind the long-term nature (50 years or more) of port operations. Similar to airports, extreme weather events, insurable or not, can disrupt port operations, typically for shorter time frames. However, the severity and frequency of major weather events seem to be increasing.

There is also indirect exposure to changes in bulk cargo, notably related to coal, and longer term to oil-related product imports/exports. Even though we believe that most ports could change the type of products they handle, there is a related overhaul cost, and a timeframe to execute to guarantee future operations.

Social exposure

Ports and waterways have comparatively less social risks than other transport infrastructure assets because they focus on activities in bulk cargo and containers, rather than public mobility services. They usually obtain a license to operate to provide a service to the local economy by supplying products or generating income from exports.

Table 2

Issuer/Rating/Comments Analyst
Adani Ports And Special Economic Zone Ltd.(BBB-/Stable)  
We view APSEZ's management and governance as fair, reflecting the need for stronger governance discipline for the company. Any significant increase in related-party transactions remains a key credit risk for APSEZ, even if financial ratios stay above our downgrade trigger. APSEZ has undertaken some intergroup transactions in the past, (loans and advances) outside the normal course of business. We believe that APSEZ's management is committed to preventing the recurrence of its high exposure to related-party loans and transactions. APSEZ is part of the larger Adani family group, with the promoters owning about 63% of APSEZ (mostly in a personal capacity or through the family trust), with the remaining stake held by the public. Despite Adani Group's majority ownership, we view APSEZ's credit quality to be independent of the wider group. The company is implementing public policies to govern intergroup transactions at an arm's length basis, which if effective could also address some corporate governance concerns. APSEZ's exposure to environmental and social risks is in line with other peers operating origin and destination ports. APSEZ's gradually improving diversification and growth in container traffic is also reducing dependence on coal cargo (around 33% of total cargo in fiscal 2019), which may be more susceptible to volatility in the long term due to environmental factors. Annabelle Teo
Autoridad del Canal de Panama (A/Stable/--)  
We see environmental and social factors for the Panama Canal as credit-relevant, in line with the broader transport industry, centered on water resource conservation and quality. The latter is key for the local population, but also crucial for the business' sustainability given that vessels' transit through the canal depends on water. As such, the company has been taking several measures to secure resource availability. For example, it built 18 water-savings basins incorporated with a new set of locks that recycle 60% of the water used per lockage, saving 7% more water than the original locks. For the next two to three years, we expect the canal will prioritize investments that boost long-term water availability. We believe the canal also has a very comfortable financial situation and could absorb additional capital expenditure without significantly hurting credit metrics. We assess management and governance as satisfactory, but highlight the particular relevance of the canal's legal set-up, its articles of incorporation, and Panama's constitution, together with specific international treaties, as they provide a framework that allows us to differentiate between Panama's credit quality and the company's. In our view, governance factors prevent and will continue to reduce the government's control over the canal. Julyana Yokota
Hutchison Port Holdings Trust (HPHT)(A-/Stable/--)  
HPHT, which has two major ports in Hong Kong and Shenzhen (China), faces comparable environmental and social risks to peers. Over the past decade, HPHT has invested in converting traditional diesel rubber-tired gantry cranes to run on electricity or hybrid energy, which reduces noise and CO2 emissions. In 2018, Yantian International Container Terminals was one of the first five Chinese ports to voluntarily adopt green shore-power technology by installing mobile shore-power systems that can service 13 berths. This allows vessels to turn off their diesel engines and connect to the local electric grid while at berth, reducing noise and particle emissions. We have reflected these measures in our analysis of operating efficiency. Jason Lan
Ratings as of Feb. 11, 2020.

Land Transport: Railroads And Roads

Environmental exposure

Rail and mass transportation:   We view environmental risks as below average because rail networks and mass transportation assets have a competitive advantage in yielding lower emissions than other transport modes, considering the high volume of passengers moved in per trip. In some cases, specific government policies aim to reduce emissions via mass transport infrastructure assets, such as in Europe and Chile. Large systems in some regions are exposed to extreme weather risks and are required to focus on asset resiliency, developing adaptation plans to assure ongoing operations.

Roads:   Environmental risks are average because exposure to emissions is mainly indirect, coming from cars, buses, and trucks. A disruption in the technology used in each mode, e.g. replacement of the fleet by electric vehicles, is not expected to significantly affect demand, whereas there is no disruptive solution to replace the mobility capillarity provided by roads at large scale (even if rail and subways are more environmentally efficient). Given the long lifespan of infrastructure assets, climate change can represent a key environmental risk, albeit varying by location and nature of the assets.

Social exposure

Rail and mass transportation:   Although rail and mass transport tends to enjoy strong public support, as a provider of a critical service its importance to communities also implies somewhat above-average social risk. We believe long-term opportunities including involving governments and communities in planning, as well as in balancing economic versus environmental and lifestyle factors, benefit mass transportation assets. In particular, customer behavior is changing as passengers become increasingly environmentally conscious, and given the difficulty decarbonizing and seeking less-polluting solutions. On the other hand, developing these solutions is costly and often involves government-provided tariff subsidies, which in some cases do not always provide sufficient financial returns. The general population is also very sensitive to affordability, as we've recently observed in Chile. In addition, service quality tends to attract high public scrutiny, which can lead to adverse regulatory actions in the case of underperformance. Finally, railway and public transport assets also tend to be more exposed to actions from highly unionized workforces. Lastly, ensuring the passenger safety is of paramount importance. Accidents or acts of terrorism, even if low probability, can have a severe credit impact.

Roads:   We generally see social factors as above-average areas of risk for road infrastructure, given greater sensitivity around the acceptability and affordability of tolls, user fees, or congestion charging. This goes hand-in-hand with the increased frequency of social protests globally for more equitable sharing of wealth. Also, similar to rail and mass transport, safety is an above-average risk factor for assets involving bridges and tunnels. Low-probability catastrophes (such as Atlantia's Genoa bridge collapse) show the potential severe negative credit impact resulting from adverse public opinion and political actions.

Table 3

Entity/Rating/Comments Analyst
Abertis Infraestructuras S.A.(BBB-/Watch Neg/--)  
Governance factors have a significant and positive impact on the rating on Abertis. In our view, the governance arrangements between its shareholders Atlantia (50% plus one share) and ACS/Hochtief (50% minus one share) provide effective measures to protect Abertis' credit quality against potential negative intervention from Atlantia, the latter facing heightened regulatory and political risk. This is reflected in the rating on Abertis as we currently allow for it to be rated up to three notches above the rating on Atlantia. In our view, the presence of a large minority shareholder protects Abertis' creditworthiness because we believe ACS/Hochtief would be unwilling to allow detrimental actions to Abertis' creditworthiness and the shareholder agreement grants veto power to the minority shareholder on some strategic reserved matters, such as dividend distributions and major acquisitions. This also underpins our assessment of Abertis' management and governance as satisfactory. Abertis' exposure to social factors is broadly in line with global toll road peers. We anticipate that Abertis group will generally meet its safety and service performance targets as it has done over the past couple of years, supported by its corporate social responsibility plan, fostering a good relationship with politicians and regulators. Affordability and acceptability of tariffs, and relationships with communities more broadly, are other key social credit factors. Abertis has some higher social exposure in this respect in Latin American markets such as Brazil, Chile, and now Mexico. Protests occurred last year at its main French subsidiary Sanef (33% of Abertis' total EBITDA in 2018) from the gilets jaunes (yellow jackets), resulting in some highway toll booth disruptions and weaker end-of-year traffic. This, however, didn't significantly affect Sanef's financial metrics. Stefania Belisario
Atlantia/Autostrade per I'Italia SpA(BB-/Watch Neg/--)  
We believe the credit quality of Italian toll road operator Autostrade per l'Italia (ASPI) and its parent, Atlantia, are significantly more exposed than other infrastructure operators to social and governance risk factors following the collapse of a Genoa bridge on Aug. 14, 2018, killing 43 people. We have subsequently taken multiple negative rating actions on ASPI and Atlantia reflecting increased political and regulatory risks. The recent three-notch downgrade followed the government's unilateral changes to the legal framework for toll road operators in Italy, which could overwrite or conflict with credit-protective termination provisions in ASPI's concession agreement. The changes were introduced by Law Decree n. 162/2019 ("Milleproroghe"), which is now in effect although it must be ratified by the Italian Parliament by the end of February 2020. We revised Atlantia's management and governance assessment to fair on Sept. 20, 2019. This followed allegations of misrepresentation of information within safety reports due to the grantor that emerged during ongoing criminal investigations. In our view, this put the company in a weaker position, increasing the likelihood that a potential settlement agreement with the grantor may be under more unfavorable terms for ASPI. Subsequently, Atlantia contracted an external auditor to scrutinize its internal controls and procedures. Stefania Belisario
Aurizon Network Pty Ltd.(BBB+/Stable)  
We believe Aurizon Group, a rail network operator (track manager), has somewhat higher indirect exposure to environmental factors since coal being the main commodity transported on its network. Environmental concerns and global energy policies that reduce demand for miners' products, particularly thermal coal, could put downward pressure on transport volumes through Aurizon's rail network over the longer term. However, the group is somewhat insulated from global coal demand conditions due to the presence of a larger proportion of metallurgical and higher-quality thermal coals in Australia, which have a reasonable demand footprint in Asian markets. Tempering the risks are Aurizon's risk management measures; part of its strategic planning and technology investments are to improve efficiency and reduce its environmental impact. We see social risks for Aurizon as comparable to the industry. The business remains somewhat exposed to industrial actions by unions, mainly during enterprise agreement renegotiations, disputes with regulators and industry authorities, and delays in tariff-setting. However, the company is well positioned in our view to manage any short-term disruptions. Sonia Agarwal
Deutsche Bahn AG (DB)(AA/Stable/--)  
We see environmental factors having a more positive influence on DB's credit quality than most transport providers, as the German government sees DB as an important instrument in achieving the target of cutting the country's GHG emissions by 55% by 2030 compared to 1990, including a 40% reduction compared to 1990 of transport-related emissions. This implies a higher degree of ongoing state support, in our view, with DB benefiting from the government's policy of, among others, increasing charges on flights and reducing VAT on long-haul train tickets. In addition, to attract more passengers and cargo to the rail transportation, DB will receive, in addition to the already planned investment grants, €11 billion total in capital injections until 2030. Social factors, such as workforce and service to communities, have both a more positive and negative credit influence. Due to its size and social responsibility as one of Germany's largest employers, we see DB as having a very important role for the state, underpinning our assessment of very high likelihood of extraordinary government support. On the other hand, the group has been affected by labor actions in the past. The current wage agreements with the unions end in February 2021, so no strikes are to be expected in the foreseeable future. Beata Sperling-Tyler
Empresa de Transporte de Pasajeros Metro S.A.(A+/Stable/--)  
Social factors influence the Metro of Santiago's stand-alone credit quality, comparatively more than peers in our view, in light of the short-term discontent that emerged in October 2019 catalyzed by a 4% increase in metro fares. The protestors' most urgent demands relate to an entire revamping of the pension system, ways to curb increases in public transportation fares, cheaper social security, and free (or at least cheaper) education. President Pinera announced a series of social reforms, including increases to basic pensions and minimum salaries, the freeze of electricity tariffs for 12 months, the scrapping of the metro fare hike, and lower salaries for congressmen and public workers. At the same time, the metro's critical social role as the largest public transportation provider in Santiago also contributes to our expectation of an extremely high likelihood of extraordinary government support. Proof of this is the recently approved capitalization, which will be entirely devoted to the Metro's reconstruction. From an environmental standpoint, the Metro of Santiago--similar to mass and rail transport peers--significantly benefits emissions because 60% of public transport users in Chile's capital city ride the Metro. In addition, the Metro actively contributes to Chile's environmental goal of having 20% of its energy matrix be through renewable sources by 2025 and 70% by 2050. To achieve this, the Metro committed to continue buying around 70% of its energy consumption from renewable sources. Cecilia Fullone
Getlink (BB/Negative/--)  
Getlink is more positively influenced by environmental factors because its high-speed rail link contributes indirectly to reducing CO2 emissions by providing an advantageous option to short-haul air and ferry travel. At the same time, given its unique position as an operator of the only large-span transportation tunnel between the U.K. and continental Europe, Getlink is more exposed to social factors than other infrastructure assets. While the exclusive concession supports our view of its strong competitive position, terrorism incidents in Paris, Brussels, and London, and most recently the rail strikes in France, have negatively impacted Eurostar traffic, and the migrant crisis has disrupted and reduced traffic levels. Under the concession agreement the obligation for security is with the U.K. and French governments, which, following the events in summer 2015, have invested significantly in tunnel security. Safety is equally a key credit factor and under the concession agreement the Fixed Link's operations are monitored by the Intergovernmental Commission. Although the risk of fires leading to a partial shutdown (as was the case in 2008) cannot be excluded, the company has reduced the risk by adding two SAFE firefighting stations in both tunnels. The financial impact is also partially mitigated by an insurance program covering material damage and business interruption. To guarantee a smooth crossing to transporters, Getlink remains engaged in a continuous review along with the two governments, to ensure that a high level of safety and security is employed on its site. Beata Sperling-Tyler
MTR Corp. Ltd.(AA+/Stable/--)  
By providing an efficient mass transit metro system, MTRC plays a very important role in reducing use of personal vehicles and associated pollution, as well as congestion. This, together with its social mandate to provide affordable public transportation, are credit positives because they underpin MTRC's critical role for the Hong Kong government and our assessment of an almost certain likelihood of extraordinary government support. At the same time, social factors negatively influence MTRC's credit quality, which as a government-owned entity, has come under attack during the recent social unrest in Hong Kong and has sustained significant damage to stations and equipment. During the more severe periods, there were numerous temporary station closures, some lines were shut for multiple days, and the entire system was closed early each day for weeks. While financially the company can currently withstand the impact, significant additional damage and service operations will have a negative impact. Governance has also been an important factor in our review of MTRC. The construction scandal at the Hung Hom terminal reveals some deficiency in the company's oversight of this project, and the government is investigating process control issues. While the scope of MTRC's responsibility for these incidents is unclear, we believe this is a credit negative. If evidence points to a significant deficiency in the company's oversight framework, we could adjust our governance scores. In addition, severe governance deficiency could lead to financial penalties, negatively affecting MTRC's financial profile. That said, we believe the company has demonstrated overall satisfactory governance through the set-up of its board and various committees, reasonable transparency and reporting, and a long operating and construction track record. Jason Lan
Pacific National Holdings Pty Ltd.(BBB-/Stable)  
Australian rail-freight operator, Pacific National has exposure to environmental and social factors as around 49% of its revenue is derived from coal haulage (split about 40% thermal coal and about 60% metallurgical coal. This exposure is partly mitigated by Australian coal being higher-quality relative to global suppliers, and thus in relatively stronger demand. Pacific National is also actively working with industry to transition to rail-based freight from road, which is significantly less emission-intensive than trucks. The company appropriately manages noise and air quality (diesel emissions and coal dust), factors that could affect its capacity to operate. As to social factors, Pacific National is exposed to industrial actions similar to industry peers, but has historically managed this well. Alexander Dunn
Russian Railways (BBB-/Stable/--)  
Similar to other large railway operators, RZD is a very large employer and provides socially important services such as passenger transportation. These social factors, together with RDZ's economic importance, underpins its critical role for the state, contributing to our view of extremely high likelihood of extraordinary government support. At the same time, as a government-related entity, RZD could be exposed to political influence or investment mandates that pressure cash flow. Environmental factors both positively and negatively influence RZD's credit quality, with rail being a greener mode of transport, but RZD being more exposed to coal and oil freight volumes. RZD invests in electrification to reduce its carbon footprint. In May 2019, RZD issued Russia's first green bond. Still, RZD's high share of commodities in total freight volumes (in 2018, oil and oil products contributed 18%, while coal 29%) reflects the Russian economy's focus on commodities and RZD's monopoly status, implying a mandate to provide transportation services to all customers. We believe freight volumes could be influenced over the long term by customers' environmental concerns; Europe and China have specific policies to reduce coal usage. Elena Anankina
SMRT Corp. Ltd.(AA+/Stable/--)  
High expectations in Singapore for seamless and affordable public transport and government intervention to impose higher operational standards than specified under the licensing arrangements expose SMRT to higher social risks than some other transportation infrastructure companies. The higher operating standard of 1 million MKBF ("mean kilometers between failures," meaning trains on average should travel a million kilometers before there is a more than five-minute delay) goes beyond SMRT's operating standards under the current license requirement. The resulting higher operating expenditure to meet the government's new benchmark has not been compensated as promised on time, resulting in significant earnings and cash flow pressure on SMRT's stand-alone credit profile in the next one to two years. We expect eventual recovery of these higher costs, though the amount and timing are still uncertain. We expect some fare increases, but they won't unlikely reflect full cost and returns due to the socio-politically sensitive nature of rail fare increases in Singapore. On the other hand, SMRT's social role and importance to the Singapore government, which remains committed to reliable public transport services, equally underpins our view of extremely high likelihood of government support. Overall, we believe SMRT is exposed to similar environmental and governance risks as other public transport operators in the region. SMRT's role as an operator significantly mitigates elevated environmental risk during planning and construction phase, which is now handled by government-owned Land Transport Authority. Mary Anne Low
Societe Nationale SNCF S.A.(AA-/Stable/--)  
We believe that SNCF group is more exposed to social factors than other rail peers. This reflects the fact that actions promoted by its large and unionized workforce have resulted in significant loss of revenues for the group in past years. At the same time, SNCF plays a key social role as one the largest employers in France, and benefits from a €35 billion debt take-over by the French state over 2020-2022 as part of the rail reform implemented on Jan. 1, 2020. This further supports our view of an extremely high likelihood of support by the French state, which exercises tight controls over the group via its nontransferrable 100% ownership of Société nationale SNCF SA and appoints the group's CEO and most board members, resulting in six notches' uplift to an 'AA-'rating. Rail unions' opposition to the government's reform aimed at open competition in rail services lead to about 39 days of strikes in 2018. This resulted in €700 million-€800 million in lost revenues for rail operator SNCF Mobilités and about €200 million for the owner of the infrastructure SNCF Réseau. Since December 2019, opposition to pension reform has led to over 40 days of strikes, estimated to have resulted in €800 million in lost revenues so far for the group, which is now consolidated into Société nationale SNCF S.A., the group's holding company since Jan. 1, 2020. These amounts are significant compared to group EBITDA (SNCF Mobilités and SNCF Réseau), which averaged €5.2 billion over the past three years, and negatively weigh on the group's expected financial metrics and stand-alone credit profile. Nevertheless, the rail reform opposed by union strikes in 2018 has now entered into force, ending the current special civil-servant status for employees joining after Jan 1, 2020. The promotion of a more efficient workforce organization, combined with the transformation of the group into a vertically integrated group, has strengthened our view of SNCF group's ability to maintain more stable cash flows. Environmental factors have a supportive credit influence, similar to other European rail peers, as it supports traffic growth and implies more supportive policies from the French government, for which rail transport is essential to achieving some environmental targets. This further speaks to the company's very important role to the government. Stefania Belisario
Transnet SOC Ltd.(BB/Negative/--)  
We see Transnet's management and governance as fair only and more exposed to governance factors than domestic peers. Significant governance failures and irregularities, most notably in procurement, appear to have been facilitated by Transnet's former board and executive team. Allegations that certain government officials tasked to oversee Transnet's governance were complicit in the governance failures and procurement irregularities are being investigated. Furthermore, Transnet's 2018 and 2019 financial statements received audit qualifications (notably related to auditors' inability to confirm accuracy of reporting per legislative requirements, not IFRS) and publication of the 2019 results was delayed, raising the risk of listing requirement breaches, and broadly sterilizing Transnet's ability to raise public debt in calendar year 2019. Consequently, we continue to monitor possible leadership and motivational challenges stemming from these issues, as well as the trajectory of board effectiveness, internal controls, reporting transparency, and regulatory relationships. These governance deficiencies have not, to date, resulted in a rating action, given that investigations and remediation plans and actions are well advanced and have not resulted in poor operational performance. Environmental and social considerations for Transnet are broadly in line with industry peers, reflecting its acceptable service delivery and management of regulatory risk and public opinion, supported by its monopoly position in several markets. However, the share of coal in transport volumes is quite significant at 35%. From a social perspective, the impact on local communities in relation to lifestyle, congestion, noise, and air quality is being increasingly highlighted, but the critical nature of its existing railway and port operations leads us to see these risks as limited for existing operations. Omega M Collocott
Transurban Finance Co. Pty Ltd. and Transurban Queensland Pty Ltd. (BBB+/Stable/--)  
As the largest toll road operator in Australia, Transurban has managed relationships with governments, regulatory concession authorities, and community stakeholders well. Its approach has assisted in both supporting its existing business and growing the company by expanding and extending its existing toll roads. We believe Transurban's approach to social issues positions it better than peers. Transurban's operations could affect users and local communities. Public campaigns from either of these groups can affect the business' social license to operate, reputation, or, importantly, potential new developments. The company is highly focused on delivering and improving safety, both for existing road operations and future roads under development. Further, various customer-focused initiatives seek to continually enhance customer experience. Transurban's credit is not greatly affected by environmental factors. Nevertheless, Transurban is taking measures to reduce emissions and climate change exposure in its operations. For example, it installed solar PV panels at some operational sites to generate renewable energy, which is used directly onsite. Richard Timbs
VINCI S.A.(A-/Positive/--)  
We see Vinci as having similar ESG risks as most transport infrastructure toll road and airport operators. We believe the group faces limited risk of direct regulatory or political intervention in its French toll road activities (about 65% of EBITDA). This is because of France's strong rule of law and the contractual protections under the toll road's concession agreements: this was evidenced in 2015 when the French regulator allowed some additional tariff increases to compensate for tax rises and, following a court dispute regarding the tariff freeze in 2015. Thanks to its international diversity, Vinci's exposure to social risks is comparable to peers. That said, the risk of social tensions was evidenced last year by the gilets jaunes (yellow jackets) protests in France, locking a number of ASF's highway toll booths and resulting in weaker end-of-year traffic on French toll roads. The issue seems to have abated since, with Vinci also offering daily toll road commuters a 30% rebate. Other important factors relate to safety standards, because Vinci is a major construction company and operates a significant number of tunnels and bridges. The company is committed to a zero- accident policy. Juliana Gallo
Ratings as of Feb. 11, 2020.

This report does not constitute a rating action.

Primary Credit Analysts:Julyana Yokota, Sao Paulo + 55 11 3039 9731;
Juliana C Gallo, London (44) 20-7176-3612;
Kurt E Forsgren, Boston (1) 617-530-8308;
Gloria Lu, CFA, FRM, Hong Kong (852) 2533-3596;
Parvathy Iyer, Melbourne (61) 3-9631-2034;
Richard Timbs, Sydney (61) 2-9255-9824;

No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.

Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.

To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw or suspend such acknowledgment at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.

S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.

S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, (free of charge), and and (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at

Any Passwords/user IDs issued by S&P to users are single user-dedicated and may ONLY be used by the individual to whom they have been assigned. No sharing of passwords/user IDs and no simultaneous access via the same password/user ID is permitted. To reprint, translate, or use the data or information other than as provided herein, contact S&P Global Ratings, Client Services, 55 Water Street, New York, NY 10041; (1) 212-438-7280 or by e-mail to:

Register with S&P Global Ratings

Register now to access exclusive content, events, tools, and more.

Go Back