Refer 2004 - EN

Report and
Accounts
2004
Rede Ferroviria Nacional Refer, E.P.
Contas
Report & Accounts 2004
Letter from the President

2004
2004 was the second complete year in office for the Board of Directors of REFER EP which I have the honour of
presiding over. This is, therefore, an appropriate moment to summarise the activities carried out by the company
over the past year and to highlight some of our priorities for 2005.
Firstly, it must be noted that there was a change in the composition of the Board of Directors of the company
during 2004 as the result of the Resolution of the Council of Ministers n 103/2004 (2nd series), of 24 September,
which nominated Manuel Alfredo Aguiar de Carvalho to be a member of REFERs Board of Directors, substituting
Antnio Bentes Correia Alemo, who ceased his duties. The Board of Directors expresses its appreciation and the
companys recognition of the contribution made by Antnio Bentes Correia Alemo during the time in which he
held office.
Set against a background of the guidelines defined by the government authorities for the railway sector, for our
company 2004 was noteworthy for the following facts which I feel must be highlighted:
In 2002, when the Board of Directors assumed office, several areas were defined as having priority. It is with
great pleasure that, two years later, I can say that many of the objectives set out at that time were achieved
during 2004.
For example, on 30 May 2004, before the inauguration of the European Football Championships (Euro
2004) held in our country, the direct railway link between Braga and Faro, the so-called Atlantic Axis, was
opened. The line allows safe, comfortable and fast railway travel and is a major milestone in the
modernisation of the backbone of our railway network.
The restructuring of the company, considered as a strategic objective of REFER for directing the company
towards its core business, was consolidated throughout 2004 through the re-organisation of the General
Engineering Department.
In order to properly carry out its mission of making the investments necessary to modernise the national
railway network in the name of the State, REFER has to ensure that it has the different types of engineering
skills and specialist techniques which allow more efficient management of human and financial resources.
The creation of the Operating Control Centres (OCC) Project Department in 2004 was the first step towards
the setting up of centralised operating control centres aimed at optimising network operations and the
management of railway circulation, with high standards of safety, efficiency and quality.
REFER continues its work on re-classifying and eliminating level crossings in order to ensure suitable safety
levels with regard to crossings. We are rapidly approaching the European average with regard to the
indicator for the number of level crossings per kilometre of railway line.
The closing of the Rossio Tunnel last October was one of the most notable happenings of 2004.
The Board of Directors decision to close the tunnel for use was not an easy one to take but the companys
Rede Ferroviria Nacional, EP

mission, as the manager of railway infrastructure, of ensuring the safety of people and assets, clearly had to
take precedence over considerations of any other nature.
The involvement and support, from the outset, of the Ministry of Public Works, Transport and Communications
and of the various transport operators of Lisbon metropolitan area allowed the rapid implementation of
alternative solutions for minimising the inevitable inconvenience caused to the members of the public using
the railway line in question.
The re-opening of the Rossio Tunnel is forecast for June 2006, after the completion of major work which has
been considered necessary for several decades now but which had always been successively postponed
until now.
The creation of the REFER Branch in the North in the first semester of 2004 allowed us to coordinate work with
the high speed rail network authority (RAVE) with regard to the Porto Vigo route.
In addition, seeking more efficient management of resources, the Board of Directors approved the setting
up of a REFER/ RAVE/REFER TELECOM task force for information systems and technologies to seek out
synergies and to consolidate IT matters.
REFERs information systems and technology department is currently working with RAVE to define the
conceptual design of the common SAP R/3 system for the companies in the so-called REFER Group.
Special mention should be made of the fact that REFER completed the process of obtaining a public
financial rating during 2004.
The rating awarded is based on REFERs status as an EPE (Public State Company). The companys rating is
very close to the rating level for the Portuguese Republic and is thus considered satisfactory.
REFER was analysed by two of the most important international rating agencies, Moodys and Standard &
Poors, and this allows investors to understand REFERs positioning in terms of credit risk. The conditions have
thus been created for the company to diversify its financing sources by accessing the international capital
markets, in coordination with its supervising government authorities. The first such instance of this was
finalised during the first quarter of 2005 with a 600 million euro bond issue.
On the internal level, several matters took place in 2004 which I consider were important for the organisation.
Firstly, I want to mention the commemoration of REFERs seventh anniversary which took place in Entroncamento
Railway Complex when about 700 company employees were present during an event when friendly
companionship was the order of the day.
Also worthy of mention were the two Staff Members Meetings held in 2004 at which staff from our affiliated
companies also took place, namely: REFER TELECOM, FERBRITAS, INVESFER, RAVE and CPCOM. These were
excellent opportunities to debate the challenges facing the companies in the REFER Group. The culture of
communication and sharing of ideas evident at these meetings is something which we intend to build on in the
future.
In a similar context I must also refer to the various thematic workshops held to provide suitable information to all
interested parties in order to ensure that our employees have suitable conditions for enabling them to carry out

their functions properly in the REFER universe.

Lastly, I want to mention the launching in the final quarter of 2004 of a pilot project involving 45 staff members with
the objective of identifying our in-house human resource potential.
For the year 2005 several targets have been set out in the companys activity plan. The following are worthy of
special mention:
Phased implementation of external contracting of the railway network conservation and maintenance work;
Preparation of the National Railway Network Master Plan and the reconfiguration of the current network,
ensuring its inter-connection with the future high-speed railway network;
Implementation of an integrated document management solution covering the entire company.
On my behalf and on behalf of the Board of Directors, I would like to publicly express my gratitude to all the
companys employees for their hard work and the many hours they have dedicated in their respective areas. Their
efforts are the base on which the companys route in the future is built and I am sure that REFER can count on
everyones support to achieve the objectives which have been defined.
Jos Braamcamp Sobral

President of the Board of Directors

Contents
Governing Bodies...................................................................................................................................7
REFER in2004....................................................................................................................................9
REFERs Cultural, Social and Sporting events in 2004 .....................................................................13
Macroeconomic Environment..............................................................................................................15
Economic and Financial Situation ........................................................................................................18
The Company .......................................................................................................................................21
Safety..............................................................................................................................................22
Strategic Planning ...........................................................................................................................23
Human Resources...........................................................................................................................24
Purchasing and Logistics.................................................................................................................25
Information Systems ........................................................................................................................26
Environment ....................................................................................................................................27
Real Estate Assets............................................................................................................................29
Auditing and Quality Management ................................................................................................ 30
International Relations.....................................................................................................................31
General Engineering Department...................................................................................................33
General Operations and Conservation Department.......................................................................41
REFERs Northern Branch..................................................................................................................46
Investments and Coverage of Investments ...........................................................................................48
REFER Group .........................................................................................................................................53
Economic Financial Performance .....................................................................................................56
Financial ...............................................................................................................................................67
Statements ............................................................................................................................................67
Annex to the Balance Sheet and the Profit and Loss Account ..............................................................73
Reports and Certification of Accounts ..................................................................................................96

Mission:
To provide the market with competitive transport

infrastructure, managing and developing the
railway network efficiently and safely, with respect
for the environment.
Governing Bodies

rgos Sociais
Governing Bodies
Responsible for the following areas:

Coordination of the Board of Directors;
Relations with the supervising authorities;
Information systems and technology
President of the Board of

Directors Responsible for the following areas:
Jos Braamcamp Sobral
General Operating and Conservation
Department;
o Operating Department;
General administration;
Legal area
Strategic Planning;
Communication and Image;
Human resources; Vice-President of the Board of
Safety Directors
Jos Osrio e Castro
Responsible for:
General Engineering Department;
REFERs Northern Branch;
Environment.
Member of the Board of

Directors
Lus Miguel Silva
Responsible for:
General Operating and Conservation
Department;
o Conservation and Maintenance
Department;
Real Estate Assets;
Intenrational Relations
Member of the Board of
Directors
Manuel Alfredo Aguiar de Carvalho
Responsible for:
Economy and Finances;
Planning and Control;
Auditing and Quality Systems;
Purchasing and Logistics.
Member of the Board

of Directors
Jos Marques Guedes

1997
Founding of REFER.
The Board of Directors took office in May 1997.

REFER in2004
REFER, as the company responsible for managing the national railway network, has to guarantee the regular and
continuous supply of this public service, carrying out its activities in an effective way to provide operators with
competitive infrastructure, managing and developing an efficient and safe railway network, with respect for the
environment.
Alongside this objective, and ensuring it is carried out, is REFERs constant concern to ensure that its employees are
fully trained and qualified to do their jobs.
At the end of 2004 our company had 4 258 employees. 191 new employees joined the company during the year
while 569 workers left REFER, with 91% of the latter resulting from the payroll adjustment process.
Giving top priority to the investment projects on account of their role in the modernisation and development of the
national railway network made sense during the major capital spending phase which took place up to 2004. With
this cycle now having been completed, the organisational structure should evolve to take account of new
priorities, namely:
Making full use of all synergies;
Centralising specialised railway engineering skills;
The functional management of investments;
The optimisation of the management of human and material resources.
Accordingly, in 2004 the re-organisation of our company continued with the General Engineering Department
being changed to a structure based on the centralisation of technical specialities.
The General Engineering Department defined a new organisational model to enable the improvement of
operating efficiency and to ensure, simultaneously, greater flexibility and matching of skills to the new realities of
railway investment. In this model, the Engineering Department has become a skills centre equipped with a critical
mass able to ensure the development of technical capabilities and to guarantee an effective response to internal
client, investment, conservation, and network operation needs.
The Board of Directors took the decision to create the Mission for the implementation of the Operating Command
Centres (OCCs), which later gave rise to the creation of the OCC Project Department, thus ensuring the work will
be done which is necessary for the construction of the Operating Command Centres, so that network operations
can be optimised and railway circulation management carried out with high standards of safety, efficiency and
quality. Three OCCs will be set up to cover the entire country.
The Operating Command Centres will combine the functions of Centralised Traffic Control (CTC), Regulation,
Circulation Supervision, Catenary Tele-command, Public Information System (PIS), Video-Surveillance System,
Infrastructure Function and the Telecommunications function.
On the technological level, the year 2004 was marked by a set of initiatives aimed at taking better advantage of
our corporate system, the SAP system, after the technological upgrade carried out at the end of 2003. During the
year the extension of the PM module to the entire network of the Conservation function was completed. The
Remedy system was also extended to the permanent teams in the different Conservation Operating Zones and

they were connected to the RDC system, promoting the concept of Service Management supported by a Web
application.
Other examples of REFERs technological initiatives were: the implementation of multimedia kiosks in 31 railway
stations and the remote access to our systems by a VPN infrastructure, made available to previously authorised
users.
In 2004 the General Secretariat section continued its role as a liaison body between the Board of Directors and
REFERs operating structure. During the year in question two meetings of REFER Group staff members were
organised, as were three workshops. One of the objectives achieved with these initiatives was the improvement of
the communication channels throughout the companys structure. The consequent speeding up of
communication has led to reduced costs. The Documentation Centre saw a significant increase in the number of
registered readers as well as a major increase in the number of documents under its control. Currently the Centre
has about 5 000 types of document, twice the number at the end of the previous year.
During 2004, the Planning and Control Department, as part of its task to provide management information to the
Board of Directors, consolidated and improved the Corporate Balanced Score Card (BSC). After a presentation
session with the Ministry of Public Works, Transport and Housing (MOPTH) and the Secretary of State for Transport (SET),
direct access to our Corporate BSC was made available to the MOPTH.
The Planning and Control Department undertook three control sessions during the first half of the year, specifically
to monitor the progress of work on the Atlantic Axis with the objective of ensuring the fulfilment of the public
commitment made by REFER regarding the start-up of operations on that route.
On 30 May 2004, the inaugural journey was made on the Braga / Faro route. A special Alfa Tilting train left Braga at
08h35m and reached Faro at about 14h30m. Since that time, railway passengers can now travel between Lisbon
and Faro in less than three hours.
At the same time, the multimedia kiosks installed inside the railway stations were officially inaugurated. On 2
February a protocol was signed with UMIC (Mission Unit for Innovation and Knowledge), under which our company
will participate actively in the initiatives of that unit which seek to promote the Information Society. One of REFERs
initiatives in this regard was the installation of 64 broad band points (multimedia kiosks) located in 31 railway stations
with the objective of familiarising the public with the new technology.
REFER is also going to participate in the Community Networks project which promotes the development of
infrastructure in less-favoured areas and encourages technological solutions.
REFER is constantly concerned with all aspects of safety, namely, the safety of our workers and installations and
operating safety. The Safety Department plays a fundamental role in this area.
During the Euro 2004 football championships, a REFER helicopter, with the participation of employees from the
Conservation and Safety Departments, inspected the Cascais, Sintra, South, North, Beiras, Minho, Douro, and
Guimares lines and the Cceres and Braga branch lines. Photographs were also taken during the inspections,
allowing us to improve and update data available on the status of the network.
Fulfilling REFERs duty to ensure that railway transport conditions are reliable and safe, the Rossio Tunnel was shut
down on 22 October 2004 for major repair work. After this decision was taken, the Board of Directors nominated a
10

committee of experts to produce a report on the situation. This report stated that the re-opening of the tunnel
should only be done after the structural reinforcement of four critical zones. A strong, continuous support should be
installed along the entire perimeter of the tunnel section in those zones.
Several possible work scenarios were analysed. The solution chosen consists of structural work involving the
construction of a closed, reinforced concrete section in the interior of the tunnel, the construction of a continuous
concrete rail platform, the installation of an automatic monitoring system with remote data transmission and the
installation of new passive safety equipment. This work will have an overall cost estimated at 49 550 000 euros,
including the project, inspection and supplementary work. The re-opening of the tunnel is planned for June 2006.
As is the case ever more these days, the undertaking of all these actions must take account of environmental
aspects. In this regard, the Environmental Department, one year after its creation, has identified 153 different
activities coming under its area of interest which can be grouped into four specific areas:
Quality Management and Environment
Environmental Assessment
Environmental Monitoring
Specialist technical areas.
The increased number of technical staff members in this department has enabled a substantial amount of effort
to be put into two very important areas: Quality Management and Environment and Waste Management.
One of the mainstays of our company is the General Department of Operations and Conservation (GDOC) which
comprises the Operations Department, the Conservation and Maintenance Department and the Management
Department. The activities of this General Department is closely connected with REFERs core business since they
basically seek to guarantee the reliability and safety of railway transport, resorting more and more to sophisticated
technological systems which reduce the risks of dependence on the human factor.
Along with the completion of the investments in the Atlantic Axis, the GDOC undertook several projects for
rationalising operations and improving management. Of particular interest is the new strategy for conservation
which is based on increasing the use of contractors and new equipment for inspecting and recording the state of
infrastructure elements. The development of the Quality Management System is aimed at obtaining certification of
the companys activities on a gradual basis. After the Lisbon Conservation Operating Zone was certified the quality
system was implemented for the Oporto Conservation Operating Zone and the intention is to extend the quality
system to cover all the other Conservation Operating Zones. New operating management tools were
implemented, taking advantage of the new technologies installed and the development of a management
culture directed towards gradually balancing the operating results account.
In 2004 the modernisation of the railway network saw the investment of approximately 477 million euros, including
those in PIDDAC.
Below, we list a few of the investments completed in the year in question with the objective of modernising existing
railway infrastructure:
Guimares Line: widening of track and electrification. This railway line has a fundamental role in the transport
movements of the regions inhabitants.
11

Vizela Station: major remodelling following the conversion work on the Guimares Line.
Doubling-up and electrification of the Lousado Nine section of the Minho Line, following a variety of jobs
carried out on the Oporto / Braga route, creating a modern infrastructure and thus improving mobility
standards for both people and goods.
Doubling-up and electrification of the Braga Branch Line. Together with the work on the Lousado-Nine
section, this is a significant step towards reducing journey time, in comfortable and safe conditions, on the
Minho connections. It is thus the first section of the Atlantic Axis to be completed.
Braga Station, as part of the Stations with Life project, which will affect the urban landscape surrounding the
station.
Parque das Cidades Station, built from scratch on km 332 of the Algarve Line, between the stations of Loul
and Faro, in the village of So Joo da Venda. The station directly serves the new Algarve football stadium
used in Euro 2004.
Fogueteiro Setbal section. From 6 October 2004 it has been possible to travel between the cities of
Lisbon and Setbal on a train in less than an hour. The railway service operated by the company Fertagus,
using the 25 de Abril Bridge, allows direct train journeys to be made for the first time between the two cities.
Mira Sintra Meleas Station, eliminating the restrictions existing between the Sintra and the Western Lines.
Pvoa de Santa Iria Station.
With regard to the coverage of these investments the States contributions are not sufficient and have been
reduced over the years. In 2004 the States contributions only covered 4,3% of investments.
The structure of the PIDDAC financial cover was as follows: Chapter 50 represented about 4,3% (20,6 million
euros), Community Funds 15,9% (75,6 million euros) and Other Finance Sources represented 79,8% (380,8
million euros). It should be pointed out that, as in previous years, the PIDDAC and Community Funds
contributions have been decreasing and so resorting to debt is a major part of the financial cover for the
companys investments. This obviously has a negative impact in terms of the financial charges involved.
In spite of the difficulties referred to above it was possible to reach many of the objectives which we had set
ourselves for the year, thanks to the dedication and competence of all the companys employees.
We must also acknowledge the Audit Committees loyal and diligent collaboration and thank the financial
institutions, the National Railway Transport Institute and the Ministries supervising this sector for their indispensable
support towards the achievement of REFERs objectives.
12

REFERs Cultural, Social and Sporting events in 2004

Here we point out some of the actions which REFER has undertaken to promote cultural, social and sporting
activities.
Railway Cross-Country Championship REFER Christmas parties

(Entroncamento, Parque do Bonito) Newspaper Linha
Railway Club of Portugal National rowing Exhibition in Rossio Station atrium
champions 2003 Eco-tracks
REFERs seventh anniversary REFER holiday camps
My Fair Lady Almada municipal theatre
Athletics meeting
Entroncamento railway old folks home
25 and 40 Years of Railway Company
lunch Dona Maria II National Theatre
Photographic exhibition by Lusa Ferreira
Tile Paintings
The Edge of the City
IT for young people
Artistic lighting of Rossio Station Celebration
Cinema shows
of railway patrimony
Study grants
Stations with Life
Lisbon Carregado, 148 years of rail
transport
13

The object of international appreciation, with an honourable

mention in the Brunel prizes, the bridge over the Tranco River
on the Northern Line, came into service on January 1998.
1998 In May 1998, the Gare do Oriente became operational.
On 15 November 1998, the first North-South railway crossing
took place on the 25 de Abril Bridge.
Macroeconomic
Environment
14

Macroeconomic Environment
In 2004, Portuguese Gross Domestic Product (GDP) grew by 1,1%, in contrast to what took place in the
previous year when GDP underwent negative growth of 1,3%.
This growth was noted in a strong expansion of private internal demand (2004 increase of 1,9% against -
2,5% in 2003) and led to an increase in the financing needs of the Portuguese economy and a reduction
in private savings rates.
Gross Fixed Capital Formation (GFCF) grew moderately last year (1,8%). This modest recovery, after the
recession of 2003, was based on different contributions from the different components, combining a
favourable evolution in business investment, a reduction of public investment and virtually no contribution
from housing investment.
The growth in exports was very significant at 6,8%. The Banco de Portugal is forecasting accelerated
export growth for the next two years (7,5% for 2005 and 8,6% for 2006). Some of the events which took
place in 2004 contributed to this positive evolution, notably the holding of the European Football
Championships. On the other hand, the negative growth in automobile sector exports weakened share
gains given the significant weight of this sector in Portuguese exports.
The growth rate for import volumes was abnormally high last year when compared with the evolution of
overall demand. Part of these imports may be associated with temporary factors.
The Current Account and Capital Account worsened. The joint deficit of these accounts increased from
3,6% of GDP in 2003 to 5,4% in 2004. Contributing to this fact was a negative balance for net exports, in
spite of the favourable behaviour of exports.
This worsening reflected not only just a deterioration in exchange terms, related with the increase in the
price of oil to historic highs, but also the referred anomalous growth of import volumes.
Employment grew slightly (0,4%) and an acceleration is forecast for the next two years. In spite of a
decrease in public sector employment this was offset by growth in private sector employments.
Workers salaries rose by nearly 3,7% in the private sector in 2004, while for the entire economy this growth
was about 3,2%. For 2005 and 2006, changes in salaries must take in account the reduction in inflation
and changes in productivity.
The inflation rate dropped from 3,3% in 2003 to 2,5% in 2004, and a slight decrease is forecast for the
coming two years.
15

MACROECONOMIC SCENARIO IN 2004 2003 2004 (E)
Private consumption -0,7 2,2

Public consumption 0,5 0,6
GFCF -9,6 1,8
Domestic demand -2,5 1,9
Exports 4,1 6,8
Global demand -1 3
Imports -0,5 8,2
GDP 1,3 1,1
Current Account + Capital Account(%GDP ) -3,6 -5,4
Harmonised Index of Consumer Prices 3,3 2,5
(E) Estimate
Source: Banco de Portugal, Economic Bulletin of December 2004
16

On 29 July 1999 the railway line on the 25 de Abril 1999

Bridge was officially inaugurated. This work was
awarded a prize by the International Bridge
Conference (USA). Also inaugurated at the same time
was the North South Railway Axis, a fundamental
element for connecting the south bank of the Tagus
River to Lisbon. A notable feature of this new railway
connection, which runs for 28 km from Fogueteiro to
Entrecampos, is that it is run by a private operator.
Economic and Financial

Situation
17

Economic and Financial Situation

REFERs economic and financial situation underwent an expected worsening during 2004. Although the level of
investment in 2004 was substantially below the levels seen in 2003, it was still very significant and can be expected
to remain at similar levels for the next 3 or 4 years. At the same time, the contributions from the State Budget under
Chapter 50 were very low and community financing was not sufficient to prevent a very high budget deficit which
had to be covered by resorting to loans. Simultaneously, the operating deficit is tending to grow. As the investment
projects are being completed, the financial charges associated with them are being passed on to the operating
deficit, adding to an operating deficit which results directly from the fact that the compensation payments are
systematically less than the differential between the income coming from providing services to the operators and
the costs which rendering these services entail.
During 2004, and as has been the case since the formation of the company, a substantial part of the loans
for financing REFERs investment work came from the European Investment Bank (EIB). The new loans taken
on, all of which are guaranteed by the State, total 330 million euros and are to finance investments made
on the Northern Line, on the Lisbon-Algarve Connection and on the Lisbon and Oporto suburban train
networks.
In the first half of the year, REFER went through the process of obtaining a rating from two of the most
reputable international rating agencies: Standard & Poors and Moodys. In addition to analysing all the
information available on REFER, the rating agencies analysts met the companys Board of Directors and the
Secretaries of State for the Treasury, for Finances and for Transport, in order to assess the States support for
the companys activities. The process was completed at the start of June with REFER being awarded an Aa3
rating by Moodys and one of AA- by Standard & Poors. In both cases the ratings are just one notch below
the rating given the Portuguese Republic and REFERs ratings are indexed to the latters ratings.
In December, however, Standard & Poors decided to lower REFERs rating to A+, thus putting the company
two notches below that of Portuguese sovereign debt. The arguments invoked by the rating agency were
the decrease in the proportion of debt with the explicit guarantee of the State, which of course was the
main reason for REFER obtaining it s own rating, a decrease in contributions from the State budget and fears
that government policy might favour the road sector to the detriment of the railways. A new assessment
should be made as soon as it is possible for the analysts to hold a meeting with the new government and
REFER is convinced that the rating level awarded initially will be restored.
Although, as requested by the government supervising authorities, REFER presented a Programme Contract
proposal in February, it had not been possible by the end of the year to begin the negotiations which would
have led to its signing. A clear definition, for a multi-year horizon, of the contributions which REFER will receive
from the State budget for its operating and investment activities, of the schedule for receiving such
contributions and of the effectiveness and efficiency commitments which the company undertakes to
abide by would be extremely beneficial for managing the company, particularly from the financial point of
view. When such a contract exists, by making the States support even more explicit it will certainly enable
REFERs rating to be upgraded and will thus contribute to the obtaining of financing in substantially more
18

attractive conditions. As we are dealing with a public business organisation this will be an advantage for the
State itself.
After the completion of the rating process, in July REFER contacted a very wide selection of national and
international banks in order to get proposals for raising 600 million euros of financing, without a State
guarantee. The best proposal was presented by JP Morgan and this was mandated to put together a
consortium formed by JP Morgan, Merrill Lynch and Banco Esprito Santo de Investimento. Although the initial
intention was to make the bond issue at the start of the final quarter of the year, it was only possible to make
the issue in March 2005.
The delay in obtaining long term financing meant an abnormally high use of short term credit lines had to
be resorted to. This led to an imbalance between the companys financial structure and its needs. Although
Standard & Poors felt that a weak point of the company is the fact that the level of short term credit
commitments is just below 300 million euros in a negotiated total greater than 1 000 million euros, REFER has
never felt at any time that the financial system might have any doubts about our company. Nor has REFER
ever had any liquidity problems for meeting its commitments in a timely manner.
Against this background of the use of high levels of short term credit, resulting from the long time period
required for obtaining the authorisations necessary for taking on long term debt, in 2004 REFER began
preparing commercial paper programmes with several national banks. This form of financing, more
favourable since the company has now lost the stamp duty exemption which it had benefited from since its
formation, is starting to substitute part of REFERs existing short term lines of credit.
When a company has a debt level as high as that of REFER, it is advisable to implement a strategy for the
active management of interest rate risk (since all the liabilities are in euros there is no exchange rate risk).
During 2004, the company continued to carry out interest rate derivative operations, taking advantage of
the particularly favourable environment for fixing rates and moving towards its objective of having 60% fixed
rates and 40% variable rates. Contracted operations are always very conservative in relation to the risk to
which the company is exposed and a diversification strategy is followed. Instead of just reducing financial
charges, the objective of this way of operating is to limit exposure to increases in interest rates, particularly
since the income that the company receives comes from a controlled price and is very inelastic with regard
to changes in the economic cycle.
19

On 28 May 2000 the Santa Cruz/Damaia and

Reboleira stations on the Sintra line were
inaugurated.
2000 In October 2000 REFER began studies for making
use of deactivated railway assets.
The electrification of the 4 main ports in the
country (Sines, Setbal, Lisbon and Leixes) was
completed in October 2000
The Company
20

The Company
Board of Directors
Strategic
General Secretariat
Planning
Communication and Planning and

Image Control
Auditing and
Legal Office Quality
Systems
International Safety
Relations
Environment
Economy and General Engineering General Operations REFERs Northern

Finance Department and Conservation Branch
Department
Human Engineering Conservation and

Resources Maintenance
Purchasing and Investments

Logistics Operations
Innovation and
IT Systems Standardisation
Crossings and
Level Crossings
Real Estate Management
Assets Department
Railway installation
on 25 de Abril
bridge
21

Safety
During 2004, the Safety Department, which was formed in mid-2003, sought to stabilise its structure but still
has some work to do to complete this.
The department sought to attend to activities on three fronts: Safety at Work, regarding both company
employees and safety on construction projects; Safety in Installations, from the emergency and security
perspectives; and Operating Safety, to support the companys operating units;
The main activities can be summarised as follows:
Completion of the preparation of all the emergency plans for all the RFN lines, for a total of 16 IET;
Completion of 3 internal emergency plans for 3 central buildings with the respective training and tests.
Start of preparation of said plans for another four buildings;
Strengthening of surveillance at the time of EURO 2004 and implementation of surveillance measures
in new operating sites;
Leading a working group preparing a list of access roads for railway infrastructure (Decision 89/03);
Study of railway rescue in accordance with Decree Law DL 270/2003 for presentation of a contract
proposal to CP;
Participation in a working group with CP for the prevention of forest fires (Decree Law 156/2004);
Special relationship with SNBPC, PSP, GNR and other security and information services providing
information on the companys structure and objectives;
Providing explanations and training on coordination of safety in construction jobs, in accordance with
Decree Law 273/2003, with analysis and preparation support from PSS.
Random visits to working and operating areas;
Support to various company units regarding both safety and security matters.
22

Strategic Planning
Among the activities carried out in the Strategic Planning area, particular mention should be made of the
development of the Railway Network Master Plan, with which we intend to establish a base proposal which
will then allow the re-launching of the studies necessary for drawing up a National Railway Plan.
This Master Plan seeks to integrate the planning of the High Speed network in a strategy which will allow
making full use of the synergies existing between that network and the conventional railway network,
minimising the impacts of this articulation in the configuration of new operating models in the national,
Iberian and European plans.
In this regard there has been close collaboration between REFERs and RAVEs planning units.
With the same objective in mind, the Strategic Planning department has also been developing studies of the
conventional network. Special mention should be made here of the Technical and Economic Feasibility
Study and Market Study of new railway system connections in the Western region" and the "Feasibility Study of
the railway system between Lagos and Vila Real de Santo Antnio".
Some economic-financial studies were also made to support candidature presentations for structural funds
for some of the projects which are part of trans-European networks.
23

Human Resources
2004 was notable for the largest number of new

Full Time E mplo ye e s
employees entering from outside (191) since REFER took
on all the functions that it currently carries out. Coupled 6500
Average
with a renewal of upper management, there was a 6000 December
rejuvenation of employees in the Circulation area. 569 5500
employees left the company, 91% of these did so under
5000
the payroll adjustment process.
4500
At the end of the year REFER has 4 258 employees.
4000
The changes made in terms of personnel admissions do
not mean that REFER has abandoned its policy of 3500
improving the skills of its human resources. In this regard 3000

2000 2001 2002 2003 2004
there were 334 changes in professional categories and an
increase in internal technical and technological training, with 2 700 people being involved in the training
courses begun in 2004.
Personnel costs were within forecast levels, in spite of the increase resulting from promotions and the
updates to the index table and meal subsidies.
In structural terms the various cost components did not show any significant changes in comparison with
previous years.
Basic Wage In order to manage the companys knowledge and skills

Wage Bill Other Fixed more specifically in light of its strategic objectives,
Grade/Shift
Allowance
promoting the professional development of our
7% 3% 6%
3% Variable Work
5% employees, a study was carried out on the
7% Nigth Shift/Allowance
2% Premiums implementation of the new careers system.

12% Meal Subsidy In the context of the REFERs social policy, the company
1%
Travel
54%
maintained current benefits. Significant cash increases,
Holid. Pay + 13th
greater than the inflation rate, were made to the study
Additional Salary
grants and pre-school subsidies. The Social Action Fund,
set up in 2003, completed its first full year of existence.
It was possible to decrease the number of labour dispute cases by 27%.
24

Purchasing and Logistics
In the Purchasing and Logistics department special mention should be made of the completion of the
qualification processes for the supply of ballast and gravel, concrete sleepers, the provision of hygiene and
cleaning services and the operational leasing of vehicles. The qualification processes were started for rail
and track switching device suppliers and for hazardous and normal waste disposal operators.
In the Logistics department a new consultation system was introduced for the sale of each lot of used /
waste materials to waste disposal companies. The Logistics area was also re-organised to allow the
outsourcing of the work-yard operations of REFERs logistics complex in Entroncamento.
The e-Reception software was also introduced. This is a tool for managing the parties involved in receiving
materials and allows the material reception process to be managed with greater efficiency and
effectiveness.
Special mention should be made of the qualification of suppliers and service providers in order to make
contracting more nimble through the later opening of limited tenders or negotiating processes. We also held
our first electronic bidding process for the acquisition of IT equipment from the major manufacturers.
Another important feature was the use of technical drawings, digitalised on SAP, in rail material purchase
processes.
25

Information Systems
2004 was noteworthy for a set of initiatives aimed at taking greater advantage from the SAP systems in the
company and from the technological upgrade carried out at the end of 2003.
Thus, in addition to the completion of the PM module extension process and the entire Conservation
function, very important initiatives were started in the areas of document management (technical
engineering documentation) and of financial information (by resorting to the data warehouse).
Furthermore, a licensing agreement was signed whereby REFER group companies can share licences which
they have already bought or which they may buy in the future.
In relation to the SAP systems, a pilot project was launched in the Conservation area to try out the possibilities
offered by mobile computing solutions for the work of the operating teams.
The Remedy system was extended to the permanent team members of the different Conservation
Operating Zones and was connected to the RDC system, thus promoting the concept of service
management, backed up by a web application developed internally in this period.
In the technological area, multimedia kiosks were installed in 31 railway stations. In addition, an SMS solution
was installed and VPN infrastructure was set up to make it possible for previously authorised users to have
remote access to our systems.
In the latter two cases, use was also made of the functions of the geographical information systems through
back-office work. Although not visible, this is indispensable for the next steps which are to be taken.
Lastly we must mention the setting up, during the first quarter of 2005, of an operation which is going to allow
major work to be done on the capacity and performance of the server infrastructure.
26

Environment
2004 was the first full year of existence of REFERs Environmental Department. Following on from the work
started in 2003, the department continued to make a survey of the different activities which it must look
after. A total of 153 different activities which must be carried out in a systematic way have been identified,
not including those involving the actual department itself. These activities have been grouped into four
major areas: Quality and Environmental Management, Environmental Assessment, Environmental Monitoring
and Specialist Technical Areas.
As a result of the increase of staff members in 2004, the department was able to increase its activities in two
specific areas: Quality and Environmental Management and Waste Management (the latter is classified as
a Specialist Technical Area).
In the Quality and Environmental Management area an introductory document was prepared for the initial
environmental survey of REFER. A first survey was also one of the REFER processes, especially those processes
related to the activities of the General Engineering Department and the General Operations and
Conservation Department, through the analysis of regulatory documents for the various specialist areas,
identifying the environmental impacts through the inputs and outputs of the activities undertaken. The
procedures of the Environmental Department were also set up in terms of their internal organisation and the
preparation of procedures complying with the requisites of Standards NP EN ISO 14001:1999.
With regard to Environmental Assessment, environment assessments were carried out on a wide range of
projects during 2004. Monitoring of these same projects was carried out and support was also given to the
various REFER units in the area of the environment. The department also defined the standard
environmental requisites for tender processes for studies and projects. In addition, the department handled
enquiries coming from outside REFER concerning the analysis of potential environmental interference of
several projects with the national rail network.
With regard to Environmental Monitoring, opinions were prepared in the context of consultation processes for
contractors and service providers. Assessments were made of proposals for carrying out contract
construction jobs and environmental auditing observation work was undertaken. The department also
developed the environmental terms of reference for the tender programmes and contract specifications for
contract work (and inspection) and provision of services.
Concerning noise, the department prepared a management plan for noisy activities, encouraged actions
for framing responses to complaints about noise caused by railway circulation (namely the preparation of
noise charts and the respective noise reducing plans) and considered various acoustic protection projects.
The Ferr 3 model was installed (in partnership with the Higher Technical Institute Signal Analysis and
Processing Centre) and the simulation process which the model allows was begun. Updating work on the
model was also carried out.
In the area of waste, the management standard for used and waste materials was developed in partnership
27

with the Purchasing and Logistics Department and a tender process was opened for the development of
the e-waste software application with the Information Systems Department. In another joint action with the
Purchasing and Logistics Department, provisional standards were developed for waste management as was
the qualification process for operators handling REFERs hazardous and non-hazardous waste. The
department prepared a first study on the description of waste. Several actions were taken with regard to the
recycling of diverse materials and operations were carried out to tidy up the materials accumulated at
Entroncamento. Support in the area of waste management was provided to various company units.
Also in the area of waste management, the Environmental Department carried out steps to identify new
ways of getting value from waste. This involved the organisation of suitable collection circuits adapted to
the specific characteristics of the types of waste plus the careful identification of operators which have the
capacity to extract value from the waste in question. This work has enabled us to reduce treatment costs
and sometimes even to assign a positive economic value to waste. Of particular note in this regard are
batteries, rubber linings and ceramic insulators.
The Board of Directors, recognising that successful waste management also involved raising the awareness
of and motivating the entire company in order to promote collection, sorting and selective routing of
different materials and waste, as well as making people aware that they are or can be active elements in
the company in this regard, has linked a social element to this area, assigning 10% of the revenue resulting
from the sale of waste to REFERs social action fund. The main purpose of the social action fund, which is
managed by the Human Resources Department, is to assist REFER employees who are particularly in need
of help.
The Environmental Department has also undertaken archaeological work in partnership with vora University
(preparation of archaeological risk letters for the route Sines-vora-Elvas). The department participated in the
standardisation process for specific environmental themes and also provided specific technical support in
matters concerning ecological systems.
Lastly, it should be noted that the Environmental Department has provided technical support to RAVE on
specific matters such as the strategic assessment of environmental impacts and the assessment of
environmental impact.
28

Real Estate Assets
For the Real Estate Assets Department, 2004 was a year for defining and studying a new strategy guided by
a new model of thinking about railway assets. This strategy seeks to alter the visibility of the existing assets.
This will require an enormous effort in terms of human and financial resources and has as its guideline finding
the best alternatives for the use of these resources. In this way we want to find new way of looking after and
adding value to REFERs real estate assets. On the internal level this will entail a radical change in the way
the company operates and in the way the various REFER departments and the group companies look on
these assets. A new organisational model is currently being completed as part of the real estate assets
strategic plan.
Of the work carried out by the department in the year in question we must highlight the inauguration of the
first Eco-track located on the old Mono railway branch-line, for which the promoters were the Valena
and Mono local government authorities. The objective of this project was to transform the old re-activated
railway route into a facility at the service of the regional population and economy, as has been done in
other countries such as Spain. In this regard a seminar was organised on this subject to raise the awareness
of public and private entities concerning this project. By the end of the year concessions had been granted
to local authorities for a total of 160 km and it is foreseen that concessions will be granted for the remaining
500 km, including stretches of railway without train circulation, in the next few years.
In 2004, a start was made to contracting work which will provide the company with a geographic
information system (GIS), in support of the Real Estate Assets Department, which will be in full accordance
with the policy defined by the Board of Directors for this type of management support tool.
Other highlights were the opening to the public of the car parks at the railway stations of Braga, Campanh,
Meleas, Palmela and Venda do Alcaide. There are currently about 20 000 parking spaces next to railway
stations which are available for the use of railway passengers.
Another notable event which will have a marked impact on the future operations of REFER and other
companies of the group was the start of the construction of the new headquarters: the Railway Campus
being built near to the Brao de Prata station.
29

Auditing and Quality Management
In 2004, in the Internal Auditing area, auditing actions were carried out in areas of risk. Of particular note were
those actions done on long duration infrastructure investments, the scrap metal survey processes, the contracting
of services for infrastructure maintenance and the management of real estate assets.
In the Quality Management area, work was continued on implementing the quality policy with the consolidation /
evolution of the Quality Management System (QMS) in the Lisbon Conservation Operating Zone, where certification
has been obtained, the continuation of the implementation of the QMS in the Oporto Conservation Operating
Zone, with a view to obtaining certification, and the start of the same process in the central units of the Operating
Department.
30

International Relations
In 2004 a strategy was approved for REFERs international relations which puts emphasis on strengthening its
institutional representation in international organisations, the monitoring of the common policies of the EU, its
Iberian relationship and its presence on coordination committees and working groups of a technical nature.
As a consequence, an adjustment was defined for the International Relations Departments strategy with the
following aspects being attended to: representation on international organisations with support being given
to the Board of Directors and REFERs other bodies in this regard, presence on working groups of a technical
nature and those involving the transmission of international knowledge, the guaranteeing of updated
information on initiatives/actions of interest for the sector in the area of transport undertaken by the EU, the
transmission of information to and from the exterior, and the facilitation of relations between the companys
bodies and international reality.
The following actions were carried out as a result of the above: maintaining of institutional presence in the
associations which REFER is a member of (EIM, UIC, CEEP and APOCEEP); intervention on the UIC
Infrastructure Committee, critical analysis of the presence of REFER in UIC Projects in which participation is
obligatory and the early definition of a strategy to follow in deciding whether to join projects of this type; the
accompanying of common policies of interest to the sector, spreading information about the respective
contents within the company and looking after the preparation of opinions on legislative proposals; the re-
formulation of publication support for relevant information for the railway sector, enriching and broadening
the disclosure of information; the creation of a network of correspondents within the company, a link
between the International Relations Department and those company units which most frequently have
some activities of an international nature, in order to improve the respective relationship; support for visits of
foreign entities to REFER.
The Department contributed in this way to the companys relations with international reality, supporting REFER
in appropriate reactions to international events which affect it, absorbing external knowledge in a structured,
organised and active fashion, giving the company the capability to influence decisions on matters affecting
its business and representing its interests as a railway infrastructure management company.
31

General Engineering
Department
The main objective of the transformation process of the General
Engineering Department (GED) has been to define an operating
model to improve the efficiency of the management of technical
and engineering resources and, simultaneously, to allow the
establishment of the Engineering Department of the GED as a
centralised skills and knowledge unit to look after the provision of
services to investment, conservation and network operations.
Source: Refer News
Board of Directors
Strategic
General Secretariat
Planning

Image Control
Auditing and
Systems
Relations
Environment

Department


Innovation and
Crossings and
Level Crossings
Assets Department
on 25 de Abril
bridge
32

General Engineering Department

Major changes were made in 2004 in the organisation of the General Engineering Department (GED).
In the GED the following units were closed during the year: the Mission for Signalling, Telecommunications and
Safety Systems, the Oporto / Braga Project team, the Atlantic Axis department, the Construction Teams, Port
Accesses, the Management Support Department, the teams for the Sintra/Cascais, Beira Baixa, Northern Line,
North South Crossing, Lisbon Algarve, and the Aveiro Port projects and the Signalling and Telecommunications
Nucleus of the New Technologies Department. Also closed down was the Mission for Work of the Rossio Tunnel,
created by decision n 24/03 of the Board of Directors.
As a consequence of the re-organisation of this department the following units were created: the Signalling and
Telecommunications Nucleus of the New Technologies Department, the Investments Department, the Aveiro Port
Project and the Department of Coordination and Management Control, under the command of the General
Engineering Director. Also created were: Units for the Northern Line, Aveiro Port Connection, Beira Baixa Line, Lisbon
Metropolitan Area and the Sines Elvas Connection, coming under the Investments Department, the Rossio Tunnel
Project Group under the control of the General Conservation and Operations Director and REFERs Northern Branch,
coming under the control of the Board of Directors.
In December, the physical move of the GED to the ARTs Building in Parque das Naes was completed.
In 2004, in the Quality and Safety area the Engineering Department undertook a set of actions in the context
of the standardisation and approval / certification of circulating and other materials.
In the area of Technical Engineering Standardisation, REFER was represented on the UIC Civil Engineering
Track Expert Group and participated in the works of the CEN-TC256WG 15 Track Alignment and Design
Parameters-Broad Gauge group and in the CEN-TC 256, SCI, WG 4 Restoration of Rails by Electric Arc
Welding group.
Inside the company the technical staff members of the various specialist areas were involved in the
Standardisation Plan. This work included the preparation / updating of technical instructions and standards
for the various specialist areas.
Work was carried out for the approval and receipt of track, catenaries and inert materials through the
management of service provision contracts. New installations were also received and handed over. This
involved checking that the work done was in accordance with the job projects and carrying out tests prior to
facilities being brought into service.
During 2004, the Innovation and Standardisation Department continued its work on the process of
harmonising standard preparation procedures. The department also represented REFER at seminars on
standardisation in the railway sector organised in 2004 by the IPQ Portuguese Quality Institute and by the
Portuguese Roads Institute. The department also represented REFER actively at the 5th seminar on innovation
and quality in the railway sector.
The department participated on REFERs behalf in the updating of the UIC files on signalling and
33

telecommunications and provided technical advice to the National Institute of Railway Transport INTF, in
the context of the development of technical inter-operability specifications.
A migration and implementation plan was prepared for the Portuguese ERTMS system for the conventional
network and this was coordinated with the same plan for the ERTMS of the high speed network.
A feasibility study was prepared and the technical and budget estimations elements prepared for the
opening of the tender process for the supply, assembly and technical evaluation of the first installation of the
GSM-R digital radio system, an essential component for the development of the nation high speed and
conventional networks.
Two issue of the CINCIA e TCNICA magazine were published, aimed at spreading technical and
scientific knowledge and understanding inside the company and among its partners.
Engineering Department
In 2004, in the area of quality and safety, the Engineering Department undertook a series of actions in the
context of the standardisation and approval / certification of circulating and other materials.
Inside the company, the technical staff members of the various specialist areas were involved in the
Standardisation Plan. This work included the preparation / updating of technical instructions and standards
for the various specialist areas.
Investments Department
North Line
With regard to studies and projects, the following work was started in 2004: Study of corridors, preliminary
study and environmental impact study of the Santarm bypass; Re-formulation of the project for building the
Mato Miranda / Entroncamento section; Preliminary study of the rehabilitation of the Ftima and Albergaria
tunnels; Re-assessment studies of the noise impact and minimising measures projects for sub-sections 2.1
(Entroncamento Albergaria) and 3.2 (Quintans Ovar); Re-formulation of the modernisation of sub-section
3.3 (Ovar - Vila Nova de Gaia).
A tender was also opened for the preparation of preliminary studies, work projects and environmental
impact study for the modernisation of sub-section 2.3 (Alfarelos Pampilhosa).
During 2004, the drainage project between kms 10+500 and 22+500 and the project for the widening of
the flyover over the EN-109, on sub-section 3.2 (Quintans Ovar) were completed.
In terms of construction, special mention is made of the completion of the contract work on the new
southern diagonal at Alverca and the start of the following work: Modernisation of the sub-section Vila Franca
de Xira Norte Azambuja, Construction of the viaduct, over- and under-passes and respective access and
connection roads on the section Azambuja Vale de Santarm; Construction of over- and under-passes
phase 3, on sub-section 2.1 (Entroncamento Albergaria); Assembly of catenary tele-command in sub-
section 2.1 (Entroncamento Albergaria); Substitution of the So Loureno and Simes bridges on Sub-
34

section 2.2 (Albergaria Alfarelos); Finishing off work on Aveira station; Construction of Quinta do Cruzeiro
over-pass on Sub-section 3.2 (Quintans Ovar); and lowering of the track at the Espinho city crossing.
Contract work also continued in 2004 on the modernisation of Sub-section 2.1 (Entroncamento Albergaria)
and the modernisation of Sub-section 3.2 (Quintans Ovar), with the latter being now in its closing stages.
Tenders were opened for the following jobs: Modernisation of the section Azambuja Vale de Santarm (at
the awarding stage); Modernisation of Coimbra B station; Construction of over-passes at Avanca and
Salreu and the passengers building at Estarreja station on Sub-section 3.2 (at the awarding stage);
Construction of the Aveiro inter-face(at the awarding stage); Carrying out of electrical and ventilation
facilities for the Aveiro road under-pass; Supply and installation of transformer stations at Aveiro station (work
being started).
With regard to Signalling, Telecommunications and Convel, the following contract jobs were completed:
Public information system on the Azambuja line; Telecommunications system for the Moscavide stopping
place; Signalling and Convel for the new south diagonal at Alverca; and Signalling and Convel of Sub-
section 3.2 (Quintans Ovar).
During 2004, the contract job started for the signalling and telecommunications work on Sub-sections 1.2
and 1.3 (section Alhandra (not included) Vale de Santarm (not included), and the contract jobs
continued for the signalling and telecommunication work on Sub-section 2.1 (Entroncamento Albergaria)
and the telecommunications work on Sub-section 3.2 (Quintans Ovar).
Also of note was the closure in 2004 of 17 level crossings with 193 level crossings having been closed since
the start of the project.
Aveiro Port Connection

This project is for the construction of the Cacia multi-mode platform and the railway branch line linking with
Aveiro port.
At the start of 2004, the public hearing was held for the environmental impact study but due to some
technical questions which were raised the project for building the railway branch line to Aveiro port had to
be re-drafted. The environmental impact study also had to be changed and will probably be ready at the
start of next year.
Beira Baixa Line

With regard to the modernisation of the Beira Baixa line, in which the work has been done in phases and
sub-divided into sections, on the section Mouriscas A Castelo Branco work continued on Signalling,
Telecommunications, Electrification, Tele-command of the Catenary and Supervision, and on the re-
modelling of the Rdo and Castelo Branco stations. On the same section, contracts were awarded for
studies and projects to allow the Alvega-Ortiga station to be converted into a stopping place.
During 2004, on the section Castelo Branco / Covilh, work was completed on the passenger platform of
Vale de Prazeres and Tortosendo stations and at the end of the year the final stages of work were underway
35

on the over-pass at Km 150+049. Contracts were also awarded for several studies and projects, namely
those referring to lines, the re-modelling of stations and over- and under-passes.
On the section Covilh / Guarda, the bridge strengthening contract job, covering 5 bridges, was completed
in 2004. Work was started on assessing the project for widening the Baica under-pass and contracts were
awarded for projects for 6 bridges to replace the existing ones. In addition, various studies and projects
were carried out for over- and under-passes, lines, station re-modelling and electrification.
Lisbon Metropolitan Area

Lisbon Algarve Connection, Bulk Materials Route and Tunes-Lagos Section
In 2004, on the section Pinhal Novo/ Faro the essential parts of the modernisation of the line infrastructure
elements were completed with the finishing of the work on the section Tunes / Faro. Of the 150 level
crossings existing in 1998, 134 had been eliminated by the end of 2004.
On the section Ermidas/Funcheira, the line infrastructure modernisation work allowing speeds of up to 220
km/h was completed, as was the electrification (catenary for speeds up to 220km/h), the installation of
Convel and land-train radio systems, the re-sizing and optimisation of station layouts, platforms and
accesses and the construction of over- and under-passes for the closure of level crossings.
On the section Funcheira/Faro, the modernisation was completed of the line infrastructure, electrification,
new signalling, integrated telecommunications network, the installation of Convel and land-train radio
systems and over- and under-passes.
The new Parque das Cidades station at km 331,800 of the Algarve line came into service.
On the bulk materials route, the installation of new signalling and telecommunications systems was
completed on the section Funcheira/Ourique.
On the Algarve line between Tunes and Lagos, work was started on the new Lagos station (2nd phase).
Sintra and Cascais Lines

On the Sintra line modernisation project, ten stations have been re-modelled and four new ones have
been built. The Barcarena/Tercena and Cacm stations have still to be re-modelled and the
quadruplication of the section of adjoining lines still has to be done.
In 2004, the Mira Sintra / Meleas station was completed. This has allowed the Cacm family of trains
to start doing their reversing there and has allowed the Meleas level crossing to be closed. The work was
completed to make it possible for all the Sintra line to be commanded and controlled from the
Campolide CTC. A contract was awarded for the acoustic barriers.
Tenders were opened for the construction of the Papel under-pass, which will allow the last road level
crossing on this line to be closed, and for the work on the Barcarena/Tercena station.
With regard to the re-modelling of the Cacm station, the respective work project was developed during
the year and is near to completion.
In relation to the modernisation of the Cascais line, two stations have been re-modelled and the park for
36

rolling stock has been built at Carcavelos, where the level crossing has also been eliminated. The
substitution of the metal bridges in Oeiras has also been completed.
In 2004, the re-modelling of the Pao de Arcos passenger platforms and roof was completed and the
contract was awarded for the construction of the Parede pedestrian under-pass.
North-South Crossing
With most of the work projects having been completed, in 2004 construction was started on the new
Setbal station, the quadruplication of the loop line between Chelas (Technical terminal) and Brao de
Prata and the Siderurgia Nacional branch line.
The following construction and supply contracts were completed: Palmela and Venda do Alcaide
stations; line and platform of the section Pinhal Novo / Setbal; electrification of the sections Coina /
Pinhal Novo and Pinhal Novo / Setbal; acoustic barriers on the sections Coina / Pinhal Novo and Pinhal
Novo / Setbal; pedestrian over-passes on the section Pinhal Novo / Setbal; telecommunication systems
between Pinhal Novo / Setbal, Convel between Coina / Pinhal Novo and Pinhal Novo / Setbal and the
over-pass at Recosta (Barreiro).
Construction work was started on the joint headquarters of the Ramiro Jos Group and the So Joo de
Deus Parish Offices.
Oporto / Braga Project

During 2004, re-modelling was completed on the sections Lousado Nine, Nine station, Nine Tadim and
Tadim Braga. This work involved the duplication of the new sections, the electrification of the line, and the
re-modelling of the stations and respective halts.
This work also led to the elimination of 17 of the 53 level crossings on the route through the construction of a
wide grid of over- and under-passes and the setting up of various access roads.
The completion of these jobs enabled the Braga Faro connection to be inaugurated in May 2004.
Railway line on the 25 de Abril Bridge

Several jobs were carried out on this line in 2004. Of particular interest was the contract job for the
installation of new rigid beam support devices for the suspension bridge. This work allowed the original
support devices, whose behaviour in response to train movements was not reliable, to be replaced. Also
noteworthy was the re-formulation of the electricity supply system for the railway lighting on the bridge and
the access viaduct with the installation of a new transformer post and an emergency generating group. The
work carried out was monitored by LNEC (National Civil Engineering Laboratory), in the context of a
cooperation protocol signed by REFER, LNEC and IEP (Portuguese Roads Institute) for the structural monitoring
of the 25 de Abril Bridge, in accordance with decision n 23184/2002, of 10 October, of the Minister of
Public Works, Transport and Housing (MOPTH, currently the Minister of Public Works, Transport and
Communications (MOPTC)), in which it is stated that the major developments in which the MOPTH (current
37

MOPTC) is or becomes involved in, as the supervising ministry, will be monitored by LNEC in the areas in
which LNEC has relevant skills and competence.
Crossings and Level Crossings Management Department
With regard to the elimination and re-classification of level crossings, in 2004 the following actions were
carried out in collaboration with the Investments Department and REFERs Northern Branch:
LCs eliminated LCs re-classified

REFER unit
Planned Done Planned Done
NORTHERN BRANCH 34 37 0 0
INVESTMENTS DEPARTMENT
North Line Project 11 9 0 0
Beira Baixa Project 6 1 2 0
Sintra /Cascais Project 1 1 0 1
North South Project 9 6 0 0
Lisbon Algarve Project 24 23 7 13
Sub total 51 40 9 14
CROSSINGS AND LC MANAGEMENT DEPARTMENT
Department for Elim. and re-class. LCs 114 121 55 56

LC Management Department 0 0 31 26
Sub total 114 121 86 82
OUTSIDE ENTITIES 5 7 --- ---
TOTALS 204 205 95 96
As can be seen, in 2004 there were 205 eliminations and 96 re-classifications, with planned numbers being
exceeded.
The work carried out by REFER which enabled the elimination or re-classification of these level crossings was
as follows: construction of 56 over- and under-passes which enabled the elimination of 63 level crossings
and the re-classification for pedestrians-only of another 2, the construction/improvement of alternative roads
which allowed the elimination of 135 level crossings and the re-classification for pedestrians-only of another
3, the automation of 8 level crossings, the alteration of automation, with the installation of half barriers, on 26
level crossings and ensuring regulatory line of sight at 56 level crossings.
In addition to this work, 5 over- and under-passes were built by municipal councils and this led to the
elimination of 7 level crossings.
As a result of the above, on 31 December 2004 there were 1 476 level crossings on all the lines with traffic
on the railway network. This is an average density of 0,524 level crossings/km, compared to 0,600 level
crossings/km at the end of 2003. The level crossings are distributed as follows:
38

CLASSIFICATION NUMBERS
With Guard 156
Automatic Type A 3
Automatic Type B 242 340
Public Level Automatic Type C 95

Crossings
Without Guard 617
Pedestrians 191
Subtotal 1304
Private Level Crossings 172
TOTAL 1476
In the year in question, work was also done on matching the classification of all (152) of the old level
crossings of 1st, 2nd, 3rd or 4th categories (with guard) on railway lines with traffic to conform with the Level
Crossing Regulations Decree-Law n 568/99 of 23 December.
An awareness and educational campaign was also carried out, coordinated by the Communication and
Image Department, being broadcast on Portuguese TV channels under the title of Stop, Listen and Look.
The combined effect of all these actions has been a gradual decrease in the number of level crossing
accidents, as can be seen in the following table.
Level Crossing Accidents 1990 to 2004
Total C ollisions Persons Hit
250
200
n of Accidents
150
100
50
Year 0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Total 234 218 198 205 182 166 147 144 144 154 119 123 113 105 102
C ollisions 199 173 160 171 160 148 129 122 127 129 104 106 95 90 84
Persons Hit 35 45 38 34 22 18 18 22 17 25 15 17 18 15 18
39

General Operations and

Conservation
Department The General Operations and Conservation
Department is responsible for the operational
management of the railway network, providing
railway operators with suitable circulation channels,
the use of reliable infrastructure and the command
and regulation of traffic, with high standards of safety
and quality.
Source: REFER News
Board of Directors
Strategic
General Secretariat
Planning

Image Control
Auditing and
Systems
Relations
Environment

Department


Innovation and
Crossings and
Level Crossings
Assets Department
on 25 de Abril
bridge
40

General Operations and Conservation Department
Conservation and Maintenance
During 2004, the Conservation and Maintenance department implemented a qualification system for
suppliers providing services in the railway infrastructure maintenance area, covering the specialist areas of
line and geotechnical matters, civil construction, low tension, catenary and special structures.
Currently, market imperatives and the companys strategic orientation are aiming toward the contracting
out of all railway infrastructure maintenance work. This move, currently in progress, requires the Conservation
and Maintenance department to adjust to a new reality, optimising available resources, seeking to maintain
existing know-how while simultaneously increasing skills, particularly in the area of contract management.
In light of the perspective of contracting out the maintenance services, a strategy has been drawn up for
the overall conservation activity for the railway infrastructure. The Conservation and Maintenance
Department thus put in place a set of strategic objectives in 2004 with a view to improving its skills in the
area of monitoring the state of the railway infrastructure in real time, by extending the Permanent
Infrastructures system to the entire railway network and by the completion of the integrated conservation
management project.
With a view to achieving the objective of continually improving Conservation and Maintenance processes, the
project to implement the Conservation and Maintenance quality management system is currently in progress. This
is being done in accordance with standard NP EN ISO 9001:2000. In 2004, following the certification of the Lisbon
conservation operating zone, the quality management system was launched in the Oporto conservation
operating zone.
Operations Department
Circulation Management
The Circulation Management department started the e-post project for distributing service orders in 2003
and this was put into full use during 2004.
Work was started for the launching of the e-telegrams project which seeks to facilitate the methods currently
used in the recording of telephone communications.
The manoeuvring networks underwent a significant increase both in terms of equipment and of recording
processes. Several manoeuvring radios were acquired and functions were installed for recording
communications in several locations.
Due to the rationalisation and modernisation steps introduced in the railway operating processes, this
department has been gradually reducing the number of its workers and 308 employees left in 2004.
41

Capacity Management
The department participated in the definition of the strategic plan for the implementation of the operating
command centres OCCs of REFERs network and the preparation of the conceptual model for the referred
OCCs. We also collaborated in the implementation of the quality management system in the central
services and in the definition of the respective processes.
Another aspect worth highlighting was the coordination of the preparation of the network directory for 2005
which involved the compilation of information related to the access to, and use of, infrastructure and the
relevant physical characteristics.
The capacity management department prepared several layout studies (new layout of Coimbra-B station
and alteration of the layout of Pinhal Novo station for the maintenance of the old signalling post tower),
participated and collaborated in the project team for the re-structuring of technical regulations, prepared
opinions on urban licensing processes adjacent to public railway domains, and prepared a contingency
operating plan for the Rossio Tunnel closure scenario and the consequent study for changing the signs at
the loop line stations. The department also participated in the preparation of the report concerning the
integration of the high speed network with the conventional network.
The department also participated in the development of a new interdepartmental project for registering
infrastructure elements in the context of the e-infrastructure software which will be used by the application e-
Viriato, among others.
Following the completion of the modernisation work on the railway network completed in 2004, train speeds
were raised on significant sections of line. Particularly worthy of note in this regard are the North and South
Lines:
% of line on which the speed is applicable
North Line South Line

Speed interval
End of 2003 End of 2004 End of 2003 End of 2004
Under 120 Km/h 5,1 4,9 46,4 37,1
Between 120 and 150 Km/h 59,4 49,9 45,7 26,1
Between 160 and 190 Km/h 12,2 18,8 3,5 11,7
Equal to or greater than 200 Km/h 23,2 26,5 4,3 25,1
Of the alterations made to the technical timetable, six resulted from the modernisation of the infrastructure,
with two being made at the request of the operators re-formulation of CPs good service and extension of
FERTAGUSs service to Setbal.
42

Regulations
In 2004, numerous regulatory texts were prepared and proposed for approval by INTF. A significant number
of these related to the entry into service of new installations.
Mention should be made of the regulations for the Special Circulation Regime which allows, in a safe and
agile manner, the re-establishment of normal circulation after the occurrence of signalling faults, and of the
new model for speed limitation.
With regard to new signalling installations, we highlight the signalling concentration stations of Nine,
Funcheira, Faro and Tunes, Pinhal Novo, Algueiro, Meleas and Ermidas-Sado.
The CONVEL system now covers the entire South Line, the Alentejo Line between Funcheira and Ourique and
the Algarve Line between Olho and Lagos.
With regard to ground train radio, this now covers the complete South Line, the Alentejo Line between
Funcheira and Ourique, and the Algarve Line between Tunes and Faro.
In relation to the electrified network, this now covers the entire Axis between Braga and Faro.
Commercial Contract Management

Work done in the year included accompanying the re-negotiations of the concession contract between the
State and Fertagus, carrying out analysis of forecast revenues and costs.
The conditions to allow the coming into effect of the station operation concession contract celebrated with
CP were established.
The department coordinated the implementation and updating of the information and support systems for
passengers in stations, particularly with regard to sound information, telenotices and signs.
Numerous contracts were established for the ceding of spaces and the contract with CPCom was looked
after.
43

Management and Control Department

In 2004, the essential services tariffs were calculated for publication in the 2005 Directory.
The SITRA system was used to collect periodically all the information needed to allow the determination of
operational facilities provided and thus enable REFER to charge the operators for the use of railway
infrastructure.
Below we show the evolution of TKs (train kilometres) on the general network, although the TKs travelled on
the lines in Annexe I of Decree-Law n. 270/2003 were not subject to tariff collection in 2004.
OPERATOR: CP EVOLUTION OF TKs

2001 2002 2003 2004
45.000.000
40.000.000
35.000.000
30.000.000
25.000.000
20.000.000
15.000.000
10.000.000
5.000.000
0
Passenger TKs Goods TKs Slow TKs Total TKs
During 2004, a service contract was signed for matching management accounting and the costing system to the
new regulatory demands with regard to tariffs and to define a reporting model for the regulated accounts showing
activity indicators.
OPERATOR FERTAGUS EVOLUTION OF TKs
Operator Fertagus
1.280.000
1.260.000
1.240.000
1.220.000
1.200.000
1.180.000
1.160.000
1.140.000
1.120.000
1.100.000
1.080.000
2001 2002 2003 2004
44

Description of the National Railway Network
At the end of 2004, the National Railway Network was 3 624,0 km long. 2 849,2 km of this network had railway
traffic. The characteristics of the network in 2004 are shown in the following table:
Without Railway National Railway

With Railway Traffic
Traffic Network
Electrified Non
TOTAL TOTAL TOTAL
Electrified
25.000V 1.500V Sub-Total
Wide track 1.347,4 25,5 1.372,88 1.288,32 2.661,2 326 2.987,3

Single track 782,3 - 782,3 1.272,88 2.055,2 - 2.055,2
Double track 532,3 25,45 557,759 15,4 573,0 - 573,0
Multiple track 32,8 - 32,8 33,0 - 33,0
Narrow track 0 0 0 187,6 188,0 448,7 636,7
Single track - - - 187,6 188,0 448,7 636,7
TOTAL 1.347,4 25,5 1.372,9 1.476,0 2.849,2 774,8 3.624,0
45

REFERs Northern Branch
REFERs Northern Branch was set up on 1 June 2004 with the main objective of accompanying all the railway
projects undertaken by REFER group companies located in the Oporto municipal area, of which an
example is the articulation with RAVE regarding the works related to the implementation of the high speed
railway network on the Oporto Vigo network. A highlight of the branchs operating activity included the
completion, in the first quarter of 2004, of the railway infrastructure re-modelling works on the section
Lousado Nine Braga, aimed at raising and standardising the speed levels on the Atlantic Axis between
Braga and Faro.
Mention must also be made of the re-opening to railway traffic of the Guimares line on 19 January 2004
following substantial work carried out between Santo Tirso and Guimares to convert the line to wide track
with electrification of the route and elimination of 65 level crossings and the re-modelling of stations and
halts.
In the context of the Stations with Life Project, work started in January 2004 on the construction of the West
Campanh interface. The first phase ended with the opening, in September 2004, of 175 parking places in
the eastern zone of the new underground car park which is to have a total capacity for 400 vehicles.
We must also mention the start of work in June 2004 to improve Rio Tinto station. This work includes the
construction of a pedestrian under-pass and the building of an interface with capacity for about 50 cars.
46

In May 2001 work was completed on the re-modelling of Ermesinde

station.
In September 2001 line infrastructure rectification work on the route
2001 Pinhal Novo/Pinheiro Concordncia do Poceiro on the Alentejo and
South lines was completed.
On 14 November 2001, REFER and local authorities of Valena and
Mono signed a protocol for the construction of an Eco-track
between the two towns, based on the route of the old railway.
Investments and Coverage

of Investments
47

Investments and Coverage of Investments
The total volume of investments carried out by REFER during 2004 was 494 million euros, 78% of the planned
investment total. Of this total, 97% (477 million euros) were for LDI (long term infrastructure) included in
PIDDAC. The remaining 3% (17 million euros) were investments made outside PIDDAC, including on-going
capital spending of infrastructure (7,2 million euros), studies of a general nature (7,4 million euros) and
operational investments (2,4 million euros).
PIDDAC Financing Budget Financing Sources

on 31 December 2004 (thousand euros)
Financial Coverage
Perform.
PROGRAMS / PROJECTS Forecast Performed
PIDDAC EU Financing Other rate (%)
National Railway Network - General Network 334.655 256.874 12.873 49.762 194.239 77%
North Line Integrated Project 186.603 159.001 6.371 49.762 102.869 85%
Algarve Line Integrated Project 73.294 67.348 2.204 65.144 92%
Beira Baixa Line Integrated Project 26.821 11.310 1.020 10.290 42%
West Line Integrated Project 4.393 2.920 80 2.840 66%
Minho Alm Nine Integrated Project 1.714 326 70 256 19%
Douro Line (Marco Rgua) Integrated Project 4.403 1.384 4 1.380 31%
North Line New Espinho Station 18.168 3.913 380 3.533 22%
Sines port Spain Railway Connection 1.708 697 100 597 41%
Algarve Line Modernisation 3.176 2.134 4 2.130 67%
Regional Lines 1.791 495 70 425 28%
Road Safety Elimination and Re-conversion of Level Crossings 12.584 7.346 2.570 4.776 58%
Reinforcement of 25 de Abril Bridge Structure 8.098 7.471 200 7.271 92%
National Railway Network - Oporto Metropolitan Area 129.355 121.058 3.080 6.448 111.529 94%
Minho Line (Oporto Nine) 59.976 57.491 1.480 6.448 49.562 96%
Guimares Line 10.196 9.254 200 9.054 91%
Douro Line (Ermesinde Marco) 10.698 5.830 500 5.330 54%
Braga Branch Line 48.484 48.484 900 47.584 100%
National Railway Network - Oporto Metropolitan Area 127.816 90.036 4.323 19.429 66.284 70%
Sintra Line, Alcntara Branch Line and West Line (to Sabugo) 28.074 17.061 920 16.141 61%
Cascais Line 8.601 2.461 250 2.211 29%
North South Railway Axis (Chelas Fogueteiro) 5.287 4.322 4 4.318 82%
North South Railway Axis (Brao de Prata Chelas) 302 171 4 167 57%
North South Railway Axis (Coina Pinhal Novo) 48.567 38.051 1.445 6.935 29.671 78%
North South Railway Axis (Barreiro Pinhal Novo) 9.829 6.655 765 5.890 68%
North South Railway Axis (Pinhal Novo Setbal) 27.156 21.314 935 12.494 7.885 78%
Multimodality 3.497 1.688 154 0 1.534 48%

Cacia Terminal and Aveiro Port Connection 2.394 864 150 714 36%
Railway Accesses to Lisbon Port
Leixes Connection and So Gemil Junction 1.103 824 4 820 75%
Total Investment in Long Duration Infrastructure PIDDAC 603.421 477.126 20.630 75.639 380.858 79%
Other Current Investments in LDIs 14.334 7.218 7.218 50%

Other Investments 18.569 9.836 9.836 53%
Total Other Investments 32.903 17.053 0 0 17.053 52%
Total REFER Investments 636.324 494.179 20.630 75.639 397.911 78%
48

In relation to the PIDDAC investment budget, the following allocations were made to the various REFER
organisational units:
General Engineering Department (GED): 72,16%;
REFERs Northern Branch (RNB): 25,45 %
General Operations and Conservation Department (GOCD): 2,36%
Strategic Planning (SP): 0,04%
Contribution of company departments

to PIDDAC spending
0,04%
25,45%
2,36%
72,16%
GED GOCD RNB SP
Of these investments, the main work was done on the following PIDDAC projects:
Integrated North Line Project: work on the North Line Project, which contributed to about 32% of
PIDDAC investment, continued in three main areas: Studies and Projects, Civil Construction and
Signalling, Telecommunications and Convel. Work was continued on modernising sections 2.1
(Entroncamento Albergaria) and 3.2 (Quintans Ovar).
Minho Line (Oporto Nine) and Braga Branch Line: as an important step in the connection
Braga/Faro with the reduction of journey times, greater safety and reliability, REFERs Northern Branch
carried out a major modernisation of this section involving the construction of new stations and
interfaces, the construction of over- and under-passes and the respective accesses,
implementation of a new double electrified line and the installation of new signalling and
telecommunications systems. This work contributed to about 22% of the investment in these two
PIDDAC projects.
Integrated Lisbon Algarve Connection Project: completion on the Lisbon / Algarve Connection
project (14% contribution towards PIDDAC investment) on the major work elements in terms of the
modernisation of line infrastructure, electrification and installation of signalling and
telecommunications systems which allow the Lisbon / Algarve journey to be made in less time and
with greater safety and reliability.
49

PIDDAC Investments Budget - Organ

on 31 December 2003 (thousand euros)
North
PROGRAMS / PROJECTS Planned DGEN DGEC Others TOTAL
Oporto
National Railway Network - General Network 334.655 248.059 8.637 0 178 256.874
North Line Integrated Project 186.603 155.337 3.665 159.001
Algarve Line Integrated Project 73.294 67.348 67.348
Beira Baixa Line Integrated Project 26.821 10.816 494 11.310
West Line Integrated Project 4.393 1.462 1.280 178 2.920
Minho Alm Nine Integrated Project 1.714 78 248 326
Douro Line (Marco Rgua) Integrated Project 4.403 1 1.384 1.384
North Line New Espinho Station 18.168 3.913 3.913
Sines port Spain Railway Connection 1.708 447 250 697
Algarve Line Modernisation 3.176 1.980 154 2.134
Regional Lines 1.791 1 494 495
Road Safety Elimination and Re-conversion of Level Crossings 12.584 6.678 669 7.346
Reinforcement of 25 de Abril Bridge Structure 8.098 7.471 7.471
Suburban Routes Oporto 129.355 0 259 120.799 0 121.058

Minho Line (Oporto Nine) 59.976 216 57.275 57.491
Guimares Line 10.196 9.254 9.254
Douro Line (Ermesinde Marco) 10.698 43 5.786 5.830
Braga Branch Line 48.484 48.484 48.484
Suburban Routes Lisbon 127.816 87.899 2.137 0 0 90.036

Sintra Line, Alcntara Branch Line and West Line (to Sabugo) 28.074 16.198 863 17.061
Cascais Line 8.601 1.639 822 2.461
North South Railway Axis (Chelas Fogueteiro) 5.287 3.989 333 4.322
North South Railway Axis (Brao de Prata Chelas) 302 171 171
North South Railway Axis (Coina Pinhal Novo) 48.567 38.051 38.051
North South Railway Axis (Barreiro Pinhal Novo) 9.829 6.655 6.655
North South Railway Axis (Pinhal Novo Setbal) 27.156 21.196 118 21.314
Multimodality 3.497 864 215 610 0 1.688

Cacia Terminal and Aveiro Port Connection 2.394 864 864
Railway Accesses to Lisbon Port
Leixes Connection and So Gemil Junction 1.103 215 610 824
Total Investment in Long Duration Infrastructure PIDDAC 603.421 344.292 11.248 121.408 178 477.126
Other Current Investments in LDIs 14.334 2.643 3.544 30 1.000 7.218

Total Other Investments 18.569 1.179 2.250 39 6.367 9.836
Total REFER Investments 636.324 348.115 17.042 121.477 7.546 494.179
Financing for long duration infrastructure inscribed in PIDDAC was provided by the State budget under
chapter 50, by EU Funds and other sources of financing. In 2004, the structure of the financial coverage of
the PIDDAC investments was as follows: Chapter 50 represented about 4,3% (20,6 million euros), EU Funds
represented 15,7% (74,6 million euros) while other sources represented 80% (381,9 million euros). As in
previous years the contributions by PIDDAC and EU Funds decreased and so the use of loans represents the
largest part of the financial coverage for the investments. This has had a negative impact in terms of
financial charges.
50

Investment Financial Coverage
PIDDAC EU Fund Other Financing
600.000
500.000
Thousand euros
400.000
300.000
200.000
100.000
0
1997 1998 1999 2000 2001 2002 2003 2004
Investment Carried Out
51

The new Guarda station, on the Beira Alta Line,

was inaugurated on 29 April 2002. The
inauguration of the new Pao de Arcos station, on
the Cascais Line, took place on 12 May 2002. On
14 June 2002 the inauguration took place of the
2002
new Rio de Mouro railway station, on the Sintra
Line.
In December 2002, the remodelling of the Queluz-
Belas station on the Sintra Line was completed.
REFER Group
52

REFER Group
2004 was a year of consolidation and assessment in the REFER universe. In this context, the staff meetings
held between the group companies were important since at those meetings it was possible to debate the
challenges facing the group in a spirit of communication and the sharing of ideas. It was of great value to
get to know colleagues from affiliated companies with which REFER shares the same values, vision and
sector challenges.
Affiliated Companies
Establishment, management and operation of telecommunications infrastructure and systems, the

provision of telecommunications services, as well as carrying out all complementary, subsidiary or
accessory activities, directly or through the setting-up of new companies or taking shareholdings in other
companies.
Promotion and commercialisation of land and buildings; management of real estate

developments; acquisition and sale of real estate assets, as well as setting-up rights on the
same assets.
Provision of consulting services and technical, industrial and commercial assistance in the
transport area, and other areas; carrying out of public works and civil construction projects;
industrial and commercial operation of quarries and quality management activity on
construction developments.
Promotion and commercialisation of shops and commercial spaces which currently exist or are
to be set up in existing or future Portuguese railway stations.
53

REFER Rede Ferroviria Nacional, EP
COMMERCIAL
TELE- PROPERTY VOCATIONAL RAIL-RELATED
AREA
COMUNICATIONS MANAGEMENT TRAINING BUSINESSES
MANAGEMENT
REFER
INVESFER, SA FERNAVE, SA FERBRITAS, SA CP COM, SA
TELECOM, SA
GIL, SA
RAVE, SA
METRO
MONDEGO, SA
54

2003
On 20 January 2003, the Minister of Public Works,

Transport and Housing paid a technical visit to the works
of the North South Railway Crossing and made the first
railway journey between Coina and Pinhal Novo, through
the 25 de Abril Bridge.
On 11 July 2003, the Lisbon Conservation Operating
Zone (one of REFERs conservation areas) was awarded
quality certification, in accordance with Standard NP EN
ISSO 9001:2000, by APCER (Portuguese Certification
Association).
The new Moscavide station, on the North Line, entered
service on 17 December 2003.
Economic Financial
Performance
55

Economic Financial Performance
The 2004 financial year had a negative (euros)
2004 2003
Net Result of 154 157 239 euros, 25%
Operating Results -88.806.928 -66.449.047
worse than the 2003 result, as the
Financial Results -53.767.657 -45.593.159
consequence of the difference between
Current Results -142.574.585 -112.042.206
total costs incurred (336 343 279 euros)
Extraordinary Results -11.485.202 -10.958.902
and the total income obtained (182 286 Pre-Tax Results -154.059.787 -123.001.108
040 euros). Net Result for the Year -154.157.239 -123.092.410
The worsening of this result in comparison with the previous year was due mainly to the decrease in
income for 2004 (-15%), for the following reasons:
Income from the Utilisation Charge was 55 754 918 euros in 2004, a decrease of 12% from the
value for the previous year which was 63.111.003 euros.
With the transposition of the Community Directives known generically as Railway Package I to the
national legal system through Decree-Law n. 270/2003, Regulation n. 19/2000 was revoked and
new tariff rules were defined, with a transitional regime being used for 2004.
The combination of the new rules, the decrease in traffic measured in train-kilometres and the
non-contracting of tariffs to be paid for the use of the autonomous networks listed in Annexe I
which in tariff matters are excluded from the rules applicable to the Network Directory, were the
factors which led to these results. We should point out that up until 2004 the collection of
passenger TKs took into account the operators promised capacity whereas under the new rules
the TKs actually used are what is taken into account.
In-company work decreased by 45%. This item totalled 47 576 028 euros in 2004 whereas the
figure the previous year was 86 405 677 euros
However, there were other relevant factors which also contributed to the increased deficit, for example:
The settlement of some situations which were the subject of reservations in the legal certification of
the accounts and in the external auditors report for 2003.
The deferral for five years of the costs on compensation paid for the rescission of work
contracts by mutual agreement.
This procedure was altered in 2004 and it was decided to book compensation paid in 2004 in
the extraordinary costs item and to book compensation paid in previous years in the item
Results Carried Forward. The total amount in question was 20 161 052 euros.
The impact of this change in criterion was a worsening of the Net Results by 5 541 053 euros.
The non setting-up by REFER of a provision for risks and charges to reflect its responsibilities
resulting from its equity shareholdings in its affiliate companies, GIL, Gare Intermodal de
Lisboa, S.A. and FERNAVE Formao Tcnica, Psicologia em Transportes e Portos, S.A.
The setting-up of these provisions causes a worsening of the Net Results of 885 889 euros.
56

Costs, Income and Results for the Year

The trend seen in 2003 for income to grow was reversed this year. Total Income decreased by 15%. Total
Costs also decreased, by -0,3%.
The coverage of costs by income worsened with the relevant percentage being 54% this year, as
compared to 64% in 2003.
Coverage and Financial Results
2004
2003
2002
2001
2000
1999
1998
1997
0% 20% 40% 60% 80% 100%
C ost Income
In 2004, Operating Results had a negative value of -88 806 928 euros, an increase of 34% in comparison
with the previous year.
Operating Income decreased by 23% compared to 2003 and the Operating Costs component also went
down, by 9%.
Total Operating Income in 2004 was 84% of Total Income. In 2003 this percentage was 93%.
The Operating Income component which decreased most in 2004 in relation to 2003 was the item In-
Company Work.
In 2003 this item represented 40% of Total Income and 43% of Operating Income, while in 2004 it
represented only 26% of Total Income and 31% of Operating Income.
This account is composed of the consumption of materials for Investment (18 659 344 euros), by internal
labour booked against investment (3 101 842 euros), by investment project operating costs (12 524 055
euros) and by structural costs (12 914 938 euros).
The value of consumption of materials for Investment decreased by 67%, (in 2004 the figure was 18 659
344 euros, while in 2003 it was 56 314 793 euros).
The investment works entered service in 2004. However, the application of the materials to these works
took place in 2003.
The item Rendering of Services also decreased (by 9%) in comparison with the previous year.
The amount received in 2004 for the utilisation charge from the operator CP was 55 754 917 euros. This
57

was a decrease of 12% in comparison with the amount received in 2003 of 63 111 002 euros.
The item Rendering of Services represented 38% of total Income while in 2003 this item represented 35%.
In accordance with the decision of the Council of Ministers, the amount of Operating Subsidies, through
compensatory payments, received in 2004 was 28 345 256 euros. This amount included the usage rate
charged to FERTAGUS (2 438 004 euros). The item Operating Subsidies represented 16% of Total Income
and 18% of Operating Income.
The item Other interest and similar income grew significantly in 2004 due to the debiting of late payment
interest from CP and to the participation of REFER in the positive results of our affiliate companies, REFER
TELECOM, S.A., FERBRITAS, S.A. and INVESFER, S.A. This item represented 5 % of Total Income whereas in the
previous year it represented just 0,7 %.
The item Extraordinary Income and Gains totalled 20 511 471 euros, an increase of 54% in relation to the
previous year. This increase was mainly due to the settlement of the account Provision for Doubtful
Receivables resulting from the agreement reached with CP for 5 736 211 euros and for the annulment of
the sales advance to LS of 2 155 610 euros through the contract ceding REFERs contractual position to
INVESFER.
This item represented 11% of Total Income.
Income Struture
Rendered Services 38,6%

35,5%
Works for the C ompany 26,4%

40,3%
Extraordinary Income 10,2%

6,2%
Financial Income 4,7%

0,7%
Operation Subsidies 15,7%

13,7%
Supplementary Income 3,9%

3,6%
Other Income 0,5%

0,0%
2004
2003 0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
Operating Costs decreased by 9%, reversing the upward trend of recent years. (The weight of these costs
on Total Costs decreased to 72%, compared to 79% for the previous year).
The item which contributed most to this reduction was account 61 Cost of goods sold and materials
consumed, which decreased by 60%. The reason for this reduction is based on the decrease in
consumption of materials by the investment works (see explanation for reduction of the item In-Company
Work). The weight of this item on Total Costs was 7% in 2004, against 18% for the previous year.
External Supplies and Services grew by 11% in comparison with 2003. The value of the Sub-contracts
58

represented 62% of the total for the item External Supplies and Services, 10% more than the figure for the
previous year. Other Supplies grew by 14% in comparison with 2003.
This item represented 21% of Total Costs and 29% of Operating Costs. In 2003, the respective weights
were 19% and 24%.
Personnel Costs continued the downward trend which we have seen in recent years.
The Provisions account grew in a marked way (353%), and assumed a weight of 4% of Total Costs (in 2003
this weight was 2%).
This increase is justified by the increase of court cases. For example, a provision of 6 800 000 euros was
created for the Dragados Group legal case in relation to the Bobadela Goods Station. Furthermore, a
provision was set up for the risks and charges resulting from REFERs negative equity holdings in the
companies GIL, S.A. and FERNAVE, S.A. The impact resulting from the setting-up of this provision for risks
and charges was about 900 thousand euros.
Extraordinary Results had a negative value of 11 485 202 euros, an increase in 5% over the year in
question.
There was an increase of 32% in the item Extraordinary Costs and Losses. One of the factors which
contributed to this increase was the change to the way accounting is done for compensation paid for
work contract rescission by mutual agreement. Until 2003, these rescissions were deferred in the accounts
for 5 years. In 2004, the rescission amounts were fully booked under Extraordinary Costs of the year.
Financial Results have a negative value of 53 767 657 euros, a worsening of 18 % in relation to the figure
for the previous year.
Although Financial Income increased significantly, this amount was very small in comparison to the
amount of Financial Costs.
The item Other Interest and Similar Costs grew by 32% in comparison with the previous year. The rapid
growth in debt, resulting from the high operating and investment deficits, has led to increased financial
charges in spite of the current low interest rate environment. In 2004 this account represented 18% of Total
Costs, while in 2003 the respective figure was 14%.
59

Cost Struture
Other C osts 7,2%

9,5%
Material C onsumption 14,0%

18,5%
External Supplies and 2,4%

Services 4,4%
Personnel C osts 37,0%

35,8%
Provisions and 18,6%

Depreciation 20,8%
Financial Expenses 17,9%

7,2%
Extraordinary C osts 2,9%

3,8%
2003 0% 5% 10% 15% 20% 25% 30% 35% 40%
2004
According to what is set out in Decree-Law n 104/97, REFERs Mission is to provide the public management
service for the railway infrastructure in the National Railway Network and also to manage the construction,
installation and renovation of railway infrastructure.
To carry out its work, REFER has been structured in accordance with both aspects of its mission, but
considering that its main objective is to provide a public service for infrastructure management. However,
REFERs entire corporate and administrative structure serves both activities on a non-differentiated basis
and this makes it difficult to directly attribute the respective shares of costs.
For this reason, and taking account of the functions of each organisational unit, criteria have been
defined for distributing the respective operating costs among the two major activities, thus showing the
costs and income associated to each of them. In terms of investment activity not only the costs incurred
by each of the investment bodies are shown but also a share of the operating costs of the companys
central bodies. For 2004, the amount allocated was 12 915 thousand euros.
Lastly it should be noted that the result of this activity comes mainly from the financial charges for the loans
taken on to finance investment in long duration infrastructure already completed, in which, under accounting
rules, the respective capitalisation cannot be done.
60

PROFIT AND LOSS ACCOUNT PER ACTIVITY IN 2004

unit:1000
ACTIVITY
ITEMS
INFRASTRUCTURE TOTAL OF THE
INVESTMENT
MANAGEMENT COMPANY
COSTS 51.703 276.311 328.014

61-Goods Sold and Consumed 18.664 5.510 24.174
62-External Supplies and Services 4.143 65.705 69.849
63-Taxes and Fees 31 9.178 9.210
64-Personnel 20.204 100.308 120.512
65-Other Operating Costs 3 3.468 3.471
66-Depreciation 1.453 4.593 6.046
67-Provisions 0 8.895 8.895
68-Financial Costs and Losses 285 53.576 53.860
69-Extraordinary Costs and Losses 6.920 25.076 31.997
INCOME 48.887 133.399 182.286

71-Sales 0 0 0
72-Services Rendered 67 69.440 69.506
73-Supplementary Income 1.027 6.005 7.032
74-Operation Subsidies 6 28.350 28.356
75-Works for the Company 47.200 376 47.576
76-Other Operating Income 0 879 879
78-Financial Income and Gains 9 8.416 8.425
79-Extraordinary Income and Gains 579 19.932 20.511
86-Income Tax 0 97 97
RESULTS -2.817 -143.009 -145.825
68-Financial Expenses not Capitalised in the Invest. 8.332 0 8.332
NET RESULT -11.148 -143.009 -154.157
Balance Sheet
REFERs Net Assets at the end of the year in question had a value of 6 046 155 591 euros, an increase of
6% in comparison with the equivalent figure at the end of the previous year.
In 2004, there was an increase of 41% in comparison with 2003 in the item Intangible Fixed Assets.
Contributing towards this rise was an increase of 92% in the Research and Development Expenses
account. During 2004 REFER invested in the implementation of e-projects, mainly in the Operating area for
the speed limitation management solution. Multimedia kiosks were installed in the stations and, in
61

addition, an Infrastructure Management Accounting Costing model and new software applications are
being implemented in the General Operations and Conservation Department.
In structural terms, Net Assets recorded an increase, representing 97% of Total Assets. In 2003, this weight
was 94%. The reason for this is because depreciation was never applied to long duration infrastructure
belonging to the State and integrated in the public railway domain. The item Other Reserves, where the
subsidies for financing these projects are booked, has never been reduced proportionally.
There was an increase of 37% in the item Financial Investments mainly due to the positive results of the
companies in which REFER has shareholdings, REFER TELECOM and INVESFER, which are booked in the
account Capital Shareholdings Group Companies.
On the other hand, there was a significant decrease (of 48%) in the item Short Term Third Party
Receivables. The agreement reached between REFER and CP was the main reason for this decrease.
Another of the major decreases in 2004 was the 59% drop in the item Accruals and Deferrals. The
compensation amounts paid for the rescission of work contracts by mutual agreement were booked
under Deferred Costs and depreciated using the straight-line method over 5 years. According to
accepted accounting principles these compensation amounts should be considered as costs of the year
in question. In 2004, this situation was thus rectified and this led to a 76% reduction in the item Deferred
Costs and to an increase in extraordinary costs (see the explanation given above for the Extraordinary
Costs account).
Liabilities increased by 16% and ended the year at 3 600 718 773 euros. There was a change to the
structure of the Liabilities with Medium to Long Term Third Party Debts representing 64% of the total (in 2003
the equivalent percentage was 71%).
Short Term Third Party Debts represented 34% of Total Liabilities. The amount in this account increased by
46%. The item Debts to Credit Institutions increased considerably, by 116%. The delay in the medium and
long term financing operation meant that REFER had to resort to successive short term loans.
The item Provisions for Risks and Charges increased by 49%. This increase is due to the setting-up of a
provision to face up to the negative equity of the affiliate companies GIL, S.A. and FERNAVE, S.A., for the
sum of 8 662 057 euros.
Equity at the end of 2004 had a total value of 2.445.436.818 euros. This was a 5% decrease in
comparison with the 2003 figure.
As has happened in previous years, Equity value is less than that of Total Liabilities. This trend worsened in
2004, with Equity representing only 68% of Total Liabilities whereas in 2003 it represented 83%. The reasons
for this change are due to the worsening of the Net Result and the non-increasing of the Statutory Capital
through Capital Input from the State.
During 2004, in addition to the net results of 2003, the following amounts were transferred to Results
Carried Forward: 14 945 114 euros for late payment interest debited against CP up to 31-12-2003, 7 776
156 euros for the provision for risks and charges for the negative equity of affiliated companies, 12 414
325 euros of annulments of previously booked income, 16 761 008 euros resulting from the REFER / CP
62

Agreement of September 2004 and the amount of the compensation payments made for the rescission of
work contracts by mutual agreement recorded under deferred costs, which totalled 20 161 052 euros.
In September 2004 a REFER / CP Agreement was signed. This settled various invoiced amounts which were
in dispute and which were not covered by the 1st agreement in 2003.
The September 2004 Agreement settled invoices resulting from delays, derailments, other incidents and
services provided by REFER to CPs UTML, UVIR, USGL and USGP business units.
The settling of accounts resulting from this Agreement had a positive effect of REFERs accounts of 18 451
175 euros.
The Liabilities + Equity structure underwent some alterations with the weight of Equity on the Liabilities +
Equity Total going down to 41% in 2004 from 46% in 2003. Short Term Third Party Debts represented 20% of
Total Liabilities + Equity in 2004 (in 2003 these represented 15%). Medium to Long Term Debts remained
stable at 39% of Total Liabilities + Equity.
Balance Sheet Struture
3,1%
96,9% 20%
41%
39%
Paid C apital + C ash Fixed Assets Equity M/L Term Liabilities Short Term
The analysis of economic-financial indicators shows a marked drop in the general liquidity ratio which in
2004 reached a minimum value of 0,14.
In 2004, there was a 37% shrinkage in Working Capital caused mainly by the decrease in the item Clients
(reduction of 71% in relation to the previous year). Alongside this reduction, Current Liabilities grew by 46%,
emphasizing once again the short term difficulties faced by REFER.
The financial autonomy indicator maintained the downward trend seen in recent years. The worsening of the
Net Result is one of the reasons for the negative development of Equity. In the year in question this item
represented 41% of Total Assets (in 2003 it represented 46%). In other words, 60% of the assets are financed
by debt.
With regard to debt structure, the total amounts of short term commitments represent 34% of Total Liabilities.
This ratio has risen in comparison with the previous year, thus demonstrating a greater use of short term credit
to pay for REFERs expenses. This has increased the pressure on the companys treasury.
63

Genaral Liquidity Ratio Financial Autonomy Debt Structure
0,90
0,80
0,70
0,60
0,50
0,40
0,30
0,20
0,10
0,00
1997 1998 1999 2000 2001 2002 2003 2004
64

Results Application Proposal
In the terms of the current provisions, it is proposed that the net results for the year a loss of 154 157 239
euros be transferred to the Results Carried Forward account.
Lisbon, 31 March 2005
The Board of Directors
PRESIDENT Jos Braamcamp Sobral
VICE-PRESIDENT Jos Osrio e Castro
DIRECTOR Lus Miguel Silva
DIRECTOR Manuel Aguiar de Carvalho
DIRECTOR Jos Marques Guedes
65

19 January 2004 saw the re-opening of the Guimares
2004
Line after its electrification and wide track conversion.
On 21 April 2004, on the Minho Line, the section
Lousado Nine and the Braga Branch Line were
opened, the latter after its electrification and
conversion into a double line. Presided over by the
Prime Minister, Mr. Duro Barroso, the ceremony took
place in Braga station and was followed by an
inaugural journey to Famalico
Financial
Statements
66

Financial
Statements
Balance Sheet
on 31 December 2004 (euros)
2004 2003
Code ASSETS Notes Accrued
Gross assets Depreciation and Net assets Net assets
Provisions
FIXED ASSETS:
Intangible Fixed Assets 10
431 Setup costs 154.561 132.947 21.614
432 Investment and development costs 13.542.939 11.117.457 2.425.482 1.262.729
433 Property and other rights 29.928 29.928 0
443 Intangible fixed assets in progress 14.560.853 14.560.853 10.763.581
28.288.281 11.280.332 17.007.949 12.026.310
Tangible Fixed Assets: 10
421 Land and natural resources 128.555.509 128.555.509 114.134.549
422 Buildings and other structures 3.397.943.479 4.055.743 3.393.887.736 3.232.871.361
423 Basic equipment 47.949.751 6.719.241 41.230.510 40.074.768
424 Transport equipment 7.161.336 6.382.844 778.492 963.327
425 Tools and utensils 449.129 425.015 24.114 10.192
426 Office equipment 10.331.535 7.924.976 2.406.559 2.429.805
429 Other tangible fixed assets 423.674 189.392 234.282 261.692
441/2/4 Fixed assets in progress 11 2.238.220.199 2.238.220.199 1.929.829.499
448 Advances on account of tangible fixed assets 12.183.731 12.183.731 8.602.752
48.12 5.843.218.343 25.697.211 5.817.521.132 5.329.177.945
Financial Investments
411 Shareholdings 10 0
4111 Group companies 16 15.364.784 15.364.784 11.466.314
4113 Other companies 16 12.476 12.476 12.564
413 Financing loans 16
4131 Group companies 16 6.172.625 6.172.625 3.752.185
4133 Other companies 16 1.871.429 1.871.429 1.871.429
23.421.314 0 23.421.314 17.102.492
CURRENT ASSETS
Stocks: 34
36 Raw and secondary materials and consumables 41 23.642.600 61.000 23.581.600 22.311.540
35 Work in progress 9.089.600 9.089.600
32 Merchandise 22 178.662 178.662 360.671
37 Advances for purchases 494.809 494.809 698.357
33.405.671 61.000 33.344.671 23.370.568
Third-party Receivables - Short Term

21 Clients 48.1 32.378.874 0 32.378.874 110.986.876
24 State and other public entities 28 51.604.615 51.604.615 67.800.853
22/261/2/8 Other debtors 48.5 36.251.464 36.251.464 52.620.727
23 120.234.953 0 120.234.953 231.408.456
Negotiable Securities
18 Other treasury applications 0
Bank deposits and cash
12 Bank deposits 11.359.513 11.359.513 8.466.268
11 Cash 53.592 53.592 81.236
11.413.105 0 11.413.105 8.547.504
ACCRUALS AND DEFERRALS

271 Accrued income 16.807.014 16.807.014 28.864.660
272 Deferred costs 6.405.453 6.405.453 27.172.113
23.212.467 0 23.212.467 56.036.773
Total Depreciation 36.977.543 31.198.447
Total provisions 61.000 6.030.467
Total Assets 6.083.194.134 37.038.543 6.046.155.591 5.677.670.048
67

Balance Sheet
on 31 December 2004 (euros)
Code EQUITY AND LIABILITIES Notes 2004 2003
EQUITY 40
51 Capital 35 305.200.000 305.200.000
55 Shareholding adjustments -106.428 -229.650
575 Other reserves 3.100.869.129 3.005.502.846
59 Retained results -806.368.644 -611.218.579
Subtotal 2.599.594.057 2.699.254.617
88 Net result 40 -154.157.239 -123.092.410

Total Equity 2.445.436.818 2.576.162.207
LIABILITIES
Provision for risks and charges: 34
293 Legal cases in progress 48.4 18.343.105 15.400.862
294 Work accidents and occupational illnesses
296 Provisions for risks and charges-Shareholding companies 8.662.057
298 Other provisions for risks and charges 2.394.230 2.394.230
299 Provision for early retirement 48.13 841.287 2.496.109
30.240.679 20.291.201
Medium and Long Term Third Party Payables 29
231/2 Debts to credit institutions 48.6 2.312.886.111 2.199.281.282
268 Other creditors
2.312.886.111 2.199.281.282
Third Party Payables - Short Term

12/231 Debts to credit institutions 975.453.971 451.135.679
221/3 Suppliers a/c 34.323.903 55.603.201
228 Suppliers - invoices received and being checked 15.839.653 11.723.246
229 Advances to suppliers 85.177 85.177
261 Fixed asset suppliers 168.717.139 274.492.451
24 State and other public entities 28 3.182.441 3.396.843
262/3/5+267/8/9 Other creditors 20.634.129 39.056.994
1.218.236.413 835.493.591
ACCRUALS AND DEFERRALS

273 Accrued costs 39.241.392 46.258.939
274 Deferred income 114.178 182.828
39.355.570 46.441.767
Total Liabilities 3.600.718.773 3.101.507.841
Total Equity and Liabilities 6.046.155.591 5.677.670.048

0 0
THE CHARTERED ACCOUNTANT THE BOARD OF DIRECTORS
Maria do Cu Pernas PRESIDENT - Jos Braamcamp Sobral
VICE-PRESIDENT - Jos Osrio e Castro
DIRECTOR - Lus Miguel Silva
DIRECTOR - Manuel Aguiar de Carvalho
DIRECTOR - Jos Marques Guedes

68

PROFIT AND LOSS ACCOUNT

Period ending on 31 December 2004 (euros)
Code COSTS AND LOSSES Notes 2004 2003
61 Cost of merchandise sold and materials consumed:

Secondary materials 41 24.173.791 24.173.791 60.282.434 60.282.434
62 External supplies and services 69.848.917 62.857.355
Personnel costs
641+642 Wages 91.726.402 95.560.045
Social expenses:
645/7/8 Others 28.785.821 120.512.223 29.290.442 124.850.487
66 Depreciation of tangible and intangible fixed assets 10 6.045.792 6.254.260
67 Provisions 34 8.895.207 14.940.999 1.965.342 8.219.602
63 Taxes 9.209.832 7.096.040
65 Other operating costs and losses 3.471.177 12.681.009 2.697.239 9.793.279

(A) 242.156.939 266.003.157
681/2+685/8 Interest and similar costs
Others 45 62.192.215 47.172.069
(C) 304.349.154 313.175.226
69 Extraordinary costs and losses 46 31.996.673 24.281.819
(E) 336.345.827 337.457.045
86 Income tax for the year 97.452 91.302

(G) 336.443.279 337.548.347
88 Net result for the year 40 -154.157.239 -123.092.410
182.286.040 214.455.937
69

PROFIT AND LOSS ACCOUNT

ITEM CODES INCOME AND GAINS Notes 2004 2003
72 Services rendered 48.1 69.506.312 76.082.682
75 Works for the company 48.3 47.576.028 86.405.677
73 Supplementary income 7.031.960 7.681.139
74 Operating subsidies 48.2 28.356.213 29.384.612
76 Operating income 879.498

(B) 153.350.011 199.554.110
7815 Earnings from negotiable securities and other financial investments:

Others 1.098.517
7811/8+782/5/6/8 Interest and similar income:
Others 45 8.424.558 8.424.558 480.393 1.578.910
(D) 161.774.569 201.133.020
79 Extraordinary income and gains 46 20.511.471 13.322.917
(F) 182.286.040 214.455.937
Summary:
Operating results: (B) - (A) = -88.806.928 -66.449.047
Financial results: (D - B) - (C - A) = -53.767.657 0 -45.593.159
Current results: (D) - (C) = -142.574.585 0 -112.042.206
Pre-tax results: (F) - (E) = -154.059.787 0 -123.001.108
Net results for the year: (F) - (G) = -154.157.239 0 -123.092.410
70

PROFIT AND LOSS ACCOUNT BY FUNCTION

2004 2003
Services rendered 69.506.312 76.082.682

Cost of sales -24.173.791 -60.282.434
Gross result 45.332.521 15.800.248
Other operating income and gains 83.843.699 123.471.428

Distribution costs
Administrative costs -214.511.971 -203.023.484
Other operating costs and losses -3.471.177 -2.697.239
Operating results -88.806.928 -66.449.047
Revenue from shareholdings

From associated companies 3.698.069 19.507
From other companies
Revenue from negotiable securities and other financial instruments

From associated companies
Others 1.098.517
Other interest and similar income

Related to associated companies
Others 4.726.489 460.886
Depreciation and provisions for applications and financial investments
Interest and similar costs

Related to associated companies -111.435 -1.250.377
Others -62.080.780 -45.921.692
Current results -142.574.585 -112.042.206
Extraordinary income and gains 20.511.471 13.322.917

Extraordinary costs and losses -31.996.673 -24.281.819
Pre-tax results -154.059.787 -123.001.108
Income tax for the year -97.452 -91.302

Net result for the year -154.157.239 -123.092.410

71

Annex to the Balance

Sheet and the Profit and
Loss Statement
72

Annex to the Balance Sheet and the Profit and Loss Account
on 31 December 2004
Introduction
Rede Ferroviria Nacional REFER, E.P., also referred to by the abbreviated name REFER, E.P. was founded
by Decree-Law n 104/97 of 29 April. REFER is a public business entity with administrative and financial
autonomy and with its own assets, subject to supervision by the Ministry of Finance and the Ministry of Social
Equipment. REFERs registered offices are at Santa Apolnia station in Lisbon. The Companys main business
activity is to render a public service for managing the infrastructure comprising the national railway network
and for building, installing and renewing railway infrastructure.
Note 1. Derogations from the Portuguese Official Chart of Accounts (POC)
The financial statements of the company have been prepared in most significant aspects in accordance
with the Portuguese Official Chart of Accounts (POC), approved by Decree-Law n. 410/89, of 21 November.
The following notes respect the sequential numbering laid down in the Official Chart of Accounts. Notes not
included in this annex are not applicable to the company or are not relevant to a reading of the financial
statements.
All amounts are expressed in Euros (Eur) unless otherwise indicated.
Note 2. Comparative Values
The company has not altered its accounting practices and policies, except for those referred to in notes 34
and 48.15. All amounts presented are thus comparable in materially relevant aspects with the amounts for
the previous financial year.
Note 3. Presentation bases and main valuation criteria

The Financial Statements were prepared on the going concern basis from the companys accounting books
and records which are kept in accordance with the accounting principles generally accepted in Portugal.
The valuation criteria used in relation to the various items on the Balance Sheet and the Profit and Loss
Account were as follows:
Note 3.1. Fixed Assets
Fixed assets consist essentially of long-duration railway infrastructure (LDI) and include assets of the now
defunct offices, assets transferred from CP and investments made by REFER.
Note 3.1.1. Intangible Fixed Assets
Intangible fixed asserts are recorded at purchase cost and are depreciated using the method of
73

equal annual amounts over a 3-year period.
Note 3.1.2. Tangible Fixed Assets
Tangible fixed assets are shown at purchase and/or transfer value and depreciated annually, where
applicable.
Depreciation is calculated using the method of equal annual amounts in such a way that the values
of the assets are written down over their estimated lifetimes.
The following deprecation rates were applied:
Rates
Buildings 2% and 10%
Basic equipment 3,33% to 20%
Tools and utensils 12.5% to 100%
Transport equipment 4% to 100%
Office equipment 12.5% to 100%
Other tangible fixed assets 12.5% to 20%
Financial costs inherent in the purchase of long-duration infrastructure are capitalised as fixed assets in
progress, up until the date of their completion.
Fixed assets regarded as State infrastructure were not subject to any depreciation.
In the year in question the infrastructure considered as being REFERs was depreciated.
Note 3.1.3. Financial Investments
Financial investments refer to shareholdings in the following companies:
GIL Gare Intermodal de Lisboa, SA

FERBRITAS Empreendimentos Industriais e Comerciais, SA
INVESFER Promoo e Com. de Terrenos e Edifcios, SA
REFER TELECOM Servio de Telecomunicaes, SA
RAVE, SA
FERNAVE Formao Tcnica, Psicologia Aplicada e Consultoria em Transportes e Portos,
SA
METRO MONDEGO, SA
CPCOM Explorao de Espaos Comerciais da CP, SA
and their value was determined by the asset equivalence approach.
In 2004 the company purchased CPs 40% shareholding in CPCOM, through the joint order of 21 June
2004 made by the Ministry of Finance and the Ministry of Public Works, Transport and Housing.
On 29 July 2004, a promissory purchase and sale contract concerning shares in Ecosade
74

Educao, Investigao e Consultoria em Trabalho, Sade e Ambiente, SA was celebrated between

Fernave, CP and REFER. Under this contract Fernave will sell to CP and REFER, on a 50% / 50% basis,
all the shares which Fernave holds in Ecosade.
REFER is to acquire 200 000 shares for Eur. 5 each, for a total value of Eur. 1 000 000, when the
definitive purchase and sale contract is signed.
Note 3.2. Stocks
Stocks consist of raw and secondary materials and consumables and are valued at purchase cost, using
the average cost as the costing method.
The Provision of 31 December 2003 of Eur. 294 256 was reduced to Eur. 61 000 after a stock inventory was
carried out.
The work in progress refers to the construction of the Interrepblica building.
Note 3.3. Accruals and Deferrals
This account is the visible expression of the years accrual concept, since it is through changes in it that costs
and income are added, according to whether or not they related to the year in question.
Thus REFER enters costs and income for which it did not have documentation but which relate to this
financial year, along with costs and income for which it has documentation but which refer to years to
come.
During the year in question, income for business units from previous years was annulled, under the
agreement of 22 September 2004. The amount in question was Eur. 12 414 321, and this was balanced by
a corresponding change to Results Carried Forward.
REFER altered its accounting policy with regard to compensation paid for the rescission of work contracts by
mutual agreement. (See note 48.15)
Note 3.4. Subsidies awarded to finance tangible fixed assets
Subsidies awarded to the company on a non-refundable basis to finance tangible fixed assets are recorded
in reserves since long-duration infrastructures are not subject to depreciation.
Subsidies Received Amount
PIDDAC 20.641.426
FEDER/IOT 1.497.787
DGTREN 1.725.184
COHESION FUND 71.411.886
95.276.283
75

Note 3.5. Provisions
The provisions established are for the forecast needs.
Note 4. Assets and liabilities recorded in foreign currency
All assets and liabilities expressed in foreign currency as at 31 December 2004 were converted into Euros
using the exchange rates prevailing on that day. Exchange rate differences were recorded in the results.
Currency Exch. Rate
Swiss Franc 1,5429

Dollar 1,3621
Swedish Kronor 9,0206
Favourable and unfavourable exchange rate differences arising from differences between the exchange
rates prevailing on the date of the transactions and those prevailing on the date of collections and
payments were recorded as income and costs in the profit and loss account for the year.
Note 7. Average number of employees
The average number of employees working for the company in the year in question was 4 362.
Note 8. Set-up, research and development and industrial property costs
Set-up costs and research and development costs essentially consist of the cost of studies and projects
related to implementing REFER and the SAP system in particular.
Note 10. Changes in Fixed Assets
Changes in fixed assets and the corresponding depreciation shown on the balance sheet are broken down in
tables 10.1 and 10.2. There are transfers between accounts due to the fact that corrections have been made to
the classification of certain assets.
Note 11. Capitalised financial costs
During the year, financial costs related to loans taken out to finance fixed assets were recorded under fixed
assets in progress. Therefore, Eur 23 518 191 were capitalised, of which about Eur. 21 811 117 are interest on
loans from the EIB, from Bank of Berlin, from ABN Bank and from WestLB Bank, the rest were surety fees for
those loans. (See note 14 b)
76

Note 14. Description of tangible fixed assets and fixed assets in progress:
a)
There are no fixed assets in the possession of third parties
All fixed assets are assigned to the companys business
Fixed assets on property belonging to third parties:
Fixed assets on property belonging to third parties amount to Eur 199 987 and refer to the buildings
on Avenida Fontes Pereira de Melo and on Rua Diogo do Couto. In relation to the latter building
there are still fixed assets in progress valued at Eur 14 267.
There are no fixed assets abroad.
b) Capitalised Financial Costs

Increases in the
01.01.2004 31.12.2004
year
Financial expenses
Interest 105.005.534 21.811.117 126.816.651
Surety Fee 4.035.739 1.707.074 5.742.813
109.041.273 23.518.191 132.559.464
77

Note 16. Group companies, associated companies and companies in which the company has a
shareholding
Balance Sheet
Companies Shareholding % Equity Result in Year
Value
In the Group
FERBRITAS 98,43% 7.790.291 1.690.671 7.667.983
Empreend. Industriais e Comerciais, AS
Rua Jos da Costa Pedreira n11 - Lisbon
INVESFER 99,33% 289.748 52.068 287.807
Promoo e Com. De Terrenos e Edif., AS
Palcio de Coimbra - Rua de Santa Apolnia n 51 - Lisbon
REFER TELECOM 100,00% 6.153.371 1.976.478 6.153.371
Servios de Telecomunicaes, AS
Estao de Santa Apolnia - Lisbon
RAVE 40,00% 2.300.911 -22.360 920.364
Av D.Joo II Lote 1.07.2.1, 1 Piso- Parque das Naes - Lisbon
CPCOM - Explorao de Espaos Comerciais da CP, AS 80,00% 419.073 104.288 335.259
Av. Da Repblica, 90 Galeria Fraco 4 - Lisbon
15.364.784
Associated
GIL 33,00% -21.636.336 -2.076.674
Gare Intermodal de Lisboa, AS
Av.Marechal Gomes da Costa, n 37 - Lisbon
Other Companies
FERNAVE 10,00% -15.220.659 -1.806.211
Formao Tcnica, Psicologia Aplicada e Consultoria
em Transportes e Portos, AS
Rua Castilho n 3 - Lisbon
METRO MONDEGO 2,50% 499.065 -3.509 12.476
Praa 8 de Maio, 38 - Coimbra
12.476
15.377.260
The information indicated above about companies in which the company has shareholdings was taken
from their respective financial statements for the year in question.
The shareholdings we have in those companies are valued using the asset equivalence approach.
REFER has made a provision for risks and charges to cover its responsibilities resulting from its shareholdings in
the equity of the entities GIL and Fernave. (See note 40)
Loans investments of a long-term nature were made to Group companies Ferbritas, REFER Telecom and
Invesfer and to other companies Fernave totalling Eur 9 249 054, broken down as follows:
Company Amount
Group Companies
Ferbritas 997.861
Refer Telecom 500.000
Invesfer 4.674.764
6.172.625
Other Companies
Fernave 1.871.429
1.871.429
8.044.054
78

The loan to Invesfer pays interest at the Euribor 12M rate + 1,5% and will be repaid between 2007 and
2009.
Note 22. Goods in transit
On 31.12.2004 the figure of about Eur 178 662 of goods in transit refer to track switching devices (TSDs),
whose drawings have not been approved, and thus for which the respective nomenclature cannot be
created. These TSDs were contained in this item in the previous financial year.
Note 23. Doubtful Debt
During 2004 the provision for clients with doubtful debt of Eur. 5 736 211 was annulled as the result of the
negotiations which culminated in the agreement made in September 2004.
Note 25. Debts owed by and to employees
Total debt in relation to company employees is as follows:
2004 2003
Credit Balances 767.632 645.192

Debit Balances 518.484 499.431
Note 28. State and Other Public Entities
As at 31 December 2004, there were no overdue debts under the item State and Other Public Entities. The
amount shown consists of:
2004 2003
Assets Liabilities Assets Liabilities
VAT 50.867.432 66.702.628

Income Tax 339.508 1.137.689 394.982 1.053.023
Social Security 396.836 2.028.809 703.243 2.343.670
Others 839 0 150
51.604.615 3.166.498 67.800.853 3.396.843
79

Note 29. Debts of over five years to third parties
Medium and long term debts are broken down as follows:
Description Amount Closing Date Rates
Debts of over 5 years to Banking Institutions
EIB - Railway Crossing of the Tagus River 99.759.579 15.09.2016 2,150%

EIB - Douro Line Project 43.894.215 15.09.2016 2,150%
EIB - Railway Crossing of the Tagus River - B 79.807.663 15.09.2017 2,150%
EIB - CPIII North Line - B 49.879.790 15.06.2022 2,150%
EIB - CPIIE 16.495.115 15.06.2012 2,160%
EIB - Minho Line - A 66.835.393 15.09.2018 2,150%
EIB - Railway Crossing of the Tagus - C 88.449.969 15.09.2018 2,150%
EIB - CPIIB 11.971.149 15.09.2011 4,830%
EIB - CPIII North Line - D 25.937.491 15.09.2020 2,150%
EIB - Connection to the Algarve - A 90.000.000 15.09.2021 2,150%
EIB - Connection to the Algarve - B 30.000.000 15.03.2022 2,150%
EIB - Minho Line - B 59.855.748 15.09.2021 2,150%
EIB - CPIII2 North Line A 100.000.000 15.03.2022 2,150%
EIB - CPIII2 North Line B 200.000.000 15.12.2023 2,150%
EIB - Suburban lines 100.000.000 16.06.2004 2,150%
Berlin 250.000.000 04.08.2010 2,185%
ABN 300.000.000 11.04.2011 2,008%
WESTLB 200.000.000 08.10.2012 2,048%
Logo Securities 1 250.000.000 30.01.2008 2,495%
Logo Securities 2 250.000.000 30.01.2009 2,545%
2.312.886.111
The loans were obtained exclusively to finance investment projects. The interest is paid every quarter, every half
year or annually, at the end of the respective period. Except for loans from ABN, from Berlin, from WestLB and
from Logo Securities that will be repaid in a single payment, in the other loans the capital is repaid in equal
and consecutive annual amounts after the grace period. These loans have the States surety, except for those
from Logo Securities.
Note 32. Guarantees given
As at 31 December 2004, REFER has assumed the following responsibilities for guarantees given:
Bank guarantees given to clients 3.366.886
Bank guarantees given to suppliers 3.423.645
Other guarantees 7.863.327
Promissory notes given by REFER
Barclays Bank 75.000.000
80

This promissory note is associated with the credit line granted.
Note 34. Changes in provisions
The breakdown of accumulated provisions and the respective changes in them during the year were as
follows:
Opening Closing
Accounts Increases Decreases
Balance Balance
281 - Provision for doubtful debt 5.736.211 5.736.211 0

5.736.211 0 5.736.211 0
293 - Prov. For law suits in progress 15.400.861 8.009.307 5.067.064 18.343.104
296 - Prov. Risks and Charges - Shareholdings 0 8.662.057 8.662.057
298 - Other provisions 2.394.230 2.394.230
299 - Early Retirement provisions 2.496.109 1.654.822 841.287
20.291.200 16.671.364 6.721.886 30.240.678
396 - Raw material provisions 294.256 233.256 61.000

294.256 0 233.256 61.000
26.321.667 16.671.364 12.691.353 30.301.678
The provision of judicial proceedings in progress includes the Legal Departments legal cases, as well as
those related the labour relations.
The provision for work accidents relates to the costs of accidents to be accounted for in years to come. In
2000, REFER signed a work accident insurance policy with the Imprio insurance company and
consequently the said provision no longer makes sense.
The Provision for early retirement benefits is for employees in departments transferred from CP who had taken
early retirement and will be used in the applicable years. This provision ends in 2007.
The provision for Risks and Charges related to companies in which REFER has shareholdings is to cover
REFERs responsibility on account of its equity shareholdings in GIL Gare Intermodal de Lisboa, SA and
Fernave Formao Tcnica, Psicologia Aplicada e Consultoria em Transportes e Portos, SA, which have
negative values of about Eur.21 636 336. and Eur. 15 220 659, respectively. The impact of this change was
reflected in Results Carried Forward and Results for this Year of Eur. 7 776 157 and Eur. 885 900, respectively.
Note 35. Changes in capital

The Portuguese State holds 100% of REFERs share capital. This year there was no change to the statutory
capital.
81

Note 40. Changes in other equity items

Changes in equity items, under the items shown on the balance sheet, were as follows:
Accounts Opening Balance Increases Settlement Closing Balance
51 - Statutory Capital 305.200.000 305.200.000

55 - Shareholding Adjustments -229.650 123.222 -106.428
57 - RESERVES
575 - Subsidies
Transferred:
from the extinguished GNFL, GNFP, GECAF 678.085.773 678.085.773
from CP ( Annex III and 2nd half of year) 128.604.887 128.604.887
from CP (Annex IV and V) 716.452.794 716.452.794
Subsidies obtained:
PIDDAC 592.195.625 20.641.426 612.837.051
FEDER/IOT 368.585.997 1.497.787 370.083.784
COHESION FUND 469.534.261 71.411.887 540.946.148
DGTREN 1.725.185 1.725.185
DGVII 9.780.503 9.780.503
Expo 98 31.147.349 31.147.349
EU - Feder 7.101.823 7.101.823
AP Lisbon 949.736 949.736
INTF 158.713 158.713
SETEP 8.479 8.479
REN 2.418.465 2.418.465
PRODOURO 67.338 67.338
COPRNICOS 9.572 9.572
AP Aveiro 373.529 373.529
3.005.474.844 95.276.285 0 3.100.751.129
576 - Donations 28.000 90.000 118.000
57 - RESERVES 3.005.273.194 95.366.285 123.222 3.100.869.129
59 - Results brought forward -611.218.579 -72.057.655 -123.092.410 -806.368.644
Result for the year -123.092.410 -154.157.239 123.092.410 -154.157.239
2.576.162.205 -130.848.609 123.222 2.445.436.818
Note 41. Cost of goods sold and materials consumed

The following table shows goods sold and materials consumed:
2004 2003
Initial stocks 22.605.796 30.596.831

Purchases 24.276.144 50.203.376
Gains in stocks (surplus) 296.048 973.491
Final stocks -23.642.600 -22.605.796
Others 638.403 1.114.532
Costs in the year 24.173.791 60.282.434
These costs are for materials sold and consumed, material incorporated in investments and in the renewal
of track switching devices.
82

Note 43. Remuneration of members of the governing bodies
The following remunerations were paid to the governing bodies:
2004 2003
Board of Directors 522.727 508.463

Audit Committee 14.258 25.664
Note 45. Financial Profit and Loss Account
The financial profit and loss account is as follows:
2004 2003
Financial Costs and Losses

681 - Interest paid 57.292.766 42.592.422
682 - Losses in group and associated companies 234.658 1.250.377
685 - Unfavourable currency exchange differences 4.830 16.165
688 - Other financial costs and losses 4.659.961 3.313.105
Financial Result -53.767.657 -45.593.159
8.424.558 1.578.910
Financial Income and Gains

781 - Interest Received 4.713.320 1.437.235
782 - Gains in group and associated companies 3.698.069 19.507
785 - Favourable currency exchange differences 4.702 13.039
786 - Cash payment discounts 7.973 19.504
788 - Other financial income and gains 494 89.625
8.424.558 1.578.910
Of the interest paid, about 30% was for interest on the short-term lines of credit.
Losses in group and associated companies refer to the shareholdings in REFER Telecom, RAVE, CPCom and
Metro Mondego and to depreciation of adjustments to shareholdings, over 5 years, in GIL, Ferbritas, Invesfer,
REFER Telecom and Metro Mondego.
The item Other Financial Costs and Losses consists of the following:
2004 2003
Bank Services 1.786.032 655.902

Bond issue expenses 4.417 38.249
Surety Fees 1.720.890 1.432.937
Rounding differences 35
Other unspecified costs 1.148.587 1.186.017
4.659.961 3.313.105
The surety fee is for loans from EIB, ABN, Berlin and WestLB, and has been capitalised at about Eur 1 707 074.
83

The other, non-specified costs, nearly all of the value (99,99%), refer to expenses with the Logo Securities I
and II loans which are being deferred for 5 and 6 years, respectively.
Gains in Group Companies refer to the asset equivalence carried out at Invesfer, Ferbritas and REFER
Telecom.
Note 46. Extraordinary Profit and Loss Account

The extraordinary profit and loss account is as follows:
2004 2003
Extraordinary costs and losses

691 - Donations 44.124 10.701
693 - Losses in stock 292.618 657.545
694 - Losses in fixed assets 86.986 130.276
695 - Fines and penalties 3.373 4.142
696 - Depreciation 787 116.162
697 - Corrections from previous years 13.173.790 11.313.845
698 - Other extraordinary costs and losses 18.394.995 12.049.148
Extraordinary Result -11.485.202 -10.958.903
20.511.471 13.322.916
Extraordinary income and gains

791 - Tax refunds 195 367
793 - Gains in stocks 2.451.658 973.325
794 - Gains in fixed assets 91.704 21.542
795 - Benefits from contract penalties 68.102 21.923
796 - Decreases in deprecation and provisions 12.695.844 4.266.854
797 - Corrections of previous years 5.189.979 8.019.262
798 - Other extraordinary income and gains 13.989 19.643
20.511.471 13.322.916
About 27% of the balance of the items Costs and Losses Corrections of Previous Years, correspond to the
compensation paid to Contacto resulting from the CSOPT Agreement and about 10% refers to the
cancellation of invoices sent to TEX in 2000, referring to the occupation of spaces in stations.
In Other Extraordinary Costs and Losses, about 6% of the account refers to early retirements (see Note
48.13). Compensation payments for mutual agreement rescissions for the current year, which have ceased
to be deferred for a period of 5 years (see Note 48.15), account for 89%.
As for Extraordinary Income and Gains, in the items Gains in Stocks Eur. 2 155 610 refer to the annulment of
the advance for sales of LS, due to the contract ceding the contractual position to INVESFER. In the item
Reductions of Amortizations and Provisions, about 13% refers to the use of the Early Retirement Provision,
40% is related to settled legal proceedings and 45% is for the annulment of the Provision for Doubtful
Collection, in light of the September 2004 agreement with CP.
In the items Income and Gains Corrections to Previous Years, about 54 %, refers to the correction of the
Provision for Holidays and Holiday Subsidies in 2003.
84

Note 47. Information required by legislation
Note 47.1. Information referred to in the Order of the Secretary of State of the Treasury of 25 June 1980:
Costs of employee representative organisations
For the employees involved on a full-time basis union leaders and members of the workers
committee the cost of the employee representative organisations was calculated to be Eur. 233 867,
broken down as follows:
Amount
Monthly pay 134.888

Length of service bonus 13.234
Holiday subsidy and thirteenth month 26.018
Employer's contribution 43.713
Others 16.014
233.867
Number of workers involved
Part-time (average number):

Union leaders 137
Committee and sub-committees 28
Full-time:
Union leaders 12
Worker committees 1
Note 47.2. Information referred to in DecreeLaw n 411/91 of 17 October:
The debt to Social Security T.S.U. was Eur 2 014 830. None of this was overdue.
Note 48. Additional information
Other information considered relevant for a better understanding of the financial position and results:
Note 48.1. REFER began to operate its infrastructure in 1999 and consequently it was then that is began to
charge user and other service fees to the railway operators CP and FERTGUS.
85

On 31.12.2004 the amount owed by those two entities was broken down as follows:
Amount
CP 30.789.447
Fertgus 1.577.162
Others 12.265
32.378.874
CP accepted the User Fee charged by REFER this year of Eur 55 754 918.
Fertgus made no payment since, according to what has been agreed contractually, traffic was below
the minimum reference range subject to invoicing. Under the terms of Decree-Law n 189-B/200, of 2
June, the State has compensated REFER for that fee. The respective amount was included in
Compensation Indemnities received. In 2004, the user fee owed by Fertgus was Eur 2 438 004.
From the matching of accounts resulting from the REFER / CP agreement of September 2004 there was a
balance in favour of REFER of Eur. 18 451 175 which has already been settled by CP.
Note 48.2. During the year in question Eur 25 907 252 were entered for account adjustments (RCM 51/2003).
Note 48.3. Work for the company refers essentially to the costs of materials used in the investments, the
operating costs of REFERs project teams and the management and administrative costs directly related with
the investments. These costs were Eur 12 914 938.
Note 48.4. At the end of 2004, the value of judicial proceedings in progress for expropriations totalled Eur 4
138 999. Judicial proceedings covered by provisions related to accidents and claims for compensation for
damages, for occupation of land, etc, reached Eur 9.313.846, of which Eur. 6 800 000 concerned Grupo
Dragados SA. Labour relations cases had a total value of Eur 9 029 256.
Note 48.5. The Other Debtors item consists of:
2004 2003
Suppliers 3.694.108 6.768.892

Personnel 518.484
Amounts to be settled 8.059.586 22.173.987
Other debtors and creditors 23.956.467 22.963.168
Others 22.819 714.680
36.251.464 52.620.727
The item Amounts to be Adjusted includes about Eur 2 585 699 for VAT reimbursement requests whose right
to deduction has exceeded the one-year period, of which about Eur 1 993 620 have already been
requested from the VAT Services. (Eur 517 146 in July 2001, Eur 582 499 in November 2002 and EUR. 893
86

975 in August 2004). About Eur 3 054 170 refer to VAT on investment invoices to be regularised in 2005.
The item Other Debtors includes about Eur 11 286 370 (47% of the balance) in court accounts to meet
expenses for expropriation proceedings. O2 Tratamento de Ambiente, Parque Expo, REFER Telecom,
CPCom and Fernave make up about 25% of the balance.
Note 48.6. Eur 2 024 792 111 relate to surety provided by the State for the EIB loans, the CP 1995/2005 bond
loan, and for the loans from the Berlin Bank, ABN Bank and WestLB Bank.
Note 48.7. On 31 December 2004 there were about Eur 186 743 772 of bank guarantees received from
suppliers and about Eur 35 846 048 for other guarantees received from suppliers.
Note 48.8. On 21/12/2004, there were about Eur 1 286 471 for bank guarantees received from clients /
debtors.
Note 48.9. In 1999, with the acquisition of the FERBRITAS shares, REFER took on the full responsibilities thereof.
This means that REFER is liable for the letter of comfort signed in favour of Banco Mello for property leases /
medium and long-term loans, up to the amounts of Eur 4 239 782 and Eur 498 798, respectively.
Note 48.10. With regard to Invesfer, REFER is responsible for the letters of comfort signed in favour of BPI for
short-. medium-, and long-term credit and vehicle leases up to the amounts of Eur 274 339, Eur 39 904 and
Eur 67 116, respectively.
Note 48.11. Concerning Fernave, REFER is responsible for the letter of comfort signed in favour of Banco
Esprito Santo for short term financing up to the amount of Eur 2 743 388.
Note 48.12. Approximately 98,74% of all tangible fixed assets correspond to fixed assets belonging to the
State (long-term infrastructure). Thus, on 31/12.04 this item stood at Eur 5 769 811 808, of which Eur 2 230
147 563 was for fixed assets in progress.
Note 48.13. With the transfer of approximately one thousand employees who took early retirement prior to
the creation of REFER and who had worked in departments transferred to REFER in 1998 and 1999, REFER
was obliged to establish provisions of Eur 25 285 517 which are being used in the years to which they refer.
This provision ends in 2007.
Note 48.14. The Other Creditors item consists of the following:
2004 2003
Various creditors 5.015.507 10.608.940

Personnel 767.632
Advances for sales 13.114.231 13.589.633
Amounts to be settled 17.395
Bondholders 11.590.298
Others 1.736.759 3.250.728
20.634.129 39.056.994
87

In the item Advances for sales the companies Visabeira, Condiana and El Corte Ingls make up about
77% of the balance.
Note 48.15. During the years from 2000 to 2003 REFER paid compensations to employees in relation to work
contract mutual agreement rescissions for the amounts of Eur. 4 868 831, Eur. 11 668 418, Eur. 13 384 742
and Eur. 8 111 342, respectively. These amounts, which on 31 December 2003 were recorded in the
deferred costs item, totalling Eur. 20 161052, were being amortised over a period of five years. In 2004 this
methodology was altered with the cost for the year in progress being put in an Other Extraordinary Costs and
Losses account and the amount booked in the Deferred Costs account was transferred to Results Brought
Forward.
This change led to a worsening of costs of Eur. 5 541 053 (2004 costs: Eur. 16 434 650 Costs under
previous method: Eur. 10 893 597) and of the results carried forward of Eur. 20 161 052.
Note 48.16. During 2004, in addition to the 2003 results and the amount of Eur 20 161 052 referred to in the
previous point, the following amounts were transferred to Results Brought Forward: Eur. 14 945 114 for late
payment interest debited by CP up to 31-12-2003, Eur. 7 776 156 of the provision for risks and charges, Eur.
12 414 325 on annulments of previously specialised gains and Eur. 16 761 008 resulting from the REFER / CP
Agreement of September 2004.
The Chartered Accountant The Board of Directors
Maria do Cu Pernas
PRESIDENT Jos Braamcamp Sobral
VICE-PRESIDENT Jos Osrio e Castro
DIRECTOR Lus Miguel Silva
DIRECTOR Manuel Aguiar de Carvalho
DIRECTOR Jos Marques Guedes
88

10.1 Changes in Tangible Fixed Assets

(euros)
Items Opening Balance Transf/Sett. Increases Write-offs Closing Balance
Intangible Fixed Assets

Setup expenses 122.140 32.421 154.561
Research and development expenses 10.776.763 2.766.176 13.542.939
Industrial property and other rights 29.928 29.928
Fixed assets in progress 10.763.581 -919.586 4.716.858 14.560.853
21.692.412 1.879.011 4.716.858 28.288.281
Tangible fixed assets
Long Duration Infrastructures (State)
Land and natural resources 113.506.577 14.420.960 127.927.537
Buildings and other structures 3.208.427.340 160.856.958 3.369.284.298
Basic equipment 30.268.679 30.268.679
Fixed assets in progress 1.922.411.452 -178.385.466 486.121.577 2.230.147.563
Advances for tangible fixed assets 8.602.752 -5.323.853 8.904.832 12.183.731
5.283.216.800 -8.431.401 495.026.409 5.769.811.808
REFER
Land and natural resources 627.972 627.972
Buildings and other structures 27.606.522 1.137.020 84.361 28.659.181
Basic equipment 15.159.692 1.694.571 826.810 17.681.073
Transport equipment 6.954.997 112.781 353.176 259.617 7.161.337
Tools and utensils 404.479 44.650 449.129
Office equipment 8.920.332 145.948 1.265.254 10.331.534
Other tangible fixed assets 401.448 22.226 423.674
Fixed assets in progress 7.418.045 -2.302.372 2.956.962 8.072.635
67.493.487 787.948 5.469.078 343.978 73.406.535
5.350.710.287 -7.643.453 500.495.487 343.978 5.843.218.343
Financial Investments
Shareholdings
Group companies 11.466.314 3.586.722 311.748 15.364.784
Associated companies
Other companies 12.564 -88 12.476
Financing Loans
Group companies 3.752.185 2.420.440 6.172.625
Other companies 1.871.429 1.871.429
17.102.492 3.586.634 2.732.188 23.421.314
10.2 Changes in Depreciation of Items

(euros)
Items Opening Balance Transf/Sett. Increases Write-offs Closing Balance
Intangible Fixed Assets

Setup expenses 122.140 10.807 132.947
Research and development expenses 9.514.034 1.603.422 11.117.456
Industrial property and other rights 29.928 29.928
9.666.102 1.614.229 11.280.331
Buildings and other structures 3.162.502 896.616 3.375 4.055.743
Basic equipment 5.353.602 -4.491 1.370.130 6.719.241
Transport equipment 5.991.670 650.790 259.617 6.382.843
Tools and utensils 394.287 30.728 425.015
Office equipment 6.490.527 1.434.450 7.924.977
Other tangible fixed assets 139.756 49.637 189.393
21.532.344 -4.491 4.432.351 262.992 25.697.212
31.198.446 -4.491 6.046.580 262.992 36.977.543
89

STATEMENT OF ORIGIN AND APPLICATION OF FUNDS

Period ending on 31 December 2004
ORIGIN OF FUNDS APPLICATION OF FUNDS
Internal Increase in fixed assets

Net result for the year -154.157.239 Intangible fixed assets
Depreciation 5.779.097
Variation of provisions 9.949.478 Fixed assets in progress 6.595.869
-138.428.664 6.595.869
External
Equity increases Tangible fixed assets
Capital adjustments 123.222 Basic equipment 826.810
Reserve increases 95.366.283 Transport equipment 353.176
95.489.505 Tools and utensils 44.650
Medium and long-term financial changes Office equipment 1.265.254
Increase in third-party payables Other tangible fixed assets 22.226
Loans obtained 113.604.829 Fixed assets in progress 481.435.086
113.604.829 Advances 8.904.832
492.852.034
Decrease in fixed assets
Financial investments 6.318.822
Transport equipment 259.617
Buildings and other structures 84.362 Increase in results brought forward 72.057.654
343.979
Decrease in working capital 506.814.730
577.824.379 577.824.379
90

STATEMENT OF WORKING CAPITAL VARIATIONS

1. Increase in stocks 1. Decrease in short-term third-party receivables

Raw materials, secondary and consumables 1.270.060 Clients 78.608.002
Work in progress 9.089.600
10.359.660 State and other public entities 16.196.238
Other debtors 16.369.263
2. Decrease in short-term third-party payables 111.173.503
Suppliers 21.279.298
Advances to suppliers 0 2. Increase in short-term third-party payables
State and other public entities 214.402 Credit institutions 524.318.292
Fixed asset suppliers 105.775.312 Supplies being received and confirmed 4.116.407
Other creditors 18.422.865 528.434.699
145.691.877
3. Variations in accruals and deferrals
3. Increase in liquid funds Decrease in deferred income 12.057.646
Banks 2.893.245 Decrease in deferred costs 20.766.660
2.893.245 32.824.306
4. Variation in accruals and deferrals 4. Decrease in treasury applications

Decrease in accrued costs 7.017.547 Cash 27.644
Decrease in deferred income 68.650 27.644
7.086.197
5. Decrease in stocks
Merchandise 182.009
Decrease in working capital 506.814.730 Advances for purchases 203.548
385.557
672.845.709 672.845.709
91

CASH FLOW STATEMENT - Indirect method

2004 2003
Operating Activities:
Result for the year -154.157.239 -123.092.410
Adjustments:
Depreciation 5.779.097 6.047.227
Provisions 9.949.478 -2.316.407
Increase in third-party receivables -46.124.873
Decrease in third-party receivables 111.173.503 231.043.702
Increase in stocks -10.359.660
Decrease in stocks 385.557 11.190.711
Increase in third-party payables 528.434.699 144.452.115
Decrease in third-party payables -145.691.877 -157.848.500
Increase in treasury investments
Decrease in treasury investments 854.000
Increase in accrued costs and deferred income 15.717.397
Increase in accrued income and deferred costs -5.731.221
Decrease in accrued costs and deferred income -7086197
Decrease in accrued income and deferred costs 32.824.306 6.238.542
Cash flow from operating activities (1) 371.251.667 80.430.283
Investment Activities:
Financial investments 6.318.822 667.117
Tangible fixed assets 492.508.054 721.872.432
Intangible fixed assets 6.595.869 4.174.528
Cash flow from investment activities (2) 505.422.745 726.714.077
Financing Activities
Loans supplied 113.604.829 490.552.047
Suppliers
Capital increase
Shareholding adjustments 123.222 -40.820
Reserves 95.366.282 163.058.778
Results brought forward -72.057.654
Cash flow from financing activities (3) 137.036.679 653.570.005
Variation of cash and equivalents

(4)=(1)-(2)+(3) 2.865.601 7.286.211
Cash and equivalents at end of period 11.413.105 8.547.504
Cash and equivalents at start of period 8.547.504 1.261.293
Variation of cash and equivalents 2.865.601 7.286.211
92

CASH FLOW STATEMENT - Direct method

2004 2003
Operating Activities:
Amounts received from clients 155.146.274 314.807.523
Short-term loans obtained 524.318.292 77.667.070
Payments to suppliers -245.572.281 -203.012.533
Payments to employees -120.512.223 -124.850.487
Cash low generated for operations 313.380.062 64.611.573
Payment/receipt of income tax -97.452 -91.302

Other amounts received / paid related to operating activity 60.242.125 29.778.786
Cash flows generated before extraordinary items 60.144.673 29.687.484
Amounts received related to extraordinary items 21.565.742 9.041.168

Amounts paid related to extraordinary items -32.263.368 -24.488.852
-10.697.626 -15.447.684
Cash flow from operating activities (1) 362.827.109 78.851.373
Investment Activities
Amounts received from:
Financial investments
Intangible fixed assets
Investment subsidies
Interest and similar income 8.424.558 1.578.910
8.424.558 1.578.910
Amounts paid for:
Financial investments 6.318.822 667.117
Tangible fixed assets 492.508.055 721.872.432
Intangible fixed assets 6.595.869 4.174.528
505.422.746 726.714.077
Cash flow from investment activities (2) 496.998.188 725.135.167
Financing Activities
Amounts received coming from:
Loans obtained 113.604.829 490.552.047
Capital increase
Reserves 95.366.283 163.058.778
Others 123.222
209.094.334 653.610.825
Payments made for:
Loans obtained
Amortisation of contracts
Interest and similar costs
Dividends
Results brought forward -72.057.654
Others -40.820
-72.057.654 -40.820
Cash flow from financing activities (3) 137.036.680 653.570.005
Variation of cash and equivalents (4)=(1)-(2)+(3) 2.865.601 7.286.211
Effect of exchange rate differences
Cash and equivalents at end of period 11.413.105 8.547.504
Cash and equivalents at start of period 8.547.504 1.261.293
Variation of cash and equivalents 2.865.601 7.286.211

93

Annex to Cash Flow Statement
Description 2004 2003

Cash 53.592 81.236
Bank deposits 11.359.513 8.466.268
Liquid assets on the Balance Sheet 11.413.105 8.547.504
Note numbers not covered in this annex are not applicable

2. Breakdown of cash components and equivalents
94

Reports and Certification

of Accounts
95

Reports and Certification of Accounts
REPORT AND OPINION BY THE AUDIT COMMITTEE

(2004 Financial year)
I - Introduction
1. According to paragraph b) of n 1 of article 11 of the Articles of Association of Rede Ferroviria Nacional

REFER, EP, that comprise annexe I of Decree Law n 104/97, of 29 April, the Audit Committee (AC)
must issue an opinion on the Companys rendering of accounts. It is in compliance with this statutory
provision that the AC issues this report and opinion on the REFER Annual Report submitted by the
respective Board of Directors (BD) for the year ending on 31 December 2004.
As relevant facts occurring in 2004, the following are worthy of mention: the completion of the
modernisation works on the Atlantic Axis, allowing direct railway connection between Braga and Faro;
the completion of the process of awarding a risk rating to REFER by the international agencies Moodys
and Standard & Poors, thus opening up access to the international capital markets; and the closure of
the Rossio Tunnel to enable repair work to be undertaken.
The members of the current Board of Directors (1 president, 1 vice-president, 3 board members) were
nominated by Resolution n. 102/2004 (2nd Series), of 27 October. With the exception of one of the
ordinary board members, these members are the same as those who served on the previous Board of
Directors nominated by Resolution n. 75/2002, of 04 November.
2. REFER was created by Decree-Law n. 104/97, of 29 April, and began operating on 4/5/97.
REFER, EP is still governed by the statutes annexed to Decree-Law n. 104/97, of 29 April, which have not
yet been adapted to the regime of chapter III of Decree-Law n. 558/99, of 17 December.
II Activities of the Audit Committee

1. During the year, the Audit Committee regularly monitored the activity and management of the
Company, for which it requested and obtained the necessary explanations from the Board of Directors
and the various Company departments.
2. We analysed the minutes of meetings held by the Board of Directors and the support documentation
that, consequent to the analysis carried out, we deemed it necessary to request.
3. From the analysis of the referred minutes and the consideration of the matters which were discussed, we
made recommendations to the Company and the Board of Directors. These recommendations were
fully accepted.
96

4. During 2004 we issued the quarterly reports referred to in n 2 of article 11 of the Articles of Association of
REFER, EP, and these were sent to the government authorities supervising financial and sectorial issues,
to the Board of Directors and to the Inspectorate General of Finances.
5. We monitored the financial application of the Companys capital spending projects and their means of
financing.
6. We monitored the evolution of the Companys financial and treasury situation.
7. We analysed the evolution of the main cost and income items.
8. We held all our normal monthly meetings. In total the Audit Committee met sixteen times during 2004.
9. In carrying out our activity we obtained support from the external auditors with whom we maintained
permanent contact through the official auditor who is a member of this committee.
We carried out a number of specific actions covering accounting procedures and other internal control
procedures through the official auditor who is a member of this committee in order to form our opinion
about the financial statements on a sample basis by examining the support documents. The official auditor
also issued the corresponding legal certification of accounts and the annual auditing report, documents
with which we are in agreement.
III- Assessment of REFERs Annual Report

1. The Board of Directors Report is sufficiently clear about the Companys activity during 2004.
2. The Audit Committees official auditor member wrote an annual report covering the year ending on 31
December 2004, in the terms of paragraph a) of n 1 of article 52 of Decree-Law n 487/99, of 16
November, as well as the corresponding Legal Certification of Accounts, with the reservations and
special remarks regarded as being appropriate by the official auditor. The contents of the said
documents warranted the agreement of the Audit Committee.
3. REFERs Board of Directors proposes that the Net Result for 2004, a loss of Euros 154 157 239, be
transferred to Results Carried Forward.
4. The investment and financing plans prepared by the Company and submitted to the respective
government authorities continue not to be the object of any formal authorisation or approval, in the
terms of the provisions of paragraph d) of article 13 of the Companys Articles of Association.
IV Economic and Financial Situation

After analysing the financial statements, we would like to highlight the following aspects:
1. REFER recorded a net loss of 154,2 million euros in 2004, which is a worsening of 25,3% (+31,1 million
euros) in relation to the previous year. This worsening was due basically to the decrease in the rate of
use of railway infrastructure (-7,3 million euros) and to significant increases in Supplies and External
97

Services (+7 million euros) and Financial Costs (+15 million euros). The item Results Carried Forward was
also affected negatively, by about 72 million euros, due to the regularisation of situations from the past,
such as the correction of accounts following the Agreement with CP (about 44 million euros, including
indirect effects and late payment interest debited by CP up to the end of 2003), alteration of the
accounting criterion for compensation paid for the mutual agreement rescission of individual work
contracts (20,2 million euros) and the setting up of provisions for covering risks resulting from
responsibilities inherent in shareholdings in the companies with negative equity (7,8 million euros).
2. Personnel costs, which are the Companys main cost item, represented about 50% of operating costs in
2004, and continued to decrease due to the reduction in employee numbers which was been ongoing
since 1999. After absorbing the employees coming from CP, following the respective splitting off and
creation of REFER, a re-structuring process was set in motion for the Company, resizing its technical and
human resources. Resorting to outsourcing, both as a strategic option and for the use of new
technological infrastructure, has also contributed to a reduction in employee numbers. The Companys
average number of workers has decreased from 6.500, in 1999, to 4.436, in 2004. In the latter year
there was a reduction of about 7,9%. Personnel costs decreased by 3,5% in 2004 in comparison with
the previous year. However, the average cost of staff increased by about 4,8% and there was a 4,2%
increase in the sub-item Remunerations, which includes only wages paid to the workers and excludes
compensation paid for the rescission of individual work contracts.
3. Most of the Companys activity consists of the development of railway infrastructure capital spending
projects. In 2004 the amount spent on such projects was 494,2 million euros. The degree of financial
execution of the capital spending in 2004 was about 77,7% of the overall forecast amount (636,3
million euros). The financial coverage of the capital spending by public funds (PIDDAC and Community
Financing) was only 19,3% in 2004 and the decrease seen in recent years has very serious effects on the
Companys financial structure since there is a consequent increased reliance on bank loans (for
financial coverage of capital spending and the operating deficit):
2001 2002 2003 2004
Financial cover percentage 51,5 40,1 22,8 19,3
Bank debt millions of euros 205 317 551 638
4. The Companys total debt was about 3 531,1 million euros, on 31/12/2004 (3.034,8 million euros, on
31/12/2003), an increase of about 496,3 million euros compared to 31/12/2003. The current level of
REFERs debt corresponds to about 2,7% of Portuguese GDP. The trend is for this to worsen in view of the
high annual operating deficit and the insufficient equity for financing investment projects in progress. It
should be pointed out that the capital spending on modernisation and expansion of the network has not
been reflected in any increase in operating revenue, namely in the railway infrastructure use rate, but
has signified an increase in equipment maintenance costs. This trend does not combine well with the
principles for the economic and financial balance of the Company as set out in article 8 of Decree-Law
98

104/97, of 29 April.
V - Opinion
In view of the aforementioned, the Audit Committee hereby issues a favourable opinion on the approval of
the Annual Report of Rede Ferroviria Nacional REFER, EP for the year ending 31 December 2004, and for
approving the results application proposal made by the Board of Directors, with the reservation and special
remarks expressed in the Legal Certification of Accounts.
Lastly, we would like to thank the Board of Directors, other employees and managers of the various
Company areas and the External Auditors for their support and collaboration.
Lisbon, 31 March 2005

Jos Antnio Coelho Alves Portela (President)
SALGUEIRO, CASTANHEIRA E ASSOCIADOS, SROC (official auditor member)

Represented by Issuf Ahmad
99

SALGUEIRO, CASTANHEIRA & ASSOCIADOS
SC FIRM OF OFFICIAL AUDITORS

(Auditors Association n. 151)
LEGAL CERTIFICATION OF ACCOUNTS
Introduction
1. We have examined the financial statements of Rede Ferroviria Nacional REFER, E.P.,
which include the Balance Sheet as of 31 December 2004 (showing a total of
6.046.155.591 euros and total equity of 2.445.436.818 euros, including a negative net
result of 154.157.239 euros), the Profit and Loss Statements by nature and by function of
expense and the Cash Flow statements for the year ending on that date, and the
corresponding annexes.
Responsibilities
2. The Board of Directors is responsible for preparing financial statements which show the
financial position of the company, the results of its operations and the cash flows in a
true and suitable manner. The Board is also responsible for applying suitable accounting
criteria and policies and for maintaining an appropriate internal control system.
3. Our responsibility consists of expressing a professional and independent opinion based

on our examination of those financial statements.
_______________________________________________________________________________________________________
Registered office: Rua da Padaria, n. 25, 1. Dt., 1100 388 Lisbon Tel: 96 608 72 72; 21 494 35 14; Fax: 21
491 10 53
Office: Av. 11 de Setembro n. 14 7 B 2700-624 AMADORA Tel.: 21 491 44 05 / Fax: 21 491 10 53
_______________________________________________________________________________________________________

Scope
4. Our examination was performed in compliance with the Technical Standards and the
Auditing Guidelines of the Portuguese Order of Official Auditors which require that the
examination be planned and executed in such a way as to obtain an acceptable level
of certainty that the financial statements are free of materially relevant distortions. As
such the referred examination included:
- a sample check of the documents supporting the figures and disclosures in the
financial statements and the assessment of the estimates, based on judgements
and criteria defined by the Board of Directors, used for preparing said statements;
- the assessment of whether the accounting policies and their disclosure are suitable
in view of the circumstances;
- confirmation of the applicability of the principle of continuity; and
- the assessment of whether, in overall terms, the financial statements have been
presented in an appropriate way.
5. Except for the limitations indicated in the following paragraph, we believe that our
examination provides an acceptable basis for expressing our opinion.
Reservations
6. The available information on tangible fixed assets is still insufficient to issue an opinion on
the reasonableness of a large proportion of the amounts booked in the Financial
Statements for the following reasons:
- The fixed assets file still does not guarantee the completeness of the respective
records, particularly whether existing assets are all recorded or whether all the
_______________________________________________________________________________________________________
491 10 53
_______________________________________________________________________________________________________

recorded assets exist physically. Nor does the fixed assets file identify the condition
and location of the assets, particularly those transferred from CP, which represented
about 20% of REFERs assets on 31/12/2004;
- The long duration infrastructures (LDIs), of the States account, are never
depreciated. Consequently, the item Other Reserves, that is part of Equity, and
which includes the subsidies granted for the financing of these investments, in the
terms of paragraph b) of n 4 of article 22 of the REFER Statutes, approved by
Decree-Law n 104/97, of 29 April, was not reduced proportionally.
We cannot determine the effect of adjustments that may result from resolving the
aforementioned situations.
Opinion
7. Except for the effects of the adjustments that may become necessary if the limitations
described in paragraph 6 above did not exist, we are of the opinion that the said
financial statements present in a true and appropriate manner, in all materially relevant
aspects, the financial position of Rede Ferroviria Nacional REFER, E.P. on 31 December
2004, as well as the result of its operations and cash flows for the year ending on that
date, in accordance with the accounting principles that are generally accepted in
Portugal.
_______________________________________________________________________________________________________
491 10 53
_______________________________________________________________________________________________________

Special remarks
Without affecting our opinion regarding the accounts, we draw your attention to the
following:
8. The Agreement reached with CP last September regarding several transactions related
to previous financial years resulted in a net loss for REFER of about 16 761 000 euros,
which is shown in the item Results Carried Forward. The reconciliation of accounts
between the two companies, for the date of 31/12/2004, resulted in a total figure of 4
059 000 euros, not yet recognised by the parties, which refers mostly to situations later
than the referred Agreement.
9. Until the end of 2003 the amounts paid as compensation for the rescission of work
contracts by mutual agreement, paid from 1998, were booked in the item Deferred
Costs Balance and depreciated over five years. This procedure was the object of
reservations made in the legal certification of previous annual accounts. As described in
note 48.15 of the Notes to the Financial Statements, in 2004 a new criterion was
adopted for the booking of these compensation amounts. This resulted in the booking
of 16 434 650 euros in the item Other extraordinary costs and losses. An effect of this
alteration to the criterion employed was the worsening of the losses for the financial year
and Results carried forward, respectively, of 5 541 053 euros and 20 161 052 euros
(balance still to be depreciated on 31/12/2003).
10. In relation to its shareholdings in companies with negative equity, no provisions were
made for risks and charges to offset the Companys responsibilities arising from this
situation. This procedure was also the object of a reservation, considering the
accounting principle of prudence and the possibility that REFER might participate in the
replenishing of the capital of these companies. As described in note 34 of the Notes, in
2004 a provision was created of 8 662 057 euros, corresponding to the risk inherent in
the 33% share capital participation in GIL Gare Intermodal de Lisboa, SA and 10% in
FERNAVE Formao Tcnica, Psicologia Aplicada e Consultoria em Transportes e
Portos, SA, which on 31/12/2004 have negative equities of 21 636336 and 15 220 659
euros, respectively. This new procedure had the effect of worsening the Results carried
_______________________________________________________________________________________________________
491 10 53
_______________________________________________________________________________________________________

forward and Results of the financial year by 7 776 157 and 885 900 euros, respectively.
The necessary measures should be taken to rectify the respective situation taking
account of the provision of article 35 of the Portuguese Commercial Companies Code,
with the redaction given by Decree-Law n. 19/2005, of 18 January.
SALGUEIRO, CASTANHEIRA E ASSOCIADOS

Firm of Official Auditors
Represented by:
Issuf Ahmad, ROC (Official Auditor) n 779
_______________________________________________________________________________________________________
491 10 53
_______________________________________________________________________________________________________
PricewaterhouseCoopers
& Associados - Sociedade de
Revisores Oficiais de Contas, Lda.
Palcio Sottomayor
Rua Sousa Martins, 1 - 3
To the 1050-217 Lisboa
Board of Directors of Portugal
Tel +351 213 599 000
Rede Ferroviria Nacional REFER, E.P.
Fax +351 213 599 999
Auditors Report
(Free Translation from the original in Portuguese)
1 We have audited the accompanying balance sheet of Rede Ferroviria Nacional -

REFER, E.P. as of December 31, 2004, the related income statements, by natures and by
functions, and cash flows and the related notes to the accounts for the year then ended.
These financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on our audit.
2 Except as discussed in paragraph n 3 below, we conducted our audit in

accordance with the International Standards on Auditing. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
3 The available information relating to tangible fixed assets, including the fixed
assets in construction, it is not considered sufficient, due to:
i) During 2003 the Company has completed the breakdown of the items included
within the register relating to the assets transferred to REFER, E.P. from CP -
Caminhos de Ferro Portugueses E.P., in agreement with Decree - Law n104/97,
Annexes III, IV e V, amounting to some Euro 1.225.760 thousand. However, the
Company has not yet performed a physical count to confirm the existence,
operating conditions and reasonableness of the valuation of the above mentioned
assets. Therefore, it is not possible to ensure the completeness and accuracy of
the accounting records, supporting the Financial Statements, mainly in what
relates to the assets transferred from CP Caminhos de Ferro Portugueses, E.P.;
ii) Since its incorporation in 1997, it has been Companys policy not to depreciate the
state owned fixed assets relating to long life infrastructures (ILD's), either
transferred to the Company at the start-up moment, or build by it, being the
subsidies received to finance those investments considered as Reserves and
included in Equity (in accordance with paragraph 4 b) of Article 22 of the
Companys Articles of Association, approved by Decree Law n 104/97 of April
22), and not as Deferred Income, to be charged to the income statement
proportionally to the depreciation of the above mentioned fixed assets;
it is not possible to calculate the effect of the adjustments which may arise from the above
situations.
PricewaterhouseCoopers & Associados - Sociedade de Revisores Oficiais de Contas, Lda. Matriculada na Conservatria do Registo Comercial sob o n 11912
Sede: Palcio Sottomayor, Rua Sousa Martins, 1 - 3, 1050 - 217 Lisboa Inscrita na lista dos Revisores Oficiais de Contas sob o n 183
NIPC 506628752 Capital Social Euros 137.600 Inscrita na Comisso de Valores Mobilirios sob o n 9077
Rede Ferroviria Nacional - REFER, E.P.
31 March 2005
4 In our opinion, except for the effects of such adjustments, if any, as might have
been determined to be necessary, if the scope limitations referred to in paragraph n 3
above had not existed, the financial statements present fairly, in all material respects, the
financial position of Rede Ferroviria Nacional - REFER, E.P. as of December 31, 2004,
the results of its operations and its cash flows for the year then ended in accordance with
the generally accepted accounting principles in Portugal.
5 Without qualifying the opinion stated on the previous paragraph, we draw attention
to the fact that our report relating to the 2003 financial statements, dated March 30, 2004,
included qualifications in respect of the matters discussed below, which were adequately
considered by the Company during 2004 and therefore the related qualifications no longer
apply to the 2004 financial statements:
i) In 2000, 2001 and 2002 REFER, E.P. has booked within fixed assets in
construction, the amounts of some Euro 8.800 thousand, Euro 12.090 thousand
and Euro 15.912 thousand, respectively, relating to internal costs incurred by the
Company with the management and execution of several investments in progress
related with the ILD's, being the available information at the above mentioned
dates not sufficient to allow to ascertain the reasonableness of neither the
capitalisation policies applied by the Company, nor of the values capitalised.
However, during the audit in respect of the 2004 financial statements and based
on additional information produced by the Company in respect of the above
mentioned years, it was possible to perform tests which allowed to conclude over
the reasonableness of the values capitalized;
ii) During the third quarter of 2004 the Company and CP Caminhos de Ferro
Portugueses, E.P. signed an agreement in respect of several transactions still
pending from booking and which generated to REFER, E.P. a net loss of some
Euro 16.761 thousand, booked to retained earnings, as the above mentioned
amount relate to transactions made in previous years. As of the date of the present
report and arising from situations not covered by the above mentioned agreement,
there are several transactions amounting only to some Euro 4.059 thousand,
whose booking by both entities is still pending;
iii) From 2000 to 2003, the Company paid the amounts, in Euro thousand, of 4.869,
11.668, 13.385 and 8.111, respectively, relating to indemnities in respect of
personnel redraws by mutual agreement. These values, stated in the balance
sheet as Deferred Costs, were being amortized on a straight line basis over a
period of 5 years, and the related balance as of December 31, 2003 amounted to
Euro 20.161 thousand. In accordance with the generally accepted accounting
principles in Portugal, the amounts of the referred indemnities are to be considered
as costs of the year in which they are incurred, and thus the Company as of
December 31, 2004 has transferred the above mentioned balance to retained
earnings;
(2)
Rede Ferroviria Nacional - REFER, E.P.
31 March 2005
iv) As of December 31, 2004 the Company has booked a provision in respect of
potential responsibilities arising from the investments held in the entities GIL -
Gare Intermodal de Lisboa, S.A. and Fernave Formao Tcnica, Psicologia
em Transportes e Portos, S.A., which present negative equity values of some
Euro 21.636 thousand and Euro 15.221 thousand, respectively. The above
mentioned provision, amounting to some Euro 8.662 thousand, has been booked
to retained earnings (Euro 7.776 thousand) and to results for the year (Euro 886
thousand).
6 We also draw attention to the fact that as of December 31, 2004 the entities GIL
Gare Intermodal de Lisboa, S.A., Fernave Formao Tcnica, Psicologia em
Transportes e Portos, S.A. and Metro Mondego, S.A. presented a situation of loss of
half their initial shareholding capital. Thus, as indicated by article 35 of the Companies
Code, measures should be taken to overcome this situation, namely by increases of the
shareholding capital.
Lisbon, March 31, 2005
(3)

Refer 2004 - EN

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Report and

Letter from the President

Rede Ferroviria Nacional, EP

Rede Ferroviria Nacional, EP

their functions properly in the REFER universe.

Jos Braamcamp Sobral

Rede Ferroviria Nacional, EP

REFERs Cultural, Social and Sporting events in 2004 .....................................................................13

Economic and Financial Situation ........................................................................................................18

The Company .......................................................................................................................................21

REFER Group .........................................................................................................................................53

Economic Financial Performance .....................................................................................................56

Reports and Certification of Accounts ..................................................................................................96

Rede Ferroviria Nacional, EP

To provide the market with competitive transport

Rede Ferroviria Nacional, EP

Responsible for the following areas:

President of the Board of

Member of the Board of

Member of the Board

Rede Ferroviria Nacional, EP

Rede Ferroviria Nacional, EP

Rede Ferroviria Nacional, EP

Rede Ferroviria Nacional, EP

Rede Ferroviria Nacional, EP

Rede Ferroviria Nacional, EP

REFERs Cultural, Social and Sporting events in 2004

Railway Cross-Country Championship REFER Christmas parties

Rede Ferroviria Nacional, EP

The object of international appreciation, with an honourable

Rede Ferroviria Nacional, EP

Rede Ferroviria Nacional, EP

MACROECONOMIC SCENARIO IN 2004 2003 2004 (E)

Private consumption -0,7 2,2

Current Account + Capital Account(%GDP ) -3,6 -5,4

Harmonised Index of Consumer Prices 3,3 2,5

Source: Banco de Portugal, Economic Bulletin of December 2004

Rede Ferroviria Nacional, EP

On 29 July 1999 the railway line on the 25 de Abril 1999

Economic and Financial

Rede Ferroviria Nacional, EP

Economic and Financial Situation

Rede Ferroviria Nacional, EP

Rede Ferroviria Nacional, EP

On 28 May 2000 the Santa Cruz/Damaia and

Rede Ferroviria Nacional, EP

Communication and Planning and

Economy and General Engineering General Operations REFERs Northern

Human Engineering Conservation and

Purchasing and Investments

Rede Ferroviria Nacional, EP

Rede Ferroviria Nacional, EP

Rede Ferroviria Nacional, EP

2004 was notable for the largest number of new

improving the skills of its human resources. In this regard 3000

Basic Wage In order to manage the companys knowledge and skills

2% Premiums implementation of the new careers system.

Rede Ferroviria Nacional, EP

Purchasing and Logistics

Rede Ferroviria Nacional, EP

Rede Ferroviria Nacional, EP

Rede Ferroviria Nacional, EP