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Annual Report
Version submitted to
the Minister aproval
Annual Report

GOVERNING BODIES............................................................................................................................9
MACROECONOMIC FRAMEWORK .....................................................................................................21
ACTIVITIES IN 2006 .............................................................................................................................23
ACTIVITIES IN 2006 .............................................................................................................................24
1. Infrastructure Management .................................................................................................27
1.1 Conservation and Maintenance .................................................................................33
1.2 Operation ....................................................................................................................38
2. Investment in Long Duration Infrastructures (LDI) ...................................................................42
3. Activities: - Other ..................................................................................................................50
ENVIRONMENT ...................................................................................................................................53
Property Assets ..................................................................................................................................56
Human Resources ............................................................................................................................61
Human Resources ............................................................................................................................62
Economic and Financial Situation ....................................................................................................68
Proposta de Aplicao de Resultados .............................................................................................78
Financial Statements ........................................................................................................................80
An Annex to the Balance Sheet and Profit and Loss Statement ........................................................86

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The year of 2006 marked Portugals 150th year since the countrys inaugural train trip from Lisbons
Santa Apolnia Station to Carregado, a historical milestone.

REFER, the railway infrastructure management company, although in operation for only nine years,
was handed an important historical legacy.

With this legacy in mind, REFER has progressively consolidated its mission of providing a competitive
transport infrastructure by managing and developing an efficient, safe and environmentally friendly
railway network.

It was also within this perspective that, during the last year, the Board of Directors profoundly
reorganised the company to meet strategic operation objectives from a customer-oriented
perspective. Consequently, it created four General Departments:
1. The General Department of Organisation and Development, which combines a number of
operation areas of a corporate nature, in particular the General Secretariat, Human
Resources, Organisational Development, Legal Issues and Claims, Contracting and
Procurement, Information Systems and Technology and Work and Facilities Safety. This
General Department will create a more effective organisation and simplify work processes
and procedures.
2. The General Department of Planning and Strategic Control combined the prior Strategic
Planning Department and the Planning and Control Department into a single General
Department. The success of REFERs mission is highly dependant on corporate Planning and
Control and Strategic Planning for preparing the Railway Master Plan adapted to REFERs
missions based on agreements with the state.
This General Department was also assigned the Crossings and Level Crossings Management
Department which implements actions to reduce accident rates at level crossings. It meets
this goal by eliminating level crossings, improving safety conditions at crossing sites and
through awareness and civic education campaigns covered by a Level Crossing Elimination
and Reclassification Plan, thereby ensuring integrated management of all the railway
networks level crossings.
3. The General Department of Infrastructure Operation improves the efficiency of railway
infrastructures, provides more effective solutions to meet market needs and to overcome
challenges, implements the new organisational structure that has been under development
in stages, since it requires a substantial number of personnel, and covers the operation core
of the whole national railway network.

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Designing the new organic structural model presupposes more optimised use of resources,
more management flexibility and better adaptability to the mission. The said design focuses
on the following aspects:
Safe access to a quality infrastructure,
Capacity management in a liberalised market,
Customer relations and customer satisfaction,
Business opportunities and profitability of assets.
4. The General Department of Engineering and Construction, in carrying out its investment
activities, has created structures for all railway infrastructure interventions whether
modernisation, renewal or rehabilitation thereby ensuring appropriate planning for overall
goals, not only in cost control and completion deadlines, but also in optimising the necessary
means and resources.
The Engineering Department is a key player since it encompasses all railway expertise for
coordinating and carrying out modernisation and rehabilitation railway projects, for inspecting
and characterising railway infrastructures, for preparing technical standards and for
innovation by studying and applying new technology to the infrastructures.

As a public service provider managing the railway infrastructures, REFER improved its service to
operators in 2006. REFER attained 94% punctuality rates for pendular trains, 93% for regional trains
and 97% for suburban trains. It also maintained efforts from previous years to provide operators with
an infrastructure equipped with systems for greater safety and reliability.
A the end of 2006, about 55% of the wide track (on which 90% of trains run) was equipped with
sophisticated circulation command and control safety systems that included, in addition to very
safe automatic signalling, the Automatic Speed Control System (CONVEL), the Automatic Stopping
System (ATS) and the fixed Ground-Train Radio system.

REFERs investments in Long Duration Infrastructures (LDI), on behalf of the state, included the
investment projects to modernise and develop the National Railway Network and to eliminate level
crossings. In 2006, REFER eliminated 66 level crossings and reclassified 87.
As for investments to modernise the National Railway Network, emphasis goes to the completion of
the general contract work to modernise the Azambuja Vale de Santarm section that allows trains
to run on renovated tracks all the way from Vila Franca de Xira North to Vale de Santarm, a
distance of over 30 km; the completion of the construction contract work for the railway viaduct at
Santana do Cartaxo and the work to modernise the power and surveillance remote control systems
at the Substation of Vila Franca de Xira and Entroncamento; completion of the work to install the
automatic train speed control system in the sections of Campanh / Contumil and Santo Tirso /
Guimares and the link to the Douro Line of the logistics platform of the container company
Sociedade Portuguesa de Contentores (SPC) in Valongo.

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In 2006, REFER invested 313 million euros. Interventions for LDI covered by PIDDAC (Central
Administration Development Investment and Spending Program) represented 85% of this total, in
the amount of 266 million euros. The remaining 15% (47 million euros) were assigned to investments
not covered by PIDDAC and for current investments in infrastructures (41.1 million euros), general
studies (4.6 million euros) and operation investments (0.9 million euros).
In past years, the state has financed a progressively smaller part of these investments due to its
cost-cutting policies. In 2006, Chap. 50 represented about 1.7% (4.5 million euros), E.U. Funds
represented 33% (87.8 million euros) and Other Financing Sources represented 65.3% (173.5 million
euros). Note that, as in previous years, since contributions by PIDDAC and by E.U. funds have been
decreasing, loans have been the main means of financing investments, with the consequent
negative impact on financial expenses.

To improve its information systems and technology, in 2006 REFER made a strong investment in
technological upgrades to its servers and respective management software.

The technological infrastructure was improved by installing a spatial database system that will
support the next project to implement a geographic information system for the railway
infrastructure the SIGRAIL project which is expected to bring significant progress to this field in
In 2007, the company also expects to switch to electronic invoicing, an important milestone that
will substantially improve processes involving REFERs suppliers and clients.

In the second half, REFER carried out a refinancing operation in an overall amount of 1.1 billion
euros. The amount in question allowed the company to consolidate all of its short-term debt.
The refinancing operation was split into two parts, the first in the amount of 600 million euros at 20
years and with the states surety, and the second of 500 million euros at 15 years, issued by REFER
based on its rating. This operation is part of a professional REFER debt management strategy using
cost-optimisation instruments to reduce associated costs and to reduce the interest rate risk.

In keeping with its Environmental Policy, REFER has continued to develop its Environmental
Management System (according to standard ISO 14001), for which the Board of Directors has
approved a number of procedures transversal to the organisation.
According to its noise management policy, REFER completed the strategic noise chart for the
Cascais Line, whilst a noise chart for the Sintra Line is being prepared (to be completed at the end
of the first quarter of 2007), as well as the digital cartography for the North Line (Lisbon Azambuja
section) and the Cintura Line, an essential factor for developing the respective charts and plans (to
be carried out during 2007).
As for waste management, the company has maintained its work to decrease the dispersion of
waste outside stockpile sites. The company was able to transform its wood crossties into energy and

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thus eliminated most of this stockpiled material. The company implemented the e-waste
application and has expanded its selective material collection. In 2006, it began collecting oil,
batteries and computer consumables, the latter under a protocol signed between REFER and the
AMI Foundation.
Monitoring plans are also in progress for the Minho Lines, the Braga Branch Line, and the South Line,
which are expected to be completed at the end of the first quarter of 2007.
Moreover, during 2006, intense work was carried out to prepare the work contracts to be awarded
in early 2007, for which it compiled the preliminary information for licensing procedures and for the
respective environmental follow-up.

It is essential to provide railway transport operators with high safety levels for passenger transport. On
a daily basis, REFER collects and processes all the statistical information about railways activities,
thus making it aware of the type of anomalies that occur on the National Railway Network, thereby
facilitating the deployment of measures to eliminate and control the risks of railway accidents.

On 28 October 2006, to commemorate the 150th year of railway transport, the respective ministry
announced the strategic guidelines for the railway sector that identified four strategic goals to
support priority targets and actions identified for the 2015 horizon:
Improve access and mobility, to substantially increase the railways market share;
Ensure suitable safety, interoperability and environmental sustainability standards;
Evolve to a sustainable financing model and promote efficiency;
Promote research, development and innovation.

Adapting REFERs investment plan in order to integrate the conventional network with the high-
speed network, articulation with the national logistics platform network and improvement of links to
ports were regarded as priorities for the infrastructure manager.

REFER has been meeting its goal of submitting a contract program to the state based on
transparent principles regarding its financial and accounting autonomy. The said contract
program stipulates the companys obligations to develop its activities and the states commitment
to provide financial support through pre-determined annual allocations for infrastructure investment
and management.

Lastly, but not less important, the Board of Directors approved the first REFER Ethics and Conduct
Code that will reinforce the companys ethics. This code is expected to be a fundamental basis for
the social responsibility policy developed by REFER.

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At the end of the year, on average REFER had 3,654 personnel who collaborated diligently with the
Board of Directors to fulfil the companys goals and to overcome the main future challenges faced
by REFER and the railway sector.

We would also like to express our appreciation for the Audit Committees collaboration and to thank
the financial institutions, the National Railway Transport Institute and the respective supervision
ministries for their essential support in meeting our targets.

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Companys Mission,

According to Decree-Law 104/97, REFER has the mission to provide a competitive transport
infrastructure by managing and developing an efficient and safe railway network in an
environmentally friendly manner.

REFER split its structure in order to fulfil two aspects of its mission. Nevertheless, it has maintained its
main goal of rendering a public infrastructure management service whereby the whole corporate
and administrative structure serves both activities indiscriminately.
In addition to the activities covered by its missions infrastructure management and investment
management REFER, in performing its normal operations, also carried out other complementary

According to its official activities, REFER operates in two complementary business areas:

Infrastructure Management and Operation, as a public service provider managing the

National Railway Network infrastructures, which includes capacity management,
infrastructure conservation and maintenance and the management of the respective
command, control and safety systems;

Investment in the construction, installation and renovation of the infrastructures, an

activity performed on behalf of the state (the assets belong to the public railway

The following table illustrates the strategic goals for 2007 as defined by REFER in the Activities /
Budgets Plan:

Analysis perspective Strategic Goals

1. Ensure economicfinancial sustainability

Financial 2. Reduce costs of rendered services
3. Increase input from complementary operation activities

4. Improve network service levels

5. Improve and modernise the network infrastructure
Client 6. Improve services rendered to end clients
7. Ensure high safety levels
8. Promote environmental sustainability

9. Increase the organisation's productivity

Internal / Processes 10. Optimise management and control of investments / contracts
11. Foster the uniformity of processes and promote standardisation

12. Strengthen technical and management expertise

Organisational Learning
13. Forster professional development

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Internal and External Rules and


This chapter will list the external and internal regulations to which REFER is subject:

Legal Code for the Land Transport System, Law 10/90 of March 17, the land transport system
includes the infrastructures and production means assigned to land travel by persons and
merchandise within the Portuguese territory or when the trip ends or has part of its route within
the said territory and is governed by this law, its development decree-laws and regulations.

On 29 April 1997, Decree-Law 104/97 was published that created REFER, E.P.

REFER, whose share capital is 100% held by the state, is governed jointly by the Ministry of
Finance and the Ministry of Public Works.

REFER carries out activities to fulfil its goal, according to the principles of modernisation and
effectiveness, to regularly and continuously render a public service of managing the national
railway network infrastructures.

According to what was established, REFER:

9 May perform all necessary or convenient management acts to fulfil its objective;

9 Maintain the rights and assume the responsibilities assigned by the applicable
legal provisions and regulations covering the public railway domain.

Decree-Law 299-B/98 published on 29 September 1998, created Instituto Nacional do

Transporte Ferrovirio (INTF) (National Railway Transport Institute) which regulates and inspects
the railway sector, supervises activities and intervenes in public service concessions.

Decree-Law 568/99, of December 23, revises regulations applicable to level crossings,

approved by Decree-Law 156/81, of June 9, and establishes the obligation to prepare multi-
year plans to eliminate level crossings. It was altered by Decree-Law 24/2005, of January 26.

Decree-Law 93/2000, of May 23, establishes the conditions to be met in the national territory
to obtain interoperability of the trans-European high speed railway system (transposes Council
Directive 96/48/CE, of 23 July 1996). It was altered by Decree-Law 152/2003, of July 11, which
rectifies omissions detected in the transposition of Council Directive 96/48/CE, of July 23,
made applicable by Decree-Law 93/2000, of May 23, which stipulated the conditions to be
met to achieve interoperability of the trans-European high-speed railway system in the
national territory.

In October 2003, Decree-Law 270/2003 of October 28 was published and which transposes
to national law Directives 2001/12/CE, 2001/13/CE and 2001/14/CE, normally called 1st
Railway Package to open the railway transport market to participation by private companies,

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thus guaranteeing a number of criteria regarding technical, financial and safety capacity.
(Altered by Decree-Law 146/2004, of June 17)

Decree-Law 276/2003, of November 4, establishes the new legal policy applicable to assets
of the public railway domain, including rules on the respective utilisation, disfranchising,
exchange and the rules applicable to relations of bordering proprietors and of the population
in general with those assets, legislative authorisation given by Law 51/2003, of August 22.

Consequent to what was stipulated in this legal statute, REFER prepared and published, in this
year, the first edition of the Network Directory which provides railway transport companies with
essential information for their access to and utilisation of the national railway infrastructure
managed by REFER and open to railway transport.

Decree-Law 24/2005, of January 26, alters the Level Crossing Regulations approved by
Decree-Law 568/99, of December 23.

In March 2005, INTF published Regulations 21/2005 covering the tariff rates of services
rendered to operators by the infrastructure manager.

Decree-Law 156/2005, of September 15, establishes the obligation for all goods and service
providers that maintain contact with the general public to maintain a complaints book.

For contracting purposes, REFER is covered by Decree-223/01, in the specific case of

contract works, and everything not regulated therein is covered by Decree-Law 59/99.

As an issuer of securities, REFER must publish all the information stipulated in the Securities
Code and in CMVM Regulations 4/2004 and 11/2005 (Securities and Exchange Commission)
in reference to the application of the IFRS.

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Information on relevant
transactions with related entities

The following table illustrates the most relevant contracts with companies in the REFER Group during

Most relevant contracts with REFER Group companies

in 2006


Company Contract Amount

CPCOM Advertising facilities contract 395.589

Concession of commercial spaces 902.903
Advertising 515.476

REFER Telecom concession 874.628
Antennas of mobile network operators 680.987
Radiomvel's Infrastructures 3.375

INVESFER - ENTRECAMPOS: Cancellation 1.034.333
Supplementary capital entries 18.782.000

The loans to INVESFER bear interest at the 12-month Euribor rate + 0.5% and will be reimbursed
between 2007 and 2009. In 2006, 1,590,267 euros were recognised as interest on the financing

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Information about other


Facturados 2006
Mota - Engil, Engenhar e Construo 51.610.804
Ferrovias e Construes, S.A. 31.291.759
Alcatel Transport Solutions 26.157.901
Alcatel Portugal SA 25.163.873
Dimetronic SA 18.963.746
SOMAGUE Engenharia SA 14.234.907
FERBRITAS-Empreend. Ind.Comrcio SA 12.022.951
Refer Telecom Serv Telecomunic SA 11.936.412
Neopul - Soc Estudos Construes SA 11.183.360 Const. Soares da Costa SA 10.813.167
SOPOL-Soc Geral de Construes e 10.219.127 For contracting purposes, REFER is
Teixeira Duarte-Eng. Construes SA 9.973.613
INVESFER-Prom.Com.Terr.Edifcios SA 8.333.452 covered by Decree Law 223/01.
BRISA Engenharia e Gesto, SA 7.199.297
Anything not regulated therein related to
CP-Caminhos Ferro Portugueses, EP 7.158.720
Bento Pedroso Construes SA 7.078.532 contract works is covered by Decree-Law
EFACEC - Sistemas de Electronica SA 5.667.541
Futrifer-Indstrias Ferrovirias SA 4.902.321
Somafel-Eng.e Obras Ferrovirias SA 4.575.460
TECNOVIA-Sociedade de Empreitadas 4.449.317
EDP Distribuio Energia SA(Lisboa) 4.425.592 REFER applied internal procedures to
Bombardier Transportation Portugal, 4.363.159
contract services worth less than 400,000
Geofer -Prod Com Bens Equipament SA 4.229.898
Fergrupo - Const Tecnicas Ferrov SA 4.100.191 euros, for which it prepares standard
Promorail - Tecnologias de 3.970.972
models of contracts and contract
Satepor-Indstria de Travessas de 3.654.567
Grupo 8-Vigilncia Prev Electr Lda 3.569.007 specifications.
Opca-Obras Publicas Cim Armado SA 3.509.663
INTF - Instituto Nacional 3.439.023
Obrecol - Obras e Construes SA 3.138.401
Metropolitano de Lisboa EP 3.071.861
Siemens,S.A. 2.713.535
Consulgal-Consult Engenh Gesto, SA 2.654.037
Azvi, S.A,-Sucursal em Portugal 2.423.463
Arcelor Espan, S.A. 2.333.601
GESFIMO-Esprito Santo Irmos, 2.069.813
EDP Comercial 1.901.884
Manuel Rodrigues Gouveia SA 1.830.114
TPF Planege - Consultores Eng 1.785.913
DHV FBO - Consultores S.A. 1.783.798
Ws Atkins(Portugal)Consultores 1.770.892
Efacec - Servicos Manut Assist SA 1.621.226
AVS-Corretor Seguros , SA 1.547.843
COBA - Consult Ob Barrag Planeam SA 1.488.891
Joo Mata Lda 1.462.771
GIL - Gare Intermodal de Lisboa SA 1.402.034
LNEC-Laborat. Nac. Engenharia Civil 1.386.948
Accenture, Consultores de Gesto, 1.381.140
TECNASOL-FGE Fundaes Geotecnia SA 1.351.110
PORSOL - Materiais de Soldadura,Ld 1.330.230
CME - Construo e Manuteno 1.301.677
Petrleos de Portugal-Petrogal-SA 1.296.189
FITONOVO Portugal Deservagens 1.249.675
ISQ - Inst de Soldadura e Qualidade 1.188.588 13
Maranho - Soc de Construes Lda 1.170.022
EMEF -Emp Manutenc Equip Ferrov SA 1.140.293
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Governing Bodies

According to its statutes, the governing bodies of REFER includes a Board of Directors and an Audit
The REFER Board of Directors and the respective duties are described below:

General Dep. of Engineering and Construction;

Chairman of the Board of Directors
Lus Filipe Melo e Sousa Pardal, Eng.
General Dep. of Organisation and Development;


Economics and Finance

Vice-Chairman of the Board
General Dep. of Planning and Strategic Control
Alfredo Vicente Pereira, Dr.

Property Assets

International Relations

E.U. Funds
Board Member
Romeu Costa Reis, Dr. Auditing

Communication and Image

Board Member General Dep. of Operations and Infrastructures

Alberto Jos Engenheiro Castanho Ribeiro,


Infrastructure Access Tariffs

Board Member Commercial Contract Management Department

Carlos Alberto Joo Fernandes, Eng.
Liaison with the FERTAGUS Concession Contract

Contracts with the State

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REFERs accounts are audited by the international audit firm PricewaterhouseCoopers & Associados
Sociedade de Revisores Oficiais de Conta, Lda., according to what is stipulated by Contract no.
01/05/CA/EF Rendering of External Auditing Services, REFER Group Support to the Audit

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Remuneration to Members of
the Governing Bodies

Information referred to in the Council of Ministers Resolution 155/2005 of 8 September 2005:

2006 2005

Employer Employer
Social Security Main Accessory Main Accessory
Deductions for Deductions for
Regime Remunerations Remunerations Remunerations Remunerations

Board of Directors (from 01/01/2005 to 26/10/2005)

Jos de S Braamcamp Sobral Chairman Normal Regime 52.767,00 48.716,00 18.024,00
Jos Osrio da Gama e Castro Vice Chairman CGA (pension fund) 53.391,00 37.742,00 17.611,00
Lus Miguel dos Reis Silva Member Normal Regime 48.845,00 40.262,00 16.749,00
Jos Roque de Pinho Marques Guedes Member Normal Regime 47.239,00 37.748,00 16.367,00
Manuel Alfredo Aguiar de Carvalho Member Old Age Pension 53.857,00 72.044,00 11.729,00

Boad of Directors (from 27/10/2005 to 31/12/2005)

Lus Filipe Melo e Sousa Pardal Chairman Normal Regime 68.223,00 30.084,00 18.607,00 10.139,00 10.663,00 4.098,00
Alfredo Vicente Pereira Vice Chairman Normal Regime 64.641,00 26.786,00 17.757,00 9.593,00 5.344,00 2.864,00
Romeu Costa Reis Member CGA (pension fund) 60.546,00 25.497,00 0,00 8.969,00 9.257,00 0,00
Alberto Jos Engenheiro Castanho Ribeiro Member Normal Regime 60.546,00 26.430,00 16.784,00 8.969,00 10.127,00 3.690,00
Carlos Alberto Joo Fernandes Member CGA (pension fund) 60.546,00 25.481,00 0,00 8.969,00 9.257,00 0,00

TOTAL 314.502,00 134.278,00 53.148,00 302.738,00 281.160,00 91.132,00

The accessory remunerations to the Board of Directors include the subsidy for accumulation of
duties stipulated in Council of Ministers Resolution 29/89 of August 26, no. 17.

The Audit Committee consists of three members appointed by a joint order of the Minister of
Finance and the Minister of Transport. The third member, a chartered accountant, is independent
and earns fees rather than a wage.
Main Employer Deduction
Remunerations for SS

Jos Antnio Coelho Alves Portela Chairman of A.C. (Until 2006) 8.713

Hilrio Manuel Marcelino Teixeira 11.406 2.709

20.119 2.709

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Analysis of the companys economic, social and

environmental sustainability

This chapter is included in the 2006 Sustainability Report.

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Evaluation of the level of compliance with the Principles

of Good Governance

This chapter is included in the 2006 Sustainability Report.

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Code of Ethics and Conduct

In a pioneering attitude within the sector, REFER was one of the first railway companies to approve a
Code of Ethics and the respective Committee, at a national and international level. The company
is committed to everyone, personnel and the general community alike, in its compliance with its
ethical values and principles. It strives to strengthen its personnels character and convictions
through a culture of coherence and responsibility.
Since the REFER Code of Ethics and Conduct is important to the companys activities, it was
distributed to all company personnel.
All REFER personnel, clients, suppliers, all public entities representing the community in general and
individual citizens may access the REFER Code of Ethics and Conduct at They may
also contact the Ethics Committee directly for an answer to any doubts, to request clarifications
and report any event, complaint or abnormal situation that may violate the codes standards.
These contacts will remain completely confidential.
Anyone or any entity may contact the Ethics Committee at or forward a
letter to:
Comisso de tica da REFER
Estao de Santa Apolnia
1100 105 LISBON

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According to the Bank of Portugals economic forecasts for 2006 and 2007, in 2006 the Portuguese
economy recovered slightly after a meagre growth of 0.3% in 2005. In real terms, GDP increased
by 1.2% in 2006, and a 1.5% growth is forecast for 2007.
In terms of expenditure, note that the economy was boosted by stronger net foreign demand
which meant higher exports. Portugals growth rate is much lower than in the main markets of
Portuguese exports. Moreover, a small country that is highly dependent on energy is naturally more
affected by the rising oil prices.
Private consumption, on an average annual basis, is estimated to have slowed to 1.1% in 2006,
maintaining the trend from 2005. This performance, associated to higher debt payments (due to
higher interest rates and weak employment opportunities) has led to lower family savings.


Private Consumption 1,1

Public Consumption -0,2

GFCF -3,2

Exports 9,0

Imports 4,0

GDP 1,2

Current Accounts + Capital Accounts (% GDP) -7,6

Harmonised Index of Consumer Prices 3,0

Source: Bank of Portugal

The overall Gross Fixed Capital Formation has been negative in previous years. This has led to a
continued sharp drop in investment, which in 2006 fell 3.2%, followed by a growth forecast for 2007
of 0.5%. This negative performance was felt by public investment, housing investment and
corporate investment.
The need for foreign financing deepened in 2006, a trend that is expected to continue in 2007. The
impact of oil prices is clearly visible in the deteriorating goods and services deficit. The negative
revenue balance resulted from lower foreign investment in Portugal and higher interest rates.
Although employment stagnated, it is expected to improve in the following year by keeping pace
with the moderate economic recovery, a growth which is based exclusively on employment in the
private sector.
Inflation rose from 2.1% in 2005 to 3% in 2006, and is expected to return to 2.1% in 2007.
REFER thus operated within an unfavourable global setting in 2006, which was further aggravated
by rising interest rates and their consequent negative impact on the companys financial results.

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The Portuguese states budget cuts had a particularly negative effect on the two areas in which
REFER operates. The company received fewer contributions for its investment activities and less
compensation for the operation costs to render a public service. In 2006, those compensations fell
way short of needs, as in previous years, thereby increasing the companys reliance on debt and
accentuating its structural disequilibrium.

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IN 2006 2006

REFER renders a public service by managing the overall National Railway Network infrastructure,
and is therefore responsible for carrying out activities to meet its goals according to the principles of
modernisation and effectiveness by operating in two business areas:

Infrastructure Management includes managing the railway infrastructures capacity,

conservation and maintenance and managing the respective circulation command and
control systems, including signalling, regulation and promptness in order to ensure the
indispensable safety and quality conditions of a public railway transport system.

Investment consists of building, installing and renewing the infrastructure, an activity carried
out on behalf of the state (the assets are part of the public railway domain).

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Besides the activities related to its mission infrastructure management and investment REFER,
through its normal operations, also performs other complementary activities, as shown below in the
Profit and Loss Statement per Activity:


(10^6 euros)

Infrastructure Management
Investment Other Total Company
Conservation Operation Total

Earnings 53,88 48,80 51,43 100,24 96,29 250,41

Sales 0,00 0,00 0,00 0,00 20,20 20,20

Services Rendered 0,25 28,76 29,04 57,80 4,91 62,97

Production Variation 0,00 0,00 0,00 0,00 -15,41 -15,41

Supplementary Earnings 0,52 0,77 4,15 4,93 10,97 16,41

Operation Subsidies 0,00 15,27 13,73 29,00 0,00 29,00

Work for the Company 50,09 0,03 0,00 0,04 0,00 50,13

Other Operating Earnings 0,44 0,00 0,00 0,00 1,31 1,75

Operating Earnings 51,29 44,84 46,93 91,77 21,98 165,04

Costs 55,01 181,75 138,84 320,59 42,95 418,56

Materials 17,95 6,09 0,29 6,38 0,80 25,12

External Supplies and Services 7,86 71,30 16,72 88,02 7,97 103,85

Taxes and Duties 0,04 1,62 0,68 2,30 3,95 6,29

Personnel 22,12 27,31 56,11 83,42 4,76 110,30

Other Operating Costs 0,12 1,85 1,67 3,52 0,01 3,65

Depreciation 2,94 4,01 1,75 5,76 0,47 9,17

Provisions 0,00 1,73 0,34 2,07 4,27 6,34

Operating Costs 51,04 113,91 77,56 191,47 22,21 264,72

Operating Income 0,26 -69,08 -30,63 -99,71 -0,23 -99,68

Financial Income -1,45 -60,56 -54,71 -115,27 51,89 -64,84

Extraordinary Income 0,07 -3,31 -2,07 -5,38 1,67 -3,63

86- Income Taxes 0,00 0,06 0,05 0,11 0,02 0,13

INCOME PRIOR TO FINANCIAL COSTS -1,12 -133,01 -87,46 -220,47 53,31 -168,28

Finan. costs not capital. in Investments 33,42 33,42

NET PROFIT -34,54 -133,01 -87,46 -220,47 53,31 -201,70

Service rendering earnings are recorded under the activities responsible for their execution or
management. Therefore, operation activities include earnings from services rendered to railway
operators, in particular rolling stock manoeuvres.
User fees, also recorded as a rendering of services, are broken down into operation and
conservation, similar to the Compensation Indemnities included in the Operation Subsidies.
Supplementary earnings from operation activities consist of selling traction energy. Contract
specifications are assigned to the investment mission. This headings other items arise from non-
regulated activities.

Annual Report

Work for the company includes all the materials, labour, equipment and structural costs assigned
directly to the investment mission. Only expenses arising from work at the warehouse are not
covered by this concept, since they were distributed among the infrastructure management
activities proportionally to each activitys consumption of warehoused materials.
Sales (like Production Variation) income stemmed from the sale of a property, and is thus a non-
regulated activity.
Operating and extraordinary costs are distributed among REFERs missions and activities essentially
through the distribution keys that indicate the allocation of resources from each company
organisation unit to its business functions. However, some amounts are specifically associated to
concrete activities, in terms of infrastructure management, such as infrastructure maintenance
costs (particularly subcontracted maintenance), expenses on stations, telecommunications, rescue
trains, capacity management and traction energy. Works carried out for third parties are viewed as
a non-regulated activity.
Financial Income arises from assigning the respective costs and earnings among the activities that
give rise to the companys deficit, according to each ones contribution. Only financial expenses
not capitalised as investment are submitted to a specific analysis, in view of REFERs debt
Income taxes were distributed according to the relative weight of each activitys operating costs.

Annual Report

1. Infrastructure Management
The infrastructure management mission essentially covers the following two activities:
Railway infrastructure conservation and management;
Operation (management of circulation command and control and management of the
railway infrastructure capacity)

Real In 2005 Change

(1) (2)

Earnings 91,73 92,13 -0,4%

Utilisation Rate 53,77 55,37 -2,9%

Operation Subsidies 29,00 27,10 7,0%

Other Earnings 8,96 9,65 -7,2%

Costs 173,13 163,52 5,9%

Materials 6,39 7,89 -19,0%

Subcontracts 67,90 52,37 29,6%

Other Supp. of Ext. Serv. 14,76 14,52 1,6%

Personnel 77,23 81,70 -5,5%

Depreciation 2,99 3,20 -6,7%

Other Costs 3,86 3,83 0,8%

Operating Income
-81,40 -71,39 14,0%

Costs of DGOD, DGPCE

and Support Departments
18,31 16,78 9,1%

Total -99,71 -88,17 13,1%

3.135 3.474 -9,8%

Operating Earnings
Total operating earnings from infrastructure management activities recorded at the end of 2006
reached 91.7 million euros, a slight decrease (0.4%) compared with the previous year.
The changes that influenced earnings are highlighted below:
The user fee (59%) was the item with the greatest impact on this activitys earnings, totalling
53.8 million euros, a 2.9% decrease compared with last year. Note that this amount includes a
full year of charges to FERTAGUS, which was not the case in the user fee revenue in previous

Annual Report


CP + FE RTA G US O P E RA TO RS For comparative purposes, the years of
2006 and 2005 should be harmonised. That

60.000 is, 2005 should include the impact of a full

annuity by the FERTAGUS operator, which
would place that years earnings for
20.000 essential services at 57.7 million euros, (thus

a 7% decrease).
2002 2003 2004 2005 2006 The evolution of earnings from essential
services rendered to both operators is
shown in this graph, keeping in mind that prior to 2005 the FERTAGUS operator was covered
by a special policy.


An analysis of earnings from the CP O P E RA TO R

operator which has nearly all the 80.000

traffic on the national railway network,
representing 96% of the TKs
provides a clearer view of the annual
earnings trend from essential services. 20.000

The tariffs published in the 2006 2002 2003 2004 2005 2006

Network Directory were the first to be

calculated according to Regulations no. 21/2005. Consequently, and since there were
differences between that directorys rules and those applied previously, amplified by a
period of intense investment, REFER felt that the tariffs of that first year, for rendering
essential services, should be the reference tariff for the management efficiency incentive in
following years. According to this principle, the tariffs of essential services covered by the
2006 Directory should not be subject to the price cap.
This was not the opinion of the Regulatory Entity when it considered that, in this matter, the
regulations were to be applied immediately and, as such, the prices of essential services
were restricted to increases below the inflation rate. This decision had a strong impact, as
revealed by the tariffs disclosed in the 1st Addendum to the 2006 Directory, and caused a
drastic cut in revenue, of about 27% compared to initial expectations based on the tariffs
that had been published in the Directory.
Services rendered to the operators also involved rendering services associated to railway
activities, called additional services and auxiliary services, subject to the tariffs published in
the Directory.
The other earnings item fell 7.2% compared with the previous year. In this item, note the
accounting of additional services, broken down into 3.43 million euros for the sale of

Annual Report

traction power, 2.2 million euros for train manoeuvre activities, 1.8 million euros for parking
rolling stock and 1.4 million euros for eliminated trains, that is, earnings arising from the
capacity requested and not used that is subject to a tariff payment that varies according
to the advance period in which the request was cancelled.
The state allocated about 29 million euros in compensation indemnities to REFER to settle
the accounts, a 7% increase over 2005.

Operating Costs

Infrastructure management costs include two major items: external supplies and services, with
emphasis on subcontracts and personnel costs.
Operating costs for infrastructure management reached 173.1 million euros, a 6%, growth over
the previous year.
The following changes took place in the main items:
A 29.6% rise in the subcontracts item, resulting from various factors, in particular a sharp rise
in new assets, some of which did not exist in the recent past, less investment fronts, a new
maintenance policy focussed on providing greater reliability to the infrastructures and new
legal provisions that influenced work planning.
On the other hand, personnel costs decreased about 5.5%. The company continues to
progressively reduce its railway infrastructure management personnel due to the railway
networks technological modernisation that provides a more centralised operation policy
and optimises production processes.
Consequent to a smaller workforce and better work distribution, personnel costs have been
decreasing progressively in the past years.
The average number of workers fell by 9.8%, corresponding to a reduction of 339 workers.

Of the total operating costs of this activity, 91% (158 million euros) are eligible for tariff calculation
purposes, 5% (8.1 million euros) correspond to Annex I and the remaining 4% (7 million euros) are
Other Infrastructure Management Activities not eligible for tariff calculation purposes.
The percentages remained unaltered in relation to the previous year.

The Operating Result of the Infrastructure Management Mission was aggravated by higher
maintenance activities, with an impact on operating costs and, in particular, on the cost of external
supplies and services. This situation was caused mostly by the network modernisation implying a
substantial number of new installations, many of which did not exist previously, and others that
replaced very rudimentary systems. The modernisation introduced new technology for infrastructure
operation and made the infrastructures more suitable to demands.

Annual Report

The new infrastructures provide greater safety, reliability and flexibility, but require more demanding
and more efficient maintenance, with faster response times since the mostly centralised systems
have a greater impact on operations.

The railway service quality is very directly influenced by the infrastructures reliability. To minimise
occurrences, it is fundamental for the conservation concept to evolve into a policy of preventative
action instead of acts to merely correct problems.

Annual Report

Description of the National Railway Network

At the end of 2006, the National Railway

Network was 3,613 km long, of which only 27%
Secondary Network 35%
2,839 km had train traffic.
The lines currently in operation are classified Main Network

as Main Network, Complementary Network or

Secondary Network according to their length, Network

and are broken down as follows: 38%

The networks are briefly described in the

following table:


National Railway
With Train Traffic Without Train Traffic

Non-electrified TOTAL TOTAL TOTAL
25,000V 1,500V Sub-Total

Wide Track 1.411 25 1.436 1.211 2.648 325 2.972

Single Track 844 - 844 1.196 2.040 - 2.040
Double Track 534 25 559 15 575 - 575
Multiple Track 33 - 33 33 - 33
Narrow Track 0 0 0 192 192 449 640
Single Track - - - 192 192 449 640

TOTAL 1.411 25 1.436 1.403 2.839 774 3.613

Electrified lines totalled 1,436 km, corresponding to 51% of the network with railway traffic, whereby
531 km began operating in the last 5 years.


Electrified Single Track

25,000V 51%
Electrified Single Electrified Multiple Track
Track 15,000V 25,000V
Non-electrified Electrified Single Track
49% 15,000V

The Cascais Line was the first in the National Railway Network to have electric traction, where 1,500
Volts of direct current was installed and inaugurated in 1926. Only in 1956, that is, 30 years later,
were new electrification systems put in operation, for which alternating current was used at

Annual Report

25,000Volts/50 Hertz. Because of this circumstance, the Cascais Line previously had an
electrification system distinct from that of the remaining network.
In the first 39 years, electrification at 25,000 Volts was extended to 462 km of track. This length was
exceeded by the service start-ups in the last 5 years, thus revealing the investment being made in
this area, as shown in the following graph:


Km of Line

1990 1992 1994 1996 1998 2000 2002 2004 2006

At the end of 2006, about

SAFETY AND COMMAND CONTROL SYSTEMS 55% of the wide track (on
which 90% of trains run),
Convel 1.404
was equipped with
ATS (Automatic Braking) 25 sophisticated circulation

Ground/Train Radio 1.400 command and control

safety systems that
Ground/Train Radio
w/o Data Transmission included, besides the
automatic and highly safe signalling system, the Automatic Speed Control System (CONVEL) and
the Automatic Train Stopping System (ATS), and the fixed equipment of the Ground Train Radio
As for todays network coverage by the systems shown in the table, its worth noting that 72% of the
speed control system was installed in the last 5 years and that 69% of the line kilometres equipped
with the ground-train radio system began operating within the same period.
These figures clearly reveal the effort by REFER to provide operators with an infrastructure equipped
with systems that ensure greater safety and reliability.

Annual Report

1.1 Conservation and Maintenance

Infrastructure conservation activities include the following tasks:

Conservation of the track, signalling, telecommunications and other fixed installations;
Planning of the conservation management activities;
Control of the quality, safety, reliability and economic operation parameters;
Management of accidents and incidents with implications on the infrastructure.

(10^6 euros)

Real In 2005 Change

(1) (2)


Materials 6,10 7,68 -20,6%

Subcontracts 64,29 43,67 47,2%

Other External Services 4,29 4,51 -5,0%

Personnel 22,96 22,53 1,9%

Depreciation 1,77 1,70 4,4%

Other Costs 1,84 1,94 -5,3%

Subtotal 101,25 82,03 23,4%

Structural Costs 0,94 0,89 5,6%

Costs for DGOD, DGPCE

11,72 10,84 8,1%
Support Departments

TOTAL 113,91 93,76 21,5%

Employees 944 988 -4,5%

Operating Costs

The costs of infrastructure conservation and maintenance activities include:

Conservation costs;
Conservation costs for the lines of Annex I;
Structural conservation costs;
Other operating costs;
Costs of conservation activities increased 21.5%, compared with the previous year. Underlying this
change, essentially note the 47.2% increase in subcontracts item, of about 20.6 million euros.

Annual Report

That increase resulted

(10^6 euros)
essentially from a new
Real 2005 Change
maintenance policy Specialties %
(1) (2)
committed to making the
infrastructures more reliable Track 21,53 16,43 31,0%

and from new legal Signalling 13,80 11,23 22,9%

provisions that influence the Power Lines 8,44 4,50 87,3%

work planning, relying on Construction and Low Voltage 9,07 5,90 53,7%

subcontracting for the Telecommunications 6,99 2,71 157,7%

various specialised tasks. Substations 2,45 1,89 29,9%

Emphasis goes to the Bridges 1,89 1,45 30,1%

following subcontracts Other Subcontracts 0,12 -0,45 -127,1%

whose costs all increased in Total 64,29 43,67 47,2%

the following proportions: for
the track by 31%; signalling by 22.9%; power lines by 87.3%; construction by 53.7%;
telecommunications by 157.7%; substations by 29.9%; and bridges by 30.1%.

Personnel costs increased 1.9% over the previous year. The average number of employees
assigned to this activity decreased by 4.5%, (44 workers). Fewer workers did not imply lower
personnel costs. REFER readjusted its workforce, which had an impact on the professional
qualification levels and on the preparation for challenges arising from technological innovations
associated to the railway sector. There are now more staff and less unqualified workers, particularly
in the signalling area.

Note that the higher costs in this activity, compared with the previous year, also resulted from higher
costs by the General Departments (DGOD and DGPCE) and Support Departments assigned to
conservation activities, 8.1%.

Of the total operating costs in this activity, 93% (81.9 million euros) are eligible for calculating the
tariff, 4% (3.1 million euros) correspond to Annex I, the remaining are Other Conservation Activities
(3.3 million euros).

In the previous year, the percentages were of 92% (65.1 million euros) and 4% (3.1 million euros)

Annual Report

Railway Network Conservation and Maintenance Actions

In order to improve the infrastructures availability, the company carried out a number of measures,
of which we highlight:

Maintenance of the track superstructure by heavy

mechanical work at various sites of the railway network,
in particular in some sections of the North Line, Douro
Line, Tua Line, Oeste Line, Algarve Line, East Line and
Cceres R.
Minho Line Nine/Valena Replacement of the wood
crossties, levelling of track switching devices and
deactivation of the Mides station.
Minho Line Stabilisation of the embankment between
km 60+000 and 60+250, construction of the retaining
wall and drainage system.
Minho Line Durres Stop Rehabilitation of the
excavation embankments surface.
Minho Line Improvement of the track superstructure between ncora and Senhora da
Agonia, km 97+190 103+991.
Service start-up of electro-mechanical signalling at Vila
Nova de Cerveira, Minho Line.
Service start-up of electro-mechanical signalling at the
Juncal station, Douro Line.
Service start-up of automatic level crossings at 50.163 and
51.126, Minho Line and their command by electric
signalling from the Barcelos Station, Minho Line.
Chemical weed control along the National Railway
Brush clearing along the marginal strips and cleaning of
water systems throughout the railway network, at the
most vulnerable sections to prevent fires.
Reinforcement and repair of the narrow canal of
Alcntara at the intersection with the South Line at km
Construction of fences in urban areas, on the North Line
between PK 312/325, on the Oeste Line in the area

Annual Report

surrounding the stations of Marinha Grande, Leiria and Monte Real, on the Beira Alta Line in
the area of the Celorico Station, on the South Line between PK 25 and 26 and on the
Algarve Line. The railway domain was fenced off at some alternative roads to level crossings
and underpasses/overpasses, to prevent pedestrians from
accessing the railway track and, as such, improving safety.
Rehabilitation of the track to reduce slowdowns on the North
Line from km 107.000 to km 107.700.
Algarve Line and Oeste Line, Lourial / B. Lares section
replacement of wood crossties with concrete crossties.
Integrated maintenance on lines with heavy train traffic in
Greater Lisbon, on the South Line and on the Alentejo Line, which at the same time involved
specialised services for the track and geotechnics, construction, low voltage, power lines,
special structures (bridges, aqueducts and tunnels) and complementary services, by
introducing a new maintenance method focussed more on preventative maintenance to
meet the goal of gradually improving service quality.
Urgent and essential intervention to rehabilitate the embankment at Km 60.045/60.085 on
the Beira Alta Line.
Urgent intervention to rehabilitate
the embankment at km 260.500
and to repair the track at km
255.500 on the South Line due to
damage to the railway
infrastructure caused by intense
rain in late 2006.

North Line PK 281.690 stabilisation of the

embankment where a landslide took place due to
adverse weather conditions, which displaced the
power cable duct that could have caused other
problems to the railway infrastructure.

North Line Work on the track

north and south of the Ftima
Tunnel to restore normal
operation that had been
affected by serious damage
to the railway infrastructure in

Annual Report

this region caused by heavy rain in November.

Vendas Novas Line, PK 29.370 29.400 Due to the heavy rain and the consequent
concentration of water at the site, the backfill embankment collapsed, for which urgent work
was carried out to repair the destroyed track bed. The track was disassembled and

Annual Report

1.2 Operation

The operation activities include:

Circulation command and control management;
Circulation personnel management;
Safety management, including operation management of occurrences;
Authorisation and control of infrastructure restrictions;
Capacity analysis;
Assigning capacity to operators;
Infrastructure restrictions planning;
Measuring, control, billing and collection of the used capacity.
(10^6 euros)

Real 2005 Change

(1) (2)


Materials 0,29 0,21 41,2%

Subcontracts 3,60 8,70 -58,6%

Other External Services 10,18 9,91 2,7%

Personnel 53,21 58,36 -8,8%

Depreciation 1,07 1,14 -6,4%

Other Costs 2,02 1,84 -209,7%

Subtotal 70,38 80,17 -12,2%

Structural Costs 0,55 0,42 31,5%

Costs of DGOD, DGPCE and

6,63 6,30 5,2%
Support Depart.

Total 77,56 86,90 -10,7%

Employees 2.118 2.411 -12,2%

Annual Report

Operating Costs

The operating costs include:

Operation costs;
Operation costs of the lines of Annex I;
Structural operation costs;
Other operating costs.

Costs covered by these activities fell about 10.7% compared with the previous year.
Lower personnel cost, about 5 million euros less than in the previous year, contributed to this
change. The average number of workers decreased by 12.2% (293 workers less) compared with
December 2005.

(10^6 euros) Subcontracts was

Real 2005 Change another item that also
Specialties %
(1) (2)
(1)/(2) decreased by 58.6%
compared with 2005.
Telecommunications 0,28 4,76 -94,0%
Remote Control 0,00 0,00
fell about 94%
Rescue Train 1,41 2,25 -37,5%
compared with the
Level Crossings 1,26 1,15 9,8% same period in the
Other Subcontracts 0,64 0,54 19,2% previous year.
Of the total operating
Total 3,60 8,70 -58,6%
costs for this activity,
90% (76.1 million euros) are eligible for calculating the tariff, 6% (4.9 million euros) correspond to
Annex I, and the remaining amount is for Other Activities (3.7 million euros).
In the previous year, the percentages were of 90% (81.7 million euros) and 5% (5 million euros)

Network Directory

The Network Directory is an essential document in the railway activity, since REFER uses it to establish
the technical and commercial conditions for rendering the infrastructure availability service and
associated services to operators. The directory stipulates the rules guaranteeing transparent and
non-discriminatory network access in compliance with the principles of competition.

Annual Report

The 2006 Network Directory, published in September 2005, was the first directory to be prepared
according to the rules stipulated in Regulations 21/2005. After its publication, the operators filed
appeals that forced REFER to present the properly compiled processes to the Regulatory Entity and
to provide, in 2006, a variety of additional information complementary to the submitted information
it used to justify the tariff rates, so that INTF could reach a decision.

The 1st Addendum to the 2006 Directory was published based on that decision.

Capacity Management

Operators with access to the infrastructure reached about 39 million TKs (train kilometres) on the
national railway lines in the past two years.


2001 2002 2003 2004 2005 2006
CP Operator Fertagus Operator Total TK's

The measures to progressively liberalise the

market, starting with cargo, have not yet
influenced demand in 2006. There are still
only two operators: CP, which is responsible
for 96% of traffic on the network; and
FERTAGUS with 4%, which offers only a
passenger service on the North/South axis.
Traffic distribution on the various network lines
is very heterogeneous and concentrated in
the Main Network whose length represents 39% of the network with traffic and 73% of total traffic.

Annual Report

In 2006, the Rossio tunnel remained closed to traffic, which now is channelled to the Cintura Line.


Main Network 28.392.178
Main Network
Complementary Network 7.769.685
Complementary 20%
Secondary Network 2.877.119 Network
Secondary Network 73%
TOTAL 39.038.982

Punctuality Rate

Preventative maintenance aims to provide a more reliable infrastructure and thereby reduce the
number of faults or failures disrupting normal operation.
During 2006, there was a general improvement in services rendered to the operators. The
Punctuality Rate, due to causes for which REFER (IPR) is at fault, was as follows:






Pendular International Intercity Inter-Regional Regional Suburban Cargo

2005 2006

Note the improvement in Pendular trains (+5.1%), which reached an IPR of 0.94, on IC trains (+
1.32 %), once again proving the success of REFERs goal to provide a more reliable infrastructure
and thus reduce the number of faults or failures disrupting normal operation.

Annual Report

2. Investment in Long Duration Infrastructures (LDI)

The investment mission includes, besides each departments costs and earnings directly related
with the investment, a share in the structure of other company departments, materials, labour and
equipment applied to carry out this activity.
(10^6 euros)

Real 2005 Change

(1) (2)


Materials 17,97 17,65 1,8%

Subcontracts 0,23 0,24 -0,8%

Other External Services 4,72 4,73 -0,4%

Personnel 15,95 17,02 -6,3%

Depreciation 0,91 1,06 -14,7%

Other Operating Costs 0,02 0,02 -11,9%

Other Costs/Earnings 0,50 2,18 -76,8%

Subtotal 40,31 42,90 -6,0%

Costs of DGOD, DGPCE and

10,90 8,58 27,1%
Support Departments

Total 51,21 51,47 -0,5%

Employees 519 550 -5,6%

During 2006, work for the company reached 50.1 million euros, broken down as follows:

23.37 million euros of structural costs,

17.96 million euros of materials,
7.82 million euros of running costs,
0.93 million euros of labour and equipment.

Note also that this activitys results should correspond only to financial costs that, by imposition of
accounting rules, cannot be capitalised, but that are related directly with the lack of financial
resources for investment activities.
Investment management costs fell slightly compared with the previous year.
Personnel costs fell 6.3% compared with 2005. On average, in 2006 there were 519 employees
assigned to this area compared with 550 in 2005, a 5.6% decrease, meaning 31 less employees.

Annual Report

Overall Investment Value

In 2006, REFER invested approximately 313 million euros, 41% of what had been planned.
Investments in LDI stipulated in the PIDDAC represented 85% of this total (266 million euros). The
remaining 15% (47 million euros) were investments outside PIDDAC and covered current
investments in infrastructures (41.1 million euros), general studies (4.6 million euros) and operation
investments (0.9 million euros).
The table below illustrates investments in 2006, compared with what had been programmed and
the respective means of financing.

Investment Budget - Performance and Financing Sources

On 31 December 2006 (thousand euros)

Financial Coverage (*)

Budget 2006 Performed
PIDDAC EU Financ. Other (b)/(a)
(a) (b)

Integration of the Territory's Structural Corridors in the Trans-

279.607 161.126 2.221 82.862 76.043 58%
European Transport Network
North Line Integrated Project 164.276 107.830 1.511 68.811 37.508 66%
Algarve Line Int. Proj., incl. Sol. Bulk Route 46.844 15.718 350 4.797 10.571 34%
North Line - New Espinho Station 43.331 12.421 230 12.191 29%
Port of Sines - Spain Railway Link 25.156 25.156 130 9.253 15.773 100%

Development of Urban Access Routes 249.793 84.355 1.365 3.407 79.583 34%

Sintra Line, R.Alcntara, and Oeste Line (until Sabugo) 73.272 22.437 420 22.017 31%
Cascais Line 10.135 3.898 50 3.848 38%
North-South Railway Axis (Chelas-Fogueteiro) 2.526 1.447 6 1.441 57%
North-South Railway Axis (Brao de Prata-Chelas) 30.579 816 145 671 3%
North-South Railway Axis (Coina-Pinhal Novo) 14.299 7.856 65 7.791 55%
North-South Railway Axis (Barreiro-Pinhal Novo) 20.743 4.020 110 3.910 19%
North-South Railway Axis (Pinhal Novo-Setbal) 17.171 4.360 120 1.727 2.513 25%
Minho Line (Porto - Nine) 36.866 16.623 190 620 15.813 45%
Guimares Line 5.966 5.705 30 660 5.015 96%
Douro Line ( Ermesinde - Marco) 33.836 13.962 200 13.762 41%
Braga Branch Line 4.400 3.232 30 400 2.802 73%

Intermodal Coordination 4.050 2.245 20 0 2.225 55%

Cacia Terminal and Port of Aveiro Link 3.391 1.777 18 1.759 52%
Leixes Line and S.Gemil Junction 660 469 2 467 71%

Development of Regional and Interregional Accesses 106.855 11.281 802 1.081 9.397 11%

Integrated Beira Baixa Line Project 86.500 9.750 800 1.081 7.869 11%
Integrated Oeste Line Project 18.747 105 0 105 1%
Modernisation of the Algarve Line 1.608 1.426 2 1.424 89%

Transport System Safety, Quality and Efficiency 23.238 6.865 100 443 6.322 30%

Traffic Safety - Elimin. and Reconversion of Level Cross. 23.238 6.865 100 443 6.322 30%

Total Investment in Long Duration Infrastructures 663.543 265.872 4.508 87.794 173.571 40%

Studies and Projects 14.405 4.620 4.620 32%

Current Infrastructure Investments 74.066 41.143 41.143 56%
Operation Investments 2.501 874 874 35%
Total Investment - EAG's (**) 90.973 46.638 0 0 46.638 51%

Total REFER Investments 754.516 312.510 4.508 87.794 220.208 41%

(*) - The investment financing coverage is applied to the actual expenditure

(**) - includes 47,627 thousand euros approved through Deliberation 25/05

Annual Report

An analysis of the table reveals the most significant differences between actual investments and
the value budgeted for 2006:

Integrated Algarve Line Project, including the Solid Bulk Route,

34% of this PIDDAAC project was implemented The project had a low implementation rate
because the execution project had to be reformulated, thus delaying the respective work for
the Alccer Alternative Route (23,500,000 euros). Additionally, at the start of the work there
was also a delay in implementing the regulations and in eliminating obstacles. Lastly, the
level crossings, the stabilisation of embankments and other minor works were not started
(7,000,000 euros).

Sintra Line, Alcntara Branch Line and Oeste Line (up to Sabugo)
Preparing the budget for this PIDDAC project included the Sintra Line Undertaking (32,450,000
euros), the Rossio Tunnel Undertaking (32,750,000 euros) and work to implement the
regulations (3,700,000 euros).
The 31% implementation rate is low and is associated to the fact that the Barcarena Work
(29,000,000 euros) did not start as planned due to problems during the contract work tender,
which involved posterior reformulation of some aspects related with the work stages.
The work to implement the regulations also did not start in 2006. The work contract for the
Rossio Tunnel did not progress as planned due to the contract termination.

North South Railway Axis (B. Prata Chelas Section)

The completion of this project depends on the definitions stipulated in the RAVE, whereby all
interventions planned for 2006 were delayed (approx. 28,000,000 euros).

Integrated Beira Baixa Project

The difference between the planned value and what was actually implemented is mainly
related with the fact that this undertaking was subject to guideline changes during the year in
terms of the work strategy, both in the Mouriscas A/Castelo Branco section and in the Castelo
Branco/Covilh section.
Part of the financial application was for the construction of the Technical Building (3,500,000
euros) in the Cast. Branco / Covilh section, and the rest was essentially for completing works
and financial adjustments in the Mouriscas / Cast. Branco section (work: 2,450,000 euros +
inspection: 1,700,000 euros).

Annual Report

Financial Coverage of Investments

The financing of investments on long duration infrastructures through the PIDDAC was ensured by
the State Budget Chap. 50, by E.U. Funds and other financing sources.
The financial coverage structure for
PIDDAC investments in 2006 was as
follows: Chap. 50 represented
about 1.7% (4.5 million euros), E.U.
Funds 33% (87.8 million euros) and
EU Funds
Chap. 50
other financing sources reached
Other Sources 65.3% (173.5 million euros).
Note that in 2006 the contribution
by PIDDAC and by E.U. funds
decreased, similar to previous
years. As such, reliance on loans represented the largest part of the financial coverage for
investments, with the consequent negative impact on financial expenses.



Thousand euros





1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Investment Carried Out

PIDDAC Fundos Comunitrios Out. Fontes Financ.

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Railway Network Modernisation Actions

REFERs investment activities on behalf of the state included investment projects to modernise and
develop the National Railway Network, of which we point out the following actions:

North Line
General work contract to modernise the Azambuja Vale de Santarm section so that all
circulation will be on renovated lines between Vila Franca de Xira North and Vale de
Santarm, in a length of over 30 km;
Construction work contract for the railway viaduct in Santana do Cartaxo and for the work to
modernise the power and video surveillance remote control systems at the Substation of Vila
Franca de Xira and Entroncamento;
Continuation of the contract work to install signalling and telecommunications between
Alhandra and Vale de Santarm and for studies on protecting the Azambuja Station from
floods caused by the Tejo River;
The preliminary study was started again for the alternative route of Santarm and to
modernise the Setil Entroncamento subsection that will allow the North Line to be fully
modernised in a length of about 170 km;

Minho Line
Construction of the roadway viaduct providing access to the overpass at Km 11+476, which
made it possible to close the level crossing of Leandro, in the county of Maia, and the work
for eliminating the level crossings north of the county of Viana de Castelo;
Installation of the automatic speed control system for trains in the sections of Campanh /
Contumil and Santo Tirso / Guimares and the link to the Douro Line of the Logistics Platform
of the container company Sociedade Portuguesa de Contendores (SPC) in Valongo;
To improve the Minho Lines current operating conditions and to obtain the route times
stipulated for the Porto Vigo route, in December 2006, an international public tender was
launched to build the tunnel for the alternative route of Trofa, which is 1.404 m long;
As for the public information system in the area of the Porto Operation Command Centre,
work was continued to use the system in a semi-automatic manner, whereby it was possible
to install and operate this equipment at the Ermesinde Station;

Sintra Line
The Rossio Tunnels rehabilitation was interrupted in October 2006 when the contract with the
Teixeira Duarte/EPOS consortium, which had been signed in July 2006, was terminated based
on contractual non-compliance with technical specifications and the deadline. Until that
date, only about 30% of the initial contract work had been completed. In December 2006,
two new contracts were awarded for the Primary Support work between the Rossio Station -

Annual Report

km 0+573 and km 0+869 km 0+934 and to perform the remaining construction work and
special works necessary for completing the tunnels rehabilitation;
Completion of the work to the Papel underpass, power lines station and signals (track
switching gear) of Cacm and the installation of sound barriers (2nd stage);

Sines Elvas Link

Full track and platform renovation of the vora Line Casa Branca vora Section (P.K.
89.900/116.100), corresponding to the 1st stage. Note the innovative aspect of this
intervention by applying monoblock concrete crossties for 3 rails. Along with this intervention,
the SOR (Simplified Operation Regime) operation system was altered to telephone blocking;
In the Sines Casa Branca Section, the basic program was started and completed;
In the vora Elvas section, the basic program was completed and the preliminary study was
started, now in progress in coordination with the RAVE;
Contract work to adapt/alter signalling, Convel, telecommunications, power lines, track and
implementation of provisory measures of the RCT+TP (Traction Current Return Protection
Earthing) regulations on the Sines Line;

South Line Alccer Large Alternative Route

In December 2006, a contract was awarded for the 1st construction stage of the Alccer
Alternative Route that will take place in 3 stages, corresponding essentially to land levelling
and drainage. In November, the announcement for the 2nd stage was published for the
Railway Crossing of the Sado River Bridge and Viaducts;
The construction of this large alternative route, besides reducing travel time between Lisbon
and Faro by about 10 minutes, will reinforce capacity by separating passenger and cargo
traffic between the alternative route and the existing section, harmonise the operation
conditions with the standards of adjacent sections and will be eventually integrated in the
Sines / Spain route;
In the modernisation of the Algarve Link, emphasis goes to the contract work for the sound
barriers between Ermidas and Funcheira and the consignment of the sound barriers between
PK 94 and Ermidas, and the execution project for the overpasses/underpasses to be built in
the zone of Alccer do Sal, which are in the review stage.

Continuation of the construction of the building for the Lisbon Operation Command Centre
(CCOs), designed to optimise the networks operation and the railway circulation operation
management, in order to obtain high standards of reliability, availability, efficiency, quality
and safety.

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Level Crossings
The previous Department of Crossings and Level Crossings Management took measures to reduce
accident rates at level crossings by eliminating them, by improving safety conditions and through
awareness raising campaigns.
To eliminate and reclassify level crossings (LCs), in 2006 and in collaboration with the Construction
and Renovation Department (CR) and the REFER North Delegation (DN), the following actions were
carried out:

Eliminated LC's Reclassified LC's

Planned Performed Planned Performed


21 17 --- 2
Beira Baixa (BB) Line Undertaking 4 --- --- ---
Metropolitan Lisbon (ML) Undertaking 3 2 --- ---
Sines Elvas (SE) Link Undertaking 1 1 --- ---

IV/CR - Total 8 3 0 0

Dep. of Elimination and Reclassif. of LC's (SRPN) 71 19 23 20

Dep. of Management of LCs (GTPN) 9 25 101 63
LC - Total 80 44 124 83
REFER - TOTAL 109 64 124 83
6 --- --- ---
Town Councils 3) 3)
15 1 1 ---

EP - Estradas de Portugal, E.P.E. 1 --- --- ---

AENOR --- 1 --- 1


TOTAL 131 66 125 84

1) Includes the actions performed for the North Line Undertaking Plan 2006
2) Prior works carried out, LC's to be eliminated according to no. 2 of art. 4 of the LC Regulations - DL 588/99 of 23/12
3) Works with a Protocol between REFER and Town Councils

The following work was carried out to eliminate or reclassify these level crossings:
Work Eliminated LCs

Overpass/Underpass (25 OU's) 25 1

Alternative Route 17 1

Automation --- 10

Automation Alt. (1) --- 27

Visibility --- 35

Others 24 13

TOTAL 66 87

1) Installation of lift gates at automated LCs

Annual Report

Consequently, of the universe of railway network lines with traffic, on 31/12/2006 there were 1,297
LCs, for an average density of 0.457 LCs/km, broken down as follows:

LC Type Number

With Guard 97


With lift gates 371 398

Without lift gates 27

Public LC's Without Guard

Type D 307 492

5th cat. 185

Pedestrians 174

Subtotal 1161

Private LC's 136

TOTAL 1297

Through work by the Conservation and Maintenance Department / Operations Management

Department, various actions were also carried out to improve safety conditions at level crossings,
by improving the paving of LCs and by placing signalling requiring the use of sound signals when
approaching LCs with low visibility.

Accident s at Level Crossings - 1990 t o 2006

No. of Accidents

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

TOTAL 234 218 198 205 182 166 147 144 144 154 119 123 113 105 102 78 68
Pers. Hit 35 45 38 34 22 18 18 22 17 25 15 17 18 15 18 19 11
Collisions 199 173 160 171 160 148 129 122 127 129 104 106 95 90 84 59 57

By combining all these actions, it has been possible to progressively reduce accidents at level
crossings. In a five-year period, total accidents have decreased from 113 to 68.

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3. Activities: - Other

Other Activities Include:

Material Recovery and Waste Management;
Rendering of services, in particular: Telecommunications, Conservation of Branch Lines,
Overpasses and Underpasses, Track Crossings Level Crossings, Repairs for which Third Parties
are Responsible, Concession of Commercial Spaces and Other Secondary Services;
Work for Warehoused Stocks, in particular the creosoting of crossties.

(10^6 euros)

Real 2005 Change

(1) (2)

Earnings 13,66 13,80 -1,1%

Other earnings 13,66 13,80 -1,1%

Costs 5,81 5,82 0,0%

Materials 0,20 0,36 -42,7%

Subcontracts 0,77 1,02 -24,1%

Other External Services 3,79 3,31 14,4%

Personnel 0,90 0,97 -7,0%

Depreciation 0,15 0,16 -8,6%

Other Costs 0,00 0,00 -195,9%

Operating Income 7,84 7,99 -1,8%

Costs of DGOD, DGPCE

4,74 7,37 -35,6%
and Support Departments

Total 3,10 0,62 -399,3%

Employees 73 75 -2,7%

Operating earnings from this activity decreased 1.1% compared with the previous year.
Note that the item of concessions and miscellaneous licences in 2006 reached about 3 million
euros, of which, 1.8 million euros correspond to the contract with CPCOM advertising and
concession of commercial spaces at stations.
In contracts to generate revenue from facilities, in 2006 special emphasis goes to agreements with
CP to operate the Tadim Cargo Terminal (Braga) in the amount of 10,000 euros/month (which
began in March 2006 and thus totalled 98,500 euros) and the assignment of facilities for the
Merchandise Depot in Elvas (in the amount of 16,000 euros/year in 2006).

Annual Report

In 2006, the Scrap Sales item recorded 2.2 million euros, whereby the most relevant materials were
rail and track switching devices (tsds).
At the end of 2006, this activity showed a positive Operating Income.

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Annual Report


The Environment Departments activities are grouped into four main areas:
Environmental Management;
Environmental Evaluation and Monitoring;
Environmental Follow-up; and
Technical Specialties.

In Environmental Management, the first 7 procedures transversal to the organisation were prepared
and approved, by the Board of Directors, and were combined with previous waste management
measures. In the particular context of waste management, two work instructions were prepared
and approved for specific waste (oils and used tires), a policy that is to be maintained and
expanded to other types of waste. Emphasis also goes to the first steps for defining strategic
environmental goals and the respective control indicators to be taken into account in future
developments of the Balance ScoreCard.
In environmental evaluation and monitoring, we highlight the preparation work and preliminary
measures to start the main contract works, for which tenders were launched in 2006. These
measures included preparing and compiling the licensing processes, supervising preliminary
studies and clarifying minimisation measures to the official entities of the Ministry of the Environment.
Procedures were also prepared for the future supervision of those licensing processes. The
company launched the first two environmental monitoring plans (Minho Line/ Braga Branch Line
and South Line) thus maintaining REFERs obligations in terms of post-evaluation.
Environmental follow-up focussed on three fundamental areas: specific follow-up of a selection of
works of special relevance to REFER (with emphasis on the contract work of Casa Branca / vora,
Rossio Tunnel, construction of the Porto Operation Command Centre (CCO) and elimination of the
level crossings in the Cade Marco Sectiom); follow-up and auditing of the integrated conservation
activities; and training courses.
Maintaining the companys noise strategy, special note goes to the review of the Noisy Activities
Management Plan (in anticipation of legislative alterations scheduled for the middle of 2007,
whereby REFER had an active voice in formulating those statutes) within the Permanent Work Group
for Noise (GTR), and the launching of strategic noise maps and respective action plans for the
Cascais and Sintra Lines. Tenders were also launched for creating digital charts for the North Line
(Lisbon / Azambuja), Cintura Line and Minho Line), whereby the first were awarded in 2006. The
basic cartography necessary for preparing the maps and plans, for all the lines with more than
60,000 runs per year, will thus be completed, and the respective plans should be completed in
February 2008.
In addition to the progressive expansion of the selective structured waste collection network, and
the particular technical instructions for managing certain types of waste, emphasis goes to the
management of deteriorated wood crossties. Culminating a research work by REFER, the process

Annual Report

to produce energy from about 10,000 tons of wood crossties was successfully carried out at
cement production units which are properly qualified for this purpose by the Environmental Ministry
authorities, thus replacing the commonly used fossil fuel. The material utilisation processes already
launched in the previous year were maintained. The characterisation of environmental liabilities is
another area that has been gaining exposure, for which two works were performed for a preliminary
evaluation of potentially contaminated areas.

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Annual Report

Property Assets
Property Assets

This departments activities include the Strategic Plan for Ecotracks submitted to town councils with
disabled railway corridors. During the year, protocols were signed for about 45 km of track corridors
to create Ecotracks. Currently, about 300 km are already under concession, from a total of nearly
700 km.

In its role to defend and safeguard Property Assets under the responsibility of the railway
Infrastructure Manager, this department has strived to obtain the human and technical means
necessary to comply with legislative stipulations in order to issue opinions to public and private

Within this perspective, an integrated operation model was implemented for documental
management at the company, which will provide the department with an indispensable tool for
controlling any requests.

Lastly, we also point out car parking. Currently, about 20,500 parking spots for passengers are
available next to railway stations. Of the 82 car parks, 2 were inaugurated in 2006 in Aveiro and
Castanheira do Ribatejo, with a capacity of 600 spots. Of all the parks, 27 (including the parks
managed by FERTAGUS in the North-South crossing) are for paid parking.

Annual Report

The following table summarises the main completed actions in terms of the Property Assets under
analysis for the year:
Amount forecast for
Description Real Amount

Car Parking
No. of Parking Spots(1) 7.132 7.132
Parking Revenue 655.047 645.484
Other Revenue 735 1.205
Extraordinary receipts 0

Geographic Information and Records

Aerial photographic surveys(2) 0
Domain managed in SIG (Geogr. Inform. System) 0
Domain Studies(2) 43
Final opinions 291
Revenue 10.052 22.222

Management and Valuation

Operational homes 252
Revenue 235.700 189.392

Concessioned buildings and land 124

Revenue 609.503 546.414

Concessioned Eco-tracks 17
Revenue 36.900 33.576
Other revenue(5) 9.844

Appraisals 56
DUP (declaration of public utility) 5

Condominium under management(3) 5.669 5.669

Total Revenue 1.547.937 1.448.137

Operation Cost 2.971.115 2.256.039

(1) Paid spots

(2) In kilometres of track or channel
(3) Area in square meters
(4) Unless stated otherwise, the indicators are given in units
(5) Other revenue of the channel space
(6) Recovery of the debt by SIENT

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Annual Report

Safety Safety

Safety is essential for any transport system and, in the case of train transport, benefits from a wide
range of measures implemented by REFER, which guarantee high transport and passenger safety
levels to railway transport operators.

Consequently, in the railway infrastructure modernisation plan, technological systems have been
under development mainly to improve circulation safety, such as geotechnical risk charts, level
crossing obstacle detection systems, a system to detect abnormally hot train wheels and axle
casings, a circulation monitoring system to control the real weight of vehicles and mechanical
impact of wheels on the track.

On the other hand, every day REFER collects and processes all the statistical information about the
railway activities so that it may be aware of the types of anomalies on the National Railway Network.
This knowledge facilitates employing measures to eliminate and control railway accident risk
factors. Likewise, accidents and incidents with an impact on railway circulation are carefully
analysed to determine and overcome the respective causes.

As a complement, REFER has implemented safety inspection actions focussed on the internal
aspects of the railway system (railway traffic structure, regulation and operation), and in various
other domains that, not belonging to the railway system, may interact with it.

REFER has given particular attention to crossings of railway tracks, due to the implied risks to the
safety of people who cross them and to the safety of train circulation. Within this context, REFER, in
association with town councils, has implemented broad measures to eliminate dispensable level
crossings and to modernise the others. It has also raised public awareness on how to correctly use
level crossings and on the risk associated to the circulation of persons along lines.

In association with other entities, REFER has also focussed on the prevention of forest fires that may
reach railway tracks. It has done this through information campaigns to those involved in railway
operations, train passengers and owners of properties bordering railway tracks in order to change
risky behaviours and to minimise potential sources of ignition and inflammable materials within the
railway domain.

REFER has also set up systems to resolve critical situations of railway safety. Within this context,
railway accident scenarios are analysed and placed which are adapted to emergency plans for
railway lines and through staged rescue operations, thus creating procedure routines in

Annual Report

collaboration with civil protection agents to guarantee operation conditions for intervention and
protection of persons in real critical emergency situations.
Within this context of critical scenarios, REFER has contingency plans to guarantee the operation
capacity of railway rescue means and passenger transport alternatives.
In addition to the lines, railway stations and office buildings, the company has been setting up
internal emergency plans to guarantee the effective management of any event that may
generate a critical situation for occupants (internal and external). These plans also define
procedures in collaboration with external rescue teams.

Moreover, at the busier stations and facilities, security guards and video surveillance have been
extended to twenty-four hour coverage. This ensures the normal operation of the facilities and
suitable protection of railway property assets and of the public using those spaces.

Lastly, many actions have been carried out regarding worker safety and health through systematic
actions to evaluate professional risks and to apply specific safety regulations, measures and work
methods at worksites, all of which is backed up by ongoing and programmed employee health

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Human Resources

Due to REFERs ongoing policy to

rejuvenate its human resources and,
consequently, to enhance employee
qualifications, the average employee 5000

age continued to decrease, reaching

44 years in 2006.
Once again, education levels 4000

increased. Whereas, in the previous

year 50% of employees had grade
12 or higher, in 2006 this figure
2002 2003 2004 2005 2006
reached 56.7%.
Average December

In 2006, on average the company had 3,654 employees, consequent to 113 new employees
hired and 366 employees who left the company, 87% of which through contract termination my
mutual agreement. There was also an increase in the number of young employees with higher
education degrees.

12% There were no significant alterations

2% to the wage structure compared
6% with previous years, and there was a
slight decrease in the percentage
3% of overtime.
56% In fact, the overtime rate fell by
5.8%, and the monthly average in
Base wage Other Fixed
2007 was of 6.5%. The absenteeism
En-route/shift subsidy Overtime
Night / compensated work Bonuses rate also fell by 4.4%, for a monthly
Meal subsidy Travel average of 4%.
Holiday subsidty + 13th month Additional remunerations

Annual Report

Training and Education

The emphasis on training has played a

70 5.000
key role in enhancing personnel
60 3.935
expertise. 3.486

No. of trainees
In 2006, trainee numbers fell sharply 2.700 3.000

N. Hours
compared with 2005. The previous year 30
was exceptional due to three factors: 20
a) A large number of internal 10

tenders were launched to 0 0

2004 2005 2006
change job categories;

b) A large number of external Training hours per worker Trainees

recruits of operation personnel

who needed the respective initial training;

c) It was decided to teach all level crossing guards (at the time, about 300) a refresher course
about railway safety matters.

However, although there were fewer trainees, the number of training hours increased significantly,
from 14 hours in 2005 to 20 hours of training in 2006 (as shown in the graph).

The most relevant results refer to the increasing percentage of staff with complementary
management education, partly due to the fact that REFER finances tuition fees for Masters degrees
and Post-graduate degrees. The data for 2006 indicate some stability in this matter.

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REFER Shareholdings
REFER Shareholdings

REFER has shareholdings in a number of companies that were

founded for the railway sectors reorganisation, which began in the
80s, even before REFER was founded, and that complement railway
infrastructure management activities.

REFER Rede Ferroviria Nacional, EP



100% 99,33% 10% 98,43% 80%




Affiliated Companies and Main Activities

Of the REFER shareholdings, emphasis goes to the following companies in which the parent
company has a stake of over 50%.

Sets up, manages and operates telecommunications infrastructures and systems, renders
telecommunications services and any complementary, subsidiary or accessory activities, directly or by
setting up or obtaining shareholdings in other companies.

Promotes and commercialises land and buildings, manages property complexes,

purchases and sells immoveable assets and also obtains rights over these assets.

Annual Report

Renders consultancy and technical, industrial and commercial assistance services in transport
and other fields, carries out public works and construction contracts, industrial and commercial
quarry operations and carries out quality management at construction undertakings.

Promotes and commercialises current or future shops and commercial spaces at stations and
terminals of the Portuguese railway.

The activities of the affiliated companies and their transactions in 2006 with the parent company,
REFER, and with the external market are shown in the REFER Groups 2006 Consolidation Report.

Annual Report


Annual Report

Economic and Financial
and Financial Situation Situation

Operating Income
Operating Income reached the negative amount of 99.68 million euros, 8% less (7.5 million euros)
than in 2005.
The results are summarised in the following table:
(10^6 euros)
Real 2005 Change
(1) (2)
Operating Earnings 165,04 159,09 3,7%

20,20 0,00 100,0%

62,97 65,28 -3,5%
Services Rendered
-15,41 0,00 100,0%
Production Variation
16,41 16,72 -1,8%
Supplementary Earnings
29,00 27,12 6,9%
Operating Subsidies
50,13 49,24 1,8%
Work for the Company

Other Operating Earnings 1,75 0,74 137,2%

Operating Costs 264,72 251,26 5,4%

25,12 26,33 -4,6%

103,85 86,66 19,8%
External Supplies and Services
6,29 4,41 42,6%
Taxes and Duties
110,30 116,16 -5,0%
3,65 3,72 -1,9%
Other Operating Costs
9,17 10,34 -11,3%

Provisions 6,34 3,65 73,8%

Operating Income -99,68 -92,17 8%

Annual Report

The operating income fell due to REFERs infrastructure conservation policy to provide the operator
with a safer, more reliable and more flexible infrastructure by modernising the network. This has
been achieved through a significant number of new installations, much of which did not exist
previously and others that replaced very rudimentary systems, by introducing new technology. This
gave rise to a sharp rise in subcontracts, since the new infrastructures require more specialised and
more efficient maintenance and faster response times, due to the impact on operation, since
these systems are often of a central design that the company cannot respond to (according to
what was stated in the Operating Income of the Infrastructure Management activities).

Financial Income

The financial income in 2006 is shown in the following table:

(10^6 euros)

Real 2005 Change

(1) (2)

Financial Earnings 70,41 19,52 260,7%

Interest Earned 66,86 7,68 770,4%

Gains in Group and Associated Companies 3,52 3,99 -11,6%

Other Financial Earnings 0,03 7,86 -99,6%

Financial Costs 168,67 72,20 133,6%

Interest Paid 162,46 61,91 162,4%

Losses in Group and Associated Companies 2,50 0,39 535,5%

Other Financial Costs 3,71 9,89 -62,5%

Financial Income -98,26 -52,68 86,5%

Financial earnings increased about 50 million euros (260.7%) over the previous year, essentially due
to an alteration to the method of accounting swaps associated to loans. Swaps are now
accounted independently rather than merely the operation balance as was the case in previous
Gains in group and associated companies fell 11.6%. REFER valuates shareholdings in group
companies by the asset equivalence method. Gains were accounted in this item from the
companies REFER TELECOM, by 3.4 million euros, and CPCOM by 95,000 euros.

Annual Report

Financial costs also increased sharply, 134% (96.5 million euros) over the previous year, which was
justified by the alteration in the method of accounting the swaps associated to loans, and due to
the higher dependence on loans combined with higher interest rates.

Losses in group and associated companies FERBRITAS, 2.4 million euros, RAVE, 18,000 euros,
personnel costs of 18,000 euros and METRO MONDEGO, 104,000 euros are valuated through the
asset equivalence method.

Financial Income fell compared with the previous year due to the greater need for loans and
higher interest rates.
REFER has been relying on loans, not only to cover investments in long duration infrastructures, but
also because of the growing operating deficit. To make matters worse, high levels of short-term
loans were obtained in 2006, whose interest rates rose. The long-term financing operation, in the
amount of 1.1 billion euros, was obtained in the last quarter of the year, thereby consolidating all
short-term loans.

Annual Report

Extraordinary Income

The following table shows the Extraordinary Income:

(10^6 euros)

Real 2005 Change

(1) (2)

Extraordinary Earnings 14,96 20,49 -27,0%

Earnings from Previous Years 13,83 10,98 26,0%

Other Extraordinary Earnings 1,13 9,52 -88,2%

Extraordinary Costs 18,59 35,95 -48,3%

Costs from Previous Years 10,70 19,35 -44,7%

Other Extraordinary Costs 7,89 16,60 -52,5%

Extraordinary Income -3,63 -15,46 -76,5%

Extraordinary Income improved 7% over the previous year, reflecting management improvements
which led to a timely recognition and planning of costs and earnings.

Annual Report

Net Profit

The Net Profit for the year in question was a negative 201.57 million euros, as shown in the following
table, a deterioration compared with the previous year.
(10^6 euros)

Real 2005 Change

(1) (2)

Total Earnings 250,41 199,11 25,8%

Total Costs 451,98 359,41 25,8%

Net Income -201,57 -160,30 25,7%

REFERs economic and financial situation has been progressively deteriorating in previous years. This
fact may be explained by:

A higher operating deficit. To manage the railway infrastructures, REFER charges operators a
user fee that should progressively move toward total coverage of the railway network
management costs. Moreover, according to art. 8 of the said Decree-Law 104/97, REFER
should be allocated the necessary compensatory indemnities to balance its financial
accounts, seeing as the state owns the rights over the railway network. This, however, has not
been the case.
The tariff calculation takes into account the potential sales capacity, but the companys
revenue corresponds to the real utilisation, that in 2006 reached a mere 42%. Another factor
that limits revenue is that tariffs are limited by a regularly stipulated price cap.
Lower contributions through the State Budget, in the form of capital allocations and through
the PIDDAC, Chapter 50, has implied systematic reliance on loans and, consequently, higher
financing interest payments.
A lower capitalisation of financial expenses for investment, brought about by the lower
investment in the last two years and by the completion of some investment projects.
Financial expenses that were associated to it will become an extra burden on the operating

Annual Report


1. At the end of 2006, Assets reached 6.914 billion euros, a 7% increase (about 413.9 million
euros) compared with the end of 2005.
The most significant changes, compared with values at the end of 2005, are listed below:
Tangible fixed assets increased 5% (about 305.5 million euros), corresponding to part of the
investment in LDI covered by the PIDDAC (266 million euros) implemented in the current
Stocks fell 48% (21.1 million euros), justified by a reduction of 14 million euros in item 35
Work in progress on 31/12/2005 for the construction of the Interrepblica building, which
was sold in 2006.
An 18% rise in short term third-party receivables, essentially justified by the 25% increase
(9.3 million euros) in the item of other debtors. This item includes 6.3 million euros
(corresponding to 12% of the balance) in favour of courts to meet expropriation processes.
INFERVISA, with a balance of 8.7 million euros, O2 with an amount of 1.8 million euros,
Parque EXPO with 888,000 euros and personnel costs with a balance of 1.1 million euros,
comprise about 24% of the balance.
An increase of 54 million euros in negotiable securities regarding a short-term financial
application not used to amortise loans due to factors regarding the terms of those loans.
A 461% increase (46 million euros) in Accruals and Deferrals regarding the accrual of
earnings from swap operations, the accrual of billing for train manoeuvres (1.9 million
euros), of Traction Power (488,000 euros), of CP Auxiliary Services (1 million euros), of the
Metro Sul do Tejo (163,000 euros), of the Concession Rent from REFER TELECOM (874,000
euros) and of Eliminated Trains (646,000 euros).
2. The Equity of 2.317 billion euros fell 5% (123.8 million euros) compared with December 2005,
due to the net profit in the year (-201,57 million euros) and the rise in Other Reserves of 77.8
million euros, broken down into 4.5 million euros referring to Chap. 50 PIDDAC and 73.3
million euros of E.U. Funds/ Cohesion Fund.
3. Liabilities reached 4.597 billion euros, a 13% increase, of 537.8 million euros, compared with
December 2005. This increase is explained by the higher debts to banks.
The companys debt has increased through the years to cover investments in LDI and also to
meet the operating deficit.
Contributions to finance the states investment activities, through Chapter 50, and by E.U.
financing have been decreasing. In 2006, the amount reached 92.3 million euros (35% of the
investment value), the remaining investment value had to be covered by loans, a situation that
has been repeated yearly since REFER was founded.
Consequent to lower investment in the past two years, there has been a simultaneous
decrease in the capitalisation of associated financial costs which have placed an additional

Annual Report

burden on the operation. In addition to these aspects, there is an operating deficit arising from
the fact that compensation indemnities systematically fall short of the difference between
revenue from the rendering of services to the operators and the costs that the said service
operation involves.
Within this scenario, and in a strategy for professional management of the REFER debt, by using
suitable instruments to rationalise the cost associated to reducing interest rate risks, in the last
quarter of 2006, REFER obtained a refinancing operation in two parts in the amount of 1.1
billion euros, thus adapting the financing term to the duration of the investments in LDI. The
value in question made it possible to consolidate all short-term debts.

The Asset Structure was not significantly altered in comparison with the previous year, whereby the
value of fixed assets represents 96% of total assets.
The Liabilities Structure altered its percentage, whereby medium and long term liabilities increased
in the period by 60% of the value of assets. Equity represents 34% of assets, and short-term liabilities
represent 6%.






Realised + Available Fixed Assets Equity M/L Term Liabilities Short Term

Annual Report


The following table shows a number of indicators illustrating the activities in the various
management areas: client, financial and human resources:

Principais Indicadores

2006 2005 2004 Variaes Variaes

% %
(1) (2) (3)
(1)/(2) (1)/(3)

Comboio quilmetro (CK) (10 3) 39.039 39.232 37.899 -0,5% 3%

Proveitos Utilizao da Rede (000) 53.771 55.373 55.755 -3% -4%

Investimentos Longa Durao (ILD's) (000) 307.016 415.030 484.344 -26% -37%

61,90 57,30 54,39 8% 14%
(Passivo Remunerado/Activo Liquido) X100

Efectivo mdio 3.654 4.024 4.362 -0,09 -16,2%

Custos com Pessoal (000) 110.296 116.159 120.512 -0,05 -0,08

Extenso da rede (km) 3.613 3.613 3.613 N/A N/A

Com trfego ferrovirio 2.839 2.839 2.839 N/A N/A

Via Larga 2.648 2.648 2.648 N/A N/A

Electrificada 1.436 1.436 1.359 N/A N/A

No electrificada 1.403 1.403 1.477 N/A N/A

Via estreita 192 192 188 N/A N/A

Sem trfego ferrovirio 774 774 774 N/A N/A

Densidade mdia PNs por km 0,46 0,48 0,52 N/A N/A

In 2006, train kilometres by operators increased 3% over 2004 and decreased slightly compared
with 2005. REFER does not control this variable since it is influenced merely by the CP and FERTAGUS
Earnings from the user fee, essential services, grew 3% over 2005 and 4% over 2004. The tariff
calculation includes the whole potential sales capacity, but the revenue corresponds to the actual
utilisation, that in 2006 corresponded to only 42%. Another factor which restricts earnings is that tariff
increases are limited by a regularly stipulated price cap.

Investments in long duration infrastructures have decreased since 2004. The company invested
less, but it also received much less in state contributions through Chapter 50 (in 2006 the company
received 4.5 million euros compared with 18.1 million in 2005) and less E.U. financing contributions

Annual Report

(87.8 million euros in 2006 compared with 131.8 million euros in 2005). Higher debt was therefore

On average, personnel decreased by 9% compared with 2005 and by 16.2% compared with
Personnel costs decreased 5% compared with 2005 and 8% compared with 2004.

The electrified part of the network with railway traffic increased from 2004 to 2006. The higher
number of electrified lines means having to maintain new electric traction infrastructures that did
not exist until that time, which naturally also include traction substations to power the power lines.
Because of the network modernisation, REFER has commissioned a significant number of new
facilities and renovated and technologically reconverted many others to make railway operation
safer, more reliable, more flexible and better suited to demand and to provide more mobility
among the various means of transport.

Annual Report


Annual Report

Proposta deApplication
Aplicao Proposal
de Resultados

In accordance with the provisions in force, it is proposed that the net income for the year a deficit
of 201,701,575 euros be transferred to retained income.

Lisbon, March 2006


CHAIRMAN Lus Filipe Melo e Sousa Pardal

VICE-CHAIRMAN Alfredo Vicente Pereira

MEMBER Romeu Costa Reis

MEMBER Alberto Jos Engenheiro Castanho Ribeiro

VOGAL Carlos Alberto Joo Fernandes

Annual Report


Annual Report

Financial Statements


on 31 December 2006 (euros)
2006 2005

Code ASSETS Notes Depreciation and

Gross Assets Net Assets Net Assets

Intangible fixed assets: 10
431 Setup costs 154.561 154.561 0 10.807
432 Research and development costs 14.435.820 12.645.315 1.790.505 8.501.103
433 Property and other rights 2.704.085 1.812.700 891.385 1.782.771
443 Intangible fixed assets in progress 6.786.132 6.786.132 5.346.983
24.080.598 14.612.576 9.468.022 15.641.664
Tangible fixed assets: 10
421 Land and natural resources 148.339.011 148.339.011 139.231.805
422 Buildings and other structures 3.719.517.463 6.124.177 3.713.393.286 3.485.550.646
423 Basic equipment 49.477.098 9.354.094 40.123.004 40.481.462
424 Transport equipment 7.500.129 6.947.214 552.915 800.111
425 Tools and utensils 480.044 463.878 16.166 23.538
426 Office equipment 20.681.830 16.852.887 3.828.943 2.198.002
429 Other tangible fixed assets 439.731 285.932 153.799 200.607
441/2/4 Fixed assets in progress 11 2.618.558.674 2.618.558.674 2.550.144.553
448 Advances for tangible fixed assets 13.490.673 13.490.673 14.299.600
48.12 6.578.484.653 40.028.182 6.538.456.471 6.232.930.324
Financial investments:
411 Shareholdings 10 0
4111 Group companies 16 18.881.151 18.881.151 17.859.098
4113 Other companies 16 91.369 45.188 46.181 104.031
413 Financing loans 16
4131 Group companies 16 54.454.625 54.454.625 35.672.625
4133 Other companies 16 0 1.882.869
73.427.145 45.188 73.381.957 55.518.623
Stocks 34
36 Raw and secondary materials and consumables 41e22 23.204.884 248.736 22.956.148 28.913.537
35 Work in progress 0 14.375.186
32 Merchandise 22 25.976 25.976 726.691
37 Advances for purchases 148.340 148.340 287.015
23.379.200 248.736 23.130.464 44.302.429

Third-party receivables - Short term

21 Clients 48.1 52.509.192 52.509.192 52.476.646
24 State and other public entities 28 43.756.327 43.756.327 47.625.959
22/261/2/8 Other debtors 48.5e23 47.405.550 28.888 47.376.662 38.005.504
23 143.671.069 28.888 143.642.181 138.108.109
Negotiable securities
18 Other short-term investments 48.15 54.000.000 54.000.000
Bank deposits and cash
12 Bank deposits 15.934.195 15.934.195 3.715.395
11 Cash 21.535 21.535 21.571
15.955.730 0 15.955.730 3.736.966


271 Accrued earnings 48.16 46.692.486 46.692.486 4.214.771
272 Deferred costs 9.461.794 9.461.794 5.799.415
56.154.280 0 56.154.280 10.014.186
Total depreciation 54.640.758 47.109.802
Total adjustments 21 322.812 247.704
Total Assets 6.969.152.675 54.963.570 6.914.189.105 6.500.252.301

Annual Report

on 31 December 2006 (euros)


51 Capital 35 305.200.000 305.200.000
55 Adjustments to shareholdings -37.167 -40.556
575 Other reserves 3.334.470.524 3.256.622.139
59 Retained income -1.120.895.363 -960.525.882
Subtotal 2.518.737.994 2.601.255.701

88 Net income 40 -201.701.575 -160.369.481

Total Equity 2.317.036.419 2.440.886.220

Provisions 34
293 Legal proceedings in progress 48.4 18.509.143 18.187.589
296 Risks and charges - shareholdings 13.787.558 10.272.398
299 Early retirement provisions 48.13 3.781 85.883
32.300.482 28.545.870
Third-party payables - Medium and long term: 29
231/2 Debts to banks 48.6 2.891.871.885
261 Leasing suppliers 4.371 19.746 2.891.891.631

Third-party payables - Short term:

12/231 Debts to banks 223.383.902 832.942.071
221/3 Suppliers, c/a 48.076.698 39.925.045
228 Suppliers, invoices pending approval 16.850.872 16.797.042
229 Advances to suppliers 17.839 17.839
261 Suppliers of fixed assets, c/a 95.076.113 157.401.584
24 State and other public entities 28 3.338.285 3.338.443
262/3/5+267/8/9 Other creditors 48.14 23.778.508 34.288.264
410.522.217 1.084.710.288


273 Accrued costs 48.16 96.760.670 54.026.572
274 Deferred earnings 1.342.666 191.720
98.103.336 54.218.292

Total Liabilities 4.597.152.686 4.059.366.081

Total Equity and Liabilities 6.914.189.105 6.500.252.301


CHAIRMAN Lus Filipe Melo e Sousa Pardal

Alberto Manuel Diogo

VICE-CHAIRMAN Alfredo Vicente Pereira

MEMBER Romeu Costa Reis

Isabel Rasteiro Lopes

MEMBER Alberto Jos Engenheiro Castanho Ribeiro

MEMBER Carlos Alberto Joo Fernandes

Annual Report


Period ending on 31 December 2006 (euros)

Code COSTS AND LOSSES Notes 2006 2005

61 Cost of merchandise sold and materials consumed:

Secondary materials 41 25.123.052 26.333.312

62 External supplies and services 103.854.000 86.658.084

Personnel costs:
641+642 Wages 83.460.565 87.880.058
Social costs:
645/7/8 Others 26.835.593 110.296.158 28.278.841 116.158.899

662+663 Depreciation of tangible and intangible fixed assets 10 9.139.927 10.150.897

666+667 Adjustments 21 29.920 186.704

67 Provisions 34 6.338.290 15.508.137 3.646.269 13.983.870

63 Taxes 6.291.996 4.411.476

65 Other operating costs and losses 3.646.451 9.938.447 3.715.579 8.127.055

(A) 264.719.794 251.261.220
683+684 Depreciation and adjust. of financial appl. and invest. 45 381.985
681/2+685/8 Interest and similar costs 45 168.285.807 168.667.792 72.197.917
(C) 433.387.586 323.459.137
69 Extraordinary costs and losses 46 18.588.310 35.948.488
(E) 451.975.896 359.407.625

86 Income Tax for the Year 133.393 70.071

(G) 452.109.289 359.477.696

88 Net profit for the year 40 -201.701.575 -160.369.481

250.407.714 199.108.215

Annual Report


Period ending on 31 December 2006 (euros)


71 Sales 20.200.000

72 Services rendered 48.1 62.966.785 65.282.830

Production variation 42 -15.410.253

75 Work for the company 48.3 50.126.557 49.238.286

73 Supplementary earnings 16.412.048 16.715.581

74 Operating subsidies 48.2 28.997.806 27.120.753

76 Other operating earnings and gains 656.988 736.073

77 Reversions of depreciation and adjustments 1.089.271

(B) 165.039.202 159.093.523

7812/5/6+783 Income from negot. securities and other financial applications

Others 136.081 6.798.611
7811/8+782/5/6/8 Other interest and similar earnings:
Others 45 70.276.328 70.412.409 12.723.831 19.522.442
(D) 235.451.611 178.615.965

79 Extraordinary earnings and gains 46 14.956.103 20.492.250

(F) 250.407.714 199.108.215

Operating income: (B) - (A) = -99.680.592 -92.167.697
Financial income: (D - B) - (C - A) = -98.255.383 0 -52.675.475
Current income: (D) - (C) = -197.935.975 0 -144.843.172
Pre-tax income: (F) - (E) = -201.568.182 0 -160.299.410
Net profit for the year: (F) - (G) = -201.701.575 0 -160.369.481


CHAIRMAN Lus Filipe Melo e Sousa Pardal

Alberto Manuel Diogo

VICE-CHAIRMAN Alfredo Vicente Pereira

MEMBER Romeu Costa Reis

Isabel Rasteiro Lopes

MEMBER Alberto Jos Engenheiro Castanho Ribeiro

MEMBER Carlos Alberto Joo Fernandes

Annual Report


Period ending on 31 December 2006 (euros)

2006 2005

Sales and Services Rendered 83.166.785 65.282.830

Production Variation -15.410.253
Cost of Sales -25.123.052 -26.333.312
Gross Income 42.633.480 38.949.518

Other Operating Earnings and Gains 97.282.670 93.810.693

Distribution Costs
Administrative Costs -235.950.291 -221.212.329
Other Operating Costs and Losses -3.646.451 -3.715.579
Operating Income -99.680.592 -92.167.697

Revenue from Shareholdings

From related companies
From other companies

Revenue from negotiable securities and other financial applications

From related companies 3.522.976 3.965.931
Others 136.081 6.798.611

Other interest and similar earnings

From related companies 1.590.267 597.736
Others 65.163.086 8.160.164

Depreciation and provisions for financial applications and investments -381.985

Interest and similar costs

In related companies -2.504.312 -394.090
Others -165.781.496 -71.803.828
Current Income -197.935.975 -144.843.173

Extraordinary earnings and gains 14.956.103 20.492.250

Extraordinary costs and losses -18.588.310 -35.948.487
Pre-tax income -201.568.182 -160.299.410

Income tax for the year -133.393 -70.071

Net profit in the year -201.701.575 -160.369.481


CHAIRMAN Lus Filipe Melo e Sousa Pardal

Alberto Manuel Diogo

VICE-CHAIRMAN Alfredo Vicente Pereira

MEMBER Romeu Costa Reis

Isabel Rasteiro Lopes

MEMBER Alberto Jos Engenheiro Castanho Ribeiro

MEMBER Carlos Alberto Joo Fernandes

Annual Report



Annual Report

An Annex to the Balance Sheet and Profit and Loss Statement

Annex to the Balance Sheet and Profit and Loss Statement


Rede Ferroviria Nacional REFER, E.P., abbreviated to REFER, E.P., is a public corporate entity with
administrative and financial autonomy and its own assets, subject to supervision by the Ministry of
Finance and the Ministry of Social Equipment, with its head office at the Santa Apolnia station in
Lisbon. The company was founded through Decree-Law no. 104/97 of April 29, with the main
objective of rendering a public service of managing the overall national railway infrastructures and
to build, install and renew railway infrastructures.

Note 1. Waivers to the Official Chart of Accounts

The companys financial statements, in their most significant aspects, were prepared in
compliance with the Official Chart of Accounts (OCA) approved by Decree-Law no. 410/89, of
November 21, and according to any alterations, in particular those by DL 35/2005 of February 17.

The following notes comply with 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.

Public domain fixed assets are not subject to depreciation (see note 3.1.2)

All amounts are expressed in euros (Eur) unless otherwise indicated.

Note 2. Comparability of Account Contents

In 2006, REFER did not alter its accounting practices or policies.

Until November 2005, FERTAGUS was not subject to any billing since, according to contractual
stipulations, its train traffic fell below the minimum reference range for invoicing purposes.
According to Decree-Law 189-B/200, of June 2, the state would be responsible for compensating
REFER for the amounts owed from the respective fee, a value included in the received
Compensation Indemnities.

According to paragraph b) of no. IX of Accounting Directive no. 28/01, of June 6, the company
decided not to recognise assets and liabilities from deferred taxes regarding the first application of
the said directive.

As for deferred tax assets, we cannot expect to have fiscal profits in the future to recover the
temporary fiscal assets since there are fiscal losses to be applied in the total amount of Eur

Annual Report

746,354,369 (see note 6) because of the current economic setting and because of the budgets
for the upcoming years.

There were no situations giving rise to deferred tax liabilities.

Note 3. Presentation Bases and Main Valuation Criteria

The financial statements were prepared presupposing the continuity of operations, based on the
companys accounting books and records that were maintained 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 infrastructures (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 assets are recorded at the acquisition cost and are depreciated by the method of
equal annual amounts during a 3-year period.

Note 3.1.2. Tangible Fixed Assets

Tangible fixed assets are recorded at the purchase and/or transfer cost and are depreciated
annually, applicable to fixed assets which are not of the public domain.

Investment subsidies are recorded in reserves in compliance with the policy on public domain
assets, as stipulated by no. 4 of article 22 of the statutes of REFER, EP. Consequently, REFER E.P.
does not depreciate these assets (see note 3.4).

Assets not belonging to the public domain are depreciated using the method of equal annual
amounts in such a way that the value of the assets is written down over their estimated lifetime.

The applied depreciation rates are those stipulated in Regulation Decree 2/90, of January 12, and
respective updates that are summarised as follows:

Annual Report


Buildings 2% a 100%

Basic equipment 3,33% a 100%

Tools and utensils 12,5% a 100%

Transport equipment 4% a 100%

Office equipment 12,5% a 100%

Other tangible fixed assets 12,5% a 100%

Financial costs underlying the purchase of long-duration infrastructures are capitalised as fixed
assets in progress until the date of their completion (see note 11).

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
Personnel costs Formao Tcnica, Psicologia Aplicada e Consultoria em Transportes e
Portos, SA
CPCOM Explorao de Espaos Comerciais da CP, SA

Shareholdings in affiliated and associated companies are valuated according to Accounting

Directive no. 9. Other shareholdings are recorded according to the valuation criteria of the Official
Chart of Accounts for financial investments (see note 16).

Note 3.2. Stocks

Stocks consist of raw and secondary materials and consumables and are valued at the purchase
cost, using the mean cost as the costing method.

The provision on 31 December 2005 was of Eur. 247,704 and was increased by Eur. 1,032, after the
stock inventory, for a balance of Eur. 248,736 (see note 21).

Work in progress on 31/12/2005 is related to the construction of the Interrepblica building, which
was sold in December 2006.

Annual Report

Note 3.3. Accruals and Deferrals

This account is the visible expression of the years accrual concept.

Note 3.4. Subsidies Obtained to Finance Tangible Fixed Assets

Subsidies awarded to the company on a non-refundable basis to finance tangible fixed assets are
recorded in reserves, as stipulated in the statutes of REFER, since long-duration infrastructures are
not subject to depreciation (see notes 3.1.2 and 40).
In 2006, the following subsidies were received:

Subsidies Received 2006 2005

PIDDAC 4.508.401 18.053.705

FEDER/IOT 27.102.526 20.243.101

DGVII 478.500

COHESION FUND 46.237.458 116.896.634

77.848.385 155.671.940

Note 3.5. Provisions

The established provisions are for the forecast needs and comply with the principle of prudence
specified in the GAAP (Generally Accepted Accounting Principles) (see note 34).

Note 4. Assets and Liabilities Recorded in Foreign Currency

All assets and liabilities expressed in foreign currency as at 31 December 2005 were converted into
euros using the exchange rates prevailing on that date. Exchange rate differences were recorded
in results.


Swiss franc 1,6069

Dollar 1,3170

Swedish crown 9,0404

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 earnings and costs in the profit and loss statement for
the year.

Note 6. Deferred Taxes

As indicated in note 2, REFER did not include deferred taxes in its accounts since the amounts of
retained fiscal income in the last six years are as follows:

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Year Amount

2000 88.572.597
2001 124.998.468
2002 118.234.573
2003 110.760.838
2004 144.237.869
2005 159.550.024


Note 7. Average Number of Employees

The average number of employees working for the company in the year in question was of 3,654
employees (4,024 employees in 2005).

Note 8. Setup, Research and Development and Industrial Property Costs

The Setup costs included the expenses to found REFER.

Research and Development Expenses refer to costs for studies and projects related with the
companys activities and also refer to expenses for developing general applications. As of 2006,
assets for developing general applications were recorded in the corresponding item of Tangible
Fixed Assets, according to the valuation criteria for fixed assets stipulated by the Official Chart of

Note 10. Movements in Fixed Assets

Movements recorded under fixed assets and the corresponding depreciation shown in the balance
sheet are broken down in charts 10.1 and 10.2. The transfers between accounts, besides
transferring fixed assets in progress to definitive fixed assets, also refer to corrections in the
classification of some assets.

Note 11. Capitalised Financial Costs

During the year, financial costs related to loans obtained to finance fixed assets were recorded
under fixed assets in progress. As such, 37,790,005 euros were capitalised, of which about
35,332,899 euros are interest on loans from the EIB, from Bank of Berlin, from Bank ABN and from
Bank WestLB, the remainder being surety fees for those loans (see note 14b).

Note 14. Description of Tangible Fixed Assets and Fixed Assets in Progress:

Annual Report

There are no fixed assets in the possession of third parties

All fixed assets are assigned to the companys business activities
Fixed assets on properties owned by third parties:
Fixed assets on properties owned by third parties amount to approximately Eur 127,393
and refer to buildings at Av. Fontes Pereira de Melo, n3-10Esq, at Terreiro do Pao, at
Av. Columbano Bordalo Pinheiro, n108 to 108c, at Rua Diogo Couto, n1 1 to 6
and at Parque das Naes (Edifcio ARTs) Av. D. Joo II, lote 1.18.0-bloco A. There
are also fixed assets in progress in the value of Eur 508,682 related to these facilities.
There are no fixed assets abroad.

b) Capitalised Financial Costs

Increases in the
01.01.2006 31.12.2006

Financial expenses
Interest 160.534.131 35.332.899 195.867.030
Surety fee 8.043.985 2.457.317 10.501.302

168.578.116 37.790.216 206.368.332


On 31/12/2006, the company had the following leasing contracts for vehicles and equipment with
the following leasing companies:

Lessor Equipment Contract Value Depreciation Owed Amount

SGALD Vehicles 431.724 130.421 301.303

Rentilusa Vehicles 248.435 231.934 16.501
Classis Renting Vehicles 694.748 345.788 348.960
Lease Plan Vehicles 808.352 488.165 320.187
Europcar Vehicles 135.952 69.925 66.027
RICOH Photocopiers 241.358 153.852 87.506
Fax 106.888 23.528 83.360
Printers 107.151 27.021 80.130
2.774.608 1.470.634 1.303.974

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Note 16. Group Companies, Associated Companies and Shareholdings

Companies Shareholding % Equity Profit in the year Balance

In the Group
FERBRITAS 98,43% 4.224.035 -2.522.619 4.157.717
Empreend. Industriais e Comerciais, AS
Rua Jos da Costa Pedreira n11 - Lisbon
INVESFER 99,33% -5.060.508 -4.274.715
Promoo e Com. De Terrenos e Edif., AS
Palcio de Coimbra - Rua de Santa Apolnia n 51 - Lisbon
REFER TELECOM 100,00% 13.319.759 3.427.241 13.319.759
Servios de Telecomunicaes, AS
Estao de Santa Apolnia - Lisbon
RAVE 40,00% 2.234.233 -44.772 893.693
Av D.Joo II Lote, 1 Piso- Parque das Naes - Lisbon
CPCOM - Explorao de Espaos Comerciais da CP, AS 80,00% 637.477 119.669 509.982
Av. Da Repblica, 90 Galeria Fraco 4 - Lisbon

GIL 33,00% -26.548.352 -2.733.102
Gare Intermodal de Lisboa, AS
Av.Marechal Gomes da Costa, n 37 - Lisbon

Other Companies
FERNAVE 10,00% 461.801 -1.538.198 64.494
Formao Tcnica, Psicologia Aplicada e Consultoria
em Transportes e Portos, AS
Rua Castilho n 3 - Lisbon
METRO MONDEGO 2,50% -445.316 -790.739 26.875
Praa 8 de Maio, 38 - Coimbra

The information indicated above about shareholdings was taken from the companies respective
financial statements for the year subject to approval. The statements for the company GIL are
definitive and those for Other Companies were presented to us as provisory data.

Shareholdings in group and associated companies are valued through the asset equivalence

REFER set up a provision covering liabilities arising from its shareholdings in GIL and Invesfer (see
note 34).

A provision for financial investments, in the amount of Eur. 45,188, was set up for personnel costs
and for METRO MONDEGO to overcome the market devaluation on 31/12/2006 (see note 45).

Loans to group companies FERBRITAS and INVESFER made in previous years were not
reimbursed, and the amount loaned to INVESFER was increased by 18,782,000 euros in 2006.

Annual Report

The loan from FERNAVE was used to cover losses as explained in note 45.
The said loans are broken down as follows:

Company 2006 2005

Group Companies
Ferbritas 997.861 997.861
Invesfer 53.456.764 34.674.764
Other Companies
Fernave 1.882.869

54.454.625 37.555.494

Loans to INVESFER bear interest at the 12-month Euribor rate + 0.5% and will be reimbursed from
2007 to 2009. For 2006, Eur. 1,590,267 in interest was recorded from loans made (see note 45).

Note 21. Adjustments

Movements in the current assets items, was as follows:

Items Increases Reversion Closing Balance

Financial Investments
Other companies 45.188 45.188
Stocks 0
Raw, secondary and consumable materials 247.704 1.032 248.736
Other Debtors
Doubtful debt 28.888 28.888

247.704 75.108 0 322.812

Note 22. Merchandise

On 31/12/2006, this item was broken down as follows:

2006 2005

Merchandise in transit 25.976 121.751

Merchandise held by third parties 604.940

25.976 726.691

The amount for goods in transit refers to track switching devices (TSD) whose design has not been
approved, and thus the respective nomenclature cannot be created. These TSD were transferred to
this item from the previous year.

Annual Report

Note 23. Doubtful Debt

In the year, it was necessary to set up a provision for doubtful debt, in the amount of Eur. 28,888,
broken down as follows: (see note 21)


Benaterras 6.818

Aetur 22.070


The balance of Benaterras dates back from 2001 to 2003, and the balance of Aetur dates back
from 2003 to January 2006.

Note 25. Debts by and to Personnel

2006 2005

Creditor Balances 1.329.995 732.685

Debtor Balances 1.039.816 617.566

Note 28. State and Other Public Entities

On 31 December 2006, there were no overdue debts under the state and other public entities
item. The amount of this item consists of:

2006 2005

Assets Liabilities Assets Liabilities

VAT 41.985.190 46.842.596 45.790

Income tax 1.451.725 1.038.873 355.866 985.228
Social Security 319.412 1.988.351 427.497 2.104.169
Others 311.061 203.257

43.756.327 3.338.285 47.625.959 3.338.444

Of the owed corporate income tax, Eur. 20,000 refers to an arithmetic error in return form 22, of
February 2000, for which a refund was requested, which was approved in February 2006 but has
not been refunded yet; Eur. 354,490 refers to special payments on account from 2000 to 2006 and
the remaining amount refers to deductions at source in 2006 by entities that owe property and
financial revenue and that will be deducted from the corporate income tax payment for 2006.

Annual Report

The amount owed to Social Security is justified because REFER is a centralising company which thus
temporarily substituted Social Security in making payments to employees who were on sick
leave/medical leave.

The others item refers to stamp tax paid in January 2007.

Note 29. Debts of Over Five Years to Third Parties

Medium and long term debts are broken down as follows:

Description Amount Term Rate

Bank debts of over 5 years

BEI - Tagus River Railway Crossing 89.783.621 15.09.2016 3,650%
BEI - Douro Line Project 39.504.793 15.09.2016 3,650%
BEI - Tagus River Railway Crossing - B 66.506.386 15.09.2017 3,650%
BEI - CPIII North Line - B 49.879.790 15.06.2022 3,650%
BEI - CPIIE 11.782.224 15.06.2012 3,700%
BEI - Minho Line - A 58.351.102 15.09.2018 3,650%
BEI - Tagus River Railway Crossing - C 76.640.358 15.09.2018 3,650%
BEI - CPIIB 7.980.766 15.09.2011 3,298%
BEI - CPIII North Line - D 25.937.491 15.09.2020 3,650%
BEI - Link to the Algarve - A 90.000.000 15.09.2021 3,650%
BEI - Link to the Algarve - B 30.000.000 15.03.2022 3,650%
BEI - Minho Line - B 59.855.748 15.09.2021 3,650%
BEI - CPIII2 North Line A 100.000.000 15.03.2022 3,650%
BEI - CPIII2 North Line B2 200.000.000 15.06.2022 3,650%
BEI - Suburban 100.000.000 16.06.2024 3,650%
BEI - Suburban B 100.000.000 15-09-2025 3,615%
ABN 300.000.000 11.04.2011 3,574%
WESTLB 200.000.000 08.10.2012 3,604%
Eurobond 05-15 600.000.000 16-03-2015 4,000%
Eurobond 06-21 500.000.000 13-12-2021 4,250%
Eurobond 06-26 600.000.000 16-11-2026 4,047%

Logo Loan < 5 years 250.000.000 30-01-2008 4,32%

Logo Loan < 5 years 250.000.000 30-01-2009 4,37%
Berlin 250.000.000 04.08.2010 3,335%

Loans from the EIB, ABN, Berlin and Westlb 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 the loans from ABN, Berlin, WestLB, Eurobond 06/26, Eurobond 06/21 and Logo Securities,
which will be paid in a single payment, in the other loans the capital is reimbursed in consecutive and
equal annual amounts after the grace period. All these loans have the states surety, except for the
loans from Logo Securities, JP Morgan and Eurobond 06/21 (see note 48.6).

Annual Report

Note 32. Guarantees Given

On 31 December 2006, REFER had assumed responsibilities for the following guarantees:

Bank Guarantees to Courts 116,669

Other Guarantees 2,731,333

Promissory Notes given by REFER 75,000,000

These promissory notes are associated to the respective credit lines.

Note 34. Movements in Provisions

Accumulated provisions and the corresponding movements in the year were as follows:
Opening Closing
Items Increases Reduction
Balance Balance

293 - Legal proceedings in progress 18.187.589 1.083.025 761.470 18.509.144

296 - Provisions for shareholdings 10.272.398 5.255.265 1.740.105 13.787.558

299 - Prov. for early retirement 85.883 82.102 3.781

28.545.870 6.338.290 2.583.677 32.300.483

The provision for judicial proceedings in progress includes civil proceedings and labour relations
proceedings (see note 48.4).

The provision for shareholdings will be used to cover REFERs liability arising from its shareholding in
GIL Gare Intermodal de Lisboa, SA and Invesfer, SA, which have negative balances. As such, the
amount shown refers to both companies in the amounts of Eur. 8,760,956 and Eur. 5,026,602,

The provision for early retirement pensions is for personnel in departments transferred from CP who
had taken early retirement. The provision will be used in the applicable years and will end in 2007.

Note 35. Capital Movements

The Portuguese state holds 100% of REFERs share capital. The statutory capital in this year was not
subject to any changes.

Note 40. Changes in Other Equity Items

Movements in equity items, for items shown in the balance sheet, were as follows:

Annual Report

Opening Closing
Items Increases Adjustments
Balance Balance

51 - Statutory Capital 305.200.000 305.200.000

55 - Adjustments to Shareholdings -40.556 3.389 -37.167
575 - Subsidies
From the defunct GNFL, GNFP, GECAF 678.085.773 678.085.773
From CP ( Annex III and 2nd Semester) 128.604.887 128.604.887
From CP (Annex IV and V) 716.452.794 716.452.794
Subsidies obtained:
PIDDAC 630.890.756 4.508.401 635.399.157
FEDER/IOT 390.326.885 27.102.526 417.429.411
COHESION FUNDS 657.842.782 46.237.458 704.080.240
DGTREN 1.725.185 1.725.185
DGVII 10.259.003 10.259.003
Expo 98 31.147.349 31.147.349
UE - 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
3.256.423.069 77.848.385 0 3.334.271.454
576 - Donations 199.070 0 199.070
57 - RESERVES 3.256.622.139 77.848.385 0 3.334.470.524
59 - Retained Income -960.525.882 -160.369.481 -1.120.895.363
Profit for the year -160.369.481 -201.701.575 160.369.481 -201.701.575
2.440.886.220 -284.219.282 160.369.481 2.317.036.419

Note 41. Cost of Goods Sold and Materials Consumed

Statement of goods sold and materials consumed:

2006 2005

Initial stocks 29.161.241 23.642.600

Purchases 18.165.321 29.942.583
Adjustments of stocks 1.001.374 1.909.370
Final stocks -23.204.884 -29.161.241

Costs in the year 25.123.052 26.333.312

These costs are for materials sold and consumed, material incorporated in the investment and in
the renewal of track switching devices.

Note 42. Production Variation

REFER sold the Interrepublica building during the year. Consequently, the production variation was
as follows:

Annual Report


Initial stocks 14.375.186

Increases 1.035.067
Final stocks 0

Increase/reduction in the year -15.410.253

Note 43. Remuneration to Members of the Governing Bodies

Information referred to by Council of Ministers Resolution no. 155/2005 of 8 September 2005:

2006 2005

Employer Employer
Social Security Main Accessory Main Accessory
Deductions for Deductions for
Regime Remunerations Remunerations Remunerations Remunerations

Board of Directors (from 01/01/2005 to 26/10/2005)

Jos de S Braamcamp Sobral Chairman Normal Regime 52.767,00 48.716,00 18.024,00
Jos Osrio da Gama e Castro Vice Chairman CGA (pension fund) 53.391,00 37.742,00 17.611,00
Lus Miguel dos Reis Silva Member Normal Regime 48.845,00 40.262,00 16.749,00
Jos Roque de Pinho Marques Guedes Member Normal Regime 47.239,00 37.748,00 16.367,00
Manuel Alfredo Aguiar de Carvalho Member Old Age Pension 53.857,00 72.044,00 11.729,00

Boad of Directors (from 27/10/2005 to 31/12/2005)

Lus Filipe Melo e Sousa Pardal Chairman Normal Regime 68.223,00 30.084,00 18.607,00 10.139,00 10.663,00 4.098,00
Alfredo Vicente Pereira Vice Chairman Normal Regime 64.641,00 26.786,00 17.757,00 9.593,00 5.344,00 2.864,00
Romeu Costa Reis Member CGA (pension fund) 60.546,00 25.497,00 0,00 8.969,00 9.257,00 0,00
Alberto Jos Engenheiro Castanho Ribeiro Member Normal Regime 60.546,00 26.430,00 16.784,00 8.969,00 10.127,00 3.690,00
Carlos Alberto Joo Fernandes Member CGA (pension fund) 60.546,00 25.481,00 0,00 8.969,00 9.257,00 0,00

TOTAL 314.502,00 134.278,00 53.148,00 302.738,00 281.160,00 91.132,00

Accessory remunerations to the Board of Directors include the subsidy for accumulating positions as
stipulated in Council of Ministers Resolution no. 29/89 of August 26, no. 17.

Remuneration to the Audit Committee:

Main Employer Deduction
Remunerations for SS

Jos Antnio Coelho Alves Portela Chairman of A.C. (Until 2006) 8.713

Hilrio Manuel Marcelino Teixeira 11.406 2.709

20.119 2.709

Annual Report

Note 45. Financial Profit and Loss Statement

The financial profit and loss statement is as follows:

2006 2005

Financial Costs and Losses

681 - Interest paid 162.458.197 61.913.629
682 - Losses in group and associated companies 2.504.312 394.090
684 - Adjustments to financial applications 381.985
685 - Unfavourable exchange rates 7.412 25.778
688 - Other financial costs and losses 3.315.886 9.864.420
Financial Income -98.255.383 -52.675.475
70.412.409 19.522.442
Financial Earnings and Gains
781 - Interest earned 66.860.830 7.681.205
782 - Gains in group and assoc. companies 3.522.976 3.965.931
785 - Favourable exchange rates -774 2.934
786 - Cash payment discounts 28.954 16.912
788 - Reversions and other finan. earn. and gains 423 7.855.460
70.412.409 19.522.442

About 27% of interest paid covers interest for debentures, about 31% for medium and long term
loans, nearly 22% for interest paid regarding SWAPs and the remaining 20% for interest on credit
lines, commercial paper and bank overdrafts.

Losses in group and associated companies refer to the adjustment of shareholdings in FERBRITAS
and RAVE.

Adjustments to financial application refer to the companies FERNAVE and METRO MONDEGO, of
Eur. 355,110 and 26,875, respectively. The amount referring to FERNAVE is split into two parts, about
Eur. 336,796 for the loss that REFER supported, according to its proportional shareholding, to cover
losses to reinforce that companys capital, which was increased in November 2006. The remaining
part, Eur. 18,314, refers to the adjustment arising from the market devaluation on 31/12/2006.

The other financial costs and losses item is broken down as follows:

2006 2005

Bank services 901.685 1.578.118

Bond emission expenses 19.595 3.528.733
Surety fee 1.245.691 1.509.061
Rounding off differences 27 3
Others not specified 1.148.888 3.248.504

3.315.886 9.864.419

Annual Report

The surety fee is for loans from EIB, ABN, Berlin and WestLB that were capitalised by an additional Eur
2,457,317 (see note 14 b).

The others not specified item refers to expenses on the loans Logo Securities I and II, obtained in
2003 and that are being deferred for 5 and 6 years, respectively.

About 97% of interest earned refers to gains in Swaps. This item also includes Eur. 1,590,267
referring to interest charged to Invesfer for supplementary entries made to this company (see note

Gains in group companies refer to the asset equivalence carried out in relation to REFER Telecom
and CPCom.

Note 46. Extraordinary Profit and Loss Statement

The extraordinary profit and loss statement is broken down as follows:

2006 2005

Extraordinary Costs and Losses

691 - Donations 36.383 27.000
693 - Losses in stocks 95.297 258.944
694 - Losses in fixed assets 62.902 67.745
695 - Fines and penalties 38.354 11.201
696 - Depreciation increases 3.096 218.524
697 - Corrections to previous years 10.698.234 19.348.278
698 - Other extraordinary costs and losses 7.654.044 16.016.797
Extraordinary Income -3.632.207 -15.456.239
14.956.103 20.492.250

Extraordinary Earnings and Gains

791 - Tax refunds 595 2.608
793 - Gains in stocks 139.022 343.622
794 - Gains in fixed assets 79.009 6.146.533
795 - Benefits from contractual penalties 63.507 37.822
796 - Decreased provisions 843.573 2.948.250
797 - Corrections to previous years 13.829.961 10.999.232
798 - Other extraordinary earnings and gains 436 14.183

14.956.103 20.492.250

About 23% of the balance in the item costs and losses corrections to previous years, corresponds
to corrections of incorrect entries in the fixed assets item in 2005; about 11% refers to maintenance
costs on the Minho Line from July to December 2005, not recognised at the proper time, and 6%
refers to stamp tax from 2003 to 2005 for financial operations not recognised in costs in the
respective years.

Annual Report

In other extraordinary costs and losses, about 95% of the account refers to indemnities for contract
terminations by mutual agreement in the year in question, the remaining 5% cover pre-retirement
pensions (see note 48.12).

In the reduction in provisions item, about 10% refers to applying the provision for pre-retirement
pensions and 90% is related with the settled legal proceedings (see note 34).

In the item Earnings and Gains Corrections to Previous Years, nearly 30% refer to the sale of a land
plot in July 2005 that was not recorded in the accounts until 2006, about 21% refers to the
correction of the provision for holidays and holiday pay in 2005 and about 10% refers to
infrastructure utilisation invoicing in previous years arising from alterations to the Network Directory.

Note 47. Information Required by Legislation

Note 47.1. Information referred to in the Order by the Secretary of State of the Treasury, of
25 June 1980:
Costs arising from employee representation organisations
For employees participating full-time union leaders and the employee
committee the cost of employee representation organisations in 2006
reached a total of Eur. 177,259 broken down as follows:


Monthly remuneration 101.027

Seniority payment 9.426
Holiday pay and 13th month 20.029
Employer's contribution 33.621
Others 13.156


Number of employees involved

Part-time (average number):
Union leaders 130
Committee and Sub-committees 17
Union leaders 8

Note 47.2. Information referred to in Decree Law no. 411/91 of October 17:
The debt to Social Security T.S.U. reached Eur 1,988,351, without any overdue

Annual Report

Note 48. Additional Information

Other relevant information for a better understanding of the financial position and results:

Note 48.1. REFER began to operate its infrastructures in 1999 and consequently began to charge
user and other service fees to railway operators - CP and FERTGUS, along with other services.

On 31/12/2006, the debt by those two entities was as follows:

2006 2005

CP 49.361.367 48.351.938
Fertgus 3.147.825 4.124.708

52.509.192 52.476.646

In this year, CP and FERTAGUS were invoiced user fees that reached a total of Eur 51,317,514 and
Eur. 2,453,940, respectively, which represent 85 % of the value of rendered services.

Note 48.2. During the year in question, Eur 28,997,806 were recorded as account adjustments
(RCM 557/2006 and 158/2006), that is, compensation indemnities received from the state.

Note 48.3. Work for the company refers essentially to material costs, labour and equipment applied
in the investment, management and administrative costs of activities related directly with the
investment and part of the structural costs of the other company departments, in the amount of Eur

Note 48.4. At the end of 2006, judicial proceeding in progress for expropriations reached Eur
3,624,105. Judicial proceedings covered by provisions refer to accidents and claims for
compensation of damages, for occupation of land, etc., and reached Eur 9,154,627, of which
Eur. 6,800,000 are from the Dragados SA Group, and from labour relations proceedings that
reached Eur 9,354,514.

Note 48.5. The Other Debtors item consists of:

Annual Report

2006 2005

Suppliers 7.496.641 1.226.298

Personnel 1.039.816 617.566
Amounts to be settled 4.860.399 4.651.505
Other debtors and creditors 33.912.960 31.420.795
Others 95.734 89.340

47.405.550 38.005.504

About 30% of the amount in the item amounts to be adjusted refers to VAT from invoices that were
more than one year old and thus could not be deducted. Consequent to the alteration to the CIVA
(vat code), since companies may now deduct VAT from invoices of up to two years old, these
amounts will be recovered. Nearly 52% refers to invoices from REFER TELECOM waiting to be
distributed among cost centres and PEP.

The other debtors item includes Eur. 6,253,494 (12% of the balance) in court fees to meet
expenses for expropriation proceedings. Infervisa, O2, Parque Expo and FERNAVE comprise about
37% of the balance.

Note 48.6. There is Eur 2,491,871,885 referring to surety provided by the state for loans from the EIB
and for loans from the Berlin, ABN and WestLB banks.

Note 48.7. On 31 December 2006, there was Eur 201,256,166 in bank guarantees received from
suppliers, and Eur 35,569,338 for other guarantees received from suppliers.

Note 48.8. On 31/12/2006, the company had received Eur 2,529,376 for bank guarantees from

Note 48.9. Through the acquisition of the FERBRITAS shares, in 1999 REFER took over the full
responsibilities thereof. This means that REFER will become liable for the letters of comfort signed in
favour of Banco Mello for property leases / medium and long-term loans, up to the amounts of
4,239,782 euros and 498,798 euros, respectively.

Note 48.10. In reference to Invesfer, REFER is responsible for the letters of comfort signed in favour
of BPI for short, medium and long term loans and vehicle leases up to the amounts of 274,339
euros, 39,904 euros and 67,116 euros, respectively.

Note 48.11. As for FERNAVE, REFER is responsible for the letter of comfort signed in favour of Banco
Esprito Santo for a short-term loan up to the amount of 2,743,388 euros.

Annual Report

Note 48.12. About 98.59% of all tangible fixed assets correspond to fixed assets belonging to the
state (long-term infrastructures). Thus, on 31/12/06 this item stood at Eur 6,485,462,753, of which Eur
2,607,161,456 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 25,285,517 euros 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:

2006 2005

Miscellaneous creditors 8.425.936 10.153.717

Personnel 1.329.995 732.685
Advances for sales 13.984.750 21.743.727
Others 37.826 1.658.135

23.778.507 34.288.264

In the miscellaneous creditors item, 37% of the balance refers to Estao Viana-Centro Comercial,

In the advances for sales item, the companies Visabeira and El Corte Ingls consist of about 85%
of the balance.

Note 48.15. On 31/12/2006, a short-term financial application of Eur. 54,000,000 was made at
Banco Santander which falls due on 2 January 2007.

Note 48.16. About 87% of the balance of accrued earnings refers to accruals related with SWAPs,
and about 75.5% of accrued costs refer to payable interest for the debenture loan, from the
SWAPs and others.

Annual Report

Note 48.17. In 2004, a promissory sale contract was signed for shares in Ecosade Educao,
INVESTIGAO E Consultoria em Trabalho, Sade e Ambiente, SA, between FERNAVE, CP and
REFER, whereby FERNAVE will sell to CP and to REFER, in the proportion of 50% / 50%, all the shares
held by FERNAVE in Ecosade. The definitive contract has not been signed yet.


Alberto Manuel Diogo CHAIRMAN Lus Filipe Melo e Sousa Pardal



MEMBER Romeu Costa Reis

Isabel Rasteiro Lopes

MEMBER Alberto Jos Engenheiro Castanho Ribeiro

MEMBER Carlos Alberto Joo Fernandes


Items Opening Balance Transf/Adj Increases Disposals Closing Balance

Intangible Fixed Assets

Setup costs 154.561 0 0 0 154.561
Research and development costs 24.911.506 -10.475.686 0 0 14.435.820
Industrial property and other rights 2.704.085 0 0 0 2.704.085
Fixed assets in progress 5.346.983 -84.375 1.523.524 0 6.786.132
(1) 33.117.136 -10.560.061 1.523.524 0 24.080.599
Tangible Fixed Assets
Long Duration Infrastructures (State)
Land and natural resources 138.604.132 7.279.784 478.219 0 146.362.136
Buildings and other structures 3.461.128.623 226.894.118 157.068 0 3.688.179.809
Basic equipment 30.268.679 0 0 0 30.268.679
Fixed assets in progress 2.540.286.593 -239.011.385 305.886.248 0 2.607.161.456
Advances for intangible fixed assets 14.299.600 -9.145.496 8.336.568 0 13.490.673
6.184.587.628 -13.982.978 314.858.104 0 6.485.462.753
Land and natural resources 627.673 1.728.771 268.194 -647.763 1.976.875
Buildings and other structures 29.424.344 1.903.172 10.139 0 31.337.654
Basic equipment 18.196.465 646.796 367.697 -2.538 19.208.420
Transport equipment 7.495.473 943 36.289 -32.576 7.500.129
Tools and utensils 472.605 0 7.440 0 480.044
Office equipment 11.463.184 9.306.971 382.351 -470.676 20.681.830
Other tangible fixed assets 439.325 0 405 0 439.731
Fixed assets in progress 9.857.960 -2.712.804 4.252.060 0 11.397.216
77.977.028 10.873.849 5.324.575 -1.153.553 93.021.899
(2) 6.262.564.655 -3.109.130 320.182.679 -1.153.553 6.578.484.652
(1) + (2) 6.295.681.791 -13.669.191 321.706.203 -1.153.553 6.602.565.251
Financial Investments
Group companies 17.859.098 -2.500.923 3.522.976 0 18.881.151
Associated companies 0 0 0 0 0
Other companies 104.031 0 64.494 0 168.526
Financing Loans
Group companies 35.672.625 0 18.782.000 0 54.454.625
Other companies 1.882.869 -2.141.394 258.525 0 0
55.518.623 -4.642.317 22.627.995 0 73.504.302

Annual Report


Items Open. Balance Transf/Adj. Increases Disposals Closing Bal.

Intangible Fixed Assets

Setup costs -143.754 0 -10.807 0 -154.561
Investment and development expenses -16.410.403 5.764.472 -1.999.384 0 -12.645.315
Industrial property and other rights -921.314 0 -891.386 0 -1.812.700
-17.475.470 5.764.472 -2.901.577 0 -14.612.575
Tangible Fixed Assets
Buildings and other structures -5.002.320 0 -1.121.856 0 -6.124.177
Basic equipment -7.983.682 -64.708 -1.306.843 1.140 -9.354.094
Transport equipment -6.695.362 0 -284.427 32.576 -6.947.214
Tools and utensils -449.067 0 -14.812 0 -463.878
Office equipment -9.265.182 -4.591.944 -3.466.294 470.533 -16.852.887
Other tangible fixed assets -238.718 0 -47.214 0 -285.932
-29.634.332 -4.656.652 -6.241.446 504.248 -40.028.182
-47.109.802 1.107.819 -9.143.023 504.248 -54.640.757

Annual Report


Period ending on 31 December 2006


Internal Increase in Fixed Assets

Net profit for the year -201.701.575 Intangible Fixed Assets
Depreciation 7.653.301
Variation in provisions 3.754.612 Fixed Assets in Progress 1.523.524
Other creditors -190.293.662 1.523.524

External Tangible Fixed Assets

Equity increases Land 746.413
Capital adjustments 3.389 Buildings and other structures 167.207
Increased reserves 77.848.385 Basic equipment 367.697
77.851.774 Transport equipment 36.289
Tools and utensils 7.440
Medium and Long Term Financial Movements Office equipment 382.351
Increase in debts to third parties Other tangible fixed assets 405
Loans obtained 1.164.350.395 Fixed assets in progress 296.469.121
Leasing suppliers -15.375 Advances 8.336.568
1.164.335.020 306.513.491

Decrease in Fixed Assets Financial Investments 17.985.678

Tangible Fixed Assets
Land 647.763
Basic equipment 2.538
Transport equipment 32.576 Increase in Working Capital 727.023.992
Office equipment 470.676


CHAIRMAN Lus Filipe Melo e Sousa Pardal

Alberto Manuel Diogo

VICE-CHAIRMAN Alfredo Vicente Pereira


MEMBER Romeu Costa Reis

Isabel Rasteiro Lopes

MEMBER Alberto Jos Engenheiro Castanho Ribeiro

MEMBER Carlos Alberto Joo Fernandes

Annual Report


Period ending on 31 December 2006

1. Decrease in Short-term Third-party Payables 1. Decrease in Stocks

Banks 609.558.168 Raw, secondary and consumable materials 5.957.389
State and other public entities 158 Work in progress 14.375.186
Suppliers of fixed assets 62.325.471 Merchandise 700.715
Other creditors 10.509.757 Advances for purchases 138.675
682.393.554 21.171.965
2. Increase in Third-party Receivables
Clients 32.546 2. Decrease in Short-term Third-party Receivables
Other debtors 9.371.158 State and other public entities 3.869.632
3. Increase in Short-term Third-party Payables
3. Increase Treasury Applications 54.000.000 Suppliers c/a 8.151.653
Supplies pending approval 53.830
4. Increase in Liquid Funds 8.205.483
Demand deposits 12.218.800
4. Variation in Accruals and Deferrals
5. Variation in Accruals and Deferrals Increased in accrued costs 42.734.098
Increase in deferred costs 3.662.379 Increase in deferred earnings 1.150.946
Increase in accrued earnings 42.477.715 43.885.044
46.140.094 5. Decrease in liquid funds
Cash 36

Increase in Working Capital 727.023.992

804.156.152 804.156.152


CHAIRMAN Lus Filipe Melo e Sousa Pardal

Alberto Manuel Diogo

VICE-CHAIRMAN Alfredo Vicente Pereira

MEMBER Romeu Costa Reis

Isabel Rasteiro Lopes

MEMBER Alberto Jos Engenheiro Castanho Ribeiro

MEMBER Carlos Alberto Joo Fernandes

Annual Report

CASH FLOW STATEMENT - Indirect method

Period ending on 31 December 2006

2006 2005

Operation Activities:
Profit for the year -201.701.575 -160.369.481
Depreciation and adjustments 7.653.301 10.132.261
Provisions 3.754.612 -1.694.809
Increase in third-party receivables -9.403.704 -21.851.812
Decrease in third-party receivables 3.869.632 3.978.656
Increase in stocks -11.165.552
Decrease in stocks 21.171.965 207.794
Increase in third-party payables 8.205.483 20.212.666
Decrease in third-party payables -682.393.554 -153.738.791
Increase in treasury applications -54.000.000
Increase in accrued costs and deferred earnings 43.885.044 14.862.722
Increase in accrued earnings and deferred costs -46.140.094 13.198.281
Decrease in accrued earnings and deferred costs
Flow of operation activities (1) -905.098.890 -286.228.065
Investment Activities:
Financial investments 17.985.678 32.097.309
Tangible fixed assets 305.359.938 420.083.816
Intangible fixed assets 1.523.524 4.091.351
Flow of investment activities (2) 324.869.140 456.272.476
Financing Activities:
Loans obtained 1.164.350.395 578.985.774
Suppliers -15.375 19.746
Capital increase
Adjustments to shareholdings 3.389 65.872
Reserves 77.848.385 155.753.010
Retained income
Flow of financing activities (3) 734.824.402

Variation in cash and cash equivalents 0

(4)=(1)-(2)+(3) 12.218.764 -7.676.139
Cash and its equivalents at the end of the period 15.955.730 3.736.966
Cash and its equivalents at the beginning of the period 3.736.966 11.413.105
Variation in cash and cash equivalents 12.218.764 -7.676.139


CHAIRMAN Lus Filipe Melo e Sousa Pardal

Alberto Manuel Diogo

VICE-CHAIRMAN Alfredo Vicente Pereira

MEMBER Romeu Costa Reis

Isabel Rasteiro Lopes

MEMBER Alberto Jos Engenheiro Castanho Ribeiro

MEMBER Carlos Alberto Joo Fernandes

Annual Report


Period ending on 31 December 2006

2006 2005

Operation Activities
Receipts from clients 99.546.287 61.900.639
Payments to suppliers -797.403.412 -257.475.279
Payments to personnel -110.296.158 -116.158.899

Flow generated by operations -808.153.283 -311.733.539

Income tax payment/refund -133.393 -70.071

Other receipts/payments regarding operation activities -160.581.463 27.055.758

Flows generated prior to extraordinary items -160.714.856 26.985.687

Receipts related with extraordinary items 13.431.776 14.964.468

Payments related with extraordinary items -20.074.936 -35.967.123

-6.643.160 -21.002.655
Flow from operation activities (1) -975.511.299 -305.750.507
Investment Activities
Receipts from:
Financial investments
Tangible fixed assets
Intangible fixed assets
Investment subsidies
Interest and similar earnings 70.412.409 19.522.442

70.412.409 19.522.442
Payments for:
Financial investments 17.985.678 32.097.309
Tangible fixed assets 305.359.938 420.083.816
Intangible fixed assets 1.523.524 4.091.351

324.869.140 456.272.476
Flow from investment activities (2) 254.456.731 436.750.034
Financing Activities
Receipts from:
Loans obtained 1.164.350.395 578.985.774
Suppliers 19.746
Reserves 77.848.385 155.753.010
Others 734.758.530
Payments for:
Loans obtained
Amortisation of contracts
Interest and similar costs
Retained income
Others -11.986 65.872
-11.986 65.872
Flow from financing activities (3) 734.824.402
Variation of cash and cash equivalents (4)=(1)-(2)+(3) 12.218.764 -7.676.139

Exchange rate effects

Cash and cash equivalents at the end of the period 15.955.730 3.736.966
Cash and cash equivalents at the beginning of the period 3.736.966 11.413.105
Variation of cash and cash equivalents 12.218.764 -7.676.139


CHAIRMAN Lus Filipe Melo e Sousa Pardal

Alberto Manuel Diogo


MEMBER Romeu Costa Reis

Isabel Rasteiro Lopes

MEMBER Alberto Jos Engenheiro Castanho Ribeiro

MEMBER Carlos Alberto Joo Fernandes

Annual Report

Annex to the Cash Flow Statement

Description 2006 2005

Cash 21.535 21.571
Bank deposits 15.928.744 3.715.395
Liquid Assets Shown in the Balance Sheet 15.950.279 3.736.966

Notes not included in this annex are not applicable

2. Breakdown of components of cash and cash equivalents