Engie Energia Chile S.a. · BCS:ECL

Engie Energia Chile — Q1 2017 Earnings Presentation

42 slides from Engie Energia Chile's earnings presentation, March 2017

  1. Slide 1: Presentation to investors 1Q 2017 Results

    ENGIE ENERGÍA CHILE S.A. Presentation to investors 1Q 2017 Results

  2. Slide 2: Agenda

    AGENDA Highlights Industry and Company Projects Financial Results

  3. Slide 3: Highlights

    O1 Highlights

  4. Slide 4: Financial Summary

    FINANCIAL SUMMARY 1Q2017  EBITDA reached US$66 million, a 7% decrease compared to 1Q16, mainly as a result of higher electricity purchase costs, new green taxes and higher costs in emission reduction processes.  Net income amounted to US$19.7 million, a 2.5% decrease excluding non-recurring income

  5. Slide 5: Highlights

    HIGHLIGHTS Industry  A new coordination body, the “CEN” or “Coordinador Eléctrico Nacional”, took office on January 1, 2017, in replacement of the CDEC-SING and CDEC-SIC, to manage the integrated, nationwide power grid (the “SEN” or “Sistema Eléctrico Nacional”) that will result from the interconne

  6. Slide 6: Industry and Company

    Industry and Company

  7. Slide 7: Chilean Electricity Industry

    CHILEAN ELECTRICITY INDUSTRY 1Q 2017: Two main separate grids preparing for interconnection Growth Generation GWh Main players Market Clients (2017-2026)1 (1Q17) (% installed capacity 1Q17) Regulated Renew. Diesel 1% Other 11% 11% Tamak Gas 10% 7% aya 23% capacity 10% EECL 3.5% Enel 38% SING 25% dem

  8. Slide 8: The SING

    THE SING A predominantly thermal system, with growing presence of renewables ● No exposure to hydrologic risk ● Long-term contracts with unregulated clients (mining companies) accounting for 89% of demand (bilateral negotiation of prices and supply terms) ● Maximum demand: ~ 2,428 MW in February 201

  9. Slide 9: Chile, a World-Class Copper Producer

    CHILE, A WORLD-CLASS COPPER PRODUCER Power demand growth due to declining ore grades and water pumping needs US¢/lb Copper production in the SING ('000 tons) Copper price LME (US¢/lb) GWh 500 4500 Electricity demand GWh 1800 450 4000 1600 400 3500 1400 350 3000 1200 300 2500 1000 250 3,141 3,203 3,1

  10. Slide 10: Ownership Structure as of March 31, 2017

    OWNERSHIP STRUCTURE AS OF MARCH 31, 2017 A world-class controller and a diversified ownership base ENGIE Local institutions Pension funds Foreign institutions Individuals 52.76% 15.42% 23.83% 7.49% 0.50% ENGIE ENERGÍA CHILE S.A. Inversiones Punta de (“EECL”) RedRed Eléctrica Eléctrica Chile Rieles L

  11. Slide 11: Gross Installed Capacity

    GROSS INSTALLED CAPACITY SING and EECL as of March 31, 2017 SING EECL 1,971 MW 2,000 19 2,500 2,344 MW 202 19 202 1,971 MW 2,000 19 1,500 1,405 MW 1,799 MW 623 13 202 623 317 1,500 623 962 MW 1,000 24 688 1,000 1,127 1,405 532 MW 781 1,500 500 350 MW 1,127 500 532 781 295 158 0 55 0 EECL AES Gener E

  12. Slide 12: Installed Capacity and Operating Assets

    INSTALLED CAPACITY AND OPERATING ASSETS Efficient thermal power plants, port, transmission lines and gas pipelines Installed Capacity (March, 2017) Technology Renewables Coal 1% Diesel/FO Chapiquiña (10MW) Natural gas El Aguila I (2MW) Renewables Diesel 10% P. Camarones (6MW) Diesel Arica (14MW) Die

  13. Slide 13: Contractable Efficient Capacity

    CONTRACTABLE EFFICIENT CAPACITY IEM to contribute additional capacity in 2018 December 2016 December 2018 2,500 2,500 2,345 MW 19 1,971 MW 202 2,000 19 2,000 202 623 1,647 MW 1,363 MW 6 1,500 1,500 623 487 6 521 1,000 1,000 1,501 1,127 1,154 500 500 836 - - Gross Installed capacity Contractable effi

  14. Slide 14: SIC Distribution Companies Auction

    SIC DISTRIBUTION COMPANIES AUCTION A larger, more balanced commercial portfolio was secured  In December 2014, EECL secured 15-year sale contracts to supply electricity to distribution companies in the SIC: — Up to 2,016 GWh in 2018, equivalent to 230 MW-average — Up to 5,040 GWh per year between 2

  15. Slide 15: PPA Portfolio Indexation

    PPA PORTFOLIO INDEXATION Matched with cost structure Overall indexation applicable to electricity and capacity sales (as of March 2017) Other Marginal 0.2% Cost 1.6% U.S. CPI U.S. PPI Node Price Coal 46.6% 38.6% Gas 13.1% Engie Energía Chile - Presentation to Investors – 1Q 2017 15

  16. Slide 16: Long-Term Contracts with Creditworthy Clients

    LONG-TERM CONTRACTS WITH CREDITWORTHY CLIENTS With average remaining life of 11.2 years Average demand¹ [MW] and remaining life [years] of Clients’ international credit ratings: current contracts  Codelco: A+ 600 ● Unregulated contracts  Freeport-MM (El Abra ): BB- ● Regulated contracts  Antofaga

  17. Slide 17: PPA Portfolio Indexation

    PPA PORTFOLIO INDEXATION Distribution company tariff indexed to H.H. and U.S. CPI  EMEL PPA tariffs fixed for 6-month periods every April and October (modified by Res.Ext. 641 & 778) — The tariff is set in US dollars and converted to CLP at the average observed CLP/USD rate of the month prior to th

  18. Slide 18: Energy Supply Curve – 1Q17

    ENERGY SUPPLY CURVE – 1Q17 Supply curve based on generation costs and purchases from the spot 180 US$/MWh 160 140 Average monomic price: 120 US$109/MWh 100 Average fuel & electricity purchase cost: Diesel 80 US$67/MWh 60 40 Spot CTM3 U16 U12 U13 purchases 20 CTA CTM2 CTH U15 CTM1 U14 overcosts Firm

  19. Slide 19: Average Hourly Generation in the SING – 1Q17

    AVERAGE HOURLY GENERATION IN THE SING – 1Q17 Increased and more volatile spot prices despite new base-load generation 2000 200 Diesel/Fuel Oil Gas Kelar 1500 150 Gas CTM3 Marginal Cost (US$/MWh) Gross Generation (MWh) Gas U16 Coal U12/U13 Coal U14/U15 1000 100 Coal CTM1/CTM2 Coal CTA/CTH Coal others

  20. Slide 20: Projects

    Projects

  21. Slide 21: Infraestructura Energética Mejillones (IEM)

    INFRAESTRUCTURA ENERGÉTICA MEJILLONES (“IEM”) A major project with strict environmental standards  Pulverized coal-fired power plant in Mejillones  375MWe gross capacity; 337MWe net capacity  Mechanized port, suitable for cape- size carriers  Developed to supply SIC distribution companies  ~US$

  22. Slide 22: IEM is progressing according to budget and schedule

    INFRAESTRUCTURA ENERGÉTICA MEJILLONES (“IEM”) is progressing according to budget and schedule  Status as of March 31, 2017 — Construction: • Boiler steam drum lifted and fixed in final position • Heavy equipment installation ongoing • Step up transformer in final position • Boiler pressure parts fi

  23. Slide 23: Transmisora Eléctrica del Norte (TEN)

    TRANSMISORA ELÉCTRICA DEL NORTE (“TEN”) The long awaited SIC-SING interconnection  TEN, a 50/50 joint venture between EECL and Red Eléctrica (Spain)  Double circuit, 500 kV, alternate current (HVAC), 1,500 MW, 600-km long transmission line  Key part of the national transmission system interconnec

  24. Slide 24: Transmisora Eléctrica del Norte (TEN)

    TRANSMISORA ELÉCTRICA DEL NORTE (“TEN”) The long awaited SIC-SING interconnection TEN dedicated transmission line project TEN national transmission line project S/S Nueva Crucero Encuentro Interchile (ISA) transmission project S/S Kapatur Existing lines AN G1 To S/S New projects tendered by the CNE

  25. Slide 25: Transmisora Eléctrica del Norte (TEN)

    TRANSMISORA ELÉCTRICA DEL NORTE (“TEN”) The long awaited SIC-SING interconnection  Status as of March 31, 2017 — Relevant events: • In January 2016, Red Eléctrica acquired 50% of TEN’s share capital • In December 2016, TEN signed a multi-tranche long-term project financing for a total equivalent of

  26. Slide 26: Transmisora Eléctrica del Norte (TEN) Tariff Setting

    TRANSMISORA ELÉCTRICA DEL NORTE (“TEN”) Tariff setting VI Indexation AVI COMA VATT AVI COMA VATT In MUSD @ In CLP to In USD to Oct 2013 FX Chile CPI US CPI (In MUSD @ Oct 2013 FX Rates) (In MUSD @ March 2017 FX Rates) Rates 738.3 41% 59% 75.1 10.2 85.3 72.8 8.8 81.6 αj 41% βj 59% IPC0 100.90 IPCk 11

  27. Slide 27: Renewable Energy Projects

    RENEWABLE ENERGY PROJECTS Commitment with the Energy Transition  Renewables — A portfolio of Solar Photovoltaic and Wind Projects at different locations under study. — Solar Photovoltaic projects to be developed under a Joint Development Agreement with Solairedirect, to capture SD’s local & global

  28. Slide 28: Natural Gas

    NATURAL GAS A Key Role in the Energy Transition  ENGIE Energía Chile has identified natural gas, a low CO2-emission energy source, as a good complement to renewables, to ensure continued energy generation.  We are developing Las Arcillas, a 480MW combined-cycle gas turbine (CCGT) project, in Pemuc

  29. Slide 29: Capital Expenditure Program

    CAPITAL EXPENDITURE PROGRAM An intensive CAPEX program is ongoing CAPEX (US$ million) 2015 2016 2017e 2018e TOTAL EECL-Current business 88 56 86 59 289 IEM (including port) 109 314 414 167 1,004 TOTAL 197 370 500 226 1,293 TEN CAPEX (US$ million) 2015 2016 2017e 2018e TOTAL TEN CAPEX (100%) 160 290

  30. Slide 30: CAPEX Financing Program

    CAPEX FINANCING PROGRAM A responsible plan is underway  EECL is committed to maintaining its strong investment grade rating  EECL has a flexible dividends policy; pay-out has been reduced to cope with the required investments  IEM and new port: financed within EECL’s balance sheet, with a mix of

  31. Slide 31: Financial Results

    Financial Results

  32. Slide 32: Financial Results

    FINANCIAL RESULTS Electricity sales (GWh) Net electricity generation (GWh) 2,500 Total 2,328 Total 2,194 3,000 109 Total 2,220 88 2,500 2,000 483 503 Total 1,392 2,000 460 1,500 1,500 1,000 249 1,737 1,604 1,000 1,741 500 500 1,123 0 0 1Q16 1Q17 1Q16 1Q17 Unregulated Regulated Spot Coal LNG Diesel R

  33. Slide 33: Financial Results

    FINANCIAL RESULTS Even net income excluding 1Q16’s non-recurring items Income Statement (US$ millions) 1Q16 1Q17 % Var. Operating revenues 230.9 258.8 +12% Operating income (EBIT) 36.3 32.6 -10% EBITDA 70.7 66.0 -7% Net income 212.0 19.7 - 91% Net income excluding non-recurring items 20.2 19.7 -2.5%

  34. Slide 34: EBITDA Comparison 1Q17 vs. 1Q16

    EBITDA COMPARISON 1Q17 vs. 1Q16 Higher spot purchase costs and green taxes partially offset by continued operating cost reductions In millions of US$ 90 +8 +1 -8 80 +5 -6 -4 70 60 50 71 66 40 30 EBITDA 1Q16 Net reduction in Reliquidations Margin var. on Higher spot Lower physical Green taxes & EBITD

  35. Slide 35: Net Income Comparison 1Q17 vs. 1Q16

    NET INCOME COMPARISON 1Q17 vs. 1Q16 Net income comparison affected by non-recurring income reported in 1Q16 In millions of US$ 250 Minority interest +2 +1 -53 1 200 -138 150 100 212 Minority interest 50 -4 3 20 - Net income 1Q16 Lower financial Lower depreciation Fair valuation of Income from asset

  36. Slide 36: Financial Results

    FINANCIAL RESULTS Strong liquidity and low leverage ratios Available cash (in millions of US$) Gross debt / LTM1 EBITDA (years) 300 3.0 250 2.5 200 2.0 150 1.5 279 2.6 2.6 100 199 1.0 50 0.5 - - 31/12/16 31/3/17 31/12/16 31/3/17 Net debt / LTM1 EBITDA (years) LTM1 EBITDA / Gross interest exp. (x) 2.

  37. Slide 37: Debt Breakdown

    DEBT BREAKDOWN Long-term maturity, with no exposure to FX or interest-rate risk  US$750 million in 144-A/Reg-S notes at EECL corporate level. Bullet, unsecured with no financial covenants: • 5.625%, US$400 million 144-A/Reg-S notes maturing January 2021 (YTM = 3.140% as of March 31, 2017) • 4.500%,

  38. Slide 38: Net Debt Evolution 1Q17

    NET DEBT EVOLUTION 1Q17 CAPEX financed with available cash and operating cash flow In millions of US$ 700 +8 -104 650 +4 +6 +5 +150 600 550 500 450 400 539 350 470 300 250 200 Net debt as of CAPEX Dividends (40% Accrued interest Income taxes Advances to TEN Operating cash Net debt as of 12/31/16 CTH

  39. Slide 39: EECL Share Price Evolution LTM

    EECL SHARE PRICE EVOLUTION LTM (*) EECL has slightly underperformed the IPSA, despite double-digit total return 140 EECL IPSA March 31, 2017: EECL: CLP 1,224 IPSA: 4,783 130 March 31, 2016: 120 EECL: CLP 1,052 IPSA: 3,937 110 100 90 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-

  40. Slide 40: Ratings

    RATINGS Strong investment-grade ratings reaffirmed International ratings Rating Perspective Date last review Standard & Poor’s BBB Stable July 2016 Fitch Ratings BBB Stable July 2016 National ratings Rating Perspective Shares Date last review Feller Rate A+ Stable 1st Class Level 2 December 2016 Fit

  41. Slide 41: Value Creation

    VALUE CREATION Sound financial performance and value creation for our shareholders Development and Implementation: • Intensive CAPEX program with approximately US$2 billion committed investments between 2015 and 2018, including TEN 1,500 MW, 600-km transmission project and 375 MW IEM coal project wh

  42. Slide 42: Forward-looking statements disclaimer

    This presentation may contain certain forward-looking statements and information relating to Engie Energía Chile S.A. (“EECL” or the “Company”) that reflect the current views and/or expectations of the Company and its management with respect to its business plan. Forward-looking statements include,

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