Engie Energia Chile S.a. · BCS:ECL
Engie Energia Chile — 9M 2019 Earnings Presentation
48 slides from Engie Energia Chile's earnings presentation, October 2019
Slide 1: Engie Energía Chile S.A. Presentation to investors 9M19
ENGIE ENERGÍA CHILE S.A. Presentation to investors 9M19
Slide 2: Snapshots
SNAPSHOTS 2
Slide 3: Engie Group snapshot: capacity, revenue and EBITDA breakdown
Supporting our clients in their zero BUSINESS LINE – CLIENT SOLUTIONS carbon roadmap Focus on 20 countries, 30 urban areas, BUSINESS LINE – RENEWABLES 500 global clients Decentralized organization: BUSINESS LINE – NETWORKS 24 business units; 4 business lines CAPEX 2019-2021: BUSINESS LINE – THERMAL
Slide 4: SEN market: installed capacity, generation, clients and market share
Gross installed Generation capacity (MW) 9M-2019 (GWh) Solar Hydro 11% 25% Wind Wind Hydro 5% 8% 27% Solar 7% SEN 25,339 MW 57,909 GWh 3,300 Km Thermal Thermal 54% 62% Clients Market Share (% of sales 9M19) (% installed capacity Sept-19) Enel Regulated 25% 42% Engie 9% Colbún 13% 10,694 MW 25,339 MW
Slide 5: Relevant player in the energy industry
RELEVANT PLAYER IN THE ENERGY CONTRACTED INDUSTRY GROWTH UNDERWAY BUSINESS Leader in northern mining 15-yr regulated PPA Capacity contracted under region, 4th largest electricity w/distribution companies => long-term sales agreements; generation company in contracted physical sales 12 years re
Slide 6: Technology: 2,204 MW and 2,293 kms of transmission
Technology Chapiquiña (11MW) Coal El Aguila I (2MW) Diesel/Fuel oil 2,204 MW (*) Natural gas Pampa Camarones (6MW) Renewables Baterías - Arica (2MW) Collahuasi Diesel Arica (14MW) El Abra 2,293 kms HV + MV TE Tocopilla (708MW) Chuquicamata transmission lines. 50% share in TEN Tocopilla port Gaby C.
Slide 7: Contracted revenue and EBITDA growth, TEN, new power supply
NEW PPA: NEW POWER REVENUE & EBITDA INTERCONNECTION SUPPLY GROWTH Contracted revenue growth TEN: 600-km, 500 kV, IEM + Puerto Andino • ~8,200 GWh p.a. in 2017 ~US$0.8bn, transmission company ~US$1 bn investment including • ~11,500 GWh p.a. in 2019 port More balanced portfolio On schedule
Slide 8: Our performance: PPA renegotiation, coal closures, asset rotation
Early steps OUR PERFORMANCE • Development of TEN project => procurement of low-carbon energy sources • Decision not to build any new coal plants PPA renegotiation with mining companies RENEGOTIATED PPAs • New tariff scheme: price reduction • Decarbonization (tariff indexed to CPI rather than to coal
Slide 9: Recent events
RECENT EVENTS 9
Slide 10: Coal phase-out agreement and first renewable projects
June 4, 2019: Agreement with government to October 7, 2019: Launching the first 3 renewable phase-out coal-based generation projects out of 1GW/US$1bn investment plan • Binding commitment by Engie, Enel & AES to close • Calama windfarm: construction started 8 units/1GW by 2024 • Capricornio solar PV
Slide 11: Full SIC-SING interconnection and gas imports
• Interchile’s Cardones-Polpaico transmission Project: COD = May 29, 2019: Together with increased gas supply, full interconnection contributed to SING SEN “Sistema • reduced marginal cost volatility Eléctrico • lower average marginal costs Nacional” SIC • EECL contracted up to 3.9 TBtu of gas impor
Slide 12: Recent highlights: clients, assets, ratings, shareholders
OUR CLIENTS OUR ASSETS • 55MWp Solar PV acquisition 17-Apr-19 • PPA renegotiations & new contracts Los Loros & Andacollo @ US$35 million Antucoya, Molycop & others ~778 GWh p.a. • 248MWp Wind +Solar PV in construction Calama wind farm and Capricornio solar PV plant • 15-yr. PPA w/distribution compan
Slide 13: Key messages
KEY MESSAGES 13
Slide 14: Key messages
Results in line with guidance Mastering the growth achieved Building our future together with our clients PPA renegotiation, decarbonization & life extension Paving the way for our energy transformation plan Development focused on replacing coal with renewable capacity Robust and flexible capital st
Slide 15: Profitable long-term growth; our 9M performance
PROFITABLE LONG-TERM GROWTH; IMPROVED RISK PROFILE OUR 9M PERFORMANCE New PPAs w/distribution companies and Free Clients • Growth in contracted portfolio reaching >11 TWh of contracted demand • Portfolio diversification (regulated vs. unregulated) 9M17 9M18 9M19 ENERGY SALES (TWh) Operation in an in
Slide 16: 9M19 results versus 9M18
9M18 9M19 Variation Operating Revenues (US$ million) 950.7 1,119.5 +17% EBITDA (US$ million) 278.5 429.2 +54% EBITDA margin (%) 29.3% 38.3% +9.0 pp Net income (US$ million) 72.5 143.0 +97% Net income-recurring (US$ million) 124.4 206.8 +66% Net debt (US$ million) 841.7 (*) 732.7 -13% Spot energy pur
Slide 17: Energy sources and supply cost vs monomic price
US$/MWh 140 U12 & U13 coal plants: Average monomic price 0.1% of 9M19 power supply. 120 US$114/MWh Disconnected in 2019 Diesel 100 U14 & U15 coal plants: 1.6% of 9M19 power supply. To be disconnected by YE 2021 Average fuel & 80 electricity purchase cost: US$63/MWh 60 Toll G.A. U12 & U13 IEM CTM3 U1
Slide 18: Contract portfolio with 12-year average remaining life
Sound contract portfolio with average remaining life of A GROWTH 12 years DRIVING PPA 600 ● Regulated contracts • 2018: Up to 2,016 GWh ● Unregulated contracts (230 MW-avg.) • 2019-2032: Up to 5,040 GWh Renegotiated contracts 500 Distribution per year (575 MW-avg.) Average demand (MW) Companies (Sou
Slide 19: PPA renegotiations signed in 2018 and 9M19
PPA renegotiations signed by EECL in 2018 and 9M19 Antucoya 50MW Price discount, Price discount, CPI-indexed & others PPA life extension coal-indexed 23MW Price discount, Price discount, Chuqui PPA life extension @ new, CPI-indexed price 200MW coal-indexed CPI-indexed Alto Norte Price discount, Pric
Slide 20: Contracted demand: our vision through 2030
GWh CONTRACTED DEMAND: OUR VISION THROUGH 2030 14,000 12,000 10,000 8,000 6,000 4,000 2,000 - 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Regulated SING Regulated SIC Free clients-renegotiated+new free clients Other free clients • We will potentially invest ~US$1 bn in rene
Slide 21: Renewable acquisitions and green-field projects
ACQUISITIONS: Arica y Parinacota Tamaya Los Loros & Andacollo solar PV plants 114 MWp • 54 MWp + 1.3 MWp Calama • Acquired by EECL in April, 2019 for ~US$35 million 151.2 MW Antofagasta Capricornio 97.4 MWp GREEN-FIELD PROJECTS: • 3 projects with approved “RCA” Atacama Los Loros 54 MWp • 2 under con
Slide 22: Transmission projects
Nueva Chuquicamata Arica y Parinacota • Substation + 2 x 220 kV line • Referential investment value: US$ 18 million Nueva • AVI: US$ 0.9 million Chuquicamata Antofagasta • COD: 24 / 48 months • RCA approved May-19 Atacama Algarrobal Algarrobal • Sectioning 220 kV substation Coquimbo • Referential in
Slide 23: IEM coal plant
• 377MWe gross capacity => 348MWe net base-load capacity • Pulverized coal-fired power plant w/ strict environmental standards • Turnkey EPC contractor: SK Engineering & Construction (Korea) • Commercial operation date: May 16, 2019 • 940 GWh injected to SEN in 9M19 • US$0.9 billion investment Sourc
Slide 24: Puerto Andino port
• Mechanized port • + 6 million TPY transfer capacity • 3,000 TPH unloading speed => lower demurrage costs • Conventional & tubular conveyor belts => better environmental standards • Space for mineral product exports => diversification opportunities • 3,245,128 tons of coal + 158,809 tons of limesto
Slide 25: Capex and free cash flow, debt capacity
• FOLLOWING A CAPEX-INTENSIVE PHASE, FREE CASH-FLOW POSITIVE STATUS STARTING 2019 WILL RELEASE FINANCING CAPACITY FOR ENERGY TRANSFORMATION PLAN MUSD 4.0 500 TEN 30 3.5 400 3.0 TEN 35 Debt capacity will 2.5 increase to ~US$1.2bn 300 @ 2.5x Debt/EBITDA IEM & Port 2.0 436 IEM & Port 200 TEN 20 314 Ren
Slide 26: Guidance drivers: demand, prices, risks
Demand & prices + New PPA w/distribution co’s. + New PPA w/free Clients - Client migration US$ 160 to - PPA renegotiation 180 mln Marginal cost risks - Coal prices US$ 450 to 470 US$ 161 mln mln - Hydrologic conditions Power supply US$ 376 mln US$ 87 mln - Delay in full interconnection + IEM COD 2Q1
Slide 27: Financial update
FINANCIAL UPDATE 27
Slide 28: EBITDA bridge 9M18 to 9M19
By main effect In US$ Million +72 (58) +5 (34) +20 (1) (20) +47 Physical 429 OPEX, Other energy Spot sales SG&A, Sufficiency TEN +118 operating purchases capacity Average Transmission other income result Fuel costs Gas purchases realized electricity prices 278 Regulated Unregulated Volume
Slide 29: Recurring results
Recurring Results In US$ Millions 110 (12) 207 (13) +7 minority Other interest (64) Depreciation Financial FX Diff. expenses Insurance PD 143 +7 124 minority +7 interest minority 52 interest Impairment EBITDA 73 increase +7 minority interest Impairment Net Net Net Net Recurring Recurring Incom
Slide 30: Main cash flows and net debt
Main cash flows In US$ Million +68 (22) (423) +34 +15 +79 Cash Leases Income payment +33 Accrued Taxes +107 Interest/ (IFRS 16) from TEN Dividends + Green 842 Acquisition (including deferred Taxes Los Loros 40% CTH) financial CAPEX (*) Andacollo cost + 733 (**) MTM on hedges Operating cash flow Net
Slide 31: Net debt/EBITDA well below 2.5x; ratings and debt details
Net debt/EBITDA well below 2.5x NET DEBT/EBITDA @ 1.4 X 4.000 3.500 Rating confirmed @ BBB 3.000 2.8 2.2 2.500 2.0 1.7 • International: 2.000 1.4 1.500 • Fitch (June 2019) Outlook change to Positive 1.000 • S&P (July 2018) Stable Outlook 0.500 0.000 • National scale: Dec 15 Dec 16 Dec 17 Dec 18 Sep
Slide 32: Dividends paid, market cap and share price evolution
DIVIDENDS PAID MARKET CAP & DIVIDEND YIELD In US$ Millions In US$ Millions 90 100% 100% 6.0% 78 5.4% 80 90% 7 72 2,000 5.0% 80% 70 70% 60 56 56 22 4.0% 60% 1,500 3.4% 3.8% 50 17 47 47% 50% 3.0% 40 12 30 2,265 34 72 40% 1,000 1,922 2.5% 30% 30% 30% 2.3% 1,819 1,866 30 30% 1,536 1,657 2.2% 2.0% 20 50
Slide 33: Delivery and development; clients and operation
DELIVERY AND CLIENTS AND DEVELOPMENT OPERATION LEADERS IN ENERGY IEM+PORT TRANSITION RENEWABLES PPA PORTFOLIO PORTFOLIO EXTENSION NEW PPA WITH ASSET ROTATION DISTRIBUTION CO’S CAPITAL STRUCTURE CUSTOMER SOLUTIONS & LEAN PROGRAM 33 Engie Energía Chile - Presentation to Investors – 9M 2019
Slide 34: Addenda
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Slide 35: Energy sales and prices
ENERGY SALES AND PRICES Energy sales Prices GWh US$/MWh 3,000 150 2,500 2,000 100 1,500 1,000 50 500 0 0 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 Unregulated Regulated Spot Energy+Capacity Price->Unregulated Energy+Capacity Price->Regulated Spot
Slide 36: Energy sources and average supply cost
Renewables Diesel 7% 3% Coal 61% • Increased spot purchases due to (i) coal, gas and renewable efficient Installed capacity additions in the grid since 2016 and (ii) start-up of PPA with Gas distribution companies in central Chile 29% capacity 2,204 MW • Fuel prices, CO2 taxes, emission-reduction co
Slide 37: Hydrologic risk and long-term contracts with unregulated clients
• Limited exposure to hydrologic risk until interconnection became fully operative • Long-term contracts with unregulated clients (mining companies) accounting for 89% of demand (bilateral negotiation of prices and supply terms) • Maximum demand: ~ 3,031 MW in 3Q 2019; expected 3.4% compounded avera
Slide 38: Generation North SEN, September 1 to 10, 2019
MW Generation North SEN – September 1 to 10, 2019 US$/MWh 3,500 100 90 3,000 80 2,500 70 60 2,000 50 1,500 40 1,000 30 20 500 10 0 0 1 5 9 13 17 21 1 5 9 13 17 21 1 5 9 13 17 21 1 5 9 13 17 21 1 5 9 13 17 21 1 5 9 13 17 21 1 5 9 13 17 21 1 5 9 13 17 21 1 5 9 13 17 21 1 5 9 13 17 21 1 2 3 4 5 6 7 8 9
Slide 39: Agile, diversified, client-focused approach to industry change
More agile, diversified, client-focused approach to face industry change INCREASED TECHNOLOGIC RECOVERY IN COMPETITION DISRUPTION DEMAND GROWTH More flexible power auction Lower investment cost of Mining industry recovery regulations (Law # 20,805) renewable capacity w/copper >2.7 $/lb: reviva
Slide 40: SEN installed capacity by company, September 2019
SEN – September 2019 25,339 MW 9,563 MW SING SEN “Sistema Eléctrico Nacional” 6,348 MW 5,607 78 SIC 3,450 3,382 MW 3,310 MW 21 45 271 2,204 MW 1,370 79 127 57 1,611 10 195 2,033 610 3,011 2,586 (*) 1,304 532 MW 1,332 660 532 350 Enel Generación AES Gener Colbún EECL Kelar Other Coal Gas Diesel Hydro
Slide 41: Indexation of electricity and capacity sales
Overall indexation applicable to Overall indexation applicable to electricity and capacity sales electricity and capacity sales (as of September 2019) (2021, proforma PPA renegotiation) U.S. CPI U.S. CPI Gas 11% U.S. PPI U.S. PPI Node Node Price Price 66% 57% Coal 32% 1,455 MW 1,434 MW Contracted *
Slide 42: EECL transmission lines and substations
EECL operates 23 substations with total 2,293 kms. capacity of 844 MVA 844 MVA 5 US$ 19.4 million regulated revenue p.a. Transmission substations EECL operates 2,293 kms. of transmission lines Generation 844 substations MVA 18 Kms of transmission lines 8% 891 2,293 Kms. AVI + COMA for National & Zon
Slide 43: TEN transmission project and revenues
• Double circuit, 500 kV, alternate current TEN annual revenue: (HVAC), 1,500 MW, 600-km long (in USD millions transmission line at Sep.30, 2019 FX rates) • National transmission system AVI (VI annuity): 74.4 interconnecting SIC and SING grids since + COMA (O&M cost): 8.5 Nov. 24, 2017 -------------
Slide 44: Chile copper industry challenges and Engie support
US¢/lb Copper production in Chile ('000 tons) GWh 6,500 500 8,000 Copper price LME (US¢/lb) SEN electricity demand 450 5,500 7,000 400 6,000 4,500 350 5,000 300 3,500 250 4,000 5,776 5,761 5,772 5,832 5,413 5,321 5,361 5,557 5,328 5,394 5,419 5,434 5,553 5,504 200 5,263 2,500 4,739 4,904 3,000 4,602
Slide 45: Corporate structure and shareholders
Pension funds Local institutions Foreign institutions Individuals 52.76% 22.40% 17.32% 7.10% 0.42% ENGIE ENERGÍA CHILE S.A. Inversiones Punta de Red Eléctrica Chile Rieles Ltda. (“EECL”) S.A. 40% 50% Central Central Gasoducto Edelnor Transmisora Termoeléctrica Termoeléctrica Norandino S.A. Transmisi
Slide 46: Governance and organization
Shareholders’ assembly Committee Functional committees: Board of directors - Management of directors - Commercial origination - Development - Business knowledge CEO - Stakeholders & Regulation - Change management - Construction - Portfolio & risk management Internal auditor Finance & Human Commercia
Slide 47: Ticker ECL and contact information
Ticker: ECL +562 2783 3307 inversionistas@engie.com http://www.engie-energia.cl MORE INFORMATION ON 9M19 RESULTS IN OUR WEB PAGE 9M 2019 Presentation Addenda Press Recorded Financial Analyst Release conference report pack audiocast 47 Engie Energía Chile - Presentation to Investors – 9M 2019
Slide 48: Disclaimer
Disclaimer Forward-Looking statements 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