Engie Energia Chile S.a. · BCS:ECL
Engie Energia Chile — Q1 2020 Earnings Presentation
53 slides from Engie Energia Chile's earnings presentation, Apr 29, 2020
Slide 1: ENGIE Energía Chile S.A. Investor Presentation First quarter 2020
ENGIE Energía Chile S.A. Investor Presentation First quarter 2020 ENGIE Energía Chile – Investor Presentation 1Q20 April 29, 2020
Slide 2: Snapshots
Snapshots ENGIE Energía Chile – Investor Presentation – 1Q20 April 29, 2020
Slide 3: A global energy and services shareholder committed to a zero-carbon transition
Snapshots A global energy and services shareholder committed to a zero-carbon transition FOCUSED ON FOUR GLOBAL BUSINESS LINES, 20 COUNTRIES, 30 URBAN AREAS AND 500 GLOBAL CLIENTS CLIENT SOLUTIONS NETWORKS RENEWABLES THERMAL Unique integrated solutions to Upstream presence in the gas and Generation
Slide 4: Two main grids recently interconnected
Snapshots Two main grids recently interconnected Gross installed capacity Generation (25,397 MW) (19,934 GWh – 1Q20) Solar Wind 12% 6% Solar Hydro 10% Wind Hydro 24% 9% 27% SEN 3,300 Thermal Thermal Km 53% 60% Clients Market share (% of sales – 1Q20) (% of installed capacity 1Q20) Engie 9% AES Enel
Slide 5: 4th largest generation company; 3rd largest transmission player
Snapshots 4th largest generation company; 3rd largest transmission player A RELEVANT PLAYER IN GROWTH AND CONTRACTED THE ENERGY INDUSTRY RECONVERSION BUSINESS • Prepared to provide energy • Focused on delivery in growth and • Capacity contracted over the next solutions to our customers reconversion
Slide 6: Prepared to meet our clients’ energy needs
Snapshots Prepared to meet our clients’ energy needs Technology Ownership as of 31-Mar-20 Chapiquiña (11MW) Coal El Aguila I (2MW) Diesel/Fuel oil Natural gas Pampa Camarones (6MW) Solar PV Float 24.55% Wind Baterías - Arica (2MW) Collahuasi Hydro Pension 52.76% Diesel Arica (14MW) funds El Abra 22.
Slide 7: A decisive, gradual and responsible path
Snapshots A decisive, gradual and responsible path 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 • Decarbo
Slide 8: Recent events
Recent events ENGIE Energía Chile – Investor Presentation – 1Q20 April 29, 2020
Slide 9: Decarbonization announcements
Recent Events Decarbonization announcements Jun. 4, 2019: Agreement with Dec. 8, 2019, COP 25: Engie to close 2 government to phase-out coal-based more coal units => 773 MW of coal generation capacity closed by YE 2024 • Binding commitment by Engie, Enel & AES • Letter of Intent signed w/ IDB Group
Slide 10: Launching renewable projects
Recent Events Launching renewable projects October 7, 2019: Launching of first 3 renewable projects of 1GW/US$1bn investment plan Los Loros Calama Capricornio Tamaya Acquired in April 2019 28 of 36 foundations 53% state of advance Construction to start 3Q20 US$ 35 million US$159 million CAPEX US$64
Slide 11: Successful liability management
Recent Events Successful liability management Jan 28, 2020: New 10 yr., 3.4%, US$500 million 144A/RegS bond to refinance US$400 million notes due Jan-2021 600.000 7% 500 500.000 Before: 5.34% 6% 400 350 400.000 5% 300.000 4% 200.000 After: 3.85% 100.000 3% 0.000 2% 2020 2021 2022 2023 2024 2025 2026
Slide 12: Price stabilization mechanism
Recent Events Price stabilization mechanism PEC = Adjusted upwards if Dec. 2020 Dec. 2025 PEC = Fixed price to PEC = Adjusted upwards if Jul. 2023 • Law #21,185 (Nov-19): Electricity consumers in nominal PEC = Fixed price to consumers in necessary to avoid breaching necessary to permit full price st
Slide 13: Covid-19 pandemic
Recent Events Covid-19 pandemic Focus on safety, operational continuity and reconversion strategy Safety first Operational continuity Projects in progress Caring for our people, On site customers and suppliers 23% 24% Home office Absent (shifts, 53% medical leave, vacation) 890 direct employees COVI
Slide 14: AMSA (Centinela) PPA Renegotiation
Recent Events AMSA (Centinela) PPA Renegotiation An agreement signed on March 31, 2020 Amendment of existing PPA New 11-year 186MW PPA between Inversiones Hornitos between EECL and Minera (CTH) and Centinela for its Centinela beginning 1-Jan-22 Esperanza (150MW) and El and maturing 31-Dec-33 Tesoro
Slide 15: Recent company events
Recent Events Recent company events OUR CLIENTS OUR ASSETS • 55MWp Solar PV acquisition 17-Apr-19 • PPA renegotiations & new contracts Los Loros & Andacollo @ US$35 million +5,200 GWh/y; +78% unregulated demand • 248MWp Wind +Solar PV in construction since 2018 Calama wind farm and Capricornio solar
Slide 16: Key messages
Key messages ENGIE Energía Chile – Investor presentation – 1Q20 April 29, 2020
Slide 17: Key messages
Key messages Key messages 1Q20 results in line with expectations New context, with special attention to COVID-19 crisis and its effects Building our future together with our clients PPA renegotiation, decarbonization & life extension Paving the way for our energy transformation plan Development focu
Slide 18: 2020: Working on our reconversion
Key messages 2020: Working on our reconversion To reduce CO2 emissions and average supply cost OUR PERFORMANCE New and renegotiated PPAs • Contracted portfolio has grown to approximately 12 TWh p.a. • A more balanced regulated vs. unregulated portfolio 1Q18 1Q19 1Q20 ENERGY SALES (TWh) Operating in
Slide 19: 1Q20 results in line with expectations
Key messages 1Q20 results in line with expectations 3% EBITDA increase 1Q19 1Q20 Variation Operating Revenues (US$ million) 343.8 335.3 -2% EBITDA (US$ million) 96.3 99.1 +3% EBITDA margin (%) 28.0% 29.6% +1.6 pp Net income (US$ million) 42.9 25.6 -40% Net income-recurring (US$ million) 42.9 35.6 -1
Slide 20: Demand met w/generation and energy purchases
Key messages Demand met w/generation and energy purchases Coal plant decommissioning schedule US$/MWh Unit (MW) Date % 1Q20 supply 140 U14-U15 268 Dec-21 1.4% CTM1-CTM2 334 Dec-24 3.7% 120 Average monomic price US$103/MWh 100 Diesel Average fuel & 80 electricity purchase cost: US$59/MWh 60 U15 Toll
Slide 21: PPA life extension and decarbonization
Key messages PPA life extension and decarbonization Sound contract portfolio with average remaining life of 12 years A GROWTH DRIVING PPA 700 ● Regulated contracts • 2018: Up to 2,016 GWh ● Unregulated contracts (230 MW-avg.) • 2019-2032: Up to 4,500 GWh 600 Renegotiated contracts per year (514 MW-a
Slide 22: PPA life extension and decarbonization
Key messages PPA life extension and decarbonization 0.7 GW or ~75% of unregulated PPAs renegotiated since 2018. Minera Centinela Price discount, Price discount, CPI-indexed + new PPA w/extended life 186MW coal-indexed Antucoya 50MW Price discount, Price discount, & others PPA life extension coal-ind
Slide 23: PPA life extension and decarbonization
Key messages PPA life extension and decarbonization Contracted demand: our vision through 2030 GWh 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 c
Slide 24: 1GW/1Bn asset rotation plan: first steps
Key messages 1GW/1Bn asset rotation plan: first steps ACQUISITIONS: Arica y Parinacota Los Loros & Andacollo solar PV plants Tamaya 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: Los Loros • 2.2 G
Slide 25: 151 MW Calama wind farm
Key messages 151 MW Calama wind farm US$159 million CAPEX Concrete pouring completed at 28 out of 36 foundations Civil Works at substation begun State of advance: Construction 38%; global 15% Connection process with CEN started Main contractors: Siemens Gamesa & GES Scheduled COD (post COVID-19): 3Q
Slide 26: 94.5 MWp Capricornio solar PV plant
Key messages 94.5 MWp Capricornio solar PV plant US$64 million CAPEX 11,050 drill holes; 5,950 steel piles Tracker and solar module assembly begun Global state of advance: 53% Connection process with CEN started Main contractors:GES, Trina Pro, Sungrow Scheduled COD (post COVID-19): 2Q21 ENGIE Energ
Slide 27: National / zonal transmission projects in execution
Key messages National / zonal transmission projects in execution Arica y Parinacota Nueva Chuquicamata Antofagasta Capricornio SS expansion Nueva Chuquicamata (National) Algarrobal (National) Atacama Algarrobal • Substation + 2 x 220 kV transmission line • 220 kV sectioning substation • Referential
Slide 28: New national transmission projects awarded
Key messages New national transmission projects awarded Arica y Parinacota Antofagasta By Pass By Pass • Multi-circuit transmission line 2x110 kV, 1x220 kV. Antofagasta • Referential investment value: US$13.36 million La Negra • AVI: US$0.64 million • COD: 30 & 48 months from the Decree date Atacama
Slide 29: Room to finance projects on balance sheet
Key messages Room to finance projects on balance sheet Completion of 2015-2019 investment program has released capacity to finance transformation MUSD 4.0 500 TEN 30 3.5 3.0 400 TEN 35 Net debt capacity: ~US$1.2bn @ 2.5x 2.5 Debt/EBITDA 300 IEM & Port 2.0 436 IEM & Port 200 314 1.5 Renewables Renewa
Slide 30: Our guidance before COVID-19 pandemic
Key messages Our guidance before COVID-19 pandemic Demand & prices + New PPAs - COVID-19 pandemic US$ 244 mln US$ 160 to 180 mln - Client migration & lower demand US$ 75 mln LDs (*) - PPA renegotiation US$ 450 to Marginal cost risks US$ 161 mln 470 mln US$ 460 mln - Coal prices - Hydrologic conditio
Slide 31: Potential COVID-19 impacts on demand
Key messages Potential COVID-19 impacts on demand Actual 1Q demand and sensitivities GWh 1Q Unregulated customers demand GWh 1Q Regulated customers demand 600 600 400 400 200 200 0 0 January February March January February March 2019 2020 2019 2020 Potential impact of demand decrease on EECL’s EBITD
Slide 32: Financial update
Financial update ENGIE Energía Chile – Investor Presentation – 1Q20 April 29, 2020
Slide 33: EBITDA evolution
Financial update EBITDA evolution Higher volume sales and lower energy purchase costs offset price decreases and higher fuel costs By main effect +4 (41) In US$ Million +7 +19 Capacity Volume reliquidations +37 sales - Transmission distribution Gas Volume company (14) sales free PPAs Average c
Slide 34: Net income evolution
Financial update Net income evolution Higher financial expenses due to make-whole on early bond redemption and less interest capitalization By main effect In US$ Million Recurring Results 43 43 +3 +3 minority minority 2 (4) interest interest (8) EBITDA increase Other Depreciation (-) FX Diff. (-) 36
Slide 35: Net debt evolution
Financial update Net debt evolution Net debt increased due to CAPEX, taxes and premium paid on 144-A bond prepayment Main cash flows In US$ Million +18 (8) +11 (29) +17 Cash 756 +14 Income +50 Leases payment Taxes Operating Accrued (IFRS 16) from TEN + Green cash flow Make-whole Interest/ (***) 683
Slide 36: Robust financial structure
Financial update Robust financial structure NET DEBT/EBITDA @ 1.4 X Net debt/EBITDA well below 2.5x 4.000 3.500 3.000 2.8 2.2 Rating confirmed @ BBB 2.500 2.000 1.7 1.3 1.4 1.500 • International: 1.000 • Fitch (January 2020) Positive Outlook 0.500 0.000 • S&P (January 2020) Stable Outlook Dec 16 Dec
Slide 37: Shareholder return
Financial update Shareholder return DIVIDENDS PAID MARKET CAP & DIVIDEND YIELD In US$ Millions In US$ Millions 120 100% 112 100% 7.0% 90% 100 81% 22 80% 2,000 5.4% 5.8% 6.0% 78 70% 5.0% 80 7 60% 1,500 47% 56 3.4% 4.0% 56 60 50% 47 2,265 1,000 3.0% 17 34 90 40% 1,922 1,819 1,866 2.5% 12 30% 30% 30% 3
Slide 38: Addenda
Addenda ENGIE Energía Chile – Investor Presentation – 1Q20 April 29, 2020
Slide 39: Long-term contracts
Addenda Long-term contracts The basis for stable sales and prices ENERGY SALES AND PRICES Energy sales Prices GWh US$/MWh 3,000 150 2,500 2,000 100 1,500 1,000 50 500 0 0 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 Unregulated Regulated Sp
Slide 40: Demand supplied with own generation and energy purchases hedged by our installed capacity
Addenda Demand supplied with own generation and energy purchases hedged by our installed capacity Renewables Diesel 3% • 7% Increased spot purchases due to (i) coal, gas and renewable efficient capacity additions in the grid since 2016 and (ii) start-up of PPA with Coal Installed 61% distribution co
Slide 41: Generation and spot price history – North SEN
Addenda Generation and spot price history – North SEN • Limited exposure to hydrologic risk until interconnection became fully operative • Long-term contracts with unregulated clients (mining companies) accounting for 89% of demand (bilateral negotiation of prices and supply terms) • Maximum demand:
Slide 42: Regulatory and grid coordination challenges
Addenda Regulatory and grid coordination challenges Generation North SEN – March 1 to 10, 2020 MW 3,500 200 US$/MWh 180 3,000 160 2,500 140 120 2,000 100 1,500 80 1,000 60 40 500 20 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
Slide 43: Sistema Eléctrico Nacional - SEN
Addenda Sistema Eléctrico Nacional - SEN SEN – March 2020 25,397 MW SING SEN 8,529 MW “Sistema Eléctrico 7,370 MW Nacional” 1,100 4,573 SIC 3,450 3,452 MW 3,310 MW 21 45 270 2,204 MW 1,370 127 61 57 1,611 10 195 2,033 610 2,990 2,586 (*) 1,304 532 MW 1,332 660 532 350 Enel Generación AES Gener Colbú
Slide 44: Other industry & company events in 2019
Addenda Other industry & company events in 2019 • 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” S
Slide 45: IEM and Puerto Andino
Addenda IEM and Puerto Andino • Mechanized port, with 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 • US$122 million to
Slide 46: PPA portfolio indexation
Addenda PPA portfolio indexation Shifting away from coal Overall indexation applicable to Overall indexation applicable to electricity and capacity sales electricity and capacity sales (as of March 2020) (2021, proforma PPA U.S. CPI renegotiation) U.S. CPI U.S. PPI U.S. PPI Gas 11% Node Node Price P
Slide 47: EECL, a relevant player in transmission
Addenda EECL, a relevant player in transmission EECL operates 23 substations with total 2,293 kms. capacity of 821 MVA 821 MVA 5 US$ 17.9 million regulated revenue p.a. Transmission substations EECL operates 2,293 kms. of transmission lines Generation 821 substations MVA 18 Kms of transmission lines
Slide 48: Transmisora Eléctrica del Norte (TEN)
Addenda Transmisora Eléctrica del Norte (« TEN ») • Double circuit, 500 kV, alternate current TEN annual revenue: (HVAC), 1,500 MW, 600-km long (in USD millions transmission line at Dec.31, 2019 FX rates) • National transmission system AVI (VI annuity): 71.4 interconnecting SIC and SING grids since
Slide 49: Copper industry
Addenda Copper industry Copper production in Chile ('000 tons) 6,500 US¢/lb 500 8,000 GWh Copper price LME (US¢/lb) SEN monthly electricity demand 450 7,000 5,500 400 6,000 4,500 350 5,000 300 3,500 250 4,000 5,776 5,761 5,772 5,832 5,787 5,413 5,321 5,361 5,557 5,328 5,394 5,419 5,434 5,553 5,504 2
Slide 50: Ownership structure
Addenda Ownership structure Pension funds Local institutions Foreign institutions Individuals 52.76% 22.69% 14.81% 9.32% 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 Termoeléctr
Slide 51: EECL organizational structure
Addenda EECL organizational structure 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 Inte
Slide 52: For more information about ENGIE Energía Chile
Addenda For more information about ENGIE Energía Chile Ticker: ECL +562 2783 3307 inversionistas@engie.com http://www.engie-energia.cl MORE INFORMATION ON 1Q 2020 RESULTS IN OUR WEB PAGE 1Q 2020 Presentation Addenda Press Recorded Financial Analyst Release conference report pack audiocast ENGIE Ener
Slide 53: Forward-Looking statements
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. Forward-