Engie Energia Chile S.a. · BCS:ECL

Engie Energia Chile — Q4 2016 Earnings Presentation

42 slides from Engie Energia Chile's earnings presentation, December 2016

  1. Slide 1: ENGIE Energía Chile S.A. Presentation to investors 4Q 2016 Results

    ENGIE ENERGÍA CHILE S.A. Presentation to investors 4Q 2016 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 2016  EBITDA reached US$285 million, a 9% decrease. Cost saving initiatives partially offset the effect of the decrease in gas sales and higher emission-reduction costs. The EBITDA margin increased to 29.4% in 2016.  Net income amounted to US$255 million, mainly due to non-recurr

  5. Slide 5: Highlights - Industry

    HIGHLIGHTS - Industry  On July 11, 2016, the government published the new Transmission Law, ruling the functioning of the country’s electric power transmission systems. This new law aims at fostering more investments in the country’s power transmission systems so as to avoid bottlenecks and ensure

  6. Slide 6: Highlights - Company

    HIGHLIGHTS - Company  The key milestones of EECL’s 2016 Financial Plan were successfully met: — On January 27, 2016, EECL sold 50% of its shares in the TEN transmission project to Red Eléctrica Chile SpA, an indirect subsidiary of Red Eléctrica Corporación S.A. (Spain) for US$217.6 million. As a re

  7. Slide 7: Industry and Company

    Industry and Company

  8. Slide 8: Chilean Electricity Industry

    CHILEAN ELECTRICITY INDUSTRY 12M 2016 Growth Generation GWh Main players Market Clients (2016-2025)1 (12M16) (% installed capacity 12M16) Regulated Renew. Diesel 6% Other, 11% 6% Tamakaya 7% Gas 9% 25% capacity , 10% EECL, 3.5% Enel, 38% SING 26% demand 19,467 GWh 18% 5,226 MW AES Unregulated Gener,

  9. Slide 9: 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: ~ 2,555 MW in February 201

  10. Slide 10: 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 1,800 450 4000 1,600 400 3500 1,400 350 3000 1,200 300 2500 1,000 250 3,141 3,20

  11. Slide 11: Ownership Structure as of December 31, 2016

    OWNERSHIP STRUCTURE AS OF DECEMBER 31, 2016 A world-class controller and a diversified ownership base ENGIE Local institutions Pension funds Foreign institutions Individuals 52.76% 16.97% 22.70% 7.07% 0.50% ENGIE ENERGÍA CHILE S.A. Inversiones Punta de (“EECL”) RedRed Eléctrica Eléctrica Chile Riele

  12. Slide 12: Gross Installed Capacity

    GROSS INSTALLED CAPACITY SING and EECL as of December 31, 2016 SING EECL 2,200 2,800 1,971 MW 19 2,344 MW 202 19 2,300 1,700 202 1,971 MW 1,405 MW 1,799 MW 19 623 202 1,800 13 623 1,200 317 962 MW 623 24 1,300 688 700 538 MW 1,127 1,405 781 800 349 MW 1,500 1,127 538 200 294 781 158 300 55 EECL AES

  13. Slide 13: Installed Capacity and Operating Assets

    INSTALLED CAPACITY AND OPERATING ASSETS Efficient thermal power plants, port, transmission lines and gas pipelines Installed Capacity (December 2016) Technology Renewables Coal 1% Diesel/FO Chapiquiña (10MW) Natural gas El Aguila I (2MW) Renewables Diesel 10% P. Camarones (6MW) Diesel Arica (14MW) D

  14. Slide 14: Contractable Efficient Capacity

    CONTRACTABLE EFFICIENT CAPACITY IEM to contribute additional capacity in 2018 December 2016 December 2018 2,500 2,500 2,301 MW 1,971 MW 19 202 2,000 19 2,000 202 623 1,593 MW 1,348 MW 6 1,500 1,500 623 5 521 521 1,000 1,000 1,457 1,127 1,066 500 500 822 - - Gross Installed capacity Contractable effi

  15. Slide 15: 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

  16. Slide 16: PPA Portfolio Indexation

    PPA PORTFOLIO INDEXATION Matched with cost structure Overall indexation applicable to electricity and capacity sales (as of December 2016) Other Marginal 0.2% Cost 4.1% U.S. CPI Coal U.S. PPI 33.1% Node Price 49.2% Gas, 13.5% Engie Energía Chile - Presentation to Investors – 12M 2016 16

  17. Slide 17: Long-Term Contracts with Creditworthy Clients

    LONG-TERM CONTRACTS WITH CREDITWORTHY CLIENTS With average remaining life of 11.5 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  Antofagas

  18. Slide 18: 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 y 778) — The tariff is set in US dollars and converted to CLP at the average observed CLP/USD rate of May and November of

  19. Slide 19: Energy Supply Curve – 12M16

    ENERGY SUPPLY CURVE – 12M16 Supply curve based on generation costs and purchases from the spot 160 US$/MWh 140 120 Average monomic price: US$96/MWh 100 80 Average fuel & FO electricity purchase Di 60 cost: US$49/MWh 40 Spot purchases U-12 20 CTA CTH CTM2 CTM1 U-16 CTM3 U-15 U-14 U-13 0 Renewables Co

  20. Slide 20: Generation Overcosts in the SING

    GENERATION OVERCOSTS IN THE SING Strong reduction in 2016  Starting March 2016, the Complementary Services (“Servicios Complementarios”) became effective, superseding RM39, one of the mechanisms ruling the so-called “overcosts” (“sobrecostos”) stemming from the SING’s operational characteristics: —

  21. Slide 21: Projects

    Projects

  22. Slide 22: 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$

  23. Slide 23: IEM progressing according to budget and schedule

    INFRAESTRUCTURA ENERGÉTICA MEJILLONES (“IEM”) is progressing according to budget and schedule  Status as of December 31, 2016 — Procurement: • Boiler feed water pumps, pulverizers, condenser, deaerator, feed water preheaters, steam turbine, steam turbine generator, step-up transformer, auxiliary tr

  24. Slide 24: 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 “trunk” transmission system interconnect

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

    TRANSMISORA ELÉCTRICA DEL NORTE (“TEN”) The long awaited SIC-SING interconnection TEN additional transmission line project TEN trunk 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 AN

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

    TRANSMISORA ELÉCTRICA DEL NORTE (“TEN”) The long awaited SIC-SING interconnection  Status as of December 31, 2016 — Relevant events: • In January 2016, Red Eléctrica acquired 50% of TEN’s share capital for US$217.6 million plus 50% of TEN’s debt with EECL • In December 2016, TEN signed a multi-tran

  27. Slide 27: 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 @ December 2016 FX Rates) Rates 738.3 41% 59% 75.1 10.2 85.3 71.8 8.6 80.4 αj 41% βj 59% IPC0 100.90 IPCk

  28. Slide 28: Renewable Energy Projects

    RENEWABLE ENERGY PROJECTS Several initiatives in different stages  Pampa Camarones I began commercial operations in 2016: — PV Plant 1st stage (6MW) ready and injecting to the SING — Approved environmental permits for up to 300MW  Calama wind farm is under study: — Approved environmental permits a

  29. Slide 29: Projects Under Study

    PROJECTS UNDER STUDY Las Arcillas CCGT, a long-term initiative in development stage  Combined-Cycle Gas Turbine (CCGT) project, with gross installed capacity of 480 MW  Located in Pemuco, Southern Chile (“SIC”)  Early development and socialization stage performed  Environmental impact assessment

  30. Slide 30: 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 80 84 308 IEM (including port) 109 314 433 158 1,014 TOTAL 197 370 513 242 1,322 TEN CAPEX (US$ million) 2015 2016 2017e 2018e TOTAL TEN CAPEX (100%) 160 290

  31. Slide 31: 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

  32. Slide 32: Financial Results

    Financial Results

  33. Slide 33: Financial Results

    FINANCIAL RESULTS Slow physical growth and declining energy prices Electricity sales (GWh) Gross electricity generation (GWh) 10,000 Total 9,380 Total 9,166 10,000 Total 9,060 Total 8,460 397 470 8,000 1,884 1,901 8,000 1,571 1,426 6,000 6,000 4,000 4,000 7,369 7,098 6,795 6,953 2,000 2,000 0 0 12M1

  34. Slide 34: Financial Results

    FINANCIAL RESULTS Non-recurring income offset narrower operating margins Income Statement (US$ millions) 2015 2016 % Var. Operating revenues 1,142.7 967.4 -15% Operating income (EBIT) 174.8 145.2 -17% EBITDA 312.9 284.8 -9% Net income 94.2 254.8 +170% Average realized monomic sale price (US$/MWh) 10

  35. Slide 35: EBITDA Comparison 2016 vs. 2015

    EBITDA COMPARISON 2016 vs. 2015 Cost reductions helped offset the effect of lower prices and lower gas sales In millions of US$ 400 +16 +4 -14 +4 -18 350 +28 -48 300 250 200 313 285 285 150 100 EBITDA 2015 Operating cost FX effect on Non-recurrent Margin effect Lower physical Emission Lower margin E

  36. Slide 36: Net Income Comparison 2016 vs. 2015

    NET INCOME COMPARISON 2016 vs. 2015 Positively impacted by non-recurrent income on the sale of 50% of TEN In millions of US$ 350 +158 -41 Minority interest 300 -22 -6 2 250 200 +54 Minority 150 interest +16 255 100 6 50 94 - Net income 2015 Lower financial Increased fair Net income in Asset Decrease

  37. Slide 37: 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 2.4 2.6 100 1.0 50 147 0.5 - - 31/12/15 31/12/16 31/12/15 31/12/16 Net debt / LTM1 EBITDA (years) LTM1 EBITDA / Gross interest exp. (x)

  38. Slide 38: 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 = 3.599% as of December 30, 2016) • 4.50

  39. Slide 39: Net Debt Evolution 2016

    NET DEBT EVOLUTION 2016 CAPEX and dividends financed with operating cash flow and TEN sale and project financing proceeds In millions of US$ 1,200 +30 +16 -126 1,100 +91 1,000 +357 -218 900 800 -20 -274 700 600 500 400 613 470 300 200 Net debt as of CAPEX Dividends Accrued Income taxes Reimbursed Sa

  40. Slide 40: EECL Share Price Evolution LTM

    EECL SHARE PRICE EVOLUTION LTM (*) EECL has outperformed the IPSA despite lower performance of the Utility index 140 EECL IPSA December 30, 2016: EECL: CLP 1,060 IPSA: 4,151 130 December 30, 2015: 120 EECL: CLP 926 IPSA: 3,680 110 100 90 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16

  41. Slide 41: 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

  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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