Engie Energia Chile S.a. · BCS:ECL
Engie Energia Chile — Q1 2019 Earnings Presentation
45 slides from Engie Energia Chile's earnings presentation, May 2019
Slide 1: Engie Energía Chile S.A. Presentation to investors 1Q19
ENGIE ENERGÍA CHILE S.A. Presentation to investors 1Q19
Slide 2: Agenda
AGENDA Snapshots Key messages Financial update Addenda Engie Energía Chile - Presentation to Investors – 1Q 2019 2
Slide 3: Snapshot: Engie S.A.
SNAPSHOT: ENGIE S.A. ENGIE’S AMBITION: TO LEAD THE ZERO-CARBON TRANSITION 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
Slide 4: Snapshot: Chilean electricity industry
SNAPSHOT: CHILEAN ELECTRICITY INDUSTRY SISTEMA ELÉCTRICO NACIONAL (SEN) TWO MAIN GRIDS RECENTLY INTERCONNECTED Gross installed Generation capacity (MW) Mar -2019 (GWh) Solar Hydro 10% 28% Wind Wind 5% Hydro 8% 27% Solar 8% 24,854 MW 19,150 GWh SEN 3,300 Km Thermal Thermal 55% 59% Clients Market Shar
Slide 5: EECL: a relevant player in the Chilean power industry
SNAPSHOT ENGIE ENERGÍA CHILE EECL: A RELEVANT PLAYER IN THE CHILEAN POWER INDUSTRY RELEVANT PLAYER IN THE ENERGY CONTRACTED INDUSTRY GROWTH UNDERWAY BUSINESS Leader in northern mining New 15-yr regulated PPA Capacity contracted under region, 4th largest electricity w/distribution companies =>
Slide 6: A diversified asset base to meet our clients' energy needs
SNAPSHOT: ENGIE ENERGÍA CHILE’S ASSETS A DIVERSIFIED ASSET BASE TO MEET OUR CLIENTS’ ENERGY NEEDS Technology Chapiquiña (10MW) Coal 1,928 MW (*) El Aguila I (2MW) Diesel/Fuel oil + 375 MW in Natural gas Pampa Camarones (6MW) Renewables commissioning Baterías - Arica (2MW) Collahuasi Diesel Arica (14
Slide 7: 2019: the beginning of our reconversion
SNAPSHOT: EECL IN 2019 2019: THE BEGINNING OF OUR RECONVERSION 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 • ~12,000 GWh p.a.
Slide 8: Into the decarbonization path
SNAPSHOT: EECL IN 2019 INTO THE DECARBONIZATION PATH DECARBONIZATION: OUR PERFORMANCE A DECISIVE, GRADUAL AND RESPONSIBLE PATH Early steps towards decarbonization • Development of TEN project => procurement of low-carbon energy sources • Decision not to build any new coal plants RENEGOTIATED PPAs PP
Slide 9: Agenda
AGENDA Snapshots Key messages Financial update Addenda Engie Energía Chile - Presentation to Investors – 1Q 2019 9
Slide 10: Key messages
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 flexib
Slide 11: Recent events
KEY MESSAGES RECENT EVENTS INDUSTRY COMPANY • Climatic effects 1Q19: SING • Acquisition of solar PV plants: • Altiplanic Winter affected power SEN “Sistema Los Loros & Andacollo demand from mining companies Eléctrico ~55 MWp/US$35 million • Drought in center-south Chile Nacional” • PPA renegotiation
Slide 12: 2019: grasping growth and beginning our reconversion
RESULTS IN LINE WITH GUIDANCE 2019: GRASPING GROWTH AND BEGINNING OUR RECONVERSION PROFITABLE LONG-TERM GROWTH; IMPROVED RISK PROFILE OUR 1Q PERFORMANCE New PPAs w/distribution companies and Free Clients • Growth in contracted portfolio reaching ~10 TWh of contracted demand • Portfolio diversificati
Slide 13: 1Q19 results in line with guidance
RESULTS IN LINE WITH GUIDANCE: MASTERING THE GROWTH ACHIEVED 1Q19 RESULTS IN LINE WITH GUIDANCE 1Q18 1Q19 Variation Operating Revenues (US$ million) 299.1 343.8 +15% EBITDA (US$ million) 91.7 96.3 +5% EBITDA margin (%) 30.7% 28.0% -2.7 pp Net income (US$ million) 39.2 42.9 +9% Net income-recurring (
Slide 14: Demand supplied with own generation and energy purchases
RESULTS IN LINE WITH GUIDANCE: MASTERING THE GROWTH ACHIEVED DEMAND SUPPLIED WITH OWN GENERATION AND ENERGY PURCHASES US$/MWh 140 Average monomic price US$119/MWh 120 U12 & U13 coal plants: 0.3% of 1Q19 power supply. Diesel Authorization to close down 100 in 2019 Average fuel & electricity purchase
Slide 15: Building our future together with our clients
BUILDING OUR FUTURE TOGETHER WITH OUR CLIENTS PPA RENEGOTIATION, DECARBONIZATION & LIFE EXTENSION Sound contract portfolio with average remaining life of A GROWTH 12 years (*) DRIVING PPA • 2018: Up to 2,016 GWh (230 600 ● Regulated contracts MW-avg.) • ● Unregulated contracts 2019-2032: Up to 5,040
Slide 16: PPA renegotiation, decarbonization & life extension
BUILDING THE FUTURE TOGETHER WITH OUR CLIENTS PPA RENEGOTIATION, DECARBONIZATION & LIFE EXTENSION PPA renegotiations signed by EECL in 2018 and 1Q19 Antucoya 50MW Price discount, Price discount, CPI-indexed & others PPA life extension coal-indexed 23MW Price discount, Price discount, Chuqui PPA life
Slide 17: GWh contracted demand: our vision through 2030
BUILDING THE FUTURE TOGETHER WITH OUR CLIENTS PPA RENEGOTIATION, DECARBONIZATION & LIFE EXTENSION 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 clie
Slide 18: First steps into our 1GW/~US$1bn asset rotation plan
PAVING THE WAY FOR OUR ENERGY TRANSFORMATION PLAN FIRST STEPS INTO OUR 1GW/~US$1BN ASSET ROTATION PLAN ACQUISITIONS: Arica y Parinacota Tamaya Los Loros & Andacollo solar PV plants 120 MWp • 54 MWp + 1.3 MWp Calama 150 MW • Acquired by EECL in April, 2019 for ~US$35 million Antofagasta Capricornio 9
Slide 19: National transmission projects in execution
PAVING THE WAY FOR OUR ENERGY TRANSFORMATION PLAN NATIONAL TRANSMISSION PROJECTS IN EXECUTION Nueva Chuquicamata Arica y • Substation + 2 x 220 kV line Parinacota • Referential investment value: US$ 18 million Nueva • AVI: US$ 0.9 million Chuquicamata • COD: 24 / 48 months Antofagasta Atacama Algarr
Slide 20: Infraestructura Energética Mejillones (IEM)
A PLANT COMMITTED TO SUPPLY DISTRIBUTION COMPANIES INFRAESTRUCTURA ENERGETICA MEJILLONES. “IEM” Thermal contracted Initial operation -> 30-Mar-19 / 206 GWh injected to grid in 1Q19 • 375MWe gross capacity => 337MWe net base-load capacity • Pulverized coal-fired power plant w/ strict environmental st
Slide 21: New port: cost savings + diversification opportunities
PAVING THE WAY FOR OUR ENERGY TRANSFORMATION PLAN NEW PORT: COST SAVINGS + DIVERSIFICATION OPPORTUNITIES New port in Mejillones Puerto Andino • Mechanized port • + 6 million TPY transfer capacity • 3,000 TPH unloading speed => reduced demurrage costs • Conventional & tubular conveyor belts => better
Slide 22: Ample room to finance energy transformation plan
ROBUST CAPITAL STRUCTURE AMPLE ROOM TO FINANCE ENERGY TRANSFORMATION PLAN • THE END OF A CAPEX-INTENSIVE PHASE • FREE CASH-FLOW POSITIVE STATUS STARTING 2019 WILL RELEASE FINANCING CAPACITY FOR ENERGY TRANSFORMATION PLAN MUSD 4.0 TEN 30 500 3.5 400 3.0 TEN 35 Debt capacity will 2.5 increase to ~US$1
Slide 23: Key drivers for our projected results
GUIDANCE: MASTERING THE GROWTH ACHIEVED & STARTING OUR TRANSFORMATION KEY DRIVERS FOR OUR PROJECTED RESULTS Demand & prices + New PPA w/distribution co’s. + New PPA w/free Clients - Client migration US$ 160 to - PPA renegotiation 180 mln Marginal cost risks - Coal prices US$ 450 to US$ 161 mln 470 m
Slide 24: Agenda
AGENDA Snapshots Key messages Financial update Addenda Engie Energía Chile - Presentation to Investors – 1Q 2019 24
Slide 25: Higher regulated sales offset lower free client demand and higher spot prices
FINANCIAL UPDATE HIGHER REGULATED SALES OFFSET LOWER FREE CLIENT DEMAND, UNEVEN PLANT PERFORMANCE AND HIGHER SPOT PRICES By main effect In US$ Million +7 (15) +25 (15) OPEX, SG&A, Physical (40) +8 other sales +44 Fuel costs other Energy Average clients purchase realized new price monomic mining
Slide 26: Operating results explain the 9% net income increase
FINANCIAL UPDATE OPERATING RESULTS EXPLAIN THE 9% NET INCOME INCREASE In US$ Millions Recurring Results 42 43 +3 +3 39 39 minority minority +1 +2 +2 +1 (0) interest minority minority +3 interest interest interest Other Financial Insurance EBITDA FX Diff. expenses recovery increase Depreciation (
Slide 27: Net debt evolution reveals healthy cash generation
FINANCIAL UPDATE NET DEBT EVOLUTION REVEALS HEALTHY CASH GENERATION Main cash flows In US$ Million +16 +4 +9 +11 (22) (81) 842 Dividends Accrued Income Cash 779 CAPEX (*) (including Taxes Interest + distribution Operating 40% CTH) var. from TEN cash flow deferred financial cost + var. MTM on hedges
Slide 28: Robust financial structure: room for further growth
FINANCIAL UPDATE ROBUST FINANCIAL STRUCTURE: ROOM FOR FURTHER GROWTH Net debt/EBITDA well below 2.5x NET DEBT/EBITDA @ 2.0 X 4.00 3.500 2.8 3.00 2.2 Rating confirmed @ BBB (Stable Outlook) 2.500 2.0 1.7 2.0 2.00 1.500 • International: S&P & Fitch (July 2018) 1.00 .500 • National scale: Fitch (Jul-18
Slide 29: Shareholder return
FINANCIAL UPDATE SHAREHOLDER RETURN DIVIDENDS PAID MARKET CAP & DIVIDEND YIELD In US$ Millions In US$ Millions 90 100% 100% 6.00% 78 90% 5.4% 80 7 80% 2,000 5.00% 70 70% 60 56 56 4.00% 1,500 3.4% 60% 50 47 17 50% 3.00% 40 12 30 2,265 34 30% 30% 72 30% 30% 40% 1,000 2.3% 1,922 2.5% 30 2.2% 1,657 2.00
Slide 30: Key take-aways: value creation for our stakeholders
FINANCIAL UPDATE KEY TAKE-AWAYS: VALUE CREATION FOR OUR STAKEHOLDERS 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 Eng
Slide 31: Agenda
AGENDA Snapshots Key messages Financial update Addenda Engie Energía Chile - Presentation to Investors – 1Q 2019 31
Slide 32: Long-term contracts: the basis for stable sales volumes and prices
ADDENDA LONG-TERM CONTRACTS: THE BASIS FOR STABLE SALES VOLUMES AND PRICES ENERGY SALES AND PRICES Energy sales Prices GWh US$/MWh 3,000 150 2,500 2,000 100 1,500 1,000 50 500 0 0 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 Unregulated Regulated Spot Energy+C
Slide 33: Demand supplied with own generation and energy purchases
ADDENDA DEMAND SUPPLIED WITH OWN GENERATION AND ENERGY PURCHASES, HEDGED BY OUR INSTALLED CAPACITY Renewables Diesel 8% 1% Coal 58% • Increasing spot purchases due to (i) coal, gas and renewable efficient capacity additions in the grid and (ii) Installed start of PPA with distribution companies in c
Slide 34: Generation and spot energy price history in the SING
ADDENDA GENERATION AND SPOT ENERGY PRICE HISTORY IN THE SING • Limited exposure to hydrologic risk until interconnection is fully operative • Long-term contracts with unregulated clients (mining companies) accounting for 89% of demand (bilateral negotiation of prices and supply terms) • Maximum dema
Slide 35: Current regulatory and grid coordination challenges
ADDENDA CURRENT REGULATORY AND GRID COORDINATION CHALLENGES MW Generation North SEN – March 7 to 16, 2019 US$/MWh 3,000 100 90 2,500 80 70 2,000 60 1,500 50 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
Slide 36: Game changers in the Chilean power industry
ADDENDA GAME CHANGERS IN THE CHILEAN POWER INDUSTRY 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 # 2
Slide 37: The SEN: a larger market for all players
ADDENDA THE “SEN”: A LARGER MARKET FOR ALL PLAYERS SEN – Mar. 2019 24,854 MW 9,271 MW SING SEN “Sistema 6,348 MW 5,292 Eléctrico 78 Nacional” 3,450 SIC 3,400 MW 3,310 MW 21 45 271 1,370 79 127 1,993 MW 1,611 64 10 159 2,033 3,029 633 2,609 (*) 1,304 532 MW 1,127 660 532 350 Enel AES Gener Colbún EEC
Slide 38: PPA portfolio indexation: shifting away from coal
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 December 2018) (2021, proforma PPA renegotiation) U.S. CPI U.S. CPI Gas 12% U.S. PPI U.S. PPI Node Node Pri
Slide 39: Transmission
ADDENDA TRANSMISSION Infrastructure EECL, a relevant player in the transmission business EECL operates 23 substations with total capacity of 844 MVA 2,293 kms. 844 MVA 5 US$ 17 million regulated revenue p.a. Transmission substations EECL operates 2,293 kms. of transmission lines Generation 844 subst
Slide 40: Transmisora Eléctrica del Norte S.A. (TEN)
ADDENDA TRANSMISORA ELÉCTRICA DEL NORTE S.A. “TEN” Infrastructure – Regulated ~US$0.8bn investment, 50%-owned by EECL • Double circuit, 500 kV, alternate current TEN annual revenue: (HVAC), 1,500 MW, 600-km long (in USD millions transmission line at Mar.31, 2019 FX rates) • National transmission sys
Slide 41: Copper industry
ADDENDA COPPER INDUSTRY 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
Slide 42: Ownership structure
ADDENDA OWNERSHIP STRUCTURE Pension funds Local institutions Foreign institutions Individuals 52.76% 22.69% 17.03% 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 Termoeléctr
Slide 43: 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 44: For more information about Engie Energia Chile
FOR MORE INFORMATION ABOUT ENGIE ENERGIA CHILE Ticker: ECL +562 2783 3307 inversionistas@cl.engie.com http://www.engie-energia.cl MORE INFORMATION ON 1Q19 RESULTS IN OUR WEB PAGE 1Q 2019 Presentation Addenda Press Recorded Financial Analyst Release conference report pack audiocast Engie Energía Chil
Slide 45: 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