Engie Energia Chile S.a. · BCS:ECL

Engie Energia Chile — Q3 2016 Earnings Presentation

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

  1. Slide 1: Presentation to investors 3Q 2016 Results

    ENGIE ENERGÍA CHILE S.A. Presentation to investors 3Q 2016 Results

  2. Slide 2: Agenda

    AGENDA Highlights Industry and Company Projects Financial Results 2

  3. Slide 3: Highlights

    Highlights

  4. Slide 4: Financial Performance 3Q 2016

    FINANCIAL PERFORMANCE 3Q 2016  EBITDA reached US$218 million, a 12% decrease compared to 9M15, due to the reduction in certain indices that adjust our PPA prices, the decrease in gas sales, and higher emission- reduction costs, partly offset by positive foreign exchange-related effects and cost sav

  5. Slide 5: Highlights

    HIGHLIGHTS  EECL’s Board of Directors called for an Extraordinary Shareholders’ Meeting to be held on October 28, to request shareholder authorization to pledge the Company’s shares in TEN in favor of the TEN project finance providers.  On September 20, the Minister of Energy, accompanied by regio

  6. Slide 6: Industry and Company

    Industry and Company

  7. Slide 7: Chilean Electricity Industry

    CHILEAN ELECTRICITY INDUSTRY 9M 2016 Growth Generation GWh Main players Market Clients (2016-2025)1 (9M16) (% installed capacity 9M16) Renew. Diesel Other Regulated 6% 7% 7% 11% Endesa EECL 25% capacity 4.7% Gas 10% 22% 46% SING 26% demand 14,638 GWh AES 4,471 MW Unregulated Gener 89% Coal 78% 25% U

  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: ~ 2,555 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 September 30, 2016

    OWNERSHIP STRUCTURE AS OF SEPTEMBER 30, 2016 A world-class controller and a diversified ownership base ENGIE Local institutions Pension funds Foreign institutions Individuals 52.76% 17.62% 22.65% 6.48% 0.49% ENGIE ENERGÍA CHILE S.A. Inversiones Punta de (“EECL”) RedRed Eléctrica Eléctrica Chile Riel

  11. Slide 11: Gross Installed Capacity

    GROSS INSTALLED CAPACITY SING and EECL as of September 30, 2016 SING EECL 2,500 3,000 2,040 MW 2,494 MW 18 2,500 18 2,000 2,040 MW 205 288 1,799 MW 2,000 18 205 1,500 688 13 688 317 1,121 MW 1,500 688 962 MW 1,000 24 688 1,000 1,129 1,121 781 1,500 500 348 MW 1,129 500 294 781 158 54 - EECL AES Ende

  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 (September 2016) Technology Coal Renewables Diesel/FO 1% Chapiquiña (10MW) Natural gas El Aguila I (2MW) Renewables Diesel 12% P. Camarones (6MW) Diesel Arica (14MW)

  13. Slide 13: Contractable Efficient Capacity

    CONTRACTABLE EFFICIENT CAPACITY IEM to contribute additional capacity in 2018 September 2016 December 2018 2,452 MW 2,500 2,500 18 2,040 MW 288 2,000 18 2,000 205 688 1,593 MW 1,348 MW 6 1,500 688 1,500 5 521 521 1,000 1,000 1,457 1,129 1,066 500 500 822 - - Gross Installed capacity Contractable eff

  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 September 2016) Other Marginal 0.2% Cost 3.8% U.S. CPI Coal U.S. PPI 32.9% Node Price 49.4% Gas 13.8% Engie Energía Chile - Presentation to Investors – 9M 2016 15

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

    LONG-TERM CONTRACTS WITH CREDITWORTHY CLIENTS With average remaining life of 12.0 years Average demand¹ [MW] and remaining life [years] of Clients’ international credit ratings: current contracts  Codelco: A+ ● Unregulated contracts 600  Freeport-MM (El Abra ): BB ● Regulated contracts  Antofagas

  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 (May and November changing to February and August per Res.641) — The tariff is set in US dollars and converted to CLP at the average observed CLP/USD rate of March and Septe

  18. Slide 18: Energy Supply Curve – 9M16

    ENERGY SUPPLY CURVE – 9M16 Supply curve based on generation costs and purchases from the spot 160 US$/MWh 140 120 Average realized monomic price 100 US$94/MWh 80 Average fuel & FO electricity purchase Di 60 cost: US$48/MWh 40 Spot purchases 20 CTH CTM2 CTM1 U-16 CTM3 U-15 U-14 U-13 U-12 CTA 0 Firm c

  19. Slide 19: Generation Overcosts in the SING

    GENERATION OVERCOSTS IN THE SING Strong reduction in the last year  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 character

  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  375MW gross capacity; 320MW net capacity  90% plant factor  Mechanized port suitable for cape-size carriers  Developed to supply SIC distribution c

  22. Slide 22: IEM Progressing According to Budget and Schedule

    INFRAESTRUCTURA ENERGÉTICA MEJILLONES (“IEM”) Is progressing according to budget and schedule  Status as of September 30, 2016 — Procurement: • Marine steel structure delivered on-site • Various pressure parts being shipped and delivered on-site • Steam turbine packing ongoing, shipment planned for

  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 “trunk” transmission system interconnect

  24. Slide 24: TEN: SIC-SING Interconnection Map

    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

  25. Slide 25: TEN Status as of September 30, 2016

    TRANSMISORA ELÉCTRICA DEL NORTE (“TEN”) The long awaited SIC-SING interconnection  Status as of September 30, 2016 — Relevant events: • Red Eléctrica acquired 50% of TEN’s share capital for US$217.6 million plus 50% of TEN’s debt with EECL • TEN’s trunk revenues were defined as described in next sl

  26. Slide 26: 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 @ September 2016 FX Rates) Rates 738.3 41% 59% 75.1 10.2 85.3 72.2 8.8 81.0 αj 41% βj 59% IPC0 100.90 IPC

  27. Slide 27: Renewable Energy Projects

    RENEWABLE ENERGY PROJECTS Several initiatives in different stages  Pampa Camarones I began commercial operations in September: — PV Plant 1st stage (6MW) ready and injecting to the SING — Approved environmental permits for up to 300MW  El Águila II (34MW) is under study: — Approved environmental p

  28. Slide 28: Projects Under Study: Las Arcillas CCGT

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

  29. Slide 29: Capital Expenditure Program

    CAPITAL EXPENDITURE PROGRAM An intensive CAPEX program is ongoing CAPEX (US$ million) 2015 9M16 4Q16e 2017e 2018e TOTAL EECL-Current business 88 37 24 86 84 319 IEM (including port) 109 237 126 384 158 1,014 TOTAL 197 274 150 470 242 1,333 TEN CAPEX (US$ million) 2015 9M16 4Q16e 2017e 2018e TOTAL TE

  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: Slow Physical Growth and Declining Prices

    FINANCIAL RESULTS Slow physical growth and declining energy prices Electricity sales (GWh) Gross electricity generation (GWh) Total 6,966 Total 6,911 8,000 8,000 Total 6,736 Total 6,606 300 368 6,000 1,407 1,430 6,000 1,197 1,243 4,000 4,000 5,259 5,113 5,442 5,302 2,000 2,000 - 0 9M15 9M16 9M15 9M1

  33. Slide 33: Financial Results: Income Statement

    FINANCIAL RESULTS Non-recurring income offset narrower operating margins Income Statement (US$ millions) 9M15 9M16 % Var. Operating revenues 869.2 717.9 -17% Operating income (EBIT) 145.5 114.8 -21% EBITDA 248.8 218.4 -12% Net income 72.4 260.6 +260% Average realized monomic sale price (US$/MWh) 104

  34. Slide 34: EBITDA Comparison 9M16 vs. 9M15

    EBITDA COMPARISON 9M16 vs. 9M15 Cost reductions helped offset effect of lower prices and lower gas sales In millions of US$ 300 +6 -5 +20 -10 -11 250 -30 200 249 218 150 100 EBITDA 9M15 Operating cost FX effect on Physical sales to Lower margins Emission Lower margin on EBITDA 9M16 savings (net) ope

  35. Slide 35: Net Income Comparison 9M16 vs. 9M15

    NET INCOME COMPARISON 9M16 vs. 9M15 Positively impacted by non-recurrent income on the sale of 50% of TEN In millions of US$ 350 Minority interest +159 -16 300 -24 -1 2 250 200 150 +54 Minority interest 261 100 +13 5 50 72 - Net income Lower financial Increased fair Net income in Asset Decrease in I

  36. Slide 36: Financial Results: Strong Liquidity and Low Leverage

    FINANCIAL RESULTS Strong liquidity and low leverage ratios Available cash (in millions of US$) Gross debt / LTM1 EBITDA (years) 200 3.5 3.0 150 2.5 2.0 100 1.5 147 153 2.4 2.6 50 1.0 0.5 - - 31/12/15 30/09/2016 31/12/15 30/09/16 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 = 2.729% as of September 30, 2016) • 4.5

  38. Slide 38: Net Debt Evolution 9M16

    NET DEBT EVOLUTION 9M16 Asset sale proceeds + operating cash flow financed CAPEX and dividends In millions of US$ 1,100 +11 +16 -218 1,000 +91 +9 900 +274 800 -20 -193 700 600 500 400 613 584 300 200 Net debt as CAPEX Dividends Accrued Income Net Sale 50% Sale of Operating Net debt as of 12/31/15 (E

  39. Slide 39: Dividends

    DIVIDENDS Flexible dividend policy to cope with CAPEX financing requirements  Flexible dividend policy: Minimum legal required amount (30% of annual net income) is paid, although higher payout ratios may be approved in function of (among others) anticipated capital expenditures: — Payout ratio in r

  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 September 30, 2016: EECL: CLP 1,035 140 IPSA: 4,015 EECL IPSA 130 September 30, 2015: EECL: CLP 914 120 IPSA: 3,685 110 100 90 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-

  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 January 2016 Fitc

  42. Slide 42: Forward-looking statements disclaimer

    This presentation may contain certain forward-looking statements and information relating to E.CL S.A. (“E.CL” 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, without limitat

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