Engie Energia Chile S.a. · BCS:ECL
Engie Energia Chile — H1 2018 Earnings Presentation
45 slides from Engie Energia Chile's earnings presentation, 2018
Slide 1: Engie Energía Chile S.A. Presentation to investors 1H18 Results
ENGIE ENERGÍA CHILE S.A. Presentation to investors 1H18 Results
Slide 2: Agenda
AGENDA Snapshots Key messages Financial update Addenda Engie Energía Chile - Presentation to Investors – 1H 2018 2
Slide 3: Snapshot: ENGIE S.A. – A global energy player
SNAPSHOT: ENGIE S.A. ENGIE: A GLOBAL ENERGY PLAYER LOW CO2 POWER GLOBAL CUSTOMER GENERATION NETWORKS SOLUTIONS World leading independent European leader in gas 24m customers in Europe power producer infrastructures €27bn(3) regulated asset Global leader in energy 103 GW(1) installed base in France s
Slide 4: Snapshot: Chilean electricity industry – two main grids recently interconnected
SNAPSHOT: CHILEAN ELECTRICITY INDUSTRY TWO MAIN GRIDS RECENTLY INTERCONNECTED Clients Generation Market Share 1H18 (GWh) (% installed capacity Jun-18) Renew. Enel Regulated 15% EECL 27% 58% Hydro 8% 26% SISTEMA ELÉCTRICO Gas Colbún 14% NACIONAL (SEN) 9,751 MW 38,102 GWh 18% 23,931 MW AES Gener Tamak
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 lon
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 Coal Chapiquiña (10MW) Diesel/FO 1,971 MW (*) in Natural gas operation & 375 MW El Aguila I (2MW) Renewables in construction Pampa Camarones (6MW) Diesel Arica (14MW) 2,293 kms HV + MV Diesel
Slide 7: 2018: The beginning of a new era
SNAPSHOT: EECL IN 2018 2018: THE BEGINNING OF A NEW ERA 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$0.9bn, transmission project ~US$1 bn investment • ~11,700 GWh p.a. in 201
Slide 8: Agenda
AGENDA Snapshots Key messages Financial update Addenda Engie Energía Chile - Presentation to Investors – 1H 2018 8
Slide 9: Key messages
KEY MESSAGES Results in line with guidance Mastering the growth achieved Building our future together with our clients PPA renegotiation, decarbonization & life extension Paving the way for our energy transformation plan Development focused on replacing coal with renewable capacity Robust capital st
Slide 10: Recent events
KEY MESSAGES RECENT EVENTS INDUSTRY COMPANY • SIC-SING interconnection: In • Amendments to the Codelco and operations since November 24, 2017, SING Glencore PPAs signed on April 2: tariff SEN giving birth to the SEN. The TEN “Sistema decrease, full indexation to CPI starting project was ready ahead
Slide 11: 1H18 results in line with guidance
RESULTS IN LINE WITH GUIDANCE: MASTERING THE GROWTH ACHIEVED 1H18 RESULTS IN LINE WITH GUIDANCE • EBITDA increased 33% mainly due to the new PPA with distribution companies • Net income impacted by non-recurring asset impairments 1H17 1H18 Variation Operating Revenues (US$ million) 530.4 603.4 +14%
Slide 12: Demand supplied with own generation, spot purchases and bridge contracts
RESULTS IN LINE WITH GUIDANCE: MASTERING THE GROWTH ACHIEVED DEMAND SUPPLIED WITH OWN GENERATION, SPOT PURCHASES AND BRIDGE CONTRACTS US$/MWh 140 Average monomic price 120 US$116/MWh U12 & U13 coal plants: 4% of 1H18 power supply. 100 Authorization to close down Diesel by Apr-19. Average fuel & 80 e
Slide 13: 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 A GROWTH recently extended to 13 years (*) DRIVING PPA • 2018: Up to 2,016 GWh 600 ● Regulated contracts • (230 MW-avg.) 2019-2032: Up to 5,040 ● Unr
Slide 14: PPA renegotiations signed April 2, 2018
BUILDING THE FUTURE TOGETHER WITH OUR CLIENTS PPA RENEGOTIATION, DECARBONIZATION & LIFE EXTENSION PPA renegotiations signed by EECL on April 2, 2018: A win-win transaction 200MW Chuqui Price discount, Price discount, PPA life extension @ new, CPI-indexed price coal-indexed CPI-indexed 16MW 34MW 16MW
Slide 15: 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 16: Renewable capacity development projects
PAVING THE WAY FOR OUR ENERGY TRANSFORMATION PLAN RENEWABLE CAPACITY DEVELOPMENT PROJECTS Project development focused on energy transition Nueva Chuquicamata Antofagasta Arica & Biobío Parinacota Los Lagos Araucanía Algarrobal O’Higgins Wind El Rosal Solar PV Geographic and power source Gradual repl
Slide 17: National transmission projects awarded in 2018 auctions
PAVING THE WAY FOR OUR ENERGY TRANSFORMATION PLAN NATIONAL TRANSMISSION PROJECTS AWARDED IN 2018 AUCTIONS Nueva Chuquicamata SS + T.Line 2 x 220kV Ref. I.V. 18.0 MUSD AVI: 0.9 MUSD COD: 24 / 48 months Antofagasta Arica & Biobío Parinacota Los Lagos O’Higgins Araucanía Wind Algarrobal El Rosal Sectio
Slide 18: 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: New proof of delivery in our project execution • Mechanized port, suitable for Cape- size carriers (of up to 180,000 DWT) • Capacity to transfer +6,000,000 T
Slide 19: Ample room to finance energy transformation plan
ROBUST CAPITAL STRUCTURE AMPLE ROOM TO FINANCE ENERGY TRANSFORMATION PLAN • 2018: THE END OF A CAPEX-INTENSIVE PHASE • FREE CASH-FLOW POSITIVE STATUS STARTING 2019 WILL RELEASE FINANCING CAPACITY FOR ENERGY TRANSFORMATION PLAN MUSD 04 TEN 30 500 04 Debt capacity to 03 400 finance new TEN 35 CAPEX wi
Slide 20: Key drivers for our results
GUIDANCE: MASTERING THE GROWTH ACHIEVED & STARTING OUR TRANSFORMATION KEY DRIVERS FOR OUR RESULTS • PPA with distribution companies + PPAs • PPA renegotiation - REGULATION • Green taxes - • Client migration - DEMAND • Mining investment + Electric vehicles + • Coal prices - FUEL & SPOT PRICES • Hydro
Slide 21: Ongoing focus on delivery in our growth path
GUIDANCE: MASTERING THE GROWTH ACHIEVED & STARTING OUR TRANSFORMATION ONGOING FOCUS ON DELIVERY IN OUR GROWTH PATH PREPARING THE GROUNDS FOR A LARGER-SCALE, LEANER OPERATION Embracing the growth US$ 160 to 180 mln achieved: New PPA => larger sales volume US$ 460 to Interconnected system => lar
Slide 22: Agenda
AGENDA Snapshots Key messages Financial update Addenda Engie Energía Chile - Presentation to Investors – 1H 2018 22
Slide 23: Regulated revenue from new PPA largely explains the 33% EBITDA increase
FINANCIAL UPDATE REGULATED REVENUE FROM NEW PPA WITH DISTRIBUTION COMPANIES LARGELY EXPLAINS THE 33% EBITDA INCREASE By main effect In US$ Million +4 +3 (10) +90 (7) TEN Insurance Sales to (6) (9) result recovery free Margin (11) (50% share) (BI) effect Reliq. (7) clients Spot 187 electricity Capaci
Slide 24: Operating results explain the net recurring income increase
FINANCIAL UPDATE OPERATING RESULTS EXPLAIN THE NET RECURRING INCOME INCREASE In US$ Millions Recurring Results 83 +4 minority +5 (53) +3 +1 interest +34 Other Insurance Financial recovery FX Diff. expenses (PD) Depreciation Tax effects 51 +5 minority 44 35 interest (8) +5 +4 minority minority
Slide 25: Net debt evolution reveals strong cash generation
FINANCIAL UPDATE NET DEBT EVOLUTION REVEALS STRONG CASH GENERATION Main cash flows In US$ Million +27 +16 (191) +58 +31 +117 Accrued Income Dividends Taxes 830 Financial Interest + 771 (including lease 40% CTH) var. Operating CAPEX (*) (tolling deferred cash flow agreement financial w/TEN) cost + va
Slide 26: Robust financial structure: room for further growth
FINANCIAL UPDATE ROBUST FINANCIAL STRUCTURE: ROOM FOR FURTHER GROWTH Net debt/EBITDA below 3.0x NET DEBT/EBITDA ≤ 3.0 X • Strong cash flow generation 4.00 3.500 2.8 • Proceeds from asset sales (TEN) in 2016 3.00 2.6 2.500 2.0 2.00 1.6 1.7 1.500 Rating confirmed @ BBB (Stable Outlook) 1.00 .500 • Int
Slide 27: 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 4.00% 1,500 3.4% 60% 50 47 17 50% 3.00% 40 12 2,265 34 72 40% 1,000 1,941 30% 30% 30% 30% 30 2.3% 2.2% 30 30% 1,536 1,657 2.
Slide 28: 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 COD 4Q18 TRANSITION RENEWABLES PPA PORTFOLIO PORTFOLIO EXTENSION NEW PPA WITH ASSET ROTATION DISTRIBUTION CO’S CAPITAL STRUCTURE & CUSTOMER SOLUTIONS LEAN PR
Slide 29: Agenda
AGENDA Snapshots Key messages Financial update Addenda Engie Energía Chile - Presentation to Investors – 1H 2018 29
Slide 30: 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$/MWh 3,000 150 2,500 2,000 100 1,500 1,000 50 500 - - 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 Unregulated Regulated Spot Energy+Capacity Price->
Slide 31: Demand supplied with own generation, spot purchases and bridge contracts
ADDENDA DEMAND SUPPLIED WITH OWN GENERATION, SPOT PURCHASES AND BRIDGE CONTRACTS, HEDGED BY OUR INSTALLED CAPACITY Renewables Diesel 10% 1% Coal 57% • Increasing spot purchases due to (i) coal, gas and Installed renewable efficient capacity additions in the grid and (ii) Gas capacity start of PPA wi
Slide 32: Generation and spot energy price history in the SING
ADDENDA GENERATION AND SPOT ENERGY PRICE HISTORY IN THE SING • No exposure to hydrologic risk until interconnection is fully operative • Long-term contracts with unregulated clients (mining companies) accounting for 89% of demand (bilateral negotiation of prices and supply terms) • Maximum demand: ~
Slide 33: Current regulatory and grid coordination challenges
ADDENDA CURRENT REGULATORY AND GRID COORDINATION CHALLENGES MW Generation in the SING – June 1 to 10, 2018 US$/MWh 3,000 120 2,500 100 2,000 80 1,500 60 1,000 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 17 21 1 5 9 1
Slide 34: Recent game changers in the Chilean power industry
ADDENDA RECENT 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 (
Slide 35: The SEN: a larger market for all players
ADDENDA THE “SEN”: A LARGER MARKET FOR ALL PLAYERS SEN – Jun-2018 23,931 MW 7,637 MW SING SEN “Sistema 6,348 MW 78 Eléctrico Nacional” 3,658 3,450 4,133 MW SIC 291 3,310 MW 831 45 1,370 127 1,611 1,971 MW 10 202 2,033 3,011 623 2,609 (*) 1,304 532 MW 1,127 660 532 350 Enel AES Gener Colbún EECL Kela
Slide 36: 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 June 2018) (2021, proforma PPA renegotiation) U.S. CPI Gas 13.1% U.S. CPI U.S. PPI U.S. PPI Node Price Node
Slide 37: Transmission
ADDENDA TRANSMISSION Infrastructure EECL, a relevant player in the transmission business EECL operates 23 substations with 2,293 kms. total capacity of 844 MVA 844 MVA 5 US$ 16 million regulated revenue p.a. Transmission substations EECL operates 2,293 kms. of transmission lines Generation 844 subst
Slide 38: Transmisora Eléctrica del Norte (TEN) (page 1 of 2)
ADDENDA TRANSMISORA ELÉCTRICA DEL NORTE S.A. “TEN” (PAGE 1 OF 2) Infrastructure – Regulated ~US$0.9bn investment, 50%-owned by EECL • Regulated revenues on “national • Double circuit, 500 kV, alternate assets” + contractual toll on current (HVAC), 1,500 MW, 600- “dedicated assets” km long transmissi
Slide 39: Transmisora Eléctrica del Norte (TEN) (page 2 of 2)
ADDENDA TRANSMISORA ELÉCTRICA DEL NORTE S.A. “TEN” (PAGE 2 OF 2) Infrastructure – Regulated ~US$0.9bn investment, 50%-owned by EECL VI Indexation TEN’s annual revenues: (in USD millions In MUSD @ Oct In CLP to In USD to at Mar.31, 2018 FX rates) 2013 FX Rates Chile CPI US CPI AVI (VI annuity): 75.5
Slide 40: Infraestructura Energetica Mejillones (IEM)
ADDENDA INFRAESTRUCTURA ENERGETICA MEJILLONES. “IEM” Thermal contracted + port US$1.0bn investment in commissioning phase • 375MWe gross capacity => • Developed to supply distribution 337MWe net base-load capacity companies • Turnkey EPC contracts: • Pulverized coal-fired power plant • IEM plant: SK
Slide 41: Copper industry
ADDENDA COPPER INDUSTRY US¢/lb Copper production in Chile ('000 tons) GWh 6,500 500 6,000 Copper price LME (US¢/lb) SING Electricity demand (GWh) SIC Electricity demand (GWh) 450 5,500 5,000 400 4,500 350 4,000 300 3,500 250 3,000 5,557 5,776 5,761 5,772 5,553 5,413 5,321 5,361 5,328 5,394 5,419 5,2
Slide 42: Ownership structure
ADDENDA OWNERSHIP STRUCTURE Pension funds Local institutions Foreign institutions Individuals 52.76% 25.62% 15.02% 6.12% 0.48% 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 - Origination of directors - Development - Business knowledge - Regulation CEO - Change management - Management - Steering Committees: - IEM Internal auditor Corporate Finance People Lega
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.cl MORE INFORMATION ON 1H 2018 RESULTS IN OUR WEB PAGE 2018 6 months Presentation Addenda Press Recorded Financial Analyst Release conference report pack audiocast Engie Energía Chi
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