Engie Energia Chile S.a. · BCS:ECL
Engie Energia Chile — H1 2017 Earnings Presentation
42 slides from Engie Energia Chile's earnings presentation, Jun 1, 2017
Slide 1: Presentation to investors 1H 2017 Results
ENGIE ENERGÍA CHILE S.A. Presentation to investors 1H 2017 Results
Slide 2: Agenda
AGENDA Highlights Industry and Company Projects Financial Results
Slide 3: Highlights
O1 Highlights
Slide 4: Financial Summary
FINANCIAL SUMMARY 1H2017 EBITDA reached US$140 million as operating cost savings offset the effect of new green taxes, higher costs in emission reduction processes and lower physical sales. Net income increased 5% excluding non-recurring items, which in 1H16 were primarily explained by the sale
Slide 5: Highlights
HIGHLIGHTS Industry The Ministry of Energy and the CNE have been progressing in the drafts of the following documents: (i) regulations related to the new Transmission Law (ruling ancillary services, among others), which should be published by YE 2017; (ii) amendments to the Distribution Law; (iii)
Slide 6: Industry and Company
Industry and Company
Slide 7: Chilean Electricity Industry
CHILEAN ELECTRICITY INDUSTRY 1H 2017: Two main separate grids preparing for interconnection Growth Generation GWh Main players Market Clients (2017-2026)1 (1H17) (% installed capacity 1H17) Regulated Renew. Diesel 1% Other 11% 10% Gas 10% 16% EECL 23% capacity 34% 3.5% Tamakaya SING 25% demand 9,015
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: ~ 2,511 MW in April 2017;
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 Copper production in the SING ('000 tons) (1) Copper price LME (US¢/lb) Electricity demand GWh 4,500 US¢/lb GWh 500 2,000 4,000 450 1,800 3,500 400 1,600 3,000 350 1,400 300 2,500 1,200 250 1
Slide 10: Ownership Structure as of June 30, 2017
OWNERSHIP STRUCTURE AS OF JUNE 30, 2017 A world-class controller and a diversified ownership base ENGIE Local institutions Pension funds Foreign institutions Individuals 52.76% 15.70% 24.35% 6.70% 0.48% ENGIE ENERGÍA CHILE S.A. Inversiones Punta de (“EECL”) RedRed Eléctrica Eléctrica Chile Rieles Lt
Slide 11: Gross Installed Capacity
GROSS INSTALLED CAPACITY SING and EECL as of June 30, 2017 SING EECL 1,971 MW 2,000 19 2,500 2,344 MW 202 19 202 1,971 MW 2,000 19 1,500 1,405 MW 1,799 MW 623 13 202 623 317 1,500 623 962 MW 1,000 24 688 1,000 1,127 1,405 532 MW 781 1,500 500 350 MW 1,127 500 532 781 295 158 0 55 0 EECL AES Gener En
Slide 12: Installed Capacity and Operating Assets
INSTALLED CAPACITY AND OPERATING ASSETS Efficient thermal power plants, port, transmission lines and gas pipelines Installed Capacity (June, 2017) Technology Renewables Coal 1% Diesel/FO Chapiquiña (10MW) Natural gas El Aguila I (2MW) Renewables Diesel 10% P. Camarones (6MW) Diesel Arica (14MW) Dies
Slide 13: Contractable Efficient Capacity
CONTRACTABLE EFFICIENT CAPACITY IEM to contribute additional capacity in 2018 December 2016 December 2018 2,500 2,500 2,345 MW 19 1,971 MW 202 2,000 19 2,000 202 623 1,647 MW 1,363 MW 6 1,500 1,500 623 487 6 521 1,000 1,000 1,501 1,127 1,154 500 500 836 - - Gross Installed capacity Contractable effi
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
Slide 15: PPA Portfolio Indexation
PPA PORTFOLIO INDEXATION Matched with cost structure Overall indexation applicable to electricity and capacity sales (as of June 2017) Other Marginal 0.2% Cost 1.5% U.S. CPI U.S. PPI Node Price Coal 46.8% 38.0% Gas 13.5% Engie Energía Chile - Presentation to Investors – 1H 2017 15
Slide 16: Long-Term Contracts with Creditworthy Clients
LONG-TERM CONTRACTS WITH CREDITWORTHY CLIENTS With average remaining life of 11.1 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 Antofaga
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 every April and October (modified by Res.Ext. 641 & 778) — The tariff is set in US dollars and converted to CLP at the average observed CLP/USD rate of the month prior to th
Slide 18: Energy Supply Curve – 1H17
ENERGY SUPPLY CURVE – 1H17 Supply curve based on generation costs and purchases from the spot 200 US$/MWh 180 160 140 Average monomic price: 120 US$111/MWh 100 Average fuel & electricity Diesel purchase cost: 80 US$66/MWh 60 40 CTM3 U16 Spot purchases CTM2 U15 U14 CTM1 U12 U13 CTA CTH 20 overcosts 0
Slide 19: Average Hourly Generation in the SING – 1H17
AVERAGE HOURLY GENERATION IN THE SING – 1H17 Increased and more volatile spot prices despite new base-load generation 2,000 200 Diesel/Fuel Oil Gas Kelar 1,500 150 Gas CTM3 Marginal Cost (US$/MWh) Gross Generation (MWh) Gas U16 Coal U12/U13 Coal U14/U15 1,000 100 Coal CTM1/CTM2 Coal CTA/CTH Coal oth
Slide 20: Projects
Projects
Slide 21: 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$
Slide 22: IEM progressing according to budget and schedule
INFRAESTRUCTURA ENERGÉTICA MEJILLONES (“IEM”) is progressing according to budget and schedule Status as of June 30, 2017 — Construction: • Boiler steam drum lifted and fixed in final position • Heavy equipment installation ongoing • Step-up & auxiliary transformers w/cables connected • Overall pro
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 national transmission system interconnec
Slide 24: Transmisora Eléctrica del Norte (TEN)
TRANSMISORA ELÉCTRICA DEL NORTE (“TEN”) The long awaited SIC-SING interconnection TEN dedicated transmission line project TEN national 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
Slide 25: Transmisora Eléctrica del Norte (TEN)
TRANSMISORA ELÉCTRICA DEL NORTE (“TEN”) The long awaited SIC-SING interconnection Status as of June 30, 2017 — Relevant events: • In January 2016, Red Eléctrica acquired 50% of TEN’s share capital • In December 2016, TEN signed a multi-tranche long-term project financing for the equivalent of US$7
Slide 26: TEN Tariff Setting
TRANSMISORA ELÉCTRICA DEL NORTE (“TEN”) Tariff setting VI Indexation AVI COMA VATT AVI COMA VATT In MUSD @ In CLP to In USD to Oct 2013 FX Chile CPI US CPI (In MUSD @ Oct 2013 FX Rates) (In MUSD @ June 2017 FX Rates) Rates 738.3 41% 59% 75.1 10.2 85.3 72.9 8.8 81.7 αj 41% βj 59% IPC0 100.90 IPCk 115
Slide 27: Renewable Energy Projects
RENEWABLE ENERGY PROJECTS Commitment with the Energy Transition Renewables — A portfolio of Solar Photovoltaic and Wind Projects at different locations under study. Energy Storage — Storage solutions to remedy the intermittence of some renewable sources, to guarantee continuous electricity suppl
Slide 28: Natural Gas
NATURAL GAS A Key Role in the Energy Transition ENGIE Energía Chile has identified natural gas, a low CO2-emission energy source, as a good complement to renewables, to ensure continued energy generation. We are developing Las Arcillas, a 480MW combined-cycle gas turbine (CCGT) project, in Pemuc
Slide 29: Capital Expenditure Program
CAPITAL EXPENDITURE PROGRAM An intensive CAPEX program is ongoing CAPEX (US$ million) 2015 2016 2017e 2018e TOTAL EECL-Current business 88 56 68 59 271 IEM (including port) 109 314 412 169 1,004 TOTAL 197 370 480 228 1,275 TEN CAPEX (US$ million) 2015 2016 2017e 2018e TOTAL TEN CAPEX (100%) 160 290
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
Slide 31: Financial Results
Financial Results
Slide 32: Financial Results
FINANCIAL RESULTS Electricity sales (GWh) Net electricity generation (GWh) 5,000 Total 4,664 Total 4,357 5,000 Total 4,172 277 170 4,000 842 4,000 959 955 Total 2,850 3,000 3,000 511 2,000 2,000 3,428 3,232 3,642 1,000 1,000 2,548 0 0 1H16 1H17 1H16 1H17 Unregulated Regulated Spot Coal LNG Diesel Re
Slide 33: Financial Results
FINANCIAL RESULTS Slight increase in recurring net income Income Statement (US$ millions) 1H16 1H17 % Var. Operating revenues 471.1 530.4 +13% Operating income (EBIT) 73.2 73.0 0% EBITDA 142.0 140.4 -1% Net income 233.6 51.2 -78% Net income excluding non-recurring items 41.8 43.7 +5% Average realize
Slide 34: EBITDA Comparison 1H17 vs. 1H16
EBITDA COMPARISON 1H17 vs. 1H16 Impact of lower physical sales and green taxes offset by operating cost reductions In millions of US$ 170 +5 -9 +5 -9 150 +7 130 110 142 140 90 70 50 EBITDA 1H16 Net reduction in Margin variations: Other income-net + Lower physical Green taxes (-6.8) EBITDA 1H17 opera
Slide 35: Net Income Comparison 1H17 vs. 1H16
NET INCOME COMPARISON 1H17 vs. 1H16 Net income comparison affected by non-recurring income reported in 1H16 In millions of US$ 300 Minority interest +9 -2 -53 250 +5 1 200 -136 150 234 Minority 100 interest 3 50 2 51 - Net income Financial Lower Increase in Fair valuation of Income from Decrease in
Slide 36: 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 2.6 2.6 100 1.0 50 93 0.5 - - 31-Dec-16 30-Jun-17 31-Dec-16 30-Jun-17 Net debt / LTM1 EBITDA (years) LTM1 EBITDA / Gross interest exp. (
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$400 million 144-A/Reg-S notes maturing January 2021 (YTM = 2.785% as of June 30, 2017) • 4.500%,
Slide 38: Net Debt Evolution 1H17
NET DEBT EVOLUTION 1H17 CAPEX financed with available cash and operating cash flow In millions of US$ 900 +17 -188 +50 800 +15 +21 +269 700 600 500 654 400 470 300 200 Net debt as of CAPEX Dividends (incl. Accrued interest Income taxes Contributions to Operating cash Net debt as of 12/31/16 40% CTH)
Slide 39: EECL Share Price Evolution LTM
EECL SHARE PRICE EVOLUTION LTM (*) In the last 12 months ending June 30, 2017, EECL has evolved positively (+8.3%), although behind the IPSA. 140 EECL IPSA June 30, 2017: EECL: CLP 1,213 IPSA: 4,747 130 June 30, 2016: EECL: CLP 1,121 IPSA: 3,996 120 110 100 90 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-
Slide 40: Ratings
RATINGS Strong investment-grade ratings reaffirmed International ratings Rating Perspective Date last review Standard & Poor’s BBB Stable July 2017 Fitch Ratings BBB Stable July 2017 National ratings Rating Perspective Shares Date last review Feller Rate A+ Stable 1st Class Level 2 December 2016 Fit
Slide 41: Value Creation
VALUE CREATION Sound financial performance and value creation for our shareholders Development and Implementation: • Intensive CAPEX program with approximately US$2 billion committed investments between 2015 and 2018, including TEN 1,500 MW, 600-km transmission project and 375 MW IEM coal project wh
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,