AGUAS ANDINAS Corporate Presentation January 2016
01 OUR COMPANY
AGUAS ANDINAS Chile’s Largest Sanitation Company TARIFFS (Potable Water, Sewerage, and Sewage Treatment US$/m3) Coyhaique 3,17 Antofagasta 2,94 Copiapó 2,69 2.145.122 clients Iquique 2,38 Representing 43% 100% coverage in Punta Arenas 2,30 of the clients in the potable water and sewage Puerto Montt 2,26 industry treatment Arica 2,05 Valparaíso 2,02 Temuco 1,95 Valdivia 1,95 Talca 1,92 La Serena 1,90 50.5 % of potable One of the lowest tariffs in Rancagua 1,64 water billed in the Chile Concepción 1,55 industry Gran Santiago 1,34 Maipú 1,06 Tariffs as of December 2014 considering US $1= $607.38 3 Source: SISS' 2014 Management Report
CORPORATE STRUCTURE World Class Controlling Shareholders Chilean Pension Funds CORFO 2,5% 5,0% SUEZ is one of the leading water and sewage treatment players worldwide 100% Stock Brokers 8,5% AGBAR is an international benchmark in the Ownership sanitation business with more than 150 years of December IAM Others experience in the sanitation industry, with a 31 st 50,1% 9,5% 56.6% presence in 14 countries 2015 50.1% International Shareholders 24,4% 100% 100% 53.5% 100% 100% 100% 100% REGULATED COMPANIES NON-REGULATED COMPANIES 4 4 Source: Aguas Andinas
SUSTAINABILITY Leading Company in Emerging Markets Sustainability efforts strongly linked with the Company’s Stakeholders Key Issues stakeholders, with open and permanent communication with them Career development and training; equal opportunities; good Collaborators During 2015, the Company reported to the CDP (Carbon labor conditions and communication; health and safety Disclosure Project) initiative for the first time Quality and continuity of supply; customer service, service Clients channels and complaints management; transparency and Due to the Company’s sustainable management, in 2015 Aguas accuracy in billing Andinas joined the select group of Chilean companies which Profitability; investment stability; risk management; compose the Dow Jones Sustainability Index (DJSI) Emerging Shareholders transparent management Markets and DJSI Chile Suppliers and Transparent and equal conditions; timely payments; contractors development opportunities In addition to this, in November of the same year, Aguas Andinas was selected as a component of the Euronext-Vigeo EM 70 Index Legal Compliance; collaborative relationships; contribution Authorities to local development Neighboring Impact management; dialogue and relationships; local Communities development opportunities 5
INTEGRAL WATER CYCLE MANAGEMENT 100% Coverage of Potable Water, Sewerage, and Sewage Treatment Ground and Surface Network of 15,218 Returning 100% sources kilometers Network of 12,348 100% of coverage 100% Sewage Treatment kilometers 6 6 Source: SISS' 2014 Management Report and Aguas Andinas
OPERATIONAL RATIOS High Standards of Productivity and Quality of Service CLIENTS/EMPLOYEE BILLING/EMPLOYEE 522 136 Th. M 3 366 81 AGUAS ANDINAS INDUSTRY AVERAGE AGUAS ANDINAS INDUSTRY AVERAGE RUPTURES* X 100 KMS RUPTURES* X 1,000 CLIENTS 1,90 19,50 0,39 5,50 AGUAS ANDINAS INDUSTRY AVERAGE AGUAS ANDINAS INDUSTRY AVERAGE 7 Source: SISS' 2014 Management Report and Aguas Andinas, (*) Ruptures in the Potable Water Red
02 OUR INDUSTRY AND REGULATORY FRAMEWORK
WATER & SEWERAGE INDUSTRY IN CHILE XV y I Region / Iquique Aguas Del Altiplano An example of a successful public-private alliance II Region / Antofagasta Aguas De Antofagasta III Region / Copiapó Aguas De Chañar IV Region / La Serena Aguas Del Valle TWO CONCESSION MODELS 1998 BEGINNING V Region / Valparaíso Indefinite concession Esval R.M. / Santiago OF THE Aguas Andinas VI Region / Rancagua PRIVATIZATION Essel Concession for 30 years VII Region / Talca PROCESS Aguas Nuevo Sur VIII Region / Concepción Essbio IX Region / Temuco Clients breakdown by Economic Group Aguas Araucania Los Ríos / Valdivia X Region de Los Lagos y XIV Region Aguas Décima AGBAR SUEZ 43.0% de Los Ríos / Pto.Montt Essal ONTARIO TEACHERS PP 31.1% Private companies: 6 MARUBENI 9.2% Xi Region / Coyhaique INV. AGUAS RIO CLARO 5.1% 30 years Concessions: 8 Aguas Patagonia SMAPA 3.9% EPM 3.3% 96% OF CLIENTS served by a HIDROSAN-ICAFAL-VECTA 2.6% privately-held operator Xii Region / Pta.Arenas OTHERS 1.9% Aguas Magallanes 9 Source: SISS' 2014 Management Report
HIGHLY REGULATED SANITATION INDUSTRY Proven, Stable, and Transparent Framework Regulatory framework in place for more than 25 years MODEL COMPANY vs. REAL COMPANY Superintendence of Sanitation Services (SISS) acts as the regulator counterpart MODEL COMPANY AGUAS ANDINAS in the tariff setting process, which lasts for 1 year approximately Greenfield operation Existing infrastructure Tariffs are reset every five years, based on an unbiased and technical model: Combination of new and Latest technology – Based on the long term total cost of a model company existing technologies – Discrepancies are solved by an independent experts committee Cost efficiency Real costs – Minimum real return on assets of 7% after taxes – Automatic interim adjustments linked to polynomials based on CPI and 100% coverage in all services Real coverage WPI indexes Self-financing of investments Self-financing of investments through tariffs through tariffs Government subsidies for low-income clients Ability to use debt to finance Minimum Capex and enhance return on The regulatory framework of the Chilean water industry has been fundamental Return on Assets equity to the development of the sector 10
TARIFF NEGOTIATION STEPS From General Parameters to the Model Company Size SISS OFFER Publication of the Tariff Setting Process Parameters and Methodology Aguas Andinas provides information about the Real Company to the SISS SISS analyses the Aguas Andinas analyses the Model Company Model Company Aguas Andinas highlights discrepancies Negotiation Agreement? No Yes Expert Committee Committee Decision Tariff Decree 11
ESSAL TARIFF-SETTING PROCESS Technical and Negotiation Process For One Year Agreed list of Definitive candidates Bases for the Expert Committee Parameters and SISS Committee Comments on SISS answers SISS calls Background Exchange of Methodology The company gives sets new Tariffs the to the Comments delivery of the Committee the Tariff Publication highlights Expiration its Tariff parameters of Experts Tariff Study Studies Discrepancies answer Formulas are made Process JUNE AUGUST SEPTEMBER MARCH APRIL APRIL JUNE AUGUST SEPTEMBER OCTOBER 12 2015 11 2015 8 2016 7 2016 26 2016 5 2016 12 2016 11 2016 25 2015 29 2015 30 days 16 days 30 days 30 days 12
RESOLUTION OF SIXTH TARIFF NEGOTIATION PROCESS An Agreement Was Reached with the SISS On November 14 th 2014, Aguas Andinas and its subsidiaries Aguas Maintain Aguas Andinas’ and Aguas Cordillera’s current tariffs from Cordillera and Aguas Manquehue, December 31 st 2013 came to an agreement with the Superintendence of Sanitary Services – The new tariff decree will apply from March and July 2015 (the "SISS") within the framework of respectively the sixth tariff-setting process for the period 2015-2020 on the following Reduce Aguas Manquehue’s tariffs by 5% in comparison to those terms: applicable on December 31 st 2013 – The new tariff decree applies from May 2015 The indexation polynomials will remain the same 13
RESOLUTION OF SIXTH TARIFF NEGOTIATION PROCESS Changes In Tariffs When New Services Go Into Operation In addition to the indexation Additional tariffs when new works come into operation: polynomial, during the next five years, tariffs will change when new services Turbidity safety works: +1.1% in 2018 that have previously been negotiated with the SISS enter into operation Quality improvement works WWTP Farfana + Trebal: +1.4% in 2018 Tariff discounts for Non-Regulated Businesses: Alto Maipo Project: -1.2% in 2018 (estimated) 14
03 INVESTMENTS
INVESTMENTS PLAN FOR THE NEXT FIVE YEARS Ensuring The Continuity Of Service INVESTMENTS 2015 - 2020 USD OBJECTIVE: Guarantee the continuity of our service even in Infrastructure replacement and operational adverse situations and that our clients are confident of this improvement plans 900 MILLION Works associated with growth, security, and quality of service DEVELOPMENT PLAN AGREED UPON WITH THE SISS FOR INVESTMENTS 2015 200 MILLION THE 2015-2020 PERIOD (UF) 3.160.487 AGUAS ANDINAS CONSOLIDATED MAIN PROJECTS FOR 2015-2020 USD MM Extension of the Mapocho Treatment Plant 120 Potable Water Safety Infrastructure Works 100 Potable Water and Sewage Network Preventive 80 Renovation 561.176 Strengthening of the Chicureo – Chamisero Potable 267.929 30 Water Supply System Vizcachas Plant UPGRADE 50 Potable Water Sewerage Sewage Treatment and Disposal Hydraulic Efficiency Director Plan 30 16 Source: SISS' 2014 Management Report and Aguas Andinas
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