Aguas Andinas Corporate Presentation June 2015
01 OUR COMPANY
AGUAS ANDINAS Chile’s Largest Sanitation Company TARIFFS (Potable Water, Sewerage, and Sewage Treatment US$/m3) Coyhaique 3,29 Antofagasta 3,02 Iquique 2,50 Natural regulated Puerto Montt 2,38 100% de coverage in monopoly Punta Arenas 2,35 potable water and sewage Copiapó 2,29 treatment Arica 2,14 Valparaíso 2,08 Valdivia 2,03 Talca 2,00 Temuco 1,99 Exclusive La Serena 1,95 resources One of the lowest tariffs in Rancagua 1,72 Chile without expiry Concepción 1,62 Greater Santiago 1,35 Maipú 1,06 Source : SISS’ 2013 Management Report. Tariffs to December 2013 considering US $1= $523,76 3
CORPORATE STRUCTURE World Class Controlling Shareholders Chilean Pension Funds CORFO 2,4% 5,0% SUEZ ENVIRONNEMENT is one of the leading water and sewage treatment players worldwide. 100% Stock Brokers 8,3% AGBAR is an international benchmark in the sanitation business with more than 150 years of Ownership 56.6% IAM Others as of May 31 experience in the sanitation industry, with a 50,1% 10,5% 2015 presence in 14 countries. 50.1% International Shareholders 23,6% 100% 100% 53.5% 100% 100% 100% 100% REGULATED COMPANIES NON-REGULATED COMPANIES 4 4
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 5 5
OPERATIONAL RATIOS High Standards of Productivity and Quality of Service CLIENTS/EMPLOYEES BILLING/EMPLOYEES Th. M 3 144 573 82 365 AGUAS ANDINAS INDUSTRY AVERAGE AGUAS ANDINAS INDUSTRY AVERAGE RUPTURES X 100 KMS. RUPTURES X 1,000 CLIENTS 1,87 22,90 7,40 0,21 AGUAS ANDINAS INDUSTRY AVERAGE AGUAS ANDINAS INDUSTRY AVERAGE 6 Source: SIIS' 2013 Management Report
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 Esval R.M. / Santiago OF THE Indefinite concession Aguas Andinas VI Region / Rancagua PRIVATIZATION Essel VII Region / Talca PROCESS Concession for 30 years Aguas Nuevo Sur VIII Region / Concepción Essbio IX Region / Temuco Aguas Araucania Los Ríos / Valdivia X Region de Los Lagos y XIV Region AGBAR SUEZ 43,0% Aguas Décima de Los Ríos / Pto.Montt Essal ONTARIO TEACHERS PP 31,1% Total Privatization 6 MARUBENI 9,4% Xi Region / Coyhaique INV. AGUAS RIO CLARO 5,0% Concessions 8 Aguas Patagonia SMAPA 4,0% LUKSIC GROUP 3,3% HIDROSAN-ICAFAL-VECTA 2,6% 96% OF CLIENTS served by a Xii Region / Pta.Arenas OTHERS 1,6% privately-held operator Aguas Magallanes 8
HIGHLY REGULATED SANITATION INDUSTRY Proven, Stable, and Transparent Framework Regulatory framework in place more than 25 years MODEL COMPANY vs. REAL COMPANY Superintendence of Sanitation Services (SISS) acts as the regulator counterpart MODEL COMPANY AGUAS ANDINAS in tariff setting process, which lasts 1 year Greenfield operation Existing infrastructure Tariffs are reset every five years, based on an objective and technical model: – Combination of new and Tariffs are calculated based on long term total costs of a model company Latest technology legacy technology – Company and regulator have equal roles in the tariff calculation process – Discrepancies are solved by an independent experts committee Cost efficiency Real costs – Minimum real return on assets of 7% after taxes 100% coverage in all – Automatic interim adjustments linked to polynomials based on CPI and Real coverage services WPI indexes Self-financing of Self-financing of investments through investments through tariffs Government subsidies for low-income clients tariffs Ability to use debt to The regulatory framework of the Chilean water industry has been fundamental Minimum return on finance Capex and enhance to the development of the sector. capital return on equity 9
STAGES OF THE TARIFF NEGOTIATION PROCESS From General Parameters To The Size Of The Model Company SISS DRAFT Parameters and Methodology for Tariff Process are published Aguas Andinas provides information on the “real” company to the SISS SISS study of model company Company study of model company Company presents discrepancies Negotiation Agreement? No Yes Expert Committee Decision of the Committee Tariff Decree 10
AGUAS ANDINAS TARIFF PROCESS Technical Process Lasting One Year List of Final ‘middle parameters candidate’ and for Expert methodology Committee is published determined SISS Tariff New Tariff requests SISS rules on studies Expert SISS Publication of Settlement minutes observations Observations exchanged Final committee Administrative Company parameters and establishes 2009-13 info from expert on on preliminary Parameters between called by appeal over the presents methodology new tariffs provided committee preliminary parameters company SISS SISS decision on discrepancies for tariff study parameters to make made and SISS the parameters / observations final ruling 21 MAR 2014 30 OCT 2013 30 DEC2013 13 FEB 2014 26 FEB 2014 12 MAR 2014 01 OCT 2014 31 OCT 2014 17 NOV 2014 07 JAN 2015 30 JAN 2015 28 FEB 2015 13 MAY 2014 30 days 16 days 46 days 30 days 11
RESOLUTION OF SIXTH TARIFF NEGOTIATION PROCESS An Agreement Was Reached with the SISS Maintain Aguas Andinas’ and Aguas Cordilleras’ tariffs as of December 31 2013. On November 14th, Aguas Andinas and its subsidiaries Aguas Cordillera – The new tariff decrees will apply from March and July 2015 and Aguas Manquehue, came to an respectively.. agreement with the Superintendence of Sanitary Services (the "SISS") Reduce Aguas Manquehue’s tariffs by 5% in comparison to those within the framework of the sixth applicable on December 31 2013.. tariff-setting process for the period 2015-2020 on the following terms: – The new tariff decree applies from May 2015.. The indexation polynomials will remain the same. 12
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) 13
03 INVESTMENTS
INVESTMENT 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 the 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 SIIS FOR INVESTMENTS 2015 200 MILLION THE 2014-2024 PERIOD (UF) 2.036.305 MAIN PROJECTS FOR 2015-2020 USD MM Extension of the Mapocho Treatment Plant 120 Potable Water Safety Infrastructure Works 100 950.122 Potable Water and Sewage Network Preventive 80 650.147 Renovation Strengthening of the Chicureo – Chamisero Potable 30 Water Supply System Vizcachas Plant UPGRADE 50 Potable Water Sewerage Sewage Treatment and Disposal Hydraulic Efficiency Director Plan 30 15
SAFETY INFRASTRUCTURE WORKS Increasing Potable Water Reserves A two-phase plan that will strengthen our network has been developed. Safety Infrastructure Projects – Phase I (completed): 7 new wells (500 liters per second) 6 storage tanks for drinking water with a capacity of 225,000 m3 Duct (4 m3/s) connecting the El Yeso Reservoir with the Las Vizcachas water production plant Tariff increase of 1.2% applied beginning 1 March 2014 Safety Infrastructure Projects - Phase II: Construction of a raw water storage tank with a capacity of 1,500,000 m3 Network autonomy will be raised to 32 hours Investment of approximately US$100 million Anticipated tariff increase of 1.1% to be applied when the project is completed (2018) 16 16
DROUGHT MITIGATION PLAN Guaranteeing Water Supply For the Fifth Consecutive Year EMBALSE EL YESO VOLUME 120% New investments to increase capacity and agreements with primary users for the joint management of the Maipo river 100% Volume (% of capacity) 80% Measures taken by the company to mitigate the impacts of the drought during the last five years and its mission is to guarantee 61% 60% the quality and quantity of the supply of potable water 40% MAIN INITIATIVES: 20% New capacity in wells 0% Purchase of raw water Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Renting of water rights 2010 2011 2012 2013 2014 2015 Agreements with other users of the river Monitoring and control of illegal water usage/extraction In order to guarantee the supply for the 2015-2016 summer, Embalse El Yeso must have a minimum volume of 90hm 3 (41% of capacity) as of the 31st of October 2015. 17 17
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