Corporate Presentation August 2014
FINANCIAL HIGHLIHGTS (millions of USD) AGUAS ANDINAS Largest Water Utility REVENUE 327.225 402.624 5,3% 119.473 108.284 annual Largest water utility in Chile and one of the largest in Latin America average 1 2009 2013 mar-13 mar-14 EBITDA 247.277 205.609 4,7% 79.727 70.354 annual More than 2 million clients average 1 2009 2013 mar-13 mar-14 Natural monopoly (regulated) MARKET SHARE (1) Proven, stable regulatory 43% of industry revenue framework Minimum, guaranteed return of 7% 51% of billed water in the industry 43 % of clients in the industry Stable demand Exclusive, high-quality water resources that do not expire (1) Annual average 2009-2013 (2) Marketshare estimated according to SIIS ´ Informe de Gestión 2013
CORPORATE STRUCTURE World Class Controlling Shareholders OWNERSHIP AS OF JUNE 30 2014 75,4% Others 12,4% • SUEZ ENVIRONNEMENT is one of the leading water and CORFO 5,0% sewage treatment players worldwide. IAM 50,1% • AGBAR is an international benchmark in the sanitation 56,6% business with more than 150 years of experience in the International sanitation industry, with a presence in 14 countries. Shareholders 24,1% 50,1% Chilean Pension Brokers Funds 6,5 % 1,9% 100% 100% 53,5% 100% 100% 100% 100% REGULATED COMPANIES NON-REGULATED COMPANIES
INDUSTRY COVERAGE RATIOS** CONSOLIDATED INDUSTRY 99,9% (DW) 100% 99,8% (WT) Operated by private players 80% 96,5% (S.) 60% 40% MARKET SHARE* 20% 0% 43% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 AGBAR SUEZ Drinking Water Sewage Wastewater Treatment 31% ONTARIO TEACHERS PP 9% MARUBENI 5% INV. AGUAS RIO CLARO 4% SMAPA INDUSTRY REVENUES & CAPEX (USD TH. MILLONS)** GRUPO LUKSIC 3% HIDROSAN-ICAFAL-VECTA 3% OTROS 2% $ 321 $ 351 $ 399 $ 442 $ 483 $ 528 $ 596 $ 667 $ 688 $ 734 $ 738 $ 802 $ 878 $ 924 $ 110 $ 192 $ 262 $ 178 $ 111 $ 148 $ 174 $ 100 $ 135 $ 154 $ 115 $ 219 $ 181 $ 232 Currently, 95.7% of the population is served by a privately-held operator. 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Revenue (MMM$) CAPEX (MMM$) *Market share based on number of clients. Source: Informe de Gestión 2013 de SISS. **Source: SISS. Exchange rate: 523.76 CLP/USD as of 31 December 2013.
CHALLENGES Aguas Andinas • • Service continuity Increased service standards • • Service reliability New channels to provide customer service • • Automation and technology OPERATIONS CLIENTS Customer service, infrastructure and better processes • Security ORGANIZATION COMMUNICATIONS • Intelligent organization • Open dialogue with the community • Efficiency and changes in • Education/community outreach corporate culture • Corporate Responsibility • Human Resources
COMMITTED INVESTMENT PLAN WITH THE SISS FOR 2013-2023(USD MILLONS) SERVICE CONTINUITY Increase Reserves of Drinking Water A two-phase plan that will strengthen our network has been developed. 84 39 27 Safety Infrastructure Projects – Phase I (completed): • 7 new wells (500 liters per second) Drinking Water Sewage Sewage • 6 storage tanks for drinking water with a capacity of 225,000 m3 Collection Treatment • 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 m 3 • Network autonomy will be raised to 32 hours • Investment of approximately US$100 million • Anticipated tariff increase of 1.6% to be applied when the project is completed (2018) Source: Aguas Andinas * USD/CLP=570 UF/CLP=23.500
FLOW OF THE MAIPO RIVER (M 3 /S) SERVICE CONTINUITY Drought Mitigation Plan New investments to increase capacity and agreements with Jun Jul Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun primary users for the joint management of the Maipo river WATERFALL AT EMBALSE EL YESO (mm) (1) Measures taken by the company to mitigate the impacts of the drought during the last four years have ensured 1313 1400 1196 water supply for 2014-2015, even in the event that 2014 1129 1200 is a dry year. 975 1000 854 667 800 655 655 532 445 600 466 463 442 322 MAIN INITIATIVES: 400 188 • New capacity in wells 200 • Purchase of raw water 0 • Renting of water rights • * Average calculated from 1983 to date. Agreements with other users of the river (1) Source: Dirección General de Aguas (DGA) • Monitoring and control of illegal water usage/extraction El Yeso Reservoir June 2014- Aproximately 47,54% of Capacity
SERVICE CONTINUITY Operating Highlights 2012-2013 2. PRODUCTION • New wells in the Cerro Negro area • Drought Contingency Plan 4. COLLECTION • Maintenance of sewage network to provide optimal service. 5. TREATMENT 1. EXTRACTION • Completion of the Mapocho • Connection between El Yeso Sewage Treatment Plant, reservoir and Laguna Negra aqueduct which allowed the Company 3. STORAGE AND DISTRIBUTION to reach 100% coverage in • Additional reserve volume of 225,000 m 3 in 6 new tanks sewage treatment. • Investment in “Ice Pigging,” cleaning technique that utilizes pressurized ice • Hydraulic efficiency plan Aguas Andinas’ high coverage levels for all water and sewage services ranks the Company as a world -class operator.
STRATEGIC CUSTOMER SERVICE PLAN New World Class System Implementation of AquaCIS, new billing tool that will allow us to further strengthen our commitment to serving clients Integrates commercial operations processes, such as customer service, contracting services, readings, billing and collection, etc. Work-flow management and business processes are integrated into a single technology platform
The regulatory framework of the REGULATORY FRAMEWORK Chilean water industry has been fundamental to the development of Proven, Stable and Transparent the sector. Regulatory framework in place more than 20 years MODEL COMPANY vs. REAL COMPANY Superintendency of Sanitation Services (SISS) acts as the regulator counterpart in tariff setting process, which lasts 1 year MODEL COMPANY AGUAS ANDINAS Greenfield operation Existing infrastructure Tariffs are reset every five years, based on an objective and technical model: • Tariffs are calculated based on long term total costs of a model company Combination of new and Latest technology • Company and regulator have equal roles in the tariff calculation process legacy technology • 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 WPI indexes 100% coverage in all Real coverage services Very low delinquency levels due to the legal Self-financing of Self-financing of empowerment to disconnect clients investments through investments through tariffs tariffs Ability to use debt to Minimum return on finance Capex and Government subsidies for low-income clients capital enhance return on equity
Mechanism for Tariff Negotiation Process SIXTH TARIFF NEGOTIATION PROCESS SISS study of Company study model of model CALENDAR company company At least 12 months 2 months Discrepancies 1 5 months 1a Negotiation 1b 2 2 4 months Agreement? 45 days 3 1 month 4 No Yes 1. Publication of preliminary bases (October 2013) 1 a. Observations/comments of preliminary bases (December 2013) 1 b. Publication of definitive bases (March 2014) 2. Exchange of model company studies (October 2014) Expert 2-3. Negotiation Tariff Decree Committee 3. Tariff decree 4. New tariffs applied
TARIFF BENCHMARKS TARIFFS PER CUBIC METER (WATER AND SEWAGE) US$/M 3 7,09 Oslo 3,29 Coyhaique 6,6 Berlin 3,02 Antofagasta 5,93 Sydney 2,50 5,33 Iquique Copenhagen 5,12 Ottowa 2,38 Puerto Montt 3,88 Paris 2,35 Punta Arenas 3,65 London 2,29 3,23 Copiapó Mexico City 2,74 Washington 2,14 Arica 2,56 Madrid 2,08 Valparaíso 2,33 Stockholm 2,03 Valdivia 1,95 Montevideo 1,62 Athens 2,00 Talca 1,53 Cape Horn 1,99 Temuco 1,41 Moscow 1,95 La Serena 1,39 Santiago* 1,36 Rome 1,72 Rancagua 1,24 Seoul 1,62 Concepción 1,04 Sao Paulo 1,35 Gran Santiago 0,66 Lima 0,51 1,06 Shanghai Maipú 0,16 Caracas Source: Informe de Gestión 2013 de SISS. Tariffs to December 2013 considering US $1= $523,76 *Santiago includes Gran Santiago & Maipú
PRODUCTIVITY/QUALITY OF SERVICE CLIENTS/EMPLOYEES BILLING/EMPLOYEES Th. M 3 144 573 82 365 AGUAS ANDINAS CHILEAN INDUSTRY AVERAGE AGUAS ANDINAS CHILEAN INDUSTRY AVERAGE RUPTURES X 100 KMS. RUPTURES X 1.000 CLIENTES 1,9 22,9 7,4 0,2 AGUAS ANDINAS CHILEAN INDUSTRY AVERAGE AGUAS ANDINAS CHILEAN INDUSTRY AVERAGE Source: Informe de Gestión 2013 de SISS
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