ENGIE ENERGÍA CHILE S.A. Presentation to investors 3Q 2016 Results
AGENDA Highlights Industry and Company Projects Financial Results 2
Highlights
FINANCIAL PERFORMANCE 3Q 2016 EBITDA reached US$218 million , a 12% decrease compared to 9M15, due to the reduction in certain indices that adjust our PPA prices, the decrease in gas sales, and higher emission- reduction costs, partly offset by positive foreign exchange-related effects and cost saving initiatives. The EBITDA margin increased to 30.4% in 9M16. Net income amounted to US$260.6 million , mainly due to non-recurring income primarily explained by the sale of 50% of the TEN project Gross debt has remained unchanged despite heavy expansion CAPEX. Strong cash balances resulting from healthy operating cash flow and proceeds from the TEN sale, resulted in a 4.8% decrease in net debt to US$584 million: Financial Highlights 9M15 9M16 Variation Operating Revenues (US$ million) 869.2 717.9 - 17% EBITDA (US$ million) 248.8 218.4 - 12% EBITDA margin (%) 28.6% 30.4% + 1.8 pp 72.4 260.6 + 260% Net income (US$ million) - 4.8% Net debt (US$ million at end of September) 613.2 (1) 584.0 (2) (1) As of the end of December 31, 2015; (2) as of September 30, 2016 Engie Energía Chile - Presentation to Investors - 9M 2016 4
HIGHLIGHTS EECL’s Board of Directors called for an Extraordinary Shareholders’ Meeting to be held on October 28, to request shareholder authorization to pledge the Company’s shares in TEN in favor of the TEN project finance providers. On September 20, the Minister of Energy, accompanied by regional authorities as well as executives of TEN and its shareholders, conducted a site visit to the SIC-SING interconnection project being carried out by TEN. The TEN project showed an overall progress rate of over 60% as of the end of September, 2016. EECL filed an environmental impact study for the Las Arcillas combined-cycle gas project with the regional Environmental Evaluation Service. The Las Arcillas CCGT Project includes a power plant, a gas pipeline and a transmission line in the south of Chile. On August 17, the CNE communicated the results of an up to 12,430 GWh/year Energy Supply Auction covering regulated clients’ power supply needs for 20 years starting in 2021. 84 companies bid for 5 power supply blocks accounting for approximately 1/3rd of distribution companies’ current energy demand. The resulting weighted average energy price was US$47.6/MWh . Engie Energía Chile - Presentation to Investors - 9M 2016 5
Industry and Company
CHILEAN ELECTRICITY INDUSTRY 9M 2016 Growth Generation GWh Main players Market Clients (% installed capacity 9M16) (9M16) (2016-2025) 1 Renew. Diesel Other Regulated 6% 7% 7% 11% EECL Endesa 4.7% 25% capacity Gas 10% 46% 22% SING 26% demand 14,638 GWh 4,471 MW AES Unregulated Gener 89% Coal 78% 25% Unregulated 30% Diesel 7% Renew. Colbún 20% 8% 74% capacity 4.1% Other 31% Gas 20% SIC 73% demand Santiago Hydro 16,487 MW 35% 40,472 GWh AES Gener 17% Regulated Endesa 33% 70% Coal 28% Aysén and Notes: Magallanes • Sources: CNE, CDEC SING and CDEC SIC (1) Compounded annual sales growth • Excludes AES Gener’s 643MW Termoandes plant located in Argentina, since it is based on projection by Comisión no longer dispatching electricity to the SING. Nacional de Energía (CNE) as per • In the SIC, Endesa includes Pangue and Pehuenche. the Informe Técnico Definitivo Precio • AES Gener includes EE Guacolda as well as EE Ventanas, and E. Santiago. Nudo SING/SIC – Abril 2016. Engie Energía Chile - Presentation to Investors – 9M 2016 7
THE SING A predominantly thermal system, with growing presence of renewables ● No exposure to hydrologic risk ● Long-term contracts with unregulated clients (mining companies) accounting for 89% of demand (bilateral negotiation of prices and supply terms) ● Maximum demand: ~ 2,555 MW in February 2016; expected 4.7% compounded average annual growth rate for the 2016-2025 period MW US$/MWh Coal Gas Diesel Renew. Spot price 2500 350 Average generation (MW) Marginal cost (US$/MWh) 300 2000 250 1500 200 150 1000 100 500 50 0 0 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Engie Energía Chile - Presentation to Investors - 9M 2016 8
CHILE, A WORLD-CLASS COPPER PRODUCER Power demand growth due to declining ore grades and water pumping needs US¢/lb Copper production in the SING ('000 tons) Copper price LME (US¢/lb) GWh 500 4500 1800 Electricity demand GWh 450 4000 1600 400 3500 1400 350 3000 1200 300 2500 1000 250 3,959 3,721 3,141 3,203 3,170 3,421 3,799 3,767 3,826 4,087 3,876 3,981 3,747 3,964 3,987 3,981 2000 800 200 1500 600 150 1000 100 400 500 50 200 0 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 (1) Copper Produced by SING producers calculated as Chile’s total copper production less El Teniente, Andina, Salvador, Los Pelambres, Anglo American Sur, Candelaria and Caserones. Source: COCHILCO Engie Energía Chile - Presentation to Investors - 9M 2016 9
OWNERSHIP STRUCTURE AS OF SEPTEMBER 30, 2016 A world-class controller and a diversified ownership base Foreign institutions ENGIE Local institutions Pension funds Individuals 6.48% 52.76% 17.62% 22.65% 0.49% ENGIE ENERGÍA CHILE S.A. Inversiones Punta de Red Eléctrica Chile (“EECL”) Red Eléctrica Rieles Ltda. Chile S.A. 40% 50% Central Central Gasoducto Edelnor Transmisión Transmisora Termoeléctrica Termoeléctrica Norandino S.A. S.A. Eléctrica del Norte Hornitos S.A. Andina S.A. (“CTA”) S.A. (“TEN”) (“CTH”) 60% 100% 100% 100% 50% Electroandina S.A. Gasoducto (port activities) Norandino Argentina S.A. 100% 100% Engie Energía Chile - Presentation to Investors - 9M 2016 10
GROSS INSTALLED CAPACITY SING and EECL as of September 30, 2016 SING EECL 2,500 3,000 2,040 MW 2,494 MW 2,500 18 18 2,000 2,040 MW 205 288 1,799 MW 18 2,000 205 1,500 688 688 13 317 1,121 MW 1,500 688 962 MW 1,000 24 688 1,000 1,129 1,121 1,500 781 500 348 MW 1,129 500 781 294 158 54 - - EECL AES Endesa Other 2010 2016 2018 Gener Coal Gas/Diesel Coal Gas Diesel Renewable Diesel/Fuel Oil Hydro & Renewables Sources: CNE & CDEC-SING AES Gener excludes Termoandes (located in Argentina and not available for the SING) Engie Energía Chile - Presentation to Investors - 9M 2016 11
INSTALLED CAPACITY AND OPERATING ASSETS Efficient thermal power plants, port, transmission lines and gas pipelines Installed Capacity (September 2016) Technology Coal Renewables Diesel/FO Chapiquiña (10MW) 1% Natural gas Renewables El Aguila I (2MW) Diesel 12% P. Camarones (6MW) Diesel Arica (14MW) Diesel Iquique (43MW) Collahuasi TE Tocopilla (915MW) 2,040 MW Coal 55% El Abra Tocopilla puerto Gas 32% Chuquicamata C. Tamaya (104MW) Gaby Gas transportation TE Mejillones (592MW) Escondida Gasoducto Norandino CT Andina (177MW) Chile - Argentina (Salta) Coal Gas Diesel Renewables CT Hornitos (177MW) 2,199 km of high voltage transmission lines Sources: CNE & CDEC-SING Engie Energía Chile - Presentation to Investors - 9M 2016 12
CONTRACTABLE EFFICIENT CAPACITY IEM to contribute additional capacity in 2018 September 2016 December 2018 2,452 MW 2,500 2,500 18 2,040 MW 288 18 2,000 2,000 205 688 1,593 MW 1,348 MW 6 1,500 1,500 688 5 521 521 1,000 1,000 1,457 1,129 1,066 500 500 822 - - Gross Installed capacity Contractable efficient Gross Installed capacity Contractable efficient capacity capacity Coal Gas/Diesel Diesel/Fuel Oil Renewables Coal Gas Diesel/Fuel Oil Renewables Source: Engie Energía Chile “Contractable” efficient capacity is measured as net installed capacity of coal, gas and renewable plants minus spinning reserve, estimated maintenance, degradation & outage rates, and transmission losses Engie Energía Chile - Presentation to Investors - 9M 2016 13
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 2019-2032, equivalent to 575 MW-average — Monomic price: US$ 111.4/MWh (until March 2017) This will represent a significant increase in contracted sales, a more diversified client portfolio, and access to the SIC, Chile’s main market and three times larger than the SING. To meet these commitments, EECL took the following main initiatives to expand its generation capacity: — Construction of a new US$1.1 billion coal-fired plant (IEM1) and associated port; — New 15-year LNG supply contracts for use at its existing combined-cycle units (2 LNG cargoes in 2018, 3 LNG cargoes per year as from 2019 onwards) Engie Energía Chile - Presentation to Investors - 9M 2016 14
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