ENGIE ENERGÍA CHILE S.A. Presentation to investors 1H 2017 Results
AGENDA Highlights Industry and Company Projects Financial Results
Highlights
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 of 50% of the TEN project. Gross debt has remained unchanged, but expansion CAPEX has so far been financed with available cash, resulting in a 39% increase in net debt to US$654 million. Financial Highlights 1H16 1H17 Variation Operating Revenues (US$ million) 471.1 530.4 +13% EBITDA (US$ million) 142.0 140.4 -1% EBITDA margin (%) 30.2% 26.5% -3.7 pp Net income (US$ million) 233.6 51.2 -78% Net income-recurring (US$ million) 41.8 43.7 +5% Net debt (US$ million) 470.0 * 654.2 +39% * As of the end of December 31, 2016 Engie Energía Chile - Presentation to Investors – 1H 2017 4
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) energy sector’s 30-year development plan; and (iv) a study referred to electricity supply auctions and power demand evolution. The “ CEN ” or “ Coordinador Eléctrico Nacional” , implemented measures to cope with the intermittence caused by the increasing penetration of renewable energy sources, such as (i) increasing the spinning reserve and (ii) extending the visibility of LNG supply. This contributed to decrease the volatility of spot energy prices in 2Q17. CO 2 taxes began to accrue in 2017, with the first payment due in April 2018. The tax is equivalent to US$5/ton of CO 2 generated. Company In July 2017, both S&P and Fitch Ratings confirmed EECL’s BBB rating with stable outlook. A final US$12.85 million dividend on account of 2016 ’s net income, was paid on May 18, 2017. The commissioning of new power plants in the system during 2016 led to a decrease in our own generation and an increase in energy purchases from the spot market in 1H17 . Engie Energía Chile - Presentation to Investors – 1H 2017 5
Industry and Company
CHILEAN ELECTRICITY INDUSTRY 1H 2017: Two main separate grids preparing for interconnection Growth Generation GWh Main players Market Clients (1H17) (2017-2026) 1 (% installed capacity 1H17) Diesel 1% Renew. Other Regulated EECL Gas 10% 16% 11% 10% 23% capacity 34% 3.5% Tamakaya SING 25% demand 9,015 GWh 9% 5,777 MW Enel AES Unregulated 17% Gener Coal 79% 89% 24% Unregulated Diesel 5% Renew. Colbún 19% 30% 11% 76% capacity Gas 23% Other 35% 3.6% SIC 74% demand Hydro Santiago 17,481 MW 27,461 GWh 32% AES Gener 16% Regulated Coal 24% Enel 31% 70% Aysén and Notes: Magallanes (1) Compounded annual sales growth • Sources: CNE, CEN • Excludes AES Gener’s 643MW Termoandes plant located in Argentina, since it is based on projection by the Comisión no longer dispatching electricity to the SING. Nacional de Energía (CNE) as per • In the SIC, Endesa includes Pangue and Pehuenche. the Informe de Previsión de • Demanda – January 2017. AES Gener includes EE Guacolda as well as EE Ventanas, and E. Santiago. Engie Energía Chile - Presentation to Investors – 1H 2017 7
THE SING A predominantly thermal system, with growing presence of renewables ● No exposure to hydrologic risk ● Long-term contracts with unregulated clients (mining companies) accounting for 89% of demand (bilateral negotiation of prices and supply terms) ● Maximum demand: ~ 2,511 MW in April 2017; expected 3.5% compounded average annual growth rate for the 2017 - 2026 period US$/MWh MW 2,500 350 Coal Gas Diesel Renew. Spot price Average generation (MW) 300 Marginal cost (US$/MWh) 2,000 250 1,500 200 150 1,000 100 500 50 0 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Engie Energía Chile - Presentation to Investors – 1H 2017 8
CHILE, A WORLD-CLASS COPPER PRODUCER Power demand growth due to declining ore grades and water pumping needs Copper price LME (US¢/lb) Electricity demand GWh Copper production in the SING ('000 tons) (1) 4,500 GWh US¢/lb 500 2,000 4,000 450 1,800 3,500 400 1,600 3,000 350 1,400 300 1,200 2,500 250 1,000 2,000 (est.) 3,141 3,203 3,170 3,421 3,799 3,767 3,826 4,087 3,876 3,981 3,721 3,747 3,987 3,981 3,842 3,626 3,959 3,964 200 800 1,500 150 600 1,000 100 400 500 50 200 0 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017e (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 – 1H 2017 9
OWNERSHIP STRUCTURE AS OF JUNE 30, 2017 A world-class controller and a diversified ownership base Pension funds Foreign institutions ENGIE Local institutions Individuals 6.70% 52.76% 15.70% 24.35% 0.48% ENGIE ENERGÍA CHILE S.A. (“EECL”) Red Eléctrica Inversiones Punta de Red Eléctrica Chile Rieles Ltda. Chile S.A. 40% 50% Central Central Gasoducto Edelnor Transmisión Transmisora Termoeléctrica Termoeléctrica Norandino S.A. S.A. Eléctrica del Norte Andina S.A. (“CTA”) S.A. (“TEN”) Hornitos S.A. (“CTH”) 60% 100% 100% 100% 50% Electroandina S.A. Gasoducto (port activities) Norandino Argentina S.A. 100% 100% Engie Energía Chile - Presentation to Investors – 1H 2017 10
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 1,799 MW 1,405 MW 623 202 13 623 317 1,500 623 962 MW 1,000 24 688 1,000 1,127 1,405 532 MW 1,500 781 500 1,127 350 MW 500 781 532 295 158 55 0 0 EECL AES Gener Enel Tamakaya Other 2010 2016 2018 Generación (Kelar) Coal Gas/Diesel Coal Gas Diesel Renewable Diesel/Fuel Oil Hydro & Renewables Sources: CNE & CEN AES Gener excludes Termoandes (located in Argentina and not available for the SING) “ Other ” includes ENEL Green Power Engie Energía Chile - Presentation to Investors – 1H 2017 11
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 Renewables El Aguila I (2MW) Diesel 10% P. Camarones (6MW) Diesel Arica (14MW) Diesel Iquique (43MW) Collahuasi TE Tocopilla (877MW) 1,971 MW Gas 32% El Abra Tocopilla port Coal 57% Chuquicamata C. Tamaya (104MW) Gaby Gas transportation TE Mejillones (560MW) Escondida Gasoducto Norandino CT Andina (177MW) Chile - Argentina (Salta) Coal Gas Diesel Renewables CT Hornitos (177MW) 2,157 kms of high & medium voltage transmission lines owned by EECL Sources: CNE & CDEC-SING Engie Energía Chile - Presentation to Investors – 1H 2017 12
CONTRACTABLE EFFICIENT CAPACITY IEM to contribute additional capacity in 2018 December 2016 December 2018 2,345 MW 2,500 2,500 19 1,971 MW 202 2,000 19 2,000 202 623 1,647 MW 6 1,363 MW 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 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 – 1H 2017 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$ 121.43/MWh (until Sept. 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 – 1H 2017 14
PPA PORTFOLIO INDEXATION Matched with cost structure Overall indexation applicable to electricity and capacity sales (as of June 2017) Marginal Other Cost 1.5% 0.2% 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
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