ENGIE Energia Per Corporate Presentation March 2018 KEY MESSAGES - PowerPoint PPT Presentation

ENGIE Energia Perú Corporate Presentation March 2018

KEY MESSAGES 2017 Solid results in a volatile context Limited commercial risk in a highly competitive environment Value proposition for our clients and portfolio optimization Solid financial discipline ENGIE Energía Perú - Corporate Presentation / March 2018 2

HIGHLIGHTS 2017 Solid results in a volatile context - Total energy generation (SEIN) - grew 1.4% compared to 2016. As of FY 2017 EBITDA reached December, EEP was the first 325.0MUSD while Net Result private player of the sector totalized 129.7MUSD , growing 5% accounting for 21% of the total and decreasing 1% compared to FY capacity and 16% of the total energy 2016 generation of the system - On March 31 st EEP announced the - Industry & End of DU049 Our business commercial operation of Intipampa regulation solar project. - Natural gas Price declaration norm was modified - At the end of 2017, total debt reached 837MUSD , decreasing 17% with respect to 2016 - - ENGIE’s good environmental, social Bond issuance in local capital market and governance practices were once for ~ 100MUSD @ 10/7 years at an more recognized. EEP was appointed attractive rate below 3.5% by Capital Finance International as - 5.5 year Corporate Loan with The Best ESG Power Producer in Financial Scotiabank for up to 150MUSD Peru in 2017 for a consecutive year Awards @3.3%. discipline - Net debt / EBITDA (12m): 2.5x @ Dec/2017 ENGIE Energía Perú - Corporate Presentation / March 2018 3

SNAPSHOT 2017 Operation • Excellent availability & reliability of our operating assets • Main focus in efficiency and Health & Safety standards through all internal processes (ENGIE previene app) Commercial • New commercial contracts with free clients, regulated and extensions for 380 MW • Net buyer position in the spot market for FY 2017, net seller position in Q4 2017 • Very competitive conditions in the PPA market due to oversupply continues Finance • Successful 100MUSD bond issuance in local capital market: 25MUSD @ 7 years and 75MUSD @ 10 years, at final rates in USD of 3.15% and 3.55%, respectively • Average cost of debt reduction (4.5%) & maturity extension Sustainability • 2.9MUSD investment in infrastructure (education & basic services), access and productive areas that benefited +12,000 people • Lima PV rooftop project, 31 kwp in our corporate building that reduces our CO2 footprint •Support campaigns for communities affected by “niño costero” ENGIE Energía Perú - Corporate Presentation / March 2018 4

AGENDA Energy market ENGIE Energia Peru overview Financial update Capital structure ENGIE Energía Perú - Corporate Presentation / March 2018 5

ENERGY SYSTEM Composed by three different sectors Generation Transmission Distribution Energy Sales 12,001 MW 27,358 km 7.1 million clients 44,500 GWh Total Capacity Basic transmission 18 37 21 24  87% Private   100% Private 38% Private Mining and smelting  Free market – market   Exclusive concession Exclusive concession Industry prices   Regulated tariff Two type of clients: Residential  Two type of clients:   Free clients: Open Access Commercial  Free clients: Mainly Industries with  Main players: ISA mining and industry. consumption below (56%), Abengoa (11%) Consumption > 0.2 2.5 MW. & Red Electrica (3%) MW. Private auctions  Households and  Regulated Distribution industries with companies. Public demand below auctions 0.2MW  Main players: Government (62%), Enel disco (20%) & Luz de Sur (15%) ENGIE Energía Perú - Corporate Presentation / March 2018 6

ENERGY GENERATION MARKET An energy matrix with strong natural gas and hydro components Market Clients Generation matrix Market share 16% 3% 45% 37% 34% 22% Installed capacity 57% 55% 12,000 MW 16% 13% 3% -1% Hydro Non Conventional Renewables ENGIE Government Enel Generación IC Power Natural Gas Regulated Clients Free Clients Others Coal & diesel Peak demand • Main regulated clients are • • 6,596 MW Natural Gas generation is Market share as of Enel Distribución and Luz concentrated in Chilca December in terms of del Sur (Distribution district (60km from Lima) energy generation +2% companies in Lima) • Diesel plants dispatch in • Others include: Colbun, I • Main free clients are case of emergency and Squared, Statkraft, Mining and industrial transmission congestion Termochilca, among Annual energy companies others Generation • Clients with a consumption 48,993 GWh above 0.2MW are able to contract directly with generation companies +1% (free clients) ENGIE Energía Perú - Corporate Presentation / March 2018 7

BUSINESS MODELS IN ENERGY GENERATION After the privatization of the sector in the 90´s, the government developed different mechanisms to increase energy generation sources looking for i) hydro and natural gas power balance, ii) diversification of non conventional renewable sources, iii) geographic diversification of natural gas thermoelectric generation and iv) increase reserve for emergencies Traditional model Non Conventional Renewables • Government auctions every 2-3 years. Lower tariff projects • Investments are repaid by long term commercial are awarded contracts (PPAs). Private auctions & negotiations • The project commits to generate a certain amount of energy Commercial margin & Producer margin • per year and receives a fixed tariff ($/MWh) for ~20 years Capacity (fixed fee) and energy (variable charges) charges • • Electricity consumers are charged an additional fee in their electricity bill (charge is the difference between the Contractual and physical position determines “buyer” or • auctioned tariff and the spot prices) “seller” position in spot market Cold reserves & Nodos Hydro investment cost is higher than Hydro  natural gas thermoelectric investment Geographic diversification of natural gas generation • and operational cost Public auctions for dual fuel (Natural gas / diesel plants) • Pro-inversion auctions to promote hydros  Projects are available for the national system and receive an • Given hydrological seasonality, hydro  annuity for ~20 years power plants are normally net sellers in the spot market during wet season Electricity consumers are charged an additional fee in their • electricity bill ENGIE Energía Perú - Corporate Presentation / March 2018 8

MAIN REGULATION FRAMEWORK • Centralized generation • 2 markets: PPA market and the spot market Distribution • PPA market companies • Private negotiations or private / public auctions Generators • Protection against short term volatility Free clients • Spot market (physical exchange) • Goal of the dispatch system is to minimize total cost for the system Free clients • Marginal cost or spot price is the result of the system optimization and reflects the cost to generate an additional unit of electricity at a given time Interconnected SEIN • Spot settlement between generators (sellers and buyers depending on Energy System contractual positions) • Natural Gas generators declare prices to optimize its fixed cost structure Generators ENGIE Energía Perú - Corporate Presentation / March 2018 9

SUPPLY AND DEMAND IMBALANCE Oversupply generates low spot prices Incremental supply by mechanism (MW) Peruvian electricity generation system is based mainly on • 3000 hydro and natural gas from Camisea Field 2500 2000 2 seasons: wet (from November to April) and dry (from May • 1500 to October) 1000 500 • Electricity demand increased on average 7% annually 0 between 2005 and 2016 (YTD). Based on these conditions 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 and forecasts, the Government incentivized new generation Market (Demand / Supply) RER Other incentive mechanisms projects for more than 4000MW that started operations between 2012-2016 Balance Supply - Demand - Dry Season Reserve MW In 2016/2017, demand growth diminished its expected pace 14,000 100% • 12,000 (2% in 2017) due to delays in investment and lower 80% 10,000 consumption. Currently, demand is expected to have an 60% 8,000 average annual growth of 5-6% between 2018 and 2023 6,000 40% 4,000 As a result, a temporal imbalance between supply 20% 2,000 and demand has generated strong competition in - 0% 2017 2018 2019 2020 2021 2022 the PPA market and very low levels of spot prices Hydro Dry Season Renewable Natural Gas (CC) Natural Gas (OC) Coal Oil and Fuel Oil Max Demand Reserve Dry Season (%) Source: COES, OSINERGMIN a Sep-2017 ENGIE Energía Perú - Corporate Presentation / March 2018 10

MARGINAL COST RESULTING FROM SETTING UP DISPATCH ORDER Generation mix by fuel and Marginal Cost (energy only) GWh USD/MWh 4,500 50 45 4,000 40 3,500 35 3,000 30 2,500 25 2,000 20 1,500 15 1,000 10 500 5 0 0 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Hydro Renewable Natural Gas Coal Fuel Oil Marginal Cost Source: COES ENGIE Energía Perú - Corporate Presentation / March 2018 11

AGENDA Energy market ENGIE Energia Peru overview Financial update Capital structure ENGIE Energía Perú - Corporate Presentation / March 2018 12