ENGIE ENERGÍA CHILE S.A. Presentation to investors 4Q 2016 Results
AGENDA Highlights Industry and Company Projects Financial Results
Highlights
FINANCIAL SUMMARY 2016 EBITDA reached US$285 million , a 9% decrease. Cost saving initiatives partially offset the effect of the decrease in gas sales and higher emission-reduction costs. The EBITDA margin increased to 29.4% in 2016. Net income amounted to US$255 million , mainly due to non-recurring income primarily explained by the sale of 50% of the TEN project. Net debt decreased 23% despite heavy expansion CAPEX. Cash balances increased due to strong operating cash flow, proceeds from the TEN sale, and refunding of advances made to TEN following the successful closing of the TEN project financing. Financial Highlights 2015 2016 Variation Operating Revenues (US$ million) 1,142.7 967.4 - 15% 312.9 284.8 EBITDA (US$ million) - 9% EBITDA margin (%) 27.4% 29.4% + 2.1 pp Net income (US$ million) 94.2 254.8 + 171% Net debt (US$ million) 613.2 470.0 - 23% Engie Energía Chile - Presentation to Investors - 12M 2016 4
HIGHLIGHTS - Industry On July 11, 2016, the government published the new Transmission Law , ruling the functioning of the country’s electric power transmission systems. This new law aims at fostering more investments in the country’s power transmission systems so as to avoid bottlenecks and ensure greater security of supply. 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 . A new coordination body, the “ Coordinador Eléctrico Nacional” , took office on January 1, 2017, in replacement of the CDEC-SING and CDEC-SIC, to manage the integrated, nationwide power grid (the “SEN” or “Sistema Eléctrico Nacional” ) that will result from the interconnection of both power grids beginning 2018. CO 2 taxes resulting from the 2014 tax reform will begin to apply in 2017, with the first payment due in April 2018. The tax is equivalent to US$5/ton of CO 2 generated. Engie Energía Chile - Presentation to Investors - 12M 2016 5
HIGHLIGHTS - Company The key milestones of EECL’s 2016 Financial Plan were successfully met : — On January 27, 2016, EECL sold 50% of its shares in the TEN transmission project to Red Eléctrica Chile SpA, an indirect subsidiary of Red Eléctrica Corporación S.A. (Spain) for US$217.6 million. As a result, TEN began to be joint-controlled by EECL and Red Eléctrica , and was deconsolidated from EECL’s books. — On December 6, 2016 TEN closed a multi-tranche, long-term Project Financing with 10 financial institutions. Total committed amounts under the senior facilities reached US$-eq.745 million. In addition, TEN closed a US$-eq.110 million VAT financing facility. The first disbursement (~US$457 million) allowed TEN to repay US$171 million to EECL. The TEN project financing was named Latin America Power Deal of the Year AWARDS by PFI, a Thomson Reuters company. 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. EECL signed two power supply agreements with Minera El Abra for an aggregate 110MW over 11 years starting January 2018. The contracts with Lomas Bayas and Alto Norte were extended through 2028 and 2032, respectively. This will allow EECL to continue supplying some of Chile’s most relevant copper mining projects. Engie Energía Chile - Presentation to Investors - 12M 2016 6
Industry and Company
CHILEAN ELECTRICITY INDUSTRY 12M 2016 Growth Generation GWh Main players Market Clients (% installed capacity 12M16) (12M16) (2016-2025) 1 Renew. Regulated Other, Diesel 6% 6% 11% Tamakaya 7% Gas 9% 25% capacity , 10% EECL, 3.5% 38% SING Enel, 26% demand 5,226 MW 19,467 GWh 18% AES Unregulated Gener, 89% Coal 78% 27% Unregulated Diesel 7% Renew. 30% Colbún 20% 11% 74% capacity Gas 19% Other 32% 3.3% SIC 73% demand Hydro Santiago 36% 16,742 MW 53,906 GWh AES Gener 16% Regulated Enel 32% Coal 27% 70% Aysén and Notes: Magallanes (1) Compounded annual sales growth • Sources: CNE, CDEC-SING and CDEC-SIC • 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 – December 2016. AES Gener includes EE Guacolda as well as EE Ventanas, and E. Santiago. Engie Energía Chile - Presentation to Investors – 12M 2016 8
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 3.5% compounded average annual growth rate for the 2016-2025 period MW US$/MWh Coal Gas Diesel Renew. Spot price 2,500 350 Average generation (MW) Marginal cost (US$/MWh) 300 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 Engie Energía Chile - Presentation to Investors - 12M 2016 9
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 1,800 Electricity Demand GWh 450 4000 1,600 400 3500 1,400 350 3000 1,200 300 2500 1,000 3,832 250 3,799 3,767 3,981 3,721 3,964 3,981 3,141 3,203 3,170 3,421 3,826 4,087 3,876 3,959 3,747 3,987 (e) 2000 800 200 1500 600 150 400 1000 100 200 500 50 0 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 (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 - 12M 2016 10
OWNERSHIP STRUCTURE AS OF DECEMBER 31, 2016 A world-class controller and a diversified ownership base Pension funds Foreign institutions ENGIE Local institutions Individuals 7.07% 52.76% 16.97% 22.70% 0.50% 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 - 12M 2016 11
GROSS INSTALLED CAPACITY SING and EECL as of December 31, 2016 SING EECL 2,200 2,800 1,971 MW 19 2,344 MW 202 19 2,300 1,700 202 1,971 MW 19 1,405 MW 1,799 MW 623 202 1,800 13 623 317 1,200 962 MW 623 24 1,300 688 700 538 MW 1,127 1,405 781 800 349 MW 1,500 1,127 538 200 294 781 300 158 55 EECL AES Enel Tamakaya Other Gener 2010 2016 2018 -300 -200 Coal Gas Diesel Renewable Coal Gas/Diesel Sources: CNE & CDEC-SING Diesel/Fuel Oil Hydro & Renewables AES Gener excludes Termoandes (located in Argentina and not available for the SING) Engie Energía Chile - Presentation to Investors - 12M 2016 12
INSTALLED CAPACITY AND OPERATING ASSETS Efficient thermal power plants, port, transmission lines and gas pipelines Installed Capacity (December 2016) 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) 2,199 km of high voltage transmission lines Sources: CNE & CDEC-SING Engie Energía Chile - Presentation to Investors - 12M 2016 13
CONTRACTABLE EFFICIENT CAPACITY IEM to contribute additional capacity in 2018 December 2016 December 2018 2,301 MW 2,500 2,500 19 1,971 MW 202 2,000 19 2,000 202 1,593 MW 623 1,348 MW 6 1,500 1,500 623 5 521 521 1,000 1,000 1,457 1,127 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 - 12M 2016 14
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