AGUAS ANDINAS Results Meeting September 14 2018 AGENDA Financial - - PowerPoint PPT Presentation

Results Meeting

September 14 2018

AGUAS ANDINAS

AGENDA

Financial Performance Investments Tariffs Contingencies Q&A

FINANCIAL PERFORMANCE

FINANCIAL PERFORMANCE AS OF JUNE 30 2018

Numbers in Millions of Pesos

248.532 273.746 282.624 291.513 298.604 156.003 166.760 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 100.000 200.000 300.000 400.000 2013 2014 2015 2016 2017 jun-17 jun-18

EBITDA & EBITDA Margin

EBITDA EBITDA Margin 403.879 440.734 473.397 492.003 509.541 261.642 276.307 100.000 200.000 300.000 400.000 500.000 600.000 2013 2014 2015 2016 2017 jun-17 jun-18

Revenues

116.676 119.422 129.008 135.343 139.620 75.021 81.165 0% 5% 10% 15% 20% 25% 30% 35% 20.000 40.000 60.000 80.000 100.000 120.000 140.000 160.000 2013 2014 2015 2016 2017 jun-17 jun-18

Net Income and Net Income Margin

Recurring Net Income Non-Recurring Net Income Net Income Margin

The Company’s revenues increased to CLP$276 billion due to: Increased sales volumes, registering an increase of 3.4% in Potable Water and 2.9% in Sewage Treatment. Tariff indexations registered during 2017 and 2018.

REVENUES INCREASED BY 5.6%

2.238.137 2.184.916 2.289.126 2.235.637 500.000 1.000.000 1.500.000 2.000.000 2.500.000

Potable Water Sewerage

Clients

jun-18 jun-17 109 116 126 132 2 4 25 24

50 100 150 200 250 300

jun-17 jun-18

Revenues (Billion CLP$)

Potable Water Sewage Treatment Ohter Regulated Revenues Non-Regulated Revenues

COSTS INCREASED BY 3.7%

Raw Materials and Consumables Used increased due to: An increase in electricity costs for CLP $1.7 billion, due to more consumption associated with sales volume and increased tariffs. Higher costs of CLP $744 million for the purchasing of raw water in order to supply the potable water plants. Personnel Expenses increased due to: Increased remunerations and bonuses associated to increases in CPI, in addition to an increased workforce and extraordinary benefits for personnel due to the collective negotiation process for CLP $1.6 billion. Other Expenses, By Nature decreased due to: Lower sludge management costs in the Biofactories for CLP $289 million. Lower allocation for doubtful accounts for CLP$2.5 billion due to greater efforts in collection management.

17 19 jun-17 jun-18

Raw Materials and Consumables Used (BN CLP$)

+14.8 % 28 29 jun-17 jun-18

Personnel Expenses (BN CLP$)

+5.7% 61.016 60.821 jun-17 jun-18

Other Expenses, By Nature (BN CLP$)

• 0,3%

OTHER HIGHLIGHTED RESULTS

Texto Texto Texto Texto Other revenues were obtained for CLP $2.6 billion, CLP $914 million higher than obtained for the same half of 2017, due to higher sales of expendable lands located in different municipalities of the Metropolitan Region for CLP $3.5 billion, partially offset by organizational restructuring costs for 2018 for CLP $2.3 billion. Financial income displayed a loss of CLP $22.1 billion, higher by CLP $1.4 billion than that of the previous year, mainly as a result of a higher revaluation of the debt in Unidades de Fomento (Indexation Units). In order to finance the Company’s investment plan and the refinance its liabilities, two bonds were issued in April of this year with the following characteristics: “Green and Social Bond” AC series of UF 1.5 million, structured to a 7-year term at a 1.8% rate. Series AD Bond of UF 2.0 million, structured to a 25-year term at a 2.83% rate. Income tax expense at the end of the first half of 2018 was CLP $27.3 billion, CLP $3.1 billion higher than obtained for the same half of the previous year. This variation was mainly explained by the change in the tax rate from 25.5% to 27.0% due to the Tax Reform, added to a higher before taxes result of CLP $8.7 billion. Net income as of June 30, 2018 amounted to CLP $81.2 billion, CLP $6.1 billion(8.2%) higher than

• btained in the first half of the previous year.

Risk Classification Modality Currency / Reajustability Term Grace Period Coupon Rate Start Date Maturity Date

GREEN AND SOCIAL BOND

AA+ / (Fitch / ICR Best Efforts Inflation-linked 7 years 3 years 1.80% 15-03-2018 15-03-2025

ISSUANCE CHARACTERISTICS

Placement Time: 8 seconds Total Demand: 3.6 times Placement Rate: Inflation + 1.8%. Spread: 53 bps Purchasers: mainly mutual funds, Chilean penson funds, and insurance companies.

Lowest spread of any corporate bond issued in Chile in the past 4 years. Second lowest all-in rate for a 7 year bond in the past 4 years.

Results

BANK DEBT RENEGOTIATION

During the second quarter, some of the existing loans were repaid and others were refinanced to give the company's debt maturity profile greater leeway. Part of the funds raised through the Green and Social Bond were used to pay bank loans for CLP $24 billion. This loan was used to finance projects related to the access to potable water, resilient investments and sewage treatment. Additionally, loans were refinanced for CLP $ 44.25 billion, delaying the postponing the maturity of some loans that matured in the short and medium term.

$- $5 $10 $15 $20 $25 $30 $35 $40

2018 2019 2020 2021 2022 2023 2024 2025

Billion Pesos

Debt Maturity Profile

Maturity Profile as of March 31 2018 Maturity Profile as of June 30, 2018

DEBT STRUCTURE AS OF JUNE 30, 2018

• Leverage: 1.70x Limit: 1.96
• Financial Expense Coverage: 7.49x
• Local Credit Rating: AA+
• Total Net Financial Debt: CLP$ 925

billion

• Net Debt/EBITDA Ratio*: 2,99x

Bank Loans 10% Bonds 71% Promissory Notes 19%

DEBT BREAK DOWN BY INSTRUMENT

Variable 10% Fixed 90%

DEBT BREAK DOWN BY INTEREST TYPE

$- $20 $40 $60 $80 $100 $120 $140

2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043

Billion Pesos

Promissory Notes Bonds Bank Loans

Source: Aguas Andinas, (*) EBITDA last 12 months

INVESTMENTS

INVESTMENTS

Investments (CLP BN$) as of June 2018 Pirque Tank Construction 9.4 Asset Replacement in the La Farfana-Trebal Wastewater Treatment Plants 4.1 Sewerage Networks Renovation 3.6 Construction of Emergency Works for Turbidity Events 2.5 Replacement of Starters and Meters 2.4 Talagante Wastewater Treatment Plant Expansion 2.3 Potable Water Network Preventive Renovation 2.3 Construction of a Potable Water Treatment Plant for Chamisero 2.1

86 89 127 113 132 166 120 2013 2014 2015 2016 2017 2018e 2019e

Annual Investments (BN CLP$)

PROGRESS IN INCREASED AUTONOMY WORKS

2018

9

Reserve tanks with 54 milllion liters

• f capacity.

Wells to extract underground water.

$24

Million USD invested.

11

HOURS OF AUTONOMY for emergencies

16

2019

6

mega reserve tanks. milllion liters

• f capacity.

$121

Million USD invested.

34

HOURS OF AUTONOMY for emergencies

with 1,500 Stage 1 Progress: 37.6%

Construction Civil Works, Supply of Equipment, Assembly and Commissioning, Elevation and Emptying Works– Reserve Tanks

PROGRESS IN NITROGEN TREATMENT WORKS

ANAMMOX Process (anaerobic ammonium oxidation): Conversion of 50% of ammonium to nitrite in a first stage In the second stage, autotrophic denitrification takes place, in which the bacteria convert 50% of the remaining ammonium and the nitrite produced directly into nitrogen gas, under anaerobic conditions and without consuming organic matter. Beneficios of the ANAMMOX Process: Reduction of energy consumption Reduction of the amount of biomass generated from the process. Characteristics of the being conducted in the La Farfana Biofactory: Treatment flow: 320 m3/h Ammonia removal percentage: over 90%. Works progres: Physical Progress of Civil Works: 35% General Progress of the Project: 30% Execution time: 27 months. Includes Detail Engineering, Construction of Civil Works, Assembly of Equipment, Testing and Commissioning. Estimated Completion Date: October 2019.

PROGRESS IN CIRCULAR ECONOMY

Texto Texto Texto Texto 2022 Goal: 0% of biosolids produced in the Metropolitan Region to be sent to landfills From January to July 2018, 10% of biosolids went to landfills in comparison to 20% the previous year. During this period, the use of sludge as fertilizer increased to 53% in comparison to 42% the previous year. This is mainly due to: Improvements in transport management, allowing for more trips to agricultural fields Improvements in the application of biosolids in fields Improvements in the managament of available fields

50.000 100.000 150.000 200.000 250.000 300.000 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Biofactory Biosolids Disposal (Ton, Year)

AGRICULTURE CGIB EL RUTAL LANDFILL 10.000 20.000 30.000 40.000 50.000 60.000 70.000 80.000 90.000 ene-julio 2017 ene-julio 2018

Biofactory Biosolids Disposal (Ton, Jan-Jul)

AGRICULTURE CGIB EL RUTAL LANDFILL

PROGRESS IN DIGITALIZATION

On August 2nd, Aguas Andinas’ network started to become digitalized. The first stage consists on the instalation of pressure and flow sensors which allow for the measurement and control of 268 kilometers of network in a sector of Santiago Centro. This has been done in order to improve the quality of service and avoid water losses in the distribution network. This digitalization will allow us to monitor and anticipate emergency situations that can generate an impact on the customer and the normal functioning of the city. This will allow permanent monitoring in real time from the company's Operational Control Center.

TEXTO TARIFFS

TIMELINE

01 OCT 2019 Tariff studies exchanged between company and SISS 2013-18 info provided for tariff study Final parameters and methodology published SISS rules on

• bservations
• n preliminary

parameters 14 DEC 2018 16 FEB 2019 30 days 01 NOV 2019 Company presents discrepancies /

• bservations

17 NOV 2019 Expert committee called by SISS 16 days 02 JAN 2020 SISS requests minutes from expert committee to make final ruling 46 days 30 JAN 2020 SISS establishes new tariffs 01 MAR 2020 New Tariff Settlement 30 days 26 DEC 2018 Administrative appeal over the SISS decision on the parameters Final Parameters 14 JAN 2019 01 OCT 2018 Publication of parameters and methodology List of ‘middle candidate’ for Expert Committee is determined Observations

• n preliminary

parameters made 30 NOV 2018

PROJECT OF LAW 10.795-33

In December 2016, the Chamber of Deputies approved the Project of Law Bulletin Nº 10795-33 which intends to modify the legislation which applies to public sanitation services in regards to: non-regulated services, the tariff-setting process and the fulfillment of development plans by service providers. This initiative has been submitted to the Senate in its second legislative instance and is currently in the Commission of Public Works. Sessions of the Commission of Public Works:

January 4th 2017 Commission of Public Works requests constitutionality report from the Secretary General

• f the President (Segpres)

March 1st 2017 Commission of Public Works requests formal report from the Ministry of Public Works (MOP) stating its opinión on the Project of Law May 3rd 2017 Comission of Public Works receives the reports from the MOP and Segpres May 2018 The Comission of Public Works requests a formal report from the new Minister of Public Works June 13th 2018 MOP proposes Technical Committee to discuss the Project of Law August 2018 Discussion in Progress

CONTINGENCIES

APPEAL SUBMITTED TO THE CONSTITUTIONAL COURT

On May 28, 2018, Aguas Andinas filed an application for unconstitutionality with the Constitutional Court, requesting that certain provisions of Law No. 19,496 be declared inapplicable in a judicial proceeding initiated by SERNAC against Aguas Andinas, a through a class- action lawsuit. This collective action is related to the potable water cuts that occurred in the city of Santiago during the months of February and April 2017, as a result of events of force majeure associated with the extreme turbidity observed in the waters of the Maipo river, which supply the potable water plants of the company. In the above-mentioned civil process -currently in progress-, Sernac requests that hefty fines be imposed on Aguas Andinas for each one of the affected consumers, a possibility that upon understanding this company is unconstitutional, since the eventual sanction would be totally disproportionate. In addition, the sectoral authority (the SISS) has already become aware of this situation, which could cause the company to be sanctioned twice for the same facts, a matter that does not comply with the constitution. This violates the principle "non bis in idem" which means that no

• ne can be tried or double convicted for the same act.

This appeal was accepted by the Constitutional Court on August 3rd.

RAIN WATER SITUATION

Legislation Reality Rain Water Management Mixed Water Management Sewage Management Sanitation Services General Law DFL N°382 Chilean Sewage Elevation Plant Norm (2472 Of 2000) Rain Water Law N°19.525 SISS Instructions: Use of by pass

• Ord. 3104/2011
• Ord. 4208/2010

Separate Networks Sewage Water Sewerage and Sewage Water 80% to 95% of potable water consumption

31,2 32,3 33,1 33,7 53,8 57,1 58,0 57,6 2012 2013 2014 2015 millones de m3

X y XIV Región

Facturación AP Volúmen Tratado

Sewage treatment plants receive more tan 1.7 times the volumen consumed by clients. Rain water is a challenge for ESSAL, our water utility in the south of Chile.

Potable Water Billing Treated Volume

Q&A Session

CONTACT DETAILS

Stephanie Baier Arocha Head of Investor Relations Email: sbaiera@aguasandinas.cl Phone: +562 2569 2301 Address: Avda. Presidente Balmaceda N°1398, 14th floor, Santiago, Chile

Results Meeting

September 14 2018

AGUAS ANDINAS