AGUAS ANDINAS RESULTS BREAKFAST June 2017 FIN INANCIAL - - PowerPoint PPT Presentation

AGUAS ANDINAS RESULTS BREAKFAST

June 2017

FIN INANCIAL PERFORMANCE MARCH 2017

Aguas Andinas 3

Numbers in millions of Pesos

FINANCIAL PERFORMANCE AS OF MARCH 31 2017

2015-2016 Growth: +3.9% revenues, +3.1% EBITDA y +16.7% Net Income Revenue CAGR of 6.5% and EBITDA CAGR of 4.7% over the 2012-2016 period

242.404 248.532 273.746 282.624 291.513 91.043 95.791 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 100.000 200.000 300.000 400.000 2012 2013 2014 2015 2016 mar-16 mar-17

EBITDA & EBITDA Margin

EBITDA EBITDA Margin 382.886 403.879 440.734 473.397 492.003 139.313 145.870 100.000 200.000 300.000 400.000 500.000 600.000 2012 2013 2014 2015 2016 mar-16 mar-17

Revenues

121.738 116.676 119.422 129.008 135.343 48.294 50.837 15.233 0% 5% 10% 15% 20% 25% 30% 35% 40% 20.000 40.000 60.000 80.000 100.000 120.000 140.000 160.000 2012 2013 2014 2015 2016 mar-16 mar-17

Net Income & Net Income Margin

Recurring Net Income Non-Recurring Income Net-Income Margin

Aguas Andinas 4

• Revenues increased to $145,870 million due to:

‒ Increase in volumes: +4.5% in potable water & +4.1% in sewage treatment

REVENUES INCREASED BY 4.6%

2.215.289 2.161.626 2.165.647 2.112.640 500.000 1.000.000 1.500.000 2.000.000 2.500.000

Potable Water Sewerage

Clients

mar-16 mar-17 59.145 62.606 64.404 67.546 4.768 4.061 10.995 11.656

20.000 40.000 60.000 80.000 100.000 120.000 140.000 160.000

mar-16 mar-17

Revenues (Million of Pesos)

Potable Water Sewage Other Regulated Revenues Non-Regulated Revenues

Aguas Andinas 5

• Raw materials and consumables decreased due to :

– Lower costs of CLP $213 million in power energy, due to the re-liquidations registered during the first quarter of 2016, together with a lower consumption of kWh due to lower groundwater abstraction, and a decrease in material costs of CLP $181 million due to lower sales of materials by Gestión y Servicios

• Personnel Expenses increased due to:

– Higher compensation and gratuities associated to CPI adjustments, together with a larger work force

• Other expenses, by nature:

– Higher provision of CLP $1,331 million for uncollectible bills, – Higher costs of CLP $484 million for sanitation infrastructure transfers, – Higher costs of CLP $417 million for transportation service leasing, mainly in order to lease tank trucks

COSTS INCREASED BY 3.7%

8.915 8.364 mar-16 mar-17

Raw Materials and Consummables Used (Millions of Pesos)

• 6.18%

12.466 12.799 mar-16 mar-17

Personnel Expenses (Millions of Pesos)

2.67% 26.888 28.916 mar-16 mar-17

Other Expenses, By Nature (Millions of Pesos)

+7.54%

Aguas Andinas 6

• Financial earnings showed a loss of CLP $9,283 million, which was CLP $1,111 million less than the

same quarter last year. This was mainly the result of a lower revaluation of the debt that can be adjusted in Unidades de Fomento (UFs).

• Income tax expense at the end of the first quarter of 2017 was CLP $16,878 million, which was CLP

$2,466 higher than the same quarter of the prior year. This change is mainly explained by a higher pre-tax gain of CLP $4,719 together with the change in tax rate from 24% to 25.5% due to the Tax Reform in force since September 2014.

• Net income as of March 31, 2017 amounted to CLP $50,837, which was CLP $2,544 higher (5.3%)

than that obtained in the previous year.

OTHER RESULTS TO NOTE

Aguas Andinas 7

• Leverage: 1.41x Limit: 1.91
• Coverage of Financial Expenses: 8.30x
• Local Credit Rating: AA+
• Total Net Financial Debt: CLP 808 billion
• Net Debt / EBITDA* Ratio: 2,73x

Bank Loans 12% Bonds 65% Promissory Notes 23%

DEBT STRUCTURE AS OF MARCH 31 2017

(*) EBITDA last 12 months

DEBT BREAK DOWN BY INSTRUMENT

Variable 12% Fixed 88%

DEBT BREAK DOWN BY INTEREST TYPE

$- $20.000 $40.000 $60.000 $80.000 $100.000 $120.000

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040

Millions of Pesos

Promissory Notes Bonds Bank Loans

RIS ISKS

Aguas Andinas 9

• In December 2016, the Chamber of Deputies approved the Project
• f 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.

• The project of law includes six articles through which it seeks to

modify the norms which are stipulated in the following legislations:

• Decree with Force of Law N° 382, from 1989, of the Ministry
• f Public Works, General Law on Sanitation Services.
• Decree with Force of Law N° 70, from 1988, of the Ministry
• f Public Works, about Sanitation Service Tariffs.
• Law N° 18.902, which created the Superintendence of

Sanitation Services.

REGULATORY RISK: PROJECT OF LAW 10.705-33

Aguas Andinas 10

• Due to climate change, there has been an increase in convective rains

with isotherm zero (> 3,600 meters) in the pre-mountain area.

• This produces an increase in turbidity in the Maipo river caused by

floods and landslides.

• Due to these events of force majeure, there have been water cuts as

when turbidity levels surpass the design conditions of the potable water plants, the only measure that can be taken is to stop the plants to prevent embankments.

• Since 2008 and to date, there have been 6 events of high turbidity that

have paralyzed the plants.

• However, 30 events have been mitigated in which the plants have not

had to stop production.

• Aguas Andinas is doing all of the necessary investments in order to

mitigate this risk.

CLIMATE CHANGE RISK: TURBIDITY

Table: Number of turbidity events whose duration has been over 12 hours over 5,000 and 15,000 NTU, during the 1990-2017 period. Source: Water Footprint published by the Water Rights and Management Center of the UC (CDGA)

6 8 29 1 1 9

5 10 15 20 25 30 35

1990-2007 2008-2012 2012-2017

Number of events

CLIMATE CHANGE AND ITS INFLUENCE Y THE HIGHER FREQUENCY OF FLOODS >5000 NTU >15000 NTU

Aguas Andinas 11

CLIMATE CHANGE RISK: DROUGHT

Short-Term Plan: Drought Mitigation Plan

• New capacity in wells
• Purchase of raw water
• Renting of water rights
• Agreements with other users of the river
• Monitoring and control of illegal water usage/extraction

Long-Term Plan: Drought and Climate Change Plan 2016-2030

• Preliminary studies in development:
• Demand projection
• Demand management
• International experiences in drought
• Other actions:
• Actions to increase supply
• Water supply projection
• Synergies at a user level

84,10%

0% 20% 40% 60% 80% 100% 120% jan feb mar apr may jun jul aug sept

• ct

nov dec Volume (% of capacity)

EL YESO RESERVOIR LEVELS

2010 2011 2012 2013 2014 2015 2016 2017

IN INVESTMENTS

13 Aguas Andinas

WHAT HAVE WE DONE?

• 25% more potable water reserves (225,000

m3 ).

• Habilitation of the Cerro Negro wells with a

flow of 300 l/s.

• Conduction from the El Yeso Reservoir to

Laguna Negra

• Double the number of hours of autonomy

from 4 to 9 hours.

• 30 turbidity events without impact.
• Investments: CLP 39 billion.

Estanque Las Vizcachas

• f 161,000 m3

INVESTMENTS TO MANAGE TURBIDITY EVENTS PHASE I

COMPLIMENTARY WORKS TO AVOID WATER CUTS DUE TO TURBIDITY EVENTS

CONSTRUCTION OF 8 POTABLE WATER TANKS with reserves of 54,000 cubic meters, in the pre- mountain area. Investment: CLP$11 billion CONSTRUCTION OF NEW WELLS with a capacity of 400 liters per second in the communes of Pedro Aguirre Cerda and Lo Espejo. Investment: CLP$2 billion HABILITATION OF 13 EMERGENCY WELLS with a production capacity of 500 liters per second in the communes of Conchali, Independencia, and Recoleta. Investment: CLP$2 billion SUPPLY AUTONOMY From 9 hours to 11 hours.

New works for 2018 Associated investment: CLP$15 billion

15 Aguas Andinas

WHAT ARE WE DOING?

• Tripling the autonomy from 9 to 32 hours with an investment of CLP$64.22 billion
• Working with municipalities and authorities in emergency situations.
• Increasing the capacity of the Padre Hurtado Plant and four new filters in the

Vizcachas Complex.

• New Chamisero potable water plant in construction.
• New interconnection works (lifting and impulsion plants)

1,500,000 cubic meters

• f water

INVESTMENTS TO MANAGE TURBIDITY EVENTS PHASE II

• A1. INCREASE CAPACITY of

raw water reserves with a second tank next to the

• ne in progress (Pirque

Tank, Phase II). Estimated investment: USD $115 million

• A2. COYANCO

RESERVOIR and the conduction to the Pirque Tank. Estimated investment: USD $238 million

• A3. WATER RECYCLING,

through the regeneration

• f water treated in Aguas

Andinas’ WWTP and transporting them to supply points. Estimated investment: Over USD $500 million

• A4. CONDUCTION

from the El Yeso Reservoir to the Pirque Tank. Estimated Investment: USD $410 million SAFETY WORKS

4 possible alternatives to have over 48 hours of autonomy

TURBIDITY WORKS: PHASE III

Exchange rate used: 650 CLP/USD

Aguas Andinas 17

EXPECTED RELEVANT ACHIEVEMENTS:

• Decrease water production by 75 Hm3/year (equivalent to 1/3
• f the El Yeso Reservoir)
• Decrease the average daily production in 200,000 m3/day

equivalent to:

• More than 1 Vizcachas safety tank.
• More than 2 Padre Hurtado treatment plants.
• 6 additional hours of reserves in addition to the Pirque

Tank.

HYDRAULIC EFFICIENCY PLAN

75Hm3

Aguas Andinas 18

• This plant is being built in order to satisfy

the demands of the Chamisero and Chicureo zones.

• It will be operational in May 2018.
• Associated investment: USD$22 million.
• Migration from the use of chlorine gas to

sodium hypochlorite in order to reduce the operative risks implied in the management of chlorine gas.

• Three out of the four phases of this

project had been executed and the last will be executed in 2017.

• Associated investment: USD$10 million.
• An arsenic abatement plant is being

built in the San Antonio complex which will be operational during 2017

• Additionally, the Quilicura plant is being

expanded to treat an a flow of 250 l/s and which will be ready at the end of 2017

• Associated investment: USD$11 million.
• Increase in capacity from 0.8 m3/s to 1.25

m3/s in the Padre Hurtado Plant.

• A regulation tank is being built with a

capacity of 2,000 m3.

• Associated investment of USD$2 million.

INVESTMENTS IN POTABLE WATER

Increase in Capacity New Chamisero Plant Arsenic Abatement Chlorine Gas Migration

Aguas Andinas 19

BIOFACTORY 100% self-generation Clean water

Biosolids

0% Pollution

Biogas

100% waste to energy

processes

• f decontaminated wastewater

we transform your waste into energy

BIOFACTORY

The City 100%

O% Emission

CIRCULAR ECONOMY

Aguas Andinas 20

BIOGAS

45,990,665 kWh

Of electricity was produced by Aguas Andinas’ cogeneration motors in 2016.

+ 43.8%

Of bio solids have been destined to the recovery of farmlands during 2016.

580.7 MILLION

Cubic meters was the volume of clean water which was put back into the rivers during 2016.

TREATED WATER

78.44%

Of the electricity demand of the Trebal- Mapocho Plant is supplied by biogas.

BIOSOLIDS

PARADIGM SHIFT: FROM SEWAGE TREATMENT TO RESOURCE MANAGEMENT

Aguas Andinas 21

• 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

AGUAS ANDINAS INVESTOR RELATIONS CONTACT DETAILS

The future is built, starting today.

23

ANNEX

AGUAS ANDINAS

Chile’s largest water utilitiy company 100% coverage in potable water and sewage treatment 2,213,869 clients Representing 43% of the industry’s clients 50% of the industry’s potable water billing One of the lowest tariffs in Chile and in OECD nations

1 2 3 4 5 6 7 Copenhagen, Denmark Berlin, Germany Washington D.C., USA Luxemboug, Luxembourg Oslo, Norway Zurich, Switzerland Amsterdam, Netherlands Sydney, Australia Vienna, Austria Brussels, Belgium Helsinki, Finland Paris, France London, United Kingdom Prague, Czech Republic Reykjavik, Iceland Auckland, New Zealand Warsaw, Poland Ottawa, Canada Istambul, Turkey Bratislava, Slovakia Stockholm, Sweden Tallinn, Estonia Budapest, Hungary Jerusalem, Israel Tokyo, Japan Ljubljana, Slovenia Lisbon, Portugal Madrid, Spain Riga, Latvia Rome, Italy Dublin, Irland Athens, Greece Santiago, Chile Mexico City, Mexico Seoul, South Korea

Combined Potable Water and Sewage Tariffs for the Main Cities of OECD Countries Comparison in USD/m3 based on a comsumption of 15 m3 per month

Note: In the cases of Australia, New Zealand and Switzerland, the cities considered are Sydney, Auckland and Zurich respectively. Source: Global Water Intelligence Water Tariff Survey 2016, Suez

25 Aguas Andinas Suez IAGSA 56,6% International Shareholders 18,6% Stock Brokers 13,0% Others 11,8% Chilean Pension Funds 0,0% IAM 50,1% International Shareholders 25,8% Others 7,9% Stock Brokers 8,6% CORFO 5,0% Chilean Pension Funds 2,6%

AGUAS ANDINAS’ SHAREHOLDER STRUCTURE 31/05/2017 100% 50.1% 100% 56.6% 100% 100% 53.5% 100% 100% 100% REGULATED COMPANIES NON-REGULATED COMPANIES IAM’S SHAREHOLDER STUCTURE 31/05/2017

CORPORATE STRUCTURE

26 Aguas Andinas

CONCESSION AREAS

VISION

To be a leading company in sustainability in Chile ensuring water for future generations.

PURPOSE

We manage resources efficiently, creating shared value.

STRATEGY

Santiago Merece Un 7 (Santiago deserves an A+). The future is built starting today.

COUNTRY COMMITMENT

STRATEGY TO ACCOMPLISH OUR COMMITMENT

• 1. BUSINESS MODEL
• 2. RESILIENCE
• 3. DIGITALIZATION
• 4. CIRCULAR ECONOMY
• 5. SOCIAL LEGITIMACY
• 6. INNOVATION AND PEOPLE
• 7. WATER AND QUALITY OF LIFE

• Transform its sewage treatment plants into

biofactories

• Reuse 100% of residues and transform them into

energy for their production.

• Drastically reduce its carbon foot print and that of

the country.

• Aguas Andinas and its subsidiaries are contributing

to the country, through 12 of the 17 Sustainable Development Goals.

• The SDGs were suscribed to by the Chilean

Government as a guide in sustainable development matters.

Aguas Andinas’ goal ins to achieve zero emissions

CHALLENGES

30 Aguas Andinas

AGUAS ANDINAS CONTRIBUTES TO 12 OF THE 17 SDGS

REGULATORY FRAMEWORK

Aguas Andinas 32

CHILEAN WATER UTILITY INDUSTRY

1998 Two Concession Models 96%

The privatization process starts Indefinite Concessions 30 Year Concessions

• f clients are supplied by

private providers

VIII Región / Concepción Essbio Xii Región / Pta.Arenas Aguas Magallanes XV y I Región / Iquique Aguas Del Altiplano V Región / Valparaíso Esval VI Región / Rancagua Essel VII Región / Talca Aguas Nuevo Sur Los Ríos / Valdivia Aguas Décima Xi Región / Coyhaique Aguas Patagonia II Región / Antofagasta Aguas De Antofagasta III Región / Copiapó Aguas De Chañar IV Región / La Serena Aguas Del Valle IX Región / Temuco Aguas Araucanía R.M. / Santiago Aguas Andinas, Aguas Cordillera, Aguas Manquehue X Región de Los Lagos y XIV Región de Los Ríos / Pto.Montt Essal

Aguas Andinas 33

• Technical regulatory framework defined by law
• Superintendence of Sanitation Services (SISS) acts as the regulator counterpart in

the tariff setting process, which lasts for 1 year approximately

• Tariffs are reset every five years, based on an unbiased and technical model:
• Based on the long term total cost of a model company
• Discrepancies are solved by an independent experts committee
• Minimum real return on assets of 7% after taxes
• Automatic interim adjustments linked to polynomials based on CPI and

WPI indexes

• Government subsidies for low-income clients
• The regulatory framework of the Chilean water industry has been fundamental to

the development of the sector

HIGHLY REGULATED INDUSTRY

Model Company

Greenfield operation Latest technology Cost efficiency 100% coverage in all services Self-financing of investments through tariffs Minimum Return on Assets

Aguas Andinas

Existing infrastructure Combination of new and existing technologies Real costs Real coverage Self-financing of investments through tariffs Ability to use debt to finance Capex and enhance return on equity

Aguas Andinas 34

STAGES OF THE TARIFF NEGOTIATION PROCESS

SISS analyses the Model Company Aguas Andinas analyses the Model Company Aguas Andinas highlights discrepancies Negotiation Tariff Decree Expert Committee Agreement? Yes No Publication of the Tariff Setting Process Parameters and Methodology Aguas Andinas provides information about the Real Company to the SISS Committee Decision SISS PROPOSAL

The future is built, starting today.