AGUAS ANDINAS 1st Hal alf 2019 19 Results ults 27 September, - - PowerPoint PPT Presentation

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AGUAS ANDINAS

27 September, 2019 1st Hal alf 2019 19 Results ults

Financial Summary Investments Water Situation Tariff Revision ESSAL

FINANCIAL SUMMARY

Figures in CLP million

440.734 473.397 492.003 509.541 530.405 276.307 284.900

50.000 100.000 150.000 200.000 250.000 300.000 350.000 400.000 450.000 500.000 550.000

2014 2015 2016 2017 2018 jun-18 jun-19

Revenues

+3,1% a/a

Financial Results

273.746 282.624 291.513 298.604 309.664 166.761 170.982

0% 10% 20% 30% 40% 50% 60% 70% 50.000 100.000 150.000 200.000 250.000 300.000 350.000 400.000

2014 2015 2016 2017 2018 jun-18 jun-19

EBITDA & EBITDA Margin

EBITDA EBITDA Margin

119.422 129.008 135.343 137.677 132.851 81.165 80.610 139.620 136.057

0% 5% 10% 15% 20% 25% 30% 35% 20.000 40.000 60.000 80.000 100.000 120.000 140.000 160.000 180.000 200.000

2014 2015 2016 2017 2018 jun-18 jun-19

Net Income & Net Income Margin

Recurring Net Income Non-Recurring Net Income Net Income Margin

+2,5% a/a

• 0,7%

a/a

150.576

Financial Results

Figures in CLP million

276.307 1.715 3.483 1.025 2.370 284.900

1H2018 Potable Water Sewage Treatment Other Reg Revenues Non Reg Revenues 1H2019

Operating Revenues (Million CLP)

Company’s revenues increased to $285 billion Regulated Revenue: mainly explained by tariff indexations recorded in the previous year, partially offset by lower volumes supplied in Potable Water and Served Water (-0.4% and -0.4% respectively). Non-Regulated Revenue: mainly explained by higher revenues in non-sanitary subsidiaries, technical advice for the rural drinking water segment, and greater activity in modifications of sanitary infrastructure requested by clients, compensated by lower activity in customer home services.

+1,5% a/a

+2,6% a/a +25,0% a/a +9,9% a/a

Revenues Increased by 3.1%

Potable Water; 41% Sewage Treatment; 48% Other Reg Revenues; 02% Non Reg Revenues; 09%

147.165 151.487 2.091 598 1.682 49

1H2018 Raw Materials Employees

• Depr. & Amort.

Other Expenses by Nature 1S2019

Operating Costs (Million CLP)

Raw Materials and Consumables: Higher cost of sale of materials by the subsidiary Gestión y Servicios for $ 1,016 million together with greater use of chemical inputs for $ 590 million. Higher energy consumption partially offset by lower electricity rates due to the entry into force of supply free customers contracts for 52 of the Company's premises. Other expenses, by nature: Lower costs for biosolid management for $ 380 million and other general services for $ 269 million. Higher expenses for advisory and studies of $ 1,007 million, maintenance of equipment and enclosures for $ 767 million and cost of sale associated with greater activity in modifications of sanitary infrastructure for $ 359 million.

+10,8% a/a +2,0% a/a

• 0,1%

a/a

+2,8% a/a ( )

Costs Increased by 4.0%

Biosolid management Savings of $380 million were made from the beneficial use of sludge as fertilizer and soil recuperator. Other projects Improvements in costs of customers management services by $269 million .

Proyectos de eficiencia

Lower electric rates Savings obtained as a result of the migration plan for clients regulated to free clients, for 52 company enclosures.

Efficiency improvement projects: The development of process improvement projects and digital transformation has continued, that have allowed containing and reducing certain cost line items such as the following:

Net profit $ 80,610 million figure lower by $ 555 million or 0.7% than the one

• btained in the

previous year.

Other Highlights

Financial Result $ 1,059 million

• f higher

expenses, mainly due to higher interest on financial debt and lower financial income.

Bank Loans 18% Bonds 70% AFRs 11% Variable 11% Fixed 89%

• 10.000

20.000 30.000 40.000 50.000 60.000 70.000 80.000 90.000

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 2044

Million CLP

AFRS Bonds Bank Loans

Debt Structure as of June 30, 2019

• Leverage: 1,8x Limit: 2,0x
• Financial Expense Coverage: 7,0x
• Local Credit Rating: AA+
• Total Net Financial Debt: CLP$1,015 billion
• Net Debt/EBITDA Ratio: 3,2x

DEBT BREAK DOWN BY INSTRUMENT DEBT BREAK DOWN BY INTEREST TYPE

INVESTMENTS

Investments: continuous growth

Investments as of June 2019 Million CLP

Construction of Pirque Tanks 18,640 Potable Water Networks Renewal 5,038 Cogeneration capacity for La Farfana-Trebal 4,096 Asset replacement Biofactories La Farfana- Trebal 3,544 Sewerage Networks Renewal 3,132 Ammonia Treatment Plant Sewage Treatment Farfana-Trebal 2,544 Other investments 23,641

Total 60,635

Other Activities 6% Non Sanitation subsidiaries 1% Potable Water production 40% Sewage collection 8% Potable Water distribution 20% Sewage Disposal 25%

Investments as of June 2019

PIRQUE PROJECT: tripling hours of autonomy

2018

Reserve tanks with 54 milllion liters

• f capacity

Wells to extract undergroun d water Million USD invested

11

hours

• f AUTONOMY

for emergencied

mega reserve tanks milllion liters

• f capacity

~$24

16 9

2019

Million USD invested

34 34

hours

• f AUTONOMY

for emergencies

~$121

1,500 6

PIRQUE PROJECT: start of

• perations by the end of 2019

Civil Works, Supply of Equipment, Assembly and Commissioning, Corresponding to Each of the Six Water Reservoir Tanks for Human Consumption. Construction of the Civil Works, Supply of Equipment, Assembly and Commissioning, Corresponding to the Elevation and Emptying Works - Water Reserve Tanks for Human Consumption.

low zone high zone

* As of June 30, 2019

WATER SITUATION

Rainfall in Metropolitan Region

The drought that currently affects the Metropolitan Region, dates from the beginning of the decade, transforming the decade of 2010 into the driest of the last 190 years. This is how between the 1820s and 2010, Santiago went from having average rainfall of 460 to 198 mm / year.

3 similar events: 1924 (66 mm/year) 1968 (69 mm/year) 1998 (89 mm/year)

Rainfall in Santiago, 1824 - 2019 Rainfall in Santiago, 1824 - 2019

Annual Rainfall Decade Avg Trend

Addressing water scarcity

Hydro Efficiency Plan / Leak Detection Management with Municipalities and fraud control Mass Awareness Campaigns Drilling and Enabling New Wells Purchase of raw water in autumn- winter months

Intensive use

• f drilling

Rent of additional water rights Purchase of water in summer (November to March) Purchase / lease of additional shares to canalistas Reservoir closure El Yeso Nov-Aug instead of Nov-Mar

W aterS w ap w ithirrigato rs

Reuse of treated water

Short, medium and long term strategy

Addressing water scarcity

TEXTO

Tariff Revision

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 Company presents discrepancies /

• bservations

Expert committee called by SISS SISS requests minutes from expert committee to make final ruling SISS establishes new tariffs New Tariff Settlement AA AM AC Administrative appeal over the SISS decision on the parameters Final Parameters Publication of parameters and methodology List of ‘middle candidate’ for Expert Committee is determined Observations

• n preliminary

parameters made

01 OCT 15 MAR 15 MAY 01 NOV 16 NOV 28 NOV 30 JAN 28 FEB 18 MAY 29 JUN 27 MAR APR 30 NOV 30 JAN 2018 2019 2020

Tariff Process 2020-2025

OECD’S Tariffs

Source: SISS Management Report, 2016 0,00 1,00 2,00 3,00 4,00 5,00 6,00 7,00

Berlin, Germany Washington D.C., USA Luxembourg, Luxembourg Zurich, Switzerland Oslo, Norway Sydney Australia Amsterdam, Netherlands Vienna, Austria Brussels, Belgium Reykjavik, Iceland Helsinki, Finland Paris, France Prague, Czech Republic Auckland, New Zealand London, United Kingdom Warsaw, Poland Ottowa, Canada Bratislava, Slovakia Tallin, Estonia Istambul, Turkey Budapest, Hungary Jerusalem, Israel Lisbon Portugal Liubliana, Slovenia Tokyo, Japan Madrid, Spain Riga, Latvia Rome, Italy Athens, Greece Santiago, Chile Seoul, South Korea

ntegrated Tariff for Drinking Water and Sewerage Service Main cities OECD countries Comparative in USD / M3 based on monthly consumption of 15 Mt3

Tariff without subsidies, self-financed, and with 100% sewage coverage

ESSAL

Background

07/ 07/11/ 11/19 19

A hydrocarbon spill occurs at the Osorno Drinking Water Production Plant.

07/21/19 07/21/19

The service is gradually restored from July 17, normalizing the supply for all customers on July 21. Safety protocols were activated and ESSAL had to suspend the supply of drinking water, for several days, at the same time as necessary repairs were made.

Actions at the operational level

140 tons of filter material were moved and replaced More than 500 people worked, including Essal's

• wn

staff, contractors and technicians from Aguas Andinas The drinking water plant was completely rehabilitated in very limited times given the magnitude of the damage

Issues at the corporate level

07/30/19 CEO Gustavo Gómez Jiménez resigns. In his replacement José Sáez Albornoz was appointed 08/06/19 Resigns Guillermo Pickering de la Fuente as Chairman of Essal and Aguas Andinas 09/09/19 At the Extraordinary Shareholders Meeting, the ESSAL Board of Directors is renewed, whose presidency Gustavo Mayor Lemarie assumes

Economic Impact

There are committed insurances that have been activated with the respective companies and whose scope of coverage is in the process of analysis and evaluation

$2.900

million

$300

$300

million

$300

T.B.D.

$300

T.B.D. T.B.D.

SISS - Sanction Process and Special Expiry Process Sernac - Collective Voluntary Procedure (PVC) and Automatic Compensation Control Ministry of Economy - Compensation to micro and small businesses affected Other Administrative Procedures of Sanctions: SEC, Seremi de Salud and DGA

Originated Legal Processes

Public Prosecutor - Investigation regarding possible crimes Valdivia Court - Local Police Courts - LPDC individual claims Environmental and financial-legal information requirements

• Res. SISS 2864: Special process begins to determine if there is merit to issue an Expiry

Report.

Article 26 ° DFL 382/88 General Sanbitation Services Law The President of the Republic, based on a technical report prepared by the regulatory entity, may declare expired concessions that are in operation: a) if the conditions of the service provided do not correspond to the requirements established in the law or its regulations, or to the conditions stipulated in the respective concession decree; b) if the concessionaire does not fulfill the development program; c) for breach of the contract referred to in the second paragraph of article 11 and of the provisions of article 32 of this law. For the classification of these causes, the regulatory entity must consider the seriousness of their consequences and the repetition of their occurrence.

Special Expiry Process

On September 24, the company presented its response to the expiration process to the SISS. Arguments: The “service conditions” provided by ESSAL do correspond to the established requirements The interruption of service was only one, there is no repetition. Forced use of the penalty type SISS jurisprudence contemplates expiration for extreme cases Expiration would apply due to technical and /

• r economic infeasibility (insolvency): ESSAL is

absolutely viable to continue providing service in Osorno Historical compliance that Essal has made of its services and Development Plans Correct performance of Essal compared to

• ther concessionary companies

Essal's ability to face a serious contingency and execution of major works in record time Historical investments, additional works and future investment plan are of high magnitude

Special Expiry Process

On September 24, the company presented its response to the expiration process to the SISS. Arguments:

Expiration has a legal nature of

• sanction. Principles of sanctioning

administrative law: last ratio, proportionality, reasonableness, etc.

Violation of the non bis in idem in the “adjective” phase (fine process and expiration file for identical facts) Public anticipation of pronouncements without having heard the company.

Need for due process. Pre-judgments

Violation of the non bis in idem in the “substantive” phase (sanction to companies and executives) Violation of the principle of objectivity in the audit

Special Expiry Process