Consorcio Transmantaro S.A. Index I. ISA Group Overview II. - - PowerPoint PPT Presentation

Consorcio Transmantaro S.A.

Index

• I. ISA Group Overview
• II. Peruvian Transmission sector overview
• IIII. CTM - Power Transmission Network
• IV. CTM credit highlights
• V. Financial information

1

• I. ISA Group Overview

2

Business

3 Over than 40,500 circuits

• f transmission lines in
• peration.

Represent 69.1% of revenues. 907 km of toll road infrastructure in operation. Represent 22.4% of revenues. 25,466 km in operation. Represent 6.1% of revenues. ELECTRIC POWER TRANSMISSION VIAL CONCESSIONS TELECOMUNICATIONS SHIPPINGOF INTELLIGENT MANAGEMENT OF REAL – TIME SYSTEM Planning, coordination and supervision of the SIN

• peration in Colombia.

Represent 2.4% of revenues.

Source: Company information and public filings for the period ended March 31, 2014

4

Presence

Source: Company information and public filings for the period ended March 31, 2014

• II. Peruvian Transmission sector overview

Peru power sector

Overview

Vertical separation of activities

Generation: Competitive Transmission: Regulated monopolies Distribution: Regulated monopolies

Coordinated system operation based on

efficiency principles and cost minimization

Open access to transmission and distribution

networks

Differentiated client classification and price

regimes

Regulated and non-regulated clients Negotiated prices for competitive activities

and regulated tariffs (based on efficient costs) for which competitive market

• perations cannot be performed and/or are

not possible or recommended

Regulation promotes private investment and

competition

6

Power market rules Peru power sector segmentation Generation Transmission Distribution End-user

Generation

• Competitive
• Non-regulated users:

Freely agreed prices

• Regulated users:

Public auction or contracts with regulated prices Transmission

Regulated monopoly Competition to obtain

concessions (public projects)

Open access to networks Regulated transmission

tariffs Distribution

Regulated monopoly Open access to

networks

Regulated tariffs:

Regulated clients

Competition: Non-

regulated clients End-users:

Regulated: Regulated tariffs Non-regulated optional users

(greater than 0.2MW and smaller than 2.5MW)

Non-regulated users (greater than

2.5MW): Free price negotiation

Large users (free users greater than

10MW): Short term market

Source: CTM company information.

Power sector interrelations

7

Comité de Operación Económica del Sistema

Users

Tariff regulation Oversight Concessions Regulation Oversight Tariff regulation Claims Regulation Concessions

Regulator / oversight Coordinator Regulation

Market administration Transmission planning Operations coordinator Concessions Regulation Transmission plan Transmission plan Regulation Concessions Service

Power Companies

(Generation, transmission and distributions)

Investment promotion

Source: CTM company information.

Credible, stable and well respected regulatory framework

Constructive and transparent regulatory framework

8 Constructive and

transparent regulation

Established track-

record

Overall investor

friendly framework Organization Description

i) Defines national energy policies, ii) Regulates environmental

matters applicable to the sector and iii) Oversees licenses, authorizations and concessions

Private Investment Promotion Agency System operator responsible for the dispatch of all generation

units and main transmission lines that are part of the SEIN(1)

Coordinates the SEIN’s functioning in order to optimize

• perations while maintaining the security of the system

Proposes necessary expansions and reinforcements of the

SEIN’s transmission system to the MINEM

Manages the short-term market transactions (acts as clearing

house)

Does not have any legal or economic dependence on public or

government entities

Regulatory entity that controls and enforces compliance with

legal and technical regulations

Regulates tariffs and manages the bidding processes held by

distribution companies to purchase capacity and energy

Monitors and regulates the environmental requirements of

power generators in the country

Consumer protection agency

(1) National Interconnected Electricity Transmission System of Peru.

CTM enjoys strong and constructive relationships with regulatory agencies

Peru power sector overview

Transmission

9

Complementary System

• Installations included in the Transmission Plan that

are built as a result of a private decision

• Additionally, all installations not included in the

transmission Plan. Tariff determined by the regulator and paid only by users of that system aVNR

• Annuity of the Replacement Value (12%) through a

30 year period Total Cost

• CT = aVNR + COyM

COyM

• Operations and Maintenance Cost

Transmission sector overview Location of Peru’s power transmission assets

Regulated monopoly: Economies of scale business Open access Concession required Centralized planning by the COES Expansion plan approved by MEM Guaranteed System: Transmission lines considered in centralized

plan

• Tariff defined based on bids
• Include return on investment and O&M costs

Complementary System: Transmission lines implemented by private

parties’ decision

Source: CTM company information and Document of Energy Subsector 2012.

Guaranteed System

• Installations included in the Transmission Plan and

built as a result of a public bid

• Paid by all customers (end users)

Key differentiating factors

Revenues in US dollars Stable regulatory framework

• Legal stability agreements
• Tax stability agreements

Lowest risk profile within the power sector

10

Transmission segment offers the best risk / return profile in the power sector and one of the most attractive risk / return profiles in the entire market

The transmission segment has the most stable and predictable cash flows in the entire utilities space

Segments Transmission Distribution Generation Volume Risk Environmental Risk Construction Risk Operations Risk Counterparty Credit Risk Regulatory Risk

Higher Risk Medium Risk Low Risk Lowest Risk Very Low Risk

Transmission sector legal framework

11 July 23, 2006 (Law 28832) Secondary Transmission System (SST) Main Transmission System (SPT) Secondary Transmission System (SST) Complementary Transmission System (SCT) Guaranteed Transmission System (SGT)

Legal classification of transmission lines (pre and post 2006) Overview of transmission assets legal classifications

Guaranteed Transmission System (SGT) Complementary Transmission System (SCT) Secondary Transmission System (SST) Main Transmission System (SPT)

New assets built as a result of a auction process according to

the transmission plan

Compensation assigned to all the end users in the system BOOT type contract (30 year) Example: Zapallal – Trujillo All transmission lines that form part of the investment plan that

were not awarded via auction process as well as individual party initiative lines

Private contracts Example: El Platanal – Chilca Under LCE framework For existing installations (operating prior to 23 July, 2006) Example: CTM does not have SST lines As stipulated by LCE (Law of Electrical Concessions) For existing installations (operating prior to 23 July, 2006) Example: Mantaro – Socabaya

Main Transmission System (SPT)

Source: CTM company information. Note: Main transmission system lines (SPT) include Mantaro – Socabaya, Guaranteed Transmission System lines (SGT) include Chilca – La Planicie – Zapallal, Trujillo – Chiclayo, Zapallal – Trujillo, Talara – Piura, Pomacocha – Carhuamayo and Machupicchu – Abancay – Cotaruse. Complementary transmission lines (SCT) include Independencia – ICA, El Platanal – Chilca, CTM – Miski Mayo, CTM – Kallpa (CC Chilca), CTM – Kallpa, CTM – Egenor, CTM – Fenix, CTM – Termochilca and CTM – Cotaruse.

Before After New framework Legacy framework Legacy framework New framework

Tariff structure for transmission companies

12

Tariff structure

Contract for Main Transmission System (SPT)

• VNR: investment amount
• Term: 30 years
• Return: 12% per annum for the first 10

years

Total cost of service

= Annuity of investment O&M costs +

Contract for Guaranteed Transmission System (SGT)

• Investment: cost of investment
• Term: 30 years
• Return: 12% per annum

Total cost of service

= Annuity of investment O&M costs +

• Proposed operation and maintenance

costs

Contracts for Complementary Transmission System (SCT)

• Investment: cost of investment in facility
• Term: defined by parties
• Return: target 12% per annum

Total cost of service

= Annuity of investment O&M costs +

• Operation and maintenance cost

estimated as a % of investment value

Tolls & compensation / Indexation

• Tolls and tariffs determined by COES
• The tariff (annuity determined by VNR and

O&M costs) is adjusted upon each revision period by the WPSSSOP3500 index (finished goods less food and energy), as determined by the US bureau of labor statistics

• Tariff reviewed annually by OSINERGMIN
• Tolls and tariffs determined by COES
• The tariff (annuity determined by VNR and

O&M costs) is adjusted upon each revision period by the WPSSSOP3500 index (finished goods less food and energy), as determined by the US bureau of labor statistics

• Tariff reviewed annually by OSINERGMIN
• Amount established in contract

Source: CTM company information. Note: Main transmission system lines (SPT) include Mantaro – Socabaya, Guaranteed Transmission System lines (SGT) include Chilca – La Planicie – Zapallal, Trujillo – Chiclayo, Zapallal – Trujillo, Talara – Piura, Pomacocha – Carhuamayo and Machupicchu – Abancay – Cotaruse. Complementary transmission lines (SCT) include El Platanal – Chilca, Independencia – ICA, CTM – Miski Mayo, CTM – Kallpa (CC Chilca), CTM – Kallpa, CTM – Egenor, CTM – Fenix, CTM – Termochilca and CTM – Cotaruse.

In spite of changes in regulation, SPT and SGT are for the most part the same; CTM also aims to structure its SCT contracts as similarly as possible to SPT/SGT contracts

5,246 5,319 5,864 6,422 6,970 2012 2013 2014 2015 2016

Centro Norte Sur

44 254 339 278 500 185 195 360 370 2008 2009 2010 2011 2012 2013 2014 2015 2016

27.0 27.2 29.5 31.8 33.6 39.7 0.94 0.93 1.00 1.07 1.12 1.30 2008 2009 2010 2011 2012 2013

Sales MWh Sales (MWh per cápita)

Transmission sector growth

13

Portfolio Projects3 Capex spent on transmission2

The transmission sector in Peru has seen strong historical growth which is expected to carry

• n as Peru continues to experience economic growth and increased electricity needs

(US$ in million)

Power consumption (total & per capita)1 High Demand (MWH)1

1 Source: APOYO Consultoría 2 Includes projects under construcion in the period 2013-2016 (APOYO Consultoría) 3 Source : National Society of Mining, Petroleum and Energy

Over US$ 8,000 million by 2016

Hydroelectric 62% Transmission Lines 17% Thermal Power (Gas) 11% Non-conventional renewable energy 7% Power Plants (cold reserve) 3%

• III. CTM - Power Transmission Network

Company snapshot

15

CTM transmission network Company highlights

ISA, through its subsidiaries in Peru (REP, CTM and ISA

Peru) controls 75.3% of the country’s transmission market(1).

CTM has 9 concessions with the Peruvian State and 10

contracts with private companies, representing 88% and 12% respectively, of total revenues. CTM operates 10 substations.

In 2012, CTM represents ~ 27% of the market share of

Peruvian transmission.

CTM’s main concession is the Mantaro-Socabaya line,

which began operations in 2000 and connects the National interconnected electricity transmission system

• f Peru (Central – Northern), which includes the main

urban areas of Peru.

On September 26, CTM entered into an agreement with

Proinversión to build the project "500 kV transmission line Mantaro - Marcona - Socabaya - Montalvo and the construction

• f

two electrical substations and the expansion of three existing substations. 500 kv transmission line of 920 km in length. Concession period, 30 years. USD 447 million of estimated investment.

Source: CTM company information, public filings and COES. (1) Source: Osinergmin, Market share 2012 based on percentage of total market transmission revenue.

Corporate structure

16

ISA: 100%(1) ISA : 60.0% EEB: 40.0% ISA: 60.0% EEB: 40.0%

Source: Company information and public filings. (1) ISA acquired the shares of public service and natural resources investment fund (managed by AC Capitales SAFI SA).

2013 revenues:

US$1,869 million

2013 EBITDA:

US$1,044 million

Network:

~41,000 km

#1 transmission player in Colombia and

leading transmission player in LatAm

Ratings: Baa3 / BBB- / BBB- 2013 revenues:

US$ 1,016 million

2013 EBITDA:

US$ 922 million

Leading power sector player in

Colombia

Ratings: Baa3 / BBB- / BB+

ISA Peru

• 2013 revenues:

US$11.8mm

• 2013 EBITDA:

US$9.7 mm

• Network:

393 km

CTM

• 2013adj. revenues: US$109.0 mm
• 2013 adj. EBITDA: US$ 90.2 mm
• Network:

2,465 km

• Rating: BBB-, Baa3. Fitch, Moody’s

REP

• 2013 revenues:

US$125.1 mm

• 2013 EBITDA:

US$76.0 mm

• Network:

6,231 km

• Rating:AAA, Apoyo and Equilibrium

Jointly, ISA subsidiaries control 75.3% of Peru’s transmission market

Proyectos de Infraestructura (PDI)

• 2013 revenues:

US$90.6 mm

• 2013 EBITDA:

US$3.7 mm

• ISA vehicle tasked with managing

construction of ISA projects in Peru

Each subsidiary has legal and tax stability agreements in place which guarantee same legal and tax regime as at

beginning of original concession

REP focuses on expansions of the existing network and CTM focuses on the development of new transmission lines

CTM is the vehicle that develops new transmission lines as a result of a more favorable tax regime that allows for

accelerated asset depreciation

ISA: 100.0%

Mantaro – Cotaruse – Socabaya Length: 1,221 km Beginning of operations: Oct-00 Remaining life: 18 years Tension: 220 kV

(1)

Pomacocha - Carhuamayo

Length:

106 km

Beginning of operations:

Sep-13

Remaining life:

30 years

:

Zapallal – Trujillo (Fideicomiso) Length: 529 km Beginning of operations: Dec-12 Remaining life: 30 years Tension: 500 kV 17 C hilca – La P lanicie – Z apallal Length: 290 km Beginning of operations: Jun-1 1 Remaining life: 28 years Tension: 220 kV / 500 kV

Source: CTM company information and public filings for the period ended March 31, 2014 (1) Includes an expansion that began in July 2011. (2) All lines have more than 15 years left on contracts.

Location of CTM’s existing assets

Main Transmission System (SPT) Guaranteed Transmission System (SGT)

Total existing network: 2,465 km

Talara - Piura

Length:

103 km

Beginning of operations:

May-13 Tension: 220 kV

Remaining life:

30 years 220 kV Tension:

Line kV Length CTM - Fenix

220 kV 8 km

CTM - Termochilca

500 kV 2 km

CTM - Cotaruse

220 kV NM

Complementary Transmission System (SCT)(2)

Overview of CTM’s lines

Overview of CTM’s lines

18

Source: CTM company information and public filings. 2) All lines have more than 15 years left on contracts. 3) Includes length of Mantaro-Marcona-Socabaya-Montalvo TL

Overview of CTM’s assets under development Location of CTM’s assets under development

Guaranteed Transmission System (SGT)

(million of US$, unless otherwise indicated)

Total expansion network3: 1,666 km

Complementary Transmission System (SCT)(2) Line kV Length El Platanal - Chilca 220 kV 107 km CTM - Miski Mayo 138 kV 41 km CTM - Kallpa (CC Chilca) 220 kV NM CTM - Kallpa 220 kV NM Independencia - ICA 220 kV 57 km CTM - Egenor 220 kV NM

Trujillo - Chiclayo (Fideicomiso) Length: 325 km Expected beginning of operations: Jun-14 Tension: 500 kV Estimated investment: $134 Physical / economic advance: 97% / 82% Machupicchu - Abancay - Cotaruse (Fideicomiso) Length: 421 km Expected beginning of operations: Jan-15 Tension: 220 kV Estimated investment: $107 Physical / economic advance: 58 / 37% Mantaro-Marcona-Socabaya-Montalvo (Fideicomiso) Length: 920 km Expected beginning of operations : Nov-16 Tension: 500 kV Estimated investment : $447mm

Total existing network: 2,465 km

Physical / economic advance 7% / 0.5%

• IV. CTM credit highlights

Contracted revenue and EBITDA ramp-up

20

Source: Company information and public filings. (1) Expansion began operating in July 2011. (2) Investment to date as of March 31st, 2014. (3) Adjustments result from increases in revenue which are a result of interest on accounts receivable related to disputed revenues under ongoing arbitration proceedings and interest on accounts receivable related to power transmission services from private clients, both of which are, for accounting purposes, considered financial income.

Main existing projects (MTS / GTS lines)

(US$ in million)

Adjusted Revenues(3)

Line (tension) Length (km)

• Est. beginning
• f ops.

Investment to date

(2)

Total Cost Trujillo – Chiclayo (500 kV) 325 jun 2014 $110.9 $133.8 Machu Picchu – Abancay – Cotaruse (220 kV) 421 jan 2015 $37.7 $106.8 Mantaro-Marcona-Socabaya- Montalvo 920 nov 2016 $7.7 $446.9

Main expansion projects (GTS lines)

(US$ in million) (US$ in million)

$32.1 $36.1 $49.8 $59.5 $109.0 2009 2010 2011 2012 2013 2014E 2015E 2016E

Adjusted EBITDA and EBITDA margin(3)

$28.0 $31.6 $43.2 $47.3 $90.2 87.2% 87.4% 86.7% 79.5% 82.7% 2009 2010 2011 2012 2013 2014E 2015E 2016E

Adjusted EBITDA margin (%)

Line (tension) Length (km) Beginning of

• ps.

Cost Mantaro-Socabaya (220 Kv) 1,222 Oct 2000 (1) $230.1 Chilca – La Planicie – Zapallal (500 / 220 kV) 290 jun 2011 $140.0 Ica Independencia (220kV) 57 jun 2011 $10.4 Zapallal – Trujillo (500 kV) 529 Dec 2012 $205.6 Talara – Piura (220 kV) 103 may 2013 $20.9 Pomacocha – Carhuamayo (220 kV) 106 sep 2013 $23.8 CTS lines (various) 158 Various $81

(US$ in million)

Stable and predictable cash flow generation

21

Inherent risk mitigants Regulated revenue (MTS/GTS) represents majority of revenue

(% of total revenue)

1Q14

Attractive / stable margins

(US$ in million)

Little to no client credit risk

In relation to regulated revenues:

− Revenue for lines are paid by all of the transmission system’s end-users (little to no counter-party credit risk) − Ultimately government is responsible for payment to transmission companies

In relation to non-regulated revenues

− Users are typically large consumers and / or producers of energy with strong credit profiles Revenues / debt in US$

All of CTM’s revenues are in US$, which matches currency

• f bond debt.

Regulated tariffs 88%

• f revenues in 1Q14

Attractive and stable margins

Majority of pipeline

projects consist of GTS lines − GTS lines expected to represent a more significant part of total revenue going forward $8.1 $18.0 $17.4 $18.4 $36.3 $19.6

56.7% 82.2% 80.6% 81.0% 84.9% 81.3%

4Q12 1Q13 2Q13 3Q13 4Q13 1Q14

Adjusted EBITDA margin (%)

The increase recorded in 4Q13

includes the additional income earned by Controversy Addendum 10.

Comments

SPT (BOOT contracts) 46.4% SGT 42.0% SCT 11.7%

Strong shareholder support and highly efficient / integrated business model

22

Sector expertise and strong shareholder support Highly efficient / integrated business model

CTM’s shareholders supply the optimal combination of

• perational expertise and financial support

Interconexión Eléctrica S.A. (“ISA”) Baa3 / BBB- / BBB-

• One of the leading power

transmission companies in Latin America

• ISA’s main shareholder is the

government of Colombia

• ISA has important presence in

Peru, Colombia, Brazil, Chile, Ecuador, Argentina, Bolivia, Panama and other parts of Central America

• ISA’s main business segment is

power transmission

60%

Empresa de Energía de Bogotá (“EEB”) Baa3 / BBB- / BB+

• Integrated energy company that

participates in the electricity and natural gas sectors with presence in Colombia, Peru and Guatemala

• Controlled by the City of Bogotá
• Participation in the energy sector

(generation, transmission and distribution) and the natural gas sector (transportation and distribution) through minority and majority stakes

40%

Source: Company information and public filings.

REP top service provider Efficiency focused business model REP synergies Proyectos de Infra. (PDI)

• CTM is focused on making
• perations as efficient and cost

effective as possible − In the transmission market, efficiency and cost effectiveness translate into competitive advantage

• REP is recognized for its technical

leadership in the power transmission sector in Peru

• REP also ensures that ISA

subsidiaries in Peru maintain the highest level of operational quality (aligning operational standards with those of ISA)

• REP is responsible for the
• peration and maintenance of CTM

assets

• Streamlining the operation of ISA

subsidiaries in Peru allows for increased economies of scale and numerous synergies

• PDI is tasked with managing the

construction of ISA subsidiary lines in Peru

• PDI is the leading player in the

sector and boasts a very strong execution track-record

• PDI‘s experience / expertise is

invaluable in maintaining low costs and the highest standard of quality

As a result of its business model, CTM is able to solidify its position as a leader in Peru’s transmission sector

Leading power transmission player in Peru

23

Leading market position, enhanced by market’s natural monopoly condition Market share 2012(1)

Source: COES and OSINERGMIN.

(1) Last information published by OSINERGMIN

(% of total sector sales)

CTM is a leading player in the Peruvian power transmission markets

CTM owns one of the most important transmission concessions in Peru, the Mantaro – Socabaya line that integrated

the national interconnected system

In 2012, the Company was responsible for ~27% of total revenue in the sector Going forward, CTM aims to increase or at least maintain its current market participation

CTM is controlled by ISA, who in turn also controls REP and ISA Peru

In 2012, between the three ISA subsidiaries in Peru, ISA controlled the 75.3% of total sales in the market ISA subsidiaries in Peru have significant strategic importance for the transmission sector and the country

REP 43.6% CTM 26.8% ABENGOA 9.4% REDESUR 6.1% ISA Peru 4.9% Eteselva 3.7% Conenhua 1.2% Others 4.3%

ISA controls the 75.3% of the market

Main Clients

Edegel 15.9% Enersur 18.0% Electroperu 10.3% Kallpa 16.4%

• Cia. Eléctrica el Platanal

5.6% Egenor (Duke) 4.2% Otros (empresas mineras y generadoras) 29.5%

CTM credit highlights

24

Peru, one of the most attractive investment destinations Constructive and transparent regulatory framework Lowest risk profile within the power sector Contracted revenue and EBITDA ramp-up Sector expertise and strong shareholder support Highly efficient / integrated business model Stable and predictable cash flow generation Leading power transmission Company in Peru

• V. Financial information

CTM key financial information

26

Adjusted Revenues Net Income

The increase recorded in 4Q13

includes the POC

• f

Talara- Piura TL, Pomacocha Carhuamayo TL, 500 kV Fénix and Termochilca connetion; also includes an additional income earned by Controversy Addendum 10.

$21.6 $22.7 $42.8 $21.9 $24.1 2Q13 3Q13 4Q13 1Q13 1Q14 ($2.8) $4.9 $15.9 $2.4 $5.8 2Q13 3Q13 4Q13 1Q13 1Q14

Net

Income significantly increased in 1Q14, mainly due to the POC

• f

the above projects.

CTM key financial information

27

Capex

(US$ in mm)

Source: CTM company information and public filings.

Comments

Historically stable margins expected to continue throughout projected period

Adjusted EBITDA and EBITDA margin

$8.1 $18.0 $17.4 $18.4 $36.3 $19.6

56.7% 82.2% 80.6% 81.0% 84.9% 81.3%

4Q12 1Q13 2Q13 3Q13 4Q13 1Q14

Adjusted EBITDA margin (%)

$47 $172 $203 $156 $97 $24 2009 2010 2011 2012 2013 1Q14

In

1Q14, the 76%

• f

the executed Capex corresponds to the concessions

• f

the Guaranteed Transmission System related to the investments

• n

Trujillo- Chiclayo TL and MachuPicchu

• Abancay - Cotaruse TL.

Thank you