AGUAS ANDINAS Corporate Presentation JANUARY 2017
01. OUR COMPANY 2
AGUAS ANDINAS Chile’s Largest Sanitation Company TARIFFS (Potable Water, Sewerage, and Sewage Treatment US$/m3) Berlin 6,25 Copenhagen 5,87 Oslo 5,59 2,199,208 clients 100% coverage in Representing 43% of Sydney 4,9 potable water and the clients in the Washington D.C. 4,73 sewage treatment industry Paris 4,18 London 4,04 Ottowa 3,06 Stockholm 2,36 Madrid 2,13 50 % of potable Rome One of the lowest tariffs in 1,88 water billed in the Chile Athens 1,65 industry Santiago 1,26 Seoul 0,9 3 Source: SISS' 2015 Management Report
CORPORATE STRUCTURE World Class Controlling Shareholders SUEZ is one of the leading water Chilean Pension Funds CORFO Chilean Pension Funds and sewage treatment players 0,0% 5,0% 2,6% Others worldwide 12,1% Stock Brokers 100% 7,6% AGBAR is an international Stock Brokers Aguas 13,3% IAM Others benchmark in the sanitation business Andinas 8,4% Ownership IAM Ownership with more than 150 years of December 50,1% Suez IAGSA December 56.6% 56,6% 31 2016 experience in the sanitation 31 2016 industry, with a presence in 14 countries International 50.1% International Shareholders Shareholders 18,1% 26,3% 100% 100% 53.5% 100% 100% 100% 100% REGULATED COMPANIES NON-REGULATED COMPANIES 4 Source: Aguas Andinas
SUSTAINABILITY Leading Company in Emerging Markets Sustainability efforts strongly linked with the Company’s stakeholders, with open and permanent communication with Stakeholders Key Issues them During 2015, the Company reported to the CDP (Carbon Career development and training; equal opportunities; good Collaborators Disclosure Project) initiative for the first time. This was labor conditions and communication; health and safety continued in 2016. Quality and continuity of supply; customer service, service Clients channels and complaints management; transparency and Due to the Company’s sustainable management, in 2015 Aguas Andinas joined the select group of Chilean companies which accuracy in billing compose the Dow Jones Sustainability Index (DJSI) Emerging Profitability; investment stability; risk management; Markets and DJSI Chile Shareholders transparent management In addition to this, in November of the same year, Aguas Suppliers and Transparent and equal conditions; timely payments; Andinas was selected as a component of the Euronext-Vigeo EM contractors development opportunities 70 Index Legal Compliance; collaborative relationships; contribution to Authorities local development Neighboring Impact management; dialogue and relationships; local Communities development opportunities 5 5
INTEGRAL WATER CYCLE MANAGEMENT 100% Coverage of Potable Water, Sewerage, and Sewage Treatment Ground and Surface Network of 15,260 Returning 100% sources kilometers Network of 12,499 100% of coverage 100% Sewage Treatment kilometers 6 Source: SISS' 2015 Management Report and Aguas Andinas Annual Report
OPERATIONAL RATIOS High Standards of Productivity and Quality of Service CLIENTS/EMPLOYEE BILLING/EMPLOYEE 518 Th. M 3 133 357 79 AGUAS ANDINAS INDUSTRY AVERAGE AGUAS ANDINAS INDUSTRY AVERAGE RUPTURES* X 100 KMS RUPTURES* X 1,000 CLIENTS 20,83 1,56 13,27 0,89 AGUAS ANDINAS INDUSTRY AVERAGE AGUAS ANDINAS INDUSTRY AVERAGE Source: SISS' 2015 Management Report, Aguas Andinas includes Aguas Andinas, Aguas Manquehue, Aguas Cordillera and ESSAL (*) Ruptures in the Potable Water Network 7
02. OUR INDUSTRY AND REGULATORY FRAMEWORK 8
WATER & SEWERAGE INDUSTRY IN CHILE XV y I Region / Iquique Aguas Del Altiplano An example of a successful public-private alliance II Region / Antofagasta Aguas De Antofagasta III Region / Copiapó Aguas De Chañar IV Region / La Serena Aguas Del Valle TWO CONCESSION MODELS 1998 BEGINNING V Region / Valparaíso Indefinite concession Esval R.M. / Santiago OF THE Aguas Andinas, Aguas Cordillera, VI Region / Rancagua PRIVATIZATION Aguas Manquehue Essel Concession for 30 years VII Region / Talca PROCESS Aguas Nuevo Sur VIII Region / Concepción Essbio IX Region / Temuco Clients breakdown by Economic Group Aguas Araucania Los Ríos / Valdivia X Region de Los Lagos y XIV Region AGBAR SUEZ 43.0% Aguas Décima de Los Ríos / Pto.Montt Essal ONTARIO TEACHERS PP 31.1% Indefinite Concessions: 6 MARUBENI 9.2% Xi Region / Coyhaique INV. AGUAS RIO CLARO 5.1% 30 years Concessions: 8 Aguas Patagonia SMAPA 3.8% EPM 3.3% 96% OF CLIENTS served by a HIDROSAN-ICAFAL 2.3% privately-held operator Xii Region / Pta.Arenas OTHERS 2.2% Aguas Magallanes 9 Source: SISS' 2015 Management Report
HIGHLY REGULATED SANITATION INDUSTRY Proven and Transparent Framework MODEL COMPANY vs. REAL COMPANY Regulatory framework in place for more than 25 years Superintendence of Sanitation Services (SISS) acts as the regulator counterpart in MODEL COMPANY AGUAS ANDINAS the tariff setting process, which lasts for 1 year approximately Greenfield operation Existing infrastructure Tariffs are reset every five years, based on an unbiased and technical model: Combination of new and Latest technology – Based on the long term total cost of a model company existing technologies – Discrepancies are solved by an independent experts committee Cost efficiency Real costs – Minimum real return on assets of 7% after taxes – Automatic interim adjustments linked to polynomials based on CPI and WPI 100% coverage in all services Real coverage indexes Self-financing of investments Self-financing of investments through tariffs through tariffs Government subsidies for low-income clients Ability to use debt to finance Minimum Capex and enhance return on The regulatory framework of the Chilean water industry has been fundamental to Return on Assets equity the development of the sector 10
TARIFF NEGOTIATION STEPS From General Parameters to the Model Company Size SISS PROPOSAL Publication of the Tariff Setting Process Parameters and Methodology Aguas Andinas provides information about the Real Company to the SISS SISS analyses the Aguas Andinas analyses the Model Company Model Company Aguas Andinas highlights discrepancies Negotiation Agreement? No Yes Expert Committee Committee Decision Tariff Decree 11
ESSAL TARIFF-SETTING PROCESS Technical and Negotiation Process For One Year Agreed list of candidates for Definitive the Expert Bases Committee Parameters and Committee SISS Comments on SISS calls SISS answers Background Exchange of the Methodology The company Tariffs gives sets new the parameters Committee to the Comments delivery of the Tariff Studies Publication highlights Tariff Expiration its are made of Experts Tariff Study Discrepancies answer Formulas Process JUNE AUGUST MARCH APRIL APRIL JUNE AUGUST SEPTEMBER SEPTEMBER OCTOBER 12 2015 11 2015 8 2016 7 2016 26 2016 5 2016 12 2016 11 2016 25 2015 29 2015 30 days 16 days 30 days 30 days 12
RESOLUTION OF SIXTH TARIFF NEGOTIATION PROCESS An Agreement Was Reached with the SISS Maintain Aguas Andinas’ and Aguas Cordillera’s current tariffs from December 31 st 2013 Aguas Andinas and its subsidiaries – The new tariff decrees have been in application from March and July Aguas Cordillera, Aguas Manquehue, 2015 respectively and ESSAL all came to an agreement with the Superintendence of Sanitary Reduce Aguas Manquehue’s tariffs by 5% in comparison to those applicable on December 31 st 2013 Services (the "SISS") within the framework of the sixth tariff-setting process on the following terms: – The new tariff decree has been applied from May 2015 Maintain ESSAL’s current tariffs from December 31st 2014. – The tariff decree has been applied from September 11 2016 The indexation polynomials will remain the same 13
RESOLUTION OF SIXTH TARIFF NEGOTIATION PROCESS Changes In Tariffs When New Services Go Into Operation Additional tariffs when new works come into operation: In addition to the indexation Aguas Andinas: Turbidity safety works: +1.1% in 2019 polynomial, during the next five years, tariffs will change when new services Aguas Andinas: Quality improvement works WWTP Farfana + Trebal: +1.4% that have previously been negotiated in 2018 with the SISS enter into operation ESSAL: Safety infrastructure works (safety tanks, generators, and support equipment): +1.5% in 2017 Tariff discounts for Non-Regulated Businesses: Alto Maipo Project: -1.2% in 2018 (estimated) 14
03. INVESTMENTS 15
2015 -2020 INVESTMENTS Ensuring the Continuity of Service INVESTMENTS 2015-2020 Investment plan of USD$ 830 MILLION SEWAGE 40% 2015-2020 MAIN PROJECTS 60% Investments in potable water Replenishment and operational improvement plans. POTABLE WATER Growth, safety and quality of service Potable Water Safety Infrastructure Works Phase 2 Investments in sewage treatment Growth, safety and quality of service Collection of sewage Sewage treatment Replenishment and improvement plans 16
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