Strategic Update. Investor Relations Bogotá. July 3, 2013 Medellín. July 4, 2013

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1 Strategic Update Investor Relations Bogotá. July 3, 2013 Medellín. July 4, 2013

2 DISCLAIMER Certain statements contained in this report constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of These forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Also, these forward-looking statements present our estimates and assumptions only as of the date of this report. Except for our ongoing obligation to disclose material information as required by federal securities laws, we do not intend to update you concerning any future revisions to any forward-looking statements to reflect events or circumstances occurring after the date of this report. 2

3 AGENDA Corporate Strategy Strategic Pillars Implementation 3

4 MEGA Achievements as of 2012 MEGA Expectations Achievements Revenues USD 3.5 billion USD 2.43 billion (70%) 80% revenues generated outside Colombia USD 1.66 billion (68%) 20% revenues different from Energy Transport USD 538 million (22%) Present in 50% of energy exchanges International Interconnections Business diversification Major data transporter at the Andean Region Entrance to the Road Concession Business Continental leadership in connectivity infrastructure Development of energy futures markets Energy derivatives negotiation system 4

5 Strategic Update Implementation Plan From project to process Strategic Definition Implementation of Changes Strategy immersed in the organization

6 Corporate strategy aspirations Business and geographic mix: based on synergies with existing capabilities and assets, mainly in Colombia, Brazil, Peru and Chile Profitability as primary strategic goal Growth: Will depend on the opportunities that meet the desired profitability level (superior). ISA s vocation: Value creation of value through the operation and high quality infrastructure development 1 Capturing growth opportunities with higher profitability 2 Improving profitability of current and core businesses 3 Dynamic adjustment of business and geography portfolio 6

7 ISA s mission is 7 The highly-efficient development and operation of linear infrastructure systems where ISA has differential capacities or advantages, based on the development of its human talent and innovation capacity to create value for shareholders and other stakeholders, and contribute to the sustainable development of the communities where it operates. 7

8 2020 Outlook By 2020, ISA will have tripled its net income, by capturing the most profitable growth opportunities in its businesses existing in Latin America, the boost of operational efficiency and the optimization of its business portfolio. INICIO MADUREZ CRECIMIENTO ISA will have a return higher than its equity cost, sustainable over time. In the Energy Transmission business, ISA continues to be the operator with the largest presence in Latin America, will strengthen its position in the region and will achieve operational efficiency levels aligned with the world s best practices. In the Road Concessions business, ISA will capture opportunities in the region, focused on Colombia. In the Telecommunications Transport business, ISA will consolidate its leading position as an independent carrier in Latin America and will have developed an IP ecosystem in the region. ISA will extend its ability for the Smart Management of Real-Time Systems to new services, accessing highly profitable opportunities in other businesses. 8

9 AGENDA Corporate Strategy Strategic Pillars Implementation 9

10 Growth: First Strategic Pillar 1 Capturing of growth opportunities with a higher return for ISA Focus on profitable opportunities in TE Successful and profitable development of investment projects in Chile Focus on growth opportunities in TE segments of higher profits (reinforcements and new connections; acquisition and integration of brownfield assets ) Selective participation in new bids (according to the level of synergies with the current assets, asset expansion, subtransmission assets) Opening of new markets with opportunities of value creation due to restructuring (i.e., Mexico, Ecuador) Development of road concessions, mainly in Colombia. The capturing of highly synergic opportunities in other businesses, such as: Telecommunications 1 GSTR 2 Renewable energies in the future 1 Especially in the commerce of fiber of transmission lines. 2 For other TSOs or clients 10

11 Profitability: Second Strategic Pillar 1 Capturing of growth opportunities with a higher return for ISA 2 Improvement of the returns of the Group's current and core businesses Focus on profitable opportunities in TE Successful and profitable development of investment projects in Chile Focus on growth opportunities in TE segments of higher profits (reinforcements and new connections; acquisition and integration of brownfield assets ) Selective participation in new bids (according to the level of synergies with the current assets, asset expansion, subtransmission assets) Opening of new markets with opportunities of value creation due to restructuring (i.e., Mexico, Ecuador) Improvement of the Group s O y M through the identification and extension of better practices in a transversal manner Leverage of the Group s scale in the provision of equipments, materials and projects and excellence in service supply. Ensure the cost and term, as well as the Group s expansion CAPEX optimization. Development of road concessions, mainly in Colombia. The capturing of highly synergic opportunities in other businesses, such as: Telecommunications GSTR2 Renewable energies in the future 11

12 2 Profitability: 3 Opportunity Areas that are Relevant to Asset Management A Operation and maintenance (O+M) Optimize asset management (1) Optimize the O+M operational model Consolidate the outsourcing and management model for suppliers Make O+M efficient through technology Perform equipment standardization Simplify standards of operation in roads Foster technologies as electronic tolls for roads Improve the return on actual assets and new investments leveraging the O+M Opex (1) Jointly with the Capex area SOURCE: ISA s team analysis 12

13 2 Profitability: 3 Opportunity Areas that are Relevant to Asset Management A Operation and maintenance (O+M) B Capex Optimize asset management (1) Optimize the O+M operational model Consolidate the outsourcing and management model for suppliers Make O+M efficient through technology Perform equipment standardization Simplify standards of operation in roads Foster technologies as electronic tolls for roads Implement the process of active management of risks Enhance the land and environmental risk management Perform key activities in early stages of the project Create the process of decision stages ( Stage- Gate-process ) Implement Design-to- Value to optimize project Enhance project management (PMI) Improve the return on actual assets and new investments leveraging the O+M Opex Improve the profitability of investment projects optimizing budget execution and schedules (1) Jointly with the Capex area SOURCE: ISA s team analysis 13

14 2 Profitability: 3 Opportunity Areas that are Relevant to Asset Management Operation and A B Capex C maintenance (O+M) Supply Optimize asset management (1) Optimize the O+M operational model Consolidate the outsourcing and management model for suppliers Make O+M efficient through technology Perform equipment standardization Simplify standards of operation in roads Foster technologies as electronic tolls for roads Implement the process of active management of risks Enhance the land and environmental risk management Perform key activities in early stages of the project Create the process of decision stages ( Stage- Gate-process ) Implement Design-to- Value to optimize project Enhance project management (PMI) Achieve victories in selected categories (positioning) Manage suppliers and outsourcing Achieve positioning in corporate supply for the Group Perform procurement for several roads according to geographic location Improve the return on actual assets and new investments leveraging the O+M Opex Improve the profitability of investment projects optimizing budget execution and schedules Develop a leverage corporate function that makes use of the Group s scale (1) Jointly with the Capex area SOURCE: ISA s team analysis 14

15 Portfolio Adjustment: Third Strategic Pillar 1 Capturing of growth opportunities with a higher return for ISA 2 Improvement of the returns of the Group's current and core 3 businesses Dynamic adjustment of the business and geography portfolio Focus on profitable opportunities in TE Successful and profitable development of investment projects in Chile Focus on growth opportunities in TE segments of higher profits (reinforcements and new connections; acquisition and integration of brownfield assets ) Selective participation in new bids (according to the level of synergies with the current assets, asset expansion, subtransmission assets) Opening of new markets with opportunities of value creation due to restructuring (i.e., Mexico, Ecuador) Improvement of the Group s O y M through the identification and extension of better practices in a transversal manner Leverage of the Group s scale in the provision of equipments, materials and projects and excellence in service supply. Ensure the cost and term, as well as the Group s expansion CAPEX optimization. Keep a constant assessment alive regarding adjustment opportunities for the portfolio based on the following criteria: ISA s value creation potential for a third party Access to opportunities of profitable growth Profitability in comparison to other options Development of road concessions, mainly in Colombia. The capturing of highly synergic opportunities in other businesses, such as: Telecommunications1 GSTR2 Renewable energies in the future 15

16 Principles of Organizational Design: Benefits Affiliates Home Office 100% Electric Power Transport Colombia ISA Otras Other filiales nacionales National Affiliates INTERCOLOMBIA affiliate will be in charge of managing, operating and maintaining ISA s electric power assets in Colombia. Otras Filiales Otras exterior Other Filiales exterior Affiliates Abroad The organization will facilitate the obtaining of challenges. Clarity and transparency in the separation of the double role of ISA: one mainly strategic and the other as the operator of the national transmission system. Governance model adjusted in the report lines of the affiliates towards home office. Create a home office focused on strategic activities of a corporate nature. Technical excellence center for capturing value through better practices. 16

17 AGENDA Corporate Strategy Strategic Pillars Implementation 17

18 Strategic Update Implementation Plan From project to process Strategic Definition Implementation of Changes Strategy immersed in the organization

19 TE Asset Management ISA s 2020 Strategic Update 1 Implementation Plan Align internally and externally the main stakeholders 2013 Implementation Scheme Corporate Reorganization Reorganization 2 3 Implement the organizational change in order to propel strategic initiatives (structure, governance and incentives) Define and develop efficiency initiatives, establish the bases for their capturing and estimate their potential Project Office (PMO) Opex Capex Procurement 4 Develop capabilities for the next strategic cycle (future) Road Efficiency Communication and Alignment 19

20 General Timeline 1 Align internally and externally the main stakeholders 2013 Communication Adequate business plans Implement the organizational change in order to propel strategic initiatives Define efficiency initiatives, establish the bases for their capturing and estimate their potential 4 Develop capabilities for the next strategic cycle (future) 2013 Make viable the separation from the corporation Implement reorganization Initiative developments (asset management, opex, capex, procurement) Initiative developments (management models, capabilities, innovation) 20

21 CONTACT INVESTOR RELATIONS Phone Website Twitter 21

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