October 4, Chile Trip Santander GBM

Transcription

1 October 4, 2011 Chile Trip Santander GBM

2 Presenter Lode Verdeyen, CEO 2

3 Agenda Chilean electricity sector overview Company overview Financial profile 3

4 Structure of Chile s energy sector Market share Expected growth ( )¹ Clients Generation by fuel type² Main players (% of installed capacity) SING 25% capacity 26% demand 6.0% 90% 10% 7% 27% 66% ECL Endesa Gener Otros Other 0,4% 24,6% 51,8% 23,1% MW SIC Santiago 74 % capacity 73% demand 6.1% 41% 59% Regulated Un-regulated 11% 36% 27% 23% Hydro Carbon Diesel Gas / LNG Other Endesa Colbun Gener Other 18% 19% 21% 42% MW SING highlights Aysén and Magallanes 1% capacity 1% demand Close to 100% of installed capacity based on coal, diesel and gas (including LNG). No exposure to hydrology Unregulated clients (mainly mining co s) represent over 90% of total demand 6.0% expected CAGR in physical sales for Source: CNE, CDEC-SIC, CDEC-SING, E.CL ¹ Based on CNE ( National Energy Commission ) projections in the Informe Técnico Preliminar Precio Nudo SING/SIC report dated April 2011; ² Based on gross generation; 3 Does not include projects under construction during

5 Evolution of Power Generation, Prices and Demand in the SING New capacity Source: CDEC- SING / CNE 5

6 Exposure to mining sector growth Chile is a global, low-cost copper producer Low correlation between copper prices and SING demand for electricity. SING copper production (kt), SING Generation (GWh) and commodity prices (US$/lb, bbl) kt SING copper production (kt) SING demand (GWh) Annual average copper price (US$/lb) Annual average WTI price (US$/bbl) ,2 3,2 3,3 GWh Volatility¹ Correl. with energy output² 100 2, Copper Production 11.2% Copper Price 28.2% (0.40) , ,8 41 1, , ,4 1, ,0 19 1,0 30 1, ,9 0,9 31 1,0 1, ³ 0 Source: Cochilco, CNE, Bloomberg ¹ Measured as the standard deviation of the annual changes; ² Calculated as the correlation of the annual changes; ³ Annualized September 2010 data 6

7 SING: installed capacity and generation mix Gross installed capacity by technology (MW) Monthly generation (GWh) and energy prices (US$/MWh) GWh Coal Nat. Gas Diesel + Fuel Oil Hydro Spot Contract average¹ Gas restrictions from Argentina² US$ 350 US$/MWh US$ Diesel + Fuel oil LNG ST 3 Nat. Gas-Arg US$ 250 LNG + Diesel 800 US$ New coal Coal Hydro 600 US$ US$ E.CL Endesa 2 AES Gener 1 Other 200 US$ 50 Source: CDEC-SING (1) AES Gener has an additional 416MW of capacity from the gas turbine in its 643MW CCGT in Salta, Argentina, which is currently unavailable for dispatch to the SING. (2) Includes 182MW from 100% Endesa-owned Celta, and 781MW from Gas Atacama CCGTs (50% Endesa/50% Southern Cross). (3) LNG supply arrangement between mining companies, GNL Mejillones, E.CL, and Gas Atacama in place from through US$ 0 Source: CNE, CDEC ¹Average of contracted energy prices as published by the CNE 2 Gas restrictions started in 2004, but were more strictly enforced starting in

8 Investment highlights: Attractive industry ATRACTIVE INDUSTRY Mature, 100% privatized market Stable, investor friendly regulatory framework Strong industry growth prospects Current Challenges: New regulation on emissions from thermoelectric plants stricter limits on particulate matter and gas emissions: Limits for existing plants: PM = 50 mg/nm 3 ~ Dec 2013 SOx = 400 mg/nm 3 ~ Jun 2015 (saturated zones; NOx = 500 mg/nm 3 e.g., Tocopilla) ~ Jun 2016 (unsaturated zones; e.g., Mejillones) Action / Effects: Focus on environmental / social responsibility Investing to comply with new emission requirements Est. US$164 MM CAPEX in Ongoing studies for the potential development renewable power sources Environmental approval for additional 2 x 350MW coal capacity in place Availability to sell LNG-based generation Law Nr. 20,257 on Non-Conventional Renewable Energy ( ERNC Law) New discussion about 20/20 8

9 Agenda Chilean electricity sector overview Company overview Financial profile 9

10 Largest electricity generator in Chile s mining dominated northern grid (~ 50% market share) Installed capacity E.CL assets 18% 1% 1,796 MW % Chapiquiña (10MW) Technology Coal Diesel/derivatives Natural Gas Hydro 38% Diesel Arica (14MW) 16% Diesel Iquique (43MW) TE Tocopilla (1,004MW) Collahuasi 15% 0% 32% El Abra 37% Tocopilla port Chuquicamata 2,159 MW 2011 C. Tamaya (104MW) Gas transmission and Gaby distribution operations Coal Gas/Diesel Diesel & F.O. Hydro New Coal Mantos Blancos 1 (29MW) TE Mejillones (592MW) CT Andina 2 (165MW) CT Hornitos 2 (165MW) Escondida 2,449 kms of high voltage transmission lines Norandino pipeline to Argentina (Salta region) 1 Owned by a mining company but operated by ECL; ² Commercial operations commenced in

11 History and recent developments Electroandina is founded as an electricity generation plant for Chuquicamata (Codelco) Edelnor is created as spinoff of Endesa s assets in northern Chile Edelnor is privatized. Southern Electric acquires control. Tractebel (now IPR GDF Suez) acquires 1/3 ownership in Electroandina. Codelco retains 2/3s. Edelnor files for Chapter 11. GDF Suez & Codelco acquire 82% GDF Suez & Codelco merge their electricity generation and gas transportation assets in northern Chile under E.CL (ex- Edelnor) 2011 International Power (U.K.) & GDF Suez Energy International combine their assets giving origin to the new International Power, a company with 66GW of installed capacity, 70% controlled by GDF Suez. Codelco sells its 40% stake in E.CL in a public auction in the Bolsa de Comercio de Santiago for approximately US$ 1 billion. 11

12 New ownership structure Chilean Pension Funds Other Chilean Institutional Investors Foreign Institutional Investors Other 52.76% % 13.02% 12.40% 1.68% (691 MW) Electroandina (1,105 MW) CTA (165 MW) CTH² (165 MW) Distrinor GNAC (4.5mm m³/day) GNAA (4.5mm m³/day) Electricity generation Gas distribution Gas transportation 1 Considers the 0.7% equity reduction due to retirement of treasury stock acquired by E.CL from shareholders that exercised their dissenter s rights in relation to the December 2009 merger. ² 60% owned by E.CL, with the remaining 40% owned by Inversiones Punta de Rieles (Antofagasta Railway PLC). 12

13 Long-term contracts with creditworthy customers Average demand¹ (MW) and remaining life (years) of current contracts Contracts average remaining life of 10 years Codelco (A+) 350 Average demand (MW) BHP Billiton SQM Current contracts Committed contracts² Other Anglo American Freeport-MM (BBB) Xstrata (BBB) Barrick (A-) Antofagasta plc 0,0 3,0 6,0 9,0 12,0 15,0 18,0 Remaining life of contracts (years) Emel (BBB) ¹ Average demand based on 2010 energy consumption except for (a) Esperanza (Antofagasta plc) estimated using an 85% load factor over 150MW of contracted capacity and (b) Emel, calculated using average contracted energy over the life of the contract ² Contract with Esperanza (started in 2011) and Emel (starting in 2012) 13

14 Driver s of E-CL s commercial policy Long- term contracts, reducing exposure to the volatility of spot market prices Tariff index to fuel prices, that mitigate the risk of potential cost increases. Define optimal level of contractual obligations, taking into account our generation capacity by type of fuel. 14

15 Investment highlights: Exposure to mining sector growth Potential future mining projects in the SING Company Proyect Capacity Demand- MW Full Capacityyr Antofagasta Minerals Esperanza 130MW Apr-2011 Antofagasta Minerals Antucoya 45MW 2014 Codelco Ministro Hales 80MW 2015 BHP Escondida OGP 80MW 2015 Collahuasi Collahuasi expansion Phase I-II MW Current challenges: Growth could be slower in near term: Large investments in green-field copper projects take time to structure; Significant electricity demand growth expected for 2015/2016 will require new capacity (and/or use of existing CCGTs) for at least 800MW: Quadra FNX s Sierra Gorda; Teck s Quebrada Blanca; Collahuasi s Phases I & II. Quadra FNX Mining Sierra Gorda 190MW 2015 Teck International PBX Ventures Quebrada Blanca Hip. 210MW 2016 Copaquire 80MW 2017 Action / Effects: Ongoing development of new 375MW coal plant and other projects: Subject to sign PPA for at least 50% Capitalize on near-term growth: 135MW of new demand from Minera Esperanza starting 2011; 200MW under EMEL contract starting

16 Investment highlights: Attractive expansion plan Current and expected base capacity (MW) 2500 Approx. 200MW commited LNG capacity to supply EMEL, starting 2012; Environmental approval for 2 x 375MW coal fired power plant in Mejillones + a port facility 2000 Availability to commit remainder gas capacity at LNG market price beyond MW of coal base generation in Current coal and hydro capacity CTA/CTH LNG Mejillones Expected base load capacity 16

17 New plants during 2011 already in commercial operations Central Termoeléctrica Andina ( CTA ) Central Termoeléctrica Hornitos ( CTH ) Characteristics Characteristics Gross capacity 165 MW Gross capacity 165 MW Location Mejillones Location Mejillones Total capex (inc. contingencies) US$496mm Total capex (inc. contingencies) US$380mm COD July 15, 2011 Contract Codelco: 150MW / 21 years Ownership 100% COD Aug 5, 2011 Contract Esperanza: 150MW / 15 years Ownership 60% CTA and CTH Capex breakdown (USD m, %) US$ 876 mm 100% 4% 75% 50% 96% 25% 0% Invested as of June-11 Pending Total 17

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19 Agenda Chilean electricity sector overview Company overview Financial profile 19

20 E.CL: Financial Results USD millones FY 10 1H10 1H11 Var. H% Revenues % Operating income (7%) Operating margin 21% 23% 17% - EBITDA (4%) Net income % Energy sales (GWh) % 2011: Adjustment period to new supply reality in the SING: 840MW of new efficient coal capacity (approx. 40% of average system output) under commissioning/testing in 1H and fully operational by 3Q; New capacity will displace higher-cost less-efficient generation, pushing marginal energy costs downward; Marginal energy costs averaged US$175MWh YTD June 30, July 15, 2011 CTA commenced commercial operations with Codelco PPA in place April 2011 CTH s PPA with Minera Esperanza commenced. 20

21 Strong financial profile Sales (USD million) Sales breakdown (Jun 2011) Jun Months Moving window Spot energy and capacity sales 3% EBITDA (USD million) and EBITDA margin (%) Jun-11 Costs breakdown (Jun 2011) 12 Months Moving window Spot energy and capacity purchases 17% Contracted energy and capacity sales 92% Other operating Fuel and lubricants Revenues 5% 50% Depreciation and amortization 10% Other operating costs 23% Total = USD 633 million Total = USD 523 million 21

22 coupled with a conservative debt structure Total debt/ebitda 3,0x Net debt/ebitda 3,0x 2,0x 2,0x 1,0x 2,1x 2,2x 2,2x 1,0x 1,6x 1,7x 1,7x,0x Jun Months Moving window EBITDA/Interest expenses 25,0x 20,0x 15,0x 10,0x 5,0x,0x 23,2x 24,1x 26,7x Jun Months Moving window,0x Jun Months Moving window Credit ratings Investment grade international ratings by S&P and Fitch: S&P: BBB- (Stable Outlook) Fitch: BBB- (Stable Outlook) Investment grade local ratings by Fitch, Feller and ICR Feller: A (Stable Outlook) Fitch: A (Stable Outlook) ICR: A (Stable Outlook) 22

23 Contractual Obligations as of June 30, 2011 Payment due by period Debt breakdown by rate type (only principal amounts) USD m Total <1 Year 1-3 years 3-5 years More than 5 years Fixed rate (93%) Bank debt Bonds (144 A/Reg S Notes) Variable rate (7%) Accrued interest Total Bank debt: Santander: USD 50.0 million (paid on July 6, 2011) IFC/KfW: USD million (CTA project financing) Bond: USD 400 million, 10-year, 144-A/Reg.S notes Total Principal = USD million Low Debt Conservative maturity profile Access to different sources of financing 23

24 An attractive shareholder return E.CL Share (as of 10/03/2011): Market Cap: USD bn Price: CH$ 1,215 Source: Bloomberg US$ 0,300 Return and Dividend per share US$ 0,250 US$ 0,200 US$ 0,150 0,243 30% payout ratio 0,189 50% payout ratio: dividend paid in 2011 on account of FY2010 = USD 100 million 0,16 30% provisional dividend on account of 1H11 net earnings USD 25 million US$ 0,100 0,075 0,095 US$ 0,050 0,024 US$ 0, E Note: EPS 2011 anualizado 24

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