Brazil Enel Américas’ 2018 Analyst Update Meeting

Carlo Zorzoli

Country Manager Enel Brasil Enel Brasil Positioning Presence in

Thermal Distribution Transmission Trading Renewable Enel X Generation Present in 21 states

Distribution 1,355 MW installed capacity RR Thermal Generation AP Enel X Trading 1,355 MW AM In Operation MA CE PA RN 1,036 MW PI PB Hydro AC PE AL Thermal 319 MW RO TO SE MT BA Renewable DF Trading 2,200 MW Interconnection Brazil – GO MG ES 17 million of customers, 4 distribution Renewable MS companies Distribution Distribution SP RJ Enel X Trading Commercial agents: PR Trading Distribution PA, RR, BA, PI, SP, MG, ES, DF, GO, MT, PR, SC, RS. SC Enel X Trading RS States with Trading Clients Transmission 4 Trading Generation and Distribution

5 Sectorial Context | Gx Market Generation in 2017

Generation: Market (Installed Capacity) Companies fleet breakdown Generation by source (GWh)

ELETROBRAS 24.9% ENEL 76% 24% Hydroelectric 72.0% 6.1% 87% 6% 2% 3.9% 3.6% ENGIE 85% 14% 3% Thermoelectric 19.1% 3.0% PETROBRAS 98% 2% THREE GORGES 2.2% Wind 7.2% AES 2.1% 158 GW CEMIG 90% 2% 8% 550 GWh STATE GRID 2.0% THREE GORGES 99% 1% 1.5% Biomass 1.7% COPEL 100% EGP 1.1% ENEL 0.9% STATE GRID 43% 6% 20% Solar 0.0% OTHERS 48.9% Hidro Termo Nuclear Wind Solar Main Players Generation: Generation: 3/ Installed Capacity (GW) Installed Capacity by Technology (%) 158 HPP +58% 63.9% TPP 1/ 2/ 18.6% 100

NCRE 17.5% 1/ State Grid 2/ China Three Gorges (CTG) 2007 2017 5 3/ In Brazil through Neoenergia Sectorial Context | Enel's assets in Brazil Generation assets

Volta Grande EGP Cachoeira Enel Fortaleza

. Thermoelectric plant: 327 MW . Large Hydro: 380 MW . Large Hydro: 658 MW . Authorization: 2001 – 2031 (30 years), . Concession: 2017 – 2047 (30 years) . Concession: 1997 – 2027 (30 years) can be extended . Energy generation: 2,020 GWh/year . Energy generation: 3,076 GWh/year . Energy Generation: 1,983 GWh/year . Physical warranty: 230.6 MWavg . Physical warranty: 394.3 MWavg . Physical Warranty: 318.5 MWavg . Sales: 70% Regulated / 30% Free . Sales: Free Market . Sales: 100% regulated, PPA with Enel Market CE until 2023 . Gas supply: Built under the Thermoelectric Priority Program Gas supply guarantee for 20 years

6 *Data base as of December 31, 2017 Sectorial Context | Dx Market Distribution in 2017

Distribution: Market (Revenue) Distribution: Market (Customers) Main Players ENEL * 19.3% ENEL * 19.6% STATE GRID 13.3% IBERDROLA 16.5% 1/ 2/ IBERDROLA 12.5% STATE GRID 11.3% CEMIG 8.7% CEMIG 10.1% ENERGISA 8.1% ENERGISA 8.1% LIGHT 7.2% 41 bi US$** EQUATORIAL 6.1% 82 million 3/ COPEL 6.0% ELETROBRAS 5.7% ELETROBRAS 5.7% COPEL 5.5% EQUATORIAL 5.0% LIGHT 4.7% EDP/CTG 4.3% EDP/CTG 4.1% OTHERS 9.9% OTHERS 8.2% *Considering Eletropaulo numbers in 2017

Number of costumers (Million) Energy Consumption 5% 4% Residential +32% 82.3 Industrial 60.5 Rural 24% 1/ State Grid 44% Government 2/ China Three Gorges (CTG) 3/ In Brazil through Neoenergia Comercial 5% 7% Public Service 11% Public Lighting 2007 2017 **Brazil Market / Exchange rate: 3,19 BRL/US$ 7 Sectorial Context | Enel's assets in Brazil Distribution assets

Enel Distribuição Rio Enel Distribuição Ceará Enel Distribuição Goiás Eletropaulo

Concession area: 32,600 Km² Concession area: 148,921 Km² Concession area: 337,000 Km² Concession area: 4,526 Km² Cities: 66 Cities: 184 Cities: 237 Cities: 24 Consumers: 2.7 million Consumers: 3.5 million Consumers: 2.9 million Consumers: 7.2 million Grid: 59 thousand Km Grid: 146 thousand Km Grid: 215 thousand Km Grid: 43.3 thousand Km Energy distributed: 11.4 TWh Energy distributed: 11.5 TWh Energy distributed: 13.3 TWh Energy distributed: 43 TWh Concession contract: 1996-2026 Concession contract: 1998-2028 Concession contract: 2015-2045 (Renewable for + 30 years) (Renewable for + 30 years) (Renewable for + 30 years)

*Data base as of December 31, 2017 8 Quality of Service Hours and Frequency of interruptions Regulatory limits Contract limits (only Rio and Goiás) Enel Rio Enel Ceará* Enel Goiás 37.48 21.08 31.78 29.24 26.91 22.06 18.21 16.81

DEC 12.09 hours 11.51 10.90 14.94 14.01 13.69 11.2 10.8 10.5 8.81 8.78 9.39 2016 2017 mar.-18 2016 2017 mar.-18 2016 2017 mar.-18

24.55

11.6 18.42 17.98 16.48 12.02 9.87

FEC 8.83 8.61 8.45 7.79 12.84

frequency 11.51 11.03 9.19 8.51 7.92 5.04 5.37 5.83

2016 2017 mar.-18 2016 2017 mar.-18 2016 2017 mar.-18

* Data includes March’s 2018 Blackout at northeast region. Values without it – DEC: (9,38 - 1,21= 8,17 Hours) / FEC: ( 5,83 – 0,55 = 5,28 times). 9 Enel X

10 Enel X

e-Home e-Industries B2G B2C B2B

Micro-insurance Electrical Infrastructure PPP of Public Lighting

Third Party Billing and Distributed Generation Collection (Cobrança na Energy Efficiency fatura) B2B / B2G Financial Products Utility Bill Management New Projects to Home Management Platforms Solutions Electric Pole and Recharge Demand Response Feasible Business Model

11 Digitalization

13 Digitalization programs Overview of relevant programs for Brazil 2018-22

Program Main initiatives

. There is no power Customer Journey Rethinking of customer . I want to be known . I have to pay my bill experience . Info on my billing . I am interested in your offer . Emergency management . Sales Unique solution for all markets Customer CRM Platform . Customer Care . Mobile, App & One hub

Operation and maintenance . Heat Rate Optimization . Digital Worker Transf. DGPlant digitalization in thermal plants . Advanced Process Control . Remote predictive diagnostic

Advanced IoT sensors and . Predictive maintenance Big Data / IOT sophisticated analytical models . Losses reduction

New global platform for smart . Automatic Meter Mgnt Asset . Work-force Mgnt BEAT meter2.0 . Meter data Mgnt GDS Integration and standardization . ERP Global Distribution System of technical systems . Grid Employee as internal client to . I am interested in this job . I am travelling for job Employee Journey unlock their full potential . I am a new hire . Get to now the organization

Unique front end and . Frequent events . Productivity People HRM Platform integration among functions . Discovery / new job . Reward & Development

Infrastructures & Networks Thermal Generation Market Staff 13 Digitalization Digital Relation

15.228.139 9.841.064 5.258.205 Support in 2018 Automatic Channels Conventional Channels (2017 x 2018 = +24%) (2017 x 2018 = +46%) (2017 x 2018 = -4%)

Self attendance 65% SMS 10% Others Twitter Automatic App 1% Facebook Support 13% Auto 24hs

IVR 23% 35% Store Support+Call Website *Data of March/2018 53% 14 Center Digitalization

What else are we doing to make our service more efficient

CHATBOT Self attendance Video

Large Curtomers Share stores Support Service

15 Sustainability

17 Sustainable Strategy

Enel commitments Contribution Enel Brasil Main Challenges Enel Brasil to the global SDGs - 2017 2015 to 2017

Expand integrated work with the business 400,000 people by 2020 119.738 24% lines to solve questions as losses, billing defaults and community relations

Expand the measurement of the value 3 million people by 2020, mainly 891.884 returning for the company and the projects in , and 52% develop for the society

Application of the Shared Value Creation tools in all assets of the company 1.5 million people by 2020 181.563 12% Use digitalization in the community projects and in our internal processes

Maintain the contribution with Agenda 2030: < 350 gCO2 /kWheq by 2020 Sustainable Development Targets (-25% vs base year 2007) < 90,7 gCO2 /kWheq by 2017

17 Value creation

252 Social projects, Brazilian Committee of the Global Compact board member cultural and environmental Strategic goals for 4 of the 17 UN 6.8 million sustainable development goals benefited people Recognized by “Guia Exame de 18 states Sustentabilidade” and as a Pro-Ethics benefited company Enel Distribuição Ceará won first 2.4 million place in the Abradee Prize – 2017 in of income generated Social and Environmental Responsibility category 431 Community leaders engaged Sustainability report in the GRI guidelines | Gold Community 26/06/2018 19 18 Financial Focus

20 Financial Focus Focus on Brazil (US$ bn)

Revenues EBITDA and Margin EBITDA

0.9 CAGR 2014-2017: 31,8%. 5.2

0.6 0.5 23.2% 3.0 2.8 20.6% 17.9% 17.5% 0.3 1.2

64% 2015 2016 2017 1Q18 2015 2016 2017 1Q18 Net Income Net Debt

0.27 1.9 0.24 2% 1.6 0.18 1% 6% 0.09 0.6 0.7

2015 2016 2017 1Q18 2015 2016 2017 1Q18 20 Financial Focus Gross Capex (US$ m)

By Activity By Business

851 851

98% 33% 445 445 411 411

42% 37% 92% 95% 139 67% 139 1% 58% 63% 64% 5% 97% 64% 36% 8% 2% 2% 2 2015 2016 2017 1Q18 2015 2016 2017 1Q18 Maintenance 64% Growth Generation Distribution Others

Estimated investment 2018-2020: 1.5 €bn*

21 * Not considering M&A. Hot topics

22 Brazil | Follow-up TermoFortaleza Unilateral termination of the gas supply contract by Petrobras - Status, June 2018

Actions taken Next Steps Timeline

Presentation of two alternatives to the MME: Structural Solution: September 2017 . New MP; Notification from Petrobras 1 Amendment to the provisional measure “MP814” Regulatory (Eletrobras): Increase of gas cost – pass through to . Specific Law proposal; ending the gas contract all consumers . Inclusion of amendment on the Sector MP 814 expired: Congressmen decided not to Reform’s Law proposal vote the MP . Interministerial ordinance (Ministries of November 2017 2 Revision of interministerial ordinance: increase Mines and Energy + Finance): increase of Enel attained an injunction of gas cost – pass through to Enel CE gas cost – pass through to Enel CE ensuring the gas supply

Lawsuit closed due to Arbitration (appealed) Legal . Updating from Rio and Ceara’s lawsuits; February 2018 New injunction to restore gas supply . Arbitrator to be nominated by ICSID (likely): Judge denied the injunction parties will agree about deadline to present State of Ceara presented a new lawsuit to defenses. restore gas supply . Legal Actions ongoing to cancel Arbitration Arbitration: Actions questioning its validity March 2018 Gas Supply was interrupted Termofortaleza out of operation Institutional and Media Newspaper Article explaining the cost of . Work with Government and Congressmen to activities thermal interruption for the support the structural solution June 2018 consumers New injunction ensuring gas supply Termofortalzeza restored operation

23 Brazilian Regulatory Framework

Anna Pacheco

Head of Regulation Enel Brasil

24 Sectorial Context | Sector Governance Main government agency

Others Agencies Advises the Presidency and CNPE Monitors the Safety and National Council for develops policies for the Energy Policy Efficiency of Energy sector. Supply

CMSE MME ANEEL Electricity Sector Ministry of Mines and Brazilian Electricity Monitoring Committee Energy Regulatory Agency

Independent Regulator Promotes investment, finances research and implements government policies

Responsible for Coordinates and developing EPE controls the CCEE Coordinates the ONS electricity integrated and long- Energy research generation and Electric Energy Trading National Grid Operator markets term planning of the company transmission of Chamber electricity sector electricity

25 Sectorial Context | Energy Market Structure Rules and structure

REGULATED MARKET FREE MARKET Who can participate? (~70%) (~30%) Large consumers (> = 3 MW) . Generators . Generators Special consumers (0,5 MW ≤ cl < 3 MW) . Self-producers renewable energy only . Traders (only existing energy)

Sellers . Traders What is the term of PPAs in regulated auctions? . Public Auctions . Bilateral Trading (conditions defined by Government) (conditions defined by the agents; New energy: 15-30 year contracts freely negotiated)

. Long terms PPA Existing energy: 1-15 year contracts

Market Mechanisms How does Settlement Market . Distribution (regulated work? consumers) . Free Consumers

Buyers Monthly settlement of the difference between generation and contracts at Spot Price Short term Settlement Market (PLD)

26 Sectorial Context | Regulated Auctions Promoted by MME to guarantee energy supply

Existing energy New energy New energy + Transmission

. supply start: same year (A) – . supply start: from 3rd year (A-3) . supply start: from 5th year (A-5) until 5th year (A-5) to 6th year (A-6) to 7th year (A-7)

. PPA: between 1-15 years . PPA: between 15-30 years . PPA: between 15-30 years Energy

supply start A-7 A-6 A-5 A-4 A-3 A-2 A-1 A

15 year Energy contract types (PPA) 30 year

. Fixed: assets remuneration and fixed costs . MWh x Price (auction) – function of Availability . Variable: declared cost in auction x MWh Quantity amount of energy contracted . Thermal, and solar plants . Hydro, wind and solar sources

Other . Adjustment Auction: Up to 5% of the Dx load with supply up to 2 years Auctions . Reserve Auction: Objective of guaranteeing energy security. Paid by all consumers (Sector Charge)

27 Sectorial Context | Electricity Market reform Draft bill 1917/2015

. Gradual opening of the free market to all consumers until 2028 3 MW Hoje 2 MW 2020 1 MW Free Market Growth 2021 500 kW 300 kW . By 2022 the government will have to present 2022 All clients with a study to extend liberalization to the low 2024 tensión > 2,3 kV voltage (LV) market End of Market reserve for 2026 All clients Renewables 2028

. Separation of capacity and Energy from 2021: capacity paid through sectorial charge by all Possibility minimum Separation energy and consumers renewable purchase capacity requirement for each . Auctions segmented by energy source, consumer attributes valuation, hybrid projects and storage (free and regulated)

Carbon Market . Creation of a low carbon emission market on 2021

28 Sectorial Context | Electricity Market reform Draft bill 1917/2015

. Possibility of change from computer system cost optimization model dispatch to Price and Operation price offer dispatch . Hourly SPOT price starting from 2020

. Possibility of distribution tariff independent of the ~ 99% of the Enel Dx meters (~ 10 Distribution tariff model million) needed to be replaced to be distributed energy volume able to apply the binomial rate

. Legal reinforcement of actions to combat loss and delinquency Delinquency and losses . Compulsory adhesion to prepaid tariff modality for customers with recurring delinquency

The law proposal is not very specific, relevant details that can make the difference will be defined in subsequent secondary regulation

29 Sectorial Context | Main events in coming months Next generation, transmission and distribution auctions

. Distribution Auctions:

─ 6 distributors from the states of Amazonas, , , Rondônia, Piauí and Alagoas ─ 4,6 million consumers (5,7% of Brazilian market) ─ Approximately 2,46 million km² (29% of the national territory) ─ Scheduled for July 26

. A- 6 Energy Auctions: Registered Projects GW ─ Scheduled for August 31 ─ 1.090 Registered Projects – 59 GW capacity 27.1 28.7

1.3 1.0 0.9 . Transmission Auction: Wind Gas Hydro Biomass Coal ─ Scheduled for June 28 ─ 24 lots with 60 projects located in 18 states: 3.954 Kilometers of transmission lines

30 Dx Regulation | Tariff Structure The tariff is divided into two parts, Components A and B

Power Purchase Component B Component A + Taxes ~20% ~80% . Public auctions based on lowest price (negotiations between Dx and Gx are not allowed) . Obligation of 100% long term contractual coverage ( with pass-trough tariff up to 105% ) Transmission

. National grid costs are shared between Dx, Gx and free consumers (50% for Gx side and 50% for consumption side)

Sectorial Charges

. Tariff subsidies costs are shared between all Dx (low income customer, renewable generation, thermal power plant fuel costs, etc)

Distribution

. Distribution Opex and Investment Remuneration . Regulatory losses and delinquency costs

31 Dx Regulation | Tariff Structure The tariff is divided into two parts, Components A and B

How is Component B defined in the Tariff Reviews? When Tariff is update?

. Annually in the Tariff Adjustment Operational Costs OPEX Benchmarking . Every 4/5 years in the Periodic Tariff Reviews Analysis

How Tariff is update? Investment Net Remuneration remuneration Asset Base x WACC

. Component A items: The new costs are pass-through to consumers annually (in the Annual Tariff Adjustment and in the Periodic Tariff Reviews) Gross Remuneration Asset Depreciation Base x % of depreciation . Component B:

─ Annual Tariff Adjustment: Component B is update by Non Technical Losses market growth + inflation (discounted factor of quality Losses and default and delinquency rate and productivity) rate based on socioeconomic model and benchmarking ─ Periodic Tariff Reviews: Component B is recalculated

32 Dx Regulation | Regulatory vs. Real Current situation

Key issues EBITDA Enel Dx BRL millions . Enel Rio: The main offenders remain the non-technical losses, 2,265 delinquency rate and the 1,874 1,831 adequacy of the quality Regulatory indicators the company's service Current to the regulatory standards

. Enel Ceará: The Company is in 2017 2018* a better position than the EBITDA Enel Rio EBITDA Enel Ceará EBITDA Enel Goiás defined regulatory parameters. BRL millions BRL millions BRL millions Losses remain a regulatory challenge

1,160 . Enel Goiás: 2018 tariff revision 829 637 638 792 620 should increase the gain from 407 402 485 October. The main challenge is to adapt the quality of service 2017 2018* 2017 2018* 2017 2018* indicators to the regulatory 25/06/2018 Source: Aneel standards 33 *Based ion the result of 2018 tariff adjustments defined by Aneel Dx Regulation | Ongoing actions What is being discussed with the Regulator

Enel Rio Energy Losses from apr/2017 to mar/2018 % Energy demand . The new contract addendum and the 2018 Tariff Review led to a partial recognition of the risk areas and to the + 2,44 p.p. full recognition of the technical losses of 20.66% the distributor

. Enel is working with the Pontificia 17.30% Enel Rio Universidade Catolica of Rio, the 16.82%

Energy losses Federal University Fluminense and 14.86% Siglasul consultants to ensure the recognition of losses in the areas of Risk

. The non-technical regulatory losses of Enel Rio should be defined until Current 2014 Tariff New 2018 Tariff Revision contract Revision March 2019

. New Contract: partial recognition of Risk Areas

. Tariff revision: New Regulatory Technical losses 34 Dx Regulation | Ongoing actions What is being discussed with the Regulator

. Enel is working with the Pontificia Universidade Catolica of Rio, the Federal University Fluminense and Enel Rio Siglasul consultants to ensure the recognition of delinquency rate in the risk areas Delinquency . The issue should be discussed with Aneel together non-technical losses

. Enel has been working with Aneel to ensure a flexibility in the quality of service targets with the Enel Rio recognition of the impacts of risk areas Quality of Service . During 2018 will be discussed by Aneel changes in the methodology used to defined the financial compensation for noncompliance with quality indicators

35 Enel Américas’ 2018 Analyst Update Meeting Contact us

Rafael De La Haza Head of Investor Relations Enel Américas

Jorge Velis Investor Relations Enel Américas

Itziar Letzkus Email Investor Relations Enel Américas [email protected] Javiera Rubio Phone Investor Relations Enel Américas +562 23534682 Gonzalo Juarez Web site IR New York Office www.enelamericas.com

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