Annual Report
1 2016 /
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 Sustainable commitment
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 In Empresas Copec we develop our investments with a long term vision, assuming a responsible 3 commitment with the / environment and all our stakeholders
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / Index
Corporate information 06_ Board of Directors 07_ Senior Management 08_ Administrative Structure 09_ Senior Management of Main Affiliates and Associates 10_ Chairman’s Statement 17_ Empresas Copec at a Glance 23_ History 27_ 2016 Highlights 35_ Mission 36_ Vision 37_ Corporate Governance 40_ Empresas Copec and the Community 47_ Financial Results
4 / Business areas
52_ Forestry Sector 62_ Fuels Sector 80_ Fisheries Sector 87_ Other Investments
Financial information
95_ General Information 117_ Summary of Financial Statements 125_ Summary of Financial Statements Principal Affiliates 143_ Ownership Structure 144_ Company Identification 145_ Corporate Purpose and Articles of Incorporation
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 Corporate 5 information /
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / CORPORATE INFORMATION Board of Directors
> ROBERTO > JORGE ANGELINI ANDUEZA Chairman Vice - Chairman Industrial Civil Engineer Engineer
5.625.652-0 5.038.906-5
> MANUEL > ANDRÉS BEZANILLA BIANCHI Lawyer Economist
4.775.030-K 3.367.092-3
6 /
GABRIEL > JUAN > BITRÁN EDGARDO Industrial GOLDENBERG Engineer Lawyer
7.033.711-8 6.926.134-5
ARNALDO > CARLOS > TOMÁS > GORZIGLIA HURTADO MÜLLER Lawyer Commercial Commercial Engineer Engineer 3.647.846-2 2.300.859-9 4.465.942-5
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / CORPORATE INFORMATION Senior Management > > >
EDUARDO NAVARRO JOSÉ TOMÁS GUZMÁN RODRIGO HUIDOBRO Chief Executive Officer Corporate Counsel and Secretary Chief Financial Officer Commercial Engineer of the Board of Directors Industrial Engineer 7 10.365.719-9 Lawyer 10.181.179-4 / 6.228.614-8 > > >
JORGE FERRANDO CRISTIÁN PALACIOS PAMELA HARRIS Corporate Research Manager Director of Investor Relations Head of Corporate Affairs Industrial Engineer and Investments Industrial Engineer 12.059.564-4 Commercial Engineer 14.119.104-7 13.234.980-0
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / CORPORATE INFORMATION Administrative structure
Board
Chief Executive Committee Ethics Officer of Directors Committee
Information Security Committee 8 /
Corporate Chief Head of Legal Internal Research Financial Corporate Adviser Audit Manager Officer Affairs
Director of Head Investor of Corporate Accountant Relations and Research Investments
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / CORPORATE INFORMATION Senior Management of Main Affiliates and Associates
9 /
FORESTRY FISHERIES
Matías Domeyko Arturo Natho Celulosa Arauco y Constitución S.A. Corpesca S.A.
FUELS Rigoberto Rojo Orizon S.A. Lorenzo Gazmuri Copec S.A. OTHER INVESTMENTS Joaquín Cruz Abastible S.A. Erwin Kaufmann Alxar Minería S.A. Pablo Sobarzo Metrogas S.A. Sebastián Gil Mina Invierno S.A. Roberto Hetz Sonacol S.A.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / CORPORATE INFORMATION Chairman’s statement
Year 2016 will undoubtedly hold “ a special place “in the history of Empresas Copec.
10 /
Dear shareholders: in practically all geographies, challenging the opening of important blocs, even those leading the world trade. This, Year 2016 will undoubtedly hold a special place in the together with the growing relevance of China, has made history of Empresas Copec. The important productive financial markets and prices of raw materials volatile, all of expansion carried out in the forestry and energy areas which has transversally affected our exporting businesses. materializes a strategy that has been consistent and sustained in time, which will also mark the trajectory for At a national level, activity has remained at growth levels the coming years. Empresas Copec is changing, assuming of less than 2% per year, significantly far from the goal greater challenges imposed by current times and a more of achieving a new development stage for Chile. Today´s relevant position in global markets. country has nothing to do with that one of 30 years ago. We have undoubtedly made great progress, as a result of an The operations of Empresas Copec and its affiliates were economic, political and institutional system that has been developed in a complex international context, characterized widely recognized and valued. by the emergence of political uncertainties throughout the world. The questioning of the traditional way of running Logically, this progress has also involved new expectations countries, and the aggravation of several social and and requirements in many areas. Many of them are economic phenomena, have resulted in electoral surprises shared by everyone, but upon which it is necessary to
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / CORPORATE INFORMATION
“The important productive expansion carried out in the forestry and energy areas materializes a coherent and sustained strategy in time, that also marks the / trajectory of the next years.”
build solutions in a reflexive and consensual way, and to Regarding our results, in 2016, Empresas Copec and its implement them with the necessary gradualness. In that, affiliates 2016 had profits for US$ 554 million, figure we have failed. The sudden structural changes in the solid that represents an increase of 2.8%, and which is mainly institutions that distinguished our country, sometimes explained by a better non-operational performance. The without the technical support we were used to, have operating flow, which represents the results of our activities, negative impacts and do not help the country achieve the amounted to US $1,738 million, experiencing a 13% drop. goals it has set for itself in the last decades. This weakening has undermined trust and has generated an unhealthy Both the flow drop and the level of results reflect the environment of uncertainty. challenging environment to which I have referred, marked by significantly lower prices in the forestry business, We are particularly concerned by the current anti-corporate especially regarding pulp, an industry that has been affected climate, which raises the risk of every entrepreneurship, by the simultaneous entry into the market of new efficient and thus affects Chile´s attractiveness as a market for capacity and the strong importance China has gained investment. On the other hand, as companies, we have the regarding demand. 11 challenge of rethinking our role with a long-term vision. We / must evolve and understand the new social requirements, The aforementioned situation is a clear proof of the virtuous finding proper answers. dynamic of competition, an inspiring force that reminds us of the permanent obligation to reinvent ourselves, seeking new It would be impossible to understand the growth of ways of becoming increasingly competitive, reducing costs Chile over the last 25 years without considering the and innovating in order to always deliver more value to our entrepreneurship factor. Today, however, that is being counterparties. In this regard, during 2016, Arauco, our forestry questioned. Therefore, we are challenged to build a new affiliate, promoted an ambitious program oriented to modify platform of credibility and legitimacy of the corporate the organizational structure in order to make it more simple, action. The country needs to make growth and development efficient and sustainable, and at the same time, leave the for everyone; globalization and local development; company in a better position to compete in global markets. industrialization and environment, compatible. It also needs productivity and innovation, competitiveness and strong Another clear testimony of the strong will to continue corporate governance, among other matters. growing as a company, guided by the same long-term perspective, is the investment figure for financial year 2016, As companies, we have taken note and learned from the which totaled US$ 1,830 million. If we to this the agreement junctures of recent years; it is time for society to notice with ExxonMobil announced at the end of the year, which these positive changes. has not yet been materialized, investment commitments in 2016 exceed US$ 2,500 million. A record figure, far exceeding We cannot miss out opportunity to be a better country, our historical levels. Rather than expressing a willingness to doing things in a proper and responsible fashion. In order to raise the pace of investment, the increase is largely explained answer many legitimate expectations, we must necessarily due to the fact that in 2016, we had the chance to consolidate, return to the path of growth, stability of legal structures and coincidentally, many initiatives that we had been pursuing for unity of the country around common projects. years in different areas, which I will detail below.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / CORPORATE INFORMATION
“In 2016, we had the chance to consolidate, coincidentally, many initiatives that we had been / pursuing for years in different areas.”
In addition to how impressive this total investment amount in Spain; 2 panel plants and one resin plant in Portugal; is, it is also worth revealing its composition, which gives 4 panel plants in Germany and 2 in South Africa. The operation an idea of we where the relative emphasis of our growth of all these facilities and the enhancement of Tafisa´s efforts is located. First, it is worth mentioning that more commercial networks allowed for Arauco to successfully than 98% was used for the forestry and fuel sectors, our enter with its products into new markets, thus becoming the main businesses. 74% of this amount corresponds to world´ second producer of wood panels. the fuel sector, very focused on sales and closely linked to the economic development of the markets where we In the North American market, Arauco approved the participate. If we also take into account the disbursements investment in a new panel plant in the Grayling area, relating to the expansion of the wood business, this State of Michigan, with an annual production capacity of percentage rises to 80%, evidencing our interest in balancing 800,000 m3. The startup of this new plant, which will involve the portfolio of activities of Empresas Copec towards those disbursements for about US$ 400 million, is expected for 2018. having less fluctuating flows over time. Is important to highlight the positive acceptance this project received from local communities and the authority, which 12 Another relevant vision is the itemization by geographical carried out a short but very rigorous approval process. / areas. More than 70% of our investment went abroad, a clear demonstration of the will to continue taking firm steps The way in which projects are approved, the times and the towards the operational internationalization of all business certainty to develop them, are essential elements for the areas. This is a one-way process, where we move from a more entrepreneurial impulse. While projects are stopped, the exporting view, from Chile to the world, towards one that world and the markets change and, therefore, initiatives lose seeks to turn Empresas Copec into a multinational company, their force and appeal, and are left aside by an increasingly with presence in countries that deepen and also complement mobile capital, which seeks agility and economic and their competitive advantages. Chile, in the world. institutional opportunity.
For many years, our forestry and fishing products have We must have always a spirit of public-private collaboration, reached more than 80 international destinations, through an essential basis to regain force of growth as a country. For commercial offices. Today, we are structuring a highly relevant our part, we reiterate our best willingness and commitment industrial and operative base throughout America, as well to contribute, from our role, to restore the conditions as taking the first steps in other continents. The productive required to relaunch growth and, thus, the creation of presence of our companies already covers 16 countries. economic and social wealth.
In this regard, during 2016, the affiliate Arauco continued to In Chile, the MAPA project increases the production capacity significantly strengthen its operational internationalization of the Arauco complex to up to 2.1 million tons per year, process. In this sense, it is worth highlighting the acquisition, with state-of-the-art environmental equipment. This is a for US$ 150 million, of 50% of the Spanish company Tafisa, significantly relevant initiative for our country and the an affiliate of the Portuguese group Sonae. This company Region of Biobío, which would certainly inject dynamism manufactures and commercializes OSB, MDF, and PB panels, into the economy of the area, into the heart of our activities, as well as sawn timber, through 2 panel plants and 1 sawmill renewing and increasing the efficiency and productiveness
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / CORPORATE INFORMATION
of our oldest facilities. Nevertheless, this initiative is important complement to the fuel business we already paralyzed in judicial proceedings, despite it has the operate in the region. This agreement, that is hoped authorization of the Environmental Authority. to perfect during 2017, is based on a long and solid relationship dating back to 1959, where the American On the other hand, the textile pulp project in the Valdivia company was a pioneer in assigning the commercialization plant allows the company to be the country´s first of its lubricants to a third party, back in 2003. Hence, our producer of this type of pulp, used as raw material to successful collaboration expands beyond our borders. manufacture textile fibers and for medical uses. It would be generating an innovative product with greater added The agreement, totaling a US$ 747 million investment, also value, diversifying the offer to the market, and involving, includes the acquisition of the fuel business of ExxonMobil at the same time, the entire value chain of local suppliers in Ecuador and Colombia, markets where we already operate involved in its development. Given the original design of through Terpel, and the operation and commercialization of this plant, its transformation to this new type of fiber can aviation fuels at Lima´s International Airport, an important be done in a very efficient manner, at a fraction of the cost regional aeronautical hub. involved in modifying any other facility of the industry and, also, with an environmentally friendlier production On the other hand, Abastible also expanded its presence to process. This project has the environmental authorization Peru and Ecuador, by purchasing from the multinational but is under judicial proceedings too. Repsol its liquefied gas distribution activities in those countries, operating under the brands Solgas and Duragas, During 2016, we also took another very important step in leaders in their respective markets. The transaction 13 United States. This time in the fuel area, by purchasing, involved a US$ 335 million investment, and tripled the / for US$ 535 million, a network of 348 gas stations, mainly volume of LPG commercialized by Abastible, which thus operating under the brand Mapco, in the states of Alabama, became South America´s third largest liquefied gas Arkansas, Georgia, Kentucky, Mississippi, Tennessee, and distributor. Meanwhile, in Chile, this affiliate continued Virginia. In such a manner, it is the first time Copec takes gaining market share, especially regarding packaging, its service philosophy beyond Latin America, benefiting and receiving important acknowledgments that ratify its from all those things learned in Chile and in the different leadership and the loyalty of its consumers. countries where it participates through Terpel, thus entering a more developed and competitive market, with a Regarding natural gas, Metrogas restructured its greater emphasis on convenience stores and an interesting operations by means of a corporate division, which platform for future growth. allowed grouping energy distribution activities into Metrogas, separating them from those relating to the Hence, Copec is progressing along the path to supply of the product, which were transferred to the new internationalize its value offer, based on an excellent company named Aprovisionadora Global de Energía S.A. service, a quick understanding of changes and the Hence, the assets and contracts corresponding to both generation of the best consumer experience. This certainly the purchase and transportation and sale of gas to implies adapting to the reality of each market, avoiding wholesale customers -including Metrogas- remained in mechanical transfers and rigidity in the business model, the new company, thus providing greater transparency strengthening all of its networks and relying on the and a better management. strength of each of its brands. An important milestone of 2016 was the historical In this same line, Copec executed a regional agreement agreement to export natural gas to Argentina, which reflects with ExxonMobil to produce and distribute Mobil the level of strength that the industry has achieved in lubricants in Chile, Colombia, Ecuador, and Peru, an Chile, and an important step to recover a greater energy
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / CORPORATE INFORMATION
“This is the virtuous circle of entrepreneurship and competition, leading our companies to conquer their customers, day by day, through / attractive offers.”
integration between both nations. Hence, the roles of seller production of raw materials to a broader conception of and buyer were reversed. the protein market, which also includes products for direct human consumption, functional foods, nutraceuticals and None of this would have been possible without the large even pharmaceuticals, as well as exploiting the commercial financial and logistical deployment with which Metrogas power of its brands in new segments of the food market. overcame the Argentinean gas supply crisis a decade ago, added to the daunting public-private initiative that ended In this regard, it is worth highlighting the indirect with the start-up of GNL Quintero, the first liquefied natural acquisition of 30% of FASA, a Brazilian company engaged gas import terminal in the Southern Hemisphere. During in the production of high-quality protein concentrates 2016, Aprovisionadora Global de Energía sold all of its for animal feeding, and the operational consolidation of shares in GNL Quintero in US$ 200 million, ceasing to be the the Omega-3 concentrate plant of Golden Omega in Arica, owner of an already consolidated asset, whose availability thanks to unprecedented processes that are already is guaranteed under an agreement, thus achieving supply patented. More than fishing companies, our companies security in a more efficient manner. are aimed at being key players in the field of nutrition, 14 a sophisticated and attractive market, extremely / Metrogas has repeatedly overcome great challenges, competitive, which encourages us to go further each time, expanding its networks, managing to timely and achieving new efficiency and productivity levels. conveniently supply natural gas to its residential and industrial customers, who have freely chosen this This same search allowed our associate Mina Invierno to face energy over other available alternatives, thus perceiving the difficulties relating to the complex commercial scenario of important savings and recognizing the company for its coal, through several rationalization actions to reduce costs. quality of service. In this sense, Metrogas continued the It is worth stressing in this case the enormous efforts made last financial year promoting an ambitious gasification by the company´s shareholders to sustain this initiative over plan for the following 10 years, aimed at delivering natural time, to which we were invited more than a decade ago by gas to seven other regions of the country. Hence, more the State of Chile, seeking to join forces and benefit from the than 800,000 families will be able to access this energy national resources to face the country´s energy challenges, alternative, under a new regulation allowing to invest with reducing its reliance on imports. Mina Invierno is a modern a broad horizon. facility, with the highest operational and environmental standards, and at the same time, it is a source of growth, This is the virtuous circle of entrepreneurship and employment and pride for the Region of Magallanes. competition, leading our companies to conquer their customers, day by day, through attractive offers. These On the other hand, the affiliate Alxar continued the process same forces are also the ones that urge our companies to to establish the mining potential of its asset portfolio in the innovate, constantly reinventing themselves to always north of the country, and to seek new development options remain efficient and competitive for their clients. in attractive scale operations that provide us with value, in order to keep going after the goal of being a reference in An example of this is the evolution of our fishing Chilean mining, under a management with the stamp and companies, which have raised their attention from the culture of Empresas Copec.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / CORPORATE INFORMATION
This seal involves a strong commitment to the communities winning project Elemental, among many other activities. that welcome us, which goes beyond our own production As a result of all this, Empresas Copec was chosen in 2016 activities. We participate in numerous initiatives that reflect to integrate the select Dow Jones Sustainability Index, the a long-term vision, helping to face the great challenges world´s main sustainability index, bringing together leaders we face as society, with financial resources, human in these matters from Chile and the world. This fact, along capital, technology, innovative capacity and management. with multiple awards and recognitions obtained during the Permanent contributions, for several decades, oblivious to year, confirms how our business vision and our way of doing fashions and with the profile that characterizes us. business is valued. A manner that must always be perfected, in light of the knowledge obtained from experiences and the Our commitment of so many years with education and new demands of society. I would like to specifically highlight culture was reflected in 2016, since we continued training the efforts made by the boards of our affiliates and associates teachers through Fundación Arauco; attracting, along with during the year, in order to promote a permanent self- Enseña Chile, young professionals to the classrooms; and evaluation, and to approve and implement improvements in working with Fundación Belén Educa in vulnerable sectors our policies, in order to continue raising standards in matters of Santiago. The inauguration of Campus Arauco, Chile´s such as risk management, free competition, corporate first major project integrating technical-professional governance, information security and transparency. education with private industry. It is a work with high standards, located less than two kilometers away from the Before I conclude, I cannot omit mentioning the damage center of the city of Arauco, providing excellent education caused by the terrible fire that affected the south-central to the youth of said province and training our company´s zone of our country at the beginning of 2017. Despite the 15 collaborators, in partnership with Duoc UC, under the enormous resources, we allocated to prevent and combat / educational model of alternation. fire, both in our own properties and in their surrounding areas, the magnitude of this event, which compromised Convinced that innovative capacity is also a key axis about 80 thousand hectares of Arauco, exceeded all for the country´s economic and social development, containment capacities, striking us hard at the heart of our at the beginning of the last decade, we undertook a forestry activity. We are especially grateful for the work of commitment to promote it, by creating Fundación Copec- the brigadiers, firefighters, service companies and our own UC, subsequently, with the Fondo Privado de Capital personnel, who worked tirelessly in this tough fight, always de Riesgo and, more recently, with the inauguration of having the safety of people and communities as a priority. Centro de Innovación UC Anacleto Angelini. The latter is Hundreds of thousands of hectares of our own forests a space to exchange ideas, open to all companies and and those of third-parties, cultivated for several years entrepreneurships, created in conjunction with Pontificia now, and supplying our industrial facilities, disappeared Universidad Católica de Chile, and that has become a under the flames, along with the homes and properties of true heart of innovation in Chile. These efforts should many of our collaborators and neighbors. The insurances undoubtedly contribute to the significant task of raising we have taken will only cover part of these losses, and we the country´s productiveness and competitiveness, have already begun to recover in the best and shortest directly linking university research with productive and time possible, the damaged heritage, supporting those entrepreneurial challenges. people affected by the fires, and joining or leading general reconstruction plans, thinking about our own future and During the year, we once again brought together thousands the one of those people around us. of young people in competitions promoting sports and a healthy way of living; we continue encouraging reading Shareholders, this is the summary of financial year 2016. habits, supporting social housing and overcoming poverty, A year in which we continue carrying the seal of this as well as upgrading neighborhoods thanks to the award- Chilean company to the world and, at the same time, we
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / CORPORATE INFORMATION
continue incorporating the best global practices into I would like to once again thank you for the permanent the national business. We grow, with humility and a support of our shareholders, directors, executives and sense of future. We remain attentive to the demands of employees, true protagonists of our work. I would also like time and the environment. We seek to understand and to thank for the support of the financial markets, which assimilate new cultures, other types of consumers and the do not hesitate when ratifying our trust, providing our diversity of their habits, as well as different institutional company with the resources required to materialize its arrangements. These lessons must be transferred into development strategy our local reality, helping us to cross new thresholds as a company, as a society and as a country. A strategy that is a way of doing business. The Empresas Copec mode. We are firmly committed to our principles and values, which we have shaped for several decades now. Sustainability and innovation, the continuous effort to add value to the activities and the consolidation of a productive and commercial presence in different continents, with a strong orientation towards natural resources and energy. We drive improvements in our Roberto Angelini corporate governance practices; turn those challenges of Chairman communities that welcome us into our own, generating value for everyone, transparently and with meaning. 16 /
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / CORPORATE INFORMATION Empresas Copec / at a glance
1.
13. 17 /
2. 15. 14.
3.
4. 5.
6. 1_ Canada 9_ Brazil 7. 2_ United States 10_ Uruguay 3_ Mexico 11_ Argentina 8. 4_ Dominican Republic 12_ Chile 9. 5_ Panama 13_ Germany 6_ Colombia 14_ Spain 7_ Ecuador 15_ Portugal 16. 8_ Peru 16_ South Africa 10. 11. 12.
Annual Report 2016 Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / CORPORATE INFORMATION
Empresas Copec participates in two major business areas: natural resources, where it has clear competitive advantages, and energy, closely linked to the growth and productive development of countries.
This is how it is present in the forestry business through its affiliate Arauco, which produce market pulp, panels, sawn timber and energy, and is the company with the highest forest heritage in South America.
The company also participates in the distribution of liquid fuels, lubricants, liquefied gas, and natural gas, through its affiliates Abastible and Sonacol, and its associate Metrogas.
Additionally, it is present in metal mining, through Alxar, in coal mining, through Mina Invierno, and in the real estate business, through Inmobiliaria Las Salinas. 18 / Empresas Copec also participates in the fishing business through its affiliate Igemar, which is present in the north and center-south zones of the country, manufacturing fishmeal and fish oil, preserves, frozen and concentrated Omega 3, and it is also a key player in the animal and vegetable protein industry.
In each of these businesses, the Company promotes important investment programs in order to increase the scale of its operations, expand its borders, benefit from synergies and significant cost advantages, and ensure the sustainability of the activities.
Empresas Copec has important production platforms in Chile, Germany, Argentina, Brazil, Canada, Colombia, Ecuador, Spain, United States, Mexico, Panama, Peru, Portugal, the Dominican Republic, South Africa, and Uruguay, and it commercializes its products in more than 80 countries on all five continents.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / CORPORATE INFORMATION Empresas / Copec
99.978% CELULOSA ARAUCO 99.948% FORESTAL ARAUCO Y CONSTITUCIÓN / FORESTRY 100.000% ARAUCO INTERNACIONAL BUSINESS 100.000% ARAUCO BIOENERGÍA 100.000% MADERAS ARAUCO
100.000% MAPCO 99.999% COPEC 58.510% TERPEL FUELS 40.800% / SONACOL BUSINESS 99.134% ABASTIBLE 12.000% 39.830% METROGAS 51.000% INVERSIONES DEL NORDESTE 19 39.830% APROVISIONADORA 99.990% DURAGAS / 100.000% SOLGAS
FISHERIES 81.933% IGEMAR 66.800% ORIZON 35.000% / GOLDEN BUSINESS 30.640% CORPESCA 35.000% OMEGA
/ OTHER 100.000% CAMINO NEVADO 99.961% ALXAR MINERÍA INVESTMENTS 100.000% LAS SALINAS 50.000% MINA INVIERNO
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / CORPORATE INFORMATION
STATEMENT OF FINANCIAL POSITION Thousand dollars 2016 2015 Total assets 21,446,506 19,925,614 Total liabilities 10,961,006 10,069,741 Minority interest 530,306 496,238 Equity attributable to equity holders 9,955,194 9,359,635
INCOME PER BUSINESS AREA Miles de dólares 2016 2015 Forestry 213,801 362,689 Fuels 299,969 386,988 Fisheries (35,223) (17,611) Other Investments 75,638 (192,759) Income 554,185 539,307
Indebtedness (Net Financial Debt / Equity) 0.49
20 INTERNACIONAL RISK RATING / Standard & Poor's BBB Fitch Ratings BBB
NACIONAL RISK RATING Feller-Rate AA-/1° Class Level 1 Fitch Ratings AA-/1° Class Level 1
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / CORPORATE INFORMATION
Ownership structure Net Income December 31, 2016
AFP pension Private funds individuals Others investments 6.20% 2.95% 12.8%
/ Total Forestry Corporations 554 36.3% 30.03% 60.82% Fuels million 50.9% dollars
Consolidated sales Consolidated investment
Others investments Fishing 0.3% 0.9% 21 Forestry / 28.5% / Total / Total 16,699 Fuels Fuels 1,835 Forestry 62.6% 36.2% Fishing million 70.6% million 0.9% dollars dollars
Consolidated EBITDA Consolidated assets
Others investments Fuels Fishing Fishing 7.8% 36.2% 2.0% 2.3%
Fuels Forestry / Total / Total 1,738 Forestry 23.9% 21,447 66.0% million 61.8% million dollars dollars
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / CORPORATE INFORMATION
Consolidated investment Market capitalization million dollars million dollars
28,000 2,500 24,000 1,835 2,000 20,000 16,000 1,500 12,462 12,000 1,000 8,000 500 4,000 0 0
Consolidated sales Consolidated personnel million dollars 36,000 30,000 31,714 30,000 24,000 22 16,699 / 18,000 24,000
12,000 18,000
6,000 12,000
0 6,000
Net income million dollars
1,200 1,000
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 Empresas
23 Copec’s / History
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / CORPORATE INFORMATION /History
Expansion of the Foundation Line of Business 1934 1956 / / Compañía de Petróleos Abastible is created, 24 de Chile is incorporated, with the purpose / with the purpose of of commercializing commercializing and and distributing distributing fuels in liquefied gas in the the country. country.
Diversification 1957 1976 1979 1980 / / / / Sonacol is Copec buys Celu- Copec acquires Copec acquires incorporated, with losa Arauco and Celulosa Pesquera Guanaye. the purpose of Forestal Arauco. Constitución, which transporting fuels later merges with through an oil pipeline Celulosa Arauco, network. On the other constituting hand, Copec assumes Celulosa Arauco y the representation Constitución. and distribution of Mobil products.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / CORPORATE INFORMATION
New Leadership Major Investments 1986 1989 1990 1991 / / / / The Angelini Group Fundación Bioforest is Compañía Minera acquires 41% of Co- Educacional Arauco incorporated, Can-Can, today Alxar pec’s share capital. is created, in order with the purpose Minería, is created to contribute to of developing with the purpose municipal education technologies in of exploring and in the regions of the area of forestry exploiting medium- Maule, Biobío and resources and pulp. sized mining sites. Los Ríos. 1992 1994 1996 1999 / / / / Igemar is Metrogas is Arauco acquires Corpesca is created, incorporated, after founded, with Alto Paraná, one following the the merger of the purpose of of the main pulp integration of the 25 Pesquera Guanaye commercializing plants in Argentina. operating assets / and Pesquera natural gas in the that the fishing Iquique. Metropolitan and companies Igemar, O’Higgins regions. Eperva and Coloso had in the north of the country.
Strategic Focus Global scale 2000 2002 2003 2005 / / / / The Angelini Group Fundación Copec- Compañía de Petróleos Arauco acquires achieves the control of Universidad de Chile Copec is pine plantations, an Copec, after acquiring Católica is created, incorporated as the MDF board plant, a an additional 30.05% of in order to promote affiliate in charge of particleboard plant the Company’s shares. applied scientific the business of liquid and a resin plant in Meanwhile, in the south- research in the fuels and lubricants, and Brazil. central zone of Chile, SPK area of natural the parent company is incorporated, following resources. becomes a financial the merger of the holding company, operating assets of the which corporate name fisheries Igemar, El Quillay changes into Empresas and Pacific Protein. Copec S.A.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 Global scale 2006 2007 / / Elemental is Arauco and Stora Enso incorporated with acquire forestry lands, the purpose of a sawmill and 20% of developing urban a paper plant in Brazil. projects of social On the other hand, interest. Mina Invierno is created in order to extract coal in the Region of Magallanes. 2008 2009 2010 2011 / / / / Fundación Copec-UC Arauco and Stora Enso Copec acquires the Abastible acquires creates the first buy the assets of the control of Terpel, the 51% of Inversiones del Private Investment business group Ence in main fuel distributor in Nordeste in Colombia. Fund of Chile uniting Uruguay, incorporating Colombia. Meanwhile, Meanwhile, in the 26 / the academy and the Montes del Plata. Orizon is founded in United States, Arauco company. Meanwhile, in the north the south-central zone, buys the Moncure of the country, Golden after the merger of the board plant. Omega is created fishing activities of SPK in order to produce and San José. Omega 3 concentrates. 2012 2013 2014 2015 / / / / Arauco acquires Corpesca acquires Empresas Copec and Abastible increases its stake Flakeboard Company 60% of the Brazilian Universidad Católica in Gasmar by 36.25%. On Limited, incorporating company Sementes de Chile inaugurate the the other hand, Corpesca seven board plants Selecta S.A., engaged Anacleto Angelini UC bids 30% of FASA, a Brazilian in the United States in the production Innovation Center. company engaged in the and Canada. On the of soy protein production of high quality other hand, Copec concentrates (SPC). protein concentrates for animal consolidates 58% of feeding. Terpel’s ownership through a process of public offering of shares in Proenergía Internacional. Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 2016 27 Highlights /
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 Business
Areas
/ 01. 04./ 28 Empresas Copec issued two bond series in the Chilean Copec purchased from the North American company / market, of 7 and 10 years, totaling about US$ 154 million. Delek US Holdings 100% of the shares of Mapco Likewise, Arauco issued 10-year bonds in the local Express, Inc., Mapco Fleet, Inc., GDK Bear Paw, LLC, NTI market, totaling UF 5,000,000. Investments, LLC and Delek Transportation, LLC, Inc. The acquisition totaled US$ 535 million, and involves the operation of 348 gas stations in the states of
Alabama, Arkansas, Georgia, Kentucky, Mississippi, 02./ Tennessee and Virginia.
Empresas Copec enters the Dow Jones Sustainability
Index Chile and the FTSE4Good Emerging Index. 05./
Abastible acquires all shares that the company Repsol had 03./ in the Peruvian companies Repsol Gas del Perú S.A. and Repsol Gas de la Amazonía S.A.C., and in the Ecuadorian Arauco acquires 50% of the capital of the Spanish company companies Duragas S.A. and Servicio de Mantenimiento Tafisa, an affiliate of the Portuguese group Sonae, which y Personal S.A. The operation involved a US$ 335 million manufactures and markets OSB, MDF and PB panels, and investment, and hence, Abastible becomes South America’s sawn wood, through 2 panel plants and a sawmill in Spain; third largest liquefied gas distributor. 2 panel plants in Portugal; 4 in Germany and 2 in South Africa. These facilities total an annual production capacity of 4.2 million m3 of panels. The acquisition represents a US$ 150 million investment.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1
/ 2016 HIGHLIGHTS
/ 06. 11./
Copec executes a regional agreement with ExxonMobil Aprovisionadora Global de Energía S.A. sells all its shares to produce and distribute Mobil lubricants in Chile, in GNL Quintero S.A., amounting to 20% of the ownership, Colombia, Ecuador and Peru, in addition to the operation in US$ 200 million. and marketing of aviation fuels at Lima’s international airport, and the fuel business of ExxonMobil in Colombia
and Ecuador. The investment relating to these agreements amounts to US$ 747 million. 12./
Arauco creates a new company, Arauco Nutrientes 07./ Naturales, aimed to escalate the commercialization and internationalization of different nutritional products of
Arauco approves the investment in a new panel plant in native forests. Grayling, Michigan, which annual production capacity will amount to 800,000 m3 of wood panels. The investment
will reach US$ 400 million, and it is expected to begin 13./ operating by late 2018.
Orizon inaugurates Lebu Fish, a cuttlefish processing 29
/
plant with a production capacity of 800 tons per month, 08./ operating under a shared-value model, where the company includes the local community. The installation required Corpesca acquires 30% of FASA América Latina, a Brazilian an investment of about Ch$ 560 million, which were company engaged in the production of high quality protein contributed by the Japanese Red Cross, the Regional and concentrates for animal feeding. The transaction required a Municipal Government, and Orizon.
US$ 43 million investment.
/ 09. 14./
Orizon announces the reopening of the San José de Coquim- Mina Invierno receives the environmental approval to bo canning plant, which had been closed since 2013, for which incorporate blasting to its coal mining process. it will invest more than Ch$ 700 million. This facility will have a production capacity of 200,000 horse mackerel boxes per year,
and it is expected to begin operating in January, 2017.
15./ 10./ Golden Omega consolidates the productive operation of its Omega 3 concentrate plant, reaching optimal performance Metrogas carries out a corporate division, grouping the natural levels of fatty acids from fish oil. gas distribution activities into Metrogas S.A., and those of the supply business into Aprovisionadora Global de Energía S.A.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1
/ 16./ 20.
Copec inaugurates two urban gas stations in La Serena, Arauco launches Lookid, a didactic child’s toy made of one in San Antonio and another one in Lampa, as well as a antibacterial wood panels of different sizes and shapes and roadside gas station in the town of Pozo Almonte. connectors manufactured with recycled fishing nets, which
allows manufacturing everything from chairs to rockets. 17./ 30
/ 21./ Abastible inaugurates a liquefied gas distribution office in Chiloé. Metrogas reaches 1,000 connected customers in the
Region of O’Higgins. 18./
Metrogas inaugurates new natural gas stations for vehicles 22./ in La Florida, Maipú, Peñalolén and San Bernardo.
Arauco’s Vesto melamine becomes the world’s first board
with a negative carbon footprint. 19./
Terpel launches PagoClick, an application that allows 23./ users to buy fuel and products at Altoque Stores through their smartphones, and gives them access to their transaction history. This payment method will initially be Empresas Copec publishes its First Sustainability Report, available in about 450 service stations, and it is expected where it reports its performance in the environmental, to reach an average of 13,000 transactions per month social and economic areas. during its first year of operation.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / 2016 HIGHLIGHTS Relationship with the
community
/ 01./ 02.
Arauco inaugurates Campus Empresas Copec and its affiliates Arauco, a Technical Training commemorate 10 years since the Center born thanks to an alliance first time the Anacleto Angelini with Duoc-UC, aimed at providing Fabbri Scholarship was awarded 31 young people of the Province of to finance higher technical / Arauco and the workers of the studies of the best students affiliate of the forest company, graduated from the schools of with an education of excellence Fundación Belén Educa. under the Educational model of
alternation.
/ 03./ 04.
Arauco inaugurates a Cultural The Anacleto Angelini UC Center in the district of Arauco, Innovation Center reaches an innovative architectural 100 partner companies proposal privileging wood and institutions, reflecting design and incorporating power the solid commitment of efficiency aspects and cutting- companies, organizations, edge technology. academics, researchers, students, entrepreneurs and representatives of the public sector in the promotion of a pro-innovation culture and entrepreneurship in the country.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1
/ 2016 HIGHLIGHTS 05./
Fundación Copec-UC gives the Awards for the 13th Version of the Contest on Natural Resource Development Projects, the 4th Version of Concurso de Contrapartes and the 4th Version of the Contest on Projects for Young
Investigators. 06./
Fundación Educacional Arauco carries
th out its 9 Seminar: “Construyendo 32
Confianza para la Mejora Escolar”. /
/ 07./ 08.
Fundación Copec-UC carries out the Fundación Terpel carries out the International Seminar: “Bioingeniería, 5th version of Diseña el Cambio, an Ciencia y Tecnología para la vida”. initiative that rewards those projects aimed at transforming environments and implementing innovative and sustainable solutions to the community’s problems.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / 2016 HIGHLIGHTS Awards
Roberto Angelini is chosen by the readers of Abastible is awarded with the first place 01. Diario Financiero as Best Businessman 2016. 05. in all categories of the Consumer Loyalty In turn, Empresas Copec is awarded with the Award 2016. first place in the category of International Expansion, and Metrogas with the third place in the categories Best Business Copec gets the first place in “Service Initiative and Best Public-Private Initiative. 06. Stations” of the National Consumer Satisfaction Award, ProCalidad.
Eduardo Navarro, General Manager of Empresas Copec, is awarded as “Executive of 02. Metrogas is once again recognized among the Year” by EY and El Mercurio newspaper. 07. the most innovative companies, according to the Most Innovative Companies Ranking. Alejandro Aravena, Executive Director of 03. Elemental, is awarded with the Pritzker Prize 2016, the world’s most important Terpel is recognized among the 33 architecture price, annually awarded to an 08. 20 companies having the best corporate / architect whose projects contribute to the reputation, according to the ranking Merco social development of Humanity. Empresas y Líderes Colombia 2016.
Arauco was awarded with the first place of Sonacol receives again the certification in 04. the ranking “Most Innovative Companies 09. the PEC Excellence program of the Mutual Chile 2016”, an annual study carried out by de Seguridad. the ESE Business School of Universidad de Los Andes, along with La Tercera.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / 2016 HIGHLIGHTS
Sonamar is once again awarded by Mutual Terpel receives, from Icontec and the 10. de Seguridad with the Occupational Safety 17. Chamber of Commerce of Bogotá, the and Health Certificate of the Competitive certification in Good Practices of Innovation. Company Program.
The Municipal Library of Constitución Abastible is awarded with the first place in receives the international prize Wood 11. the PXI - Praxis Xperience Index 2016 ranking 18. Design & Building Award for its innovative of the liquefied gas industry, and with the wood architecture. second place at national level.
Metrogas is awarded with the first Terpel’s Deuna kiosks are awarded with 12. place in “Home Services” of the National 19. Premio Lápiz de Acero for the best design to Consumer Satisfaction Award. promote products at sales points.
Arauco is recognized as one of the 13. country’s most innovative exporting companies within the Innovative Behavior category, by Innovation Observatory of 34 the Business Administration Department / of the Faculty of Business and Economy of Universidad de Chile and the Management Development Center Unegocios.
Terpel receives the Investor Relations 14. award of the Colombian Stock Exchange for providing legal, financial and commercial information in a transparent, timely and truthful manner.
Sonacol obtains international recognition 15. from the company Dupont for successfully implementing the Safestart occupational safety system.
Copec receives RepTrack’s Brand 16. Reputation Award.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / MISION
Empresas Copec is a world class company, be a good citizen and address and honor which seeks to provide an attractive long- the interests of shareholders, employees, term return for its investors and contribute partners, suppliers, customers, communities to the development of Chile and of the and all the parties with whom it is in some 35 countries where it undertakes its producti- way involved. Empresas Copec performs its / ve and commercial operations. To achieve productive and commercial operations with this, it mainly invests in energy and natural excellence, and all its decisions are carried resources, and generally business areas out according to the highest ethical and where it can create sustainable value. While transparency standards. it undertakes its operations, it strives to WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / VISION
To contribute to society by generating the most To forge permanent relations of mutual collabora- value possible, which sustainably benefits share- tion with the communities around its operations, holders, employees, suppliers, customers and the supporting their development. communities around its operations, by means of efficient, responsible, innovative and quality mana- To keep up transparent and honest communication gement in all its processes. with the different major players for the Company.
To promote the sustainable use of the natural and To comply with the regulations in force, contractual energy resources of the environment, investing in obligations and other commitments regulating its 36 / research, technology innovation and training to pre- business and, in as far as it can, exceed the stan- vent and gradually, continually and systematically dards established. reduce the environmental footprint of its activities, products and services. To have and apply systems and procedures enabling it to manage the risks of its business, regularly asses- To timely provide all the customers quality products sing its performance in all the processes and taking in a sustained fashion over time, driving its suppliers the timely corrective action needed. to participate in its value chain and quality. To disseminate these commitments to its emplo- To safeguard the safety and occupational health, yees, contractors and suppliers, getting this policy striving to continually and steadily reduce the safety implemented with everybody’s collaboration and risks of its operations and services. effort, and training and involving everybody to comply with it. To create conditions for the development of all the people who belong to the Company, promoting To work with dedication, correctly, honestly, and workplaces based on respect, honesty, professional with excellence and to be true to the values and quality, training and teamwork. policies of Empresas Copec.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 Corporate Governance /
Principles_ decisions are taken within a framework of transparency, participation, and efficiency. The principles governing the corporate governance of Empresas Copec are based on the rules issued by It is mainly consists of the Board and Committee of the competent authorities and those defined by the Directors, in addition to the Ethics Committee, Information Organization for Economic Cooperation and Development Security Committee, Crime Prevention Officer, Legal Advisor, (OECD). These include the promotion of transparent and Internal Audit, Risk Management Area, among others. efficient markets, consistent with the rule of law; the correct allocation and monitoring of responsibilities between Board _ the different authorities; the protection of shareholders’ 37 rights, in order to facilitate their exercise and ensure an The Board consists of 9 members, who are elected every / equitable treatment; the ongoing promotion of strategic 3 years at the relevant Ordinary Shareholders’ Meeting, and advice; and the constant concern for management to be most of them are proposed by the controlling shareholder. effectively monitored by the Board, and for it to represents all shareholders. The Directors meet monthly in order to define and evaluate the Company’s overall strategy; review, approve, and Through these principles, the Company makes sure that monitor key financial decisions, such as dividend policy and management, investment and productive action practices capital structure; control the management of the company’s consider economic, social and environmental aspects, and operations; analyze large investment projects, transactions that they become contributions that go beyond direct and asset sales; ensure an effective and efficient risk economic benefit and what the laws establishes. management; guarantee representation of the financial statements; look out for the compliance with the law and This way of doing business, shared by each of its companies, with self-regulation standards; monitor the relationship is reflected in its concern to create sustainable value and with authorities and key market players; keep shareholders to carry out a reflexive and informed long-term decision- permanently informed; select the Chief Executive Officer making process, as well as its permanent commitment to and evaluate its performance, being empowered to remove social, human, and economic development. it and supervise its replacement; and advise on the selection, evaluation, development and compensation of the Corporate Governance Structure_ Company’s main executives.
The corporate governance structure of Empresas Copec Additionally, once a year, the Board conducts a training plays a key role in ensuring that strategic and financial program with the objective of updating its knowledge on
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / CORPORATE GOVERNANCE
best corporate governance practices, issues of inclusion, diversity and sustainability reports, risk management, failures, sanctions and conflicts of interest. During 2016, the members of the Board of Directors held the following training sessions: Best Corporate Governance Practices; Risk management; Conflicts of interest; Sustainability in corporate governance; Duties of diligence, care, loyalty, right of information and reservation affecting the Directors; Roles and responsibilities of the Board; Possible legal risks associated with the use of information technologies; Antitrust; Risk management and compliance.
On the other hand, remunerations assigned to the members of the Board are annually approved at the Ordinary Shareholders’ Meeting, in accordance with the provisions of article 33 of Law No. 18,046. During 2016, they amounted to a monthly sum of 300 UF for Directors, 600 UF for the Vice Chairman, and 900 UF for the Chairman.
38 Its members are: Roberto Angelini Rossi, Jorge Andueza / Fouque, Manuel Bezanilla Urrutia, Andrés Bianchi Larre, Gabriel Bitrán Dicowsky, Juan Edgardo Goldenberg Peñafiel, Arnaldo Gorziglia Balbi, Carlos Hurtado Ruiz-Tagle and Tomás Müller Sproat.
Committee of Directors_
According to Article 50 bis of Law No. 18,046, the Committee Company’s financial statements, risk management reports, of Directors consists of 3 members. They are elected from transactions with related companies, remuneration among the members of the Board, having the Independent policies and compensation plans for managers, main Director, who is appointed with the votes of minority executives and employees. shareholders that are not related to the controlling shareholder, the right to integrate it by legal mandate. On the other hand, the remuneration and operating expenses budget of the Committee of Directors are The Committee of Directors meets in order to analyze annually approved at the Ordinary Shareholders’ Meeting, strategic issues, that allow for the Company’s management in accordance with the provisions of article 50 bis of Law and investment decisions to be carried out safeguarding No. 18,046. During 2016, the monthly remuneration paid all shareholders’ interests; propose to the Board the names was 100 UF for each of the members and the total budget of the independent auditors and private risk classifiers, amounted to 5,000 UF. for them to be suggested and approved at the relevant Ordinary Shareholders’ Meeting; and periodically review Its members are: Andrés Bianchi Larre, Gabriel Bitrán the reports submitted by the independent auditors, the Dicowsky and Juan Edgardo Goldenberg Peñafiel.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / CORPORATE GOVERNANCE
Ethics Committee_ promotes informed participation of all shareholders at the Shareholders Meetings, protecting their right to speak and The Ethics Committee consists of 3 members elected by the vote; ensures that management and investment decisions Board, in order to provide advice in matters of ethics and to take into account the interests of all shareholders. define, promote and regulate the correct behavior of workers, ensuring that it is consistent with the Company’s principles. On the other hand, the Company has a strict audit policy, which provides that the audit manager, the responsible The Ethics Committee meets in order to promote the values partner or the audit firm rotate with a minimum frequency of and behaviors promoted in the Code of Ethics; propose once every 5 years, and whose objective is to protect the total to the Board updates and amendments to such Code; and independence of this process and to ensure the transparency support the Crime Prevention Officer in the different control of financial information. activities he executes, mainly in the process to identify and analyze complaints applying to the Prevention Model, Empresas Copec also has an Investor Relations area, in the determination of investigations and the potential application of penalties in such regard. charge of serving and advising investors and analysts on the behavior of markets and the pace of businesses; make regular Its members are: Juan Edgardo Goldenberg Peñafiel, José result presentations; issue communications; and participate Tomás Guzmán Rencoret and Eduardo Navarro Beltrán. in national and international conferences.
Information Security Committee_ The Company also has a corporate website and a website for investors, through which it provides relevant and updated 39 The Information Security Committee consists of 3 members information, such as the Company’s bylaws, minutes of / elected by the Chief Executive Officer. the Shareholders’ Meetings, financial statements, annual reports, sustainability reports , press releases, news and The Information Security Committee meets quarterly, in order a list of analysts covering the Company, Manual for the to implement the policies, standards and procedures set out in Management of Information of Interest for the Market, the Information Security Model, and monitor its compliance. Corporate Governance Practices and Procedures, Code of Ethics, Community Contribution Policy, Sustainability Policy, Its members are: Rodrigo Huidobro Alvarado, Christopher Risk Management Policy, Crime Prevention Policy, Antitrust Mac-Gregor Camus and Pamela Harris Honorato. General Policy, General Information Security Policy, among others. In addition to the foregoing, an application for Interest groups_ mobile phones allowing for shareholders and investors to be informed of the latest news and publications is added. Empresas Copec’s main interest groups are investors and financial analysts, civil society, regulators, media and Additionally, the Company has an institutional magazine governmental institutions, among others. circulating every 4 months, in order to provide information on the different initiatives developed by Empresas Copec and its For each of these groups, the Company has set out a series of affiliates, investments and notes of general interest. procedures, instruments and channels that allow minimizing information asymmetries, facilitating a proper operation of the The Company also has a confidential and anonymous capital market and aligning the management’s interests with complaint channel, that allows for any person having those of the shareholders, the workers and the environment. information on an act or event that constitutes a breach to law No. 20,393, or that departs from the principles The company regularly provides all of its interest groups established in the Code of Ethics, to directly report it to with transparent, truthful, and representative information; company’s highest authorities.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 Empresas Copec and the community
Empresas Copec and its affiliates maintain a strong commitment with the local development, with environmental and people´s care, and with the promotion of culture, education, sports, innovation and scientific research. For this reason, each year they reaffirm their support for various initiatives in these areas. /
Fundación Copec - Universidad Católica _ Enseña Chile_
Fundación Copec - Universidad Católica promotes applied Enseña Chile selects and trains young professionals who scientific research, encourages the creation of strategic wish to dedicate their first working years to teach in alliances between public and private entities dedicated vulnerable schools, in order to build a network of people to research and development, and disseminates scientific with the necessary conviction and perspective to make and technological advances in the area of natural an impact in the educational system, firstly from the resources. Each year it carries out the National Contest of experience in the classroom, and then from different Development in Natural Resources Projects, the Contest sectors. To date, Enseña Chile has supported more than 40 for Young Investigators Projects and the Contest for Higher 60,000 students from 106 educational establishments in the / Education Students: “Aplica tu idea”, providing technical, regions of Aysén, Biobío, La Araucanía, Los Ríos, Los Lagos, commercial and financial support. To this is added to Metropolitan, Tarapacá and Valparaíso. a Private Investment Fund, which is managed by the Administradora General de Fondos Security, and has the Fundación Belén Educa_ support of the Corporación de Fomento de la Producción (Corfo), which provides finance to projects based on Fundación Belén Educa is an institution that has technological developments that have a strong potential for 12 educational establishments located in vulnerable growth. During 2016, the Foundation carried out its twelfth areas of the Metropolitan Region and has more than International Seminar: “Bioingeniería, Ciencia y Tecnología 13,000 students, to whom it offers a high-quality para la vida”, which was focused on disseminating the education, and constantly encourages the commitment advances of this discipline in areas such as medicine and of the families with the formation of their children. various productive sectors. The Company and its affiliates support the Foundation through financial resources and participate actively Fundación Educacional Arauco_ in various initiatives, such as the Tutoring Program. The goal of this program is that the executives can Fundación Educacional Arauco aims to contribute, transmit to students that are in their last year of high through education, to provide the best development school the importance of continuing their studies and opportunities to children and young people, thanks to becoming good professionals. To this, the Expert Talks the design, development and implementation of teacher are added, which are instances in which executives visit training programs in the boroughs of Maule, Biobío and a school of the Foundation to talk and guide high-school Los Ríos. In its 27 years of experience, the Foundation has students in the process of choosing a career. To this is carried out programs in 34 boroughs, benefiting more added the Anacleto Angelini Fabbri Fellowship, which than 575 schools and more than 5,000 teachers, who is awarded each year to the most outstanding student attend annually to about 100,000 students. of each establishment, to finance studies in a Technical
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / EMPRESAS COPEC AND THE COMMUNITY
Fundación Educacional Arauco aims / to contribute to education, through teacher training programs that provide Training Center or in a Professional Institute. In 2016 to students a quality education. were commemorated 10 years since the first time this scholarship was awarded. 34 Campus Arauco_ Boroughs
Campus Arauco is a higher education center developed from an alliance between Arauco and the Duoc UC 575 Schools Professional Institute, with the purpose of delivering an education of excellence under the alternation based educational model to the young people of the Arauco 5,000 Province in the Biobío Region. The establishment, which Teachers required an investment of US$ 8.5 million, has more than 30 teachers and 18 employees, as well as a Training Center to train the workers of the Arauco company. In 100,000 2016, it opened its doors to 209 students for the majors Students of Financial Management, Risk Prevention Technician, Electromechanical Maintenance Technician with 41 / specialty in Industries, and Technician in Electricity and Elemental_ Industrial Automation. Elemental is a do tank developed jointly by the Copec Arauco, Constitución and Cholguán schools_ affiliate, the Pontificia Universidad Católica and a group of professionals, aimed at reducing poverty and improving The Arauco, Constitución and Cholguán schools are the quality of life of the families, with urban projects of establishments open to the community that deliver high- public interest and social impact. To date, it has developed quality education to the youth of these localities. Each social housing projects in Antofagasta, Concepción, year they are recognized nationally for their performance Copiapó, Iquique, Rancagua, Santiago, Temuco, Tocopilla, and academic excellence. Valparaíso, Valdivia and Yungay, as well as Mexico and Switzerland. In 2016, Alejandro Aravena, one of its founders, Anacleto Angelini UC Innovation Center _ received the Pritzker Prize, the most important distinction of architecture at a global level that is given annually to an The Anacleto Angelini UC Innovation Center is a space open architect, who through his projects, has contributed to the to all companies and entrepreneurships, which allows social development of Humanity. stimulating the crossroad and interaction between the academy and the business community, with the objective Bioforest_ of generating knowledge and applied innovations that can respond to the needs of the country. During 2016, the Bioforest is a scientific and technological research center Center reached 100 member institutions, which reflects that carries out studies aimed at increasing the quality, the strong commitment of companies, organizations, performance and productivity of the forest plantations academics, researchers, students, entrepreneurs and and the pulp production process, as well as applying representatives of the public sector with the promotion of leading-edge procedures in the fields of genetics, site a culture for innovation and entrepreneurship. productivity, phytosanitary protection, wood properties
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 and biodiversity of the native vegetation. For that purpose, it has the Forestry, Biocel and Biopaneles areas, oriented to the research and development of forests, cellulose and panels, respectively.
Centro de Investigación Aplicada del Mar_
The CIAM was created in June, 2014, by Corpesca, Camanchaca and Serenor, with the purpose of promoting research in favor of the sustainability of the fisheries in the northern zone of Chile. At present, the information generated from the CIAM is critical for the decision making regarding the present and future of the fishing activity of the far north of Chile, both at industrial and artisanal level.
AcercaRedes_
AcercaRedes is an initiative promoted by the Arauco affiliate with the aim of establishing, in places far 42 / from the big urban centers, spaces that promote the association between local entrepreneurs, companies, technical, productive, guild, cultural, academic, corporate the cellulose plant for heating water, reaches 80% complete and commercial organizations within the boroughs, and is expected to be completed the first quarter of 2017. the region and the country, in order to promote the development of the communities. Housing Plan_
Master Plan of Sustainable Reconstruction The Arauco´s Housing Plan is an initiative that seeks of Constitución_ to contribute with a definitive housing solution for the employees of the company, contractors and related The Plan of reconstruction sustainable PRES Constitution services, and for neighbors who are in the vicinity of arises after Arauco, together with the Municipality of its commercial and industrial operations, through Constitution and the Ministry of Housing and Urbanism, the construction of high quality neighborhoods with comprised a consortium to address the reconstruction of innovation in wood, with standards of excellence in Constitution, one of the cities hardest hit by the earthquake boroughs where there is a limited residential offer. To and tsunami in February 2010. So, as Arauco has promoted date, 1,391 houses have been built and 184 are under various initiatives under it and, to date, more than 75% construction, which are distributed in the localities are finished or in the implementation stage. Among them of Curanilahue, Yungay, San José de la Mariquina, are the Municipal Library, Stadium Mutrun, the Cultural Constitución and Los Álamos. Meanwhile, it is estimated Center, the Yacht Pier, the School Enrique Donn Müller - with that the second stage in Constitución will be completed capacity for 900 students, the General Headquarters of the in 2017, and other neighborhoods are being planned first company of firefighters and a stretch of the waterfront in Arauco, Curanilahue, Ránquil, Treguaco, Coelemu, Echeverria, among others. Moreover, project of heated Collipulli and Lota. The goal is to build an average of pools, allowing you to take advantage of the residual heat of 500 houses per year.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / EMPRESAS COPEC AND THE COMMUNITY
Proyecto Raíces_ For its part, Corpesca has a collaboration agreement with the Diseña el Cambio Program in Chile, which seeks to transform The Proyecto Raíces is an initiative promoted by the Copec the educational reality of the children and youth of the country, affiliate that seeks to promote and rescue the local identity making them active protagonists in the improvement of their of the different places where its service stations are located education, providing them with tools allowing to implement through exterior and technological walls that show the changes that can improve their environment, and enable them attractions of each zone. During 2016, three new stations to achieve greater equality of opportunities. were added, reaching a total of 21. Additionally, through the intervention of eight service stations, the incorporation of Dual Education Programs_ the Pronto in Kiosko format to this Project was started by adding a green vegetation wall. Since 2003, Corpesca has been collaborating in the Dual Education Program with technical-professional education Viva Leer_ establishments in Iquique and Mejillones, allowing students to carry out part of their training inside the The Viva Leer program, promoted by Copec, has the purposes of company. During 2016, the Instituto del Mar Almirante encouraging reading through the collection of books that are Carlos Condell, the Liceo Poiltécnico Luis Cruz Martínez and sold directly at the service stations, the formation of a network the Liceo Juan José Latorre participated in this program. of volunteers within the company, the implementation of a virtual platform to support schools, the family and community, Environmental Education Program_ and the donation of 75 school libraries open to the community. During 2016, the last 15 were inaugurated, which will receive Mina Invierno has been carrying out the Environmental technical advices until the end of 2017. With this, a cycle Education Program for four years, which consists of offering 43 talks and training in schools, followed by field visits, where of 5 years is closed, in which a total of 75 libraries were / implemented from Arica to Punta Arenas, 1,744,000 books the students can learn about the greenhouses and the were sold, and the commitment of Copec with the promotion reforestation work that is carried out by the company. In 2016, of reading in Chile was consolidated. The renewal of this four establishments participated: Escuela Bernardo de Bruyne program is being evaluated by the company, in order to of Río Verde, Colegio Punta Arenas, Escuela Patagonia and the continue deepening its support to the schools and to San Juan Therapeutic Community. expand its contribution in the country´s education.
Brigada Metroambientalista_ In 2016, the Fundación Terpel carried / out its fifth version of the Diseña el Metrogas carries out its “Brigada Metroambientalista” Cambio Program, which promotes program, through which it seeks to strengthen the innovative and sustainable solutions to community problems. educational contents of children and youths regarding environmental care and energy efficiency. This program is sponsored by the Ministry of Environment and the Chilean Agency of Energy Efficiency. 96,000 Diseña el Cambio Program_ Children and Youths
In 2016, the Fundación Terpel carried out its fifth version of the Diseña el Cambio Program, which promotes the generation of 108 Educational Institutions ideas to transform environments and implement innovative of Colombia and sustainable solutions to community problems. This time, more than 96,000 children and youths from 108 educational institutions of Colombia participated.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / EMPRESAS COPEC AND THE COMMUNITY
that in 2016 brought together 17 teams from different schools of Punta Arenas.
Children and Youth Orchestras Programs_
The Company and its affiliates support different Children and Youth Orchestras Programs in Chile, with the aim of contributing to the socio-cultural development and diffusion at the communal, regional and national level. Among them, the Curanilahue Orchestra is distinguished, which this year celebrated its 20 years of existence with a concert that had an attendance of more than 2,500 people.
Biofuels_
Arauco, together with CMPC, Masisa, Universidad de Concepción, Universidad Católica de Valparaíso and Supplier Development Program_ Fundación Chile, participates in the technological consortium Bioenercel S.A., which is an institution whose objective is The Arauco affiliate permanently provides support to the to develop technologies that will allow the development of 44 local entrepreneurship of the surrounding communities to second generation biofuels from cellulose. / its productive facilities, through the Supplier Development Program, which consists of incorporating the local For its part, Copec, together with E-CL, the Pontificia entrepreneurs to the list of suppliers of goods and services Universidad Católica de Chile, Rentapack and Bioscan, is part of of the company. the Consorcio Tecnológico Empresarial Algae Fuels S.A., which is an institution that is working on the implementation of a Vineyard pole_ pilot plant to produce biofuels from microalgae, in Mejillones.
Arauco promotes a Technological Transfer Group that brings Additionally, Copec participates in an initiative developed with together several producers in the Ránquil and Portezuelo the Universidad de La Frontera, whose objective is to produce area, through an agreement with the Instituto Nacional de biodiesel from rapeseed oil, in Temuco. Innovación Agraria (INIA), aimed at improving the productivity and quality of the vineyards of the area, by training Meanwhile, Metrogas uses the biogas produced at the La farmers and improving the competitiveness of partners. Farfana wastewater treatment plant in the elaboration of Additionally, the company is working on the development city gas, thus reducing the emission of greenhouse gases and sustainability of the Cucha-Cucha vineyard state, which and other contaminants. is owned by the company and represents a relevant factor in this wine development project for the Ñuble province. Renewable energy_
Support for sports_ Arauco owns eight plants of electric cogeneration from biomass and two support units in Chile, which totalize an Copec permanently supports outstanding national installed capacity of 606 MW. They allow it to self-supply its athletes such as Francisco “Chaleco” López and Ignacio energy needs in most of its industrial processes, leaving an Casale, and the Rally Mobil car show. Meanwhile, Mina available surplus for injection into the Central Interconnected Invierno annually holds the Copa Invierno, a soccer event System. Meanwhile, it has two electric cogeneration plants
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / EMPRESAS COPEC AND THE COMMUNITY 409,000 in Argentina, which totalize an installed capacity of 78 MW, Hectares of native and it operates one in Uruguay with a capacity of 165 MW. In forest managed in this way, the company reduces its emissions, contributing to Chile, Argentina, Brazil mitigate the effects of the climate change, and participates in and Uruguay. the international market of Emission Reduction Certificates (“ERCs”). During 2016, the company issued 110,000 certificates under the Clean Development Mechanism.
In addition, Copec has the project “Renova Copec”, which 690 incorporates the use of renewable energy in its service Hectares has Mina stations. For its part, Abastible has incorporated several Invierno as Integrated applications allowing to complement the use of liquefied gas Compensation Area, which are intended with renewable energies, such as solar. for reforestation with lenga and ñirre. Native Forest and Conservation Areas_
Arauco manages a network of parks between the regions managed under responsible forest management practices. of Maule and Los Ríos, and owns 409,000 hectares of native All of its industrial areas participate in the Clean Production forest in Chile, Argentina, Brazil and Uruguay. The company Agreements and have modern technologies and equipment maintains non-substitution agreements of native forest, to reduce the environmental impact. 45 / carries out records of native species and develops programs of protection, conservation and restoration of the ecosystems. It Meanwhile, Copec applies strict controls to all its also has areas of High Conservation Value, which correspond production processes and carries out various initiatives to forest areas of exceptional or critical importance, which are to reduce its CO2 emissions, such as the Via Limpia actively managed to conserve or increase high conservation project, through which it seeks to resolve the difficulty values, based on a methodology that considers identification, that customers have with the handling of used oil and the management practices and monitoring. removal of wastes that contain hydrocarbons.
Meanwhile, Mina Invierno has an Integrated Compensation Abastible has strict standards regarding emissions and Area of 690 hectares, which are intended for reforestation handling of hazardous industrial waste, in order to ensure with lenga and ñirre. In addition to the relocation of affected that all its production plants and distribution centers species, it has a nursery of native species built as part of the fulfill the current regulations. In particular, in the San reforestation plan, and 5,400 hectares where 1,000 sheep and Vicente Maritime Terminal, it carries out an environmental 2,000 cattle coexist, in order to demonstrate that the livestock monitoring of the marine environment, which consists in activity can be carried out simultaneously with coal mining. the monitoring of the physical and chemical parameters of the resources of that area. Operational Standards_ Corpesca maintains programs of Environmental Monitoring Arauco has a custody chain system in its productive of the Marine Ecosystem, Monitoring and Control of Liquid facilities, thanks to which it connects the final products with Emissions, and Control of Gaseous Emissions, in order their origin, verifying that the supply does not come from to ensure that the processes generate the least possible protected or uncertified species. Additionally, their cellulose impact on the environment. Likewise, all its processes plants use the elemental chlorine free (ECF) technology comply with the provisions of the DS No. 138, which in their bleaching process, while their plantations are regulates emissions to the atmosphere, the DS No. 148,
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 which regulates the management of hazardous waste, plans in plants, service stations and maritime terminals, the DS No. 78, which refers to the storage of hazardous prevention and control systems against fire, spills and substances, and the DS No. 90, which regulates the liquid accidents, satellite tracking of tanker trucks, and training industrial wastes. During 2016, the company continued to and assessment programs for drivers. develop improvements in the processes of all its plants with the aim of reducing the fuel consumption. Meanwhile, Terpel has the ISO, OHSAS and NORSOK certifications for the marketing, transportation, operation Meanwhile, Orizon seeks that all its production and supply of fuels, in addition to the ISO and OHSAS for plants comply with the requirements of the General the production, marketing and distribution of lubricants. Environmental Law No. 19,300, the DS No. 90 and No. 609, which regulates the emissions of liquid industrial Abastible has the ISO and OHSAS certifications for wastes, the DS No. 138, which regulates emissions to the the supply, storage and distribution process of bulk atmosphere, and DS No. 78, which regulates the storage of products in the Metropolitan Region. Additionally, it has hazardous substances. Additionally, the company has the a strict Security Management System that establishes IFFO-RS certification for its Coquimbo and Coronel fishmeal requirements for the storage, transport and delivery of plants, whose main purpose is to ensure the sustainability gas. In addition to that, it has the Integrated Emergency of the fishery resources. Meanwhile, during 2016, Orizon Transport System (“SIET” in Spanish), which aims to implemented a Fisheries Law Management System at prevent accidents in the gas transportation process and the Coronel Plant to review the degree of knowledge, prepare the organization for eventual emergencies. compliance and responsibility in the conservation and 46 management. During 2017, this system will also be At the same time, Sonacol performs permanent controls / implemented at the Coquimbo and Puerto Montt plants. on all fuel transportation processes and carries out a remote monitoring of its valves, pipelines and facilities to Training Programs_ avoid faults and leaks. In 2016, the company received once again the certification in the PEC Excellence Program of Empresas Copec and its affiliates permanently carry out the Mutual de Seguridad, and obtained the international training programs for workers in order to enhance their skills recognition of the Dupont company for the successful and competences in different aspects of the business. In 2016, implementation of the Safestart work safety system. at a consolidated level, more than 934,000 hours of training were carried out, investing a total of US$ 8.8 million. On the other hand, Sonamar has procedures and sampling in the operations of loading and unloading of fuels, and Operational Safety Programs_ training plans for the deck personnel that takes part directly in the works of fuel transfer. It should be mentioned that Arauco maintains in force the ISO and OHSAS the company has the Safety and Occupational Health international certifications in all its industrial Certification of the Competitive Company program of the installations, and it permanently implements training Mutual de Seguridad, and all its ships are certified by the plans to strengthen the management in risk prevention, demanding international navigation standards. the compliance with the safety standards, the identification of possible contingencies and the use of Finally, Metrogas has the Metroprev program, which prevention tools, among others. seeks to promote the management in the area of risk prevention and occupational health through For its part, Copec applies strict safety measures in the the detection, identification, evaluation, control and transport and storage of fuels, such as contingency monitoring of risks.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / FINANCIAL RESULTS Consolidated Financial Results /
During 2016, Empresas Copec recorded a consolidated net Chile, compensated by greater volumes and margins in income, net of minority participation, of US$ 554 million, the concessionary area and in Terpel, especially in its 2.8% higher than the income recorded by December operation in Colombia. In turn, Abastible’s margins and 2015. This variation is mainly explained by a greater non- volumes in Chile and Colombia increased, in addition to the operating income of the Company, due to an increase consolidation of the new operations of Solgas in Peru and in the results in associates and joint ventures and more Duragas in Ecuador. favorable exchange differences. Other Income_ Gross Margin_ On the other hand, the non-operating income increased by The Company’s gross margin dropped by 9.8% compared to US$ 292 million, mainly due to a higher income in the associates the previous year, totaling US$ 2,763 million. It was mainly and joint ventures, caused by the impairment in the affiliate contributed by the affiliates Arauco (US$ 1,262 million); Laguna Blanca, recorded in 2015, for US$ 145 million, related Copec (US$ 1,080) million; Abastible (US$ 331 million); Sonacol to lower international coal prices. In addition to the foregoing, (US$ 50 million); and Igemar (US$ 46 million). an extraordinary income of the affiliate Aprovisionadora Global de Energía in 2016, due to the sale of its stake in GNL Operating Income_ Quintero, a negative effect arising from losses of the associate 47 / The operating income dropped by 27.2%, mainly due to Corpesca and more favorable exchange differences in the lower income in all business lines of the forestry sector, Parent company and the forestry and fuel sectors, relating arising from a general price level drop. On the other hand, to dollar depreciation during such period. This was partially in the fuel sector, the affiliate Copec recorded lower compensated by an increase in the net financial expenses, sales volumes and margins in the industrial channel in arising from a higher level of debt.
Net income millions dollars 1,200
1,000
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / FINANCIAL RESULTS
Consolidated EBITDA Equity millions dollars millions dollars
2,500 12,000 9,955 2,000 10,000 1,738 1,500 8,000 6,000 1,000 4,000 500 2,000 0 0
Income of the Main / Affiliates and Associates
48 3 FORESTRY SECTOR Physical sales in Chile totaled 9.8 million m , representing / a 2.4% drop compared to the previous period, due to an Arauco_ 11.1% drop in the industrial channel. Meanwhile, the During the period, Arauco’s profits totaled US$ 214 million, gas station network increased by 7.3%. In light of the unfavorable when compared to the US$ 363 million recorded foregoing, market share dropped to 58.1%. On the other in the previous period. The difference is mainly explained hand, Terpel’s physical fuel sales in Colombia, Panama, by the lower sales in all business lines, due to a general Ecuador and the Dominican Republic increased by 6.0%, price level drop, especially those of pulp. This was partially 16.2%, 4.3% and 7.2%, respectively. compensated by less unfavorable exchange differences and a higher income in the associates and joint ventures, partly Meanwhile, the non-operating income had a negative due to acquisition of the stake in Sonae-Arauco. variation due to greater financial costs, relating to the acquisition of Mapco in November 2016, and lower results FUEL SECTOR due to exchange differences.
Copec Abastible_ During the period, profits of the affiliate Compañía de Petróleos During the period, Abastible’s profits totaled Ch$ 49,177 million, de Chile Copec totaled Ch$ 130,401 million, unfavorable when representing a 41.9% increase. On the other hand, the operating compared to the Ch$ 197,042 million recorded in 2015. result increased by Ch$ 11,813 million, mainly due to greater volumes sold both in Chile and Colombia, and to the consolidation In operational terms, the income dropped by 10.7%, of the new operations of Solgas in Peru and Duragas in Ecuador, as relating to lower sales volumes and margins in the from the months of June and October 2016, respectively. industrial channel in Chile, compensated by greater volumes and margins in the concessionary channel and in Meanwhile, the non-operating income increased by Terpel, especially in its operation in Colombia. In addition Ch$ 10,203 million, as a consequence of better results to the foregoing, a negative inventory revaluation effect. in exchange differences and in other income, partly
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / FINANCIAL RESULTS
compensated by an increase in the financial expenses. FISHING SECTOR On the other hand, the Ebitda increased by 22.3%, totaling Ch$ 98,824 million. Pesquera Iquique-Guanaye_ During the period, Igemar recorded losses for US$ 35.2 million, The company’s physical sales in Chile totaled unfavorable when compared to the US$ 17.6 million loss of 2015, 459,000 tons of liquefied gas, 5.8% higher than 2015. arising from a US$ 19.6 million non-operating income drop, due Meanwhile, in Colombia, Inversiones del Nordeste’s to the lower income of the affiliate Corpesca, related to a lower physical sales totaled 188,000 tons of liquefied operating performance and to the impairment of fixed assets. gas, representing a 4.2% increase compared to the previous year. In operational terms, the income totaled US$ 7.8 million, mainly explained by lower production costs, relating to a drop Sonacol_ in international crude oil prices, to the rise in the average In general, Sonacol’s income totaled Ch$ 23,133 million, exchange rate and to a more efficient operation of the representing a Ch$ 2,114 million increase compared to the industrial fleet, due to nearby and more productive fishing previous year. This increase is mainly explained by an 8.2% areas. The Ebitda, on the other hand, reached US$ 29.8 million, increase in volumes transported through oil pipelines. representing a US$ 1.9 million drop.
Metrogas_ Physical sales of fishmeal totaled 27,800 tons, 14.7% higher On April 1st, 2016, the division of Metrogas into two than the previous period. Meanwhile, physical sales of companies came into force: on the one hand, Metrogas S.A., fish oil totaled 5,200 tons, 3.2% less than last year, whereas 49 / grouping together the natural gas distribution activities, and 16,300 tons of frozen products were marketed, 20.3% higher on the other hand, Aprovisionadora Global de Energía S.A., than the previous period. On the other hand, sales of the company resulting from the division, engaged in the preserves totaled 2,100,000 boxes, 0.9% more than last year. supply business. Processed fishing totaled 159,000 tons, an 8.4% drop.
In general, Metrogas’ profits totaled Ch$ 47,291 million, In terms of prices, preserves increased by 2.1%, whereas representing a 16.7% drop compared to the previous year, fishmeal, fish oil and frozen products dropped by 4.3%, 1.4% explained by a lower operating income due to a sales and 6.0%, respectively. volumes drop, and the division of the company, and a more negative non-operating income in Ch$ 2,965 million. On the Corpesca_ other hand, sales volumes -without taking into account The accumulated income by December was a US$ 79.2 million the supply to power generation companies- increased by loss, unfavorable compared to the US$ 17.1 million loss recorded 12.7%, since industrial and residential-commercial sales in the previous period. This is a result of a US$ 90.4 million increased by 17.4% and 6.1%, respectively. operating income drop, due to a 14.9% drop in fishmeal prices, partly compensated by a 1.7% increase in fish oil prices. On the
On the other hand, Aprovisionadora Global de Energía’s other hand, sales volumes of fishmeal and fish oil dropped by profits totaled US$ 160.3 million, due to a positive non- 28.9% and 87.5%, respectively. operating income arising from the sale of 20% of the company’s stake in GNL Quintero S.A. In addition to the In addition to the foregoing, there was a nonrecurring foregoing, a US$ 32.1 million operating income. loss relating to the impairment of fixed assets, totaling Ch$ 57.6 million.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / FINANCIAL RESULTS Statement of / Financial Situation
Assets_ Meanwhile, non-current liabilities increased by 2.5% By December 31st, 2016, the consolidated current assets compared to the last financial year, due to higher deferred dropped by 4.6% compared to those existing by December tax liabilities relating to Solgas, an affiliate of Abastible in 31st, 2015. A decrease in cash and cash equivalents stands Peru, resulting from such country’s tax reform. out in this variation, due to the acquisition of fuel assets in the United States and liquefied gas distribution assets Equity_ in Peru and Ecuador, along with the purchase of 50% of The Company’s equity increased by 6.4% compared to the stake of the company Tafisa in Europe, and a drop in December, 2015, due to an increase in the accumulated the accounts receivable from related entities. This was profits, in addition to a less unfavorable record in other partly compensated by an increase in current tax assets. reserves, resulting from the effect of the drop in the exchange rate on those affiliates which accountability is Non-current assets by December 31st, 2016, increased kept in currencies other than the US dollar. by 11.9% compared to those recorded in financial year 2015. This variation is explained by an increase in Regarding dividends, in May 2016, the Company paid a property, plant and equipment, and added value, due dividend of US$ 0.105473 per share, under the results of the to the acquisitions of Mapco by the affiliate Copec, and previous year. In December, the Company also distributed an of Solgas by Abastible. In addition to this, an increase interim dividend of US$ 0.066178 per share, under profits of in investments accounted for using the equity method, financial year 2016. 50 / relating to the acquisition of Tafisa by the affiliate Arauco, and Camino Nevado’s capitalization of accounts Finally, by December 31st, 2016, the book value of Empresas receivable from affiliates. Copec’s shares was US$ 7.659, and the profit per share was US$ 0.43. Liabilities_ Current liabilities increased by 35.9%, due to greater Investment Plan_ other current financial liabilities, mainly in the affiliate The investment plan for 2017 commits resources for about Arauco, and to a lesser extent, in the affiliates Copec, US$ 1,983 million, intended to expand and maintain the Abastible and Igemar. Company’s productive activities. About 62% is aimed at the fuel sector, 36% to the forestry sector, 1% to the fishing sector and 1% to other activities.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 Business 51 areas /
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 Forestry 52 Sector /
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / BUSINESS AREAS
/ ARAUCO
Arauco is one of Latin America´s main forestry in Chile, Argentina, Brazil, United States, Canada, companies in terms of surface and yield of its Spain, Portugal, Germany and South Africa. In plantations, production of market pulp, wood, addition to this, it has 8 power generation plants panels, and energy. from biomass and 2 backup units in Chile, totaling an installed capacity of 606 MW, 2 generation The company offers a wide variety of sustainable plants in Argentina, with an installed capacity and quality products for the paper, construction, of 78 MW, 1 generation plant in Uruguay, with an packaging and furniture industry, in order to installed capacity of 165 MW. contribute to improve people’s lives. For this purpose, it has an integrated operation of the During 2016, Arauco’s production reached production chain and a commercial structure 3.7 million tons of pulp, 2.7 million m³ of sawn capable of timely analyzing the demand and timber and 5.3 million m³ of panels. Sales promptly detecting the customers’ requirements, amounted to US$ 4,761 million, of which 45.1% allowing for the production mix to be adapted to corresponded to pulp, 52.4% to wood and 2.5% to market conditions, making the best investment other products. Of the total, 92.8% went abroad, decisions and reducing the impact of fluctuations Asia and America being the main markets. in supply costs. 53 In terms of investment, the company acquired / Additionally, Arauco is a global company having in US$ 150 million the 50% of the capital of a careful investment plan, and it is present in the Spanish company Tafisa, an affiliate of the the world with the highest forest management Portuguese group Sonae, which manufactures standards and responsible management of its and markets OSB, MDF and PB panels, and sawn operations, aimed at differentiating itself through wood, through 2 panel plants and a sawmill in innovation and added value generation. Spain; 2 panel plants in Portugal; 4 in Germany and 2 in South Africa. These facilities total an annual Products are marketed in all five continents, production capacity of 4.2 million m3 of panels. through representatives and sales agents. It also has commercial offices in 11 countries and an Additionally, the construction of a new particleboard efficient logistics and distribution chain, which panel plant (MDP) in Grayling, Michigan, United in 2016 allowed for its products to be delivered Stated, began, which will have an annual production through 230 ports in Latin America, Asia, Oceania, capacity of 800,000 m3 of wood panels. The Europe and North America, reaching more than investment will amount to US$ 400 million, and it is 4,300 customers. expected to begin operating by late 2018.
The company has 1.7 million hectares in Chile, At the same time, the trial phase of the Bennettsville Argentina, Uruguay, and Brazil. In the first 3 countries, plant, in South Carolina, began, where a US$ 30 million the company owns 7 pulp plants, having a investment was made, aimed at increasing the production capacity of 3.9 million tons per year. production capacity of particleboard and melamine Meanwhile, in Chile, Argentina, and Spain it has panels by 100,000 m3 per year. 10 sawmills that annually produce 3.0 million m³ of wood. It also has 27 panel plant, which annual On the other hand, Arauco continued progressing production capacity amounts to 8.9 million m³, in the implementation of the new effluent
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / BUSINESS AREAS
/ ARAUCO
treatment system at Arauco plant, which involves education of excellence under the Educational installing state-of-the-art biological treatment, model of alternation. It also opened a Cultural enabling an even more efficient processing of Center in the district of Arauco with an innovative effluents generated in the current production architectural proposal privileging wood design lines, the future Line 3 and other facilities of the and incorporating power efficiency aspects and Horcones Industrial Complex. These works will cutting-edge technology. require a US$ 120 million total investment and are expected to end in May 2017. It is worth mentioning that Arauco was awarded with the first place of the ranking “Most Meanwile, in Chile, Arauco creates a new company, Innovative Companies Chile 2016”, an annual Arauco Nutrientes Naturales, aimed to escalate study carried out by the ESE Business School of the commercialization and internationalization of Universidad de Los Andes, along with La Tercera. different nutritional products of native forests. And it was recognized as one of the country’s most innovative exporting companies within the Likewise, it inaugurated Campus Arauco, a Innovative Behavior category, by the Innovation Technical Training Center born thanks to an Observatory of the Business Administration alliance with Duoc-UC, aimed at providing young Department of the Faculty of Business and people of the Province of Arauco and the workers Economy of Universidad de Chile and the 54 / of the affiliate of the forest company, with an Management Development Center Unegocios.
Market Pulp Price Arauco sales per product
1,200 Wood Others 1,000 2.0% 0.5% 800 600 400 Market Panels / 4,761 Pulp 52.4% million 45.1% Source: Bloomberg dollars
Arauco sales per market
7.2% Rest of America Others 19.9% 4.0% / 4,761
North million dollars America 32.6% 29.5%
Europe 6.8%
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / BUSINESS AREAS
/ FORESTRY
Arauco has 696,000 hectares of radiata pine, identification, management and monitoring 307,000 hectares of eucalyptus, 22,000 hectares of practices are executed in order to maintain or other species, 409,000 hectares of native forest and increase their high conservation value. 242,000 hectares for afforestation and other uses, distributed in Chile, Argentina, Brazil, and Uruguay. Bioforest scientific and technological research center develops advanced research initiatives This forest heritage is the basis for the in areas such as biotechnology, genetics, competitiveness of Arauco’s business areas, phytosanitary protection, forestry, and studies since it is the main raw material to supply all on the characteristics and properties of different of its facilities. In light of the foregoing, its types of wood, as well as pulp optimization and operations are executed under responsible research processes for new uses of pulp and forest management. panels. In order to do so, its team consists of 72 highly specialized researchers, in addition to a In Chile, the company has incorporated the PES technological network that works under an open Automated Inventory Management System, collaboration with more than 30 experts and the designed to monitor the state of plantations, their participation in several national and international 55 growth, quality and future projection. On the organizations that are at the forefront in scientific / other hand, the company has implemented a plan industrial forestry, generating an exchange of to mechanize forestry works, which includes the information and experiences that enriches the incorporation of harvesting equipment in high- company and the industry in general. slope sites, GPS equipment that helps preventing the presence of workers at potentially risky sites, On the other hand, in Uruguay, it has the the use of drones and last generation vehicles. Forestry Technology Centre (CTF) of Montes del Plata, which in 2006 inaugurated 2,670 m2 of In addition, Arauco is permanently committed greenhouses aimed at research and development. in protecting native forest within its properties. In order to do so, it has strict protection and During 2016, Arauco harvested 20 million m3 conservation programs and high-standard of logs and 10.8 million m3 of logs, chips and monitoring systems that allow identifying changes combustible material were purchased from third and promoting preventive and restorative actions. parties. Meanwhile, 31.8 million m3 were aimed at pulp plants, panels, and sawmills of the company, Likewise, in all Areas of High Conservation and 2.3 million m3 were sold to third parties. Value, i.e., exceptional or critical forest areas,
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / BUSINESS AREAS
/ FORESTRY
Forest plantation inventory thousand hectares
1,200
1,000
Eucalyptus Pine
56 Logs harvested / million cubic meters
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / BUSINESS AREAS
/ PULP
Arauco produces bleached pulp or kraft, raw or period, which was mainly traded in Asia, Europe, and unbleached pulp and fluff, the main raw material Latin America. Hence, Arauco’s share in global sales to manufacture several types of printing and reached 6.5% in bleached pine pulp, 4.6% in bleached writing papers, tissue paper, packaging material, eucalyptus pulp and 24.1% in unbleached pulp. filters and fiber cement products, among others, from radiate pine (long-fiber), taeda pine (long- In terms of investment, as part of the project fiber) and eucalyptus (short- fiber. It is currently one Modernization and Expansion of Arauco Plant of the largest market pulp producers in the world. (MAPA), Arauco continued progressing in the implementation of the new effluent treatment The company has 5 mills in Chile (Arauco, system, which involves installing state-of-the- Constitución, Licancel, Nueva Aldea and Valdivia), art biological treatment, enabling an even more 1 in Argentina (Alto Paraná) and 1 in Uruguay efficient processing of effluents generated in the (Montes del Plata). operated through a joint venture current production lines, the future Line 3 and with Swedish- Finnish company Stora Enso. other facilities of the Horcones Industrial Complex. 57 These works will require a US$ 120 million total / Arauco reaches a total production capacity of investment and are expected to end in May 2017. 3.9 million tons per year. All of its plants have the highest national and international certifications, On the other hand, Montes del Plata pulp plant and EFC (elemental chlorine free) technology is received an important recognition from the used for the bleaching of pulp. shipping company Gearbulk for its port terminal’s performance, which evidenced the best shipment During 2016, the company’s production totaled performance of all ports where the international 3.7 million tons, 2.6% higher than the previous maritime transport company loads pulp.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / BUSINESS AREAS
/ PULP
Market pulp sales thousand tons
4,000 3,656
3,200
2,400
1,600
800
0
58 Market pulp production /
5.7%
Bleached Bleached / 3.7 softwood hardwood pulp pulp 41.3% million 41.4% tons
Unbleached softwood pulp 11.6%
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / BUSINESS AREAS
/ WOODS
Arauco manufactures and commercializes a wide During 2016, the total panel production reached variety of sawn wood, plywood and moulding 5.3 million m3, compared to 5.4 million m3 in 2015. products with different degrees of termination, Meanwhile, the total production of sawn wood appearance and value processes, for architecture, reached 2.7 million m3, representing a 1.8% negative design, construction, packaging and remodeling. variation compared to the previous year.
The company is currently the main producer of wood In terms of investments, the company acquired 50% of in the southern hemisphere, and one of the most the capital of the Spanish company Tafisa, an affiliate important worldwide, thanks to the quality and of the Portuguese group Sonae, which manufactures variety of its products, and to an efficient marketing and commercializes OSB, MDF and PB panels, and and distribution strategy. sawn wood, through 2 panel plants and a sawmill in Spain; 2 panel plants in Portugal; 4 in Germany In Chile, the company has five panel plants, where and 2 in South Africa. These facilities total an annual plywood, particleboard, MDF and HB panels are production capacity of 4.2 million m3 of panels, and the manufactured, which total production capacity acquisition represents a US$ 150 million investment. amounts to 1.6 million m³. Additionally, it has 8 sawmills and five remanufacturing plants, which Additionally, the construction of a new panel 59 production capacity amounts to 2.7 million m3 plant in Grayling, Michigan was approved, which / of sawn, 2.0 million m3 of dried and 420,000 m3 of will have an annual production capacity of remanufactured products. 800,000 m3 of wood panels. The investment will amount to US$ 400 million, and it is expected to In Argentina, it has two panel plants, where MDF and begin operating by late 2018. particleboard panels are manufactured, and which annual production capacities reach 300,000 m³ and At the same time, the trial phase of the Bennettsville 260,000 m³, respectively. Additionally, there is plant, in South Carolina, began, where a US$ 30 million a sawmill and a remanufacturing plant, which investment was made, aimed at increasing the production capacity amounts to 318,000 m3 of sawn production capacity of particleboard and melamine and 67,000 m3 of remanufactured products. panels by 100,000 m3 per year.
On the other hand, it has two panel plants in On the other hand, the Melamina Vesto product Brazil, which production capacity amounts to became the world’s first board with a Negative 1.3 million m³ of MDF panels and 310,000 m³ of Carbon footprint, and the marketing of Lookid, a particleboard panels. didactic child’s toy made of antibacterial wood panels of different sizes and shapes and connectors In turn, it has 8 plants in the United States and manufactured with recycled fishing nets, began. Canada, which total annual production capacity amounts to 1.5 million m3 of MDF panels and 1.5 million m3 of particleboard panels.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / BUSINESS AREAS
/ WOODS
Sawn timber sales thousand cubic meters
3,000 2,514 2,500 2,000 1,500 1,000 500 0
Panel sales thousand cubic meters 60 6,000 5,147 / 5,000
4,000
3,000
2,000
1,000
0
Timber production
Remanufactured 4.2% Kiln dried 18.0%
/ 10.3 28.8% million Green cubic meters 26.3% Particleboard 17.0%
Plywood 0.4% 5.3%
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / BUSINESS AREAS
/ ENERGY
Arauco produces clean and renewable energy of CO2. Additionally, cogeneration project from forest biomass, in order to supply the Viñales is registered under the “Verified Carbon energy requirements of its industrial facilities Standard” (VCS). and to provide electricity surpluses to the energy matrix of those countries where it operates. During 2016, the company issued 109,844 Emission Thanks to this, in Chile, the company has become Reduction Certificates (ERCs) under the CDM, reaching one of the main non-conventional renewable a net accumulated emission of 3,499,193 ERCs, and net energy generators. energy surpluses were 1,089 GWh.
Currently, Arauco has 8 power generation plants In terms of investment, the company enabled a 61 from biomass and 2 backup units in Chile, totaling new dispatch room, in order to coordinate real- / an installed capacity of 606 MW. In Argentina, it has time operation of the electrical systems between 2 generation plants, with an installed capacity of the Arauco plants, the Center for Economical 78 MW, and in Uruguay, it has 1 generation plant, Load Dispatch (CDEC), the Central Interconnected with an installed capacity of 165 MW. System (SIC) and electricity companies.
It is worth mentioning that 5 generation plants In turn, it executed an agreement to neutralize the in Chile and 1 in Uruguay are registered as carbon footprint of Revista Capital and of EREDE greenhouse gas (GHG) emissions reduction 2016, an event that brings together about projects under the Kyoto Protocol’s CDM, and 600 people in the Biobío Region, through allow annual reductions of around 650,000 tons the use of Emission Reduction Certificates.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 Fuels 62 Business /
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / BUSINESS AREAS
/ COPEC
Compañía de Petróleos de Chile S.A., Copec, US$ 535 million, and involves the operation of commercializes and distributes lubricants 348 gas stations in the states of Alabama, and fuels in the country. It also operates in Arkansas, Georgia, Kentucky, Mississippi, Colombia, Ecuador, Mexico, Panama, Perú and the Tennessee and Virginia. This transaction will allow Dominican Republic through its affiliate Terpel. Copec realize the challenge of achieving a leading position in each of those markets. In Chile, the company has 634 service stations from Arica to Puerto Williams, 91 Pronto stores, Additionally, the company executed a regional 248 Punto businesses, and 19 fuel storage plants agreement with ExxonMobil to produce and with a total capacity of 543,000 m3. Meanwhile, in distribute Mobil lubricants in Colombia, Ecuador Colombia, Ecuador, Panama, Perú and Mexico, it and Peru as well as the renewal of the contract has a network of 2,217 gas stations, 329 of them in Chile. This convention, which should close in are sales points for natural gas for vehicles under 2017, also includes the operation and marketing the Gazel brand. of aviation fuels at Lima’s international airport, in addition to the business of fuels in Ecuador During 2016, Copec’s physical sales in Chile and Colombia. It is worth mentioning that the 63 totaled 9.8 million m3, reaching a 58.1% market transfer of this business will take place within the / share. The highest sales recorded in this period time limit set by the authorities in the case of the were mainly due to a 7.1% increase in the service latter country. Investment associated with these station network, which volume totaled 5.2 million agreements amounted to US$ 747 million. m3. On the other hand, sales of the industrial channel underwent an 11.1% decrease, totaling At the local level, Copec inaugurated five service 4.7 million m3. stations, among which stand out on road one in Pozo Almonte, focused on the attention of Meanwhile, Terpel sold 9.2 million m3 of fuel, shippers with an infrastructure unpublished in which implies a 6.1% growth compared to the the North of Chile, and one located in Nos. There previous year. Particularly, sales of natural gas for are added three urban stations in La Serena, vehicles totaled 532,000 m3, 6.5% lower than the Lampa and San Antonio. previous period, and the air segment increased by about 7.0% in aviation fuels, which sales totaled At the same time, the company continued 1.5 million m3. implementing the new corporate image at its service station network. By the end of 2016, In terms of investments, Copec entered the US 160 service stations had already renewed their market after purchasing the North American image and for the 2017 is expected to complete 45%. company Delek US Holdings 100% of the shares of Mapco Express, Inc., Mapco Fleet, Inc., GDK In turn, the company undertook a total renewal of Bear Paw, LLC, NTI Investments, LLC and Delek its Pago Click application, aimed at offering greater Transportation, LLC, Inc. The acquisition totaled flexibility and providing a better user experience
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / BUSINESS AREAS
/ COPEC
for customers. To the above, its adds the launch fast-charging system, allowing you to cater to all of the TCT Premium to the market of transport types of ships in Magallanes channels, especially fleets cargo, which consists of a system, pioneer in through cruises and scientific ships plying to or Chile, of electronic rings that are attached to each from Antarctica. truck-fuel ponds, providing maximum security and control of fuel consumption. In terms of awards, Copec received the first place in “Gas Stations” of the National Consumer At the industrial level, thanks to the construction Satisfaction Award, and it was also recognized by of a plant in Maipú, Copec became direct producer RepTrack with the Brand Reputation Award. of BlueMax, solution used to reduce emissions of NOx from diesel engines, and until then Finally, in January 2017, Copec will begin to supply the company bought to an external provider. with trucks of liquefied natural gas to one of the Additionally, it began to operate the new barge of plants of the company Carozzi, which became its double tank “Tamina”, which has a large storage first LNG industry customer. capacity of marine diesel and is equipped with a
64 /
Sales Sales per product thousand cubic meters
12,000 Jet fuel 9,795 7.5% 0.8% 10,000 Fuel oil 8,000 6.6% 60.2% 6,000 / 9.8 Gasoline million 4,000 24.9% cubic meters 2,000 0
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / BUSINESS AREAS
/ COPEC
Liquid fuel market share
Others 7.8%
12.7%
58.1%
21.4%
Source: Own estimates
Sales per distribution channel 65 /
47.9%
/ 9.8 Concessionaires million 52.1% cubic meters
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / BUSINESS AREAS
/ TERPEL
Terpel markets and distributes liquid fuels and 48% of the network of stations in that country. natural gas in Colombia, Panama, Mexico, Ecuador, To that, 8 new convenience stores of the Altoque Peru and the Dominican Republic and, since 2010, is brand are added, completing a total of 32 stores. affiliate of Copec. With this result, Terpel continues to consolidate itself as the number one brand in the cars, taxi, and The company is the main fuel distributor in transport segments, and Altoque as the largest the Colombian market, and has a network of network of convenience stores in service stations 1,986 service stations in Colombia, 127 in Panama, in Colombia. Additionally, 14 carwash stations of 58 in Ecuador, 38 in Peru, and 8 in Mexico. From Ziclos brand, 2 motorcycle wash stations, 16 kiosks these, 287 commercialize natural gas for vehicles of Deuna brand, and 14 exclusive fuel dispensers in Colombia, 8 in Mexico, and 31 in Peru, under the for motorcycles were implemented. Gazel brand. Meanwhile, it supplies jet fuel for aircrafts at the major airports in Colombia and the Meanwhile, 13 new service stations and 6 convenience Dominican Republic. stores were incorporated in Panama, Peru and 66 Ecuador, expanding the coverage and presence / During 2016, the company marketed 7.1 million m3 of the brand in these countries. In addition, Terpel through liquid fuel service stations and industrial launched PagoClick, an application based on the customers, which is a 7.1% increase compared Copec’s experience, which allows users to purchase with the previous year. On the other hand, the segment fuel and products in the stores through their of natural gas for vehicles totaled sales of 532,000 m3, smartphones and access their transaction history. which is a 6.5% less than the previous period, This method of payment will be initially available in and the aviation segment recorded an increase about 450 service stations and it is expected to reach close to 7.0% in aviation fuels, reaching sales of an average of 13,000 transactions per month in its 1.5 million m3. In this way, the company totaled first year of operations. 9.2 million m3 of fuel, with a growth of 6.1% and a leading position in all countries where it operates. On the other hand, thanks to the agreement Meanwhile, in the lubricants segment, sales of reached between Copec and ExxonMobil in 39,000 m3 were registered, which represents a 14.4% late 2016 for the production and distribution increase compared with the previous year. of lubricants of that brand in Chile, Colombia, Ecuador and Peru, depending on the authorization On the other hand, 36 service stations were of the Colombian authorities, Terpel may be able to inaugurated in Colombia, totaling 891 units with incorporate a world-leading brand of lubricants to the new company image, which is equivalent to its offer in the coming years.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / BUSINESS AREAS
/ TERPEL
In terms of recognition, Terpel was distinguished transparent, timely and truthful manner. To this among the 20 companies with the best corporate is added the certification in Good Practices of reputation, according to the Merco Empresas y Innovation that is awarded by Icontec and the Líderes Colombia 2016 ranking. It also received Chamber of Commerce of Bogotá, and the Lápiz the Investor Relations (IR) recognition from de Acero Award to their Deuna kiosks for the best the Colombian Stock Exchange for providing design in the promotion of products in a shop. legal, financial and commercial information in a
Sales thousand cubic meters 9,243 10,000
8,000
6,000 67 / 4,000
2,000
0
Market share in Colombia
Others 57.4% 42.6%
Source: Own estimates WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / BUSINESS AREAS
/ CONVENIENCE STORES
ArcoPrime operates convenience stores, prepared dishes and desserts. They are sold restaurants and cafes associated with service under the brands Fres&Co, Piacceri and Cresso stations, delivering to customers products and in supermarkets, cafes, restaurants, convenience services with a high standard of quality. During stores and catering companies. Additionally, 2016, the administration of the service stations starting in 2015, it markets two new hamburgers that were operated by the affiliate Ades Ltda. is and wraps product lines in co-branding with La integrated into ArcoPrime´s operations. Crianza and Pancho Villa.
The company has 43 Pronto Urbano stores, from In addition, there are 248 Punto stores, which which 37 are in service stations, and 48 Pronto are managed by the same concessionaires of the Carretera, all of which offer a wide variety of service stations under the same quality standards products and services. It should be noted that those that characterize Copec, offering a wide range of that are located in the service stations operate products and services 24 hours a day. 24 hours a day. In particular, within city there are 68 three formats, 100, 190 and 300 square meters, In 2016, ArcoPrime inaugurated on the highway / with different offer levels of products and services. the Pronto Chimbarongo, located in the Meanwhile, on the highway there are three formats: Panamericana Sur. Additionally, it remodeled the Pronto Barra, which delivers a wide variety of baths of the Pronto Carretera of San Fernardo, services and foods that can be packaged or on a Maule and Los Angeles Sur, and the terraces of plate; Pronto Kiosco, which supplies a selective offer the Pronto Kiosco of La Serena, Coquimbo, San of quick products and elaborated products; and José de La Mariquina, Los Ángeles Norte, Parral, Truck Center, oriented to the transporters, with a Chillán, Loncoche and Los Ángeles. During service proposal designed considering their needs of 2017, the remodeling of the Pronto Ciudad of food and rest on the route, which are located in San Los Libertadores, Talcahuano and La Dehesa-El Javier and Copiapó. To that, 7 Fres&Co restaurants Rodeo will be completed, which are now under are added, which are located in places where there execution. On the highway, Pronto Nos on Route 5 is a high office concentration in Santiago, under the Sur will be added. In the city, Pronto Chamisero in Fres&Co Bistró Café and Fresco Mall modality, and Santiago and Pronto Pérez Zujovic in Antofagasta, 94 service stations. and a new Truck Center in a smaller format in Pozo Almonte will be added. On the other hand, the Arco Alimentos affiliate produces and distributes fresh, refrigerated and Additionally, the company incorporated frozen high-quality foods in sandwich format, the Lavazza cafe and the Melitta automatic
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / BUSINESS AREAS
/ CONVENIENCE STORES
equipment at the end of 2015, in order to improve and, on the occasion of the National Holidays, the the quality of its products. As a result, in 2016, shredded beef sandwich was launched in Italian, the coffee sales increased in 31.2% compared melted cheese and caramelized onions formats. with the previous year. At the same time, the In the last three months of the year, this product hamburger sandwich standard was optimized accounted for the 25% of the sandwich offer.
Number of convenience stores
69 /
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / BUSINESS AREAS
/ LUBRICANTS
Copec exclusively produces and markets growth compared to 2015. On the other hand, 35% ExxonMobil lubricants in our country, thanks of the country’s car brands recommended the use to an important agreement signed with this of Mobil lubricants. North American company in 2003, which joined the strategic alliance established in 1959 to Meanwhile, in the Industrial area, important commercialize products of the company Mobil contracts and agreements with the mining Oil in Chile. companies Caserones, Quebrada Blanca, Carmen de Andacollo, Compañía Minera del Pacífico The company manufactures 70% of its more than and Mantos Copper, were renewed. Aditionally, 450 products at the lubricant plant located at the company was awarded with a supply and Quintero, in the Region of Valparaíso. This facility maintenance service contract for the centralized has a production capacity of 124 million liters per lubrication systems of shovels and drills with year, is one of Latin America’s most modern of Minera Candelaria, and consolidated its presence its kind, and operates under ExxonMobil’s strict in freight and passenger transport, serving clients 70 Product Quality Management System program, such as Transportes Jorquera, Transportes Nazar, / which guarantees an operation with the highest Subus, Alsacia and Turbus, among others. quality and safety standards. Additionally, an image change process with the Lubricants are supplied under the Mobil brand new LUB brand began in the lubrication network to the automotive, transportation, industrial and at gas stations. During 2016, 24 points were mining markets, through gas stations, distributors, renewed, and it is estimated that in 2018, the entire industrials and car brand representatives. lubrication network will have this new image.
Complementarily to this, Copec has the affiliate In terms of investments, Copec signed a regional “Vía Limpia”, responsible for collecting about agreement with ExxonMobil to produce and 40% of the solid and liquid waste containing distribute Mobil lubricants in Colombia, Ecuador hydrocarbons generated by the customers, to and Peru, the renewal of the contract in Chile, in the transform them into fuels that can be used addition to the operation and commercialization by industries. of aviation fuels at Lima’s international airport, and the fuel business in Colombia and Ecuador. During 2016, physical sales of lubricants reached The investment relating to this agreement 96,000 m3, which is a 0.3% higher than the previous amounts to US$ 747 million and, in case of year, and the market share reached 46.3%. materialize, these new business will be operated Specifically, more than 180,000 oil changes were by the affiliate Terpel. made at the gas stations, which represents a 3%
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / BUSINESS AREAS
/ LUBRICANTS
Lubricant sales thousand cubic meters
Lubricant market share 71 / Others 2.4% 14.1%
5.3%
7.5% 46.3%
24.4%
Source: Own estimates
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / BUSINESS AREAS
/ SONACOL / SONAMAR
Sonacol transports petroleum-based fuels to the project, which would start its operations in late regions of Valparaíso, Metropolitan and O´Higgins, 2019, will require an investment of approximately through a network of pipelines of 465 kilometers, US$ 60 million, and will have an extension of 27.5 which extends between San Fernando and Quintero. kilometers, and an initial transport capacity of 330 Meanwhile, Sonamar supplies fuel to the most m3 per hour. For its part, the current infrastructure, remote areas of the country, thanks to a fleet of which has a capacity to transport 160 m3 per hour, four tanker ships (Punta Angamos, Punta Gruesa, will be used as a backup unit. Abtao and Doña Ana), which have a total capacity to transport 180,000 m3. Along with this, the company advanced in the improvement process of the San Fernando-Maipú Sonacol has 10 operation plants and two shipping pipeline, which is 140 kilometers long. This initiative centers in Maipú and Las Condes. All these facilities presents an 80% of progress, and it will allow to have been equipped with the highest technology, increase the operation safety thanks to the increase in order to deliver an efficient and safe service, in in depth of some sections of the pipeline. 72 addition to fulfill the strict environmental standards. / Additionally, Sonacol doubled the supply capacity During 2016, Sonacol transported 9.9 million m3 of at the San Fernando plant, being able to receive fuels such as gasoline, diesel, kerosene and liquefied simultaneously clean products from the north and gas from petroleum, which represents an 8.6% south of the country. increase compared with the previous year, and Sonamar transported 2.0 million m3 of fuels, which In another aspect, the company once again was is 2.6% less than the volume registered during 2015. certified in the PEC Excellence program of the Sonacol´s clients are Enap, Copec, Enex, Petrobras, Mutual de Seguridad, and obtained international YPF, Gasmar and Lipigas. recognition from the Dupont company for the successful implementation of the Safestart In terms of investments, Sonacol presented in work safety system. For its part, Sonamar was December the Environmental Impact Study for the distinguished by the Mutual de Seguridad with the construction of a second pipeline that will supply Safety and Occupational Health Certification of the the Arturo Merino Benitez airport in Santiago. This Competitive Company program.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / BUSINESS AREAS
/ SONACOL / SONAMAR
Volume transported million cubic meters
11.9 2.0 9.9
73 /
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / BUSINESS AREAS
/ ABASTIBLE
Abastible commercializes bottled and bulk During 2016, physical sales in Chile amounted liquefied gas for residential and industrial use. to 459,000 tons, a 5.8% increase compared to the Additionally, it supplies liquefied gas for vehicles previous year, and customers exceeded 2 million. to taxis and companies’ fleets through the Meanwhile, in Colombia, physical sales totaled Autogas gas stations, and supplies liquefied gas 205,000 tons, 4.0% higher than those recorded in to vessels under the brand Nautigas. It also offers 2015. Hence, the market share reached 34.7%. power efficiency, microturbine cogeneration and solar-gas solutions, consisting in the In terms of investment, the company acquired installation of solar panels in homes, businesses all shares that the company Repsol had in the and industries, enabling the combined use of Peruvian companies Repsol Gas del Perú S.A. liquefied gas and solar energy to heat human and Repsol Gas de la Amazonía S.A.C., and in the consumption water. Ecuadorian companies Duragas S.A. and Servicio de Mantenimiento y Personal S.A. The previous 74 Abastible is present across all of Chile, including operation involved a US$ 335 million investment, / Easter Island. It has 10 storage and packaging turning Abastible into South America’s third plants, 6.6 million cylinders, 57,000 tanks in largest liquefied gas distributor. In Chile, it homes, 23 sales and distribution offices, and a inaugurated a liquefied gas distribution office in network of approximately 1,300 distributors. Chiloé and a sales office in Viña del Mar. Additionally, it has a sea terminal in the Region of Biobío, which provides clean fuel wharfage Meanwhile, Abastible’s business completed 6 decades, services, and a liquefied gas storage plant having and moved its offices from the traditional location a 40,000 m3 capacity. at Av. Vicuña Mackenna 55 to the new and modern facilities at Av. Apoquindo 5550. In Colombia, through Inversiones del Nordeste, it owns 5 companies engaged in distributing and Finally, this year, the company received important commercializing liquefied gas, a cylinder factory, recognitions, including the first place in all and a bottled and bulk gas trucking company. categories of the Consumer Loyalty Award 2016.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / BUSINESS AREAS
/ ABASTIBLE
Sales thousand tons
75 Sales per product /
Bulk 29.5% Bottled 70.5%
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / BUSINESS AREAS
/ METROGAS / APROVISIONADORA
Metrogas supplies natural gas to more than exported this fuel to the Argentinian company 657,000 residential, commercial and industrial ENARSA. This reflects the level of robustness customers in the Metropolitan and O’Higgins regions, achieved by the natural gas industry in Chile, and through a distribution network of over 5,400 kilometers. represents an important step towards a greater power integration between both countries. During 2016, Metrogas carried out a corporate division, grouping the natural gas distribution Additionally, the company launched its Heating activities into Metrogas S.A., and those of the supply Plan, aimed at transforming natural gas into the business into Aprovisionadora Global de Energía S.A. first home heating option. In this sense, and for the fourth consecutive year, Metrobolsas were Commercially speaking, the physical sales of marketed through new payment and distribution Metrogas totaled 1,076 million m3, which represents methods, and over 19 million m3 were sold, which a 17.4% decrease compared with the previous represents a 50% increase compared to the period. This decrease is result of lower gas sales to previous period. Likewise, in order to seasonally 76 electricity companies, which began being supplied adjust heating device sales, summer promotions / by Aprovisionadora Global de Energia as from the were launched, offering significant discounts for second quarter of the year. During such period, this customers purchasing these products. new company’s physical sales amounted to 1,006 million m3, which include the supply to Metrogas. Metrogas also inaugurated new natural gas stations for vehicles in La Florida, Maipú, Peñalolén On the other hand, the company took the first and San Bernardo. With this, there are already steps in the Gasification Plan it presented at the 18 supply points in the Metropolitan Region, end of 2015, which includes investments for and over 7,000 converted vehicles. US$ 1.1 billion, and seeks to add 800,000 new customers in 10 years. For such purpose, the company On the other hand, Aprovisionadora Global de Energía requested distribution concessions in the cities of sold all its shares in GNL Quintero S.A., amounting to Arica, Iquique, Antofagasta, Copiapó, Valdivia, Osorno, 20% of the ownership, in US$ 200 million. and Puerto Montt, among others, and acquired sites to install satellite regasification plants. Along Finally, among the awards earned by Metrogas, we with this, Metrogas deepened its presence in the can highlight the first place of Premio Nacional de Metropolitan and O ‘Higgins regions, building new Servicio ProCalidad, elaborated by Revista Capital, networks and incorporating new customers. in the category of Home Services, for the thirteenth consecutive time; the Outstanding Company award Meanwhile, Metrogas participated in a historic from the Most Innovative Companies Chile 2016 agreement to sell natural gas to Argentina, Ranking, in the Fuel Distribution sector, elaborated by supplying 37 million m3 of natural gas to ENAP the ESE Business School of Universidad de los Andes on the border with this country, company which and La Tercera newspaper; the third place in “Best
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / BUSINESS AREAS
/ METROGAS / APROVISIONADORA
Business Initiative” for its Gasification Plan, award Company of the Energy and Distribution sector, given given by Diario Financiero; the third place in “Best by Monitor Empresarial de Reputación Corporativa, Public-Private Initiative”, along with the Ministry of Merco, which rewards organizations for their ability Energy, ENAP and Endesa, for exporting natural gas to attract and retain talent. to Argentina; and the award as the country’s Best
Sales million cubic meters equivalent
1,500 1,076 1,200 1,006 900 77 / 600
300
0
Metrogas: 2016’ sales consider one quarter (January-March) prior to the division. Aprovisionadora: 2016’ sales consider three quarters (April-December) and include the volume sold to Metrogas.
Number of Customers thousands
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / BUSINESS AREAS
/ INVERSIONES DEL NORDESTE
Inversiones del Nordeste markets and distributes the market share reached 34.7%, and the number of liquefied gas to homes and industries in Colombia, customers exceeded 120,000. through the regional companies Asogas, Gasan, Norgas, Colgas de Occidente and Gases de In turn, Inversiones del Nordeste continued with Antoquia. Additionally, it manufactures and the renewal plan of its cargo tank fleet, with markets storage cylinders and tanks through the greater load capacity, and commenced the entire company Cinsa, and it transports non-bulk and operation of the new packaging plant in Ocaña. bulk liquefied gas by trucks through the company Cotranscol. In turn, Inversiones del Nordeste It is worth mentioning that during the year, owns 33.33% and 28.22% of the gas distribution regulatory authorities issued new regulations companies Montagas and Energas, respectively, for the liquefied gas industry in Colombia, which and, since 2011, it is an affiliate of Abastible. relate to the modification of the re-inspection period for cylinders and tanks from 5 to 10 years, 78 / During 2016, Inversiones del Nordeste recorded greater technical and safety requirements and profits greater than those of the previous the obligation of annual certifications issued financial year, thanks to a greater customer by external entities enabled on regulatory loyalty, the entry into markets where there compliances of the different locations. was a low participation of liquefied gas, new Additionally, a resolution determining the supply businesses due to the substitution of other fuels, capacity of the distribution companies based on and transport fleet optimization, which allowed their investment in storage cylinders and tanks increasing product distribution levels. This, was issued in December. despite the restriction in the liquefied gas supply during the second half of the year. In 2017, the company will carry out improvements to its packaging plants, for which it will invest In this scenario, the company’s direct sales totaled about US$ 4.3 million. It will also update the ISO 205,000 tons of liquefied gas, which represent a 9001 certification and complete the certification 4.0% growth compared to 2015. On the other hand, process of the OHSAS 18001.2007 standard.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / BUSINESS AREAS
/ INVERSIONES DEL NORDESTE
Liquified Petroleum Gas Market Share
Others 65.3% 34.7%
Source: Own estimates
79 / Sales thousands tons
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 Fisheries 80 Business /
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / BUSINESS AREAS
/ ORIZON
Orizon manufactures products for human and In this context, the production of fishmeal reached animal consumption, such as fishmeal and fish oil, 25,000 tons, which represents an 8.4% decrease canned and frozen, which are marketed under the compared to 2015, and the oil production totaled San José, Colorado, Lenga, Orizon, Atlas and Wirembo 5,000 tons, which is 23.9% lower than the obtained brands. Additionally, the company markets canned production of the last year. For its part, the physical tuna, rice and legumes under the San José brand. sales reached 28,000 tons of fishmeal, 5,000 tons of fish oil, 1.8 million boxes of canned products, and The company has three plants that produce fishmeal 17,000 metric tons of frozen products. and fish oil; two of them are located in the Biobío Region and one in the Coquimbo Region, which totalize The fishmeal, fish oil and canned products were sold a production capacity of 290 tons of raw material per mostly in the domestic market, while the frozen hour. To them are added a canning plant in Coronel, products were mainly marketed in Spain, Peru, the with a daily capacity to process 30,000 boxes, each United Kingdom, Japan, Russia and Chile. one with 24 horse mackerel cans, a plant of frozen products in Coronel, with a production capacity It should be noted that, at the national level, of 600 tons of product per day, a plant of canned Orizon reaches a market share in the production of and individual quick freeze products (IQF) in Puerto fishmeal and fish oil of 11.9% and 5.9%, respectively. 81 / Montt, with a daily production capacity of 60 tons Meanwhile, in the human feeding segment, it has a of mussel and 2,000 boxes, each one with 48 mussel market share of 65% in the canned horse mackerel, cans, and a plant of frozen products in Coquimbo, 12% in the canned tuna, 21% in the canned mussel, with a capacity to process 60 tons of products per and 5% in rice. day. In addition, it has an operational fleet of 8 ships, with a total warehouse capacity of 11,000 m³, and In terms of investments, Orizon announced the 390 hectares of operating concessions in the Los reopening of the San José de Coquimbo canning Lagos Region for the cultivation of mussel, with a plant, which had been closed since 2013, for which it production capacity of approximately 22,000 tons will invest more than Ch$ 700 million. This facility will per year. have a production capacity of 200,000 horse mackerel boxes per year, and it will start its operations in During 2016, Orizon’s processed catch totaled January 2017. 161,000 tons, which is equivalent to 22.6% of the industrial catches in the south-central zone of the On the other hand, the company inaugurated Lebu country. From that total, 86,000 tons corresponded Fish, a cuttlefish processing plant with a production to its own catches, 67,000 tons corresponded to capacity of 800 tons per month, which operates under artisan catches, and 8,000 tons corresponded to a shared-value model, in which the company includes purchases from third parties. the local community. The installation required an
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / BUSINESS AREAS
/ ORIZON
investment of approximately Ch$ 560 million, which of canned horse mackerel, began its trial phase, were contributed by the Japanese Red Cross, the with which it will start its operations at the end of Regional and Municipal Government and Orizon. January 2017.
Meanwhile, the Calixto Project, which began in Additionally, Orizon was recognized for the December 2015, with a total investment of second time with the Effie Awards prize, US$ 3 million and which is aimed to the automation a contest that distinguishes the most efficient and improvement of the productivity in the line brands in the country.
Fishmeal Sales Fishmeal Sales per Market thousands tons
Others 14.0%
4.0% USA 6.0% / 28 82 thousands 44.0% / Korea tons 8.0% Taiwan 8.0% Japan 16.0%
Processed Catch thousands tons
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / BUSINESS AREAS
/ CORPESCA
Corpesca is a leading company in the use of marine- Board of Animal Feed of the Netherlands at its plant proteins in Chile and the world, characterized by in Arica, the international IFFO RS sustainability its permanent concern for the sustainable use of certification for the Spanish anchovy and sardine fishing resources and innovation in its processes fishing, and the Certification of the National Service and products. for Prevention and Rehabilitation of Drug and Alcohol Consumption (SENDA). In Chile, the company has a fleet of 48 ships that carry out fishing operations from Arica to Tal-Tal, During 2016, the total catch of Corpesca reached totaling a 19,000 m3 warehouse capacity, which 233,000 tons, corresponding to 87.4% of the operates exclusively using the purse net technique. industrial catch in the north of the country. From Additionally, the company has 2 fishmeal and fish oil the previous total, 146,000 tons correspond to own processing plants in Arica, 2 plants in Iquique and catch and 87,000 tons to artisan catch. 1 in Mejillones, which total a production capacity of 640,000 tons of raw material per hour. Within such context, the company produced 52,000 tons of fishmeal and fish oil, 44.9% less than On the other hand, In Brazil, through its affiliate in 2015, and physical sales totaled 77,000 tons, Selecta, it has a plant that enables the production 32.8% lower than those recorded the previous year. 83 of protein concentrates and other soy derivatives, Meanwhile, 65% of fishmeal sales were exported, / with an annual capacity to process 630,000 tons mainly to Asia and Europe, and 34% of fish oil sales of raw material, equivalent to a production of were commercialized in Europe. In turn, Selecta 330,000 tons of soy protein concentrate (SPC) per processed 649,000 tons of soy. year, which are mainly used by the aquaculture industry. Additionally, 130,000 tons of soy oil and In terms of investment, Corpesca acquired 30% other products can be produced in the industrial of FASA Latin America, a Brazilian company process, among which soy lecithin stands out, which engaged in the production of high quality protein is used as an ingredient for human consumption concentrates for animal feeding. The transaction and, in particular, for the market for non-transgenic required a US$ 43 million investment. products due to its high added value. On the other hand, Selecta completed the In all of its processes, the company uses the best construction of a soy oil plant with a capacity to available technology. It keeps in force the HACCP process 15,000 tons per month. (Hazard Analysis and Critical Control Points) quality assurance program in all of its plants, the GMP B2 Additionally, through the Center for Applied international quality certification of the Product Research of the Sea, Corpesca has continued its
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / BUSINESS AREAS
/ CORPESCA
significant contribution to the knowledge of the As to awards, the company was distinguished marine ecosystems of northern Chile. Research by the Chilean Chamber of Construction for carried out by this Center has considered aspects its proper management in the granting of such as the reproductive processes of anchovies, training scholarships for labor reinsertion of of birds of the marine ecosystem and the unemployed people. oceanographic phenomena affecting them.
Fishmeal Sales Fishmeal per Market thousands tons
Others 16.3% 22.7%
/ 76 35.0% thousands tons Europe 26.0% 84 /
Processed Catch Corpesca’s Fishmeal Price thousands tons US$/tons
1,200 2,500 1,000 2,000 1,500 1,000
Source: Bloomberg
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / BUSINESS AREAS
/ GOLDEN OMEGA
Golden Omega produces and commercializes nutraceutical market increased by 40% compared to Omega 3 concentrates from fish oil, being the only the previous year. However, in the pharmaceutical company in the world vertically integrated towards segment, sales were reduced by approximately fish catches. This enables for it to select the best raw 70%, due to an increased competition worldwide. materials and to offer a complete traceability in the As a result, the company’s total sales fell by 30% supply chain. compared to 2015.
In order to do this, it has a plant located in Arica, Regarding production, Golden Omega implemented with a total capacity to produce 2,000 tons per new improvements to its production processes, year of finished product. This facility operates enabling for it to produce colorless products, a with two stages, the first one manufactures highly valued feature in the market. products with concentrations of up to 60% of Omega 3 fatty acids, and the second one produces In terms of investments, the company continued 85 / concentrates with an Omega 3 fatty acid content progressing in the pharmaceutical validation of up to 85%, using its own patented elaboration process of its Omega 3 concentrate plant, which process. These technologies allow producing will allow for its products to be marketed as Omega 3 concentrates of the highest quality, active pharmaceutical ingredients. This process which stand out for their neutral and stable is expected to be completed within the first organoleptic properties over time. half of 2018, upon the audit of the Federal Drug Administration of the United States. Additionally, by-products used for different industrial purposes are obtained from the In turn, Bioambar SpA has continued conducting production process. Currently, Golden Omega is studies and analyses to detect the potential benefits conducting studies to develop new products from of Omega 3 concentrates on cellular health. currently generated by-products. In 2017, Golden Omega will continue optimizing its During 2016, the company’s production totaled product mix, in order to expand its client portfolio 1,473 tons of concentrates. 54.6% of the sales were into markets such as South Africa, Israel and marketed in Europe, 35.7% in the United States, Singapore, among others, in order to continue with 7.3% in Korea and 2.4% in other markets. It is worth its steady growth in the nutraceutical market sales. mentioning that during this year, sales aimed at the
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / BUSINESS AREAS
/ GOLDEN OMEGA
Sales per Market 2016
Japan 1.2% Others Korea 1.2% 7.3%
USA / 1.1 Europe 35.7% thousands 54.6% tons
86 /
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 Other 87 Investments /
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / BUSINESS AREAS
/ ALXAR MINERÍA
Alxar Minería develops mining operations and foregoing, several studies and exploration projects in Chile and in the metal mining sector. It works were conducted in order to estimate the currently carries out explorations and evaluations resources and reserves of this site, to increase its of projects in gold, silver, and copper mining sites. production, and to define economies of scale.
The company and its affiliates own mining Likewise, the company continued making properties in the regions of Arica and Parinacota, progress in the studies of the Sierra Norte Atacama, and Valparaiso. They include the site El project and searching for new opportunities Bronce, in the Province of Petorca; and projects to strengthen it. By December 2016, the project Choquelimpie, in the Province of Parinacota and considered an approximate investment of Sierra Norte, in the district of Diego de Almagro, US$ 518 million and is expected to produce about Chañaral Province. Additionally, the company 24,000 tons of copper fines per year during owns a plant in Copiapó, aimed at producing 12 years of operation. 88 doré from the recovery of gold and silver fines / contained in minerals and tailings. At the same time, the company is constantly evaluating other investment alternatives, During 2016, Alxar Minería did not carry out which consider both the acquisition of commercial operations due to the end of currently operating mining operations and the operations at the site El Bronce. In light of the development of new projects.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / BUSINESS AREAS
/ ALXAR MINERÍA
Sales thousand of gold ounces equivalent
89 / Gold Price US$/ounce 2,000 1,600 1,200 800 400 0
Source: Bloomberg
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / BUSINESS AREAS
/ MINA INVIERNO
Mina Invierno is dedicated to the extraction Mina Invierno also has a greenhouse called “Don of sub-bituminous coal in Isla Riesco, in the Gonzalo”, which houses native species of the Region of Magallanes, to supply the Chilean and area; it also has an integrated compensation international market. area of 680 hectares, mainly intended for reforestation with lenga and ñirre, in addition to The company owns four deposits called Adela, the relocation of native species such as coipos Elena, Río Eduardo and Invierno, which totalize and puyes. Finally it has 5,400 hectares in an area reserves of 389 million tons. The latter is the adjacent to the mine where coexist 1,000 sheep only one that is currently in operation, and the and 2,000 cattle, with the aim of demonstrating company has the exploitation rights until 2017, that the livestock activity can be carried out being able to exercise a purchase option at the simultaneously with the coal mining. 90 end of that year. / During 2016, the company totaled a production The coal is extracted using an open pit of 2.4 million tons of coal, which represents a technique known as “rajo móvil”, which 22.0% decrease compared with the previous consists of the filling of the excavated areas as year. From the total sales, 74.0% were destined to the material is extracted, in order to minimize the national market, where the companies AES the use of the outer surface. Complementarily, Gener and Engie were supplied. Meanwhile, the after a new environmental approval obtained remaining 26.0% was sent to the Asian market, in the second half of 2016, the company mainly to India. will incorporate drilling and blasting in the extraction process during 2017, which will At the beginning of 2017, Mina Invierno will carry facilitate the fracture of hard materials, as well out a shipment to Spain, which will mark its as the wear reduction of the equipment and the return to the European market. achievement of a greater efficiency.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / BUSINESS AREAS
/ MINA INVIERNO
Sales per Market
26.0% / 2.4 74.0% million tons
91 / Coal Price
Source: International Coal Report
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / BUSINESS AREAS
/ INMOBILIARIA LAS SALINAS
Inmobiliaria Las Salinas is aimed at developing of the city of Viña del Mar, thus identifying the the country’s first certified sustainable city’s development potential and its impact in the neighborhood, in the lands that belonged to the metropolitan area of Valparaíso. former Las Salinas Plant. The information obtained from these analyses This project, named Barrio Las Salinas, has a total was included in the Environmental Impact Study, area of 17 hectares, and it is located in the shoreline which will be presented in 2017, and is aimed of Viña del Mar. In this place, Copec shared with at eliminating the risk of the site for real estate other oil companies, such as Esso and Shell, for development. more than eight decades, lubricant manufacturing, fuel import and distribution tasks. Due to the On the other hand, in 2012, the company carried out increased tourism potential, in 2001, this group an international competition to elaborate a Master of companies signed an agreement with the Plan that would allow establishing the general Municipality of Viña del Mar, in order to agree the lines of the project, specifications and standards end of their activities in this area. for residential, commercial use and public spaces. The tender was awarded to the urban design and 92 Since 2001, several environmental remediation planning company Sasaki Associates. / works of the lands began, aimed at reconverting the site and enabling its residential and commercial The developed Master Plan considers aspects such use, which were successfully completed in 2016. as integrating the new neighborhood into the city, promoting the diversity of uses and with structuring These works involved the development of a public spaces, generating social and environmental Sampling Plan to have an updated, detailed value, improving connectivity and mobility with the and statistically representative environmental environment, and contributing to revitalize Viña del characterization of the soil and water of both Mar through sustainable development. Its execution the site and the beach. For this, more than was completed in 2016, and it was presented to the 2,000 samples were obtained, which were analyzed different representatives of the community of Viña by laboratories in Canada and the United States. del Mar. One of the most relevant features of this initiative is that 40% of the land will be intended At the same time, the company has met for spaces intended for public use, such as parks, with more than 145 representatives of the pedestrian promenades, different types of roads surrounding communities and with over 30 and services. This is aimed at creating a large space citizen organizations, in order to communicate, open to the city, which balances the economic in an early citizen participation process, the potentials of the project with the needs of Viña del remediation works that have been executed. It is Mar and its neighbors. worth mentioning that this urban dialogue process has been taking place since 2015, and has made Complementary to this, in 2016, a Policy Plan possible for the company to establish collaborative was carried out in order to structure the dialogue channels with several representatives different stages of the future neighborhood,
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / ÁREAS DE NEGOCIOS
/ INMOBILIARIA LAS SALINAS
and studies, analyzes and modeling that will in Energy and Environmental Design) allow proposing the necessary mitigations for sustainability certification process. the Road Impact Study (which should begin during 2017), were completed. In light of the foregoing, the development of the project is expected to begin in 2019, and to end Additionally, in 2017, Inmobiliaria Las Salinas during 2025 expects to complete the LEED ND V4 (Leadership
Uses of the site
Commercial 10.0%
10.0%
Offices Residential / 400 6.0% 70.0% thousands 93 2 Convention m centers / 1.0% Cultural center 1.0% Other uses 2.0%
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 Financial 94 information /
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / FINANCIAL INFORMATION
General information /
Company ownership Shareholder Name (1) Taxpayer Code Nº N° of Shares %
AntarChile S.A. (2) 96.556.310-5 790,581,560 60.82 Banco de Chile on Behalf of Third Parties 97.004.000-5 54,470,042 4.19 Banco Itaú on Behalf of Investors 97.023.000-9 39,891,478 3.07 Forestal y Pesquera Callaqui S.A. 96.513.480-8 29,731,091 2.29 Viecal S.A. 81.280.300-K 29,439,066 2.26 Minera Valparaíso S.A. 90.412.000-6 22,027,125 1.69 AFP Capital 98.000.000-1 20,161,323 1.55 AFP Provida 98.000.400-7 19,492,469 1.50 Banco Santander – JP Morgan 97.036.000-K 19,385,460 1.49 AFP Habitat 98.000.100-8 19,256,725 1.48 Forestal y Pesquera Copahue S.A. 79.770.520-9 18,692,371 1.44 Banchile Corredores de Bolsa S.A. 96.571.220-8 17,099,082 1.32 Subtotal 1,080,227,792 Total Shares 1,299,853,848 95 / (1) Twelve major shareholders (2) The shareholder AntarChile S.A. holds more than 10% of the company capital There were 7,282 shareholders for the year ended December 31, 2016
/ CONTROLLERS
For the year ended December 31, 2016, Empresas Copec S.A. was Mr. Maximiliano Valdés Angelini, taxpayer code Nº16.098.280-2: controlled by the publicly-traded corporation AntarChile S.A., 0.00006%, and Ms. Josefina Valdés Angelini, taxpayer code Nº16.370.055-7: taxpayer code Nº 96.556.310-5, owner of 60.820804% of Empresas 0.00006%. As already mentioned, AntarChile S.A. is controlled by its Copec S.A.’s stock. In turn, the final controllers of AntarChile S.A. final controllers, with an agreement of acting jointly legalized, which and hence Empresas Copec S.A. are Mrs. María Noseda Zambra, has no limitations on the free disposal of shares, who are the above- Mr. Roberto Angelini Rossi and Mrs. Patricia Angelini Rossi. mentioned Mrs. María Noseda Zambra, taxpayer code Nº1.601.840-6, Mr. Roberto Angelini Rossi, taxpayer code Nº5.625.652-0, and Mrs. It is also left on record that some of the above-mentioned final Patricia Angelini Rossi, taxpayer code Nº5.765.170-9. They exercise such controllers have a direct stake in Empresas Copec S.A., as follows: control as follows: a) Shares directly owned by the final controllers: a.1) Mr. Roberto Angelini Rossi is the direct owner of 0.00187% of Mr. Roberto Angelini Rossi is the direct owner of 5.98434% of the shares Empresas Copec S.A.’s stock and Mrs. Patricia Angelini Rossi is the issued by AntarChile S.A.; and a.2) Mrs. Patricia Angelini Rossi is the direct direct owner of 0.00019% of Empresas Copec S.A.’s stock. owner of 4.55509% of the shares issued by AntarChile S.A. Total shares of AntarChile S.A. directly owned by the final controllers: 10.53943%. It should also be noted that the following individuals related by kinship to the final controllers are the direct owners of the following b) Shares of AntarChile S.A. owned indirectly by the company percentages of Empresas Copec S.A.’s stock: Mrs. Daniela Angelini controlled by the final controllers: Inversiones Angelini y Com- Amadori, taxpayer code Nº13.026.010-1: 0.00005%, Mr. Maurizio Angelini pañía Limitada, taxpayer code Nº93.809.000-9, is the direct owner Amadori, taxpayer code Nº13.232.559-6: 0.00005%, Mr. Claudio Angelini of 63.40150% of the shares issued by AntarChile S.A., and indirect Amadori, taxpayer code Nº15.379.762-5: 0.00005%, Mr. Mario Angelini owner of, through its subsidiary Inmobiliaria y Turismo Río San José S.A., Amadori, taxpayer code Nº16.095.366-7: 0.00005%, Mr. Franco Roberto 0.07330% of the shares of AntarChile S.A.. Inversiones Angelini y Mellafe Angelini, taxpayer code Nº13.049.156-1: 0.00006%, Compañía Limitada is controlled by the mentioned final contro-
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / FINANCIAL INFORMATION
llers, i.e., Mrs. María Noseda Zambra, Mr. Roberto Angelini Rossi and code Nº13.232.559-6, Mrs. Daniela Angelini Amadori, taxpayer Mrs. Patricia Angelini Rossi, with a total shareholding of 64.95436% code Nº13.026.010-1, Mr. Claudio Angelini Amadori, taxpayer code on the corporate rights broken down as follows: 1) Mrs. María Nº15.379.762-5, and Mr. Mario Angelini Amadori, taxpayer code Noseda Zambra is the direct owner of 10.94402%; 2) Mr. Roberto Nº16.095.366-7 with 24.99997% of the corporate rights each. Angelini Rossi is the direct owner of 12.71222% and indirectly of Mrs. Patricia Angelini Rossi also has by-law control of Inversiones 16.99231% through Inversiones Arianuova Limitada, taxpayer code Senda Blanca Limitada, taxpayer code Nº76.061.994-9, owner of Nº76.096.890-0, of which he has 99% of the corporate rights, and 3) 14.79393% of the corporate rights of Inversiones Angelini y Compa- Mrs. Patricia Angelini Rossi is the direct owner of 10.60649% and ñía Limitada. The partners of Inversiones Senda Blanca Limitada indirectly the owner of 13.69932% through Inversiones Rondine are: (i) Mrs. Patricia Angelini with 0.000014% of the corporate rights; Limitada, taxpayer code Nº76.096.090-K, of which she has 99% of and (ii) Mr. Franco Mellafe Angelini, taxpayer code Nº13.049.156-1, the corporate rights. In accordance with the above, the controlling Mr. Maximiliano Valdés Angelini, taxpayer code Nº16.098.280-2, and group of AntarChile S.A., defined above, has a total percentage of Ms. Josefina Valdés Angelini, taxpayer code Nº16.370.055-7, with 74.01423%, directly and indirectly. 33.33329% of the corporate rights each. c) Mr. Roberto Angelini Rossi has by-law control of Inversiones Lastly, it is left on record that the aforementioned Inversiones Golfo Blanco Limitada, taxpayer code Nº76.061.995-7, which Angelini y Compañía Limitada is the direct owner of 0.15075% of owns 18.35703% of the corporate rights of Inversiones Angelini Empresas Copec S.A.’s stock, and the indirect owner, through its y Compañía Limitada. The partners of Inversiones Golfo Blanco affiliate Inmobiliaria y Turismo Rio San José S.A., of 0.04934% of the Limitada are: (i) Mr. Roberto Angelini Rossi with 0.00011% of the stock of Empresas Copec S.A. corporate rights; and (ii) Mr. Maurizio Angelini Amadori, taxpayer
/ OTHER MAJORITY SHAREHOLDERS
The following shareholders control, directly or through some kind of relationship among them, over 10% of the company’s voting power:
96 Shareholder Name Taxpayer code Nº N° of Shares % / Forestal y Pesquera Callaqui S.A. 96.513.480-8 29,731,091 2.29 Viecal S.A. 81.280.300-K 29,439,066 2.26 Minera Valparaíso S.A. 90.412.000-6 22,027,125 1.69 Forestal y Pesquera Copahue S.A. 79.770.520-9 18,692,371 1.44 Servicios y Consultoría Ltda. 93.865.000-4 16,127,425 1.24 Forestal, Constructora y Comercial del Pacifico Sur S.A. 91.553.000-1 10,638,898 0.82 Coindustria Ltda. 80.231.700-K 5,838,513 0.45 Cominco S.A. 81.358.600-2 5,513,550 0.42 Inmobiliaria Choapa S.A. 83.104.400-4 2,209,330 0.17 Inmobiliaria Rapel S.A. 83.104.700-3 1,164,237 0.09 Agrícola e Inmobiliaria Las Agustinas S.A. 83.104.900-6 590,254 0.05 Inmobiliaria Bureo S.A. 83.164.900-3 275,500 0.02 Forestal Bureo S.A. 87.014.900-K 174,767 0.01 Others 940,431 0.07 Total 143,362,558 11.03
All these shareholders belong to the same business group (Matte Eliodoro Matte Larraín, taxpayer code Nº4.336.502-2, and his children Group), whose control is indirectly exercised by the following Eliodoro Matte Capdevila, taxpayer code Nº13.921.597-4, Jorge Matte members of the Larraín Matte, Matte Capdevila and Matte Izquierdo Capdevila, taxpayer code Nº14.169.037-K, and María del Pilar Matte families who have an agreement of acting jointly legalized: Capdevila, taxpayer code Nº15. 959.356-8.
Patricia Matte Larraín, taxpayer code Nº4.333.299-6 and her children Bernardo Matte Larraín, taxpayer code Nº6.598.728-7 and his chil- María Patricia Larraín Matte, taxpayer code Nº9.000.338-0, María dren Bernardo Matte Izquierdo, taxpayer code Nº15.637.711-2, Sofía Magdalena Larraín Matte, taxpayer code Nº6.376.977-0, Jorge Ber- Matte Izquierdo, taxpayer code Nº16.095.796-4, and Francisco Matte nardo Larraín Matte, taxpayer code Nº7.025.583-9, and Jorge Gabriel Izquierdo, taxpayer code Nº16.612.252-K. Larraín Matte, taxpayer code Nº10.031.620-K.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / FINANCIAL INFORMATION
/ TRANSFERS
The changes in the shareholdings of the major shareholders of Empresas Copec S.A. from December 31, 2015 through December 31, 2016 are outlined below.
N° of Shares Shareholder Name RUT 2016 2015 Banco de Chile on Behalf of Thirds Parties 97.004.000-5 54,470,042 50,018,392 Banco Itaú on Behalf of Investors 97.023.000-9 39,891,478 36,338,624 AFP Capital 98.000.000-1 20,161,323 17,793,828 AFP Provida 98.000.400-7 19,492,469 20,001,748 Banco Santander – JP Morgan 97.036.000-K 19,385,460 19,397,141 AFP Habitat 98.000.100-8 19,256,725 19,194,603 Banchile Corredores de Bolsa S.A. 96.571.220-8 17,099,082 13,938,242
/ SHAREHOLDING OF DIRECTORS AND SENIOR MANAGEMENT
For the year ended December 31, 2016, the direct and indirect shareholding of the directors and senior management of Empresas Copec S.A. was as follows:
Directors: Senior Management: a) Mr. Jorge Andueza Fouque is the direct owner of 108 shares a) Mr. Eduardo Navarro Beltrán has no direct shareholding of Empresas accounting for a 0.000% shareholding of Empresas Copec and Copec and nor does he participate in companies that are shareholders of participates in companies which own 77,343 shares accounting the same company. for a 0.006% shareholding of the same company. 97 b) Mr. José Tomás Guzmán Rencoret is the direct owner of 5,399 shares / b) Mr. Roberto Angelini Rossi is the direct owner of 24,242 shares, which account for a 0.000% shareholding of Empresas Copec and partici- accounting for a 0.002% shareholding of Empresas Copec pates in companies that own 710,714 shares which account for a 0.055% and participates in companies with a shareholding of the shareholding of the same company. same company as reported in “Company Controllers.” c) Mr. Rodrigo Huidobro Alvarado is the direct owner of 1,067 shares c) Mr. Manuel Bezanilla Urrutia has no direct shareholding of Empresas which account for a 0.000% shareholding of Empresas Copec. Copec and participates in companies which own 209,028 shares accounting for a 0.016% shareholding of the same company. d) Mr. Jorge Ferrando Yáñez has no direct shareholding of Empresas Copec and nor does he participate in companies that are shareholders d) Mr. Andrés Bianchi Larre has no direct shareholding of of the same company. Moreover, his wife in joint ownership of property, Empresas Copec and nor does he participate in companies Mrs. María Cristina Silva Méndez, is the owner of 2,552 shares which with a shareholding of the same company. account for a 0.000% shareholding of Empresas Copec. e) Mr. Gabriel Bitrán Dicowsky has no direct shareholding of e) Mr. Cristián Palacios González has no direct shareholding of Empresas Empresas Copec and nor does he participate in companies Copec and nor does he participate in companies that are shareholders of with a shareholding of the same company. the same company. f) Mr. Juan Edgardo Goldenberg Peñafiel is the direct owner of f) Mrs. Pamela Harris Honorato has no direct shareholding of Empresas 10,000 shares which account for a 0.001% shareholding of Empresas Copec and nor does she participate in companies that are shareholders Copec and participates in companies which own 4,541 shares of the same company. accounting for a 0.000% shareholding of the same company. g) Mrs. Jorge Valdivieso Scott has no direct shareholding of Empresas g) Mr. Arnaldo Gorziglia Balbi is the direct owner of 10,000 shares Copec and nor does she participate in companies that are shareholders which account for a 0.001% shareholding of Empresas Copec. of the same company. h) Mr. Carlos Hurtado Ruiz-Tagle is the direct owner of 10,000 shares h) Mr. Ricardo Vargas Bernal is the direct owner of 42 shares which which account for a 0.001% shareholding of Empresas Copec. account for a 0.000% shareholding of Empresas Copec and participates in companies that own 400 shares which account for a 0.000% shareholding i) Mr. Tomás Müller Sproat has no direct shareholding of of the same company. Empresas Copec and nor does he participate in companies with a shareholding of the same company. Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / FINANCIAL INFORMATION
/ STOCK MARKET INFORMATION
Empresas Copec S.A. is listed on the Santiago Stock Exchange since October 2, 1935, under nemonic code COPEC.
For 2016, stock is traded on the stock exchange of Santiago, in the Valparaiso stock exchange and the electronic exchange of Chile, according to the following detail:
Total amount traded Average Price Nº of shares traded (ThCh$) (Ch$)
1Q – 2015 25,673,307 180,576,768 7,033.64 2Q – 2015 25,727,879 180,767,685 7,026.14 3Q – 2015 25,340,368 167,967,826 6,628.47 4Q – 2015 28,118,964 177,011,555 6,295.10
1Q – 2016 24,960,275 149,593,731 5,993.27 2Q – 2016 21,897,623 134,612,080 6,147.34 3Q – 2016 19,837,072 119,846,491 6,041.54 4Q – 2016 25,462,098 163,682,961 6,428.49
Meanwhile, the behavior of the stock´s price in the Santiago Stock Exchange compared with the IPSA index during 2016 was the following:
Stock Price Empresas Copec chilean pesos 98 8,000 / 12.8% 7,500 7,000 6,500 6,000 5.5% 5,500 5,000 jan apr aug dec
*Adjusted Ipsa
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / FINANCIAL INFORMATION
/ CAPITAL STOCK
The company’s subscribed and paid-up capital amounted to US$ 686,113,724.13 for the year ended December 31, 2016, distributed into 1,299,853,848 subscribed and paid-up shares.
The balance sheet had profits of US$ 554,185,935.62 for the year ended December 31, 2016, which is proposed to be distributed as follows:
PROFIT DISTRIBUTION US$
To cover interim dividend Nº32 of US$ 0.066178 per share paid in December 2016 86,021,727.95 To cover final dividend Nº33 of US$ 0.1068000 per share, to be distributed 138,824,390.97 To the accrued profit surplus fund 329,339,816.70 Total net income in the year 554,185,935.62
Should the Shareholders’ Meeting approve the distribution proposed, the following will be the breakdown of the equity accounts:
FINAL BREAKDOWN OF THE EQUITY ACCOUNTS ThUS$
Paid-up capital 686,114 Other reserves (1,009,473) Withheld earnings 10,278,553 Total Shareholders’ Equity 9,955,194
The Board agreed to propose to the Ordinary General Shareholders’ Meeting, which will analyze this Annual Report, a final dividend distribution of US$ 0.1068000 per share. This amount, plus interim dividend Nº32 paid in December 2016, gives a total dividend distribution of US$ 224.85 million, which accounts for 40.02% of the net income in 2016, according to the breakdown below: 99 / DIVIDEND DISTRIBUTION ThUS$
Net income in the year according to the balance sheet 554,186 Adjustments to the distributable net income 7,639 Distributable Net Income 561,825 30% minimum legal dividend 168,548 Actual Dividends: Interim dividend distributed in December 2016 of US$ 0.066178 per share 86,022 Plus: Final dividend proposed by the Board and to be distributed of US$ 0.1068000 per share 138,824 Total dividends for income in 2016 224,846 Actual percentage of net income 40.02%
In the next few years, the Board plans to propose to the shareholders a final dividend distribution of 40% of the net income obtained in such years.
DIVIDENDS Date US$/share
Final Nº23 May 2012 0.180331 Interim Nº24 December 2012 0.042713 Final Nº25 May 2013 0.090779 Interim Nº26 December 2013 0.103864 Final Nº27 May 2014 0.126130 Interim Nº28 December 2014 0.110882 Final Nº29 May 2015 0.142471 Interim Nº30 December 2015 0.059027 Final Nº31 May 2016 0.105473 Interim Nº32 December 2016 0.066178
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / FINANCIAL INFORMATION
/ DIRECTORS’ COMMITTEE
Pursuant to circular letter N°1.956 of the Superintendency of Securities Meeting Nº100, held on August 25, 2016 and Insurance (SVS), an ordinary board meeting held on May 28, 2016 • Financial Statements for the first half of 2016 and Auditors’ appointed the members of the Directors’ Committee referred to in Reports. article 50 bis of Law N°18.046. The members appointed were Messrs. - It was agreed to approve the financial statements for the first half Andrés Bianchi Larre, Juan Edgardo Goldenberg Peñafiel and Gabriel of 2016 and the external auditors’ report. Bitrán Dicowsky. It should be noted that the latter is the indepent • Contracts with related companies. Director and was appointed president of the Committee in a meeting - Review of transactions with related companies in 2016, no remarks. held on May 18, 2016. • Audit to the Shares Department - Review of the report prepared by Deloitte about the audit to the In 2016, the Committee fulfilled its duties and exercised the faculties Shares Department of Servicios Corporativos SerCor S.A. set forth by law which, among other matters, entailed analyzing the • Corporate Governance reports submitted by the independent auditors, the quarterly financial - Review of corporate governance issues. statements, the remuneration systems and compensation plans for senior managers and officers, and lastly the information concerning Meeting Nº101, held on September 29, 2016 operations laid down in Title XVI of Law N°18.046 on corporations. • Corporate Governance and Risk Management Regarding the latter, it should be highlighted that the Committee - Review of corporate governance issues and Servicios Corporativos reviewed the transactions referred to in such Title, noting that the SerCor S.A. presented risk management issues on Empresas Copec S.A. operations undertaken were in accordance with market conditions. Meeting N°102, held on November 21, 2016 The main activities undertaken by the Directors’ Committee in the 2016 • Financial Statements for the third quarter of 2016 and Auditors’ period are outlined below. Reports. - It was agreed to approve the financial statements for the third Meeting Nº98, held on March 31, 2016 quarter of 2016. • 2015 financial statements and independent auditors’ report. • Contracts with Related Companies. - It was agreed to approve the 2015 financial statements and the - Review of transactions with related companies for the third quarter independent auditors’ report. of 2016, no remarks. 100 • Contracts with related companies / - Review of transactions with related companies in 2015, no remarks. Meeting N°103, held on December 26, 2016 • Contract modification with related company. • Internal control and progress status of the external audit. - It was agreed to recommend to the company Board the modifica- - The company acknowledged the internal control report submitted tion of the current contract with Servicios Corporativos SerCor S.A. by the independent auditors PwC. • Independent Auditors • Risk Management - It was agreed to propose to the company Board, so it in turn propo- - Servicios Corporativos Sercor S.A. presented risk management issues ses this in the Ordinary General Shareholders’ Meeting, the appoint- on Empresas Copec S.A. ment of PwC as the company’s independent auditors for 2016. • Internal Audit • Private risk rating agencies - Servicios Corporativos Sercor S.A. submitted an internal audit report - It was agreed to propose to the company Board, so it in turn on Empresas Copec S.A. proposes this in the Ordinary General Shareholders’ Meeting, the • Transactions with related parties appointment of Fitch Chile Clasificadora de Riesgo Limitada and - The company approved the legal service fees of Portaluppi, Guzmán Feller Rate Clasificadora de Riesgo Limitada as the private risk rating and Bezanilla Asesorías Limitada. agencies for 2016. • Remuneration system for managers and senior officers - A review of the company’s remuneration system for managers and Meeting Nº99, held on May 18, 2016 senior officers was presented. • Appointment of the president of the Directors’ Committee - Mr. Gabriel Bitrán Dicowsky was appointed president of the Direc- In 2016, the Committee incurred the following expenses for the tors’ Committee. exercise of its duties: • Independent Auditors - Company’s independent auditors, PwC, presented its Annual Audit • US$ 116,872 for remunerations paid to its members, which were Plan 2016. approved in the last Ordinary Shareholders’ Meeting. • Review of the financial statements for the first quarter of 2016. - It was agreed to approve the financial statements for the first The Committee prepared an annual management report, which quarter of 2016. will be reported in the next Ordinary Shareholders’ Meeting. • Contracts with related companies. - Review of transactions with related companies in the first quarter of 2016 with no remarks.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / FINANCIAL INFORMATION
/ BOARD OF DIRECTORS
Between January 1, 2016 until 26 April 2016 exerted as directors tado Ruiz Tagle, Tomás Müller Sproat and Gabriel Bitrán Dicowsky, of the company Messrs. Jorge Andueza Fouque, Roberto Angelini this latter as independent Director. Rossi, Andres Bianchi Larre, Mateo Budinich Diez, Juan Edgardo Goldenberg Peñafiel, Arnaldo Gorziglia Balbi, Carlos Hurtado Ruiz In a company Board meeting held on April 28, 2016, was elected Mr. Tagle and Bernardo Matte Larraín. Roberto Angelini Rossi as President and Mr. Jorge Andueza Fouque as Vice President. At the Ordinary Shareholders’ Meeting.held on April 27, 2016 was the election of the Board of the company for a period of three Board Remuneration years, resulting elected Messrs. Jorge Andueza Fouque, Roberto Pursuant to what is laid down in Law N°18.046, the Ordinary Ge- Angelini Rossi, Manuel Bezanilla Urrutia, Andres Bianchi Larre, Juan neral Shareholders’ Meeting held on April 27, 2016, agreed on the Edgardo Goldenberg Peñafiel, Arnaldo Gorziglia Balbi, Carlos Hur- Board remuneration for this period.
The gross remunerations received by each director in the 2016 period were the following:
2016 Board Directors’ Committee
Roberto Angelini Rossi US$ 358,163 - Jorge Andueza Fouque US$ 203,553 - Manuel Bezanilla Urrutia US$ 94,229 - Andrés Bianchi Larre US$ 109,324 US$ 38,957 Gabriel Bitrán Dicowsky US$ 94,229 US$ 31,410 Mateo Budinich Diez US$ 15,096 US$ 7,548 Juan Edgardo Goldenberg Peñafiel US$ 109,324 US$ 38,957 101 Arnaldo Gorziglia Balbi US$ 109,324 - / Carlos Hurtado Ruiz-Tagle US$ 109,324 - Bernardo Matte Larraín US$ 15,096 - Tomás Müller Sproat US$ 94,229 -
2015 Board Directors’ Committee
Roberto Angelini Rossi US$ 228,444 - Jorge Andueza Fouque US$ 45,689 - Manuel Bezanilla Urrutia - - Andrés Bianchi Larre US$ 45,689 US$ 22,844 Gabriel Bitrán Dicowsky - - Mateo Budinich Diez US$ 14,528 US$ 7,264 Juan Edgardo Goldenberg Peñafiel US$ 45,689 US$ 22,844 Arnaldo Gorziglia Balbi US$ 45,689 - Carlos Hurtado Ruiz-Tagle US$ 45,689 - Bernardo Matte Larraín US$ 45,689 - Tomás Müller Sproat - -
No incentive plans such as bonuses, stock benefits, stock options or others existed in which the directors participated.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / FINANCIAL INFORMATION
The parent company directors listed below received the following gross remuneration for serving as directors on the boards of the following affiliates:
Forestal Arauco Arauco Arauco do Organización 2016 Arauco Copec Igemar Orizon Alxar Arauco Internacional Forest Brasil Brasil Terpel
Roberto Angelini Rossi US$ 178,726 US$ 55,425 US$ 12,000 - - ThCh$ 125,214 - US$ 100,646 US$ 38,865 US$ 20,858
Jorge Andueza Fouque US$ 178,726 US$ 55,425 US$ 12,000 - - ThCh$ 69,047 US$ 14,704 US$ 38,580 US$ 104,609 -
Manuel Bezanilla Urrutia US$ 261,450 US$ 101,900 US$ 33,000 - - ThCh$ 31,431 - US$ 38,580 - -
Andrés Bianchi Larre ------
Gabriel Bitrán Dicowsky ------
Mateo Budinich Diez ------
Juan Edgardo Goldenberg Peñafiel ------
Arnaldo Gorziglia Balbi ------
Carlos Hurtado Ruiz-Tagle ------
Bernardo Matte Larraín - - - - - ThCh$ 6,184 - - - -
Tomás Müller Sproat - - - - - ThCh$ 31,431 - - - -
Forestal Arauco Arauco Arauco do Organización 2015 Arauco Copec Igemar Orizon Alxar Arauco Internacional Forest Brasil Brasil Terpel
Roberto Angelini Rossi US$ 68,993 US$ 55,336 - - - ThCh$ 90,214 - US$ 22,834 US$ 22,880 US$ 22,881
Jorge Andueza Fouque US$ 68,993 US$ 55,336 - - - ThCh$ 18,043 US$ 5,911 US$ 22,834 US$ 32,149 -
Manuel Bezanilla Urrutia US$ 82,826 US$ 83,004 - US$ 4,000 US$ 4,000 - - US$ 22,834 - -
Andrés Bianchi Larre ------102 Gabriel Bitrán Dicowsky ------/ Mateo Budinich Diez ------
Juan Edgardo Goldenberg Peñafiel ------
Arnaldo Gorziglia Balbi ------
Carlos Hurtado Ruiz-Tagle ------
Bernardo Matte Larraín - - - - - ThCh$ 18,043 - - - -
Tomás Müller Sproat ------
The next Ordinary General Shareholders’ Meeting shall establish the directors’ remuneration for 2017.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / FINANCIAL INFORMATION
/ SENIOR MANAGEMENT
The following people were the company managers in 2016: This extraordinary accounting effect does not implies a cash Eduardo Navarro Beltrán (CEO since October 1st, 2003); José Tomás discharge. In the future, depending on the evolution of the prices Guzmán Rencoret (Legal Advisor and Secretary of the Board since of coal, operational costs or other critical factors, it new studies June 29, 2008); Rodrigo Huidobro Alvarado (CFO since August 16, could be necessary to determine the economic value of the assets 2004); Jorge Ferrando Yáñez (Corporate Research Manager since of Laguna Blanca S.A. The results of these analyses could generate August 16, 2004); Cristián Palacios González (Director of Investor the need to recognize additional losses, either partly reverse the Relations and Investments since June 1st, 2012); Pamela Harris losses generated in the current year by concept of deterioration. Honorato (Head of Corporate Affairs since August 1st, 2014); Jorge Valdivieso Scott (Head of Corporate Research since March 17, 2016); On the other hand, the affiliate Compañía de Petróleos de Chile Ricardo Vargas Bernal (General Accountant since January 31, 2005). Copec S.A. has proceeded to the dissolution and liquidation of its affiliate Copec Investments Limited, incorporated abroad, Management Remuneration through which kept 43.48% ownership of Colombian society Or- The remuneration and bonuses received by company managers ganization Terpel S.A. This operation is part of a process initiated in 2016 amounted to US$ 2,289,000 (US$ 2,234,000 in 2015), who in the year 2013, aimed at the simplification and improvement of on average received variable compensation of 32.3% of the the corporate structure through which Compañía de Petróleos de remunerations. Bonuses are voluntary and are determined Chile Copec. is the owner of its shareholding in Terpel. based on the company’s results. In 2016, US$ 168,000 were cancelled for severance payments made to the company’s As a result of this operation, the affiliate Compañía de Petróleos senior managers and officers. de Chile Copec S.A. recorded a favorable effect on results in the last quarter of 2015 amounting to close to $ 47 billion, equivalent Related Party Balances and Transactions to approximately US$ 67 million, mainly resulting from tax losses The information on related party balances and transactions is set associated with the liquidation of Copec Investments Limited. out in Note N°16 to the company’s financial statements, which are Empresas Copec S.A. will record all of this positive effect on its an integral part of this Annual Report. results to 31 December 2015.
Significant Events All the amounts mentioned above are still pending final review 103 The parent company and its affiliates reported the following sig- by the administrations and external auditors of Empresas Copec / nificant or essential events to the Superintendency of Securities and respective societies, so that they could suffer modifications, and Insurance (SVS) in 2016: although these should not affect its orders of magnitude. Therefo- re, the Board of Empresas Copec S.A. has considered it necessary I. PARENT COMPANY to, and has agreed unanimously to publicize these effects to the 1.- On January 29, 2016, the company reported the following: market, since, in both cases, are material amounts in relation to “According to the International of Financial Reporting Standards the annual income of the Company.” (IFRS), the associated company Laguna Blanca S.A. and its affilia- tes, which operate the site of coal Mina Invierno, performed in 2.- On March 31, 2016, the company reported the following: “A 2014 a test of impairment for the value of their assets, which was company board meeting, held today, unanimously agreed to carried out, inter alia, by the finding of selling prices lower than propose to the Company’s Ordinary Shareholders’ Meeting, originally budgeted owing to a prolonged path to the decline in summoned for April 27, the payment of a minimum compulsory the international price of carbon. On the other hand, operating final dividend indicated below, charged to the profits for the year costs had proved to be greater than seen in the original evalua- ended December 31, 2015, and charged to income of such year: tion of the project. The results of the mentioned test not required perform an impairment on assets in the year 2014. Dividend Nº 31 of US$ 0.105473 per share, single series.
However, given the deepening of the scenario of low international This dividend shall be paid in Chilean pesos, national currency, prices of coal registered during 2015, and in line with what they according to the “observed dollar” exchange rate published in the have been doing enterprises of the mining industry, Laguna Official Gazette on May 6, 2016. Blanca S.A. and its affiliates have been carried out and completed a new test of impairment on the items of assets included in its This dividend constitutes income for the shareholders. The balance sheet. The results, which have been validated with the company shall calculate and timely inform of the credit which, company’s external audit EY, involve a financial loss to Laguna due to the mentioned dividend, corresponds to shareholders who Blanca S.A. of approximately US$ 290 million, consisting of pay the complementary global tax and additional tax. damages in amounts corresponding to properties, plants and equipment, realizable value of inventories, intangible and active If this dividend is approved by the mentioned shareholders’ deferred tax. Therefore, the negative effect on the results of meeting, it shall be paid as of May 12, 2016, from 09:00 hours at Empresas Copec S.A. at December 31, 2015, proportional to their the company share department, located at Avda. El Golf Nº140, equity stake, will be approximately US$ 145 million. district of Las Condes, with normal business hours of 09:00 to
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / FINANCIAL INFORMATION
17:00 hours Monday through Friday. For those shareholders Pursuant to what was agreed by the company board in a meeting who have asked the company, the mentioned dividend shall be held on March 31, 2016, the payment of minimum compulsory deposited in their checking account or they shall be sent their final dividend Nº 31 of US$ 0.105473 per share will be proposed check by mail, accordingly. to the mentioned ordinary general shareholders’ meeting. The dividend shall be paid in Chilean pesos, national currency, Those shareholders listed in the company shareholders’ registry according to the “observed dollar” exchange rate published in the at midnight, on May 6, 2016, shall be entitled to the dividend Official Gazette on May 6, 2016. The dividend shall be paid in cash mentioned above, if it is approved by the shareholders’ meeting. and shall be allocated to the profits of the year ended December 31, 2015, charged to income in such year. This dividend constitutes The notification informing shareholders of the agreement income for shareholders. The company shall determine and reached by the mentioned ordinary shareholders’ meeting about timely inform of the credit that for the mentioned dividend this dividend shall be published in the El Mercurio newspaper of corresponds to shareholders who pay the complementary global Santiago, May 3, 2016 edition. tax and additional tax.
The mentioned dividend distribution shall have no effect on the The company shall propose to the Shareholders’ Meeting that the company’s financial standing. mentioned dividend be paid as of May 12, 2016, at the company’s share department, at Avda. El Golf Nº140, district of Las Condes, The information contained in this significant event is reported with normal business hours of Monday through Friday, 09:00 to as essential, in accordance with what is established by that 17:00 hours. Those shareholders who have so asked the company Superintendency in Circular Letter Nº 660 of 1986. shall have the mentioned dividend deposited in their checking account or be sent a check by mail, accordingly. This communication is signed by the company CEO Mr. Eduardo Navarro Beltrán, who is duly empowered for this by the Those shareholders listed in the company shareholders’ registry company Board.” at midnight on May 6, 2016, shall be entitled to the dividend mentioned above, if it is approved by the Shareholders’ Meeting. 3.- On April 11, 2016, the company reported the following: “I hereby inform you that the company will hold an Ordinary Shareholders’ Regarding the above-mentioned dividend, I inform you that the Meeting on April 27, at 11:30 hours, in the SOFOFA Auditorium, total shares with a right to such dividend are 1,299,853,848 shares, 104 located at Avenida Andrés Bello Nº2777, 2nd floor, district of Las single series. / Condes, Santiago, in which the following issues will be addressed: Those shareholders registered in the company’s Shareholders’ a) Submit the company’s financial statements for the year Registry at midnight on April 21, 2016, shall be entitled to ended December 31, 2015, and the Board’s Annual Report for the participate in the company’s Shareholders’ Meeting. The Shareholders’ Meeting decision and report on the performance notifications of summons to this meeting shall be published on of corporate business; b) Designation of the Board’s members; April 11, 18 and 25, 2016 in El Mercurio newspaper of Santiago. c)Report on the operations undertaken by the company to which Title XVI of Law Nº18.046 refers; d) Establish the Board The company shall send the SVS a digital copy of the 2015 Annual remuneration for the next year; e) Establish the remuneration Report through the SEIL module of the SVS, complying with and expense budget of the Committee to which article 50 bis General Regulation Nº30 of 1989.” of Law Nº18.046 refers, report on its activities and release its annual performance report; f) Appoint the independent 4.- On April 20, 2016, the company reported the following: “Today, auditors and risk rating agencies; and g) Address any other our affiliate Abastible S.A. (“Abastible”) has agreed with Repsol S.A. issue of corporate interest of the competence of the type of (“Repsol”) purchase its business of Liquefied Petroleum Gas (“LPG”) Shareholders’ Meeting mentioned. in Peru (“Solgas”) and Ecuador (“Duragas”), excluding the activities of Repsol in the retail market of automotive LPG in Peru (the As of April 14, 2016, shareholders can consult the company’s “transaction”). The above has been carried out through a contract for financial statements closed for the year ended December 31, the sale of shares that companies related to Repsol have Peruvian 2016, with their explanatory notes and the independent auditors’ companies Repsol Gas del Peru S.A. and Repsol Gas de la Amazonía report on the company website at http://investor.empresascopec. S.A.C., and Ecuadorian companies Duragas S.A. and Servicio de cl//wp-content/uploads/2013/12/Estados_financieros_ Mantenimiento y Personal S.A. pdf90690000_201512.pdf. Designated contracts for sale are subject to the fulfilment of Complying with the second subparagraph of article 59 of the conditions precedent referred to therein, which include Law Nº18.046, the website www.empresascopec.cl includes certain certificates for the case of Solgas, and in turn, in the case the rationale for the options of the appointment of the of Duragas, the authorizations to be afforded the Ecuadorian independent auditors to be submitted to the Shareholders’ authorities free competition and regulatory control of Meeting. Shareholders may obtain a copy of this on the same hydrocarbons. Expected that these conditions precedent are met Company website. during the next few months.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / FINANCIAL INFORMATION
The price to pay for the transaction, whereas the value company The price paid for the Regapesa and Regaamsac actions or Enterprise Value, that is, free of debt and cash amounts to amounted to the amount of US$ 263,475,125.25, figure which may 980,000,000 of Peruvian Soles for Solgas and US$ 33,000,000 for be adjusted subsequent to this date on the basis of criteria of net Duragas. If the net financial debt at the end of the transaction is debt, working capital and exchange rate in accordance with the similar to that recorded in the balance sheets of December 2015, respective contract of sale of shares. the amount to be paid by the actions of Peruvian companies will amount to approximately US$ 264 million, figure to be adjusted As noted in our communication dated April 20, Solgas is the brand of to the date of payment on the basis of criteria of net debt, bottled LPG of greater prestige and tradition of the Peru, with sales of working capital and exchange rate , among others. Actions of the around 570 thousand tons per year, whereas the volume to wholesalers Ecuadorian companies, the price to pay will be subject to similar and end customers. The Company has a terminal for import of LPG criteria of settings. with 10,600 tons of storage, 7 storage and packaging plants, 3.5 million own-brand cylinders, more than 5,000 ponds in customers, 57 tanks to Solgas is the brand of bottled LPG of greater prestige and supply plants and 62 trucks to supply distributors. Their participation tradition of the Peru, with sales of around 570 thousand tons per amounts to about 26% on final consumers, in a market that has shown year, whereas the volume to wholesalers and end customers. The a strong dynamism in the last decade. Company has a terminal for import of LPG with 10,600 tons of storage, 7 storage and packaging plants, 3.5 million own-brand In regards to the purchase of Duragas in Ecuador, and as cylinders, more than 5,000 ponds in customers, 57 tanks to supply indicated in the Essential Fact already referred, its realization is plants and 62 trucks to supply distributors. Their participation subject to the fulfilment of the conditions precedent provided for amounts to about 26% on final consumers, in a market that has in the respective contract of sale, which include authorizations shown a strong dynamism in the last decade. to be afforded the Ecuadorian authorities free competition and regulatory control of hydrocarbons. Expected that such For his part, Duragas currently sells about 405 thousand tons of conditions are met during the next few months. LPG per year, and has a market share of 37%. It has 4 storage and packaging plants, 1 plant repair and maintenance of cylinder, Empresas Copec S.A. estimated that the purchase of Solgas will 4.3 million own-brand cylinders, 2,500 own ponds in customers have positive effects on the results of Abastible, notwithstanding and 13 tankers to supply plants and customers, among other assets. that by the time these are not quantifiable. 105 For the affiliate Abastible this operation represents a new and On the other hand, reported also that, as stated yesterday in the / important investment in the region, where currently participates Essential Fact sent by our affiliate Celulosa Arauco y Constitución S.A. in the markets of distribution of LPG in Chile and Colombia. With (“Arauco”), Inversiones Arauco Internacional Limitada - affiliate this new incursion, Abastible becomes the third South America’s of Arauco - materialized the subscription of 50% of the shares largest LPG operator. of Tableros de Fibras S.A., a Spanish affiliate of Sonae Industrias, which was renamed “Sonae Arauco” from yesterday. The Company estimates that, once materialized described transaction, this will have positive effects on the results of The price paid by Arauco for the subscription of 50% of the shares Abastible, notwithstanding that by the time these are not in Sonae Arauco was the sum of € 137,500,000. The 50% remaining quantifiable.” of Sonae Arauco will continue to be controlled by Sonae Industrias, which held a shareholders agreement. 5.- On June 1st, 2016, the company reported the following: “On last April 20, the Society reported to that Superintendence that One of the preceding conditions of the contract of subscription the affiliate Abastible S.A. (“Abastible”) had agreed with Repsol, S.A. of shares was the total debt restructuring of the Group of (“Repsol”) purchase to the last of its Liquefied Petroleum Gas companies of Sonae Arauco, for which the latter signed a contract (“LPG”) business in Peru (“Solgas”) and Ecuador (“Duragas”), of credit with various financial institutions, by a maximum excluding the activities of Repsol in the retail market of amount of € 205,000,000. automotive LPG in Peru (the “transaction”). Also, is pointed out that it had made through a contract for the sale of shares that With the materialization of this transaction, Sonae Arauco and companies related to Repsol have Peruvian companies Repsol its affiliates manufacture and commercialize MDF, PB and OSB Gas del Peru S.A. (Regapesa”) and Repsol Gas de la Amazonia S.A.C. wood panels, and timber, through the operation of 2 plants (“Regaamsac”), and the Ecuadorian companies Duragas S.A. and panels and a sawmill in Spain; 2 plants panels and one of resin in Servicio de Mantenimiento y Personal S.A. Portugal; 4 plants of panels in Germany; and 2 plants of panels in South Africa. In total, the production capacity of Sonae Arauco is Hereby informs that, having complied with the conditions approximately 1.45 million m3 of MDF; 2.27 million m3 of PB; precedent for the materialization of the sale of the shares of 460 thousand m3 of OSB; and 100 thousand m3 of sawn timber. Regapesa and Regaamsac, Abastible, through its Peruvian affiliate GasBis Peru Holding S.A.C., has been in today to acquire all the Arauco believes that this transaction will have positive effects shares of which were holders certain subsidiaries of Repsol in the on its results, notwithstanding that by the time these are not mentioned Regapesa and Regaamsac. possible to quantify.”
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / FINANCIAL INFORMATION
6.- On June 30, 2016, the company reported the following: excluding the activities of Repsol in the retail market of “Yesterday, the associated Global Aprovisionadora de Energia S.A. automotive LPG in Peru (the “transaction”). Also, is pointed out (AGESA), signed with the company Enagas Chile SpA an agreement that it had made through a contract for the sale of shares that for the sale of all the shares that owns AGESA at GNL Quintero S.A., companies related to Repsol have Peruvian companies Repsol amounting to 20% of shares ownership of the latter. According to Gas del Peru S.A. (Regapesa”) and Repsol Gas de la Amazonia S.A.C. the agreement, the sale price amounts to US$ 200 million. (“Regaamsac”), and the Ecuadorian companies Duragas S.A. and Servicio de Mantenimiento y Personal S.A. Subsequently, and by This transaction is subject to the possible exercise by the rest the communication of the “Essential Fact” dated last June 1st, was of the shareholders of GNL Quintero S.A., of the right of pre- informed of the materialization of the purchase of all the shares emption established in the corresponding shareholders Pact. of Repsol in Regapesa and Regaamsac. Improvement of the sale of It is estimated that the operation should improve during the Duragas and Semapesa was pending, subject to the fulfilment of present year 2016.” certain conditions precedent.
7.- On August 29, 2016, the company reported the following: Hereby, reported that, having met the conditions precedent “Our affiliated Compañía de Petróleos Chile COPEC S.A., for the completion of the sale of the shares of the Ecuadorian hereinafter also “the Company” or “Copec”, signed in August companies Duragas S.A. and Servicio de Mantenimiento y 27, 2016 an agreement with the American company “Delek US Personal S.A., Abastible has been today, with effects for last Holdings Inc”, as it promises to which the acquisition of 100% October 1st, to acquire all of the shares that it was incumbent on of the shares and rights of five companies incorporated under Repsol butane S.A. an affiliate of Repsol, in the aforementioned the laws of the United States of America which operate 348 companies. With this, the transaction has been after. stations in that country, own most, and additionally supplied to 142 stations operated by third parties that sell fuel and have The price paid for the shares of these Ecuadorian companies convenience stores. amounted to the amount of US$ 33,000,000, more net debt of US$ 3,708,839.88 estimated at the end, which may be adjusted The operation aims to the Company to acquire all of the shares of subsequent to this date on the basis of the final financial “MAPCO Express Inc.”, “MAPCO Fleet Inc.” actions, and social rights statements, in accordance with the respective contract of sale of the companies “GDK Bear Paw LLC”, “NTI Investments LLC” and of shares. “Delek Transportation LLC”. 106 As noted in our communication of last April 20, Duragas currently / Service stations operate with different brands, being the main sells about 405 thousand tons of LPG a year and has a market one MAPCO. They are located and distributed in the States of share in Ecuador of 37%. It has 4 storage and packaging plants, Tennessee, Alabama, Georgia, Arkansas, Virginia, Kentucky and 1 plant repair and maintenance of cylinder, 4.3 million own-brand Mississippi, concentrating the greater part of them in Tennessee. cylinders, 2,500 own ponds in customers and 13 tankers to supply plants and customers, among other assets. The mentioned affiliate estimates that the described acquisition represents an attractive opportunity, considering, among Empresas Copec S.A. estimates that Duragas purchase will have others, dealing with assets located in a geographical area with positive effects on the results of Abastible, notwithstanding that interesting demographic attributes and, at the same time, with by the time these are not quantifiable.” one sufficient scale to be a competitive operation and serve as a platform for eventual Copec growth in the U.S. market. 9.- On November 8, 2016, the company reported the following: “In our communication of “Essential fact”, dated last June 30, we The price agreed for the acquisition of these debt-free companies, inform the agreement of our partner Global Aprovisionadora amounts to the amount of US$ 535 million, which includes Energia S.A. (AGESA) with Enagas Chile S.A., for the sale of all the 15 lands for future development, and value that will be paid at shares that owned AGESA at GNL Quintero S.A., amounting to 20% the end of the operation, met the agreed conditions, which are of shares ownership of the latter. As noted on that occasion, the related to permissions, authorizations and other usual in these transaction was subject to the possible exercise by the rest of types of transactions. Expected that the closing occurs during the the shareholders of GNL Quintero S.A., of the right of pre-emption last quarter of this year. established in the corresponding shareholders Pact.
Copec estimates that this transaction will have positive effects In this regard, we inform you that, having met the time on its results, notwithstanding that by the time they are not limits related to the mentioned rights, with this date AGESA possible to quantify.” proceeded to the signing of the contract for the sale of shares at GNL Quintero S.A. already referred. The sales price amounted 8.- On October 4, 2016, the company reported the following: to US$ 197,365,113. “On last April 20, the Society reported to that Superintendence that the affiliate Abastible S.A. (“Abastible”) had agreed with Repsol, S.A. According to calculations made, this operation generates for (“Repsol”) purchase to the last of its Liquefied Petroleum Gas Empresas Copec S.A. an income after taxes of approximately (“LPG”) business in Peru (“Solgas”) and Ecuador (“Duragas”), US$ 52 million.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / FINANCIAL INFORMATION
10.- On November 14, 2016, the company reported the following: designated “Terpel”. Copec Combustibles estimates that a good “In our communication of Essential Fact dated last August 29, way to optimize the business that is getting is to conduct it we inform you that our affiliated Compañía de Petróleos Chile through Terpel, which will be offered, so it will perform the COPEC S.A., hereinafter also “the Company” or “Copec”, signed necessary steps in the instance of corporate governance Terpel an agreement with the American company “Delek US Holdings corresponding and Colombia regulatory agencies, so is this Inc”, as it promises to which the acquisition of 100% of the affiliate which operate or acquire these businesses of ExxonMobil shares and rights of five companies incorporated under the in Colombia Peru and Ecuador. laws of the United States of America which operate 348 stations in that country, own most, and additionally In addition, subject to the approval of the authorities of antitrust supplied to 142 stations operated by third parties that sell fuel of Colombia, estimated it will be necessary to resell the operation and have convenience stores. and assets of fuel in that country. In this way, it will not retain that part of the business, given that the strategic focus of this Hereby I inform that this date have been signed with the transaction, in the case of Colombia, they are lubricants Mobil, aforementioned Delek US Holdings Inc. the final documents leading brand in this market. of this transaction, in virtue of which Copec Combustibles has acquired all of the shares of “MAPCO Express Inc.”, “MAPCO Fleet The agreement is based on the model of global integration of Inc.” actions, and social rights of the companies “GDK Bear Paw ExxonMobil with its dealers and the alliance which maintained LLC”, “NTI Investments LLC” and “Delek Transportation LLC”; with Copec Combustibles in Chile since 1957. The goal is to expand He has paid the purchase price; and it has taken control of the distribution of lubricants in other countries of the Andean region corresponding operations. of South America and capture the growth opportunities offered by the markets of Chile, Colombia, Peru and Ecuador. The price paid for the acquisition of these debt-free companies, amounts to the amount of US$ 535 million, in addition to the box The operation will be materialized with the takeover by part of and setting by the deadline the working capital in the amount of Copec Combustibles or Terpel, ExxonMobil Andean Holding LLC US$ 16.3 million. and its affiliates, a company with registered office in Delaware (USA), the company through which ExxonMobil controls the As noted in our Essential Fact on August 29, the mentioned operation of lubricants and fuels in Colombia, as well as affiliate estimates that taking control of these companies in lubricants and aviation in Peru businesses. Additionally, Copec 107 the United States represents an attractive opportunity for Combustibles (or Terpel, where applicable) will take control of / growth and international expansion, entering a market and ExxonMobil Ecuador Cía. Ltda., a company with registered office geographical area with interesting demographic attributes, in Ecuador, through which the business of fuel in this country with one scale sufficient for a competitive operation and that operates. Finally, ExxonMobil will yield to Copec Combustibles, can serve as a platform for an eventual growth in that country. which projected in turn pass it on to Terpel, their contracts of It is also estimated that the transaction will have positive distribution of lubricants in the latter country. effects on its results, notwithstanding that by the time they are not possible to quantify.” Investment associated with these agreements will amount approximately to the amount of US$ 747 million, of which 11.- On December 16, 2016, the company reported the following: US$ 512 million correspond to the equity value (“equity value”) “Today, the affiliate Compañía de Petróleos de Chile Copec S.A. of the acquired companies, more extra cash of approximately (“Copec Combustibles”) has signed with Mobil Petroleum US$ 235 million that they will have at the time of the closing of Overseas Company Limited and ExxonMobil Ecuador Holding B.V. the transaction. (the “sellers” or “ExxonMobil”), several contracts that account for a regional agreement for the development and distribution of Finally, the financing of this operation considered the financial lubricant Mobil, which includes the markets of Colombia, Ecuador debt of Copec Combustibles and contributions of capital from its and Peru, as well as the renewal of their contractual relationship parent company Empresas Copec S.A. to Copec and Exxon Mobil in Chile since for almost sixty years. Copec Combustibles estimated that this operation will have The agreement also considers: (i) the operation and marketing positive effects on its results, notwithstanding that by the time of fuels to the Jorge Chavez international airport in Lima, Peru; these are not quantifiable.” and (ii) the transfer of fuels business that currently operates ExxonMobil in Colombia and Ecuador. 12.- On December 21, 2016, the company reported the following: “Today, Empresas Copec has proceeded to place bonds in the The transaction also includes the assets associated with these local market, bonds that are dematerialized and bearer, whose operations, such as plants and industrial facilities. most relevant conditions are as follows:
The agreement establishes that Copec Combustibles may assign 1.- A) Bonds of Series “H”, issued from the line of bonds approved the rights of distribution to one or more of its subsidiaries, by the Board of Directors dated July 31, 2014, registered in the including Organizacion Terpel S.A., Colombian society, hereinafter securities register of the Superintendency of securities and
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / FINANCIAL INFORMATION
insurance with the Nº 791 , dated November 17, 2014. At the same (iii) Funds from the placement above will be allocated 100% to time, the above-mentioned series of bonds was approved by the finance projects of investment of the Society and/or its affiliates. Board of Directors dated August 25, 2016 and October 27, 2016 and consists of Office N° 30.867 hint Superintendence, date of It is estimated that the placement of bonds that has been December 5, 2016. referred, will be significant effects in the statements of income of the Company”. This placement has been carried out by a total amount of Ch$ 67,000,000,000, seven-year term. Interests are accrued from II. AFFILIATE: CELULOSA ARAUCO Y CONSTITUCIÓN S.A. September 15, 2016, and will be paid semi-annually, on March 15 and September 15 of each year, counting from the day 1.- On October 25, 2016, the company reported the following: March 15, 2017. “Arauco advises that today has approved the start of construction of the “MDP Grayling” project, which will be located in the State The amortization of capital shall be carried out in six installments, the of Michigan, United States of America (the “Project”). The Project first one paid day, March 15, 2021 and the last September 15, 2023. will be developed by its affiliated American Flakeboard America Limited. The issue reached a rate of 4.75% placement. This Project consists of the construction and operation of a plant The bonds of Series “H” shall accrue on the capital outstanding, that will produce panels or boards (medium density particle expressed in pesos national currency, an interest coupon of 4.75% board) MDP. He is expected to the productive capacity of the annual, made, overcome, calculated on the basis of 180 days equal project to be 800,000 m3 of finished product per year, of which semesters, equivalent to a rate of 2.3474% semi-annual. approximately 300,000 m³ will be coated with melamine paper.
(B) Bonds of Series “I”, issued from the line of bonds approved It is estimated that the project will enter operations by the by the Board of Directors dated July 31, 2014, registered in the end of the year 2018, and that its sales will exceed the US$ 200 securities register of the Superintendency of securities and million a year. insurance with the No. 792 dated November 17, 2014. At the same time, the above-mentioned series of bonds was approved by the On the other hand, it is estimated that the Project will generate Board of Directors dated August 25, 2016 and October 27, 2016 employment, in its stage of construction, for an average of 108 and consists of Office N ° 30.868 hint Superintendence, date of 300 people (can reach up to a maximum of 600) and during the / December 5, 2016. operation stage, for an average of 250 people.
This placement has been carried out for a total sum of 1,400,000 This Project requires an estimated investment of US$ 400 million Unidades de Fomento (“UF”), 10-year term. Interests are accrued investment to be financed with own resources. from September 15, 2016, and will be paid semi-annually, on March 15 and September 15 of each year, counting from the day Arauco believes that this project will have positive effects on the March 15, 2017. The amortization of capital shall be made in a results of the Company, without prejudice that for the moment single fee payable from September 15, 2026. these are not quantifiable.”
The issue reached a rate of 2.44% placement. 2.- On December 1st, 2016, the company reported the following: “Today, the Company has proceeded to place bonds in the local The bonds Series “I” shall accrue on the outstanding capital, market, bonds that are dematerialized and bearer, whose most expressed in UF, an interest coupon of 2.30% annual, made, relevant conditions are as follows: overcome, calculated on the basis of 180 days equal semesters, equivalent to a rate of 1.1435% semi-annual. 1.- Bonds of Series “S”, issued from the line of bonds approved by the Board of Directors dated August 25, 2015, registered in 2.- These series of bonds have a rating of AA-local risk, under the securities register of the Superintendency of securities and certificates granted by the Fitch Chile and Feller Rate risk classifiers. insurance with N° 825 , dated December 30, 2015. At the same time, the above-mentioned series of bonds was approved by the Board 3.- The placement agent was Credicorp Capital SA, Corredores de of Directors dated October 27, 2016 and consists in the Officio Bolsa, company with which there is no property relationship. N° 29667 of the Superintendence, date of November 22, 2016.
4.- Other relevant conditions of the above-mentioned bonds are This placement has been carried out by a total amount of as follows: 5,000,000 Unidades de Fomento (“UF”), 10-year deadlines. The interests of vest from November 15, 2016 and will be paid i) Bonds of Series “H” and “I” may be rescued from September 15, 2018. Semiannually, on May 15 and November 15 of each year, starting from May 15, 2017. Amortization of capital shall be made in a (ii) Bonds will not have any warranty. single fee payable from November 15, 2026.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / FINANCIAL INFORMATION
The issue reached a rate of 2.89% placement. Those shareholders listed in the company shareholders’ registry at midnight on May 4, 2016, shall be entitled to the dividend The Bonds of Series “S” shall accrue on the capital outstanding, mentioned above, if it is approved by the shareholders’ meeting. expressed in UF, an interest coupon of 2.40% annual, made, over- come, calculated on the basis of semesters of 180 days, equivalent The notification informing shareholders of the agreement to a rate of 1.1929% semi-annual. reached by the mentioned ordinary general shareholders’ meeting about this dividend shall be published in the El Mercurio 2.- This series of bonds has classification of local risk of AA-, newspaper of Santiago on April 29, 2016. under certificates granted by the Fitch Chile and Feller-Rate risk classifiers. The distribution of the dividend mentioned above will have no effect on the Company’s financial standing. 3.- The underwriter of placement was Santander brokers of stock exchange limited, company with which there is no The information contained in this letter is reported as essential, in property relationship. accordance with what is established by the SVS in Circular Letter Nº 660 of 1986.” 4. The spreads on the bond issued by the Banco Central de Chile in UF (“BCU”) to 10 years retrieved for the Series “S”, was IV.AFFILIATE: PESQUERA IQUIQUE GUANAYE S.A. 124 basis points. 1.- On April 8, 2016, the company reported the following: “I 5. Other relevant conditions of the above-mentioned bonds are hereby inform you that our company will hold an Extraordinary as follows: General Shareholders’ Meeting on April 26, at 16:30 hours, at Avenida El Golf N°150, 16th floor, district of Las Condes, (i) The bonds of Series “S” may be rescued from November 15, 2019. Santiago, in which the following issues will be addressed: a) Amend the bylaws to increase 5-7 the number of Directors of (ii) Bonds will not have any warranty. the Company; (b) Revoke the current Directors of the Company and to proceed to the complete renewal of the same; (c) (iii) Funds from the placement referred to above, will be allocated Adapt provisions of the bylaws to the law N° 18.046 and its 100% to the refinancing of liabilities in the short and/or long term regulations, as a result of the changes which have taken these 109 of the Company and/or its affiliates, are expressed in national or legal bodies and agree on a text updated and revised them; and / foreign currency. (d) Take all the necessary agreements to materialize, legalize and formalize the statutory reforms that the Board agreed. It is estimated the bond placement that has been referred, won’t have significant effects in the States of the result of the Company”. Immediately after and following the Extraordinary General Meeting designated above, in the same place of the latter, III. AFFILIATE: FORESTAL CHOLGUÁN S.A. society held Ordinary General Shareholders’ Meeting, to address the following: a) Submit the company’s financial statements 1.- On March 24, 2016, the company reported the following: for the year ended December 31, 2015, the Annual Report and “In a company Board meeting held on that date, it was agreed report on the performance of corporate business for decision to propose to our company Ordinary Shareholders’ Meeting, by the Shareholders’ Meeting; b) Report on the operations summoned for April 26, payment of a minimum compulsory final undertaken by the company to which Title XVI of Law Nº18.046 dividend indicated below, which will be charged to the income of refers; c) Establish the Board remuneration for the next year; the year ended December 31, 2015. d) Appoint the independent auditors; and e) Address any other issue of corporate interest of the competence of the type of Dividend Nº 39 of US$ 0. 036927796 per share. Shareholders’ Meeting mentioned.
The dividend shall be paid in Chilean pesos, national currency, As of April 12, 2016, the company’s financial statements ended according to the “observed dollar” exchange rate to be published December 31, 2015 will be available to shareholders, with in the Official Gazette on May 4, 2016. explanatory notes and the report of the external auditors, on the Company’s’ website at http://www.igemar.cl/_file/179_eeff- Should the above-mentioned dividend be approved by the diciembre-2015.pdf. shareholders’ meeting, it will be paid as of May 10, 2016, from 09:00 hours at the company’s share department, located at Complying with the second subparagraph of article 59 of Law Avda. El Golf Nº140, district of Las Condes, with normal business Nº18.046, the website www.igemar.cl includes the rationale for hours of 09:00 - 17:00 hours Monday through Friday. For those the options of the appointment of the independent auditors to be shareholders who have asked the company, the mentioned submitted to the shareholders’ meeting. Shareholders may obtain dividend shall be deposited in their checking account or they a copy of this on the same Company website. shall be sent their check by mail, accordingly.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / FINANCIAL INFORMATION
Those shareholders listed in the Company shareholders’ registry I. PARENT COMPANY at midnight on April 20, 2016, shall be entitled to participate in this meeting. The notification of summons to this meeting shall 1.- On March 9, 2017, the company informed the following: “Today, be published in the El Mercurio newspaper of Santiago on April 8, the affiliate Celulosa Arauco y Constitución S.A. (“Arauco”), in order 14, and 21, 2016. to complement in the Essential Fact submitted by it on January 27, passed in relation to forest fires from its plantations, it has The company shall send the SVS a digital copy of the 2015 Annual been reported as Essential Fact: Report through the SEIL module of the SVS, complying with General Regulation Nº30 of 1989.” (a) As a result of the fires that have affected the country in the course of this year in several regions, especially those of the V. AFFILIATE: SOCIEDAD NACIONAL DE OLEODUCTOS S.A. Maule and Biobío, Arauco has suffered burning approximately 80,000 hectares of forest plantations, which have value in their 1.- On February 29, 2016, the company informed the following: accounting of US$ 240 million, according to IFRS accounting rules. “In a Board meeting held on February 26, 2016, it was agreed This figure corresponds to approximately 6% of the IFRS value of to summon the company’s shareholders to the 17th Ordinary total forest plantations of the affiliate, and approximately 2% of Shareholders’ Meeting, to be held on March 21, 2016 at 08:00 the total assets of Arauco. hours at the head office, located in Santiago at Avenida Isabel La Católica N°4472, district of Las Condes, to submit the following (b) The affected plantations will be handled by Arauco to minimize issues for the consideration of the company’s shareholders: the damage caused by the fires. It is estimated that this will allow a recovery end of between 10% and 20% of the countable amount a) Approval of the Annual Report, balance sheet, financial of US$ 240 million, above. statements and independent auditors’ report for the year ended December 31, 2015; b) Distribution of the net income for the (c) In addition, planted forests affected by the fires have insuran- year ended December 31, 2015. The Board agreed to propose ce, with their corresponding deductibles and limitations. By virtue to the Ordinary Shareholders’ Meeting to be held on March 21, of the foregoing, Arauco estimates that you can recover up to an 2016, to allocate all the profits of Ch$ 21,019,097,436 in 2015 to amount of US$ 35 million by this concept”. a dividend, firstly covering those interim dividends distributed for the year ended December 31, 2016 and amounting to Ch$ II. AFFILIATE: CELULOSA ARAUCO Y CONSTITUCIÓN S.A. 110 16,000,427,938 and to distribute the balance of Ch$ 5,018,669,499 / as a final dividend of Ch$ 50.18669499 per share on April 29, 2016; 1.- On January 27, 2017, the company informed the following: c) Information on the dividend policy agreed on by the Board for “Since last week multiple fires have been occurring in the country, 2016; d) Report the information established in Title XVI of Law and in regard to the Company, in the regions of Maule and Biobío. N°18.046 on corporations; e) Appoint the independent auditors For purposes of preventing and combating forest fires, Arauco has for 2016; f) Fully renew the Board, due to the vacancy from the more than 1,300 professional brigades, duly trained and equipped resignation of the directors, in compliance with what is laid for fire fighting. Also account for these purposes with 8 aircraft, down in the sixth article of the corporate by-laws; g) Address 10 helicopters, more than 100 mobile teams carrying water, any other issues of corporate interest inherent to the Ordinary 120 watchtowers, 19 tracks of landing and specialized, as Shareholders’ Meeting”. well as the support of specialized companies, national and international teams. VI. ASSOCIATED: METROGAS S.A. However, product of high temperatures, the action of the wind, 1.- On March 9, 2016, the company informed the following: “The low humidity, and complexity which means combat multiple Board agreed unanimously quote to Extraordinary Shareholders’s bulbs that appear in different places simultaneously, the fire Meeting of Metrogas S.A., for the day, May 26, 2016, at 11:00 in activity has increased significantly. El Regidor N° 6, floor 8th, Las Condes, in order to submit to for consideration of Metrogas S.A. division and a new company that In the burned area, the company has approximately 80,000 will be created under division that is referred to Aprovisionadora hectares of plantations, whose degree of involvement may Global de Energía S.A., on the basis of the consolidated financial be determined once conditions permit to assess the damage, statements audited to March 31, 2016 and the corresponding depending on the age of plantations, the intensity of the fire in financial background.” different areas, and what were effectively achieved.
On the other hand, the sawmill El Cruce, of property of the / SUBSEQUENT EVENTS affiliate Maderas Arauco S.A., whose damages are in evaluation was also affected. After December 31, 2016, the company informed the SVS of the following significant event: Forest plantations and the sawmill affected by the fire have insurance, with their corresponding deductibles and limitations.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / FINANCIAL INFORMATION
For now we are not in a position to specify the effects that these Meeting, and following this, during April and whose purpose is to situations occur in the Company’s results”. strengthen the financial position of the company mainly enabling the reduction of its current debt burden. 2. On March 9, 2017, the company informed the following: “Today, the affiliate Celulosa Arauco y Constitución S.A. (“Arauco”), in order (c) The increasing complexity and requirements of the fishing to complement in the Essential Fact submitted by it on January activity, as well as growth and challenges that represent other 27, passed in relation to forest fires from its plantations, it has businesses of the company, other than the fisheries, make it been reported as Essential Fact: necessary to establish appropriate structures for the better management and optimization of different areas of business. (a) As a result of the fires that have affected the country in the So it was agreed to start a study that proposed a restructuring course of this year in several regions, especially those of the plan, either through internal restructuring or through a corporate Maule and Biobío, Arauco has suffered burning approximately division. With respect to the agreement N ° 1, in accordance with 80,000 hectares of forest plantations, which have value in their their interest in Corpesca S.A., corresponds to Pesquera Iquique accounting of US$ 240 million, according to IFRS accounting rules. - Guanaye S.A. accounting in consolidated financial statements This figure corresponds to approximately 6% of the IFRS value of from loss of the associated by the sum of US$ 13,717,000 by total forest plantations of the affiliate, and approximately 2% of concept of deterioration. The designated special accounting effect the total assets of Arauco. does not imply box output for Pesquera Iquique - Guanaye S.A.”
(b) The affected plantations will be handled by Arauco to minimize the damage caused by the fires. It is estimated that this will allow / SUPPLIERS AND CUSTOMERS a recovery end of between 10% and 20% of the countable amount of US$ 240 million, above. For each of the company’s business segments, the suppliers that (c) In addition, planted forests affected by the fires have individually account for at least 10% of the total purchases made insurance, with their corresponding deductibles and limitations. in the year for the supply of goods and services are as follows: By virtue of the foregoing, Arauco estimates that you can recover up to an amount of US$ 35 million by this concept”. Arauco: no supplier has such concentration. 111 III.AFFILIATE: PESQUERA IQUIQUE GUANAYE S.A Copec: Enap Refinerías S.A. (54.3%). /
1.- On March 8, 2017, the company reported the following: “The Abastible: Gasmar S.A. (41.3%); Enap Refinerías S.A. (13.1%). related company Corpesca S.A. reported, through Essential Fact, which in extraordinary Board session held today adopted Sonacol: Chilquinta Energía S.A. (19.6%). agreements on the following matters: Igemar: no supplier has such concentration. a) In accordance to the International’s financial reporting standards (IFRS), and as a result of market conditions, availability of fishing For each of the company’s business segments, customers who and production considered by his administration, Corpesca S.A. individually concentrate at least 10% of the revenue are as follows: has been determined in the year 2016 a difference between the recoverable value of its assets and its rising book value to Arauco: no customer has such concentration. US$ 57,573,000, generating a loss for impairment of assets by that amount. This deterioration is mainly associated to ships and other Copec: no customer has such concentration. assets that are non-operational or with low projected utilization. This generated a net charge to income in the year 2016 US$ 44,767,000. This Abastible: no customer has such concentration. extraordinary accounting effect does not an out of cash. Sonacol: Enap Refinerías S.A. (47.3%); Compañía de Petróleos de (b) It was agreed to convene Extraordinary General Shareholders’ Chile Copec S.A. (35.5%). Meeting of Corpesca S.A. in order to treat a proposition of increasing capital of this company at US$ 90 million, for the Igemar: no customer has such concentration. same day that is celebrated its Ordinary General Shareholders’
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / FINANCIAL INFORMATION
/ BRANDS
Empresas Copec owns the following brands: “Empresas Copec,” lidated debt was issued by the parent company Empresas Copec S.A., record Nºs 742026, 742027, 742028 and, “EC”, record Nºs 733767, and consisted of bonds expressed in Unidades de Fomento. 733768 and 733769. Consolidated Empresas Copec had a financial debt to shareholders’ equi- The company’s business segments use the following brands to ty ratio of 0.49 times and a hedging ratio (EBITDA on financial expenses) of market their products: 4.8 times. Debt maturing in 2017 amounts to US$ 906 million. Altogether, the Company has kept its financing capacity open on a favorable a) Arauco: Arauco, AraucoPly, +Maqui, Arauco BKP, Arauco Celulosa, basis as domestic and foreign banks have a very good appraisal of the Arauco Color, Arauco EKP, Arauco Fluff, Arauco Lumber, Arauco Mela- risk rating quality and financial performance of Empresas Copec. mina, Arauco Moulding, Arauco PBO, Arauco UKP, Bastidores Finger, Cholguán, Deck, DecoFaz, Dimensionado, Duraflake, Durolac, Durolac Financial debt maturity Brillo, Faplac, Faplac Fondos, Fibrex, Hilam, Impregnado, Lookid, MDP, Amounts expressed in millions of US dollars MSD, Oregón, OSB, Prism, Rollete, Trupán, Ultra PB, Vesto. b) Copec: BlueMax, Chiletur Copec, Copec, Cupón Electrónico, EnRuta, GeoGas, Gverde, Lavamax, Lub, MobilTEC, Mundo Copec Latampass, NeoGas, NEOTAC, PagoClick, Pronto, Punto, Renova, Solvex, S.O.S Copec, Taxiamigo, TAE, TCT, Vía Limpia, Viva Leer, Voltex, Zervo. c) Terpel: Alto, Altoque, Celerity, Club Gazel, De Una, Escuela Combus- tibles Aviación, Escuela de Isleros, Exacto Confianza, Fórmula 4, Forza, Gazel, Lubriton, Master, Masterlub, Max-Ter, Mi Estación, Mundo Terpel, Oiltec, Opese, Optimiza, PagoClick, Pits, Punto y Coma, Quick Shop, Sol, Balance Spa Terpel, Tecnoil, Teresa, Terpel, Terplus, Ter-Matic, Ter-Ex, Tesos, Trac- Ter, Toque, Tunjo, Va y Ven, Ziclos, 2T Especial, 2T Náutico. RISK RATING 112 d) Mapco: Delta Express, Discount Food Market, East Coast, Fast Food In 2016, the risk rating agency Feller Rate reaffirmed the rating / and Fuel, Favorite Markets, Fleet Advantage, Good Livin’, Good Livin’ and outlook for the shares of Empresas Copec, rating them Market, Mapco, Mapco Express, Mapco Mart, My Deli, My Reward$, as 1st Class, Level 1. Likewise, it gave it a credit rating of AA-. Victory Fuels. Moreover, Fitch Ratings maintained the rating given to the company’s shares as Level 1, and AA- for its credit rating. In e) Abastible: Abastible, Autogas, Nautigas, Pausa, Solargas. regard to international ratings, Standard & Poor’s and Fitch Ratings gave the company a risk rating of BBB. f) Inversiones del Nordeste: Asogas, Cinsa, Colgas, Gasan, Gases de Antioquia, Norgas. Concerning this, Empresas Copec S.A. has been recognized for its leadership in its two core businesses, its efficient cost structure and g) Sonacol: Sonacol. sound international presence of its forestry subsidiaries, its wide network, efficient logistics and strategic locations for fuel distribution, h) Igemar: Igemar. and the support of its controlling group. The downward trend of debt to historic levels was recognized. i) Orizon: Atlas, Colorado, Lenga, Orizon, San José, Wirembo. RISK FACTORS j) Alxar Minería: Compañía Minera Can-Can. The Company has operations in different natural resource and energy areas through its affiliates and associates. The significant risk factors vary depending on the type of business. / FINANCING, RISK AND INSURANCE Based on this, the management of each of the affiliates carries out its own risk management in collaboration with the FINANCING respective business units. For the year ended December 31, 2016, the total consolidated finan- cial debt amounted to US$ 6,649 million, with short-term financial The most important affiliates are Celulosa Arauco y Constitución S.A., liabilities accounting for US$ 180 million and long-term financial which operates in the forestry sector, and Compañía de Petróleos liabilities plus the short-term portion of long-term financial liabilities de Chile Copec S.A. in the fuels business. Both companies jointly accounting for US$ 6,469 million. The affiliate Celulosa Arauco y Cons- account for about 87% of the group’s consolidated assets, and titución S.A. accounted for 68.6% of this amount, and its debt mainly 87% of the EBITDA. They also account for around 94% of the consisted of bonds issued in the United States and expressed in US do- accounts receivable and 87% of the bond and financial debt llars. The affiliate Compañía de Petróleos de Chile Copec S.A. accounted issues. Together with the parent company, they represent 95% for 15.3%, and its financial debt is mainly bank debt. 8.7% of the conso- of the consolidated placements. Most of the risks faced by
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / FINANCIAL INFORMATION
the Group therefore lie in these three units. The specific risks inventory is indeed affected by variations in international fuel affecting each of them are analyzed below. prices. The company’s policy is not to hedge the permanent stock as the increases and decreases that occur are offset in the long FORESTRY BUSINESS term. This is not the case with specific surplus stocks, for which The global market determines the wood pulp price and the regional due to the market price establishment methodology the company market conditions. Prices fluctuate according to demand, production has not found a hedging instrument that mitigates this risk. capacity, the commercial strategies adopted by the large forestry companies and pulp and paper producers, and the availability of The affiliates in the fuels business, accounting for approximately substitutes. 27.2% of the Company’s total assets, have accounting in Chilean, Colombian, Peruvian and US pesos and their accounts receivable, As an example of the price sensitivity with all the other variables financial liabilities and most of their earnings are expressed in constant, a variation of + / - 10% in the average wood pulp price would such currency. Due to this, exposure to exchange rate fluctuations mean a variation of net income in the year after tax of + / - 64.8% is significantly reduced. Nevertheless, for the parent company (equivalent to US$ 141.0 million) and of shareholders’ equity of + / - exchange rate variations affect the value in US dollars of 1.21% (equivalent to US$ 84.6 million). investments in the sector and the income obtained.
In regard to the economic risks from interest rate variations, the FISHERIES BUSINESS affiliate had a fixed-rate debt to total consolidated debt ratio of In the fisheries business the availability of pelagic species at the approximately 87.1% for the year ended December 31, 2016, and this different fishing grounds is a determining factor of its results. policy is in keeping with the industry in which it operates. A second risk factor is the market price of fishmeal and fish oil, which is obtained from the equilibrium of supply and demand, Most of the affiliates in the forestry business have their accounting and Peruvian production is a decisive factor regarding supply, in US dollars. Nevertheless, they are subject to the risk of losses from and concerning demand consumption in Asia in general, and exchange rate variations of currencies when assets and liabilities are in China in particular. currencies other than the functional currency defined by Arauco. With all the other variables constant, a variation of + / - 10% in the US dollar Since it is a sector that exports the bulk of its production, the to Chilean peso exchange rate would mean a variation of net income result of its operations is sensitive to exchange rate variations, in the year after tax of + /- 5.28% (equivalent to US$ 15.1 million) and + / - to certain financial return policies determined by the Chilean 113 0.10% for shareholders’ equity (equivalent to US$ 6.9 million). Central Bank and to export promotion policies of competitor / countries. Fishmeal and fish oil are essentially traded in US Likewise, with all the other variables constant, a variation of + / - 10% in dollars, and therefore virtually 100% of the company’s earnings the US dollar to Brazilian real exchange rate would mean a variation from this sector are indexed to this currency. Due to the nature of net income in the year after tax of + / - 1.22% (equivalent to of this, the general bank debt of companies is shipment advances US$ 2.7 million) and a change in shareholders’ equity of + / - 0.02% in US dollars. Nevertheless, the necessary conversion of a large (equivalent to US$ 1.6 million). part of the resources to Chilean pesos is exposed to exchange rate variations, which is a risk that can be mitigated by using FUELS BUSINESS forwards or other financial instruments. Through its affiliates Copec and Abastible, the company has a leading position in the Chilean liquefied fuel and gas market. Sales agreed in currencies other than the US dollar are generally It also operates in Colombia through its affiliates Terpel and converted to such currency by using forward sales contracts that Inversiones del Nordeste, and in Peru and Ecuador, through convert such earnings into US dollars. This eliminates the risk of its affiliates Solgas and Duragas, companies recently acquired the volatility of these currencies compared to the US dollar. by Abastible. Also participates in the United States, through Mapco, company acquired by Copec at the end of 2016. In these Regarding costs, the fisheries sector is highly sensitive to the countries, the supply gets an important part of local companies. price fluctuations of fuels, specifically diesel and bunker oil. Notwithstanding the foregoing, the company can access Concerning regulations, the application of catch quotas, closed alternative fuel supply markets, enabling it to assure and optimize seasons and restrictions imposed by the authorities can have a the supply and distribution of products to the public. significant effect on the production of subsidiaries and related companies in this business. The major risk in the fuel and liquefied gas distribution business is essentially the distribution margin more than the prices of oil PARENT COMPANY and its byproducts. The distribution margin mainly depends on Lastly, the parent company risks are mainly related to its competitive factors that arise daily in the market. Moreover, since financial placements which for the year ended December 31, they are products with a low price elasticity, possible oil price or 2016 amounted to US$ 713 million. These are exposed to various exchange rate increases or decreases have little relative effect on risks, including interest rate, exchange rate and loan risks. the volumes traded in the market. Management provides written investment management policies, which establish the objectives of getting the maximum return for Notwithstanding this, at present the value of the company’s tolerable risk levels, maintaining suitable liquidity and reducing
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / FINANCIAL INFORMATION
the levels of different kinds of risks. Such policies identify the movements in interest rates. instruments allowed and set limits for types of instruments, currencies, duration, issuers and risk rating. Moreover, investment Note Nº4 to the financial statements provides more information operation and control mechanisms are determined. about risk factors.
It should be noted that on December 22, 2009, the parent company issued INSURANCE a bond in the domestic market in UF (BECOP-C) of UF 7 million. The The Company has insurance coverage for its principal assets placement rate was 4.30% for a coupon rate of 4.25%. Interest is against risks of fire, earthquake, loss from work stoppages, paid half yearly and the amortization of the capital will be paid civil liability and others with lower effects on its equity. Hence, in one single installment in 2030. The denomination currency such risks are reasonably protected with first-class national of this liability (UF) differs from the functional currency of the insurance companies that agree on reinsurance for the bulk of the parent company (US$). However, these bonds were transferred to significant risks with first-class risk reinsurers based in Europe. subsidiaries in the fuels business, whose functional currency is the peso, so the consolidated exposure to exchange rate variations for Each year the company assesses the risks involved in its this is eliminated. This transfer also eliminates any liquidity risk at operating, commercial and administrative activities. This allows parent company level. A similar situation occurred with a new for suitable risk management, incorporating appropriate bond placement in the domestic market in UF (BECOP-E), made by coverage or modifying existing coverage in keeping with what is the parent company on September 15, 2011. It amounted to offered in the market. UF 1.3 million, and the placement rate was 3.40% at a coupon rate of 3.25%. Interest is also paid half yearly and the amortization of the DIFFERENCE BETWEEN MARKET AND BOOK VALUES OF ASSETS capital will be paid in one single instalment on July 31, 2021. For the year ended December 31, 2016, there were no major differences between the market and book values of the company’s Similarly, on December 4, 2014, the parent company Empresas Copec main assets, with the exception of investments in subsidiaries and made a new bond issue (BECOP-G) in the Chilean market for a total associates which, pursuant to the regulations laid down by the amount of UF 2.5 million. The placement rate was 2.88%, with a Superintendency of Securities and Insurance, were stated using coupon rate of 2.70%. As with the previous issues, interest is paid the equity method of the respective companies. quarterly, and the capital will be amortized in one single payment on October 15, 2024. PROPERTIES AND FACILITIES 114 For the year ended December 31, 2016, the parent company was / On December 21, 2016, the company made new bond issues in the the owner of its corporate headquarters from 2.714 m2, located on local market. BECOP-H series, for an amount of Ch$ 67,000,000,000, Av. The 150 Golf. The company has no other concessions, land and/ settled at a rate of 4.75%, same level as its rate of cover. Interest is or relevant facilities, and nor has land reserved for future projects. paid semiannually and the capital is amortized from year five, and expires September 15, 2023. For his part, BECOP-I series, for a total of PATENTS, LICENSES AND FRANCHISES UF 1.4 million, settled at a rate of 2.44% and its rate of cover is 2.30%. For the year ended December 31, 2016, Empresas Copec S.A. had no Interests are also payable semiannually and the amortization of patents, licenses and franchises. capital paid in a share, from September 15, 2026. All these issues have been fixed-rate, thereby mitigating the risk of
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / FINANCIAL INFORMATION
HEADCOUNT For the year ended December 31, 2016, the headcount of the parent company Empresas Copec S.A. amounted to 28 people, including 7 managers and senior executives and 12 professionals and technicians.
As of that same date, the consolidated headcount, i.e., that of Empresas Copec and those companies in which it has a shareholding of more than 50%, amounted to 31,714 employees, including 896 managers and senior executives and 8,894 professionals and technicians.
ORGANIZATIONAL DIVERSITY For the year December 31, 2016, the breakdown of the organizational diversity of Empresas Copec S.A. was as follows:
Nº of People The Board Senior Management Rest of the Organization Gender Male 9 6 15 Female 0 1 6 Nationality Chilean 9 7 19 Foreign 0 0 2 Age Less than 30 years 0 0 11 From 30 to 40 years 0 3 3 From 41 to 50 years 0 2 2 From 51 to 60 years 2 2 2 From 61 to 70 years 2 0 2 More than 70 years 5 0 1 Years of Service Less than 3 years 3 2 9 From 3 to 6 years 1 1 6 115 / More than 6 and less than 9 0 0 0 From 9 to 12 years 4 1 2 More than 12 years 1 3 4
The consolidated breakdown of the organizational diversity is shown below:
Nº of People Consolidated Headcount Gender Male 22,523 Female 9,191 Nationality Chilean 18,140 Foreign 13,574 Age Less than 30 years 8,874 From 30 to 40 years 10,870 From 41 to 50 years 7,175 From 51 to 60 years 3,930 From 61 to 70 years 819 More than 70 years 46 Years of Service Less than 3 years 14,741 From 3 to 6 years 5,967 More than 6 and less than 9 3,130 From 9 to 12 years 2,862 More than 12 years 5,014
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / FINANCIAL INFORMATION
/ SALARY GAP
For the year ended December 31, 2016, the parent company had the following salary gap:
Position Men Women Gap (%) General Management 1 0 N/A Management 2 0 N/A Assistant management 2 0 N/A Heads 1 2 48.7% Analysts* 7 3 16.1% Secretaries 0 3 N/A Messengers 6 0 N/A
*Include analysts of the finance, studies and accounting areas with 0 to 5 years of experience
116 /
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 Summary of financial 117 statements /
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / SUMMARY OF FINANCIAL STATEMENTS
Assets At December 31 2016 2015 ThUS$ ThUS$ Current Assets 4,910,134 5,145,805 Cash and cash equivalents 1,289,413 1,584,765 Other current financial assets 185,046 174,981 Other current non financial assets 172,477 149,142 Trade and other receivables 1,358,381 1,347,354 Accounts receivable with related parties 46,530 76,669 Inventories 1,375,043 1,385,846 Biological assets 309,365 309,040 Current tax assets 166,221 110,781 Non current assets held for sale 7,658 7,227
Non Current Assets 16,536,372 14,779,809 Other non current financial assets 94,776 130,228 Other non current non financial assets 135,985 128,934 Non current fees receivable 32,958 43,151 Non current accounts receivable with related parties 25,187 7,464 Investment in associates through equity method 979,004 584,520 118 Intangible assets other than goodwill 811,178 645,999 / Goodwill 410,587 167,725 Property, plant and equipment 10,117,664 9,277,204 Biological assets 3,592,874 3,520, 068 Investment property 45,447 44,680 Deferred tax assets 290,712 229,836
TOTAL ASSETS 21,446,506 19,925,614
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / SUMMARY OF FINANCIAL STATEMENTS
Liabilities and Equity At December 31 2016 2015 ThUS$ ThUS$ Current Liabilities 2,612,925 1,923,329 Other current financial liabilities 911,454 420,815 Commercial creditors and other accounts payable 1,419,909 1,300,485 Accounts payable to related parties 7,653 6,027 Other provisions 16,357 4,247 Current tax liabilities 44,683 18,981 Current provisions for employee benefits 8,654 8,611 Other current non financial liabilities 204,215 164,163
Non Current Liabilities 8,348,081 8,146,412 Other non current financial liabilities 5,738,043 5,734,926 Non current liabilities 940 804 Accounts payable to related parties 0 0 Other provisions 67,080 46,279 Deferred tax liabilities 2,304,547 2,172,746 Non current provisions for employee benefits 102,922 87,603 Other non current non financial liabilities 134,549 104,054 119 /
Net Equity 10,485,500 9,855,873 Share capital 686,114 686,114 Accumulated earnings (losses) 10,278,553 9,974,213 Other reserves (1,009,473) (1,300,692)
Equity attributable to equity holders of the company 9,955,194 9,359,635 Minority interest 530,306 496,238
TOTAL LIABILITIES AND NET EQUITY 21,446,506 19,925,614
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / SUMMARY OF FINANCIAL STATEMENTS
Income Statement For the years ended December 31 2016 2015 ThUS$ ThUS$ Revenue 16,699,311 18,160,142 Cost of sales (13,936,759) (15,097,992) Gross income 2,762,552 3,062,150 Other operating income 278,873 286,364 Distribution costs (1,196,570) (1,159,469) Administrative expenses (778,032) (819,344) Other operating expenses (115,213) (131,266) Other income (loss) (8,014) (5,186) Financial income 65,443 76,443 Financial costs (361,519) (351,335) Income on investments in related companies and joint ventures 96,674 (125,940) Exchange rate differences 22,692 (60,478) Gains (losses) on net monetary position (12,760) (14,530)
Income before taxes 754,126 757,409 Income taxes (157,481) (186,440) Net Income 596,645 570,969 120 / Income attributable Income attributable to equity holders of the company 554,185 539,307 Income attributable to minority interests 42,460 31,662 Net Income 596,645 570,969
Earnings per share Common shares Basic earnings per share 0.4263441 0.4148982
Basic earnings per share from discontinued operations 0.4263441 0.4148982 Basic earnings per share from continuing operations 0.0000000 0.0000000 Diluted common shares Earnings per diluted share 0.0000000 0.0000000 Earnings per diluted share from discontinued operations 0.0000000 0.0000000 Earnings per diluted share from continuing operations 0.0000000 0.0000000
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / SUMMARY OF FINANCIAL STATEMENTS
Comprehensive Income Statement For the years ended December 31 2016 2015 ThUS$ ThUS$ Net Income 596,645 570,969 Comprehensive income, net of tax Other comprehensive income does not reclassify to the income of the period (5,568) (2,310) Gain (loss) for actuarial plans of defined beneficts (5,594) (1,530) Participation of other comprehensive income of associates and joint ventures 26 (780) Exchange difference on conversion 248,659 (705,656) Gain (loss) for differences on conversion 248,659 (705,656) Financial assets held for sale 276 (183) Gain (loss) on fair value changes of financial assets held for sale 276 (183) Cash flow hedges 67,919 1,424 Gain (loss) on cash flow hedges 67,347 1,427 Reclassification adjustments on cash flow hedges 572 (3) Other comprehensive income Gain (loss) from investments in equity instruments 0 4 Gain (loss) for actuarial plans of defined beneficts (2,706) (618) Participation of other comprehensive income of associates and joint ventures 0 (783) Other comprehensive income, net of tax 314,148 (705,812) 121 Income tax related to other comprehensive income (14,831) 368 / Income tax related to plans of defined beneficts to other comprehensive income 0 649 Income tax related to investment in equity instruments 0 (1) Income tax related to financial assets held for sale (68) 41 Income tax related to cash flow hedges (16,837) (331) Income tax related to plans of defined beneficts 2,074 10
Other comprehensive income 293,749 (707,754) Total comprehensive income 890,394 (136,785)
Comprehensive income attributable Comprehensive income attributable to parent company 847,358 (167,323) Comprehensive income attributable to non controlling interests 43,036 30,538 Total comprehensive income 890,394 (136,785)
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / SUMMARY OF FINANCIAL STATEMENTS
Statement of Changes / in Equity
Ordinary Changes in Changes in Shares Legal Retained Equity Attribu- Reserves Other Changes in Changes in Current Period and Conversion Beneficts Hedge Other Earnings (Ac- table to Parent available Reserves Minority Net Equity, (ThUS$) stuatory Reserves Reserves Reserves Reserves cumulated Company for sale Total Interests Total Share reserves Losses) Shareholders, Capital Total
Opening balance at 686,114 3 (468) (1,679,567) (21,924) (40,487) 441,751 (1,300,692) 9,974,213 9,359,635 496,238 9,855,873 January 1, 2016
Restated opening balance 686,114 3 (468) (1,679,567) (21,924) (40,487) 441,751 (1,300,692) 9,974,213 9,359,635 496,238 9,855,873
Changes in equity Comprehensive income statement
Net income 0 554,185 554,185 42,460 596,645
Other comprehensive 0 0 207 248,203 (6,224) 50,387 600 293,173 293,173 576 293,749 income Dividends 0 (224,643) (224,643) 0 (224,643) Other increases (decreases) through transfers and 0 0 0 0 0 0 (1,954) (1,954) (25,202) (27,156) (8,968) (36,124) other changes
Changes in equity 0 0 207 248,203 (6,224) 50,387 (1,354) 291,219 304,340 595,559 34,068 629,627
Closing balance at 686,114 3 (261) (1,431,364) (28,148) 9,900 440,397 (1,009,473) 10,278,553 9,955,194 530,306 10,485,500 December 31, 2016
122 /
Ordinary Changes in Changes in Shares Legal Retained Equity Attribu- Reserves Other Changes in Changes in Previous Period and Conversion Beneficts Hedge Other Earnings (Ac- table to Parent available Reserves Minority Net Equity, (ThUS$) stuatory Reserves Reserves Reserves Reserves cumulated Company for sale Total Interests Total Share reserves Losses) Shareholders, Capital Total
Opening balance at 686,114 0 (326) (974,990) (19,658) (41,622) 438,479 (598,117) 9,651,252 9,739,249 596,878 10,336,127 January 1, 2015
Restated opening balance 686,114 0 (326) (974,990) (19,658) (41,622) 438,479 (598,117) 9,651,252 9,739,249 596,878 10,336,127
Changes in equity Comprehensive income statement
Net income 0 0 0 0 0 0 0 0 539,307 539,307 31,662 570,969
Other comprehensive 0 3 (142) (704,577) (2,266) 1,135 (783) (706,630) 0 (706,630) (1,124) (707,754) income Dividends 0 0 0 0 0 0 0 0 (213,449) (213,449) 0 (213,449) Increases (decreases) through transfers and 0 0 0 0 0 0 (21,583) (21,583) (2,897) (24,480) (131,178) (155,658) other changes Increases (decreases) to changes in subsidiaries 0 0 0 0 0 0 25,638 25,638 0 25,638 0 25,638 that do not involve loss of control
Changes in equity 0 3 (142) (704,577) (2,266) 1,135 3,272 (702,575) 322,961 (379,614) (100,640) (480,254)
Closing balance at 686,114 3 (468) (1,679,567) (21,924) (40,487) 441,751 (1,300,692) 9,974,213 9,359,635 496,238 9,855,873 December 31, 2015
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / SUMMARY OF FINANCIAL STATEMENTS
Statement of Cash Flows For the years ended December 31, 2016 2015 ThUS$ ThUS$ Cash Flows from (used in) Operating Activities 1,511,847 1,526,269 Classes of cash receipts from operating activities Receipts from sales of goods and rendering of services 17,188,228 18,824,977 Receipts from premiums and claims, annuities and other policy benefits 342 6,122 Other cash receipts from operating activities 474,972 337,495 Classes of cash payments Payments to suppliers for goods and services (14,735,214) (16,256,561) Payments to and behalf of employees (815,407) (700,736) Payments from premiums and claims, annuities and other policy benefits (6,605) (4,307) Other payments from operating activities (287,671) (242,975) Dividends received 11,428 13,114 Interest paid (221,215) (232,646) Interest received 60,239 39,590 Income taxes refund (paid) (171,849) (258,463) Other inflows (outflows) of cash 14,599 659
Cash Flows from (used in) Investing Activities (1,821,265) (836,832) 123 Cash flows from loss of control of subsidiaries or other businesses (835,264) (10,090) / Cash flows from purchase of non-controlling interests 0 (22,202) Other cash payments to acquire equity or debt instruments of other entities (177) 0 Other cash payments to acquire joint ventures (153,135) 0 Loans to related companies (19,831) (78,663) Proceeds from sale of property, plant and equipment 22,143 11,918 Purchase of property, plant and equipment (636,007) (604,095) Proceeds from sale of intangible assets 0 99 Purchase of intangible assets (52,926) (43,691) Proceeds from other non current assets 1,859 650 Purchase of other non current assets (157,320) (126,366) Cash advances and loans to third parties (610) (2,049) Cash receipts from the repayment of advances and loans granted to third parties 456 0 Cash receipts from related parties 928 924 Dividends received 55,337 35,217 Interests received 1,187 53 Other inflows (outflows) of cash (47,905) 1,463
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / SUMMARY OF FINANCIAL STATEMENTS
Cash Flows from (used in) Financing Activities (37,916) (1,010,454) Proceeds from shares issued (791) 0 Payments of other equity interests (234) 0 Proceeds from long term borrowings 567,092 193,803 Proceeds from short term borrowings 549,808 334,396 Borrowings to related parties 0 184 Payments of borrowings (822,566) (1,206,278) Payments of finance leasing liabilities (3,414) (669) Payments of borrowings to related parties (251,105) (296,686) Dividends paid (67,852) (53,329) Interest paid (8,854) 18,125 Other inflows (outflows) of cash
Net Increase (Decrease) in Cash and Cash Equivalents (347,334) (321,017) Effect of exchange rate changes on cash and cash equivalents 52,542 (108,029) Effect of changes in consolidation on cash and cash equivalents (294,792) (429,046) Cash and cash equivalents at beginning of period 1,584,205 2,013,251 Cash and cash equivalents at end of period 1,289,413 1,584,205
124 /
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 Summary of Financial Statements 125 Principal Affiliates /
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / SUMMARY OF FINANCIAL STATEMENTS
/ CELULOSA ARAUCO Y CONSTITUCIÓN S.A. AND AFFILIATES
BALANCE SHEET At December 31 2016 2015 ThUS$ ThUS$ Assets Current assets 2,722,360 2,686,412 Non current assets 11,283,821 10,983,979 TOTAL ASSETS 14,006,181 13,670,391 Liabilities Current liabilities 1,346,064 1,034,251 Non current liabilities 5,660,834 5,989,695 Total liabilities 7,006,898 7,023,946 Equity Issued capital 353,618 353,618 Other reserves (728,042) (949,360) Accumulated earnings (losses) 7,329,675 7,204,452 Equity attributable to equity holders of the company 6,955,251 6,608,710 Minority interest 44,032 37,735 Net equity 6,999,283 6,646,445 TOTAL LIABILITIES AND NET EQUITY 14,006,181 13,670,391
126 / INCOME STATEMENT For the years ended December 31, 2016 2015 ThUS$ ThUS$ Gross profit 1,262,480 1,635,315 Profit (loss) before taxes 263,224 497,405 Income taxes (45,647) (129,694) Profit (loss) after taxes 217,577 367,711 Profit (loss) 217,577 367,711 Profit (loss) attributable to equity holders of the company 213,801 362,689 Profit (loss) attributable to minority interests 3,776 5,022 Profit (loss) 217,577 367,711
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / SUMMARY OF FINANCIAL STATEMENTS
STATEMENT OF CASH FLOWS For the years ended December 31, 2016 2015 ThUS$ ThUS$ Net cash flow from (used in) operating activities 773,584 853,650 Net cash flow from (used in) investing activities (640,212) (477,780) Net cash flow from (used in) financing activities (38,484) (812,176) Net Increase (Decrease) in Cash and Cash Equivalents 94,888 (436,306) Effect of exchange rate changes on cash and cash equivalents (2,660) (34,821) Cash and cash equivalents at beginning of period 500,025 971,152 Cash and cash equivalents at end of period 592,253 500,025
STATEMENT OF CHANGES IN EQUITY For the years ended December 31, 2016 2015 ThUS$ ThUS$ Legal and stuatory reserves (4,084) (878) Conversion Reserves 168,884 (374,275) Hedge Reserves 56,492 (2,374) Other Reserves 26 (781) Changes in Retained Earnings (Accumulated Losses) 125,223 219,888 Changes in Minority Interests 6,297 (9,871) 127 / Changes in equity 352,838 (168,291) Closing balance 6,999,283 6,646,445
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / SUMMARY OF FINANCIAL STATEMENTS
/ COMPAÑÍA DE PETRÓLEOS DE CHILE COPEC S.A. AND AFFILIATES
BALANCE SHEET At December 31 2016 2015 ThCh$ ThCh$ Assets Current assets 1,070,749,197 1,050,851,806 Non current assets 1,871,988,680 1,465,151,192 TOTAL ASSETS 2,942,737,877 2,516,002,998 Liabilities Current liabilities 783,828,480 569,704,461 Non current liabilities 1,112,885,789 1,060,314,572 Total liabilities 1,896,714,269 1,630,019,033 Equity Issued capital 511,338,349 410,502,349 Other reserves (209,755,735) (195,488,611) Accumulated earnings (losses) 586,340,725 521,140,396 Equity attributable to equity holders of the company 887,923,339 736,154,134 Minority interest 158,100,269 149,829,831 Net equity 1,046,023,608 885,983,965 TOTAL LIABILITIES AND NET EQUITY 2,942,737,877 2,516,002,998
128 / INCOME STATEMENT For the years ended December 31, 2016 2015 ThCh$ ThCh$ Gross profit 731,197,700 732,100,354 Profit (loss) before taxes 196,065,857 229,292,550 Income taxes (48,808,827) (24,702,294) Profit (loss) after taxes 147,257,030 204,590,256 Profit (loss) 147,257,030 204,590,256 Profit (loss) attributable to equity holders of the company 130,400,658 197,042,165 Profit (loss) attributable to minority interests 16,856,372 7,548,091 Profit (loss) 147,257,030 204,590,256
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / SUMMARY OF FINANCIAL STATEMENTS
STATEMENT OF CASH FLOWS For the years ended December 31, 2016 2015 ThCh$ ThCh$ Net cash flow from (used in) operating activities 364,018,769 405,046,106 Net cash flow from (used in) investing activities (546,321,159) (159,959,943) Net cash flow from (used in) financing activities 152,899,482 (123,292,989) Net Increase (Decrease) in Cash and Cash Equivalents (29,402,908) 121,793,174 Effect of exchange rate changes on cash and cash equivalents 2,206,746 (3,521,052) Cash and cash equivalents at beginning of period 311,070,842 192,798,720 Cash and cash equivalents at end of period 283,874,680 311,070,842
STATEMENT OF CHANGES IN EQUITY For the years ended December 31, 2016 2015 ThCh$ ThCh$ Opening balance 885,983,965 821,408,571 Share Capital 100,836,000 - Legal and stuatory reserves - 1,606 Reserves available for sale 49,889 (2,691) Conversion Reserves (8,217,991) (41,384,789) Hedge Reserves (4,877,438) 3,201,759 129 / Beneficts Reserves (1,382,777) (716,685) Other Reserves 161,193 18,445,560 Changes in Retained Earnings (Accumulated Losses) 65,200,329 92,714,582 Changes in Minority Interests 8,270,438 (7,683,948) Changes in equity 160,039,643 64,575,394 Closing balance 1,046,023,608 885,983,965
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / SUMMARY OF FINANCIAL STATEMENTS
/ ABASTIBLE S.A. AND AFFILIATES
BALANCE SHEET At December 31 2016 2015 ThCh$ ThCh$ Assets Current assets 100,177,177 75,737,246 Non current assets 673,343,856 410,501,852 TOTAL ASSETS 773,521,033 486,239,098 Liabilities Current liabilities 101,605,533 46,371,338 Non current liabilities 367,837,109 224,672,983 Total liabilities 469,442,642 271,044,321 Equity Issued capital 248,508,932 4,947,076 Other reserves (8,441,705) (1,392,492) Accumulated earnings (losses) 24,976,569 175,994,163 Equity attributable to equity holders of the company 265,043,796 179,548,747 Minority interest 39,034,595 35,646,030 Net equity 304,078,391 215,194,777 TOTAL LIABILITIES AND NET EQUITY 773,521,033 486,239,098
130 / INCOME STATEMENT For the years ended December 31, 2016 2015 ThCh$ ThCh$ Gross profit 222,450,091 158,417,696 Profit (loss) before taxes 74,179,279 52,163,435 Income taxes (20,242,922) (12,725,678) Profit (loss) after taxes 53,936,357 39,437,757 Profit (loss) 53,936,357 39,437,757 Profit (loss) attributable to equity holders of the company 49,176,871 34,645,405 Profit (loss) attributable to minority interests 4,759,486 4,792,352 Profit (loss) 53,936,357 39,437,757
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / SUMMARY OF FINANCIAL STATEMENTS
STATEMENT OF CASH FLOWS For the years ended December 31, 2016 2015 ThCh$ ThCh$ Net cash flow from (used in) operating activities 89,969,306 85,943,934 Net cash flow from (used in) investing activities (241,104,340) (42,975,894) Net cash flow from (used in) financing activities 148,634,120 (26,208,462) Net Increase (Decrease) in Cash and Cash Equivalents (2,500,914) 16,759,578 Effect of exchange rate changes on cash and cash equivalents 1,002,858 294,890 Cash and cash equivalents at beginning of period 37,299,358 20,244,890 Cash and cash equivalents at end of period 35,801,302 37,299,358
STATEMENT OF CHANGES IN EQUITY For the years ended December 31, 2016 2015 ThCh$ ThCh$ Opening balance 215,194,777 210,748,125 Issued Capital 243,561,856 - Legal and stuatory reserves 27,206 (115,435) Conversion Reserves (5,636,552) 79,064 Hedge Reserves (928,078) (1,015,098) Other Reserves (511,789) (395,007) 131 / Changes in Retained Earnings (Accumulated Losses) (151,017,594) 8,311,732 Changes in Minority Interests 3,388,565 (2,418,604) Changes in equity 88,883,614 4,446,652 Closing balance 304,078,391 215,194,777
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / SUMMARY OF FINANCIAL STATEMENTS
/ SOCIEDAD NACIONAL DE OLEODUCTOS S.A.
BALANCE SHEET At December 31 2016 2015 ThCh$ ThCh$ Assets Current assets 4,761,002 5,563,697 Non current assets 186,721,951 184,640,755 TOTAL ASSETS 191,482,953 190,204,452 Liabilities Current liabilities 37,312,742 37,121,729 Non current liabilities 82,434,011 81,346,523 Total liabilities 119,746,753 118,468,252 Equity Issued capital 59,575,440 59,575,440 Other reserves 0 0 Accumulated earnings (losses) 12,160,760 12,160,760 Net equity 71,736,200 71,736,200 TOTAL LIABILITIES AND NET EQUITY 191,482,953 190,204,452
INCOME STATEMENT For the years ended December 31, 2016 2015 132 ThCh$ ThCh$ / Gross profit 34,031,448 31,848,258 Profit (loss) before taxes 30,491,595 27,226,280 Income taxes (7,358,317) (6,207,183) Profit (loss) after taxes 23,133,278 21,019,097 Profit (loss) 23,133,278 21,019,097
STATEMENT OF CASH FLOWS For the years ended December 31, 2016 2015 ThCh$ ThCh$ Net cash flow from (used in) operating activities 31,738,971 33,143,928 Net cash flow from (used in) investing activities (6,743,219) (9,436,335) Net cash flow from (used in) financing activities (25,008,136) (33,216,305) Net Increase (Decrease) in Cash and Cash Equivalents (12,384) (9,508,712) Effect of exchange rate changes on cash and cash equivalents 0 0 Cash and cash equivalents at beginning of period 1,028,389 10,537,101 Cash and cash equivalents at end of period 1,016,005 1,028,389
STATEMENT OF CHANGES IN EQUITY For the years ended December 31, 2016 2015 ThCh$ ThCh$ Opening balance 71,736,200 71,736,200 Changes in equity 0 0 Closing balance 71,736,200 71,736,200
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / SUMMARY OF FINANCIAL STATEMENTS
/ PESQUERA IQUIQUE-GUANAYE S.A. AND AFFILIATES
BALANCE SHEET At December 31 2016 2015 ThUS$ ThUS$ Assets Current assets 96,447 117,125 Non current assets 405,127 420,994 TOTAL ASSETS 501,574 538,119 Liabilities Current liabilities 60,808 44,629 Non current liabilities 126,047 142,246 Total liabilities 186,855 186,875 Equity Issued capital 347,457 347,457 Other reserves (5,924) (8,273) Accumulated earnings (losses) (125,732) (90,492) Equity attributable to equity holders of the company 215,801 248,692 Minority interest 98,918 102,552 Net equity 314,719 351,244 TOTAL LIABILITIES AND NET EQUITY 501,574 538,119
133 / INCOME STATEMENT For the years ended December 31, 2016 2015 ThUS$ ThUS$ Gross profit 46,369 39,189 Profit (loss) before taxes (41,548) (26,528) Income taxes 2,639 4,103 Profit (loss) after taxes (38,909) (22,425) Profit (loss) (38,909) (22,425) Profit (loss) attributable to equity holders of the company (35,223) (17,611) Profit (loss) attributable to minority interests (3,686) (4,814) Profit (loss) (38,909) (22,425)
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / SUMMARY OF FINANCIAL STATEMENTS
STATEMENT OF CASH FLOWS For the years ended December 31, 2016 2015 ThUS$ ThUS$ Net cash flow from (used in) operating activities 16,975 17,969 Net cash flow from (used in) investing activities (22,779) (31,512) Net cash flow from (used in) financing activities (4,223) (7,436) Net Increase (Decrease) in Cash and Cash Equivalents (10,027) (20,979) Effect of exchange rate changes on cash and cash equivalents (623) 354 Cash and cash equivalents at beginning of period 11,958 32,583 Cash and cash equivalents at end of period 1,308 11,958
STATEMENT OF CHANGES IN EQUITY For the years ended December 31, 2016 2015 ThUS$ ThUS$ Opening balance 351,244 399,085 Conversion Reserves 1,870 (2,554) Hedge Reserves 652 (190) Other Reserves (173) (7,609) Changes in Retained Earnings (Accumulated Losses) (35,240) (17,631) Changes in Minority Interests (3,634) (19,857) 134 / Changes in equity (36,525) (47,841) Closing balance 314,719 351,244
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / SUMMARY OF FINANCIAL STATEMENTS
/ SOCIEDAD MINERA CAMINO NEVADO LTDA.
BALANCE SHEET At December 31 2016 2015 ThUS$ ThUS$ Assets Current assets 14,967 48,554 Non current assets 359,283 154,432 TOTAL ASSETS 374,250 202,986 Liabilities Current liabilities 140,189 352,641 Non current liabilities 117,632 13,717 Total liabilities 257,821 366,358 Equity Issued capital 354,105 69,105 Other reserves (9,790) (13,425) Accumulated earnings (losses) (227,906) (219,115) Equity attributable to equity holders of the company 116,409 (163,435) Minority interest 20 63 Net equity 116,429 (163,372) TOTAL LIABILITIES AND NET EQUITY 374,250 202,986
135 / INCOME STATEMENT For the years ended December 31, 2016 2015 ThUS$ ThUS$ Gross profit 0 (2,238) Profit (loss) before taxes (11,147) (186,702) Income taxes 2,354 3,826 Profit (loss) after taxes (8,793) (182,876) Profit (loss) (8,793) (182,876) Profit (loss) attributable to equity holders of the company (8,791) (182,871) Profit (loss) attributable to minority interests (2) (5) Profit (loss) (8,793) (182,876)
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / SUMMARY OF FINANCIAL STATEMENTS
STATEMENT OF CASH FLOWS For the years ended December 31, 2016 2015 ThUS$ ThUS$ Net cash flow from (used in) operating activities (4,085) (7,852) Net cash flow from (used in) investing activities (17,698) (49,455) Net cash flow from (used in) financing activities 16,704 63,834 Net Increase (Decrease) in Cash and Cash Equivalents (5,079) 6,527 Effect of exchange rate changes on cash and cash equivalents 0 0 Cash and cash equivalents at beginning of period 7,480 953 Cash and cash equivalents at end of period 2,401 7,480
STATEMENT OF CHANGES IN EQUITY For the years ended December 31, 2016 2015 ThUS$ ThUS$ Opening balance (163,372) 17,428 Share Capital 285,000 - Hedge Reserves 3,635 (3,139) Other Reserves 0 (9,293) Changes in Retained Earnings (Accumulated Losses) (8,791) (168,363) Changes in Minority Interests (43) (5) 136 / Changes in equity 279,801 (180,800) Closing balance 116,429 (163,372)
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / SUMMARY OF FINANCIAL STATEMENTS
/ INVERSIONES NUEVA SERCOM LTDA.
BALANCE SHEET At December 31 2016 2015 ThUS$ ThUS$ Assets Current assets 805 741 Non current assets 68,512 78,950 TOTAL ASSETS 69,317 79,691 Liabilities Current liabilities 49 19 Non current liabilities 0 0 Total liabilities 49 19 Equity Issued capital 88,951 88,951 Other reserves 11,962 11,217 Accumulated earnings (losses) (31,645) (20,496) Net equity 69,268 79,672 TOTAL LIABILITIES AND NET EQUITY 69,317 79,691
137 / INCOME STATEMENT For the years ended December 31, 2016 2015 ThUS$ ThUS$ Gross profit 0 0 Profit (loss) before taxes (11,135) (5,684) Income taxes (10) 27 Profit (loss) after taxes (11,145) (5,657) Profit (loss) (11,145) (5,657)
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / SUMMARY OF FINANCIAL STATEMENTS
STATEMENT OF CASH FLOWS For the years ended December 31, 2016 2015 ThUS$ ThUS$ Net cash flow from (used in) operating activities 0 0 Net cash flow from (used in) investing activities 0 0 Net cash flow from (used in) financing activities 0 0 Net Increase (Decrease) in Cash and Cash Equivalents 0 0 Effect of exchange rate changes on cash and cash equivalents 0 0 Cash and cash equivalents at beginning of period 0 0 Cash and cash equivalents at end of period 0 0
STATEMENT OF CHANGES IN EQUITY For the years ended December 31, 2016 2015 ThUS$ ThUS$ Opening balance 79,672 88,619 Conversion Reserves 593 (811) Hedge Reserves 206 (60) Other Reserves (54) (2,413) Changes in Retained Earnings (Accumulated Losses) (11,149) (5.663) Changes in equity (10,404) (8,947) 138 / Closing balance 69,268 79,672
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / SUMMARY OF FINANCIAL STATEMENTS
/ INMOBILIARIA LAS SALINAS LTDA.
BALANCE SHEET At December 31 2016 2015 ThUS$ ThUS$ Assets Current assets 742 598 Non current assets 133,661 105,552 TOTAL ASSETS 134,403 106,150 Liabilities Current liabilities 51,283 42,792 Non current liabilities 22,585 5,115 Total liabilities 73,868 47,907 Equity Issued capital 98,055 98,055 Other reserves (6,501) (9,976) Accumulated earnings (losses) (31,019) (29,836) Net equity 60,535 58,243 TOTAL LIABILITIES AND NET EQUITY 134,403 106,150
INCOME STATEMENT For the years ended December 31, 139 2016 2015 / ThUS$ ThUS$ Gross profit 0 15 Profit (loss) before taxes (2,789) (2,171) Income taxes 1,606 1,628 Profit (loss) after taxes (1,183) (543) Profit (loss) (1,183) (543)
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / SUMMARY OF FINANCIAL STATEMENTS
STATEMENT OF CASH FLOWS For the years ended December 31, 2016 2015 ThUS$ ThUS$ Net cash flow from (used in) operating activities (5,838) (5,201) Net cash flow from (used in) investing activities 0 0 Net cash flow from (used in) financing activities 5,832 4,823 Net Increase (Decrease) in Cash and Cash Equivalents (6) (378) Effect of exchange rate changes on cash and cash equivalents 0 (69) Cash and cash equivalents at beginning of period 21 468 Cash and cash equivalents at end of period 15 21
STATEMENT OF CHANGES IN EQUITY For the years ended December 31, 2016 2015 ThUS$ ThUS$ Opening balance 58,243 68,667 Conversion Reserves 3,559 (9,881) Defined benefit reserves (84) - Changes in Retained Earnings (Accumulated Losses) (1,183) (543) Changes in equity 2,292 (10,424) Closing balance 60,535 58,243 140 /
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / SUMMARY OF FINANCIAL STATEMENTS
/ EC INVESTRADE INC.
BALANCE SHEET At December 31 2016 2015 ThUS$ ThUS$ Assets Current assets 8 10 Non current assets 34 36 TOTAL ASSETS 42 46 Liabilities Current liabilities 34 31 Non current liabilities 0 0 Total liabilities 34 31 Equity Issued capital 20 20 Other reserves 16 16 Accumulated earnings (losses) (28) (21) Net equity 8 15 TOTAL LIABILITIES AND NET EQUITY 42 46
INCOME STATEMENT For the years ended December 31, 141 2016 2015 / ThUS$ ThUS$ Gross profit 0 0 Profit (loss) before taxes (6) (5) Income taxes 0 0 Profit (loss) after taxes (6) (5) Profit (loss) (6) (5)
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / SUMMARY OF FINANCIAL STATEMENTS
STATEMENT OF CASH FLOWS For the years ended December 31, 2016 2015 ThUS$ ThUS$ Net cash flow from (used in) operating activities (2) (1) Net cash flow from (used in) investing activities 0 0 Net cash flow from (used in) financing activities 0 0 Net Increase (Decrease) in Cash and Cash Equivalents (2) (1) Effect of exchange rate changes on cash and cash equivalents 0 0 Cash and cash equivalents at beginning of period 10 11 Cash and cash equivalents at end of period 8 10
STATEMENT OF CHANGES IN EQUITY For the years ended December 31, 2016 2015 ThUS$ ThUS$ Opening balance 15 21 Conversion Reserves 1 (2) Other reserves (1) 0 Changes in Retained Earnings (Accumulated Losses) (7) (4) Changes in equity (7) (6) Closing balance 8 15 142 /
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / FINANCIAL INFORMATION / Ownership structure
99.900% Financiamiento Doméstico
39.830% Metrogas 50.000% 50.000% Centrogas 99.995% Empresa Chilena de Gas Natural 50.000% Andes Operaciones y Servicios 39.830% Aprovisionadora 33.330% GNL Chile 47.000% GasAndes 47.000% GasAndes Argentina Compañía de 99.999% 99.900% 87.354% Petróleos CSI ArcoPrime 99.900% ASR 0.100% Arco 0.001% 0.100% 12.646% de Chile Copec 99.900% Alimentos
99.900% 99.900% Ades ADC 0.100% 0.100% 99.974% 40.000% Elemental Nueva Sercom 0.026% 99.900% 99.950% Transcom Vía Limpia 0.100% 0.050% 99.900% 0.100% ADG 100.000% EC Investrade 100.000% Copec Canal
2.330% Organización Terpel 56.183% 100.000% Copec Overseas 100.000% Mapco Express 44.640% Algae Fuels 60.000% Clapsa 33.333% Siav 50.000% Air BP Copec 40.800% Sonacol 100.000% Abastible Internacional 99.000% 12.000% Solgas 1.000% 17.387% Sonamar 18.350% 1.000% Edegas 99.000% Gas Licuado 99.000% 1.000% Motor 98.000% Forestal 1.000% 25.834% Nuestra Señora Setracom Forestal Talavera 2.000% del Carmen 50.000% 74.166% 99.990% Duragas 21.790% Semapesa 71.670% 36.145% Gas 78.210% Savitar 28.330% Natural 0.005% 12.048% Producción Muellaje Central 99.995% 9.975% Arauco 100.000% Leasing Forestal 99.134% Abastible 51.000% Inversiones del Nordeste 99.995% 90.006% Argentina 0.005% Puerto Central 99.999% Emprendimientos Santa Cruz 36.250% Gasmar FUELS 99.999% Portuaria Lirquén 0.080% Depósitos 100.000% Ongar 50.000% Portuarios 100.000% M´Bopicúa 99.920% 50.000% Hualpén Gas 0.005% Lirquén 50.000% Eufores 99.000% Puerto Lirquén El Esparragal 3.092% Puertos y 99.995% 1.000% 20.277% Logística 50.000% Celulosa 3.187% Arauco Forestal 100.000% Stora Enso 143 99.978% Arauco y 10.130% Forest Conosur Uruguay Constitución 86.683% Brasil / 98.000% Greenagro 48.991% Florestal Vale Do Corisco 50.000% Inversiones 99.990% Compañía Puerto de Coronel Puerto Coronel 100.000% Flakeboard Company 100.000% Arauco Australia 20.000% Bioenercel 0.010% 99.990% Servicios Aéreos Forestales 50.000% Eka Chile 99.999% Arauco Wood 100.000% Arauco Panels 0.001% Products 1.487% 2.956% Arauco 1.000% Bioforest 2.956% Colombia 99.000% 92.611% 50.000% Sonae Arauco 45.000% Servicios 100.000% Arauco Middle East 99.000% Logísticos Maderas 55.000% Arauco 100.000% Zona Franca Punta Pereira 1.000% Arauco 6.789% Zona Franca Punta Pereira 99.948% 43.211% Forestal Arauco 3.188% 0.052% 98.000% Arauco Celulosa y Energía Punta Pereira
FORESTRY 46.812% 2.000% Bioenergía
31.715% Pesquera 80.000% Forestal 0.800% Consorcio Los Lagos 51.610% Protección 50.218% Iquique - Guanaye Fitosanitaria 0.001% 5.320% Arauco Perú 30.640% Corpesca 25.000% Genómica Forestal 99.999% Forestal 0.001% 66.800% Orizon 100.000% Arauco Araucomex Nutrientes 99.999% 20.000% Sercor Forestal FISHERIES 98.529% 50.000% Unilin Cholguán 98.838% Arauco do 0.460% Arauco Europe 1.162% Brasil 99,550% 0.003% 98.019% Inversiones 99.997% Can - Can Arauco 80.000% Arauco Florestal Arapoti 1.981% Internacional 0.100% 99.998% 99.900% Sierra Norte Agenciamiento y 0.002% Servicios Profesionales 100.000% Las 0.100% La Merced Salinas 99.900% 100.000% Corpesca do Brasil 70.000% Selecta 99.900% Astilleros Arica 30.000% FASA 99.999% Paso San 0.001% Francisco 99.800% Serenor 20.000% 0.001% Minera Ciam 60.000% Camino 0.039% Alxar 99.999% Vilacollo 100.000% Nevado 99.961% 99.490% Línea Aérea Costa Norte Laguna 50.000% 99.800% Mina 70.000% MPH Marine Protein Holdings Blanca 0.100% Invierno 35.000% Golden Omega 60.000% Bioambar 99.800% Rentas y Construcciones 35.000% 100.000% Golden Omega USA 0.100% Fitz Roy 29.799% Boat Parking 99.800% Equipos Mineros 0.100% Rio Grande 68.000% Muelle Pesquero María Isabel 99.800% Producción y Servicios 0.100% Mineros 99.800% Eléctrica Río 0.100% Perez 99.800% Portuaria 0.100% Otway Direct ownership 99.990% Minera 0.010% Geleen Indirect ownership 99.990% Minera 0.010% Invierno 99.800% Forestal y Ganadera 0.100% Estancia Invierno OTHER INVESTMENTS 50.000% Naviera Los Inmigrantes
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / FINANCIAL INFORMATION / Company Identification
• Corporate Name: • Chilean Taxpayer Identification Number (RUT): Empresas Copec S.A. 90.690.000-9
• Type of Entity: • Business Activity: Chilean publicly held stock company Investments and Business Services
• Securities Registry Number: • Legal Address: 0028 El Golf 150, floor 17, Santiago de Chile
• Telephone: • Web Page: (562) 2461 7000 www.empresascopec.cl
• Investor Web Page: investor.empresascopec.cl
144 • Investor Relations Contact: / Cristián Palacios, [email protected], (562) 2461 7042 Leopoldo Silva, [email protected], (562) 2461 7015 Juan Pablo Serrano, [email protected], (562) 2461 7046
• External Auditors: PwC
• Credit Rating Agencies: Fitch Chile Clasificadora de Riesgo Limitada Feller Rate Clasificadora de Riesgo Limitada
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / FINANCIAL INFORMATION / Corporate Purpose and Articles of Incorporation
Corporate Purpose: a) Research, explore, industrialize, clear through parties agricultural real estate in general, develop Customs, import, export, elaborate, refine, mix, package, real estate business and the real estate construction store, transport, buy, sell, distribute, and generally trade industry arising from this, like buildings, roads, on its own behalf or for third parties hydrocarbons, bridges, canals, drainage, industrial facilities and their by-products and direct or indirect compounds, similar, and the production and installation of goods including lubricants, additives, mixtures, combinations and implements for such industry; f) Ground, air, sea and substitutes; chemicals of any kind, and any other and river freight on its own behalf or for third parties source of natural energy capable of industrial or and undertake, on its own behalf or for third parties, domestic use; b) Import, export, buy, sell, distribute, port operations and activities, with these particularly and generally trade on its own behalf or for third including wharfage, lighterage, moving loads, storage, parties motorized vehicles and machinery, elements, stowage and unloading of vessels and aircraft, and equipment and other articles for agricultural, mining, the promotion, development and exploitation of fishery, industrial, commercial, electronic computing tourism in Chile; g) Manufacture, distribute and and domestic use purposes, their accessories and spare generally trade containers of any kind; h) Exploit parts; c) Acquire, administer, manage and exploit on electronic computer equipment in all its forms, and 145 its own behalf or for third parties forest lands or those it can provid consultancy on company management / of forest capability, make paper, wood pulp and their and organization, market and feasibility studies derivatives, by-products and similar products; acquire and operative research; i) Undertake mining-related and exploit sawmills and other industries that make activities and business, including but not limited to raw materials to make paper, wood pulp and their prospection, reconnaissance, exploration and mining by-products and/or wood in all its forms, sell, exploit of mining deposits; and fishing or hunting of species and generally trade in and outside Chile the mentioned and organisms with water as their normal habitat, and products, particularly wood, wood pulp and paper in all it may market them in any way; j) Participate pursuant their forms; d) Acquire, administer, manage and exploit to law in companies with a banking purpose, and on its own behalf or for third parties agricultural real generally in financial, insurance, warrants, storage and estate, and transform, industrialize and trade food merchandise deposit services and in mutual and social and drinks of any kind or origin; e) Acquire, administer, security fund management. manage and exploit on its own behalf or for third
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 / FINANCIAL INFORMATION
Articles of Incorporation:
The Company was established under public deed the presence of the Santiago Notary Mr. René Benavente, dated October 31st, 1934, signed in the presence of the which changed the name of the Company to Empresas Santiago Notary Mr. Luis Azócar, and was authorized by Copec S.A., effective October 1st, 2003, the required Supreme Decree N° 3,610, dated November 22nd, 1934. excerpt of which was published in the Chilean Official The corresponding registration was made on folio 1,813 Gazette of May 31st, 2003 and was registered on folio N° 1,008, and folio 1,829, entry N° 1,009, in the Santiago 14,697, N° 11,252, of the Trade Registry of Santiago’s Real Trade Registry of 1934. The corporate bylaws have been Estate Registry of 2003; and an amendment made under amended on several occasions, noteworthy amongst public deed dated September 12th, 2008, in the presence which were: the amendment made under public deed of the Santiago Notary Mr. Félix Jara, when the currency dated April 20th, 1982, in the presence of the Santiago of the capital stock laid down in the Company’s bylaws Notary Mr. Andrés Rubio, when the bylaws were restated was changed, of the financial accounting registries and to adapt them to the requirements of Chilean Law of the issuance of the Company’s financial statements, Nº 18,046; an amendment to increase equity capital, from pesos of the Republic of Chile to US dollars, now divided into 1,299,853,848 shares of no par value, effective as of January 1st, 2008, and all as laid down in accordance with a public deed dated January 29th, in “Transitory Article Four” of the company’s bylaws, 1988, in the presence of Mr. Andrés Rubio, published in and this provision is added to the bylaws. The required the Chilean Official Gazette of February 10th, 1988, and excerpt of which was published in the Chilean Official 146 registered on folio 3,268 N° 1,690, of the Trade Registry Gazette of October 10th, 2008 and was registered on folio / of Santiago’s Real Estate Registry of 1988; and, finally, an 46,937, N° 32,354, of the Trade Registry of Santiago’s Real amendment set out in public deed dated May 7th, 2003, in Estate Registry of 2008.
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 147 / }
Design: Diseñadores Asociados www.da.cl
Annual Report 2016
Empresas Copec WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1
EMPRESAS COPEC S.A.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2016
IFRS - International Financial Reporting Standards IAS - International Accounting Standards NIFCH - Chilean Financial Reporting Standards IFRIC - International Financial Reporting Interpretations Committee US$ - United States dollars ThUS$ - Thousands of US dollars MUS$ - Millions of US dollars MCh$ - Millions of Chilean Pesos COP$ - Colombian peso S./ - Peruvian nuevo sol
(Free Translation of interim consolidated financial statements originally issued in Spanish, for the convenience of readers outside Chile)
WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1
INDEPENDENT AUDITOR’S REPORT
Santiago, March 15, 2017
Shareholders and Directors Empresas Copec S.A.
We have audited the accompanying consolidated financial statements of Empresas Copec S.A. and its subsidiaries, which comprise the consolidated statements of financial position as at December 31, 2016 and 2015 and the consolidated statements of net income, comprehensive income, changes in equity and cash flows for the year then ended, and the related notes to the consolidated financial statements.
Management’s responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards (IFRS). This responsibility includes designing, implementing and maintaining internal controls relevant for the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We have not audited the financial statements of the subsidiaries of Compañía de Petróleos de Chile Copec S.A., Pesquera Iquique Guanaye S.A. and Sociedad Nacional de Oleoductos S.A., which represent 26.71% and 37.74% of consolidated assets and net income as of December 31, 2016, and 22% and 37% of consolidated assets and net income as of December 31, 2015,respectively. We have not audited the financial statements of the associate Metrogas S.A. and Aprovisionadora Global de Energía S.A. These investments were accounted for under the equity method, and represent 0.70% and 15.37% of consolidated assets and net income as of December 31, 2016, and 0.6% and 5.8% of consolidated assets and net income as of December 31, 2015, respectively. The financial statements of the companies referred to above were audited by other auditors, whose reports have been provided to us. Our opinion, insofar as it relates to the amounts included of such companies, is based solely on the reports of those other auditors. We conducted our audit in accordance with Chilean generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance that the consolidated financial statements are free from material misstatement.
WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 Santiago, March 15, 2017 Empresas Copec S.A. 2
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant for the preparation and fair presentation of the entity’s consolidated financial statements with the aim of designing auditing procedures appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we do not express such an opinion. An audit also includes evaluating the accounting policies used and the reasonableness of significant accounting estimates made by Management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Opinion
In our opinion, based on our audits and on the reports of other auditors, the consolidated financial statements referred to above present fairly, in all material aspects, the financial position of Empresas Copec S.A. and subsidiaries as of December 31, 2016 and 2015, and the results of its operations and cash flows for the years then ended in accordance with International Financial Reporting Standards.
Renzo Corona Spedaliere Chilean ID Number: 6,373,028-9
WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1
Index to the consolidated financial statements of Empresas Copec S.A. and affiliates
Notes Page.
CONSOLIDATED CLASSIFIED STATEMENTS OF FINANCIAL POSITION - ASSETS ...... 1
CONSOLIDATED CLASSIFIED STATEMENTS OF FINANCIAL POSITION - LIABILITIES ...... 2
CONSOLIDATED STATEMENTS OF INCOME BY FUNCTION ...... 3
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ...... 4
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY...... 6
CONSOLIDATED STATEMENTS OF CASH FLOW, DIRECT METHOD ...... 8
NOTE 1. CORPORATE INFORMATION ...... 10
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ...... 11
2.1 BASIS OF PRESENTATION ...... 12 2.2 BASES OF CONSOLIDATION ...... 15 2.3 FINANCIAL INFORMATION OF OPERATING SEGMENTS ...... 18 2.4 TRANSACTIONS IN CURRENCIES OTHER THAN THE FUNCTIONAL CURRENCY ...... 18 2.5 PROPERTY, PLANT AND EQUIPMENT ...... 20 2.6 BIOLOGICAL ASSETS ...... 21 2.7 INVESTMENT PROPERTY ...... 22 2.8 INTANGIBLE ASSETS ...... 22 2.9 INTEREST COSTS ...... 25 2.10 IMPAIRMENT LOSSES FOR NON-FINANCIAL ASSETS ...... 25 2.11 FINANCIAL ASSETS ...... 25 2.12 DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITY ...... 27 2.13 INVENTORIES ...... 27 2.14 TRADE AND OTHER RECEIVABLES ...... 28 2.15 CASH AND CASH EQUIVALENTS ...... 29 2.16 SHARE CAPITAL ...... 29 2.17 TRADE AND OTHER PAYABLES...... 29 2.18 FINANCIAL LIABILITIES VALUED AT AMORTIZED COST ...... 29 2.19 INCOME TAX AND DEFERRED TAX ...... 30 2.20 EMPLOYEE BENEFITS ...... 31 2.21 PROVISIONS ...... 31 2.22 REVENUE RECOGNITION ...... 32 2.23 LEASES ...... 33 2.24 NON-CURRENT ASSETS HELD FOR SALE ...... 33 2.25 DIVIDENDS ...... 34 2.26 ENVIRONMENT ...... 34 2.27 BUSINESS COMBINATIONS ...... 34 2.28 LOYALTY PROGRAM ...... 35
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2.29 IMPAIRMENT ...... 35 2.30 STATEMENT OF CASH FLOWS ...... 36 2.31 EARNINGS PER SHARE ...... 37 2.32 CLASSIFICATION OF CURRENT AND NON-CURRENT BALANCES ...... 37 2.33 OFFSETTING BALANCES AND TRANSACTIONS ...... 37
NOTE 3. FINANCIAL INSTRUMENTS ...... 38
3.1 CASH AND CASH EQUIVALENTS ...... 38 3.2 OTHER FINANCIAL ASSETS ...... 39 3.3 TRADE AND OTHER RECEIVABLES ...... 40 3.4 OTHER FINANCIAL LIABILITIES ...... 42 3.5 OTHER FINANCIAL LIABILITIES AT FAIR VALUE THROUGH NET INCOME...... 48 3.6 FAIR VALUE HIERARCHY ...... 49 3.7 HEDGING FINANCIAL INSTRUMENTS ...... 50
NOTE 4. FINANCIAL RISK MANAGEMENT ...... 52
NOTE 5. ESTIMATES, JUDGEMENTS AND ACCOUNTING CHANGES ...... 69
NOTE 6. INVENTORY ...... 72
NOTE 7. BIOLOGICAL ASSETS ...... 73
NOTE 8. CURRENT TAX ASSETS AND LIABILITIES ...... 76
NOTE 9. OTHER NON FINANCIAL ASSETS ...... 77
NOTE 10. INTANGIBLE ASSETS AND GOODWILL ...... 78
NOTE 11. PROPERTY, PLANT AND EQUIPMENT ...... 83
NOTE 12. LEASES ...... 86
NOTE 13. INVESTMENT PROPERTY ...... 88
NOTE 14. DEFERRED TAXES ...... 89
NOTE 15. TRADE AND OTHER PAYABLES ...... 92
NOTE 16. BALANCES AND TRANSACTIONS WITH RELATED PARTIES ...... 93
16.1 RELATED PARTY RECEIVABLES ...... 94 16.2 RELATED PARTY PAYABLES ...... 95 16.3 RELATED PARTY TRANSACTIONS ...... 96 16.4 BOARD OF DIRECTORS AND KEY MEMBERS OF MANAGEMENT ...... 98
NOTE 17. PROVISIONS, CONTINGENT ASSETS AND CONTINGENT LIABILITIES ...... 98
NOTE 18. OBLIGATIONS FOR EMPLOYEES BENEFITS ...... 116
NOTE 19. EQUITY METHOD INVESTMENTS IN AFFILIATES AND ASSOCIATES ...... 117
NOTE 20. NATIONAL AND FOREIGN CURRENCY ...... 126
NOTE 21. EQUITY ...... 129 ii WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1
NOTE 22. OPERATING REVENUE ...... 132
NOTE 23. NET INCOME BY NATURE: ...... 133
NOTE 24. FINANCIAL INCOME AND COSTS ...... 136
NOTE 25. EXCHANGE DIFFERENCES ...... 137
NOTE 26. IMPAIRMENT OF ASSETS ...... 138
NOTE 27. ENVIRONMENT ...... 139
NOTE 28. OPERATING SEGMENTS ...... 143
NOTE 30. SUBSEQUENT EVENTS ...... 149
iii WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1
Consolidated Classified Statements of Financial Position - Assets
12.31.2016 12.31.2015 Notes ThUS$ ThUS$
Assets Current assets Cash and cash equivalents 3.1 1,289,413 1,584,765 Other financial assets, current 3.2 185,046 174,981 Other non-financial assets, current 9 172,477 149,142 Trade and other receivables, current 3.3 1,358,381 1,347,354 Current receivables from related parties 16.1 46,530 76,669 Inventories 6 1,375,043 1,385,846 Biological assets, current 7 309,365 309,040 Current tax assets 8 166,221 110,781
Total current assets other than assets or groups of assets classified as held for sale or distribution among the owners 4,902,476 5,138,578
Non-current assets or disposal groups classified as held for sale 7,658 7,227 Non-current assets or disposal groups classified as held for distribution to owners 0 0
Non-current assets or disposal groups classified as held for sale or as held for distribution to owners 7,658 7,227
Total current assets 4,910,134 5,145,805 Non-current assets Other financial assets, non-current 3.2 b 94,776 130,228 Other non-financial assets, non-current 9 135,985 128,934 Receivables, non-current 3.3 32,958 43,151 Accounts receivable from related companies, non-current 16.1 25,187 7,464 Equity method investments 19 979,004 584,520 Intangible assets other than goodwill 10 811,178 645,999 Goodwill 10 410,587 167,725 Property, plant and equipment 11 10,117,664 9,277,204 Non-current biological assets 7 3,592,874 3,520,068 Investment property 13 45,447 44,680 Deferred tax assets 14a 290,712 229,836
Total non-current assets 16,536,372 14,779,809
Total assets 21,446,506 19,925,614
The attached notes 1 to 30 form an integral part of these consolidated financial statements.
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Consolidated Classified Statements of Financial Position - Liabilities
12.31.2016 12.31.2015 Note ThUS$ ThUS$
Equity and liabilities Liabilities Current liabilities Other current financial liabilities 3.4 911,454 420,815 Trade & other payables, current 15 1,419,909 1,300,485 Accounts payable to related companies, current 16.2 7,653 6,027 Other provisions, current 17 16,357 4,247 Current tax liabilities 8 44,683 18,981 Employee benefits provisions, current 18 8,654 8,611 Other current non-financial liabilities 204,215 164,163
Total current liabilities other than liabilities included in asset groups classified as held for sale 2,612,925 1,923,329
Liabilities included in asset groups classified as held for sale 0 0
Total current liabilities 2,612,925 1,923,329 Non-current liabilities Other financial liabilities, non-current 3.4 5,738,043 5,734,926 Other payables, non-current 940 804 Accounts payable to related companies, non-current 0 0 Other provisions, non-current 17 67,080 46,279 Deferred tax liabilities 14a 2,304,547 2,172,746 Employee benefits provisions, non-current 18 102,922 87,603 Other non-financial liabilities, non-current 134,549 104,054
Total non-current liabilities 8,348,081 8,146,412
Total liabilities 10,961,006 10,069,741
Equity Share capital 21 686,114 686,114 Retained earnings (losses) 21 10,278,553 9,974,213 Share premium 0 0 Treasury shares 0 0 Other equity interests 0 0 Other reserves 21 (1,009,473) (1,300,692)
Equity attributable to owners of the parent 9,955,194 9,359,635
Non-controlling interests 21 530,306 496,238
Total equity 10,485,500 9,855,873
Total liabilities and equity 21,446,506 19,925,614
The attached notes 1 to 30 form an integral part of these consolidated financial statements.
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Consolidated Statements of Income by Function
12.31.2016 12.31.2015 Notes ThUS$ ThUS$
Net Income (loss) Operating revenue 22 16,699,311 18,160,142 Cost of sales 23 (13,936,759) (15,097,992)
Gross margin 2,762,552 3,062,150
Distribution costs 23 (1,196,570) (1,159,469) Administrative expenses 23 (778,032) (819,344)
Net Operating Income 787,950 1,083,337
Other income, by function 23 278,873 286,364 Other expenses, by function 23 (115,213) (131,266) Other gains (losses) (8,014) (5,186) Financial income 24 65,443 76,443 Finance costs 24 (361,519) (351,335) Share of profits (losses) of associates and joint ventures accounted for using equity method 19 96,674 (125,940) Exchange differences 25 22,692 (60,478) Gain (loss) on indexed assets and liabilities (12,760) (14,530) Gain (loss) arising from the difference between the prior book value and the fair value of financial assets reclassified at fair value 0 0
Profit (loss) before tax 754,126 757,409
Income tax expense 14b (157,481) (186,440)
Net income from continuing operations 596,645 570,969
Profit (loss) from discontinued operations 0 0
Net income for the period 596,645 570,969
Net income attributable to
Profit (loss) attributable to owners of the controller 554,185 539,307 Net income attributable to non-controlling interests 42,460 31,662
Net income for the period 596,645 570,969
Earnings per share
Basic earnings per share
Basic earnings per share from continuing operations 0.4263441 0.4148982 Basic earnings per share from discontinued operations 0.0000000 0.0000000
Basic earnings per share 0.4263441 0.4148982 Diluted earnings per share Diluted earnings per share from continuing operations 0.0000000 0.0000000 Diluted earnings per share from discontinued operations 0.0000000 0.0000000
Diluted earnings (losses) per share 0.0000000 0.0000000
The attached notes 1 to 30 form an integral part of these consolidated financial statements.
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Consolidated Statements of Comprehensive Income
12.31.2016 12.31.2015 ThUS$ ThUS$
Statement of Comprehensive Income
Net income for the period 596,645 570,969 Components of other comprehensive income that will not be reclassified to net income for the period, before taxes Other comprehensive income, before taxes, from revaluation gains (losses) 0 0
Other comprehensive income, before taxes, from actuarial gains (losses) on defined-benefit (5,594) (1,530) pension plans Other comprehensive income, before taxes, from gains (losses) on new measurements of 0 0 defined-benefit pension plans
Participation in other comprehensive income of associates and joint ventures accounted for 26 (780) using the equity method that will not be reclassified to net income for the period, before taxes
Other comprehensive income that will not be reclassified to net income for the (5,568) (2,310) period, before taxes
Components of other comprehensive income that may be reclassified to net income
Gain (loss) from foreign currency translation adjustment, before taxes 248,659 (705,656)
Reclassification adjustments, foreign currency translation adjustment, before taxes 0 0
Other comprehensive income, before taxes, exchange differences on 248,659 (705,656) translation
Financial assets available for sale Gain (loss) for new measurements of available-for-sale financial assets, before taxes 276 (183) Reclassification adjustments, foreign currency translation adjustment, before taxes 0 0
Other comprehensive income, before taxes, exchange differences on 276 (183) translation
Cash flow hedges Gain (loss) on cash flow hedges, before tax 67,347 1,427 Reclassification adjustments, cash flow hedges, before taxes 572 (3)
Adjustments for amounts transferred to initial carrying amount of hedged items 0 0
Other comprehensive income, before taxes, from cash flow hedges 67,919 1,424
Other comprehensive income, before taxes, from gains (losses) on investments in 0 4 equity instruments
Other comprehensive income, before taxes, from revaluation gains (losses) 0 0
Other comprehensive income, before taxes, from actuarial gains (losses) on defined- (2,706) (618) benefit pension plans Participation in other comprehensive income of associates and joint ventures accounted 0 (783) for using the equity method
Other comprehensive income, before taxes 314,148 (705,812)
Income tax relating to components of other comprehensive income that will not be reclassified to net income for the period Income tax related to defined benefit pension plans of other comprehensive income 0 649
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12.31.2016 12.31.2015 ThUS$ ThUS$
Income tax related to components of other comprehensive income Income tax related to foreign currency translation adjustments of other comprehensive 0 0 income
Income tax related to investments in equity instruments of other comprehensive income 0 (1)
Income tax related to financial assets held-for-sale of other comprehensive income (68) 41 Income tax related to cash flow hedges of other comprehensive income (16,837) (331)
Income tax related to changes in the revaluation surplus of other comprehensive income 0 0
Income tax related to defined benefit pension plans of other comprehensive income 2,074 10 Reclassification adjustments to income tax related to components of other 0 0 comprehensive income
Total income tax relating to components of other comprehensive income (loss) (14,831) 368
Other comprehensive income (loss) 293,749 (707,754)
Total comprehensive income 890,394 (136,785)
Comprehensive income attributable to:
Total comprehensive income (loss) attributable to owners of the Company 847,358 (167,323) Comprehensive income attributable to non-controlling interests 43,036 30,538
Total comprehensive income 890,394 (136,785)
The attached notes 1 to 30 form an integral part of these consolidated financial statements.
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Consolidated Statements of Changes in Equity.
The attached notes 1 to 30 form an integral part of these consolidated financial statements.
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The attached notes 1 to 30 form an integral part of these consolidated financial statements.
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Consolidated Statements of Cash Flow, Direct Method
12.31.2016 12.31.2015 Note ThUS$ ThUS$
Statement of cash flow
Cash flows provided by (used in) operating activities Proceeds from operating activities Proceeds from sales of goods and services 17,188,228 18,824,977 Proceeds from royalties, installments, commissions and other operating income 0 0 Proceeds from contracts for brokerage or trading 0 0 Proceeds from premiums and claims, annuities and other benefits arising on policies underwritten 342 6,122 Other proceeds from operating activities 474,972 337,495 Payments Payments to suppliers for goods and services (14,735,214) (16,256,561) Payments for contracts for brokerage or trading 0 0 Payments to and on behalf of employees (815,407) (700,736) Payments for premiums and claims, annuities and other obligations arising on policies underwritten (6,605) (4,307) Other payments for operating activities (287,671) (242,975) Dividends paid 0 0 Dividends received 11,428 13,114 Interest paid (221,215) (232,646) Interest received 60,239 39,590 Income taxes refunded (paid) (171,849) (258,463) Other cash receipts (payments) 14,599 659
Net cash flows provided by (used in) operating activities 1,511,847 1,526,269
Net cash flows provided by (used in) investing activities Cash flows from the loss of control of subsidiaries or other businesses 0 0 Payments to obtain control of subsidiaries or other businesses (835,264) (10,090) Payments to purchase non-controlling interests 0 (22,202) Proceeds from the sale of equity or debt instruments of other entities 0 0 Payments to acquire equity or debt instruments of other entities (177) 0 Other proceeds from sale of joint ventures 0 0 Other payments to acquire interests in joint ventures (153,135) 0 Loans to related companies (19,831) (78,663) Proceeds from sales of property, plant and equipment 22,143 11,918 Acquisitions of property, plant and equipment (636,007) (604,095) Proceeds from sales of intangible assets 0 99 Purchases of intangible assets (52,926) (43,691) Receipts from the sale of other long-term assets 1,859 650 Acquisitions of other long-term assets (157,320) (126,366) Proceeds from government subsidies 0 0 Cash advances and loans to third parties (610) (2,049) Proceeds from the repayment of advances and loans granted to third parties 456 0 Payments related to futures, forward, options and swap contracts 0 0 Proceeds from futures, forward, options and swap contracts 0 0 Proceeds from related companies 928 924 Dividends received 55,337 35,217 Interest received 1,187 53 Income taxes refunded (paid) 0 0 Other cash receipts (payments) (47,905) 1,463
Net cash flows provided by (used in) investing activities (1,821,265) (836,832)
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Net cash flows provided by (used in) financing activities Proceeds from share issues (791) 0 Proceeds from issuing other equity instruments 0 0 Payments to acquire treasury shares 0 0 Payments for other equity interests (234) 0 Proceeds from long-term loans 567,092 193,803 Proceeds from short-term loans 549,808 334,396
Total proceeds from loans 1,116,900 528,199
Loans from related companies 0 184 Loan repayments (822,566) (1,206,278) Repayment of finance lease liabilities (3,414) (669) Loan repayments to related parties 0 0 Proceeds from government subsidies 0 0 Dividends paid (251,105) (296,686) Interest paid (67,852) (53,329) Income taxes refunded (paid) 0 0 Other cash receipts (payments) (8,854) 18,125
Net cash flows provided by (used in) financing activities (37,916) (1,010,454)
Increase (decrease) in cash & cash equivalents before effect of exchange rate variations (347,334) (321,017)
Effect of exchange rate variations on cash and cash equivalents Effect of exchange rate fluctuations on cash and cash equivalents 52,542 (108,029) Net increase (decrease) in cash and cash equivalents (294,792) (429,046) Cash and cash equivalents at the start of the year 1,584,205 2,013,251 Cash and cash equivalents at the end of the year 3.1 1,289,413 1,584,205
The attached notes 1 to 30 form an integral part of these consolidated financial statements.
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NOTE 1. CORPORATE INFORMATION
Empresas Copec S.A. is a financial holding company that operates in a variety of business sectors through its affiliates and associates. Since its inception in 1934, the Parent Company was dedicated to the distribution of liquid fuel. This business was transferred to a new affiliate in October 2003.
Today, the operations of Empresas Copec S.A. can be divided into two large areas of specialization: natural resources and energy. Within the area of natural resources, the Company has businesses in the forestry, fishing and mining industries. Within the energy segment, the Company’s businesses include the distribution of liquid fuel, liquid petroleum gas and natural gas, as well as electricity generation. All of these sectors are strongly linked to the growth and development of the country.
The Company’s main affiliates and associates include Celulosa Arauco y Constitución S.A., Compañía de Petróleos de Chile Copec S.A. (Copec S.A.), Abastible S.A., Sociedad Nacional de Oleoductos S.A., Metrogas S.A., Corpesca S.A., Orizon S.A., Pesquera Iquique-Guanaye S.A., Inmobiliaria Las Salinas Ltda. and Minera Camino Nevado Ltda.
Empresas Copec S.A., the Group’s Parent Company, is a publicly held corporation that is registered in the Securities Registry under No. 0028. The Company is regulated by the Chilean Superintendence of Securities and Insurance. The Company’s legal address is Avenida El Golf No. 150, 17th floor, Las Condes, Santiago, Chile. Its Chilean identification number is 90,690,000-9.
Empresas Copec S.A. is controlled by Antarchile S.A., which holds 60.82% of the Company’s shares. Antarchile S.A. is a publicly held corporation that is registered in the Securities Registry under No. 0342 and is regulated by the Chilean Superintendence of Securities and Insurance.
The Group’s final parent is Inversiones Angelini y Compañía Ltda. which owns 63.4% of AntarChile S.A.
The consolidated financial statements were prepared on a going concern basis.
The consolidated financial statements as of December 31, 2016 were approved by the Board of Directors at its Extraordinary Meeting 2,603 held on March 15, 2017, and their publication was approved on the same date. The financial statements of the affiliates were approved by their respective Boards of Directors.
The consolidated financial statements as of December 31, 2015 were approved by the Board of Directors at its Extraordinary Meeting 2,583 held on March 11, 2016, and their publication was approved on the same date. The financial statements of the affiliates were approved by their respective Boards of Directors.
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Capital Management:
Capital management refers to the management of the Company’s equity. The purpose of the capital management policies of the Empresas Copec S.A. Group is:
To safeguard the Company’s normal operations and secure the long-term continuity of the business; To secure financing for new investments in order to maintain sustained growth over time; To maintain an appropriate capital structure, in accordance with economic cycles that affect the business and the nature of the industry; To maximize the Company’s value, providing investors with an adequate return on their investment.
Capital requirements are incorporated based on the Company’s financing needs, while at the same time taking care to maintain appropriate liquidity levels and to comply with the financial covenants established in its debt contracts. The Company manages its capital structure based on prevailing economic conditions in order to mitigate risks from adverse market conditions and take advantage of any opportunities that may arise to improve its liquidity position.
The financial structure of Empresas Copec S.A. and its affiliates as of December 31, 2016 and 2015 is the following:
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
On October 17, 2014 the Superintendence of Securities and Insurance issued Circular 856, instructing inspected entities to record differences in deferred tax assets and liabilities arising as a direct effect of the increase in corporate income tax rate introduced by Law 20,780 against equity for the respective year. This accounting treatment differs from International Accounting Standard 12 (IAS 12) and therefore represented a change in the framework for preparing and presenting financial information from that date.
As the instruction described in the previous paragraph represented a temporary deviation from IFRS, the Company decided to retroactively apply IFRS in 2016 as if it had never ceased to apply them, in accordance with paragraph 4A of IFRS 1 and IAS 8 "Accounting Policies, Changes in Accounting Estimates and Errors".
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As this decision did not amend any of the accounts in the consolidated statements of financial position as of December 31, 2016 and 2015, nor December 31, 2015 and 2014, the presentation of the consolidated statement of financial position as of January 1, 2015 (third column) is not necessary, in accordance with paragraph 40A of IAS 1 "Presentation of Financial Statements".
The consolidated financial statements are presented in thousands of US dollars and have been prepared on the basis of the accounting records of Empresas Copec S.A., its affiliates and associates.
2.1 Basis of presentation
These consolidated financial statements for Empresas Copec S.A. and affiliates, include the consolidated statements of financial position as of December 31, 2016 and 2015, the corresponding consolidated statements of net income by function and comprehensive income for the years ended December 31, 2016 and 2015; and the consolidated statements of changes in net equity and cash flows for the years ended December 31, 2016 and 2015.
During the preparation of the consolidated financial statements, certain critical accounting estimates have been used to quantify some assets, liabilities, income and expenses. In addition, Management is required to apply its judgment in the process of applying the accounting policies of the Empresas Copec Group. The areas that involve a greater degree of judgment or complexity or in which the assumptions and estimates are significant for the consolidated financial statements are described in Note 5.
New accounting pronouncements:
As of the date these consolidated financial statements were issued, the following accounting pronouncements had been issued by the International Accounting Standards Board ("IASB"), which relate to new standards, interpretations and amendments. Those that are not yet mandatory have not been adopted early.
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Recent accounting pronouncements a) The following standards, interpretations and amendments are mandatory for the first time for financial periods beginning on January 1, 2016.
Mandatory application Standards and Contents date for annual periods amendments starting
IFRS 16 Arrendamientos January 1, 2019 Establishes the principles to recognize, measure, present and disclose leases.
IFRS 15 Revenue from contracts w ith customers January 1, 2018 It establishes the principles applicable to information disclosures in financial statements in relation to the nature, amount, timing and uncertainty of revenue and cash flow s arising from contracts w ith customers.
IFRS 1 - Amendment IFRS 1 First-time Adoption January 1, 2018 Suspending short-term exceptions for first time adopters w ith respect to IFRS 7, IAS 19 and IFRS 10.
IFRIC 22 Transactions in Foreign Currency and Advance Payments January 1, 2018 This Interpretation applies to a foreign currency transaction (or part of it) w hen an entity recognizes a non-financial asset or liability that arises from the payment or collection of an advance payment before the entity recognizes the related asset, expense or income (or part of it).
IFRS 12 - Amendment Disclosures of Interests in Other Entities January 1, 2018 Clarifies the scope of this standard. These amendments should be applied to annual periods beginning on or after January 1, 2017.
IAS 28 - Amendment Investments in Associates and Joint Ventures. January 1, 2018 Related to the measurement of the associate or joint venture at fair value.
IFRS 14 - Amendment Insurance contracts January 1, 2018 Introduces tw o approaches: overlapping and temporary exemption of IFRS 9.
IAS 40 - Amendment Investment properties January 1, 2018 Clarifies that to transfer a property to or from investment properties, there must be a change in use, for w hich there must be an assessment (supported by evidence) of w hether the property meets the definition.
IFRS 2 - Amendment Share based payments January 1, 2018 Clarifies the measurement of share-based payments settled in cash and the accounting of changes to such payments w hen they are settled w ith equity instruments.
IFRS 9 Financial Instruments January 1, 2018 Replaces IAS 39. This includes classification and measurement requirements of financial assets and liabilities and a model of expected credit losses that replaces the current impairment loss model.
IAS 7 - Amendment Cash flow statement January 1, 2017 Enables users of financial statements to evaluate changes in obligations from financing activities.
IAS 12 - Amendment Income Taxes January 1, 2017 Clarifies how to account for deferred tax assets relating to debt instruments valued at fair value.
The amendment recognizes a full gain or a loss w hen the transaction involves a IAS 10 and IAS 28 - business (w hether or not in a subsidiary) and a partial gain or loss w hen the Undetermined Amendments transaction involves assets that do not constitute a business, even if these assets are in a subsidiary.
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b) Standards, interpretations and amendments issued, but not yet mandatory and which have not been adopted early.
Mandatory application Standards and Contents date for annual periods amendments starting
IFRS 14 Regulatory deferral accounts January 1, 2016 Provisional standard regarding accounting for balances arising from rate regulated transactions ("Regulatory Deferral Accounts"). This standard is applicable only to
IFRS 11 Joint Arrangements January 1, 2016 Incorporates a guide on how to account for the acquisition of a stake in a joint operation that constitutes a business.
IAS 16 and IAS 38 Clarification of acceptable methods of depreciation and amortization January 1, 2016 Additional guidance on how the depreciation or amortization of property, plant and equipment and intangible assets should be calculated.
IAS 16 and IAS 41 - Agriculture: Bearer Plants January 1, 2016 Amendments The amendments introduce the concept of bearer plants, w hich are used to cultivate products, w ithin the scope of IAS 16.
IAS 27 Separate Financial Statements January 1, 2016 This amendment allow s entities to use the equity method to account for investments in subsidiaries, joint ventures and associates in their separate financial statements.
IAS 1 Financial Statement Presentation January 1, 2016 Clarifies guidance for IAS 1 on materiality and aggregation, presentation of subtotals, structure of the financial statements and disclosure of accounting policies.
IFRS 10 and IAS 28 Investment entities: Applying the consolidation exception January 1, 2016
Annual improvements cycle 2012 – 2014 IFRS 5, IFRS 7, IAS 19 and IAS 34 January 1, 2016 improvements to four IFRS
Management believes that adopting these standards, amendments and interpretations in the future will have no significant impact on the Company’s financial statements when they are first applied. However, it is particularly analyzing the effects of IFRS 9,15 and16 becoming mandatory.
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2.2 Bases of consolidation a) Affiliates
Affiliates are all entities (including special purpose vehicles) to which the Group is exposed to, or has rights to, variable returns arising from its involvement in the entity, and can affect such returns through its ability to direct the entity’s business.. Affiliates are consolidated from the date on which control is transferred, and they are excluded from consolidation from the date on which control ceases.
The acquisition method is used to account for the acquisition of affiliates by the Group. Acquisition cost is the fair value of the assets delivered, the equity instruments issued and the liabilities incurred or assumed at the date of exchange. The identifiable assets acquired and the identifiable liabilities and contingencies assumed in a business combination are initially valued at fair value as of the acquisition date, regardless of the scope of minority interests. The excess of the acquisition cost over the fair value of the Group’s share in the net identifiable assets acquired is recognized as goodwill. If the acquisition cost is less than the fair value of the net assets of the acquired affiliate, the difference is recognized directly as a gain in income, as negative goodwill.
Intercompany transactions and balances and unrealized gains on transactions between entities are eliminated. Unrealized losses are also eliminated, unless that transaction provides evidence that the asset transferred is impaired. The accounting policies of affiliates are modified, when it is necessary to ensure that Group policies have been consistently applied.
The consolidated financial statements as of December 31, 2016 and 2015 include the consolidated figures of Abastible S.A. and affiliates, Celulosa Arauco y Constitución S.A. and affiliates, Compañía de Petróleos de Chile Copec S.A. and affiliates, Minera Camino Nevado Ltda. and affiliates, EC Investrade Inc., Pesquera Iquique- Guanaye S.A. and affiliates, Inmobiliaria Las Salinas Ltda., Sociedad Nacional de Oleoductos S.A. and Inversiones Nueva Sercom Ltda.
The direct and indirect shareholdings as of December 31, 2016 and 2015 are detailed as follows:
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The following companies indirectly form part of these consolidated financial statements as of December 31, 2016 and 2015, as a result of consolidating financial information for these affiliates:
Ow nership Percentage Chilean ID Company Number 12.31.2016 12.31.2015 Direct Indirect Total Total
76,565,182-4 ABASTIBLE INTERNACIONAL SPA 0.0000 99.1293 99.1293 0.0000 91,806,000-6 ABASTIBLE S.A. 99.1342 0.0000 99.1342 99.0481 79,927,130-3 ADM. CENTRAL DE ESTACIONES DE SERVICIOS LTDA. 0.0000 100.0000 100.0000 100.0000 79,689,550-0 ADM. DE ESTACIONES DE SERVICIOS SERCO LTDA. 0.0000 100.0000 100.0000 100.0000 77,614,700-1 ADM. DE SERVICIOS DE RETAIL LTDA. 0.0000 99.9000 99.9000 99.9000 79,927,140-0 ADM. DE SERVICIOS GENERALES LTDA. 0.0000 100.0000 100.0000 100.0000 77,215,640-5 ADM. DE VENTAS AL DETALLE ARCO PRIME LTDA. 0.0000 100.0000 100.0000 100.0000 96,942,120-8 AIR BP COPEC S.A. 0.0000 50.0000 50.0000 50.0000 96,547,510-9 ARAUCO BIOENERGIA S.A. 0.0000 99.9779 99.9779 99.9779 76,000,605-K ARCO ALIMENTOS LTDA. 0.0000 99.9999 99.9999 99.9999 93,458,000-1 CELULOSA ARAUCO Y CONSTITUCION S.A. 99.9779 0.0000 99.9779 99.9779 99,520,000-7 COMPAÑIA DE PETROLEOS DE CHILE COPEC S.A. 99.9996 0.0004 100.0000 100.0000 85,840,100-3 COMPAÑIA DE SERVICIOS INDUSTRIALES LTDA. 0.0000 100.0000 100.0000 100.0000 96,668,110-1 COMPAÑIA LATINOAMERICANA PETROLERA S.A. 0.0000 60.0000 60.0000 60.0000 96,623,630-2 COMPAÑÍA MINERA CAN CAN S.A 0.0000 100.0000 100.0000 100.0000 76,188,354-2 COMPAÑÍA MINERA LA MERCED LTDA. 0.0000 100.0000 100.0000 100.0000 76,188,363-1 COMPAÑÍA MINERA LA SAN FRANCISCO S.A. 0.0000 100.0000 100.0000 100.0000 76,188,378-K COMPAÑÍA MINERA SIERRA NORTE S.A. 0.0000 100.0000 100.0000 100.0000 96,657,900-5 CONSORCIO PROTECCION FITOSANITARIA FORESTAL S.A. 0.0000 57.4774 57.4774 57.4774 76,068,320-5 ESTUDIOS Y DESARROLLOS DE GAS LTDA. 0.0000 99.1379 99.0575 99.0575 85,805,200-9 FORESTAL ARAUCO S.A. 0.0000 99.9779 99.9779 99.9779 93,838,000-7 FORESTAL CHOLGUAN S.A. 0.0000 98.5072 98.5072 98.4769 78,049,140-K FORESTAL LOS LAGOS S.A. 0.0000 79.9823 79.9823 79.9823 76,107,630-2 GAS LICUADO MOTOR LTDA. 0.0000 99.1379 99.1379 98.1393 76,895,330-3 HUALPEN GAS S.A. 0.0000 67.5318 67.5318 63.8860 85,759,000-7 INMOBILIARIA LAS SALINAS LTDA. 0.0000 100.0000 100.0000 100.0000 76,320,907-5 INVERSIONES ALXAR S.A. (EX INV. CAN CAN S.A.) 100.0000 0.0000 100.0000 100.0000 76,306,362-3 INVERSIONES NUEVA SERCOM LIMITADA. 99.9740 0.0260 100.0000 100.0000 79,990,550-7 INVESTIGACIONES FORESTALES BIOFOREST S.A. 0.0000 99.9779 99.9779 99.9779 96,768,760-K MADERAS ARAUCO (EX PANELES ARAUCO S.A.) 0.0000 99.9779 99.9779 99.9779 76,160,625-5 MINERA CAMINO NEVADO LTDA. 99.9986 0.0014 100.0000 100.0000 96,929,960-7 ORIZON S.A. 0.0000 54.7312 54.7312 41.0484 91,123,000-3 PESQUERA IQUIQUE-GUANAYE S.A. 50.2180 99.9779 81.9330 81.9330 76,375,371-9 SERVICIOS AEREOS FORESTALES 0.0000 0.0000 99.9779 99.9779 96,637,330-K SERVICIOS LOGISTICOS ARAUCO S.A. 0.0000 99.9779 99.9779 99.9779 78,953,900-6 SERVICIOS Y TRANSPORTES SETRACOM LTDA. 1.0000 99.1380 100.1380 99.0576 77,090,440-4 SOCIEDAD CONTRACTUAL MINERA VILACOLLO 0.0000 100.0000 100.0000 100.0000 81,095,400-0 SOCIEDAD NACIONAL DE OLEODUCTOS S.A. 0.0000 52.6955 52.6857 52.6857 79,904,920-1 TRANSPORTES DE COMBUSTIBLES CHILE LTDA. 0.0000 100.0000 100.0000 100.0000 Foreign ARAUCO AUSTRALIA S.A. 0.0000 99.9779 99.9779 99.9779 79,874,200-0 VIA LIMPIA S.P.A. 0.0000 100.0000 100.0000 100.0000 Foreign AGENCIAMIENTO Y SERV. PROFESIONALES S.A. 0.0000 99.9779 99.9779 99.9779 Foreign ARAUCO ARGENTINA 0.0000 99.9589 99.9589 99.9589 Foreign ARAUCO COLOMBIA 0.0000 99.9778 99.9778 99.9778 Foreign ARAUCO DO BRASIL 0.0000 99.9779 99.9779 99.9779 Foreign ARAUCO EUROPE COOPERATIEF U.A. 0.0000 99.9779 99.9779 99.9779 Foreign ARAUCO FLORESTAL ARAPOTI S.A. 0.0000 99.9823 79.9823 79.9823 Foreign ARAUCO FOREST BRASIL S.A. 0.0000 99.9779 99.9779 99.9779 Foreign ARAUCO MIDDLE EAST DMCC 0.0000 99.9775 99.9775 99.9775 Foreign ARAUCO PANELS UCA LLC 0.0000 99.9779 99.9779 99.9779 Foreign ARAUCO PERU S.A. 0.0000 99.9779 99.9779 99.9779 Foreign ARAUCO WOOD PRODUCTS INC (USA) 0.0000 99.9779 99.9779 99.9779 Foreign ARAUCOMEX S.A. DE C.V. 0.0000 99.9779 99.9779 99.9779 Foreign CAMPAÑIA DE TRASPORTES DE COLOMBIA S.A. 0.0000 50.5145 50.5145 50.5145 Foreign CATAN EMPRENDIMENTOS E PARTICIPACOES S.A. 0.0000 99.9712 99.9712 99.9712 Foreign CENTRO NACIONAL DE REPARACIÓN COLGAS S.A. 0.0000 50.5145 50.5145 50.5145 Foreign COLGAS DE OCCIDENTE S.A. ESP. 0.0000 50.5145 50.5145 50.5145 Foreign COMERCIAL INDUSTRIAL NACIONAL S.A. 0.0000 50.5145 50.5145 50.5145 Foreign COMPAÑIAS ASOCIADAS DE GAS S.A. ESP ASOGAS 0.0000 50.5145 50.5145 50.5145 Foreign COPEC CANAL INC. 0.0000 100.0000 100.0000 100.0000 Foreign COPEC INTERNATIONAL INC. 0.0000 0.0000 0.0000 100.0000 Foreign COPEC INVESTMENTS LTD. 0.0000 100.0000 100.0000 100.0000 Foreign COPEC OVERSEAS SPA 0.0000 100.0000 100.0000 0.0000 Foreign FLAKEBOARD AMERICA LTD. 0.0000 99.9775 99.9775 99.9775 Foreign FLAKEBOARD COMPANY LTD. 0.0000 99.9775 99.9775 99.9775 Foreign FORESTAL NUESTRA SEÑORA DEL CARMEN S.A. 0.0000 99.9592 99.9592 99.9592 Foreign FORESTAL TALAVERA S.A. 0.0000 99.9730 99.9730 99.9730 Foreign GASAN DE COLOMBIA S.A. ESP. 0.0000 50.5145 50.5145 50.5145 Foreign GASES DE ANTIOQUIA S.A. ESP. 0.0000 50.5145 50.5145 50.5145 Foreign GASES DE SANTANDER S.A. ESP. 0.0000 50.5145 50.5145 50.5145 Foreign GREENAGRO S.A 0.0000 99.9597 99.9597 99.9597 Foreign INVERSIONES ARAUCO INTERNACIONAL LTDA. 0.0000 99.9779 99.9779 99.9779 Foreign MAPCO EXPRESS INC 0.0000 100.0000 100.0000 0.0000 Foreign NORTESANTANDEREANA DE GAS S.A. ESP 0.0000 50.4749 50.4749 50.4749 Foreign SEMAPESA 0.0000 99.9629 99.9629 0.0000 Foreign SOLGAS S.A. 0.0000 99.9629 99.9629 0.0000
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b) Non-controlling interests
The Group applies the policy of considering transactions with non-controlling interest as transactions with independent third parties. If the acquisition of a non-controlling interest generates goodwill or a profit, the difference between the price paid and the corresponding share in the book value of the net assets of the affiliate is recognized in equity. Gains or losses on the disposal of non-controlling shares, whilst control is retained, are recognized in equity.
When the Group ceases to have control or significant influence, any retained interest in the entity is valued at fair value with changes in net income. Fair value is the initial value when subsequently accounted for as a partner, joint venture or financial asset. The amounts previously recognized in other comprehensive income are reclassified to net income. c) Joint ventures
As from January 1, 2013 the IASB issued IFRS 11 “Joint arrangements” that classifies joint agreements into two types, based on the rights and obligations of the parties to the agreement and considering the structure, legal form of the agreement, the contractual terms and other events and circumstances: 1) joint ventures, where the parties have control over the agreement and rights over the net assets of the jointly controlled entity, that are accounted for using the equity method; and 2) joint operations, where the parties have control of the participations, rights over assets and obligations for liabilities that are related to the agreement, in which the joint operator must acknowledge its assets, liabilities and transactions, including its stake in those that it jointly operates. d) Associates
Associates are entities over which the Parent Company exercises significant influence but does not have control; this is generally the result of an ownership interest between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method and they are initially recognized at cost. The book value of these investments is increased or decreased to recognize the corresponding share in the profit or loss for the period and in the comprehensive income. Investments in associates include purchased goodwill (net of any accumulated impairment loss).
The share in the losses or gains subsequent to the acquisition of associates is recognized in income, and the share in other comprehensive income subsequent to the acquisition is recognized in other comprehensive income. When the Group’s share in the losses of an associate is greater than or equal to its share in the same, including any unsecured accounts receivable, additional losses are not recognized, unless the Group has incurred legal obligations or made payments on behalf of the associate.
Unrealized gains on transactions between the Group and its associates are eliminated in proportion to the ownership interest in such associates. Unrealized losses are also eliminated, unless the transaction provides evidence of a loss due to the impairment of the transferred asset. The accounting policies of associates are modified when it is necessary to ensure that Group policies have been consistently adopted.
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Investments in associates are detailed in Note 19.
2.3 Financial Information of Operating Segments
IFRS 8 requires companies to adopt the “Management Approach” to disclose information about the results of their operating segments. In general, this is the information that Management uses internally to evaluate segment performance and to determine how to assign resources to segments. In this context, Management means the Board.
A business segment is a group of assets and operations that supply products or services that are subject to risks and returns that differ from other business segments. A geographic segment provides products or services in a concrete financial environment that is subject to risks and returns that differ from other segments that operate in other financial environments.
The Company has chosen operating segments based on its main direct affiliates: Celulosa Arauco y Constitución S.A., Compañía de Petróleos de Chile Copec S.A., Abastible S.A., Sociedad Nacional de Oleoductos S.A. and Pesquera Iquique-Guanaye S.A.
Segment financial information is detailed in Note 28.
2.4 Transactions in currencies other than the functional currency a) Functional and presentation currency
The entries included in the financial statements of each of the entities belonging to the Group are valued using the currency of the primary economic environment in which that entity operates (“functional currency”). The functional currencies of the Parent Company and the main affiliates and associates are presented in the table below:
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The consolidated financial statements are presented in U.S. dollars, which is the functional currency defined by Empresas Copec S.A. Despite the ordinary revenue of Copec S.A (functional currency Chilean peso) being 65.1% of the consolidated ordinary revenue, the affiliates of the forestry and fishing sectors, whose functional currency is the US dollar, represent 69.2% of the Company’s consolidated assets, 68.5% of its liabilities, 48.4% of its gross margin and 59.6% of its consolidated EBITDA. These are predominantly export sectors, and consequently, the majority of their revenues are denominated in dollars. Likewise, a significant portion of their costs is indexed to the dollar, and their financial liabilities are also dollar-denominated. Both sectors perform their accounting in U.S. dollars.
Although the cost of labor and services is generally invoiced and paid in local currency, this expense is not as significant as raw materials and equipment depreciation, which are part of global markets and are predominantly influenced by the U.S. dollar. b) Transactions and balances
Transactions in currencies other than the functional currency are converted to the functional currency using the exchange rates prevailing as of the dates of the transactions. Losses and gains in foreign currency that arise from the settlement of these transactions and the conversion of foreign-currency-denominated monetary assets and liabilities to the period-end exchange rates are recognized in income, except when they are deferred to net equity, as is the case with cash flow hedges and net investment hedges. Changes in the fair value of foreign-currency-denominated monetary securities that are classified as available for sale are categorized as exchange differences resulting from changes in the amortized cost of the security or other changes in the book value of the security. Exchange differences are recognized in income for the period, and other changes in the book value are recognized in net equity.
Exchange differences for non-monetary items such as equity instruments at fair value through net income are presented as part of the gain or loss in fair value. Exchange differences from non-cash items such as equity instruments classified as available-for-sale financial assets are included in net equity, in the revaluation reserve. c) Group entities
The income and financial position of all of the entities belonging to Empresas Copec Group (none of which uses the currency of a hyperinflationary economy) that have a functional currency other than the presentation currency are converted to the presentation currency as follows:
i. Assets and liabilities of each statement are converted at the exchange rate as of the reporting date;
ii. The income and expenses of each account are converted at average exchange rates (unless the average is not a reasonable approximation of the cumulative effect of exchange rates as of the transaction dates, in which case the income and expenses are converted on the transaction dates); and
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iii. All resulting exchange differences are recognized in comprehensive income.
In consolidation, exchanges differences arising from the conversion of a net investment in foreign entities, or from foreign-currency-denominated loans and other instruments designated as hedges for those investments, are recorded in the net equity of the shareholders. When the investments are sold, the resulting exchange differences are recognized in income as part of the loss or gain on the sale.
Adjustments to goodwill and fair value that arise from the acquisition of a foreign entity, or an entity with a functional currency other than the US dollar, are treated as assets and liabilities belonging to the foreign entity and are converted at the exchange rate as of the reporting date. d) Translation basis
Assets and liabilities denominated in Chilean pesos, Unidades de Fomento or UF, which is an indexed Chilean peso currency, and other currencies have been converted in US dollars at the exchange rate as of the closing date of the consolidated financial statements, as follows:
2.5 Property, plant and equipment
Property, plant and equipment mainly includes forestry lands, production and storage plants, retail sales branches, service stations, offices and construction works in progress. These items are presented at historical cost less the corresponding depreciation.
Historical cost includes expenses that are directly attributable to the acquisition of the asset.
Subsequent costs are added to the initial value of the asset or they are recognized as a separate asset, only when it is likely that the future economic benefits associated with these components will flow to the Company and the cost of the component can be reliably determined. The value of the component that was substituted is written off for accounting purposes. The remainder of repairs and maintenance are charged to income for the period in which they are incurred.
Depreciation is calculated using the straight-line method, including any impairment adjustments. The amount presented in the consolidated statement of financial position represents the cost less accumulated depreciation and any impairment losses. 20 WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1
The estimated useful lives of the main asset categories are as follows:
The residual value and useful lives of assets are reviewed, and adjusted if necessary, at the end of each annual reporting period.
When the book value of an asset exceeds its estimated recoverable amount, the book value is immediately reduced to the recoverable amount.
Losses and gains on the sale of property, plant and equipment are calculated by comparing the proceeds obtained with the book value, and they are recorded in the statement of comprehensive income.
Costs can also include losses and gains on qualified foreign currency cash flow hedges on the purchase of property, plant and equipment.
2.6 Biological assets
IAS 41 requires biological assets to be presented in the statement of financial position at fair value. Standing forests are recorded at fair value less the estimated costs at harvesting, considering that the fair value of these assets can be reliably measured.
The valuation of forest plantations is based on discounted cash flow models, which means that the fair value of biological assets is calculated using cash flows from continuing operations, that is, on the basis of sustainable forestry management plans considering the growth potential of these forests. This valuation is performed on the basis of each stand identified and for each type of forest species.
The forest plantations presented in current assets are plantations that will be harvested and sold in the short term.
Biological growth and changes in fair value are recognized in the consolidated income statement under Other income by function.
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Living animals managed by the affiliate Orizon S.A. are also biological assets. The processes involved include growing, degradation, production and procreation all of which cause qualitative and quantitative changes in biological assets. The Company’s living animals are mussels “Mytilus Chilensis” (“chorito”).
They are initially recognized at cost and subsequently at fair value less estimated selling costs. Nevertheless, Company policy is that certain animals, principally those still growing, do not have a fair value that can be reliably measured before harvest.
Cultures of this species are initially valued at cost and adjusted at the final stage of cultivation, i.e., before harvesting, the cultures are valued at fair value less selling costs. The effect is charged or credited to income at the end of each period.
Valuation of biological assets is detailed in Note 7.
2.7 Investment property
Investment properties are held to earn a long-term return, and they are not occupied by the Group. Investment property is accounted for at historical cost.
Lands held under operating lease contracts are classified as and accounted for as real estate investments when they meet the remaining conditions for a real estate investment.
Real estate investments also include lands whose future use has not yet been determined as of the reporting date.
2.8 Intangible Assets a) Goodwill
Goodwill represents the excess of the acquisition cost over the fair value of the Company’s share of the net identifiable assets of the acquired affiliate on the acquisition date.
Goodwill that is recognized separately is tested for impairment on an annual basis or more frequently when events or circumstances indicate potential impairment, and is valued at cost less accumulated impairment losses. Gains and losses on the sale of an entity include the book value of goodwill related to the entity being sold.
Goodwill is assigned to Cash Generating Units (CGUs) in order to test for impairment losses. The assignment is made to the CGUs that are expected to benefit from the business combination that gave rise to the goodwill.
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(b) Patents and trademarks
Industrial patents are valued at historical cost. They have a finite useful life and are measured at cost less accumulated amortization. Amortization is calculated linearly over their expected useful lives.
Trademarks acquired through business combinations are measured at fair value at the date of acquisition. The fair value of an intangible asset reflects expectations about the likelihood that future economic benefits embodied in the asset will flow to the entity. The Company has determined that such intangible assets have indefinite useful lives and therefore are not subject to amortization. However, by the nature of these assets with indefinite useful lives, they are reviewed and tested for impairment annually and at any time when there is an indication that the asset may be impaired.
(c) Concessions and other rights
Concessions and other rights are presented at historical cost. They have a finite useful life and are recorded at cost less accumulated amortization. Amortization is calculated using the straight-line method over the terms established in the contracts. d) Fishing rights
Authorizations for fishing activities are presented at historical cost. There is no finite useful life for the use of such rights, and therefore they are not subject to amortization. The affiliate tests intangible assets with indefinite useful lives for impairment on an annual basis and every time there is an indication that the intangible asset may be impaired. If detected, the Company adjusts their value with a charge to net income. e) Water rights
Water rights acquired from third parties are presented at historical cost. There is no finite useful life for the use of these rights, and therefore they are not subject to amortization. The Company tests intangible assets with indefinite useful lives for impairment on an annual basis and every time there is an indication that the intangible asset may be impaired. If detected, the Company adjusts their value with a charge to net income. f) Easements
Easement rights are presented at historical cost. There is no finite useful life for the use of these rights, and therefore they are not subject to amortization. The Company tests intangible assets with indefinite useful lives for impairment on an annual basis and every time there is an indication that the intangible asset may be impaired. If detected, the Company adjusts their value with a charge to net income. g) Mining properties
Mining properties are presented at historical cost. There is no finite useful life for the use of these rights, and therefore they are not subject to amortization. The Company tests intangible assets with indefinite useful lives for 23 WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1
impairment on an annual basis and every time there is an indication that the intangible asset may be impaired. If detected, the Company adjusts their value with a charge to net income. h) IT programs
The costs of acquiring software licenses and preparing them to operate a specific program are capitalized. These costs are amortized over their estimated useful lives.
Expenses related to the development or maintenance of IT programs are recognized as expenses when they are incurred. The costs directly related to the production of unique and identifiable IT programs, and that are likely to generate financial benefits in excess of their costs for more than one year, are recognized as intangible assets. Direct costs include the expenses of the personnel that develop IT programs, as well as an appropriate percentage of general expenses.
Development costs for IT programs recognized as assets are amortized over their estimated useful lives, which shall not exceed five years. i) Research and development expenses
Research expenses are recognized as expenses when they are incurred. The costs incurred in development projects (related to the design and testing of new or improved products) are recognized as intangible assets when the following requirements are met:
It is technically possible to complete the production of the intangible asset such that it can become available for use or sale; Management intends to complete the intangible asset in question, in order to use it or sell it; It is possible to use or sell the intangible asset; It is possible to demonstrate how the intangible asset will generate probable financial benefits in the future; Adequate technical, financial and other resources are available to complete the intangible asset and to use or sell it; and It is possible to reliably value the disbursements attributable to the intangible asset during its development.
Other development expenses are recognized as expenses when they are incurred. Development costs previously recognized as expenses are not recognized as assets in a subsequent period. Development costs with a finite useful life that are capitalized are amortized using the straight-line method, from the date commercial production commences, over the period during which they are expected to generate benefits, which shall not exceed 10 years.
Development assets are tested for impairment losses annually, in accordance with IAS 36.
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2.9 Interest costs
Interest costs incurred for the construction of any qualified asset are capitalized over the period of time that is necessary to complete and prepare the asset for its intended use. Other interest costs are recorded in the consolidated income statement by function.
2.10 Impairment losses for non-financial assets
Assets with an indefinite useful life are not amortized and they are tested for impairment losses annually. Assets that are amortized are tested for impairment losses when an event or change in circumstances indicates that the book value may not be recoverable. An impairment loss is recognized for the excess of the asset’s book value over its recoverable amount. The recoverable amount is the greater of the fair value of an asset less its selling costs or its value in use. In order to evaluate impairment losses, assets are grouped at the lowest level at which they separately generate identifiable cash flows (cash generating units).
Non-financial assets other than goodwill that have suffered impairment losses are reviewed as of each annual reporting date to see if the losses have been reversed.
2.11 Financial assets
2.11.1 Classification
Financial assets are classified under the following categories: at fair value through net income, loans and receivables, financial assets held-to-maturity, and financial assets available-for sale. This classification depends on the purpose for which the financial assets were acquired. Management determines the classification of financial assets at initial recognition and reviews this classification at each reporting date. a) Financial assets at fair value through net income
Financial assets at fair value through net income are financial assets held for investment purposes. A financial asset is classified in this category if it is acquired primarily to be sold in the short term.
Derivatives are also classified as acquired for investment purposes, unless they are designated as hedges. Assets in this category are classified as current assets, and the liability position of these instruments is presented in the Consolidated Statement of Financial Position under “Other financial liabilities.”
Acquisitions and disposals of financial assets are recognized as of the date on which the Company commits to the acquisition or sale of the asset.
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These assets are initially recorded at cost and subsequently their value is updated on the basis of their fair value, with changes in value being recognized in net income. b) Financial assets available for sale
Financial assets available for sale are non-derivative financial assets that are classified in this category or that are not classified in any other category. They are included in non-current assets, unless Management intends to dispose of the investment within 12 months of the reporting date.
The Group classifies investments in publicly traded securities in this category. c) Trade and other receivables
See Note 2.14.
2.11.2 Recognition and Measurement
Acquisitions and disposals of investments are recognized on the date on which the Company commits to the acquisition or sale of the asset. Investments are initially recognized at fair value plus the transaction costs for all financial assets not recorded at fair value through net income. Financial assets at fair value through net income are initially recognized at fair value, and the transaction costs are recorded in income.
Investments are written off for accounting purposes when the rights to receive cash flows from the investments have expired and/or been transferred and/or all of the risks and rewards of ownership have been substantially transferred. Financial assets held for sale and financial assets that are booked at fair value with changes taken to net income are recorded later at their fair value. Loans and receivables are accounted for at their amortized cost, in accordance with the effective interest method.
The fair value of investments in publicly traded securities is based on current purchase prices. If the market for a financial asset is not liquid (and for securities that are not publicly traded), fair value is determined using valuation techniques that include the use of recent arm’s length transactions between knowledgeable, willing parties and that involve other instruments that are substantially the same; the analysis of discounted cash flows; and options price-setting models. In these cases market-based inputs are used to the greatest extent possible, whereas inputs specific to the entity are relied on as little as possible. In the event that none of the abovementioned techniques can be used to determine the fair value, the investments are recorded at acquisition cost net of any applicable impairment losses.
As of each reporting date, an evaluation is performed to determine whether there is objective evidence that a financial asset or group of financial assets may have been impaired. In order to determine whether capital securities classified as available for sale are impaired, the Company must determine whether there has been a significant or prolonged decrease in the fair value of the securities to below cost. If there is any such evidence for financial assets held for sale, the cumulative loss defined as the difference between the acquisition cost and the current fair value, less any impairment loss previously recognized in gains or losses, is removed from equity and is recognized in the
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Statement of Net Income. Impairment losses recognized in income for equity instruments are not reversed through the consolidated statement of income.
2.12 Derivative financial instruments and hedging activity
Derivative financial instruments are initially recognized at fair value as of the date on which the derivative contract was executed, and they are subsequently revalued at fair value. Derivatives are designated as:
a) Fair value hedges for recognized liabilities (fair value hedge);
b) Hedges for a specific risk associated with a recognized liability or a highly probable forecast transaction (cash flow hedge); or
c) Hedges for a net investment in a foreign operation (net investment hedge).
The relationship between the hedging instruments and the hedged entries are documented at the beginning of the transaction, along with the risk management objectives and the strategy to manage several hedging transactions. The initially and ongoing evaluation of whether the derivatives used in hedging transactions are highly effective at offsetting changes in fair value or the cash flows of the hedged entries is also documented.
The total fair value of the hedging derivatives is classified as a non-current asset or liability if the remaining term of the hedged entry is greater than 12 months, and as a current asset or liability if the remaining term of the hedged entry is less than 12 months. Traded derivatives are classified as current assets or liabilities.
The effective portion of changes in the fair value of cash flow hedges are recognized in the Statement of Other Comprehensive Income. The gain or loss related to the ineffective portion is immediately recognized in income under “Other operating income” or “Other miscellaneous operating expenses,” respectively.
When a hedging instrument expires or is sold, or when it ceases to fulfill the criteria to be recognized using the accounting treatment for hedges, any accumulated gain or loss in equity as of that date remains in equity and is recognized when the forecast transaction affects the statement of income. When the forecast transaction is no longer expected to take place, the accumulated gain or loss in equity is immediately transferred to the statement of income.
2.13 Inventories
Inventory is valued at its cost or net realizable value, whichever is lower. Compañía de Petróleos de Chile Copec S.A. calculates cost using the FIFO (first in first out) method for fuels, and the weighted average price method for lubricants and other products. The cost of inventories in Organización Terpel S.A. and affiliates is calculated using the weighted average price method.
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The cost of finished products and of products in progress at other companies includes the costs of design, raw materials, direct labor, other direct costs and general manufacturing expenses, but does not include interest costs.
The initial costs of harvested wood at Celulosa Arauco y Constitución S.A. are based on fair value less the selling costs following harvesting.
Biological assets are transferred to inventory as forests are harvested.
Net realizable value is the estimated sales price in the normal course of business, less any costs to complete production, less any applicable variable sales costs.
As of the date of these consolidated financial statements, there is no inventory pledged as collateral.
When the manufacturing costs of a product exceed its net realizable value as a result of market conditions, a provision is recorded for the difference. Such a provision also considers amounts related to obsolescence from low turnover and technical obsolescence.
Minor spare parts to be consumed in a 12 month period are shown under inventories and are recorded in expenses in the period in which they are consumed.
2.14 Trade and other receivables
Receivables are initially recognized at fair value (nominal value including implicit interest), and they are subsequently recognized at their amortized cost according to the effective interest method, less provisions for impairment losses. When the nominal value of the account receivable does not differ significantly from its fair value, the account is recognized at its nominal value.
Implicit interest must be disaggregated and recognized as financial income, to the extent that interest is being accrued.
The provision is the difference between the asset's book value and the present value of estimated future cash flows discounted at the effective interest rate. Receivables are presented at their net value, which is net of estimated uncollectible amounts. This provision is triggered when there is evidence that Group companies will not receive payment in accordance with the original sale terms. Provisions are recorded when the customer resorts to legal measures such as bankruptcy or cessation of payment, or when the Group has exhausted all available means of debt collection over a reasonable period of time. These include phone calls, e-mails and collection letters.
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2.15 Cash and cash equivalents
Cash and cash equivalents include cash in bank accounts, time deposits at credit institutions, mutual funds and other highly liquid short-term investments with an original term of three months or less, that are not likely to suffer changes in value.
2.16 Share Capital
Share capital is 1,299,853,848 single-series ordinary shares (See Note 21).
Incremental costs directly attributable to the issuance of new shares are presented in net equity as a deduction, net of taxes, from the proceeds obtained.
The Parent Company’s dividend policy is to distribute 40% of net profits, as defined in Note 21, on an annual basis. This policy is established each year at the Shareholders’ Meeting.
Dividends on ordinary shares are recognized as goodwill on the accumulated reserves, to the extent that the benefit for the shareholders is being accrued.
The item “Other reserves” in equity mainly consists of translation adjustment reserves and hedge reserves. Empresas Copec S.A. does not have any restrictions associated with these reserves.
The translation reserve consists of the foreign currency translation differences of Group affiliates that use a functional currency other than the US dollar.
Hedge reserves are the effective portion of the gain or loss on hedge swap contracts as of the date of these consolidated financial statements.
2.17 Trade and other payables
Trade payables are initially recognized at fair value and subsequently at their amortized cost using the effective interest method. When the nominal value of the account payable does not differ significantly from its fair value, the account is recognized at its nominal value.
2.18 Financial liabilities valued at amortized cost
Obligations to banks and financial institutions are initially recognized at fair value, net of any costs incurred in the transaction. Subsequently, third-party resources are valued according to their amortized cost; any difference between the proceeds (net of any necessary costs) and the reimbursement value is recognized in the consolidated statement of income during the term of the debt, in accordance with the effective interest method. The effective 29 WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1
interest method involves the application of referential market rates for debts with similar characteristics to the amount of the debt (net of any necessary costs).
Third-party resources are classified as current liabilities unless the Group has an unconditional right to defer settlement for at least 12 months after the reporting date.
2.19 Income tax and deferred tax a) Income tax
The income tax expense for the year is calculated on income before taxes, which is increased or decreased, as appropriate, for the permanent and temporary differences provided by tax legislation when calculating taxable income. b) Deferred tax
Deferred taxes are calculated in accordance with IAS 12 using the liability method, over temporary differences that arise between the tax value of assets and liabilities and their book value in the consolidated financial statements. Deferred taxes are determined using the approved tax rates or almost approved as of the reporting date and that are expected to apply when the corresponding deferred tax asset is realized or the deferred tax liability is settled.
Deferred tax assets are recognized to the extent that it is likely that there will be future tax benefits available to use the temporary differences.
Deferred taxes are recognized over differences that arise in investments in affiliates and associates, except in those cases where the date on which temporary differences are reversed can be controlled by the Group and it is likely that such differences will not be reversed in the foreseeable future.
The Company reviews its deferred tax assets and liabilities at each reporting date, in order to determine whether they remain current and make any necessary corrections based on the results of this analysis.
Law 20,899 was published on February 8, 2016, which simplifies the income tax system and improves other tax provisions established in Law 20,780 regarding the Tax Reform, promulgated on September 29, 2014. It restricts the original option granted to companies with shareholders who are natural people, and taxpayers who are not domiciled and resident in Chile that are not corporations, to select the attributable system, This information must be disclosed in the notes to the consolidated financial statements.
According to the tax reform established by Law 20,780 and Law 20,899, Copec Group income is subject to the partially integrated regime by default. This results in a corporate tax rate of 25.5% applying for 2017 and 27% for 2018 and subsequent years.
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2.20 Employee Benefits a) Staff vacations
The Group recognizes the expense for staff vacations using the accrual method, and the expense is recorded at its nominal value.
Certain affiliates recognize a vacation bonus expense, where there is a contractual obligation to general staff, and this obligation is a fixed amount, in accordance with employment contracts. This vacation bonus is recorded as an expense when the employee uses his or her vacation time, and it is recorded at nominal value. b) Production bonuses
The Board decided that the Group recognizes a provision when it is contractually obligated to do so, or when past practice has created an implicit obligation and it is possible to reliably estimate the obligation. This bonus is recorded at its nominal value. c) Staff severance indemnities
The liability recognized in the statement of financial position is the present value of the obligation for defined benefits as of the reporting date. Such value is calculated annually by independent actuaries, and it is determined by discounting the estimated future outflows of cash at interest rates on instruments denominated in the currency in which such benefits will be paid and with terms similar to those of the corresponding obligations.
Losses and gains that arise from experience and from changes in the actuarial assumptions are charged or credited to income for the year in which they occur.
Costs for past services are immediately recognized in the statement of income.
Assigned goodwill arising from a business combination does not give rise to deferred taxes.
2.21 Provisions
Provisions are recognized when a legal or implicit obligation arises as a result of past events, where a reliably estimated payment is likely to settle the obligation. The amount is the best possible estimate at each reporting date.
Provisions are valued at the present value of the disbursements that are expected to be necessary to settle the obligation using the best estimate available. The discount rate utilized to determine the present value reflects current market estimates, as of the reporting date, of the time value of money, as well as the specific risk related to the obligation.
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2.22 Revenue recognition
Operating revenues include the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of business. Operating revenues are presented net of value-added taxes, returns, reductions and discounts, and after eliminating intra-Group sales.
Revenue is recognized when the amount can be measured reliably, it is probable that future income will flow to the entity, all the risks and benefits of ownership have been transferred to the buyer, the seller has no longer any right to dispose of the goods or effectively control related with these, and any specific conditions have been fulfilled.
a) Sale of goods
Sales of goods are recognized when a Group entity has transferred to the buyer all the significant risks and rewards of ownership of the goods, when the revenue can be reliably quantified, when the Company cannot influence the management of the goods sold, when it is likely that the financial benefits of the transaction will be received by the Company and when the transaction costs can be reliably measured.
Sales are recognized based on the price established in the sales contract, net of volume discounts and estimated returns as of the date of the sale. Volume discounts are evaluated based on forecasted annual purchases. It is assumed that there is no significant financing component, as the sales are carried out with an average payment term, which is in line with market practice. b) Sale of services
Services are supplied on the basis of a specific date and service, or as a contract with a fixed price, for periods that range between one and three years. Revenues from contracts with specific dates and services are recognized at the rates stipulated in the contract, to the extent that personnel hours are utilized and the direct expenses are incurred.
Revenues from fixed-price contracts for the provision of services are generally recognized during the period in which the services are provided, on a straight-line basis over the duration of the contract. c) Interest income
Interest income is recognized using the effective interest method.
d) Dividend income
Dividend income is recognized when the right to receive payment is established.
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2.23 Leases a) When a Group entity is the lessee – Finance leases
Leases of fixed assets when the Group holds substantially all of the risks and rewards of ownership are classified as finance leases. Finance leases are capitalized at the beginning of the lease at the lower of the fair value of the leased property or at the present value of the minimum lease payments.
Each lease payment is distributed between liabilities and finance charges to obtain a constant interest rate over the remaining balance of the debt. The corresponding lease obligations, net of finance charges, are included under “Other long-term payables.” The interest element of the finance cost is charged to the consolidated statement of income during the term of the lease such that a constant periodic interest rate is obtained over the remaining balance of the liability for each period. Assets acquired through finance leases are depreciated over the shorter of their useful lives or the duration of the contract. b) When an entity belonging to the Group is the lessee – Operating leases
Leases in which the lessor retains a significant portion of the risks and rewards of ownership are classified as operating leases. Operating lease payments (net of any incentive received from the lessor) are charged to income on a straight-line basis over the term of the lease. c) When an entity belonging to the Group is the lessor
When the assets are leased under a finance lease, the present value of the lease payments is recognized as a financial account receivable. The difference between the gross amount receivable and the present value of such amount is recognized as the financial return.
Assets leased to third parties under operating lease contracts are included in fixed assets in the Consolidated Statement of Financial Position.
Lease income is recognized on a straight-line basis over the term of the lease.
2.24 Non-current assets held for sale
The Group classifies as non-current assets held for sale any property, plant and equipment, intangible assets, investments in associates and groups subject to divestment (groups of assets to be disposed of together with their directly associated liabilities), which is in the process of being sold and this outcome is considered highly probable at the reporting date.
These assets or groups subject to divestment are valued at the lower of their book value or estimated sale value less selling costs, and are no longer amortized from the time they are classified as non-current assets held for sale. 33 WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1
2.25 Dividends
The distribution of dividends to the Company’s shareholders is recognized as a liability in the consolidated financial statements to the extent that the benefit is accrued, in accordance with the Company’s dividend policy.
Article 79 of Chilean Corporate Law establishes that listed corporations should distribute an annual cash dividend to their shareholders, in proportion to their shares or the proportion established in the company's by-laws if it has preference shares, of at least 30% of net income for each period, except when accumulated losses from prior years must be absorbed, and unless unanimously agreed otherwise by shareholders of all issued shares.
The Company’s current dividend policy is to distribute to shareholders no less than 40% of the annual net profits available for distribution as dividends, as defined in Note 21.
During the last quarter of each year the Board shall decide whether to distribute an interim dividend. Such interim dividend is paid in December to the extent that the year-end results are expected to be positive and that the Company’s available cash flow allows for such a distribution.
2.26 Environment
Disbursements relating to improvements and investments in production processes that improve environmental conditions are recorded as expenses for the year in which they are incurred. When such disbursements are part of capital projects, they are added to property, plant and equipment.
The group has established the following types of disbursements for environmental protection projects: a) Disbursements relating to improvements and investments in production processes that improve environmental conditions. b) Disbursements relating to verification and control of regulations and laws covering industrial processes and facilities. c) Other disbursements that affect the environment.
2.27 Business combinations
Business combinations are accounted for using the acquisition method. This involves the recognition of the identifiable assets (including intangible assets that have not been recognized previously) and liabilities (including contingent liabilities and excluding future restructuring) of the acquired business at fair value.
Purchased goodwill acquired in a business combination is initially measured at cost, which is the excess of the cost of the business combination over the company’s interest in the net fair value of the identifiable assets, liabilities 34 WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1
and contingent liabilities at acquisition. After the initial recognition, purchased goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment tests, purchased goodwill acquired in a business combination is assigned from the date of acquisition to each cash generating unit or group of cash generating units that are expected to benefit from the synergies of the combination, regardless of whether other Group assets or liabilities are assigned to those units or groups of units.
If the acquisition cost is less than the fair value of the net assets of the acquired affiliate, the difference is directly recognized in income and immediately recognized under “Other gains (losses).”
Transaction costs are treated as expenses at the time they are incurred. For business combinations carried out in stages, the fair value of the acquired company is measured at each opportunity and the effects of changes in the share of net income are recognized in the period in which they occur.
2.28 Loyalty program
Mapco Express Inc. has a customer loyalty program, where customers can accumulate points that subsequently redeemed against products offered by the same company. Therefore, the Company values a deferred income liability based on the outstanding accumulated points at the reporting date, together with an estimate of the points that are not likely to be redeemed ("breakage"). The estimate of the points that are not likely to be redeemed is 1.2% of the total outstanding points.
2.29 Impairment
Financial assets
At the end of each period an evaluation is carried out to determine whether there is objective evidence that financial assets or groups of financial assets have been impaired. The effects of impairment are recognized in income only if there is objective evidence that one or more events occurred after the initial recognition of the financial asset and that the impairment will affect the associated future cash flows.
The allowance for doubtful trade receivables is determined when there is evidence that the Group will not receive payment in accordance with the original sale terms. Provisions are recorded when the customer resorts to legal measures such as bankruptcy or cessation of payment, or when the Group has exhausted all available means of debt collection over a reasonable period of time.
The value of the impairment loss is calculated as the difference between the book value of the asset and the present value of estimated future cash flows. The value is presented by lowering the value of the corresponding asset and any loss is recognized directly in the income statement. If the impairment loss decreases in subsequent periods, this is reversed either directly or by adjusting the provision for bad debts, and is recognized in the income statement.
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Non-financial assets
The recoverable amount of property, plant and equipment and other long-term assets with finite useful lives are measured whenever there is an indication that the value of an asset might be impaired. Factors that could indicate a decline in the market value of an asset include: significant changes in the technological environment, the asset becomes obsolete, the asset is physically damaged, the use or expected use of the asset changes with the possibility that the asset falls into disuse, among others. The Company evaluates whether there is any such evidence at each reporting date.
A previously recognized impairment loss can be reversed if there has been a change in the estimated recoverable amount. However, the reversal cannot be greater than the amount recognized in previous years.
In order to evaluate impairment losses, assets are grouped at the lowest level at which they separately generate identifiable cash flows for each cash generating unit. Non-financial assets other than goodwill that have been impaired are reviewed at every reporting date to identify whether any reversals have occurred.
"Cash-generating units" are the smallest identifiable group of assets whose continued use generates cash inflows that are largely independent of those generated by other assets or groups of assets.
Goodwill
Goodwill and intangible assets with indefinite useful lives are tested annually or when circumstances so indicate. The recoverable amount of an intangible asset is estimated as the higher of the asset's net selling price and its value in use. An impairment loss is recognized when the book value exceeds the recoverable amount.
A cash generating unit to which goodwill has been allocated is tested for impairment every year, or more often if there is any indication that the unit may be impaired. If the recoverable amount of the cash generating unit is less than its carrying amount, the impairment loss is first allocated to reduce the carrying amount of any goodwill allocated to the unit and then is proportionally allocated to other assets within the unit based on the carrying amount of each asset. Any impairment loss for goodwill is recognized directly in the statement of income. Impairment losses recognized for goodwill are not reversed in subsequent periods.
Goodwill is assigned to cash-generating units for the purpose of impairment testing. It is distributed between those cash-generating units or groups of cash-generating units that are expected to benefit from the business merger that generated the goodwill.
2.30 Statement of cash flows
The cash flow statement reflects the movements in cash during the year, calculated using the direct method. The following terms are used in these cash flow statements.
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- Cash flows: inflows and outflows of cash or other equivalent including highly liquid investments with a maturity of less than three months that are unlikely to suffer changes in value.
- Operating activities: these are the main revenue-producing activities of the Group and include other activities that are not investing or financing activities.
- Investing activities: these are the acquisition or disposal of long-term assets and other investments not included in cash equivalents.
- Financing activities are activities that produce changes in the size and composition of net equity and financial liabilities.
2.31 Earnings per Share
Basic earnings per share is calculated as the quotient of the net income for the period attributable to the Company divided by that the average weighted number of common shares outstanding during that period, without including the average number of shares of the Company held by any subsidiaries, should that be the case. The Company and its affiliates has not undertaken any potentially diluting transactions of any kind that would result in the diluted earnings per share differing from basic earnings per share.
2.32 Classification of current and non-current balances
In the accompanying consolidated statement of financial position, balances to be recovered or settled within 12 months are classified as current items and those to be recovered or settled in more than 12 months as non-current items.
If there are obligations whose maturities are less than twelve months, but whose long-term refinancing is guaranteed at the discretion of the Company through loan agreements unconditionally available with long-term maturities, these obligations could be classified as long-term liabilities.
2.33 Offsetting balances and transactions
As a general rule, assets and liabilities, or income and expenses, may not be offset unless offsetting is required or permitted by a standard and reflects the substance of the transaction.
Income and expenses originating from transactions that, for contractual or legal reasons, consider the possibility of offsetting and for which the Company intends either to settle on a net basis, or to recover the asset and settle the liability simultaneously, are stated net in the statement of comprehensive income and the statement of financial position. The consolidated financial statements as of December 31, 2016 and 2015, do not reflect any offset income and expenses in the statement of comprehensive income. 37 WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1
NOTE 3. FINANCIAL INSTRUMENTS
3.1 Cash and Cash Equivalents
Group cash and cash equivalents are detailed as follows:
12.31.2016 12.31.2015 Cash & cash equivalent ThUS$ ThUS$
Bank balances 391,472 401,047 Short-term deposits 470,485 611,250 Mutual funds 425,963 570,780 Overnight investments 1,477 1,688 Other cash and cash equivalents 16 0
Total 1,289,413 1,584,765
Reconciliation of cash and cash equivalents in statement of financial position to cash and cash equivalents in cash flow statement
Total reconciling items for cash and cash equivalents (*) 0 (560)
Total reconciling items for cash and cash equivalents 0 (560)
Cash and cash equivalents 1,289,413 1,584,765 Cash and cash equivalents in cash flow statement 1,289,413 1,584,205
(*) Bank overdraft of the affiliate Pesquera Iquique - Guanaye S.A.
The amortized cost of these financial instruments does not differ from their fair value.
Cash and cash equivalents correspond to cash, cash in banks, time deposits and mutual funds. These investments are readily convertible to cash in the short term and the risk of changes in value is low. For time deposits, the valuation is calculated using the accrued purchase rate of each document.
As of December 31, 2016, the Group has approved lines of credit amounting to approximately US$1,870 million (as of December 31, 2015 US$1,300 million).
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3.2 Other Financial Assets
a) This Current financial assets at fair value through net income are classified as follows:
(*) Other financial assets are mainly guarantee funds for derivatives that guarantee swap contracts.
b) Non-current financial assets at fair value through net income are classified as follows:
Financial assets at fair value includes fixed-income instruments (corporate bonds, mortgage bonds, bank bonds, time deposits and other similar items) that are managed on behalf of the company by third parties (“outsourced portfolios”). These assets are recorded at fair value, changes in value are recognized in income, and the assets are held for the purposes of liquidity and returns. Mutual funds are accounted for at unit market value at the reporting date.
Swaps are valued using the discounted cash flow method at a rate appropriate for the risk of the operation, using specific tools for the valuation of swaps. As of the reporting date, the financial assets classified in this category are not hedges, as there is no uncertainty about their underlying liabilities. Consequently, these instruments are part of a strategy of structural management of the liquidity risk implicit in the Company’s operations.
Forwards are initially recognized at fair value on the date on which the contract is subscribed, and they are subsequently revalued at fair value. Forwards are recorded as assets when their fair value is positive and as liabilities when their fair value is negative.
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The fair value of foreign exchange forward contracts is calculated by reference to current foreign exchange rates from contracts with similar maturity profiles.
The Group does not have any investments held-to-maturity.
3.3 Trade and Other Receivables a) This category contains the following balances:
12.31.2016 12.31.2015 ThUS$ ThUS$
Trade receivables 1,259,497 1,250,039 Less: Impairment provision on trade receivables (54,989) (53,739)
Trade receivables, net 1,204,508 1,196,300
Other receivables 196,314 204,321 Less: Impairment provision on other receivables (9,483) (10,116)
Other receivables, net 186,831 194,205
Total 1,391,339 1,390,505 Less: Non-current portion 32,958 43,151
Current portion 1,358,381 1,347,354
Trade and other receivables are classified as current assets except for those assets maturing in more than 12 months. Those assets maturing in more than 12 months are recorded at amortized cost using the effective interest method and are tested for impairment.
Trade receivables represent enforceable rights arising from normal business operations, where normal is defined as the Group’s habitual operations.
Other receivables are accounts receivable from sales, services or loans outside of the normal course of business.
Implicit interest is disaggregated and recognized as financial income as it accrues.
The amount of the provision is the difference between the asset’s book value and the present value of the estimated future cash flows, discounted at the effective interest rate.
The creation and reversal of the provision for the impairment of accounts receivable has been included as “Expense for the doubtful debt allowance” in the consolidated statement of income under Administration Expenses.
The amortized cost of these financial instruments does not differ from their fair value.
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b) Trade and Other Receivables includes:
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c) Allowance for doubtful receivables:
3.4 Other Financial Liabilities
Financial liabilities valued at amortized cost are non-derivative instruments with contractual payment flows with fixed or variable interest rates. Financial instruments classified in this category are valued at amortized cost using the effective interest method.
This category included obligations with banks and financial institutions and obligations to the public through bonds issued in US dollars and UF, as of the reporting date.
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Capital plus interest on the Group’s main financial liabilities that are subject to liquidity risk are presented undiscounted and grouped by maturity in the following tables.
As of December 31, 2016: Maturities Total Under 1 month 1 to 3 months 3 to 12 months 1 to 5 years Over 5 years Current Non-Current Bank loans ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$
State Bank of India 22 42 194 13,970 0 258 13,970 Banco Safra 0 30 87 202 0 117 202 Banco Alfa 0 0 17 112 0 17 112 Banco BBVA (Argentina) 874 1,814 7,368 25,375 0 10,056 25,375 Banco del Estado 939 20,177 1,070 101,422 0 22,186 101,422 Banco do Brasil 0 0 0 0 0 0 0 Banco Bndes Subcrédito 0 126 0 18,548 466 126 19,014 Banco Votorantim S.A. 0 260 646 2,007 696 906 2,703 Banco John Deere 0 62 41 83 0 103 83 BBVA Chile 10,566 16,176 0 0 0 26,742 0 Banco Continental 25,354 0 0 0 0 25,354 0 Banco Itaú 0 0 0 0 0 0 0 Banco Itaú (Brasil) 0 2,732 377 59 0 3,109 59 Fondo de Desenvolvimiento Econom. 0 0 0 0 0 0 0 Banco HSBC Uruguay 0 1,202 0 0 0 1,202 0 J.P. Morgan 12 0 0 0 0 12 0 Banco Banamex MXN 1,059 0 873 15,937 0 1,932 15,937 Santander 31,897 22,744 2,252 13,231 0 56,893 13,231 Banco BIF Soles 0 0 0 0 0 0 0 Banco Chile 313 5,330 5,307 15,000 0 10,950 15,000 Banco Security 0 0 0 0 0 0 0 Banco BCI 771 330 25,788 67,706 17,925 26,889 85,631 Inter- American Development Bank. 0 16,872 15,380 108,712 17,371 32,252 126,083 Banco Citibank 44 88 2,889 27,941 0 3,021 27,941 Banco Bradesco 0 431 90 181 0 521 181 Banco Heritage 0 1,351 0 0 0 1,351 0 Santander Investment Securities Inc 508 1,060 3,715 72,591 0 5,283 72,591 Banco HSBC USA 322 477 42,122 69,981 0 42,921 69,981 Banco Bogota 0 0 0 0 0 0 0 Banco Republ. Oriental Uruguay 0 24,733 12,563 0 0 37,296 0 Banco Dnb Nor Bank 0 89 0 0 0 89 0 The Bank of Tokyo - Mitsubishi UFJ Ltd 110 208 972 69,981 0 1,290 69,981 BNP Paribas 44 83 388 27,941 0 515 27,941 Banco Galicia 0 5,031 0 0 0 5,031 0 Banco Scotiabank 5,956 3,463 2,094 372,223 0 11,513 372,223 Bank ABC 0 7 18 0 0 25 0 Interamerican Development Bank 0 4,168 3,809 26,908 4,302 7,977 31,210 Finnish Export Credit 0 25,474 20,774 179,544 70,166 46,248 249,710 BBVA Uruguay 0 0 0 0 0 0 0 Banco Macro Argentina 0 11 29 0 0 40 0 Banco Popular 0 0 0 0 0 0 0 Mizuho Bank Ltd 44 83 388 27,941 0 515 27,941 Sumitomo Mitsui Banking Corporation 44 83 388 27,941 0 515 27,941 Societe Generale 44 83 388 27,941 0 515 27,941 Natixis 22 42 194 13,970 0 258 13,970 Bank Nassau Miami 0 298 908 29,808 0 1,206 29,808 Export Development Canada 44 83 388 27,941 0 515 27,941 Financiero - Soles 0 0 0 0 0 0 0 Bancolombia 0 0 0 0 0 0 0 BBVA - Soles 57 56 667 10,333 0 780 10,333 Banco Guayaquil 5 9 42 181 0 56 181 Banco de Crédito del Perú - BCP 0 0 0 0 0 0 0 Banco CorpBanca 0 0 12,451 32,712 0 12,451 32,712 Banco Itau (Uruguay) 0 10,135 5,003 0 0 15,138 0 Banco Credito de Perú 0 0 0 45,788 5,724 0 51,512 Total 79,051 165,443 169,680 1,474,211 116,650 414,174 1,590,861
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Maturity Total Under 1 month 1 to 3 months 3 to 12 months 1 to 5 years Over 5 years Current Non-Current Bonds ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$
Barau - F 0 0 1,931 101,547 180,490 1,931 282,037 Barau - J 0 2,115 0 215,718 0 2,115 215,718 Barau - P 0 0 996 31,176 242,571 996 273,747 Barau - Q 0 586 9,839 73,589 0 10,425 73,589 Barau - R 0 1,755 0 28,088 290,572 1,755 318,660 Barau - S 0 0 600 18,780 210,785 600 229,565 BECOP - C 0 0 11,587 57,934 368,189 11,587 426,123 BECOP - E 825 0 825 6,598 51,163 1,650 57,761 BECOP - G 0 0 2,639 13,194 103,669 2,639 116,863 BECOP - H 0 2,349 2,349 21,143 101,254 4,698 122,397 BECOP - I 0 630 630 6,301 60,139 1,260 66,440 Bond 144 A - Argentina 0 0 270,787 0 0 270,787 0 Yankee Bond 2019 0 15,205 0 570,504 0 15,205 570,504 Yankee Bond 2º issue 0 2,734 124,949 0 0 127,683 0 Yankee 2021 0 8,889 0 466,926 0 8,889 466,926 Yankee 2022 0 11,215 0 95,000 504,895 11,215 599,895 Yankee 2024 0 9,376 0 90,000 569,625 9,376 659,625 Bonds series 7 years fixed rate 0 1,521 3,322 90,241 0 4,843 90,241 Bonds series 5 years IPC E.A. 0 1,209 2,640 39,228 0 3,849 39,228 Bonds series 10 years IPC E.A. 0 2,662 5,813 31,111 92,026 8,475 123,137 Bonds series 18 years IPC E.A. 0 1,071 2,340 12,521 61,085 3,411 73,606 Bonds series 7 years IPC E.A. 0 1,634 3,265 17,472 51,297 4,899 68,769 Bonds series 15 years IPC E.A. 0 3,000 6,014 32,180 149,197 9,014 181,377 Bonds B UF 0 0 1,327 6,635 54,948 1,327 61,583 Bonds C pesos 0 0 1,693 40,257 0 1,693 40,257
Total 825 65,951 453,546 2,066,143 3,091,905 520,322 5,158,048
Maturity Total Under 1 month 1 to 3 months 3 to 12 months 1 to 5 years Over 5 years Current Non-Current Leases ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$
Banco Santander Chile UF 0 237 1,616 2,380 0 1,853 2,380 Banco Santander Chile Ch$ 0 46 138 61 0 184 61 Banco de Chile UF 0 3,294 10,861 25,767 0 14,155 25,767 Banco de Chile Ch$ 27 493 1,565 4,363 764 2,085 5,127 Banco BBVA UF 0 1,673 5,030 4,846 0 6,703 4,846 Banco Estado UF 11 667 2,109 7,665 1,222 2,787 8,887 Banco Scotiabank UF 0 1,571 4,970 11,990 0 6,541 11,990 Banco Crédito e Inversiones UF 7 1,001 3,078 10,466 0 4,086 10,466 Banco Crédito e Inversiones Ch$ 33 713 2,233 9,048 979 2,979 10,027 Certegy Check Services/Fis 2 4 18 76 0 24 76 Giddens, ELMO 7 14 66 195 0 87 195 Leasing BBVA 0 0 0 0 0 0 0 Leasing Bancolombia 283 566 2,544 14,201 8,204 3,393 22,405 Leasing Aplay Plant 38 77 348 2,599 10,123 463 12,722 Banco Itau 0 0 486 38 0 486 38 Banco Interbank 591 0 0 641 0 591 641
Total 999 10,356 35,062 94,336 21,292 46,417 115,628
Total interest bearing loans 80,875 241,750 658,288 3,634,690 3,229,847 980,913 6,864,537
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As of December 31, 2015: Maturities Total Under 1 month 1 to 3 months 3 to 12 months 1 to 5 years Over 5 years Current Non-Current Bank loans ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$
Banco BIF Soles 43 341 322 3,652 0 706 3,652 Bancolombia 18 34 157 3,168 0 209 3,168 Banco del Estado 2,448 100 28,266 77,936 0 30,814 77,936 Banco do Brasil 0 23 72 0 0 95 0 Banco Itau Brasil 0 9 13 100 0 22 100 Banco Votorantim - Brasil 0 66 442 1,853 1,163 508 3,016 Banco Jhon Deere 0 0 207 0 0 207 0 Banco Safra 0 25 72 257 9 97 266 Interamerican Development Bank 0 6,710 19,146 166,033 32,812 25,856 198,845 BBVA (Argentina) 1,023 13,899 7,255 29,035 0 22,177 29,035 Banco Galicia (Argentina) 0 0 307 0 0 307 0 Banco Itaú 0 15 37 98 0 52 98 Fondo de Desenvolvimiento Econom. 0 7 27 7 0 34 7 J.P. Morgan 0 7,912 4,356 0 0 12,268 0 Banco ABC 0 5 17 20 0 22 20 Santander 2,288 37,209 2,198 32,537 0 41,695 32,537 Banco HSBC (Uruguay) 0 1,201 0 0 0 1,201 0 Banco Chile 163 5,967 11,737 15,000 0 17,867 15,000 Banco Security 0 0 0 0 0 0 0 Banco BCI 0 0 0 0 0 0 0 Banco Scotiabank 19 0 25 306,408 0 44 306,408 Banco Citibank 37 14,158 2,834 28,194 0 17,029 28,194 The Bank of Tokyo - Mitsubishi UFJ Ltd 93 171 803 70,615 0 1,067 70,615 Banco Heritage 0 1,357 0 0 0 1,357 0 #REF! 93 171 803 70,615 0 1,067 70,615 Santander Investment Securities Inc 432 773 3,281 74,757 0 4,486 74,757 Export Development Canada 37 68 320 28,194 0 425 28,194 Banco Bogota 3 0 0 0 0 3 0 Banco Republ. Oriental Uruguay 0 16,689 18,555 0 0 35,244 0 Finnish Export Credit 0 25,810 20,354 203,827 118,826 46,164 322,653 Banco Itau Uruguay 0 5,065 5,004 0 0 10,069 0 BNP Paribas 37 68 320 28,194 0 425 28,194 HSBC Secuties (USA) Inc 299 384 1,513 111,886 0 2,196 111,886 Banco Continental 4 7 35 658 0 46 658 Banco BBVA Uruguay 0 16,115 0 0 0 16,115 0 Banco Bndes Subcrédito 0 0 7 6 1,046 7 1,052 Banamex MXN 309 0 810 35,788 0 1,119 35,788 Banco Macro (Argentina) 0 0 49 48 0 49 48 Banco HSBC (Brasil) 0 7,779 0 0 0 7,779 0 Banco Bradesco 0 5,109 1,349 249 0 6,458 249 Banco IFC - USD 0 0 0 0 0 0 0 Other banks 113 14,295 1,205 84,582 0 15,613 84,582 Mizuho Bank Ldt 37 68 320 28,194 0 425 28,194 Total 7,496 181,610 132,218 1,401,911 153,856 321,324 1,555,767
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Maturity Total Under 1 month 1 to 3 months 3 to 12 months 1 to 5 years Over 5 years Current Non-Current Bonds ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$
Barau - Q 0 0 538 69,592 9,251 538 78,843 Barau - F 0 0 1,771 85,091 239,473 1,771 324,564 Barau - R 0 0 1,610 25,756 272,750 1,610 298,506 BECOP - C 0 0 10,625 53,124 348,249 10,625 401,373 BECOP - E 0 756 756 7,563 46,916 1,512 54,479 BECOP - G 0 0 2,420 12,099 97,482 2,420 109,581 Barau - J 0 1,939 0 203,595 0 1,939 203,595 Barau - P 0 0 913 28,588 229,723 913 258,311 Bond 144 A - Argentina 0 0 1,004 277,869 0 1,004 277,869 Yankee Bond 2019 0 15,205 0 605,983 0 15,205 605,983 Yankee Bond 2º issue 0 2,734 0 134,257 0 2,734 134,257 Yankee Bond 6º issue 0 0 0 0 0 0 0 Yankee 2021 0 8,889 0 80,000 406,108 8,889 486,108 Yankee 2022 0 11,215 0 95,000 527,255 11,215 622,255 Yankee 2024 0 9,375 0 90,000 590,928 9,375 680,928 Bonds series 5 years IPC E.A. 0 962 2,369 40,463 0 3,331 40,463 Bonds series 10 years IPC E.A. 0 2,130 5,224 27,856 94,064 7,354 121,920 Bonds series 18 years IPC E.A. 0 862 2,106 11,231 59,388 2,968 70,619 Bonds series 7 years IPC E.A. 0 1,639 3,344 17,830 53,388 4,983 71,218 Bonds series 15 years IPC E.A. 0 3,003 6,117 32,619 154,330 9,120 186,949 Bonds series 7 years fixed rate 0 1,461 3,177 90,188 0 4,638 90,188 Bonds B UF 0 0 1,217 6,084 51,603 1,217 57,687 Bonds C pesos 0 0 1,596 39,546 0 1,596 39,546
Total 0 60,170 44,787 2,034,334 3,180,908 104,957 5,215,242
Maturity Total Under 1 month 1 to 3 months 3 to 12 months 1 to 5 years Over 5 years Current Non-Current Leases ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$
Banco BCI UF 4 566 1,711 7,413 0 2,281 7,413 Banco BCI Ch$ 0 468 1,401 7,291 0 1,869 7,291 Banco Santander Chile UF 0 338 904 4,662 0 1,242 4,662 Banco Santander Chile Ch$ 0 172 517 1,151 0 689 1,151 Banco de Chile UF 0 4,026 11,489 35,252 0 15,515 35,252 Banco de Chile Ch$ 0 262 704 2,013 0 966 2,013 Banco BBVA UF 0 1,814 5,344 12,354 0 7,158 12,354 Banco Estado UF 0 361 1,160 4,899 0 1,521 4,899 Banco Scotiabank UF 0 1,303 4,370 15,809 0 5,673 15,809 Vehicle leases 0 0 0 0 0 0 0 Banco BBVA US$ 0 0 0 0 0 0 0 Leasing Banco Chile 27 55 250 1,761 347 332 2,108 Leasing BBVA 24 46 206 854 0 276 854 Leasing Bancolombia 223 448 2,014 10,717 4,494 2,685 15,211 Leasing Banco Internacional 0 0 0 0 0 0 0 Banco Itau 48 96 434 522 0 578 522
Total 326 9,955 30,504 104,698 4,841 40,785 109,539
Total interest bearing loans 7,822 251,735 207,509 3,540,943 3,339,605 467,066 6,880,548
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The aforementioned maturities include interest to be paid in each period.
The Parent Company Empresas Copec S.A. and the affiliates Celulosa Arauco y Constitución S.A. and Compañía de Petróleos de Chile Copec S.A. hold 94% of the Company’s consolidated financial borrowing, which is as follows:
Amortized Cost Fair Value
12.31.2016 12.31.2015 31.12.2016 12.31.2015 ThUS$ ThUS$ ThUS$ ThUS$
Bonds issued in US dollars 2,316,913 2,317,318 2,480,063 2,409,538 Bonds issued in UF 1,684,124 1,287,002 1,617,714 1,355,040 Bonds issued in COP 369,217 351,700 385,378 351,700 Bonds issued in Ch$ 100,584 34,444 101,216 41,142 Bank loans in dollars 1,602,611 1,688,593 1,549,494 1,570,131 Bank loans in other currencies 310,481 69,928 268,611 69,928 Finance leases 138,921 145,290 130,037 145,290 Government loans 0 0 0 0 Creditors and other payables 1,224,901 1,231,853 1,183,007 1,231,853
The Group is subject to the following financial covenants:
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The current risk ratings of the Group’s debt instruments are the following:
Consolidated Net Tangibles Assets
In accordance with the provisions of Chapter VIII, Clause Twenty Five of the bond issue contracts between Empresas Copec S.A. and Banco Santander Chile, agreed on November 2, 2009, under Registries 21,122-2009 and 21,123-2009, including their modifications, as of December 31, 2016, the concepts identified in subsections /a/ and /b/ of the definition of consolidated net tangible assets were ThUS$ 402,707 and ThUS$ 469,662, respectively (ThUS$ 167,375 and ThUS$ 60,345 as of December 31, 2015).
In addition, according to the provisions of Chapter III, Tenth Clause, Empresas Copec S.A. has complied with the obligations contained in this contract, as of December 31, 2016 and December 31, 2015, in particular with regard to the financial indicators defined in section /c/ of the tenth clause.
3.5 Other Financial Liabilities at Fair Value through Net Income
The Group has the following financial liabilities at fair value through net income:
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Financial liabilities at fair value through net income include both liabilities designated as such upon initial recognition and liabilities classified as tradable. Tradable liabilities and derivatives that are financial liabilities are valued at fair value. Gains and losses are recorded in the statement of net income.
This liability is included under “Current and non-current other financial liabilities”.
3.6 Fair Value Hierarchy
The financial assets and liabilities that have been accounted for at fair value in the Consolidated Statement of Financial Position as of December 31, 2016 have been measured on the basis of the methodologies outlined in IAS 39. Such methodologies applied for each class of financial instruments are classified according to their hierarchy as follows:
Level I: Values or prices in active markets for identical assets and liabilities.
Level II: Information from sources other than the market prices in Level I, but observable in the market for those assets and liabilities, whether directly (prices) or indirectly (obtained on the basis of prices).
Level III: Information on assets or liabilities that is not based on observable market data.
Fair Value Measurement Method December 2016 Level I Level II Level III ThUS$ ThUS$ ThUS$ ThUS$
Financial Assets at Fair Value Investment Swap (asset) 5,480 0 5,480 0 Forwards 1,624 0 1,624 0 Fixed income instruments 120,466 120,466 0 0 Mutual funds 426,604 426,604 0 0 Other financial assets at fair value 56,835 56,835 0 0 Financial liabilities at fair value Investment Swap (liability) 119,875 0 119,875 0 Forward (liability) 6,771 0 6,771 0
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Fair Value Measurement Method December 2015 Level I Level II Level III ThUS$ ThUS$ ThUS$ ThUS$
Financial Assets at Fair Value
Investment Swap (asset) 0 0 0 0 Forwards 8,551 0 8,551 0 Fixed income instruments 137,093 137,093 0 0 Mutual funds 570,996 570,996 0 0 Guarantee contribution 0 0 0 0 Other financial assets at fair value 29,121 29,121 0 0
Financial liabilities at fair value
Investment Swap (liability) 254,902 0 254,902 0 Forward (liability) 1,562 0 1,562 0
3.7 Hedging Financial Instruments
Hedging financial instruments are cash flow hedges and are recorded in Other non-current financial assets and Other non- current financial liabilities depending on whether they are assets or liabilities.
The Parent Company, Empresas Copec, receives dividends from its fuel affiliates in Chilean pesos; however, it pays its shareholders dividends in US dollars (which are translated into Chilean pesos at the exchange rate prevailing 5 working days before the payment date). To mitigate this potential mismatching, the Company enters into hedges through forward contracts with financial institutions. All the amounts receivable from its fuel subsidiaries as of December 31, 2016, with regard to dividends payable in May 2017 are hedged.
As of December 31, 2016 the market value of all the forwards expressed in US dollars at the exchange rate prevailing on the reporting date is (US$ 1,068,102).
The affiliate Arauco is exposed to the risk of changes in the exchange rate of the US dollar in order to meet its obligations with the public denominated in other currencies, such as bonds issued in indexed Chilean pesos (UF).
The affiliate Arauco mitigates this exchange rate risk by contracting cross currency swaps for the F, J, P, R, Q and S series, with a market value of (US$ 80,266,199) as of December 31, 2016.
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Given that the affiliate Celulosa Arauco y Constitución S.A. has a high percentage of its assets in US dollars and obligations in indexed Chilean pesos, it needs to minimize its exchange rate risk. The purpose of this swap position is to eliminate uncertainty related to the exchange rate by exchanging flows from obligations in indexed Chilean pesos from the bonds described above for flows in US dollars (Arauco’s functional currency) at a fixed exchange rate determined at the contract’s date of execution.
These hedge instruments can be classified as highly effective under hedge effectiveness testing in accordance with IAS 39, and within an acceptable range for Arauco in order to eliminate exchange rate risks for commitments related to hedges.
Compañía de Petróleos de Chile Copec S.A. and its affiliates comply with its risk management policy by taking out derivative contracts on interest rates and exchange rates and classifies its hedges as:
• Cash flow hedges: Those that hedge the cash flows of the hedged underlying item.
• Fair values hedges: Those that hedge the fair value of the hedged underlying item.
• Non hedge derivatives: Financial derivatives that do not meet the requirements established by IFRS to be designated as hedge instruments, are recorded at fair value with changes in net income (assets held for trading).
The financial derivative contracts as of December 31, 2016 and 2015 are as follows:
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NOTE 4. FINANCIAL RISK MANAGEMENT
Financial risk factors:
Through its affiliates and associates, the Group has operations in different sectors related to natural resources and energy. The relevant risk factors vary depending on the type of business. Accordingly, the Management of each of the affiliates carries out its own risk management in collaboration with their respective operating units.
The most important affiliates are Celulosa Arauco y Constitución S.A., with activities in the forestry sector, and Compañía de Petróleos de Chile Copec S.A., with activities in the fuel sector. Together these two companies represent approximately 87% of the Group’s consolidated assets, 87% of EBITDA. Additionally, they represent around 94% of receivables and 87% of bonds and long-term financial borrowing. Together with the Parent Company, they represent 95% of consolidated placements.
Therefore, a significant portion of the risks faced by the Group lie within these three units. The specific risks that affect each unit are analyzed below.
a) Risks associated with Empresas Copec S.A., the Parent Company
The risks of the Parent Company are fundamentally associated with its financial placements. These are exposed to a several risks, including interest rate risk and exchange rate risk and credit risk. Management provides written policies for the management of investments that establish the objectives of obtaining the maximum return for acceptable levels of risk, maintaining sufficient liquidity, and limiting exposure to the different types of risk. These policies identify the instruments that are allowed, and they establish limits per type of instrument, issuer and risk rating. In addition, they determine the control and operating mechanisms for investing activities.
Risk management is managed by the investment department, which complies with the policies approved by Management, and has assistance from external experts. Part of the investment portfolio is managed by reputable managers, chosen in competitive processes under strict policies of diversification and limits to types of instrument, credit ratings, currencies and other criteria. These managers are in turn monitored by the Company’s investment department and are subject to regular internal and external audits.
The financial instruments held by the Company have been categorized as cash or financial assets at fair value through net income, as these instruments can be sold in the short term.
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i) Interest rate risk
The assets affected by this risk are the financial placements held by the Parent Company, which, in accordance with the investment policy, primarily consist of fixed-income instruments in the form of deposits, bonds, mortgage bonds and other similar items, as well as fixed-income mutual funds. The duration is used as a measurement of the sensitivity of the portfolio’s value in the face of changes in market interest rates. Given that the market value of such instruments varies according to changes in interest rates, a maximum limit on the aggregate duration of the portfolio has been set at two years. Currently, the aggregate portfolio has duration of 1.2 years.
The Parent Company has placed bonds in the local market, specifically the BECOP-C, BECOP-E, BECOP-G, BECOP-H and BECOP-I series. All of these bonds have been issued at fixed rates, thus mitigating the risk of movements in interest rates.
The table below shows the possible effects on pre-tax income of changes in the value of the Company’s investment portfolio as a result of changes in interest rates:
ii) Exchange rate risk
As part of its investment policy, the Parent Company is authorized to make placements in U.S. dollars and Chilean pesos in order to address possible cash requirements in these currencies, which would result from the needs of certain affiliates and associates, as well as new potential businesses in which the Parent Company may wish to participate. Such resources can be invested in local or international mutual funds, time deposits under third-party management, through a specific mandate.
Variations in the exchange rate affect the value of peso-denominated instruments when expressing them in US dollars. A depreciation of the Chilean peso would have a negative effect when expressing the peso-denominated investments in US dollars, whereas an appreciation of the peso would have a positive effect
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To date, approximately 75.8% of the aggregate portfolio is denominated in US dollars and 24.2% in Chilean pesos and UF. The Company’s objective is to achieve a portfolio with approximately 50-80% in US dollars, in accordance with the forecasted uses for its placements.
A table showing the possible effects on pre-tax income of changes in the value of the investment portfolio (measured in US dollars), as a result of fluctuations in the exchange rate, is presented below:
Additionally, the Company consolidates affiliates that perform their accounting in Chilean pesos, which is the case for Compañía de Petróleos de Chile Copec S.A., Abastible S.A., Inmobiliaria Las Salinas Limitada and Sociedad Nacional de Oleoductos S.A., which record their financial information as described in Note 2.4 (c). The consolidated net income of Empresas Copec S.A. can be affected by movements in the exchange rate when the peso- denominated results of these affiliates are converted to US dollars. Likewise, affiliates such as Celulosa Arauco y Constitución S.A. and the affiliates in the fishing sector are also affected by movements in the exchange rate, as a portion of their operating costs are denominated in pesos.
On December 22, 2009, the Parent Company placed a UF-denominated bond in the Chilean market (BECOP-C) for a total amount of UF 7,000,000. The placement interest rate was 4.30%, for a nominal rate of 4.25%. Interest is paid semiannually, and the principal will be repaid in a single payment on November 30, 2030. This liability is denominated in a currency (UF) other than the Parent Company’s functional currency (U.S. dollars). However, these bonds have been transferred to the affiliates belonging to the fuel sector, whose functional currency is the Chilean peso, such that the consolidated exposure to the exchange rate under this concept is eliminated. This transfer also eliminates all liquidity risk at the Parent level. A similar situation has occurred with the placement of a new UF-denominated bond (BECOP-E) in the Chilean market on September 15, 2011. The total amount was UF 1,300,000, and the placement interest rate was 3.40% for a nominal rate of 3.25%. Interest is paid semiannually, and the principal will be repaid in a single payment on July 31, 2021.
On December 4, 2014 Empresas Copec S.A. placed another issue of bonds (BECOP-G) for UF 2,500,000 in the local market. The placement interest rate was 2.88%, for a nominal rate of 2.70%. As in prior issues, interest is paid on a semiannual basis and the capital will be repaid in one installment on October 15, 2024. 54 WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1
The Company placed new bonds in the local market on December 21, 2016. Ch$ 67,000,000,000 was placed from the BECOP-H series at a rate of 4.75%, the same as the nominal rate. Interest is paid semiannually, whereas principal repayments begin in year five and end on September 15, 2023. UF 1,400,000 was placed from the BECOP-I series at a placement rate of 2.44%, and a nominal rate of 2.30%. Interest is paid semiannually, and the principal will be repaid in a single payment on September 15, 2026.
iii) Credit risk
The financial placements held by the Parent Company consist predominantly of fixed-income instruments. In accordance with the investment policy, limits per issuer and limits on the categories of instrument have been established, depending on the risk rating of such issuers. In this regard, risk ratings must be issued by recognized local or international rating agencies.
The main counterparties as of December 31, 2016 and 2015 are detailed as follows:
12.31.2016 12.31.2015 Main counterparties % Value US$ % Value US$
Banco Santander 9.40% 31,585,851 12.40% 87,861,635 JP Morgan NY 9.30% 31,145,814 10.70% 76,018,646 Banco Chile 8.80% 29,600,310 0.00% 0 Banco ItauCorp 7.80% 26,144,315 10.30% 72,951,739 Banco BCI 6.90% 23,023,048 10.30% 72,975,387 Bice Mutual Funds 6.50% 21,800,530 0.00% 0 Santander Mutual Funds 6.40% 21,630,493 5.70% 40,747,794 Banco Security 4.90% 16,362,696 4.50% 31,999,706 Santander Mutual Funds 4.40% 14,910,658 0.00% 0 Banco HSBC 3.90% 13,023,915 0.00% 0 Banco BCI 3.10% 10,311,046 13.10% 92,624,794 BTG Pactual Mutual Funds 2.20% 7,458,985 0.00% 0 Bice Mutual Funds 0.00% 0 3.20% 22,622,078 Banco Estado 0.00% 0 10.10% 71,689,647 Other 26.40% 89,027,580 19.70% 140,095,907 Total 100.00% 336,025,241 100.00% 709,587,333
b) Risks associated with Celulosa Arauco y Constitución S.A. (forestry sector)
The affiliate’s financial assets are exposed to a number of financial risks: credit risk, liquidity risk and market risk (including exchange rate risk, interest rate risk and price risk).
The global risk management program considers uncertainty in the financial markets and tries to minimize the potential adverse effects on financial yields.
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Financial risk management is administered by the Corporate Finance department. This department identifies, evaluates and hedges financial risks in close collaboration with the operating units. The Company does not actively participate in the trading of its financial assets for speculative purposes. i) Credit risk
Credit risk refers to financial uncertainty, over different periods of time, in relation to the fulfillment of obligations subscribed by counterparties at the point in time when contractual rights to receive cash or other financial assets are exercised.
The exposure of the affiliate Arauco to credit risk is directly related to the individual ability of its customers to fulfill their contractual commitments and is reflected in trade receivables. Credit risk also arises for assets that are held by third parties such as deposits, agreements and mutual funds.
Arauco has contracted insurance policies to minimize the credit risk on term sales (Open Account) in accordance with its policy that cover the export sales of Celulosa Arauco y Constitución S.A., Maderas Arauco S.A., Forestal Arauco S.A., and Arauco do Brasil S.A., and for the local sales of Arauco México S.A. de C.V., Arauco Wood Inc., Arauco Colombia S.A., Arauco Perú S.A., Arauco Panels USA LLC, Flakeboard Company Ltd., Flakeboard America Ltd., Celulosa Arauco y Constitución S.A., Maderas Arauco S.A., Arauco Florestal Arapoti, Arauco Forest Brasil S.A. and Arauco do Brasil S.A. Arauco uses the credit insurance company Continental (AA- rating according to the riskrating companies Humphreys and Fitch Ratings). It uses the credit insurance company INSUR (subsidiary of Continental in Argentina) to cover the export and local sales of Arauco Argentina S.A. Using both companies, 90% of the value of each invoice is covered without deductibles for nominated customers, and 80% for unnominated customers (those with a credit line between ThUS$ 5 and ThUS$ 50 (billed currency equivalent) for the local sales of Arauco Perú S.A., Arauco Colombia S.A., Arauco México S.A. de C.V., Arauco Do Brasil S.A., Arauco Argentina S.A. and Maderas Arauco S.A. Greater lines of credit are all nominated customers).
In order to support a line of credit or an advance payment to a provider that has been approved by the Credit Committee, Arauco has guarantees such as mortgages, pledges, stand-by letters of credit, bank guarantees, checks, promissory notes, loans and other similar items that could be enforced in accordance with the legislation of each country. The debt covered by these types of guarantees amounts to US$ 99.5 million as of December 31, 2016. The guarantee procedure is regulated by the guarantee policy, the purpose of which is to control the accounting, expiration and valuation of guarantees.
The department of Credit and Collections, which reports to the Finance department, is the area responsible for minimizing the credit risk of accounts receivable. This area monitors overdue accounts and approves or denies credit limits for all term sales. The standards and procedures for the proper control and management of the risk of sales on credit are governed by the Credit Policy.
A procedure for the approval and modification of customer lines of credit has been established and must be followed by all companies belonging to the Arauco group. Requests for lines of credit are entered into a Credit Evaluation model, where all available information is analyzed, including the amount of the line granted by the credit insurance company. Subsequently, these requests are approved or denied by the internal committees of each of 56 WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1
the companies belonging to the Arauco group, according to the maximum amount authorized by the Credit Policy. If the line of credit exceeds that amount, it is analyzed by the Corporate Committee. Credit lines are renewed annually through this internal process.
As of December 31, 2016, accounts receivable for Arauco totaled ThUS$ 609,102, of which 54.3% were sales on credit, 40.82% were sales with letters of credit, and 4.88% were other sales. These receivables covered 2,274 customers. The customer with the greatest debt represented 2.14% of total accounts receivable as of that date.
Arauco has not entered into any refinancing or renegotiations with its customers, which involve amendments to invoice due dates. Any renegotiation of debt with a customer, if necessary, will be analyzed on a case by case basis and approved by the Corporate Finance Department.
Sales on credit (Open Account) covered by various insurance policies and guarantees amount to 98.8% of the total, consequently Arauco’s portfolio exposure amounts to 1.2%.
Sales with letters of credit are mainly to the Asian and Middle East markets. A credit evaluation of the banks that issue credit letters is regularly performed, in order to obtain their rating by the main risk rating agencies, their ranking at country and global levels, and their financial situation for the past five years. Depending on the result of this evaluation, the issuing bank is either approved or a confirmation of the letter of credit is requested.
All sales are controlled using a credit verification system, the parameters of which have been defined to block orders from customers that have a certain percentage of overdue payments or whose line of credit has been exceeded or expired at the time the product would be shipped.
Debtors by net sales per range as of December 31, 2016 and 2015 respectively were as follows:
December 31, 2016
Days Not Overdue 1-30 31-60 61-90 91-120 121-150 151-180 181-210 211-250 over 250 Total
ThUS$ 562,386 31,106 257 881 39 18 21 11 64 14,319 609,102 % 92.33% 5.11% 0.04% 0.14% 0.01% 0.00% 0.00% 0.00% 0.01% 2.36% 100.00%
December 31, 2015
Days Not Overdue 1-30 31-60 61-90 91-120 121-150 151-180 181-210 211-250 over 250 Total
ThUS$ 571,499 18,927 2,303 2,332 363 168 1,102 1,413 1,444 25,650 625,201 % 91.41% 3.03% 0.37% 0.37% 0.06% 0.03% 0.18% 0.23% 0.22% 4.10% 100.00%
Arauco has implemented a Guarantee Policy in order to control accounting, valuation and expiration dates of guarantees received, and a Corporate Credit Policy.
Regarding the credit risk of time deposits, repurchase agreements and mutual funds, Arauco has in place a policy that minimizes this risk through guidelines for managing cash flow surpluses in low-risk institutions.
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Placement policy:
The affiliate Arauco has a placement policy that identifies and limits the financial instruments and the entities in which the companies, in particular Celulosa Arauco y Constitución S.A., are authorized to invest.
Treasury management is handled centrally for transactions in Chile. The Parent Company invests, deposits surplus cash, and arranges short and long-term borrowing from banks, financial institutions and the public. The exception to this rule occurs in specific transactions that must be carried out through other companies, in which case the express authorization of the Corporate Manager at Arauco is required.
Investments are restricted to fixed income instruments with appropriate liquidity. Each type of instrument has a rating and certain limits apply depending on its duration and issuer.
Intermediaries (banks, stockbrokers and mutual funds agencies, and these latter two must be affiliates of banks) are subject to a process that evaluates the relative degree of risk of each bank or financial institution in terms of its financial statements and securities. Each institution is assigned a score, which ultimately determines a relative risk ranking that Arauco uses to define the investment limits for each institution.
The background information that is necessary to evaluate these various criteria is obtained from the official financial statements of the banks and from the rating of their current short and long-term debt securities, as defined by the supervisory organization (Superintendence of Banks and Financial Institutions) and assigned by the risk rating agencies authorized by this organization, which in this case are Fitch Ratings Chile, Humphreys and Feller Rate.
The following criteria are evaluated: Capital and reserves, current ratio, share in total financial system placements, return on capital, profit margin, borrowing-to-capital ratio and risk ratings for each entity.
Any exceptions that may be necessary, mainly in relation to the investment limits in a particular instrument or entity, must be expressly authorized by the Chief Financial Officer at Arauco. ii) Liquidity risk
Liquidity risk is the ability to meet payment obligations as they fall due. The exposure to liquidity risk affects obligations with the public, banks and financial institutions, creditors and other accounts payable, and it is related to the ability to meet net cash requirements under both normal and exceptional conditions.
The Finance department constantly monitors the Company’s cash projections on the basis of short and long-term forecasts, as well as forecasts of alternative financing options available. The Company has a placement policy, in order to control the risk of the available financial assets.
The capital committed under each of the main financial liabilities subject to liquidity risk is detailed in the table below and grouped by maturity date:
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December 2016 (In thousands of US dollars) 0 - 1 months 1 - 3 months 3 months to 1 year 1 - 5 years Over 5 years Total
Maturity
Finance leases 0 9,534 30,866 73,586 0 113,986 Bank loans 0 134,140 61,483 638,989 93,001 927,613 Bonds issued in UF and US dollars 0 51,875 409,102 1,691,328 1,998,938 4,151,243 Other loans 0 0 0 0 0 0
Total 0 195,549 501,451 2,403,903 2,091,939 5,192,842
December 2015 (In thousands of US dollars) 0 - 1 months 1 - 3 months 3 months to 1 year 1 - 5 years Over 5 years Total
Maturity
Finance leases 0 9,301 27,561 90,697 0 127,559 Bank loans 0 126,795 72,948 694,698 153,856 1,048,297 Bonds issued in UF and US dollars 0 49,357 5,836 1,695,731 2,275,488 4,026,412 Other loans 0 0 0 0 0 0
Total 0 185,453 106,345 2,481,126 2,429,344 5,202,268 iii) Market risk- exchange rate
This risk arises from the likelihood of losses from changes in the exchange rates of the currencies in which the assets and liabilities of Arauco are denominated other than its functional currency.
The affiliate Arauco is exposed to the risk of changes in the exchange rate of the US dollar (functional currency) with respect to sales, purchases and obligations that are denominated in other currencies, such as the Chilean peso, Euro, Real or others. The Chilean peso is the currency with the greatest risk in the event of a significant exchange rate fluctuation.
Sensitivity analyses are performed to determine the effect of this variable on equity and net income for the business.
The sensitivity analysis assumes a variation of + / - 10% in the closing exchange rate to the Chilean peso. With all other variables at a constant rate, a US dollar exchange rate variation of +/- 10% in relation to the Chilean Peso would mean a change in the net income after tax of +/- 5.28% (equivalent to MUS$ +/- 11.5), and +/- 0.10% of equity (equivalent to MUS$ -/+ 6.9).
Additionally, sensitivity analysis was performed that assumes a variation of +/- 10% in the closing exchange rate to the Brazilian real. If all other variables remain constant, a change of +/- 10% in the exchange rate between the US dollar and the Brazilian real would result in a change in net income after tax of +/- 1.22% (equivalent to MUS$ 2.7); and a change in equity of +/- 0.02% (equivalent to MUS$ 1.6).
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iv) Market risk – interest rate
Interest rate risk refers to the sensitivity of the value of financial assets and liabilities to changes in interest rates.
The affiliate Arauco is also exposed to the risk of changes in the interest rate of obligations to the public, banks and financial institutions and variable-rate interest-bearing financial instruments.
The affiliate Arauco performs a risk analysis by reviewing the exposure to changes in the interest rate. As of December 31, 2016, 12.9% of bonds and loans with banks accrue interest at a variable rate. Therefore, a change of +/- 10% in the interest rate would have an effect of +/- 0.12% on net income after tax (equivalent to +/- MUS$ 0.3) and a change in equity of +/- 0.002% (equivalent to +/- MUS$ 0.2). v) Market risk – wood pulp price
The price of wood pulp is determined by the world market and by conditions in the regional market. Prices fluctuate as a function of demand, production capacity, business strategies adopted by large forestry companies and pulp and paper producers, and the availability of substitutes.
The prices of wood pulp are reflected in the operating revenues in the statement of income and directly affect net income for the period.
As of December 31, 2016, operating revenues from the sale of wood pulp represented about 45.1% of total revenues. Forward contracts and other financial instruments are not used for wood pulp sales; instead, the price is set on a monthly basis according to the market.
This risk is handled in a number of ways. Arauco has a specialized team that performs regular analyses of the market and the competition, providing tools to evaluate trends and adjust forecasts accordingly. Similarly, financial sensitivity analyses on variable prices enable the company to take the necessary precautions to better face different situations. Additionally, Arauco mitigates the risk of pulp prices by maintaining a strategy of low-cost production, allowing it to deal with possible price fluctuations in economic cycles.
The sensitivity analysis assumes a variation of + / - 10% in the average price of cellulose during the last quarter of the year. If all other variables remain constant, a change of +/- 10% in the average price of wood pulp would result in a change of +/- 64.80% in net income before tax (equivalent to MUS$ 141.0) and +/- 1.21% in equity (equivalent to MUS$ 84.6).
The changes shown in the reported sensitivity analysis for exchange rates, interest rates and cellulose prices, are fluctuation ranges that are considered possible given current market conditions.
c) Risks associated with Compañía de Petróleos de Chile Copec S.A. (fuel sector)
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The business at Copec S.A. and its affiliates is exposed to a number of financial risks, specifically market risk, credit risk, interest rate risk, liquidity risk and investment in foreign assets risk, with Copec S.A., its Colombian affiliate Organización Terpel S.A. and the US affiliate Mapco as the companies most exposed to these risks.. Risk management at these companies is based on the diversification of the business and of customers, the financial evaluation of customers, and the use of derivative instruments when required.
Risk management at Copec S.A is administered by the Finance department in accordance with the guidelines issued by the Company's general management and Board of Directors. Risk management in the subsidiary Organización Terpel S.A is performed at similar hierarchical levels. Specifically, the Board of Directors is responsible for establishing and supervising the risk management structure and the Management of the subsidiary ensures its compliance through standards and procedures. Financial risk management at Mapco is carried out by the Finance and Administration Department. In addition, the Board is responsible for establishing and supervising the risk management structure and management at the affiliate ensures compliance with its standards and procedures. Then in all three cases, financial risks are identified, assessed and covered jointly by the financial, operating and commercial departments in each company.
Risk management considers an individual assessment of each exposure identified. This assessment determines whether financial hedge instruments are taken out, whether there are natural hedging mechanisms in place, or whether the associated risk is simply assumed, because it is not considered to be critical for the business and the operation.
An analysis of each risk is presented separately. i) Exchange rate risk
Copec S.A.
The primary market risk facing the company is the exchange rate risk (Chilean peso/U.S. dollar) resulting from fuel import transactions on the Chilean market and export transactions, both of which are very-short-term operations.
Management has established a policy of managing the risk of exchange rates between foreign and local currency, in order to minimize the net exposure in foreign currency. The Company’s Finance department achieves this using forward contracts with local financial entities. These contracts have very short terms: less than 30 days for fuel import hedges and around 30 days for export transactions.
The exchange rate risk of financial investments in foreign currency is not managed, as these are operating positions of one or two days.
In the last quarter of 2014 the company restructured its financial obligations with local and foreign banks. For this purpose, the company obtained an international loan for US$ 500 million with bullet maturity in October 2019. These funds were used to prepay other local and foreign financial obligations, including foreign borrowings for US$ 340 million maturing in 2016. These obligations resulted from the acquisition of the affiliates in Colombia.
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As of December 31, 2016 the Company had managed the exchange rate risk on its international loans. Therefore, the company has all its notional principal and interest hedged by cross currency swap contracts.
A sensitivity analysis on changes in the exchange rate of total accounts payable in US dollars at December 31, 2016, including the aforementioned loan for US$ 500 million, using the formal US dollar exchange rate at January 1, 2017 is as follows:
ThUS$ Change % Ch$/US$ Investment MCh$ (Loss) Gain MCh$
635,353 - 669.47 425,350 0 635,353 5% 702.94 446,617 -21,267 635,353 10% 736.42 467,885 -42,535 635,353 15% 769.89 189,152 -63,802 635,353 -5% 636.00 404,082 21,267 635,353 -10% 602.52 382,815 42,535 635,353 -15% 569.05 361,547 63,802
Organización Terpel and affiliates
The Group has no currency risk exposure in trade and other receivables, trade and other payables and financial obligations, as transactions in foreign currency account for less than 1%. Each subsidiary operates with the locally accepted currency in its country, and financial indebtedness is also taken in this local currency in order not to generate foreign exchange exposure. Treasury departments in various countries cover all of their requirements locally, without generating surpluses to date.
Colombian transactions are conducted in Colombian pesos, except for one customer who is billed in dollars, with monthly average of US$ 5 million, and these funds are used to cover payments to foreign suppliers in the same currency. Therefore, no currency risk arises.
The NGV marketing business is exposed to currency risk as gas is priced with 70% of tariffs set in US dollars: for the supply, transportation and marketing. As the exchange rate fluctuates the cost of gas in Colombian pesos varies as well. In order to maintain price competitiveness of NGV compared to gasoline, an increase in the exchange rate, which translates into a higher cost, negatively impacts the business margin.
Mapco Express, Inc.
Mapco is not significantly exposed to foreign exchange risks on trade receivables, other receivables, accounts payable and financial obligations, as all transactions are denominated in US dollars, which is the local currency. ii) Fuel price risk
Copec S.A.
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Inventory values are affected by fluctuations in international fuel prices. Therefore, the Company is constantly analyzing hedge possibilities to match the risk it faces.
There are no hedging financial instruments for the price of fuel as of December 31, 2016.
However, considering the parent company’s fuel inventories at the year-end, if prices rose by 2.5% and 5%, the effect on net income would be an increase of ThUS$ 3.970 and ThUS$ 7,940, respectively. For price reductions by the same percentages, net income would fall be these amounts. iii) Interest Rate Risk
Copec S.A.
The Company has no significant short-term investments, other than those related to cash variations, which are invested over a period from 1 to 3 days. Business income and expenses are independent of changes in interest rates. Therefore, no significant financial risk exists.
Management understands that there is no significant interest rate risk for remunerated financial liabilities, as these liabilities relate to the financing of operating cash flows, with terms mainly between 1 and 90 days, and are highly variable over the course of the year.
The international loan in letter i) above is subject to the international interest rate risk, that is, a 30 day LIBOR rate. The Company's policy is to evaluate interest rate swaps individually to mitigate the risk associated with variable rates, currently the loan with a 30 day LIBOR rate is fully hedged and the rate is fixed in CLP.
Also, there are three long-term loans with Empresas Copec, one for ThUF 2,470.92, one for ThUF 5,344.13 and another one for ThCh$ 67,839,959. The first one expires in October 2024 and the second one in November 2030. Both repayments are bullet at maturity and pay interest of ThUF 150.30 semiannually. The third one matures on September 15, 2023, pays interest semiannually and principal repayments begin in year five.
Organización Terpel and affiliates
78% of the debt acquired through bond issues in February 2013 and February 2015, pay interest at rates indexed to the CPI. The risk of increases in the cost of debt as a result of an increase in the inflation rate, in part would be offset by the annual increase in the wholesale margin on June 1 each year according to the annual CPI increase over the last twelve months as established in Decree 90,675 dated 2014.
Cash surpluses are mainly held in savings accounts and collective sight portfolios, a market rate of return is received.
Short and long term loans for the periods ended December 31, 2016 and 2015 are at the best market conditions, whether at fixed or variable rates. The loans are taken with a prepayment option without penalty, which permits the debt to be restructured at any time if market conditions change. The company has no interest rate hedges. 63 WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1
- Sensitivity analysis on fair values for fixed-rate instruments: The Terpel Group does not account for fixed rate financial liabilities at fair value through net income, and does not use derivatives (interest rate swaps) as hedging instruments. - Cash flow sensitivity analysis for variable rate instruments: Terpel Group's debt as of December 31, 2016 is ThChUS$ 480,250 of which 19% is at a fixed rate and 81% is at a variable rate. Bonds are issued in Colombia at a variable rate referenced to the CPI for 12 months, and this amounts to ThUS$ 288,576 as of December 31, 2016. A variation of 100 basis points in this indicator at the end of the reporting period is considered to be reasonably possible, an increase or decrease of 100 basis points would impact the statement of net income by ThUS$ 2,748, as increased or reduced expenditure respectively. Debt placed in Panama is indexed to LIBOR. The debt in Mexico is equivalent to 4.3% of total variable debt and is indexed to TIEE. A variation in Libor and TIEE would not have a significant effect on the consolidated financial statements. The debt in Peru represents 2.1% of total Group Terpel debt and is taken at a fixed rate.
Mapco Express, Inc.
Mapco has no short-term investments. Revenues and expenses are independent of fluctuations in interest rates. Consequently, there is no significant financial risk. Management understands that there is no significant interest rate risk on its short-term financial liabilities. As they relate to financing cash flows from operating activities. Some of Mapco’s financial leases have a fixed interest rate of 2.14%.
iv) Credit risk
Copec S.A.
The Company faces credit risk resulting from the composition of its portfolio of trade receivables and its portfolio of financial investments.
The Finance department issues monthly reports on the status of the portfolio, and the Chief Executive Officer holds regular meetings with the sales and finance departments to analyze the status of the overall portfolio, as well as the portfolios of individual customers, in order to take corrective action if necessary. The Company can block customers that have not fulfilled their payment commitments or have reached their credit limits.
The Company has a portfolio of financial investments to manage surplus cash; the terms of investment for this portfolio are mostly around one to three days. In order to manage this credit risk, Management has established an investment policy for fixed-income instruments with low-risk financial entities. The Finance department manages these investments, and establishes a group of financial entities in which investment is authorized and assigns a maximum credit line and portfolio composition to each entity. The credit lines per institution are granted on the basis of an analysis of equity and solvency risk for banks and equity, and composition and term for mutual funds.
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The following table shows the arrears percentage by net sales as of December 31, 2016 and 2015:
December 31, 2016
Days Not Overdue 1-30 31-60 61-90 91-120 121-150 151-180 181-210 211-250 over 250 Total
ThUS$ 407,381 66,607 25,292 2,899 1,338 770 1,449 789 1,233 20,667 528,425 % 77.09% 12.60% 4.79% 0.55% 0.25% 0.15% 0.27% 0.15% 0.23% 3.91% 100.00%
December 31, 2015
Days Not Overdue 1-30 31-60 61-90 91-120 121-150 151-180 181-210 211-250 over 250 Total
ThUS$ 448,323 48,547 5,555 8,992 962 3,300 7,221 2,712 1,436 3,421 530,469 % 84.51% 9.15% 1.05% 1.70% 0.18% 0.62% 1.36% 0.51% 0.27% 0.64% 100.00%
Organización Terpel and affiliates
Credit risk is the risk of financial loss if a customer or counterparty to a financial instrument fails to meet its contractual obligations, which arises mainly on trade receivables, other accounts receivable and cash and cash equivalents.
Working capital or revolving loans are granted specifically for the purchase of products marketed by the Group. All loans granted must comply with the information requirements established according to the type of customer and the guarantee offered. The documentation submitted must ensure that the Group has all the information required to understand its customers and their general, commercial and taxation circumstances and a general understanding of the customer’s financial situation.
In addition to customer guarantees, the Terpel Group has contracted credit insurance covering part of the credit risk of customers, when the guarantee does not cover the credit limit. As of December 31, 2016 46% of this portfolio had guarantees, where 47% had credit insurance.
The exposure to credit risk is affected mainly by the individual characteristics of each customer, segment and country.
The Group's risk policy requires a financial analysis of each new individual customer based on external ratings, when available. This process is performed before the start of the business relationship. Lines of credit and credit limits are established for each customer and approved in accordance with levels of authorization established by the Board of Directors. Customer’s lines of credits are constantly reviewed and adjusted according to the customer’s creditworthiness and business need.
All active customers in risk centers are reviewed on a semi-annual basis to monitor whether their financial position has been impaired. The report from this review determines the need for an additional guarantee, annulment of the credit, sale against prepayment, or even annulment of the business relationship if the risk is sufficiently high.
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The Group monitors the relevant economic and political environment in its operating countries in order to make prompt decisions regarding credit extended to customers.
More than 58% of the Group’s customers have carried out transactions with it for more than 4 years and no impairment losses have been recognized against these customers. When monitoring the customer’s credit risk, these are grouped according to their credit characteristics.
Trade and other receivables are mainly related to Group wholesale customers. The customers that are classified as "high risk" are included in a list of restricted customers and are monitored by Risk Management. Future sales are made following prepayment or by requiring a guarantee.
The Group has established a guarantee policy, which covers obligations in case of non-payment. This guarantee is pledged by certain customers and sectors that allow this for business purposes.
The Group establishes a provision for impairment based on monthly monitoring of trade and other receivables within each group business, which highlights the customers that show indications of recovery risk and enables the corresponding provisions to be made.
The Group has no significant concentrations of credit risk and has policies to ensure that wholesale sales of products are made to customers with an appropriate credit history.
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*Customer classification criteria % Overdue debt or % Delinquent debt
Group A (1) < 30% < 1% Group B Between 30% and 60% Between 1 % and 20 % Group C Between 60 % and 90 % Between 20 % and 75 % Group D > 90% > 75% Other Unclassified groups of accounts
(1) Group A also includes customers w ith no debt that is currently due, related companies and fiscal entities. None of the unexpired financial assets have been renegotiated during the period.
None of the unexpired financial assets have been renegotiated during the period.
Mapco Express, Inc.
Credit risk is the risk of financial loss for Mapco, if a customer or counterparty for a financial instrument does not comply with its contractual obligations, and arises mainly from Mapco’s cash and cash equivalents, trade credits and other. Working capital credit or revolving credit facilities are specifically dedicated to purchasing inventories sold by Mapco. Any loan granted by Company must comply with the information requirements applicable to that customer and guarantee. The documentation submitted must ensure that Mapco has all the information required to understand its customers and their general, trade and taxation circumstances and a general understanding of that customer’s financial situation.
Mapco Group's exposure to credit risk within its trade and other receivables is influenced mainly by the individual characteristics of each customer and segment. The Mapco Group has established a credit policy, which requires that each new customer is individually analyzed to determine their creditworthiness, before they are offered Mapco Group’s general delivery and payment conditions. The Mapco Group’s analysis includes external credit ratings, when available. Purchase limits are established for each customer without Board approval. These limits are constantly reviewed and adjusted according to the customer’s creditworthiness and business need. v) Liquidity risk
Copec S.A.
The purpose of the Company’s liquidity risk management is to provide sufficient cash to cover liabilities. As of December 31, 2016, 64.20% of sales were made through concessionaires, which are very fragmented, with an average payment term of less than 3 days, and 32.11% of sales were made to low-risk industrial customers (with A and B ratings from a scale from A to D, where A is the lowest risk), with an average credit terms of less than 40 days. Therefore, for the purposes of liquidity risk management, the Finance department uses a period of 60 days for its daily cash flow forecasts, and it has access to immediately-available lines of credit with the main financial entities in the local market, which are solvent and have good risk ratings.
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As of December 31, 2016, the Company has liquidity of ThUS$ 424,029 in cash and cash equivalents and ThUS$ 856,898 in available long term lines of credit. Also at December 31, 2015, the Group had liquidity of ThUS$ 438,029 in cash and cash equivalents and ThUS$ 895,941 in available long term lines of credit.
Organización Terpel and affiliates
The Group monitors this risk every day through Treasury positions and forecasts, which uses the obligations and surpluses of cash to determine its cash sources and destinations.
The Group's objective is to maintain a balance between continuity and flexibility of funding using bank overdrafts, bank loans and lease contracts, among others.
The current debt profile enables the Company to meet its debt servicing commitments as they fall due.
As of December 31, 2016, the Group has approved credit facilities of MUS$ 777, of which it had used MUS$ 96 and has MUS$ 681 available, which can be used as overdrafts, treasury credit or both short and long term finance. Interest rates are agreed at the time the obligation is acquired, in accordance with market conditions. At December 31, 2015 the Group has approved credit facilities of MUS$ 915, of which it had used MUS$ 95 and had MUS$ 820 available. vi) Investment in foreign assets risk
Copec has foreign investments as of December 31, 2016 that allow it to control 58.52% of the Colombian affiliate Organización Terpel S.A. and its subsidiaries, with the Colombian peso as their functional currency. All of Mapco and other American companies were acquired in 2016, with the US dollar a their functional currency. As a result, Copec is exposed to an equivalent of MCOP$ 1,773,206 for Terpel in its consolidated statement of financial position as of December 31, 2016, and of MUS$ 366 for the Mapco Group
Sensitivity analysis was performed on the exposure resulting from the investment in Colombia, which is as follows:
Investment MCOP$ Change % Ch$/COP$ Investment MCh$ (Loss) Gain MCh$ (Loss) Gain MUS$
1,773,206 - 0.0254 45,055 0 0 1,773,206 5% 0.0267 47,308 2,253 3 1,773,206 10% 0.0279 49,561 4,506 7 1,773,206 15% 0.0292 51,813 6,758 10 1,773,206 -5% 0.0241 42,802 -2,253 -3 1,773,206 -10% 0.0229 40,550 -4,506 -7 1,773,206 -15% 0.0216 38,297 -6,758 -10
Management studied the investment in Colombia which showed that there is a natural hedge between the Chilean peso and the Colombian peso and concluded that hedging is redundant, as long as the historical correlation
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between the two currencies and the structure of interest rates continue. As of December 31, 2016 the correlation between the COP and the CLP was tested again, and was found to be 94.88%. However, when using short-term hedges on a long-term asset, any movements involve cash flow, but do not imply changes in the investment.
An additional sensitivity analysis was performed on the exposure due to investments in the USA, as follows:
Investment ThUS$ Change % Ch$/US$ Investment MCh$ (Loss) Gain MCh$ (Loss) Gain MUS$
366,108 - 669.47 245,098 0 0 366,108 5% 702.94 257,353 12,255 18 366,108 10% 736.42 269,608 24,510 37 366,108 15% 769.89 281,863 36,765 55 366,108 -5% 636.00 232,843 -12,255 -18 366,108 -10% 602.52 220,588 -24,510 -37 366,108 -15% 569.05 208,333 -36,765 -55
Management has covered all the net investments in the USA as of December 31, 2016 using forward contracts, which are intended to cover the conversion differences that may affect the Company’s equity.
NOTE 5. ESTIMATES, JUDGEMENTS AND ACCOUNTING CHANGES
The preparation of consolidated financial statements in accordance with the accounting records detailed in Note 2 requires Management to make subjective estimates and assumptions, which affect the reported amounts. The estimates are based on historical experience and various other assumptions that are believed to be reasonable, but actual results may differ from those estimates. Management believes that the accounting estimates presented below represent issues that require judgment that can lead to major changes in the reported financial statements.
The Group makes estimates and judgments in relation to the future. The resulting accounting estimates, by definition, will rarely be equal to the corresponding actual results. There are no significant risks that could cause a material adjustment to the consolidated financial statements at the reporting date. a) Staff severance indemnities
The present value of obligations for staff severance indemnities depends on a number of factors that are based on actuarial methods using various assumptions, including the interest rate, staff turnover rates, salary increments, discount rates, and inflation rates. Any changes in these assumptions will affect the book value of these obligations. Additional information about the assumptions is presented in Note 18. b) Biological assets
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The valuation of forest plantations is based on discounted cash flow models, using the cash flows from continuing operations; on the basis of sustainable forest management plans, considering the growth potential of the forests. This valuation is performed on the basis of each identified stand and for each forest species.
These discounted cash flows require estimates about the growth, harvest, sales price and costs. Therefore, the quality of the estimates of future sales and cost trends is important, as are regular studies of the forests to establish the volumes of wood available for harvest and the current growth rates. The main considerations used for the calculation of the valuation of forest plantations are presented in Note 7.
The Group has defined that mussels are recognized at cost whilst they are still growing, as fair value cannot be reliably measured before harvest.
Therefore, they are initially recognized at cost and subsequently, in the final stage of cultivation before harvest, they are recognized at fair value less estimated selling costs. The difference is charged or credited to income at the end of each period. c) Taxes
Tax assets and liabilities are reviewed regularly, and the balances are adjusted accordingly. The Group considers that it has recorded sufficient provisions to cover future taxation obligations, on the basis of current facts, circumstances and tax laws. However, the tax position could change, giving rise to different results and having a significant impact on the amounts reported in the consolidated financial statements (Note 2.19b). d) Lawsuits and contingencies
Empresas Copec S.A. and its affiliates are involved in lawsuits that have not yet been resolved, the future effects of which must be estimated by the Company’s Management, in collaboration with its legal advisors. The Company applies judgment in the interpretation of the reports of its legal advisors, who update their estimates as of each period-end and after each substantial modification in these lawsuits. e) Goodwill
Goodwill is the excess acquisition cost over the fair value of the Group's share of the net identifiable assets at the acquired subsidiary on the acquisition date. Fair value is determined either on the basis of valuations or the discounted cash flow method using assumptions, such as sales prices and industry indices, among others. f) Measurement of fair value
Several of the Group's accounting policies and disclosures require it to measure the fair value of financial and non- financial assets and liabilities.
The Group has established a control framework for measuring fair values. This includes a valuation team, which has overall responsibility for supervising all significant fair value measurements. 70 WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1
The valuation team regularly reviews the significant non-observable variables and valuation adjustments. When third party information is used to measure fair values, such as broker’s quotes or pricing services, the valuation team evaluates the evidence provided by those third parties to support the conclusion that these valuations satisfy the requirements of IFRS, including the corresponding valuation level within the fair value hierarchy.
When measuring the fair value of an asset or liability, the Group uses observable market data whenever possible. Fair values are classified into levels within a fair value hierarchy that are based on the variables used by the estimation technique, as follows:
Level 1: quoted (unadjusted) prices in active markets for identical assets and liabilities.
Level 2: data other than the quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. prices) or indirectly (i.e. price derivatives).
Level 3: data on the asset or liability that is not based on observable market data.
If the variables used to measure the fair value of an asset or liability can be classified into the fair value hierarchy, then the fair value measurement is entirely classified into the same fair value hierarchy level as the lowest level variable that is significant for the total measurement.
f) Cylinder guarantees
The affiliate Abastible S.A. receives guarantees for its cylinders, which are valued according to the current value of this obligation, so their book value might differ from their actual value. g) Other estimates and professional criteria relate to the following concepts:
- Loyalty program (see Note 2.28) - Useful lives of property, plant and equipment (see Note 2.5) - Trademark valuations to identify any potential impairment losses.
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NOTE 6. INVENTORY
As of December 31, 2016 and 2015 inventories at affiliates were as follows:
As of December 31, 2016, 62% of inventories relate to the forestry sector, 34% to the fuel sector and 4% to the fisheries sector.
As of December 31, 2015, 67% of inventories relate to the forestry sector, 29% to the fuel sector and 4% to the fisheries sector.
Changes in inventory charged to income are detailed as follows:
12.31.2016 12.31.2015 ThUS$ ThUS$
Cost of Sales 13,784,899 14,897,652 Obsolescence provision 9,259 7,610 Write offs 2,095 4,215
Total 13,796,253 14,909,477
There are no inventories pledged in guarantee at the reporting date.
The obsolescence provision is calculated by considering the product sale conditions and inventory age (rotation).
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NOTE 7. BIOLOGICAL ASSETS
Current and non-current biological assets at the reporting date were as follows:
Current and non-current biological assets as of December 31, 2016 and 2015 were as follows:
The biological assets of the affiliate Arauco are forest plantations, which are mainly radiata and loblolly pine and to a lesser extent eucalyptus. These plantations are located in Chile, Argentina, Brazil and Uruguay, on 1.7 million hectares, of which 1 million hectares are for plantations, 409 thousand hectares are for native forests, 191 thousand hectares are for other uses and 52 thousand hectares remain to be planted.
Log volume production was 18.7 million m3 as of December 31, 2016, (19.4 million m3 as of December 31, 2015).
The fair value of Arauco’s biological assets are measured under Level 3, as input data is not observable. However, this information reflects the assumptions that market participants would use in pricing the asset, including assumptions about risk.
This unobservable data was collected using the best information available and include Arauco’s own information. It may change if the available information indicates that other market participants would use different information or there is something specific at Arauco that is not available to other market participants.
The main considerations in calculating the fair value of biological assets for the affiliate Arauco are:
- Arauco uses discounted future cash flows to value its forest plantations, therefore the Company forecasts harvests of its plantations as of the reporting date.
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- Current forestry plantations are projected with total volume increases, with a minimum growth equivalent to the current supply.
- Future plantations are not included.
- The purpose of harvesting forest plantations is to supply raw materials for the rest of the products produced and sold by Arauco. By directly controlling the development of the forests to be processed, Arauco is assured of the quality of the wood to be used in each of its products.
- Flows are determined on the basis of the harvest and expected sales of forest products, which are associated with demand at the Company’s own factories and sales to third parties at market prices. In addition, this valuation takes into consideration the sales margins of the different products that are harvested from the forest. These changes are presented in the Statement of Income under “Other income by function”, which as of December 31, 2016 amounted to ThUS$ 208,562 (ThUS$ 210,479 as of December 31, 2015). The valuation of biological assets produces a cost of wood sold that is greater than the real cost incurred, which is presented under “Cost of sales” and amounts to ThUS$ 204,971 as of December 31, 2016 (ThUS$ 185,737 as of December 31, 2015).
- Forests are harvested in accordance with the demand requirements at Arauco’s production plants.
- The discount rates used in Chile, Brazil, Uruguay and Argentina vary between 8% and 12%.
- The prices of harvested wood are considered to be constant in real terms, based on market prices.
- Cost expectations with respect to the lifetime of forests are constant and are based on estimated costs included in projections prepared by the affiliate Arauco.
- The average harvest age, in years, of the forests by country and species is the following:
The sensitivity analysis below shows changes to the value of biological assets following changes in significant assumptions used in calculating the fair value of those assets:
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Movements in the valuation of biological assets are recorded in the income statement under Other Operational Income or Other Operational Expenditure depending on whether it is profit or loss.
Forest plantations classified as current biological assets are those that are harvested and sold within 12 months.
Fire insurance covers forest plantations, which combine with its own resources, can reduce the risks associated with these claims. a) Biological assets pledged in guarantee:
As of December 31, 2016, there are no forestry plantations pledged as security. b) Biological assets with restricted ownership and subventions:
There are no biological assets with restricted ownership at the reporting date. c) Government subsidies related to agricultural operations:
No significant subsidies have been received. d) Biological assets movements
Movement in biological assets
12.31.2016 12.31.2015 ThUS$ ThUS$
Opening balance 3,829,108 3,850,325
Changes in biological assets Additions through acquisition 137,439 215,557 Decreases through sales (1,351) (1,028) Decreases through harvesting (337,177) (310,445) Gain (loss) on changes in fair value less estimated selling costs 208,562 210,479 Deconsolidation on formation of joint venture recorded using the equity method 0 0 Increase (decrease) in foreign currency translation 69,068 (111,502) Other increases (decreases) (3,410) (24,278)
Total Changes 73,131 (21,217)
Closing balance 3,902,239 3,829,108
No disbursements have been committed to acquire biological assets at the reporting date.
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NOTE 8. CURRENT TAX ASSETS AND LIABILITIES
Current taxes are offset in assets or liabilities, if and only if they refer to the same legal entity and the same tax jurisdiction.
Current taxes are detailed as follows:
12.31.2016 12.31.2015 Current tax assets ThUS$ ThUS$
Monthly provisional tax prepayments 33,480 41,444 Recoverable income taxes from previous period 98,267 44,008 Training credits 2,148 1,510 Credits for fixed assets 901 0 Income tax provision 0 0 Credits for dividends received 1,240 616 Other recoverable taxes 30,185 23,203
Total 166,221 110,781
12.31.2016 12.31.2015 Current tax liabilities ThUS$ ThUS$
Corporate income tax provision 36,514 32,959 Fuel sales tax 4,031 (17,468) Additional tax on disallowable expenses 29 11 Equity tax 804 568 Other taxes 3,305 2,911
Total 44,683 18,981
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NOTE 9. OTHER NON FINANCIAL ASSETS
12.31.2016 12.31.2015 Other non-financial assets, current ThUS$ ThUS$
Unamortized roads, current 42,778 47,731 Unamortized insurance 24,432 22,158 VAT recoverable 71,835 62,681 Dividends receivable 408 0 Expenses paid in advance 5,964 5,901 Leases 3,158 79 Fishing permits 795 1,283 Contribution to ESSBIO 394 423 Swaps 0 0 Others (*) 22,713 8,886
Total 172,477 149,142
12.31.2016 12.31.2015 Other non-financial assets, non-current ThUS$ ThUS$
Unamortized roads, non current 120,928 111,319 Unamortized payments in advance (freight, insurance, others) 7,554 5,506 Lease guarantees 93 20 Deferred expenses 1,856 7,767 Others (**) 5,554 4,322
Total 135,985 128,934
(*) As of December 31, 2016 and 2015 the item "Others" includes items such as: Securities in guarantee and dividends receivable, among others.
(**) As of December 31, 2016 and 2015, the item "Others" consists mainly of tax contributions received by the affiliate Arauco S.A.
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NOTE 10. INTANGIBLE ASSETS AND GOODWILL
The main classes of intangibles assets as of December 31, 2016 and 2015 are patents, trademarks, IT programs, water and fishing rights, easements, mining properties and other acquired rights. They are recorded at historic cost.
Patents, trademarks, water and fishing rights, mining properties, easements and other acquired rights have indefinite useful lives, as neither the start nor the end of the period during which these rights are expected to generate cash flows is clear.
These rights are not amortized, but they are tested regularly for impairment.
a) Classes of intangible assets other than goodwill:
12.31.2016 12.31.2015 Accumulated Accumulated Gross Value Net Value Gross Value Net Value amortization amortization ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Patents, trademarks and other rights with indefinite lives 273,526 0 273,526 168,768 0 168,768 Patents, trademarks and other rights with defined lives 517,313 (293,878) 223,435 466,403 (239,944) 226,459 Computer software 144,070 (98,015) 46,055 115,737 (77,973) 37,764 Other Identifiable Intangible Assets 137,967 (54,509) 83,458 65,767 (38,207) 27,560 Fishing permits 16,702 0 16,702 18,202 0 18,202 Water rights 5,763 (9) 5,754 5,559 0 5,559 Mining projects 134,042 (22,776) 111,266 129,198 (22,776) 106,422 Customer portfolio 71,275 (20,293) 50,982 70,676 (15,411) 55,265
Total intangible assets 1,300,658 (489,480) 811,178 1,040,310 (394,311) 645,999
Finite lives 1,004,667 (489,480) 515,187 847,781 (394,311) 453,470 Indefinite lives 295,991 0 295,991 192,529 0 192,529
Total intangible assets 1,300,658 (489,480) 811,178 1,040,310 (394,311) 645,999
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b) The detail and movement of the main classes of intangible assets other than goodwill is as follows:
Patents, Computer Other intangible Customer trademarks and Fishing permits Water rights Mining projects Total software assets portfolio other rights
Opening balance as of January 1, 2016 395,227 37,764 18,202 5,559 27,560 106,422 55,265 645,999
Movements in identifiable intangible assets Disposals 0 (1) 0 0 0 0 0 (1) Additions 27,525 19,367 0 204 2,880 5,061 0 55,037 Additions on business mergers 96,986 400 0 0 60,765 0 0 158,151 Withdrawals (77) (51) 0 0 (631) 0 0 (759) Amortization (41,834) (14,403) 0 (9) (9,270) 0 (4,770) (70,286) Increase (decrease) for revaluation and impairment 0 0 0 0 0 0 0 0 losses recognized in net equity 0 0 0 0 0 0 0 0 Increase (decrease) for revaluation recognized in net income 0 0 0 0 0 0 0 0 Increase (decrease) in foreign currency translation 17,388 828 0 0 835 0 487 19,538 Other increases (decreases) 1,746 2,151 (1,500) 0 1,319 (217) 0 3,499
Total movements in identifiable intangible assets 101,734 8,291 (1,500) 195 55,898 4,844 (4,283) 165,179
Closing balance as of 12.31.2016 496,961 46,055 16,702 5,754 83,458 111,266 50,982 811,178
Patents, Computer Other intangible Customer trademarks and Fishing permits Water rights Mining projects Total software assets portfolio other rights
Opening balance as of January 1, 2015 552,582 38,059 18,152 5,493 29,916 108,337 63,164 815,703
Movements in identifiable intangible assets Disposals 0 (73) 0 0 (70) 0 0 (143) Additions 26,548 16,146 50 89 10,266 7,685 0 60,784 Additions on business mergers 0 0 0 0 0 0 0 0 Withdrawals (228) 0 0 0 (758) 0 0 (986) Amortization (52,877) (14,165) 0 (2) (8,343) (946) (4,819) (81,152) Increase (decrease) for revaluation and impairment 0 0 0 0 0 0 0 0 losses recognized in net equity 0 0 0 0 0 0 0 0 Increase (decrease) for revaluation recognized in net income 0 0 0 0 0 (8,654) 0 (8,654) Increase (decrease) in foreign currency translation (123,402) (2,678) 0 (21) (3,817) 0 (3,080) (132,998) Other increases (decreases) (7,396) 475 0 0 366 0 0 (6,555)
Total movements in identifiable intangible assets (157,355) (295) 50 66 (2,356) (1,915) (7,899) (169,704) Closing balance as of 12.31.2015 395,227 37,764 18,202 5,559 27,560 106,422 55,265 645,999
79 WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 c) The useful lives applied to intangible assets as of December 31, 2016 and 2015 are as follows:
The charge for amortization of intangible assets is recorded under “Cost of Sales” and “Administrative expenses” in the Statement of Comprehensive Income. d) Other intangible assets – Goodwill
Purchased goodwill represents the excess of the acquisition cost over the fair value of the Group’s share in the net identifiable assets of the subsidiary/associate acquired on the acquisition date. Purchased goodwill is not amortized, but it is tested annually for impairment.
Purchased goodwill is allocated to the groups of cash generating units identified in the operating segments in which it originates. The transactions that generated goodwill are the investments in Arauco do Brasil (formerly, Tafisa), and the successive purchases of Organización Terpel and Mapco y Solgas S.A., as follows:
i. "Flakeboard" is a company that directly or through affiliates owns and operates seven panel plants, which Arauco do Brasil acquired on September 24, 2012 at a price of ThUS$ 242,502 for all the shares in that company. This resulted in goodwill as of December 31, 2016 of ThUS$ 39,694 (ThUS$ 39,694 as of December 31, 2015). The recoverable amount of the "Flakeboard" CGU was based on calculations of value in use, using cash flow projections covering 5 years, subject to a discount of between 7% and 8%, which reflects current market assessments for the panel segment in North America.
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Goodwill of ThUS$ 32,385 and ThUS$ 2,814 (ThUS$ 26,967 and ThUS$ 2,814 as of December 31, 2015) was generated by investing in panel plants in Pien, Brazil and others.
The recoverable amount of the CGU in Pien Brazil was based on calculations of value in use, using cash flow projections based on an operating plan approved by Management covering 5 years, subject to a discount of between 9% and 10%, which reflects current market assessments for the panel segment in Brazil.
Annual impairment testing is performed and currently the value recorded in the financial statements of these panel plants does not exceed their recoverable value. Therefore, impairment losses have been recognized.
ii. Goodwill recorded on the acquisition of Organización Terpel S.A. in previous years of ThUS$ 101,784 (ThUS$ 98,250 as of December 31, 2015), and the only movement is due to exchange differences.
iii. The affiliate Abastible S.A. has goodwill from the acquisition in 2016 of 99.86% of the shares in Solgas S.A. as follows:
iv. The affiliate Compañía de Petróleos de Chile Copec S.A. has goodwill of ThUS$ 152,678 for the acquisition of Mapco Express Inc. and others, as follows:
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This purchased goodwill totals ThUS$ 410,587 as of December 31, 2016 (ThUS$ 167,725 as of December 31, 2015), and the movements each year are as follows:
(*) See Note 19b).
e) Intangible assets – Brands
As a result of the valuation of intangible assets identified in the purchase of Organización Terpel S.A. and affiliates the brands Accel, Terpel Oiltec, Maxter, Celerity, Tergas and Gazel have been registered in the consolidated financial statements using the calculation of their fair values, which all have an indefinite useful life, except Accel. Trade Relations with Customers have also been recognized as intangible assets related to the business of the acquired companies, which have been assigned a finite useful life depending on the length of contracts. Amortization is calculated linearly over their expected useful lives.
When the affiliates Abastible in Peru and Ecuador were acquired in April and October respectively, the following brands were registered: Solgas Artefactos, Solgas Auto, Gas Canalizado, Segurogas, Masgas, Duragas & Diseño, Auto Gas, Duragas, Duragas Express and Semapesa.
Following the acquisition of Mapco in November 2016 by the affiliate Compañía de Petróleos de Chile Copec S.A., the following brands were registered in December 2016: MapcoMart, Delta Express, Discount Food Mart, East Coast, Fast, Favorite Markets and Mapco Express.
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NOTE 11. PROPERTY, PLANT AND EQUIPMENT a) Classes of net property, plant and equipment.
Figures in ThUS$ to 12.31.2016 Figures in ThUS$ to 12.31.2015 Accumulated Accumulated Gross Value Net value Gross Value Net value Depreciation Depreciation
Construction in progress 745,602 0 745,602 320,817 0 320,817 Land 1,751,904 0 1,751,904 1,502,849 0 1,502,849 Buildings 4,851,570 (1,950,335) 2,901,235 4,636,718 (1,754,157) 2,882,561 Plant and equipment 7,212,664 (3,381,974) 3,830,690 6,902,306 (2,997,876) 3,904,430 IT equipment 109,773 (73,060) 36,713 93,895 (62,467) 31,428 Fixtures and fittings 499,309 (158,996) 340,313 361,717 (111,128) 250,589 Motor vehicles 163,156 (91,854) 71,302 135,473 (72,088) 63,385 Leasehold improvements 37,920 (6,358) 31,562 12,930 (5,803) 7,127 Other property, plant and equipment 788,907 (380,564) 408,343 606,138 (292,120) 314,018
Total property, plant and equipment 16,160,805 (6,043,141) 10,117,664 14,572,843 (5,295,639) 9,277,204
The depreciation expense as of December 31, 2016 and 2015 was as follows:
12.31.2016 12.31.2015 Depreciation Expense (*) ThUS$ ThUS$
Operational costs 463,255 453,013 Administrative expenses 65,333 53,901 Other miscellaneous operating expenses 11,176 15,314
Total 539,764 522,228
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b) The movements on fixed asset categories were as follows:
As of December 31, 2016 Other property, Construction in Leasehold Property, plant Land Buildings Plant and equipment IT equipment Fixtures and fittings Motor vehicles plant and progress improvements and equipment equipment
ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$
Opening balance 320,817 1,502,849 2,882,561 3,904,430 31,428 250,589 63,385 7,127 314,018 9,277,204
Changes Additions 605,084 11,254 10,649 71,615 1,323 1,003 5,478 770 32,957 740,133 Acquisitions through business combinations 17,093 168,450 120,141 88,977 6,797 73,481 6,005 25,586 49,421 555,951 Transfers from closed projects (252,459) 4,350 105,127 134,832 2,744 (386) 2,942 0 2,850 0 Disposals (196) (1,110) (494) (2,497) (109) 0 (262) 0 (1,613) (6,281) Transfers to (from) construction in progress (242,777) 23,911 65,023 70,577 2,382 19,532 11,933 (176) 38,691 (10,904) Transfers to (from) assets held for sale 0 0 0 510 0 0 0 0 0 510 Removals (4,825) (2,153) (1,026) (5,107) (90) (77) (2,192) 0 (3,254) (18,724) Depreciation 0 0 (158,274) (384,861) (8,020) (14,783) (13,173) (841) (35,696) (615,648) Impairment provision 0 0 9 (1,254) (7) (1) 0 0 (1,553) (2,806) Increase (decrease) for revaluation and impairment 0 0 0 0 0 0 0 0 0 0 Reversals of impairment recognized in income 0 0 0 0 0 0 0 0 0 0 Increase (decrease) in foreign currency translation 21,491 56,356 25,198 65,070 258 13,726 2,131 (904) 14,913 198,239 Other increases (decreases) 281,374 (12,003) (147,679) (111,602) 7 (2,771) (4,945) 0 (2,391) (10)
Total Changes 424,785 249,055 18,674 (73,740) 5,285 89,724 7,917 24,435 94,325 840,460
Closing balance 745,602 1,751,904 2,901,235 3,830,690 36,713 340,313 71,302 31,562 408,343 10,117,664
As of December 31, 2015 Other property, Construction in Leasehold Property, plant Land Buildings Plant and equipment IT equipment Fixtures and fittings Motor vehicles plant and progress improvements and equipment equipment
ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$
Opening balance 316,657 1,552,352 2,890,671 4,267,259 36,210 317,902 70,500 7,070 360,240 9,818,861
Changes Additions 280,854 68,365 178,822 186,247 3,246 5,105 9,071 1,331 24,394 757,435 Acquisitions through business combinations 0 0 0 0 0 0 0 0 0 0 Transfers from closed projects (219,908) 1,763 138,396 72,231 1,186 1,468 2,489 0 2,375 0 Disposals (20) (591) (461) (6,058) (102) (5) (593) 0 (203) (8,033) Transfers to (from) construction in progress (37,585) 24,428 (38,900) 26,989 631 2,733 6,040 243 16,536 1,115 Transfers to (from) assets held for sale 0 0 0 0 0 0 0 0 0 0 Removals (5,114) (1,412) (1,620) (15,216) (16) (61) (1,594) (198) (1,107) (26,338) Depreciation 0 0 (150,140) (369,599) (7,648) (13,465) (13,600) (620) (37,810) (592,882) Impairment provision 0 0 (518) (4,065) 0 0 (24) 0 (10) (4,617) Increase (decrease) for revaluation and impairment 0 0 0 0 0 0 0 0 0 0 Reversals of impairment recognized in income 0 0 0 0 0 0 0 0 0 0 Increase (decrease) in foreign currency translation (11,167) (142,123) (136,306) (192,568) (1,169) (38,588) (8,764) (699) (37,711) (569,095) Other increases (decreases) (2,900) 67 2,617 (60,790) (910) (24,500) (140) 0 (12,686) (99,242)
Total Changes 4,160 (49,503) (8,110) (362,829) (4,782) (67,313) (7,115) 57 (46,222) (541,657)
Closing balance 320,817 1,502,849 2,882,561 3,904,430 31,428 250,589 63,385 7,127 314,018 9,277,204
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Property, plant and equipment pledged in guarantee:
To date, there are no significant assets given in guarantee in these Consolidated Financial Statements
Disbursement commitments for projects or to acquire property, plant and equipment
c) Components temporarily out of service
There were no significant components of property, plant, and equipment that were temporarily out of service as of December 31, 2016 and 2015. d) Impairment
The consolidated companies have sought evidence of impairment and found no significant amounts at the reporting date. e) Items fully depreciated, but still in use
There were no significant components of property, plant, and equipment that were fully depreciated and still in use as of December 31, 2016 and 2015.
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NOTE 12. LEASES
Disclosure information about finance leases by class of assets, Lessee:
Minimum Lease Payments on Finance Leases, Lessee
These obligations are presented in the consolidated statement of financial position under Current and non-current financial liabilities, depending on their due dates detailed above.
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Minimum Lease Payments on Finance Leases, Lessor:
12.31.2016 Gross Interest Value Minimum lease receipts, finance leases ThUS$ ThUS$ ThUS$
Current 512 0 512 One to five years 353 0 353 Over five years 0 0 0
Total 865 0 865
12.31.2015 Gross Interest Value Minimum lease receipts, finance leases ThUS$ ThUS$ ThUS$
Current 10 1 9 One to five years 6 0 6 Over five years 0 0 0
Total 16 1 15
These leasing receivables are shown in the consolidated statement of financial position under Current and non-current trade and other receivables, depending on their due dates detailed above.
The Group has finance leases. These contracts are for forestry machinery and equipment, covering periods not exceeding five years and at market interest rates. They also include early termination options, according to the general and special conditions established in each contract.
There is no impairment, contingent lease payments or reportable restrictions for finance leases as lessee or lessor shown in the tables above.
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NOTE 13. INVESTMENT PROPERTY
12.31.2016 12.31.2015 ThUS$ ThUS$
Opening balance 44,680 52,135
Additions 0 556 Acquisitions through business combinations 0 0 Disposals 0 0 Disposals through divestitures of businesses 0 (144) Transfers (to) from properties occupied by the owner 0 0 Transfers (to) from non-current assets and disposal groups held for sale (1,477) 0 Removals 0 (830) Impairment losses recognized in income 0 0 Reversals of impairment losses recognized in income 0 0 Depreciation (53) (55) Increase (decrease) in foreign currency translation 2,297 (6,982)
Total changes in Investment Properties 767 (7,455)
Closing balance 45,447 44,680
All investment property as of December 31, 2016 and 2015 was land.
There are no significant rental income or operating expenses for investment properties.
There are no contractual obligations for the acquisition, construction or development of investment properties, or for their repair, maintenance or improvement.
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NOTE 14. DEFERRED TAXES
Deferred tax assets and liabilities can only be offset if this right has been legally recognized and the assets and liabilities refer to the same tax authority.
The tax rate applicable to the parent company's main affiliates is 25% in Chile, 35% in Argentina, 34% in Brazil, 25% in Uruguay, 34% in the United States (federal rate) and 34% in Colombia. a) Deferred tax assets and liabilities are detailed as follows:
12.31.2016 12.31.2015 ThUS$ ThUS$
Deferred tax assets Inventories 7,369 4,409 Allowance for doubtful debts 10,534 9,682 Provision for vacations 3,092 2,570 Prepaid income 4,069 3,276 Obligations for post-employment benefits 28,806 24,629 Revaluations of financial instruments 12,703 21,820 Revaluations of property, plant and equipment 9,807 7,730 Tax losses 137,136 88,716 Differences on accrued liabilities 11,802 8,535 Differences on the value of intangible assets 2,499 56 Differences on the value of trade and other receivables 4,886 4,572 Provisions 21,337 24,971 Other 36,672 28,870
Total deferred tax assets 290,712 229,836
12.31.2016 12.31.2015 ThUS$ ThUS$
Deferred tax liabilities Depreciation 185,986 178,479 Obligations for post-employment benefits 799 683 Revaluations of property, plant and equipment 1,098,766 1,011,098 Valuation of biological assets 719,577 693,103 Revaluations of prepaid expenses 42,883 40,911 Intangible assets 187,919 174,586 Revaluations of financial instruments 7,438 6,401 Inventories 32,772 32,447 Other 28,407 35,038
Total deferred tax liabilities 2,304,547 2,172,746
89 WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 b) Income (expenses) from current and deferred income taxes are as follows:
12.31.2016 12.31.2015 ThUS$ ThUS$
Deferred tax expense Deferred tax expense related to creation and reversal of temporary differences 10,201 (45,015) Deferred tax expense related to changes in the tax rate or new rates (5,407) 68 Tax benefit arising from assets for previously unrecognized taxes used to reduce deferred tax expense 11,498 (959) Other deferred tax expense (499) 1,147
Deferred tax expense, net, total 15,793 (44,759)
Total tax expense (157,481) (186,440)
c) Income (expenses) from foreign and Chilean income taxes are as follows:
90 WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 d) Reconciliation of tax expense using statutory rate with tax expense using effective rate. Reconciliation of tax expense at the legal rate to the effective rate is as follows:
12.31.2016 12.31.2015 ThUS$ ThUS$
Income tax expense using the statutory rate (318,317) (235,137) Tax effect of rates in other jurisdictions Tax effect of rates in other jurisdictions (22,406) (19,621) Tax effect of non-taxable revenue 167,373 62,634 Tax effect of non-deductible expenditure (9,294) (44,902) Tax effect of using previously unrecognized tax losses (185) 1,154 Tax effect of a tax benefit previously unrecognized in the income statement (7,645) (134) Tax effect of a new evaluation of unrecognized deferred tax assets 14,429 142 Tax effect of changes in tax rates 11,499 (3,973) Tax effect of under or over provided tax in prior periods (6,465) 4,033 Taxation calculated at the applicable rate 516 (779) Liquidating a foreign investment (*) 477 69,854 Other increase (decrease) in statutory tax charge 12,537 (19,711)
Total adjustments to tax expense using the statutory rate 160,836 48,697
Tax expense using the effective rate (157,481) (186,440) (*) The affiliate Compañía de Petróleos de Chile Copec S.A. recorded a favorable effect on current taxes, due to the tax loss in liquidating its associate Copec Invesment Ltd.
Deferred tax assets from negative tax bases that have not yet been offset are recognized to the extent that it is likely that the corresponding benefit will be recovered in the future. In this regard, there are no unrecognized deferred tax assets.
12.31.2016 12.31.2015 Deductible Deductible Concept Difference Taxable Difference Difference Taxable Difference ThUS$ ThUS$ ThUS$ ThUS$
Deferred tax assets 153,576 0 141,120 0 Tax losses 137,136 0 88,716 0 Deferred tax liabilities 0 2,304,547 0 2,172,746
Total 290,712 2,304,547 229,836 2,172,746
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NOTE 15. TRADE AND OTHER PAYABLES
Trade and other payables are detailed as follows:
The main suppliers of the Group as of December 31, 2016 and 2015 are as follows: Enap Refinerías S.A., Chevron Products Company, Valero Marketing & Supply, Exxon Mobil Sales & Supply Company, Vitol S.A. Inc., Oxiquim S.A., Iturri S.A. Eka Chile S.A., Occidental Chemical Chile Ltda. and Compañía de Leasing Tattersall S.A.
The stratification of trade payables as of December 31, 2016 and 2015 is as follows:
As of December 31, 2016
TRADE CREDITORS NOT OVERDUE Amounts by days until due Supplier Under 30 Over 365 Total ThUS$ 31-60 days 61-90 91-120 121-365 days days Products 465,631 21,877 1,599 557 2,419 9 492,092 Services 331,969 24,959 3,618 6,547 6,257 124 373,474 Other 193,691 2,810 250 0 10,784 0 207,535 Total ThUS$ 991,291 49,646 5,467 7,104 19,460 133 1,073,101
TRADE PAYABLES OVERDUE Amounts by days overdue Supplier Under 30 Over 180 Total ThUS$ 31-60 days 61-90 91-120 121-180 days days Products 116,431 7,093 2,959 484 1,235 21 128,223 Services 10,086 749 1,063 355 280 412 12,945 Other 1,598 2,041 383 809 728 5,073 10,632 Total ThUS$ 128,115 9,883 4,405 1,648 2,243 5,506 151,800
Total ThUS$ 1,119,406 59,529 9,872 8,752 21,703 5,639 1,224,901
As of December 31, 2015
TRADE CREDITORS NOT OVERDUE Amounts by days until due Supplier Under 30 Over 365 Total ThUS$ 31-60 days 61-90 91-120 121-365 days days Products 560,951 18,109 4,927 186 155 0 584,328 Services 225,086 19,355 3,722 4,731 1,337 0 254,231 Other 115,936 258 0 0 0 0 116,194 Total ThUS$ 901,973 37,722 8,649 4,917 1,492 0 954,753
TRADE PAYABLES OVERDUE Amounts by days overdue Supplier Under 30 Over 180 Total ThUS$ 31-60 days 61-90 91-120 121-180 days days Products 15,784 328 367 430 290 891 18,090 Services 3,205 502 200 27 627 276 4,837 Other 35,724 8 1 1 0 0 35,734 Total ThUS$ 54,713 838 568 458 917 1,167 58,661
Total ThUS$ 956,686 38,560 9,217 5,375 2,409 1,167 1,013,414 The Parent Company, Empresas Copec S.A., has an average payment period of 30 days. Each affiliate has different payment periods, depending on their business.
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NOTE 16. BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Related parties are the entities defined in IAS 24, in the standards issued by the Chilean Superintendence of Securities and Insurance, and in Corporate Law.
Balances receivable from and payable to related parties as of each period-end primarily arise from business transactions, they are agreed in Chilean pesos and U.S. dollars, they have payment terms that do not exceed 60 days, and in general do not have any indexation or interest clauses.
No guarantees have been granted and there are no provisions for doubtful accounts in relation to balances between related parties at the reporting date.
The “Transactions” table includes all transactions with related parties that total over ThUS$ 200 per annum in any period (which is 0.005% of operating revenues and 0.006% of cost of sales).
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16.1 Related party receivables
12.31.2016 12.31.2015 Accounts receivable from related companies, current Country Relationship ThUS$ ThUS$
96,942,120-8 AIR BP COPEC S.A. Chile Joint venture 22,117 18,726 79,825,060-4 Forestal del Sur S.A. Chile Indirect Associate 7,618 0 76,307,309-2 Naviera Los Inmigrantes S.A. Chile Common shareholder 3,978 3,925 96,505,760-9 Colbún S.A. Chile Director in common 2,952 600 70,037,855-0 Laguna Blanca S.A. Chile Joint venture 2,500 12,927 99,500,140-3 Eka Chile S.A. Chile Joint venture 1,701 1,646 71,625,800-8 Fundación Educacional Arauco Chile Indirect Associate 1,188 276 79,895,330-3 Compañía Puerto Coronel S.A. Chile Indirect Associate 1,114 141 Foreign Unillin Arauco Pisos Ltda Brazil Indirect Associate 726 523 96,532,330-9 CMPC Celulosa S.A. Chile Common shareholder 407 384 76,384,550-8 Sociedad Nacional Marítima S.A. Chile Indirect Associate 337 299 65,097,218-K Fundación Acerca Redes Chile Indirect Associate 274 21 Foreign Montagas E.S.P. Colombia Indirect Associate 249 419 96,893,820-7 Corpesca S.A. Chile Indirect Associate 235 1,237 93,628,000-5 Molibdenos y Metales S.A. Chile Common shareholder 193 287 76,349,706-2 Hualpén Gas S.A. Chile Indirect Associate 169 67 76,122,974-5 Algae Fuels S.A. Chile Indirect Associate 142 0 95,304,000-K CMPC Maderas S.A. Chile Common shareholder 140 113 91,440,000-7 Forestal Mininco S.A. Chile Common shareholder 89 98 96,731,890-6 Cartulinas CMPC S.A. Chile Common shareholder 81 36 82,777,100-7 Puertos y Logística S.A. Chile Indirect Associate 135 0 96,529,310-8 CMPC Tissue S.A. Chile Common shareholder 43 45 96,853,150-6 Papeles Cordillera S.A. Chile Common shareholder 35 33 96,722,460-K Metrogas S.A. Chile Associate 24 0 76,456,800-1 Mina Invierno S.A. Chile Joint venture 21 22,153 76,044,336-0 Golden Omega S.A. Chile Indirect Associate 16 12,075 Foreign PGNT GasNor SAC Colombia Colombia Indirect Associate 11 55 96,942,870-9 Kabsa Chile Indirect Associate 9 0 94,283,000-9 Astilleros Arica Chile Indirect Associate 8 8 Foreign PGNT GasSur SAC Colombia Colombia Indirect Associate 7 0 96,641,810-9 Gas Natural Producción S.A. Chile Indirect Associate 5 4 79,943,600-0 Propa S.A. Chile Common shareholder 4 0 89,201,400-0 Envases Impresos S.A. Chile Common shareholder 2 7 92,580,000-7 Entel S.A. Chile Common shareholder 0 1 96,636,520-K Gases y Graneles Líquidos S.A. Chile Indirect Associate 0 8 78,096,080-9 Portaluppi, Guzman y Bezanilla Abogados Chile Partner Director 0 2 96,925,430-1 Servicios Corporativos Sercor S.A. Chile Indirect Associate 0 77 86,370,800-1 Sigma Servicios Informáticos S.A. Chile Common shareholder 0 2 82,040,600-1 Sociedad de Inversiones de Aviación Ltda. Chile Indirect Associate 0 1 87,635,000-9 Sociedad Edificio Don Crescente Ltda. Chile Joint venture 0 1 Foreign Stora Enso Arapoti Industria de Papel S.A. Brazil Indirect Associate 0 472
46,530 76,669
12.31.2016 12.31.2015 Accounts receivable from related companies, non-current ThUS$ ThUS$
76,044,336-0 Golden Omega S.A. Chile Indirect Associate 17,500 0 76,040,469-1 Logística Ados Ltda. Chile Director in common 6,385 6,140 79,895,330-3 Compañía Puerto Coronel S.A. Chile Indirect Associate 957 0 96,641,810-9 Gas Natural Producción S.A. Chile Indirect Associate 345 325 96,942,120-8 AIR BP COPEC S.A. Chile Joint venture 0 999
25,187 7,464
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16.2 Related party payables
12.31.2016 12.31.2015 Accounts payable to related companies, current Country Relationship ThUS$ ThUS$
96,636,520-K Gases y Graneles Líquidos S.A. Chile Indirect Associate 3,411 3,063 76,384,550-8 Sociedad Nacional Marítima S.A. Chile Indirect Associate 1,335 1,175 96,959,030-1 Puerto Lirquén S.A. Chile Indirect Associate 1,246 0 79,895,330-3 Compañía Puerto de Coronel S.A. Chile Indirect Associate 723 111 82,040,600-1 Sociedad de Inversiones de Aviación Ltda. Chile Indirect Associate 540 459 96,925,430-1 Servicios Corporativos Sercor S.A. Chile Indirect Associate 227 62 86,370,800-1 Sigma Servicios Informáticos S.A. Chile Common shareholder 112 70 96,942,120-8 AIR BP COPEC S.A. Chile Joint venture 26 17 96,893,820-7 Corpesca S.A. Chile Indirect Associate 14 38 92,580,000-7 Entel S.A. Chile Common shareholder 11 74 96,529,310-8 CMPC Tissue S.A. Chile Common shareholder 3 6 78,096,080-9 Portaluppi, Guzman y Bezanilla Abogados Chile Partner Director 3 101 93,305,000-9 Edipac Chile Indirect Associate 2 0 82,777,100-7 Puertos y Logística S.A. Chile Indirect Associate 0 851
7,653 6,027
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16.3 Related party transactions
As of December 31, 2016
Transaction Effect on Chilean ID Related Entity Country Relationship Goods or Service Value without net income Number VAT ThUS$ ThUS$
AIR BP COPEC S.A. 96,942,120-8 Chile Joint venture Sale of fuel 263,283 263,283 AIR BP COPEC S.A. 96,942,120-8 Chile Joint venture Administrative services 1,269 1,269 AIR BP COPEC S.A. 96,942,120-8 Chile Joint venture Foreign loans 2,065 2,065 Cartulinas CMPC S.A. 96,731,890-6 Chile Common shareholder Sale of lubricants 287 287 Cartulinas CMPC S.A. 96,731,890-6 Chile Common shareholder Maintenance services 254 254 Cartulinas CMPC S.A. 96,731,890-6 Chile Common shareholder Sale of fuel 1 1 CMPC Celulosa S.A. 96,532,330-9 Chile Common shareholder Sale of fuel 2,720 2,720 CMPC Celulosa S.A. 96,532,330-9 Chile Common shareholder Sale of lubricants 798 798 CMPC Celulosa S.A. 96,532,330-9 Chile Common shareholder Sales of material, etc. 66 66 CMPC Celulosa S.A. 96,532,330-9 Chile Common shareholder Other purchases 3 (3) CMPC Maderas S.A. 95,304,000-K Chile Common shareholder Sale of fuel 81 81 CMPC Maderas S.A. 95,304,000-K Chile Common shareholder Sale of lubricants 492 492 CMPC Maderas S.A. 95,304,000-K Chile Common shareholder Sales of material, etc. 17 17 CMPC Maderas S.A. 95,304,000-K Chile Common shareholder Logs 511 (511) CMPC Tissue S.A. 96,529,310-8 Chile Common shareholder Sale of lubricants 143 143 CMPC Tissue S.A. 96,529,310-8 Chile Common shareholder Various purchases 46 (46) CMPC Tissue S.A. 96,529,310-8 Chile Common shareholder Sale of fuel 28 28 CMPC Tissue S.A. 96,529,310-8 Chile Common shareholder Sales of material, etc. 1 1 Colbún S.A. 96,505,760-9 Chile Director in common Sale of fuel 34,703 34,703 Colbún S.A. 96,505,760-9 Chile Director in common Electricity 5,999 5,999 Colbún S.A. 96,505,760-9 Chile Director in common Sales of material, etc. 71 71 Colbún S.A. 96,505,760-9 Chile Director in common Sale of lubricants 43 43 Colbún Transmisión S.A. 76,218,856-2 Chile Director in common Electricity 383 (383) Compañía Puerto de Coronel S.A. 79,895,330-3 Chile Indirect Associate Sale of fuel 1,213 1,213 Compañía Puerto de Coronel S.A. 79,895,330-3 Chile Indirect Associate Sale of lubricants 92 92 Compañía Puerto de Coronel S.A. 79,895,330-3 Chile Indirect Associate Mobilization and stevedoring 8,633 (8,633) Compañía Puerto de Coronel S.A. 79,895,330-3 Chile Indirect Associate Wharf rental 108 (108) Corpesca S.A. 96,893,820-7 Chile Indirect Associate Sale of fuel 9,670 9,670 Corpesca S.A. 96,893,820-7 Chile Indirect Associate Sale of lubricants 701 701 Corpesca S.A. 96,893,820-7 Chile Indirect Associate Sales of material, etc. 75 75 Corpesca S.A. 96,893,820-7 Chile Indirect Associate Consultancy and other services 30 30 Corpesca S.A. 96,893,820-7 Chile Indirect Associate Raw materials purchase 1,319 (1,319) Eka Chile S.A. 99,500,140-3 Chile Joint venture Electricity 16,326 16,326 Eka Chile S.A. 99,500,140-3 Chile Joint venture Purchase of sodium chlorate 47,236 (47,236) Empresa Nacional de Telecomunicaciones S.A. 92,580,000-7 Chile Common shareholder Telephone services 693 (693) Entel PCS Telecomunicaciones S.A. 96,806,980-2 Chile Common shareholder Telephone services 127 (127) Entel Telefonía Local S.A. 96,697,410-9 Chile Common shareholder Telephone services 9 (9) Forestal Mininco S.A. 91,440,000-7 Chile Common shareholder Sale of fuel 483 483 Forestal Mininco S.A. 91,440,000-7 Chile Common shareholder Logs and others 47 47 Forestal Mininco S.A. 91,440,000-7 Chile Common shareholder Logs and others 180 (180) Forestal del Sur S.A. 79,825,060-4 Chile Indirect Associate Harvesting services 21,657 21,657 Forestal del Sur S.A. 79,825,060-4 Chile Indirect Associate Wood and logs 2,093 (2,093) Gasmar S.A. 96,636,520-K Chile Indirect Associate Purchase of fuel 135,739 (135,739) Hualpén Gas S.A. 76,349,706-2 Chile Indirect Associate Leases 2,713 2,713 Instituto de Investigación Pesquera S.A. 96,555,810-1 Chile Indirect Associate Consultancy and other services 197 (197) Kabsa S.A. 96,942,870-9 Chile Indirect Associate Purchase natural gas 268 268 Metrogas S.A. 96,722,460-K Chile Associate Purchase natural gas 2,367 (2,367) Molibdenos y Metales S.A. 93,628,000-5 Chile Common shareholder Sale of fuel 2,061 2,061 Montagas 89,120,220-3 Colombia Indirect Associate Sale of property, plant and equipment 234 234 Portaluppi, Guzmán y Bezanilla Abogados 78,096,080-9 Chile Partner Director Legal advisory services 1,515 (1,515) Puerto Lirquén S.A. (ex Portuaria Sur de Chile S.A.) 96,959,030-1 Chile Indirect Associate Port services 7,372 (7,372) Servicios Corporativos Sercor S.A. 96,925,430-1 Chile Indirect Associate Management consultancy services 472 (472) Servicios Corporativos Sercor S.A. 96,925,430-1 Chile Indirect Associate Administrative services 324 (324) Servicios Corporativos Sercor S.A. 96,925,430-1 Chile Indirect Associate Reimbursable expenses 8 (8) Red To Green S.A. 86,370,800-1 Chile Common shareholder Sales of material, etc. 13 13 Red To Green S.A. 86,370,800-1 Chile Common shareholder IT services 1,067 (1,067) Sociedad de Inversiones de Aviación Ltda. 82,040,600-1 Chile Indirect Associate Storage services 4,596 (4,596) Sociedad de Inversiones de Aviación Ltda. 82,040,600-1 Chile Indirect Associate Other sales 1 1 Sociedad Nacional Marítima S.A. 76,384,550-8 Chile Indirect Associate Sale of fuel 1,554 1,554 Sociedad Nacional Marítima S.A. 76,384,550-8 Chile Indirect Associate Administrative services 533 533 Sociedad Nacional Marítima S.A. 76,384,550-8 Chile Indirect Associate Sale of lubricants 228 228 Sociedad Nacional Marítima S.A. 76,384,550-8 Chile Indirect Associate Other sales 58 58 Sociedad Nacional Marítima S.A. 76,384,550-8 Chile Indirect Associate Maritime transport 15,057 (15,057) Stora Enso Arapoti Industria de Papel S.A. Foreign Brazil Indirect Associate Timber 1,149 1,149 Unillin Arauco Pisos Ltda. Foreign Brazil Joint venture Timber 5,263 5,263
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As of December 31, 2015
Transaction Chilean ID Effect on net Related Entity Country Relationship Goods or Service Value without Number income ThUS$ VAT ThUS$
AIR BP COPEC S.A. 96,942,120-8 Chile Indirect Associate Sale of fuel 211,986 211,986 AIR BP COPEC S.A. 96,942,120-8 Chile Indirect Associate Various purchases 123 (123) Boat Parking 96,952,090-2 Chile Indirect Associate Rental of wharves 153 (153) Cartulinas CMPC S.A. 96,731,890-6 Chile Indirect Associate Sales of material, etc. 0 0 Cartulinas CMPC S.A. 96,731,890-6 Chile Indirect Associate Sale of lubricants 237 237 Cartulinas CMPC S.A. 96,731,890-6 Chile Indirect Associate Sale of fuel 118 118 CMPC Celulosa S.A. 96,532,330-9 Chile Director in common Timber sales 130 130 CMPC Celulosa S.A. 96,532,330-9 Chile Director in common Sale of lubricants 653 653 CMPC Celulosa S.A. 96,532,330-9 Chile Director in common Other sales 36 36 CMPC Celulosa S.A. 96,532,330-9 Chile Director in common Other purchases 1,949 (1,949) CMPC Celulosa S.A. 96,532,330-9 Chile Director in common Sales of material, etc. 2,930 2,930 CMPC Maderas S.A. 95,304,000-K Chile Director in common Logs 185 (185) CMPC Maderas S.A. 95,304,000-K Chile Director in common Sale of fuel 78 78 CMPC Maderas S.A. 95,304,000-K Chile Director in common Sale of lubricants 384 384 CMPC Maderas S.A. 95,304,000-K Chile Director in common Sales of material, etc. 15 15 CMPC Tissue S.A. 96,529,310-8 Chile Director in common Sale of lubricants 153 153 CMPC Tissue S.A. 96,529,310-8 Chile Director in common Sale of fuel 24 24 CMPC Tissue S.A. 96,529,310-8 Chile Director in common Miscellaneous costs 14 (14) Colbún S.A. 96,505,760-9 Chile Director in common Sale of fuel 35,026 35,026 Colbún S.A. 96,505,760-9 Chile Director in common Sale of lubricants 39 39 Colbún S.A. 96,505,760-9 Chile Director in common Electricity 1,072 1,072 Colbún S.A. 96,505,760-9 Chile Director in common Sales of material, etc. 14 14 Colbún S.A. 96,505,760-9 Chile Director in common Electricity purchases 91 (91) Colbún transmisión S.A. 76,218,856-2 Chile Director in common Electricity 316 (316) Compañía Puerto de Coronel S.A. 79,895,330-3 Chile Indirect Associate Sale of fuel 1,413 1,413 Compañía Puerto de Coronel S.A. 79,895,330-3 Chile Indirect Associate Mobilization and stevedoring 7,933 (7,933) Compañía Puerto de Coronel S.A. 79,895,330-3 Chile Indirect Associate Sale of lubricants 67 67 Corpesca S.A. 96,893,820-7 Chile Indirect Associate Sale of fuel 10,987 10,987 Corpesca S.A. 96,893,820-7 Chile Indirect Associate Sale of lubricants 707 707 Corpesca S.A. 96,893,820-7 Chile Indirect Associate Sales of material, etc. 225 205 Corpesca S.A. 96,893,820-7 Chile Indirect Associate Administration services 46 (46) Corpesca S.A. 96,893,820-7 Chile Indirect Associate Consultancy and other services 3,000 (3,000) Eka Chile S.A. 99,500,140-3 Chile Indirect Associate Sales of electricity 14,004 14,004 Eka Chile S.A. 99,500,140-3 Chile Indirect Associate Purchase of sodium chlorate 30,931 (30,931) Empresa de Residuos Industriales Resiter Ltda. 76,329,072-7 Chile Director of Parent Industrial cleaning services 5,027 (5,027) Empresa de Residuos Resiter Ltda. 89,696,400-3 Chile Director of Parent Industrial cleaning services 285 (285) Entel PCS Telecomunicaciones S.A. 96,806,980-2 Chile Director in common Telephone services 89 (89) Entel S.A. 92,580,000-7 Chile Director in common Communications 684 (684) Entel Telefonía Local S.A. 96,697,410-9 Chile Director in common Telephone services 13 (13) Forestal del Sur S.A. 79,825,060-4 Chile Indirect Associate Chips and timber 12,021 12,021 Forestal del Sur S.A. 79,825,060-4 Chile Indirect Associate Purchase of logs 822 822 Forestal del Sur S.A. 79,825,060-4 Chile Indirect Associate Sale of fuel 1,181 (1,181) Forestal Mininco S.A. 91,440,000-7 Chile Director in common Sale of fuel 481 481 Forestal Mininco S.A. 91,440,000-7 Chile Director in common Purchase of logs 204 (204) Forestal Mininco S.A. 91,440,000-7 Chile Director in common Sales of material, etc. 3 3 GasMar S.A. 96,636,520-K Chile Associate Purchase of fuel 108,640 (108,640) Harting S.A. 92,846,000-2 Chile Associate Engineering consultancy 222 (222) Hualpén Gas S.A. 76,349,706-2 Chile Associate TSV rental and unloading services 3,162 3,162 Kabsa S.A. 96,942,870-9 Chile Indirect Associate Raw materials purchase 4,006 (4,006) Lota Protein S.A. 96,766,590-8 Chile Indirect Associate Wharf rental and unloading service 241 (241) Metrogas S.A. 96,722,460-K Chile Associate Purchase natural gas 1,232 (1,232) Molibdenos y Metales S.A. 93,628,000-5 Chile Associate Sale of fuel 960 960 Novo Oeste Gestao de Ativo Florestais S.A Foreign Brazil Indirect Associate Loan (capital and interest) 16,895 16,895 Portaluppi, Guzmán y Bezanilla Abogados 78,096,080-9 Chile Partner Director Legal advisory services 1,090 (1,090) Puerto Lirquén S.A. (ex Portuaria Sur de Chile S.A.) 96,959,030-1 Chile Associate Port services 5,452 (5,452) Resiter Uruguay S.A. (ex Tony Field S.A.) Foreign Uruguay Director of Parent Industrial waste services 774 (774) Servicio de Refineria del Norte S.A. 92,545,000-6 Chile Indirect Associate Renting facilities 330 (330) Servicios Corporativos Sercor S.A. 96,925,430-1 Chile Indirect Associate Administration services 204 (204) Servicios Corporativos Sercor S.A. 96,925,430-1 Chile Indirect Associate Management consultancy services 468 (468) Servicios Corporativos Sercor S.A. 96,925,430-1 Chile Indirect Associate Reimbursement of expenses 15 (15) Sigma Servicios Informáticos S.A. 86,370,800-1 Chile Common shareholder Computational services 1,038 (1,038) Sigma Servicios Informáticos S.A. 86,370,800-1 Chile Common shareholder Purchase equipment 28 0 Sociedad de Inversiones de Aviación Ltda. 82,040,600-1 Chile Indirect Associate Storage services 11,470 (11,465) Sociedad Nacional Marítima S.A. 76,384,550-8 Chile Indirect Associate Other purchases 0 0 Sociedad Nacional Marítima S.A. 76,384,550-8 Chile Indirect Associate Sales of material, etc. 24 24 Sociedad Nacional Marítima S.A. 76,384,550-8 Chile Indirect Associate Sale of fuel 1,354 1,354 Sociedad Nacional Marítima S.A. 76,384,550-8 Chile Indirect Associate Sale of lubricants 219 219 Sociedad Nacional Marítima S.A. 76,384,550-8 Chile Indirect Associate Maritime transport 4,940 (4,938) Sociedad Nacional Marítima S.A. 76,384,550-8 Chile Indirect Associate Administrative services 356 356 Stora Enso Arapoti Industria de Papel S.A. Foreign Brazil Indirect Associate Purchase of services 4,346 4,346 Unillin Arauco Pisos Ltda. Foreign Brazil Indirect Associate Timber 2,666 2,666
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16.4 Board of Directors and key members of Management
Remuneration of key personnel includes directors, managers and deputy managers and comprise a fixed monthly amount, as well as discretionary annual bonuses.
The compensation for Directors and key members of Management are as follows:
NOTE 17. PROVISIONS, CONTINGENT ASSETS AND CONTINGENT LIABILITIES
I. Lawsuits and other legal actions of the affiliate Celulosa Arauco y Constitución S.A. (“Arauco”), its affiliates and associates:
1. Arauco Argentina S.A.
1.1 On December 14, 2007, the Federal Public Income Administration (“AFIP”) issued an official assessment questioning deductions from income tax of certain expenses, interest and exchange differences regarding Private Negotiable Obligations that were issued by Arauco Argentina S.A. in 2001 and paid in 2007 for ThUS$ 250,000. This assessment was for 417,908,207 Argentine pesos (equivalent to ThUS$ 26,300 as of December 31, 2016) for capital, compensatory interest and an omission fine.
On February 11, 2008, the company appealed to the National Tax Court, who confirmed the tax authorities decision in February 2010. The Company appealed the National Tax Court's decision before the before the Federal Appeals Chamber for Federal Administrative Matters.
Similarly, Arauco Argentina S.A. requested the Appeals Chamber to issue an injunction suspending collection of the official assessment until final judgment has been issued. On May 13, 2010, the first court of the Federal Appeals Chamber for Federal Administrative Matters upheld the injunction, requiring a guarantee, which was provided by the Company, through aguarantee insurance policy No. 86058 issued by Zurich Argentina Cía. de Seguros S.A. for 633,616,741 Argentine pesos (equivalent to ThUS$ 39,875 as of December 31, 2016).
The Appeals Chamber issued its decision in December 2012, which was also adverse. The Company filed an 98 WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 ordinary appeal before the Supreme Court of Justice that was granted by the Appeals Chamber, and an extraordinary appeal.
Throughout this process the Company's external advisers maintained their view that it was legally correct in deducting interest, expenses and foreign exchange differences arising on the borrowings challenged by the Tax Authority, and that it was likely that finally the assessment issued by the AFIP would be anulled.
Law No. 27,260 was enacted on July 22, 2016. Its Chapter II, Book II provides for a Social Security and Customs Extraordinary Reconciliation of Tax Obligations Regime, for obligations subject to a judicial procedure (hereinafter the "Reconciliation Regime").
Admission to the Reconciliation Regime carries exemption from fines, and partial interest relief. These benefits are available to taxpayers who unconditionally accept the reconciled obligations, and waive all procedures and rights, including appeals, and must pay the costs and expenses.
The legal advisers involved in the litigation issued a written opinion confirming with the very important financial benefits offered by the Reconciliation Regime compared to the inherent contingency in any lawsuit.
On September 7, 2016 the Company submitted itself to the Reconciliation Regime before the AFIP with regard to the obligations under the assessment issued by the Tax Authority on the Income Tax Declarations presented in 2001 to 2004. It reported this situation to the Supreme Court of Justice and consequently withdrew its ordinary appeal.
At that date, the updated contingency was approximately 891,758,132 Argentine pesos (equivalent to ThUS$ 56,121 as of December 31, 2016), in capital, interest and fines. The Company chose immediate payment, and the balance finally paid was 248,503,504 Argentine pesos (equivalent to ThUS$ 15,639 as of December 31, 2016). In addition, the Company must pay costs and expenses, whose value had not been finalized at the date these financial statements were issued. On November 1, 2016, the Supreme Court of Justice acknowledged the appeal withdrawal and returned the file to the original court. On November 30, 2016, Court 1 of the National Appeals Chamber returned the file.
1.2. Within the scope of Law No.25,080, the former Department of Agriculture, Livestock, Fisheries and Food approved Resolution 952/2000 containing forestry and forestry-industrial investment projects submitted by Arauco Argentina S.A. These projects allowed the Company to plant: 1) 4,777 ha. of forests during 2000 in compliance with the annual plan; and 2) 23,012 ha. between 2000 and 2006 as part of its multiple year forestation plan. It also built a sawmill with installed capacity to produce 250,000 m³ of timber per year.
On January 11, 2001 Arauco Argentina S.A. presented an extension to the approved forestry-industrial project. This extension was approved by Resolution 84/03 by the former Department of Agriculture, Fisheries and Food. The Company complied with its obligations by building an MDF board plant (panels) and planted 8,089 ha of forest between 2001 and 2006.
The Company has submitted annual forestry plans from 2007 to 2015 for its plantations located in the provinces of Misiones and Buenos Aires.
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In March 2005 the Department of Agriculture, Livestock and Forestation issued Note 145/05, which suspended the exemption of export duties that Arauco Argentina S.A. had enjoyed in accordance with Law 25,080. This measure is being discussed by the Company. On November 8, 2006 the Fifth Court of the National Appeals Chamber for Contentious, Federal and Administrative Matters issued a decision authorizing Arauco Argentina S.A. to continue enjoying the export duty exemption as it had done previously before the suspension issued in Note 145/05. However that goods should be released using the guarantee regime established in Article 453(a) of the Customs Code, for the export duty exempt from payment. The legal measure was enforced from March 2007 by pledging guarantees through providing bail policies for each of the shipping permits exempt from export duty. Notwithstanding this judgment, the aforementioned underlying issue has not been resolved yet. Arauco Argentina S.A. has a provision for ThUS$ 23,441 in connection with the aforementioned export duties, presented in the heading Non-current provisions. The Company also initiated a repetition claim for US$ 6,555,207, plus interest from the transfer notification date, for export duties paid between March 2005 and March 2007 as a result of Note 145/05 issued by the Department of Agriculture, Livestock and Forestry being enforced. Both the underlying issue and the repetition claim are pending resolution.
Also, in April 2005 the Department of Agriculture, Livestock, Fisheries and Food issued resolution 260/2005 requiring the holders of undertakings that had received certain fiscal benefits in accordance with Law 25,080 to pledge guarantees to cover the total amount of the benefits, considering the benefits that had been used until the date of their constitution. In January 2006 Arauco Argentina S.A. pledged the requested guarantees, which amount to AR$ $245,359,796 Argentinian pesos at the reporting date (ThUS$ 15.441 as of December 31, 2016). On April 29, 2016, the enforcing authority issued Resolution 154-E/2016 which repealed Resolution 260/2005 and established a minimum and maximum period to constitute the guarantee. The Company will apply the new Resolution when the next bail policy expires (May 2017).
1.3. On December 6, 2013 Arauco Argentina S.A. was notified of resolution 803 issued by the Central Bank of the Republic of Argentina (“BCRA”) on November 22, 2013. By means of that resolution the BCRA instructed proceeding 5581, which challenged the absence of entry and conversion and late entry of foreign currencies from exports.
On March 6, 2014 the decision of the BCRA regarding the answer to the charge and the opening of the proceeding was notified, the case testimonial evidence was submitted. On June 18, 2014, the closure of the evidence stage was notified. On June 26, 2014 Arauco Argentina S.A. filed an appeal. On October 6, 2014 the company was notified of resolution dated September 30, 2014 issued by the National Criminal and Economic Court 8 office of court clerk 16 stating that the court will be aware of case under file 1330/2014.
On August 23, 2016 the ruling was signed where the Judge cleared the criminal proceedings and acquitted the Company of all guilt and responsibility.
2. Celulosa Arauco y Constitución S.A.:
2.1 On August 25, 2005, the Chilean Servicio de Impuestos Internos (the “Chilean IRS”) issued tax calculations 184 and 185 of 2005. These challenged the capital reduction transactions effected by Arauco on April 16, 2001
100 WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 and October 31, 2001, and requested the Company to reimburse amounts returned to it in respect of tax losses, and to amend to its taxable profits and losses carried forward. Considering the above, the tax calculations ordered the reimbursement of the historical amount of MCh$ 4,572 (as of October 31, 2002). On November 7, 2005, the Company requested a Review of the Supervision Action (Revisión de la Actuación Fiscalizadora, or “RAF”), which is an administrative review of the tax action brought by the Chilean IRS, and a claim was filed agains t the abovementioned tax calculations 184 and 185 of 2005. The RAF was resolved on January 9, 2009 by the Chilean IRS, which only partially sustained Arauco’s request and reduced the sum to MCh$ 1,209, leaving an amount in dispute of Ch$ 3,362,265,453 (historical amount as of October 2002). In response, the Company filed an additional complaint with regard to the portion of the RAF that was not granted by the administrative review. On February 19, 2010, the Court took note of the Company’s request. The tax authority issued a report and the Company commented on such report.
On September 26, 2014 Arauco requested to submit this complaint to the jurisdiction of the new tax and customs courts. Arauco's request was accepted on October 10, 2014. Currently, these new courts are aware of the case under taxpayer number 14-9-0002087-3. On March 20, 2015, the Chilean IRS served the claims deducted by Arauco against assessments 184 and 185 dated 2005. Currently the case is at the evidence evaluation stage.
There is a reasonable possibility of obtaining a favorable result for Arauco, as the Company's position is based on solid legal arguments. Therefore, Arauco has not created any provisions for this contingency as of December 31, 2016.
Plants
2.2 With regard to the Licancel Plant, on June 22, 2011, Arauco was notified by warrant of civil claim for compensation for damages for alleged torts brought by 12 fishermen Mataquito River at court of first instance, Warranty and Family Licantén, 73-2011 auto role, on the occasion of the fish kill that occurred in the River Mataquito on 5 June 2007. The plaintiffs seek to be compensated for alleged damages as a result of the event indicated above, for actual damages, lost profits and moral damage, and assumed contractual liability for the sum of MCh$ 2,696.
The Company was notified of the final judgment of first instance, handed down on October 21, 2015, which partially resolved the demand, requiring the defendant to pay each plaintiff for non-pecuniary damage the sum of Ch$ 5,000,000 (five million Chilean pesos), plus inflation adjustments from May 2007 to the month prior to actual payment. On 16 November 2015 the Company responded to the final decision by filing an appeal. The plaintiff submitted an amendment to the appeal, seeking to increase the amount of moral damages recognized in the judgment of the court of first instance. Pending. (Court of Appeals number 60-2016).
There is a reasonable possibility of obtaining a favorable result for Arauco, as the Company's position is based on solid legal arguments. Therefore, Arauco has not created any provisions for this contingency as of December 31, 2016.
2.3 The Environment Superintendent (“SMA”) issued Resolution 1 dated January 8, 2016, notified on January 14, 2016, which leveled 11 charges against the Company for alleged breaches in Environmental Approval Resolutions at the Valdivia plant and DS 90/2000. The 11 demands were classified by the SMA as follows: 1 very
101 WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1 serious, 5 serious and 5 minor.
On February 12, 2016, the company presented its defense. The SMA must respond to the defense and could require new information or open an evidence stage. When these procedures have been completed, the SMA should issue a resolution to acquit or sanction. Its resolutions can be appealed before the Environmental Court.
The maximum fine that the SMA may impose on the Company by virtue of the charges described is UTA 36,000 (equivalent to ThUS$ 29,801 as of December 31, 2016).
There is a reasonable possibility of obtaining a favorable result for Arauco, as the Company's position is based on solid legal arguments. Therefore, Arauco has not created any provisions for this contingency as of December 31, 2016.
2.4 The Environment Superintendent issued Resolution 1 dated February 17, 2016, notified on February 23, 2016, which leveled eight charges against the company for alleged breaches in Environmental Approval Resolutions at the Nueva Aldea Plant. The 8 demands were classified by the SMA as follows: 7 serious and 1 minor.
On March 15, 2016 the company submitted a compliance program within the time limit, which contains 30 action points and goals, related to each of the 8 alleged offenses. On July 15, 2016 the Company was notified of Resolution 11 issued by the SMA, which approved the compliance program and suspended the penalty proceedings. If the program is implemented satisfactorily, it may be possible to conclude the procedure without sanctions being applied.
On August 3, 2016 third party plaintiffs in the administrative procedure filed an appeal against Resolution 11 issued by the SMA, which approved the compliance program. On December 24, 2016 the Third Environmental Tribunal rejected the appeal against Resolution 11 issued by the SMA, which approved the compliance program. The plaintiffs have not filed an appeal.
2.5 Resolution 1/Role F-020-2016, dated May 6, 2016, described four demands filed by the SMA against Arauco for alleged breaches in the Environmental Qualification Resolutions granted for the Licancel Plant. The four demands were classified by the SMA as follows: 1 serious and 3 minor.
On June 8, 2016, the company presented its defense. On October 21, 2016, the SMA requested additional information from the Company, which was provided in a timely manner. Subsequently, the SMA may require new information or begin presenting evidence. When these procedures have been completed, the SMA should issue a resolution to acquit or sanction. Its resolutions can be appealed before the Environmental Court.
On February 1, 2017, the Environmental Superintendent issued Resolution 71, fining the Company UTA 239 (equivalent to ThUS$ 198 as of December 31, 2016):
- Allegation 1 relates to the disposal of industrial waste solids, specifically ash, that exceeds the amounts authorized in RCA 75/2004. A fine of UTA 3 was applied (equivalent to ThUS$ 2 as of December 31, 2016).
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- Allegation 2 relates to not leaving the former treatment lagoon "in accordance with the RCA 308/2006", on the environmental inspection dates May 2013 and February 2015. A fine of UTA 234 was applied (equivalent to ThUS$ 194 as of December 31, 2016).
- Allegation 3 relates to exceeding the humidity percentages for sludge in the solid waste tank. A fine of UTA 2 was applied (equivalent to ThUS$ 2 as of December 31, 2016).
- Allegation 4 relates to an effluent discharge outlet that has not been built at the regulated location. However, the Company was acquitted.
On February 13, 2017, The Company filed an appeal against the fine, for that it be substantially reduced. The appeal is pending resolution.
There is a reasonable possibility of obtaining a favorable result for Arauco, as the Company's position is based on solid legal arguments. Therefore, Arauco has not created any provisions for this contingency as of December 31, 2016.
2.6 Resolution 1/Role F-031-2016, dated September 15, 2016, described three demands filed by the SMA against the Company for alleged breaches to specific Environmental Qualification Resolutions granted for the Constitución Plant, and for an alleged breach to Law 19,300 for having evaded the Environmental Impact Assessment System. The three demands were classified by the SMA as follows: 1 serious and 2 minor.
On October 17, 2016, the Company submitted a Compliance Program that contains 7 actions and goals. On January 3, 2017 the Company was notified of the resolution approving this compliance program. If the program is implemented satisfactorily, it may be possible to conclude the procedure without sanctions being applied.
There is a reasonable possibility of obtaining a favorable result for Arauco, as the Company's position is based on solid legal arguments. Therefore, Arauco has not created any provisions for this contingency as of December 31, 2016.
3. Forestal Arauco S.A.:
3.1 On October 8, 2013, Bosques Arauco S.A., now Forestal Celco S.A. was notified of a civil claim filed by Mr. Manuel Antonio Fren Casanova, requesting the court to declare the properties known as Cuyinco and Cuyinco Alto as two different properties and, therefore, to order the cancellation of the ownership registration in the name of Bosques Arauco S.A. found on number 290 of page 266 of the Registry of Property kept by the Real Estate Registrar of Lebu in 1998, on the grounds that, Bosques Arauco S.A. erroneously understood that its property, Cuyinco Alto of 4,600 hectares, would also encompass the land known as Cuyinco, which allegedly belongs to the claimant.
The claim was filed before the Civil Court in Lebu, (Case File C-269-2013). On October 27, 2015, the Court passed final judgment of first instance, rejecting the claim in full. On November 16, 2015, the plaintiff challenged the judgment of first instance by filing an appeal (Case File 1956-2015). On January 13, 2017 the Concepción Appeals
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Court ratified the judgment handed down by the court of first instance. The plaintiff could file further appeals.
There is a reasonable possibility of obtaining a favorable result for Arauco, as the Company's position is based on solid legal arguments.
3.2 Maquinarias y Equipos Klenner Limitada filed a civil claim for payment of damages against Forestal Arauco S.A. at the First Civil Court of First Instance of Valdivia in trial documents under case number C-375-2015. The plaintiff claims payment for damages due to the termination of a service agreement on February 9, 2010. The plaintiff estimated the damages in the sum of MCh$ 4,203.
On November 14, 2016, the Court of First Instance issued its judgment and partially accepted the demand, ordering Forestal Arauco S.A. to pay the plaintiff the sum of Ch$ 115,026,673 for damages and the sum of Ch$ 607,849,413 for loss of profits, but rejecting the demand for moral damages, all without costs.
Forestal Arauco S.A. challenged the judgment by filing an appeal. The plaintiff also challenged the judgment through an appeal. All the appeals have been submitted to Valdivia Appeal Court. Currently, the appeals are being considered since January 12, 2017 (Case file 779-2016).
There is a reasonable possibility of obtaining a favorable result for Arauco, as the Company's position is based on solid legal arguments. Therefore, Arauco has not created any provisions for this contingency as of December 31, 2016.
3.3 On April 28, 2015, the Company was notified and responded to a regular repossession procedure filed by Mr. Rodrigo Huanquimilla Arcos and Mr. Mario Andrades Rojas, lawyers, in conventional representation of 24 members of the Arcos beneficiaries, alleged to be the owners of the Quivolgo Estate, containing 5,202 hectares, request that Forestal Celco SA, now called Forestal Arauco SA, is required to restore this property with its civil and natural benefits, and the attached properties and any impairments to the property, with costs. They base their claims on the alleged Forestal Celco SA, now called Forestal Arauco SA, being custodian but not owner of this property. The Company responded to the demand requesting full rejection, with costs, alleging that Forestal Celco SA, now called Forestal Arauco SA is the only legitimate and exclusive owner of the property.
The Court resolved to proceed to the evidence stage and added this case to case number C-54-2015. It suspended the procedure and admonished the plaintiffs requiring them to appoint a common agent to represent both parties. The lawyers for the two parties plaintiffs conferred reciprocal mandates upon each other, so the Court resolved that this requirement had been fulfilled.
On December 9, 2016 the Court summoned the parties to hear sentence. Judgement is pending (Case Number C- 334-2014 at the Constitución Civil Court).
On February 24, 2017 the final judgment of first instance was notified, which rejected the entire demand with costs. Currently, appeals may be filed.
There is a reasonable possibility of obtaining a favorable result for Arauco, as the Company's position is based on solid legal arguments. Therefore, Arauco has not created any provisions for this contingency as of December 31,
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2016.
3.4 On April 6, 2015, the Company was notified in Santiago of a regular repossession procedure filed by Mr. Gustavo Andrés Ochagavia Urrutia, lawyer, in conventional representation of 23 members of the Arcos beneficiaries, alleged to be the owners of the Quivolgo Estate, containing 5,202 hectares, request that Forestal Celco SA, now called Forestal Arauco SA, is required to restore this property with its civil and natural benefits, and the attached properties and any impairments to the property, with costs. They base their claims on the alleged Forestal Celco SA, now called Forestal Arauco SA, being custodian but not owner of this property. On April 28, 2014, the Company filed a response requesting full rejection, with costs, alleging that Forestal Celco SA, now called Forestal Arauco SA is the only legitimate and exclusive owner of the property.
On January 8, 2016, the defendant requested an accumulation petition with Case File 334-2014, asking for the proceedings to be suspended while the accumulation petition is resolved. The Tribunal ordered that these cases be combined.
On February 24, 2017 the final judgment of first instance was notified, which rejected the entire demand with costs. Currently, appeals may be filed.
There is a reasonable possibility of obtaining a favorable result for Arauco, as the Company's position is based on solid legal arguments. Therefore, Arauco has not created any provisions for this contingency as of December 31, 2016.
4. Arauco do Brasil S.A.:
On November 8, 2012, Brazilian Tax Authorities issued an Infraction Notice against a Brazilian affiliate, Arauco do Brasil S.A., for alleged unpaid taxes purportedly due by such company for the years 2006 to 2010. In particular, the Tax Authorities (i) objected to the deductibility of certain payments made and expenses incurred (including premium amortization, interest and legal expenses) by Arauco do Brasil between 2005 and 2010 and (ii) alleged that Arauco do Brasil made certain underpayments in respect of the Brazilian Corporate Income Tax (“IRPJ”) and the Brazilian Social Contribution on Net Profits (“CSLL”) during 2010.
On July 20, 2015, Arauco do Brasil was notified of a decision at the first administrative level, to partially uphold the case. Following this decision an appeal was presented to revoke the Infraction Notice with the CARF – the Brazilian Taxation Appeals Administrative Council, which is the second administrative level. As of the date of this annual report, judgment in respect of this objection remains pending. The Company believes that its objection to the Infraction Notice is supported by solid legal arguments and that there is a reasonable likelihood that this matter will result in a favorable outcome for Arauco.
The Company believes that its objection to the Infraction Notice is supported by solid legal arguments and that there is a reasonable likelihood that this matter will result in a favorable outcome for the Company. Therefore, Arauco has not created any provisions for this contingency as of December 31, 2016.
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II. Lawsuits or other legal actions of the affiliate Compañía de Petróleos de Chile Copec S.A. and its affiliates:
At the date of preparation of these consolidated financial statements the lawsuits involving Compania de Petroleos de Chile Copec SA and its affiliates are as follows:
1. Compensation for damages
a) Sociedad Molinera del Sur S.A. and Sociedad Induservcom Ltda., both of the city of Puerto Montt, sued Compañía de Petróleos de Chile Copec S.A., citing potential environmental damage to both property located in the coastal city of Puerto Montt and that come from leaks of fuel from the former Copec plant in that city. The lower court decision was unfavorable to Copec and an appeal was filed against that ruling.
According to Management and its legal counsel, it is possible that the result will be unfavorable.
b) Mr. Mauricio Madrid Marticorena and Luis Sepulveda Marticorena filed three lawsuits in the Third Civil Court of Santiago. The first lawsuit in summary proceedings for damages caused by an alleged breach in Law 17,336 on Intellectual Property, during negotiations to launch a business making Biodiesel from algae. The amount claimed is ThUS$ 1,270.
The plaintiffs are seeking compensation for damages before the same court and for the same events, alleging that COPEC has breached business secrecy rules, namely Law 19,039 on Intellectual Property. The amount claimed is ThUS$ 347.
Finally, based on the same events, the plaintiffs brought an ordinary action for damages of tort. The amount is ThUS$ 1,337.
The first case is at the evidence stage, the second has been decided by the court of first instance in favor of Copec, since the demand for damage compensation was rejected by the court.
According to the affiliate’s legal counsel, the possibility of an unfavorable result is remote.
2. Pureo Plant
On September 6, 2011, there was a spill of diesel fuel in the Fuel Storage Plant located in Pureo, Calbuco, which had the following consequences:
- A group of mussel farmers sued the Company in Puerto Montt for compensation for the damages following the fuel spill at the plant in Calbuco, Pureo. The demand totaled ThUS$ 1,240.
- Subsequently, a second lawsuit for ThUS$ 2,243, for consequential damages, lost profits and moral damage, was presented by Martinez, which is in addition to the first. Currently the trial stage for this case has finished. There are insurance policies involved.
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- According to the legal advisors of the Company, the contingency is probable but for much lower amounts than those indicated.
3. Quintero Lubricants Plant
The Union of Independent Workers, Artisanal Fishermen, Sea-food Divers and similar trades in Horcón bay and other people in the area filed a demand with the second Santiago Environmental Court for environmental damage caused by several companies operating in the "Ventanas Industrial Complex", which is located in the Quintero and Ventanas bays, including Empresas Copec S.A. as operator of the Lubricants Plant located on the edge of Quintero Bay, Loncura sector, which is described in Case file D-30-2016, and notified on November 10, 2016.
The alleged environmental damage is based on operating an industrial plant that Empresas Copec does not control, as it is owned and operated by the affiliate Compañía de Petróleos de Chile Copec S.A. Therefore, Empresas Copec S.A. filed a defense that it is not responsible for this alleged environmental damage and requested that the case be dropped.
The process is in its initial stage and according to the legal advisers the Company’s defense is sufficiently strong to expect that the court rejects the demand.
4. SEC fines
There are several fines imposed by the Superintendence of Electricity and Fuels for approximately ThUS$ 34.
According to Management and its legal counsel, it is possible that the result will be unfavorable.
5. Affiliates
Organización Terpel Colombia
a) On July 3, 2013, the DIAN (the Colombian Directorate of Taxes and Customs) rejected the deduction of ThUS$ 46,617, being amortization of goodwill generated on the acquisition of shares in GAZEL included in the income declaration presented by TERPEL for the fiscal year 2010. TERPEL responded to this special requirement stating how it had satisfied all the requirements established by law to deduct as an expense the amortization of goodwill in the 2010 tax year and accordingly asked the DIAN to accept the declaration with this deduction.
Furthermore, on June 30, 2015, the company filed with the DIAN a petition that recognizes implicit approval.
According to Management and its legal counsel, it is possible that the result will be unfavorable.
b) The affiliate PGN GASNORTE S.A.C. filed a lawsuit against the Lima Metropolitan Municipality, Peru and PROTRANSPORTE for a breach of the Concession Agreement for Gasocentro Norte, which caused the following injuries: a) Interest accrued, b) Finance costs overrun on the accrued interest on the Loan with
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Interbank c) Lower income received by PGN GASNORTE. The amount claimed is ThUS$ 3,251.
On November 15, 2016, the Court notified the judgment to grant PGN Gasnorte the request to extend the controversial points presented last April.
Subsequently the evidence and arguments will be submitted that reinforce the application and a new citation is expected, to present an oral report within the arbitral process. The Arbitral Tribunal will then begin the period designated for issuing the award.
According to Management and its legal counsel, the likelihood of success is high.
Transportes de Combustibles Ltda.
On April 17, 2012, Transportes de Combustibles Ltda. (TRANSCOM LTDA.), was notified of a lawsuit filed by BCI Seguros Generales SA seeking the repayment of sums paid by the insurance company to those affected in a road accident in 2007 and which involved in a truck owned by Transportes de Combustibles Limitada (TRANSCOM).
The case was presented to the 7th Civil Court of Santiago and at the first stage the decision was favorable to TRANSCOM. That judgment was subsequently overturned by the Court of Appeals of Santiago and then the Supreme Court rejected the appeals. The claim amounts to ThUS$ 165.
This case is completed and Transporte de Combustibles Ltda. paid the sum of ThUS$ 163.
AIRBP Copec S.A.
AIRBP Copec S.A. requested the 14th Civil Court of Santiago to declare Aerolíneas Principal Chile S.A. bankrupt, due to the non-payment of a promissory note for ThUS$ 580.
6. Guarantees
Guarantees are received from third parties in favor of the Company and are mortgages, pledges and retentions on concession and consignment agreements, fuel supply contracts, lines of credit and construction contracts.
The main guarantees as of the reporting date were as follows:
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GUARANTEE TRANSACTION COMPANY RELATIONSHIP
Mortgage Fuel and Lubricant Supply Contract 1,092 EST DE SERV VEGA ARTUS LTDA. Concession Mortgage Fuel and Lubricant Supply Contract 747 AMELIA MARTINEZ RASSE Y COMPAÑIA LT Concession Mortgage Fuel and Lubricant Supply Contract 682 PATRICIO ABRAHAM GHIARDO JEREZ Concession Mortgage Fuel and Lubricant Supply Contract 582 DINO PEIRANO Y CIA LTDA. Concession Mortgage Fuel and Lubricant Supply Contract 570 ALTO MELIMOYU S.A. Concession Mortgage Fuel and Lubricant Supply Contract 560 SOCIEDAD COMERCIAL RINCON LIMITADA Concession Mortgage Fuel and Lubricant Supply Contract 555 COMBUSTIBLES Y SERVICIOS LTDA. Concession Mortgage Fuel and Lubricant Supply Contract 542 DISTR. DE COMB. COKE LTDA. Concession Mortgage Fuel and Lubricant Supply Contract 510 COMERCIAL DE PABLO Y MARIN LTDA. Concession Mortgage Fuel and Lubricant Supply Contract 455 AUTOMOTRIZ Y COMERCIAL LONCOMILLA LTDA. Concession Mortgage Fuel and Lubricant Supply Contract 455 AUTOMOTRIZ Y COMERCIAL LONCOMILLA LTDA. Concession Mortgage Fuel and Lubricant Supply Contract 448 COMERCIAL F. Y H. LTDA. Concession Mortgage Fuel and Lubricant Supply Contract 448 COMERCIAL MAHO LIMITADA Concession Mortgage Fuel and Lubricant Supply Contract 443 COMERCIAL Y SERVICIOS SAN IGNACIO LTDA Concession Mortgage Fuel and Lubricant Supply Contract 421 ESTACION DE SERVICIO VIÑA DEL MAR LTDA Concession Mortgage Fuel and Lubricant Supply Contract 432 MARTINEZ RASSE Y CIA. LTDA. Concession Mortgage Fuel and Lubricant Supply Contract 432 DE LA FUENTE MARTINEZ Y COMPAÑIA Concession Mortgage Fuel and Lubricant Supply Contract 430 INV Y COM LIRAY LTDA. Concession Mortgage Fuel and Lubricant Supply Contract 430 COM. Y DISTRIBUIDORA LOS LIRIOS LTD Concession Mortgage Fuel and Lubricant Supply Contract 420 GARCIA Y COMPAÑIA LIMITADA Concession Mortgage Fuel and Lubricant Supply Contract 390 ADMINISTRACION DE E/S AUTONOMA LTDA. Concession Mortgage Fuel and Lubricant Supply Contract 394 ROSENBERG Y SEPULVEDA LIMITADA Concession Mortgage Fuel and Lubricant Supply Contract 384 SOCIEDAD COMERCIAL URQUETA L Concession Mortgage Fuel and Lubricant Supply Contract 373 SERVICIOS KAYFER LIMITADA. Concession Mortgage Fuel and Lubricant Supply Contract 379 DELAC S.A. Concession Mortgage Fuel and Lubricant Supply Contract 371 COMERCIAL Y SERVICIOS CODEPA Concession Mortgage Fuel and Lubricant Supply Contract 66 COMERCIALIZADORA Y DISTRIBUIDORA DEL Concession Mortgage Fuel and Lubricant Supply Contract 362 DISTRIBUIDORA VALLE GRANDE LTDA. Concession Mortgage Fuel and Lubricant Supply Contract 367 COMERCIAL ONE STOP LIMITADA Concession Mortgage Fuel and Lubricant Supply Contract 351 COMERCIAL SOZA Y ARAVENA LTDA. Concession Mortgage Fuel and Lubricant Supply Contract 349 COMERCIAL Y SERVICIOS EL TATIO LTDA Concession Mortgage Fuel and Lubricant Supply Contract 349 COMERCIAL Y SERVICIOS PALAU LIMITADA Concession Mortgage Fuel and Lubricant Supply Contract 352 SOCIEDAD COMERCIAL LAS VIOLETAS Concession Mortgage Fuel and Lubricant Supply Contract 342 COMERCIAL Y SERVICIOS LA ROCH Concession Mortgage Fuel and Lubricant Supply Contract 341 COMERCIAL VARELA Y COMPAÑIA LTDA. Concession Mortgage Fuel and Lubricant Supply Contract 335 INVERSIONES JOTAS LIMITADA Concession Mortgage Fuel and Lubricant Supply Contract 333 COM E INV SANTA CATALINA LIMITADA Concession Mortgage Fuel and Lubricant Supply Contract 329 RAMIS Y RAMIS LTDA. Concession Mortgage Fuel and Lubricant Supply Contract 327 COMERCIAL Y SERVICIOS SEGUEL- Concession Mortgage Fuel and Lubricant Supply Contract 327 DISTRIBUIDORA PERCAB LIMITADA Concession Mortgage Fuel and Lubricant Supply Contract 325 COMERCIAL MAHANA Y COMPANIA LIMITAD Concession Mortgage Fuel and Lubricant Supply Contract 315 COM Y DIST PIRQUE LIMITADA Concession Mortgage Fuel and Lubricant Supply Contract 311 COMERCIAL Y SERVICIOS S & J F Concession Mortgage Fuel and Lubricant Supply Contract 310 COMERCIAL E INVERSIONES SALARES Concession Mortgage Fuel and Lubricant Supply Contract 308 COMERCIAL MALLKU LIMITADA Concession Mortgage Fuel and Lubricant Supply Contract 308 EXPENDIO DE COMBUSTIBLES Y LU Concession Mortgage Fuel and Lubricant Supply Contract 304 COMERCIAL DOMINGA LTDA. Concession Mortgage Fuel and Lubricant Supply Contract 301 COMERCIAL Y SERVICIOS NEWEN L Concession Mortgage Fuel and Lubricant Supply Contract 301 GERMAN LUIS CONTRERAS CHAVEZ Concession Mortgage Fuel and Lubricant Supply Contract 295 DISTRIBUIDORA B&B LTDA Concession Mortgage Fuel and Lubricant Supply Contract 294 COMERCIAL Y SERVICIOS RIMED LTDA Concession Mortgage Fuel and Lubricant Supply Contract 287 J.C. PEREZ Y COMPAÑIA LTDA. Concession Mortgage Fuel and Lubricant Supply Contract 293 SOCIEDAD COMERCIAL PEREZ Y POBLETE Concession Mortgage Fuel and Lubricant Supply Contract 293 COMERCIAL CAUTIN LIMITADA Concession Mortgage Fuel and Lubricant Supply Contract 293 BODEGAJE, LOGISTICA Y DISTRIBUCION Concession Mortgage Fuel and Lubricant Supply Contract 291 DANIEL VILLAR Y CIA. LTDA. Concession Mortgage Fuel and Lubricant Supply Contract 288 MUÑOZ Y DIMTER LTDA. Concession Mortgage Fuel and Lubricant Supply Contract 285 AUTOMOTRIZ CRISTOBAL COLON LT Concession Mortgage Fuel and Lubricant Supply Contract 282 COMERCIAL CSC LIMITADA Concession Mortgage Fuel and Lubricant Supply Contract 280 GRANESE Y ROSELLI LTDA. Concession Mortgage Fuel and Lubricant Supply Contract 279 SOCIEDAD COMERCIAL URQUIETA H Concession Mortgage Fuel and Lubricant Supply Contract 275 COMERCIAL Y SERVICIOS BALMA L Concession Mortgage Fuel and Lubricant Supply Contract 144 COMERCIAL Y SERVICIOS ESPARRAGUERA Concession
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GUARANTEE TRANSACTION COMPANY RELATIONSHIP
Mortgage Fuel and Lubricant Supply Contract 793 VALLE DORADO S.A. Distributor Mortgage Fuel and Lubricant Supply Contract 555 SOCIEDAD LUBRICANTES Y SERVIC Distributor Mortgage Fuel and Lubricant Supply Contract 279 COMERCIAL PENTALUB LTDA. Distributor Mortgage Fuel and Lubricant Supply Contract 236 COMERCIAL A.T.M. LTDA. Distributor Mortgage Fuel and Lubricant Supply Contract 169 LUBRICENTRO VICTOR VALENZUELA Distributor
Mortgage Fuel and Lubricant Supply Contract 1,348 TRANSPORTES MARITIMOS KOCHIFAS S.A. Industrial Customer Mortgage Fuel and Lubricant Supply Contract 132 BUSES METROPOLITANA S.A. Industrial Customer Mortgage Fuel and Lubricant Supply Contract 768 PULLMAN CARGO S.A. Industrial Customer Mortgage Fuel and Lubricant Supply Contract 132 BUSES METROPOLITANA S.A. Industrial Customer Mortgage Fuel and Lubricant Supply Contract 530 FUENTES SALAZAR SANDRA Industrial Customer Mortgage Fuel and Lubricant Supply Contract 487 SOTALCO II LTDA. Industrial Customer Mortgage Fuel and Lubricant Supply Contract 477 COMERCIAL CALAMA S.A. Industrial Customer Mortgage Fuel and Lubricant Supply Contract 50 PINTO LAGOS MIGUEL ANGEL Industrial Customer Mortgage Fuel and Lubricant Supply Contract 308 PETROMAULE LTDA. Industrial Customer Mortgage Fuel and Lubricant Supply Contract 332 SOCIEDAD COMERCIAL E INMOBILIARIA Industrial Customer Mortgage Fuel and Lubricant Supply Contract 308 PETROMAULE LTDA. Industrial Customer Mortgage Fuel and Lubricant Supply Contract 275 OSCAR GILBERTO HURTADO LOPEZ Industrial Customer
Ballot Fuel and Lubricant Supply Contract 1,000 DUKE ENERGY INTERNATIONAL CHI Industrial Customer Ballot Fuel and Lubricant Supply Contract 194 ASOCIACION GREMIAL DE DUEÑOS Industrial Customer Ballot Fuel and Lubricant Supply Contract 149 DISTRIBUIDORA DE COMBUSTIBLES Industrial Customer Ballot Fuel and Lubricant Supply Contract 149 DISTRIBUIDORA DE COMBUSTIBLES Industrial Customer Ballot Fuel and Lubricant Supply Contract 149 AGRICOLA Y COMERCIAL PIRINEOS Industrial Customer Ballot Fuel and Lubricant Supply Contract 75 VIAL Y VIVES - DSD S.A. Industrial Customer
Ballot Fuel and Lubricant Supply Contract 448 LUBRICANTES ARTIGUES S.A. Distributor
Pledge Fuel and Lubricant Supply Contract 105 RICARDO LEIVA Y CIA. LTDA. Industrial Customer Pledge Fuel and Lubricant Supply Contract 114 SALAZAR CRANE JULIA Industrial Customer Pledge Fuel and Lubricant Supply Contract 114 FUENTES SALAZAR SANDRA Industrial Customer Pledge Fuel and Lubricant Supply Contract 105 RICARDO LEIVA Y CIA. LTDA. Industrial Customer
Instrument Fuel and Lubricant Supply Contract - SOCIEDAD HERRERA BRAVO LTDA. Concession Instrument Fuel and Lubricant Supply Contract - PERROT Y CIA LTDA. Concession Instrument Fuel and Lubricant Supply Contract - COMERCIAL MAR Y SOL LTDA. Concession
Guarantee Fuel and Lubricant Supply Contract 149 TRANSPORTE PUBLICO DE PASAJEROS Industrial Customer
Guarantees Granted
Celulosa Arauco y Constitución S.A.
At the date of these consolidated financial statements, the affiliate Arauco has approximately MUS$ 56 in financial assets transferred to third parties (beneficiaries), as direct guarantees. If the obligation is not satisfied by Arauco, the beneficiary may enforce this guarantee.
As of December 31, 2016 there are assets pledged as indirect guarantees amounting to US$ 783 million. Unlike direct guarantees, indirect guarantees are provided to safeguard an obligation assumed by a third party.
On September 29, 2011, Arauco signed a Guarantee Agreement under which it granted a non-several commitment to guarantee 50% of the obligations of two Uruguayan companies (joint ventures) Celulosa y Energía Punta Pereira S.A. and Zona Franca Punta Pereira S.A., under the IDB Facility Agreement for US$ 454 million and the Finnvera Guaranteed Facility Agreement for US$ 900 million.
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Below is a breakdown of the main direct and indirect guarantees granted by Arauco:
DIRECT Currency Affiliate Guarantee Asset Committed origin ThUS$ Guarantee Beneficiary General Directorate of Maritime Territory Celulosa Arauco y Constitución S.A. Performance bond - Chilean peso 488 and the Merchant Navy General Directorate of Maritime Territory Celulosa Arauco y Constitución S.A. Performance bond - Chilean peso 313 and the Merchant Navy General Directorate of Maritime Territory Celulosa Arauco y Constitución S.A. Performance bond - Chilean peso 230 and the Merchant Navy General Directorate of Maritime Territory Celulosa Arauco y Constitución S.A. Performance bond - Chilean peso 209 and the Merchant Navy General Directorate of Maritime Territory Celulosa Arauco y Constitución S.A. Performance bond - Chilean peso 129 and the Merchant Navy
Celulosa Arauco y Constitución S.A. Performance bond - Chilean peso 100 Chilean National Customs Service
Arauco Forest Brasil S.A. Endorsement of ADB - US Dollar 654 Banco Votorantim S.A.
Arauco Forest Brasil S.A. Endorsement of ADB - US Dollar 3,592 Banco Votorantim S.A. Arauco Forest Brasil S.A. Equipment Property, plant and equipment US Dollar 136 Banco Bradesco S.A. Arauco Forest Brasil S.A. Equipment Property, plant and equipment US Dollar 99 Banco Bradesco S.A. Arauco Forest Brasil S.A. Equipment Property, plant and equipment US Dollar 740 Banco John Deere S.A.
Arauco Forest Brasil S.A. Mortgage of ADB's Jaguariaiva Industrial Plant - US Dollar 47,041 BNDES
Arauco do Brasil S.A. Equipment Property, plant and equipment US Dollar 201 Banco Votorantim S.A. Arauco do Brasil S.A. Equipment Property, plant and equipment US Dollar 106 Banco ABC Brasil S.A. Arauco do Brasil S.A. Equipment Property, plant and equipment US Dollar 213 Banco Santander S.A. Arauco Florestal Arapoti S.A. Endorsement of ADB - US Dollar 738 Banco Votorantim S.A. Arauco Florestal Arapoti S.A. Equipment Property, plant and equipment US Dollar 204 Banco Itaú BBA S.A. Arauco Florestal Arapoti S.A. Equipment Property, plant and equipment US Dollar 395 Banco Safra S.A. Arauco Bioenergía S.A. Performance bond - Chilean peso 221 Minera Escondida Ltda. Arauco Bioenergía S.A. Performance bond - Chilean peso 323 Minera Escondida Ltda. Arauco Bioenergía S.A. Performance bond - Chilean peso 121 Corporación Nacional del Cobre de Chile Total 56,253
INDIRECT Currency Affiliate Guarantee Asset Committed origin ThUS$ Guarantee Beneficiary Celulosa Arauco y Constitución S.A. Non several and non cumulative guarantee - US Dollar 494,468 Joint Ventures (Uruguay) Celulosa Arauco y Constitución S.A. Full guarantee - US Dollar 270,000 Arauco Argentina (bonds placed in USA) Celulosa Arauco y Constitución S.A. Guarantee letter - US Dollar 4,362 Arauco Forest Brasil y Mahal (Brazil) Celulosa Arauco y Constitución S.A. Guarantee letter - Real 14,653 Arauco Forest Brasil y Mahal (Brazil) Total 783,483
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Compañía de Petróleos de Chile Copec S.A.
The Company has furnished performance bonds to guarantee delivery of fuels to customers and to guarantee works on public thoroughfares and other similar roads for a total of ThUS$ 54,842 (ThUS$ 60,228 as of December 31, 2015).
Pesquera Iquique – Guanaye S.A.
The indirect affiliate Orizon S.A. pledged 124,150 shares in the associate Boat Parking S.A. in favor of that company, in order to ensure compliance with all current or future contractual obligations of Orizon S.A. to Boat Parking S.A.
Minera Camino Nevado Limitada
On April 25, 2016 contracts were signed with the banks Itau-Corpbanca and BCI. These novated 50% of the remaining debt that Mina Invierno S.A. owes to its indirect parent company Minera Camino Nevado Limitada, which is an affiliate of Empresas Copec S.A., together with the renegotiation and reprogramming of maturity dates and financial conditions associated with the loan. The loan amounts to approximately MUS$ 142, it is repayable in 10 semiannual installments and is jointly and severally guaranteed by Empresas Copec S.A. Minera Camino Nevado Limitada has recorded an investment in the shares of Inversiones Laguna Blanca S.A., the parent company of Mina Invierno S.A., for an equal amount, so maintaining a 50% stake in Inversiones Laguna Blanca S.A.
Therefore, loans constituted by Minera Camino Nevado Ltda. are pledged and subordinated in favor of a syndicate of banks headed by the Itaú Bank, under which the loans provided by the Company to Mina Invierno S.A. and related companies of approximately ThUS$ 45,065 are subordinated to the payment of the loans granted by this Union to Mina Invierno S.A. and related companies. Furthermore, there was a pledge over the same loans in favor of the syndicate. Also a pledge was granted over the shares that Minera Camino Nevado Ltda. has in the Laguna Blanca S.A. group of companies, composed of Inversiones Laguna Blanca S.A. and related companies, as a guarantee of the loan repayment obligation granted by the syndicate. The process to lift all these guarantees is under way.
Consequently, pledges on the following assets are being lifted:
1. - Subordinated loans of Mina Invierno S.A. and Forestal y Ganadera Estancia Invierno S.A. in favor of Minera Camino Nevado Limitada. (Committed amount ThUS$ 45,065).
2. - Shares in Mina Invierno S.A. and Forestal y Ganadera Estancia Invierno S.A. owned by Minera Camino Nevado Limitada. (Committed amount ThUS$ 73).
3. - Shares in Inversiones Laguna Blanca S.A. owned by Minera Camino Nevado Limitada. (Committed amount ThUS$ 47,306).
4.- Social rights of service companies (Equipos Mineros Rio Grande Limitada, Portuaria Otway Limitada, Eléctrica Río Pérez Limitada, Rentas y Construcciones Fitz Roy Limitada and Transportes Río Verde Limitada) in relation
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The affiliate Minera Camino Nevado Ltda. has provided a term deposit as a debt guarantee for Mina Invierno S.A., which amounts to ThUS$ 3,507 as of December 31, 2016.
As of the reporting date, there are no other contingencies which could significantly affect its financial or operating conditions.
Disclosure information regarding provisions:
Provisions are recognized when there is a legal or constructive obligation as a consequence of past events, it is likely that a payment will be necessary to settle the obligation, and the amount of such payment can be reliably estimated. The amount is the best possible estimate at each financial close.
Current Non-Current 12.31.2016 12.31.2015 12.31.2016 12.31.2015 Provisions ThUS$ ThUS$ ThUS$ ThUS$
Guarantee provision 0 0 0 0 Legal claims provision 11,226 859 20,246 10,996 Onerous contracts provision 0 0 0 0 Decomissioning, restoration and rehabilitation provision 103 98 22,484 11,438 Profit share and bonuses provision 1,128 1,157 0 0 Other provisions 3,900 2,133 24,350 23,845
Total 16,357 4,247 67,080 46,279
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(*) The change in "Other provisions" in the item "Other increases (decreases)" is mainly the reversal of provisions at Celulosa Arauco y Constitucion SA for negative net equity at Arauco Forest Brasil regarding Novo Oeste y Forestal Cholguán S.A. regarding Sercor.
The provision for legal claims primarily corresponds to labor and tax related lawsuits, and the term of payment is undetermined. The recognition of investments in associates with negative equity at the reporting date is presented in Other provisions.
The Group recognizes a provision for the present value of the dismantling, restoration and rehabilitation costs that will be incurred in the restoration of the locations of certain plants and service stations on property belonging to third parties and mine closures. The expected payment date is not yet known.
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NOTE 18. OBLIGATIONS FOR EMPLOYEES BENEFITS
These amounts are mainly obligations for service termination indemnities for certain employees, based on the provisions of collective and individual employment contracts.
The liability recognized in the consolidated statement of financial position is the present value of the obligation for defined benefits as of the reporting date based on actuarial calculations using the projected unit-credit method. This liability is for the defined benefits based on actuarial calculations in accordance with the projected unit-credit method. This calculation discounts the estimated future outflows of cash at interest rates on instruments denominated in the currency in which such benefits will be paid and with terms similar to those of the corresponding obligations.
Actuarial gains or losses arising from experience and from changes in actuarial assumptions are charged or credited to the changes in net equity statement in the period in which they occur.
Costs for past services are recognized immediately in income.
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NOTE 19. EQUITY METHOD INVESTMENTS IN AFFILIATES AND ASSOCIATES
a) The ownership interest of the Empresas Copec S.A. Group in its main associates accounted for using the equity method is the following:
As of December 31, 2016
Cost of Chilean ID Functional Investment in Name Country Relationship Number Share Currency Associates Income (Loss) % ThUS$ ThUS$
96,722,460-K Metrogas S.A. 39.83 Chile Associate Pesos 121,096 27,852 Foreign Vale do Corisco S.A.(formerly Centaurus Holding Brasil) 49.00 Brazil Indirect Associate Real 160,489 14,497 96,893,820-7 Corpesca S.A. 30.64 Chile Indirect Associate US dollars 91,153 (24,272) 82,777,100-7 Puertos y Logística S.A. 23.16 Chile Indirect Associate US dollars 70,731 2,117 96,785,680-0 Inversiones Puerto Coronel S.A. 50.00 Chile Indirect Associate US dollars 43,559 1,234 Foreign Stora Enso Arapoti Industria de Papel S.A. 20.00 Brazil Indirect Associate US dollars 0 (1,166) 96,636,520-K Gases y Graneles Líquidos S.A. 36.25 Chile Indirect Associate Pesos 38,723 7,641 99,500,140-3 Eka Chile S.A. 50.00 Chile Indirect Associate Pesos 19,069 2,115 76,384,550-8 Sociedad Nacional Marítima S.A. 18.35 Chile Indirect Associate US dollars 6,671 579 Foreign Unillin Arauco Pisos Ltda. 49.99 Brazil Indirect Associate Real 4,714 (335) Foreign Montagas S.A. ESP 33.33 Colombia Indirect Associate Colombian peso 3,636 1,167 82,040,600-1 Sociedad de Inversiones de Aviación Ltda. 33.33 Chile Indirect Associate Pesos 2,845 1,655 96,953,090-2 Boat Parking S.A. 21.36 Chile Indirect Associate Pesos 1,199 21 76,349,706-2 Hualpén Gas S.A. 50.00 Chile Indirect Associate US dollars 1,528 491 Foreign PGN Gasnorte S.A.C 50.00 Colombia Indirect Associate Colombian peso 1,318 394 Foreign PGN Gasur S.A.C 50.00 Colombia Indirect Associate Colombian peso 845 283 76,122,974-5 Algae Fuels S.A. 44.64 Chile Indirect Associate Pesos 93 (620) Foreign Energas S.A. ESP 28.33 Colombia Indirect Associate Colombian peso 553 53 96,925,430-1 Servicios Corporativos Sercor S.A. 20.00 Chile Indirect Associate Pesos 191 1 76,659,730-0 Elemental S.A. 40.00 Chile Indirect Associate Pesos 366 44 76,077,468-5 Consorcio Tecnológico Bionercel S.A. 20.00 Chile Indirect Associate Pesos 31 (40) 76,743,130-9 Genómica Forestal S.A. 25.00 Chile Indirect Associate Pesos 0 (18) 76,044,336-0 Golden Omega S.A. 25.00 Chile Indirect Associate US dollars 2,463 (3,006) Foreign Sonae Arauco 50.00 Spain Indirect Associate Euros 156,990 5,810 76,578,731-9 Aprovisionadora Global de Energía S.A. 39.83 Chile Indirect Associate Pesos 37,500 63,845 76,307,309-2 Naviera Los Inmigrantes S.A. 50.00 Chile Joint venture Pesos 5,978 256 96,942,120-8 AIR BP Copec S.A. 50.00 Chile Joint venture Pesos 5,434 376 70,037,855-0 Inversiones Laguna Blanca S.A 50.00 Chile Joint venture US dollars 197,846 (4,444) 76,456,800-1 Mina Invierno S.A. 0.10 Chile Joint venture US dollars 731 10 76,242,018-K Forestal y Ganadera Estancia Invierno S.A. 14.39 Chile Joint venture Pesos 8 0 76,037,858-5 Producción y Servicios Mineros Ltda. 0.01 Chile Joint venture Pesos (3) 1 87,635,000-9 Sociedad Edificio Don Crescente Ltda. 50.00 Chile Joint venture Pesos 0 0 76,037,872-0 Rentas y Construcciones Fitz Roy Ltda. 0.01 Chile Joint venture Pesos (56) 1 96,919,150-4 Minera Invierno S.A. 0.01 Chile Joint venture US dollars (17) (2) 76,037,864-K Portuaria Otway Ltda. 0.01 Chile Joint venture US dollars (35) 1 353630 Fibroacero 26.00 Ecuador Joint venture US dollars 3,407 126 76,037,869-0 Equipos Mineros Río Grande Ltda. 0.01 Chile Joint venture Pesos (52) 7 TOTAL 979,004 96,674
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As of December 31, 2015
Cost of Chilean ID Functional Investment in Name Country Relationship Number Share Currency Associates Income (Loss) % ThUS$ ThUS$
96,722,460-K Metrogas S.A. 39.83 Chile Associate Pesos 111,170 33,185 Foreign Vale do Corisco S.A.(formerly Centaurus Holding Brasil) 43.05 Brazil Indirect Associate Real 121,359 8,051 96,893,820-7 Corpesca S.A. 30.64 Chile Indirect Associate US dollars 113,179 (5,224) 82,777,100-7 Puertos y Logística S.A. 23.16 Chile Indirect Associate US dollars 67,760 (240) 96,785,680-0 Inversiones Puerto Coronel S.A. 50.00 Chile Indirect Associate US dollars 43,200 2,315 Foreign Stora Enso Arapoti Industria de Papel S.A. 20.00 Brazil Indirect Associate US dollars 17,397 1,199 96,636,520-K Gases y Graneles Líquidos S.A. 36.25 Chile Indirect Associate Pesos 41,040 7,785 76,329,072-7 Eka Chile S.A. 50.00 Chile Indirect Associate Pesos 20,099 1,645 76,384,550-8 Sociedad Nacional Marítima S.A. 30.00 Chile Indirect Associate US dollars 5,757 131 Foreign Unillin Arauco Pisos Ltda. 49.99 Brazil Indirect Associate Real 3,573 (470) Foreign Montagas S.A. ESP 33.33 Colombia Indirect Associate Colombian peso 3,248 1,198 82,040,600-1 Sociedad de Inversiones de Aviación Ltda. 33.33 Chile Indirect Associate Pesos 486 (320) 96,953,090-2 Boat Parking S.A. 21.36 Chile Indirect Associate Pesos 1,257 5 76,349,706-2 Hualpén Gas S.A. 50.00 Chile Indirect Associate US dollars 1,459 457 Foreign PGN Gasnorte S.A.C 25.00 Colombia Indirect Associate Colombian peso 1,124 305 Foreign PGN Gasur S.A.C 25.00 Colombia Indirect Associate Colombian peso 859 261 76,122,974-5 Algae Fuels S.A. 25.00 Chile Indirect Associate Pesos 2,039 1,433 Foreign Energas S.A. ESP 27.70 Colombia Indirect Associate Colombian peso 490 (48) 96,925,430-1 Servicios Corporativos Sercor S.A. 20.00 Chile Indirect Associate Pesos 179 2,169 76,659,730-0 Elemental S.A. 40.00 Chile Indirect Associate Pesos 328 69 76,077,468-5 Consorcio Tecnológico Bionercel S.A. 20.00 Chile Indirect Associate Pesos 67 (116) 76,743,130-9 Genómica Forestal S.A. 25.00 Chile Indirect Associate Pesos 16 (25) 76,044,336-0 Golden Omega S.A. 25.00 Chile Indirect Associate US dollars 5,427 (2,745) Foreign Novo Oeste Gestao de Ativos Florestais S.A. 49.00 Brazil Indirect Associate Real 0 (7,811) 76,307,309-2 Naviera Los Inmigrantes S.A. 50.00 Chile Joint venture Pesos 5,738 84 96,942,120-8 AIR BP Copec S.A. 50.00 Chile Joint venture Pesos 4,764 312 70,037,855-0 Inversiones Laguna Blanca S.A 50.00 Chile Joint venture US dollars 12,328 (169,334) 76,456,800-1 Mina Invierno S.A. 0.10 Chile Joint venture US dollars 341 (53) 76,242,018-K Forestal y Ganadera Estancia Invierno S.A. 14.39 Chile Joint venture Pesos 9 (1) 76,037,858-5 Producción y Servicios Mineros Ltda. 0.01 Chile Joint venture Pesos (5) (7) 87,635,000-9 Sociedad Edificio Don Crescente Ltda. 50.00 Chile Joint venture Pesos 0 0 76,037,872-0 Rentas y Construcciones Fitz Roy Ltda. 0.01 Chile Joint venture Pesos (58) (54) 96,919,150-4 Minera Invierno S.A. 0.01 Chile Joint venture US dollars (15) (14) 76,037,864-K Portuaria Otway 0.01 Chile Joint venture US dollars (36) (36) 76,037,869-0 Equipos Mineros Río Grande Ltda. 0.01 Chile Joint venture Pesos (59) (46) TOTAL 584,520 (125,940)
Summarized financial information of associates:
12.31.2016 12.31.2015 Assets Liabilities Assets Liabilities ThUS$ ThUS$ ThUS$ ThUS$
Associates current 1,164,232 940,806 813,407 601,984 Associates non-current 4,239,897 1,819,058 3,488,000 1,618,422
Total Associates 5,404,129 2,759,864 4,301,407 2,220,406
b) Interest in joint ventures:
Interests in joint ventures is accounted for using the equity method.
c) Movements in investments in associates are as follows:
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12.31.2016 12.31.2015 ThUS$ ThUS$
Equity method investments in associates Opening balance 584,520 680,226
Additions, investments in associates and joint ventures 344,411 188,383 Disposals of investments in associates and joint ventures (14,510) 0 Immediately recognized purchased goodwill 0 0 Income from the incorporation of joint ventures 7,590 0 Share in operating income (loss) 96,674 (125,940) Share in income from previous periods 0 0 Dividends received (66,765) (48,331) Impairment 0 0 Reversal of impairment 0 0 Increase (decrease) in foreign currency translation 37,358 (110,220) Other increases (decreases) (14,084) 698 Exchange rate differences 3,810 (296)
Total changes in investments in associates 394,484 (95,706) Closing balance 979,004 584,520
The principal purchases and sales of shares, capital increases, mergers and divisions for affiliates are as follows:
Abastible S.A.
On June 1, 2016, the Peruvian subsidiary of Abastible, GasBis Peru Holding S.A.C., acquired 99.86% of the shares of Solgas S.A. The purchase price stipulated in the contract amounted to ThUS$ 263,475. On the same date, Abastible acquired the remaining 0.13% of Solgas Amazonía S.A.C. for US$ 833, so now owns 100%.
On December 20, 2016, the merger between GasBis and Solgas S.A. (reverse merger) was approved, to become effective on December 31, 2016.
On October 1, 2016, Abastible took control of Duragas S.A. and Servicio de Mantenimiento y Personal S.A., both located in Ecuador. This investment was approximately ThUS$ 37,000.
On July 27, 2016 a capital increase in Abastible was approved of MCh$ 67,573, to finance the investments in Peru and Ecuador. Prior To this capital increase, the retained earnings as of December 31, 2015 were capitalized as provided in Corporate Law. After these two events, the share capital of Abastible became ThCh$ 248,508,932, divided into 52,545,975 shares.
Mapco and other entities
On November 14, 2016, Compañía de Petróleos de Chile Copec S.A. acquired from Delek US Holdings Inc. all its shares in Mapco Express, Inc. and voting rights in GDK Bear Paw, LLC, NTI Investments, LLC and Delek 119 WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1
Transportation, LLC, through the payment of the agreed price; taking control of the corresponding businesses.
The acquisition of these five US companies, allow it to operate 348 service stations in that country and supply 142 stations operated by third parties, that sell fuel and operate convenience stores.
The price paid to acquire these companies free of debt, was MUS$ 535, in addition to cash and a working capital adjustment at the closing date of MUS$ 17.9.
ExxonMobil
On November 16, 2016, Compañía de Petróleos de Chile Copec S.A. signed an agreement with Mobil Petroleum Overseas Company Limited and ExxonMobil Ecuadis Holding B.V. This is a regional agreement to develop and distribute Mobil lubricants, which also includes: i) The operation and marketing of fuels for the Jorge Chavez International Airport in Lima, Peru; ii) The transfer of the fuels business currently operated by ExxonMobil in Colombia and Ecuador.
The objective of the agreement is to expand the distribution networks for lubricants in other countries within the Andean area of South America and capture growth opportunities offered by markets in Chile, Colombia, Peru and Ecuador.
The agreement is subject to approval by governmental authorities in each country. If finalized, the investment associated with these agreements will be MUS$ 747, of which MUS$ 512 is the "equity value" of the acquired companies, plus their cash of approximately MUS$ 235 at the date the transaction is closed.
Administradora de Estaciones de Servicios Serco Ltda and Administradora de Ventas del Detalle Ltda.
On March 14, 2016 the Management of Compañía de Petróleos de Chile Copec S.A. reported the decision to concentrate the operation and development of convenience stores and service stations in Administradora de Ventas del Detalle Ltda. as the only operator. The aim being to achieve higher standards of operation and innovation that will enable them to face market challenges. Before that date they had been managed by Administradora de Estaciones de Servicios Serco Ltda. and Administradora de Ventas del Detalle Ltda.
Copec Investments Ltd.
The affiliate Copec Investments Ltd. was formally liquidated and dissolved on December 23, 2015, and the affiliate Copec was awarded all of its assets at that date. The liquidation and award referred to generated a favorable effect of MUS$ 67.
As a result of the foregoing the shares that Copec Investments Ltd. owned in Organización Terpel S.A., representing 43.48% (78,890,900 shares) of the issued shares, were transferred to Compañía de Petróleos de Chile Copec S.A. This left it directly owning 56.18% of Organización Terpel S.A.
This transaction was part of a process initiated in 2013, which aims to simplify and improve the corporate structure 120 WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1
through which Compañía de Petróleos de Chile Copec S.A. owns shares in Organización Terpel S.A. For this reason, Proenergia internacional S.A., Sociedad de Inversiones de Energía S.A. and Terpel del Centro S.A. were merged into Organización Terpel S.A. during 2014.
División Via Limpia SPA
The shareholders of Via Limpia SPA (Compañía de Petróleos de Chile Copec S.A. and Copec Canal Inc.) agreed to its division on October 31, 2015, leading to two new entities, Inversiones Cimol SPA and Complemento Filiales SPA. Their business objectives will be, directly or through its share as a partner in other companies, investing its own funds on a temporary basis, through investment contracts in private companies formed in the country, or capital contribution securities or loans, or combined forms of financing.
Compañía Latinoamericana Petrolera S.A.
The Board of Directors of Compañía de Petróleos de Chile Copec S.A. approved the liquidation of the branch in Colombia on March 13, 2015. After analyzing a number of studies that examined various opportunities to explore and exploit hydrocarbons, it was concluded that it was highly unlikely that any of these would materialize in future, due to the requirements of the Authority and the skills of medium-sized and large oil companies.
Merger and acquisitions of forestry companies
On March 31, 2016 the subsidiary Arauco do Brasil S.A. sold its interest in Stora Enso Arapoti Industria de Papel S.A. for ThUS$ 4,141. This transaction led to a loss of ThUS$ 10,369 for the affiliate Celulosa Arauco y Constitución S.A.
The affiliates Paneles Arauco S.A. (successor), Aserraderos Arauco S.A. and Arauco Distribución S.A. were merged on December 1, 2015. This transaction did not affect the results for the affiliate Arauco and was performed with the aim of generating synergies, sharing best practices and achieving better solutions for customers. Time had achieved a gradual integration between the operation of sawmills, remanufacturing, plywood, panels and distribution, each producing goods focusing on the furniture, construction, finishings and packaging industries.
In October 2015 the remaining 51% of Novo Oeste Gestao de Ativos Florestais S.A. was acquired, resulting in this becoming a 100% affiliate as of the end of 2015 through Arauco affiliates in Brazil.
The previous shareholding in Novo Oeste Gestao de Ativos Florestais S.A. was valued at fair value, recognizing a gain in Other income of ThUS$ 15,268. The price of the 51% shareholding was ThUS$ 995 generating goodwill of ThUS$ 6,697, which Arauco decided to recognize in the accumulated losses for that company and disclose net of the aforementioned gain.
Arauco Middle East DMCC was formed on August 13, 2015, with a single capital contribution from Inversiones Arauco Internacional Limitada of 3,673,000 Dirham (ThUS$ 1,000). This company's main purpose is promoting products and managing customer relationships for Arauco in the Middle East. On January 26, 2015 Arauco acquired a paper treatment plant based on melamine located in Biscoe, North Carolina 121 WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1
through its affiliates in North America. The price was ThUS$ 9,522.
Deconsolidation of Golden Omega SA from Orizon S.A.
According to IFRS 10 and IAS 27, Orizon S.A. has reevaluated control of its investment in the company Golden Omega S.A, following events that occurred during the period 2015 that reflect a change in the conditions that affect control. This change was the introduction of a new organizational structure at Golden Omega SA, which was implemented in the last quarter of 2015. This change affected the ability of Orizon S.A. to influence the business and performance of the company.
As a result of these changes in administrative, financial and operational control, the affiliate Golden Omega SA was deconsolidated from Orizon S.A. on October 1, 2015.
Other Investments
- The associate Metrogas SA has a disagreement with the Superintendency of Securities and Insurance in relation to the accounting treatment of conversion costs.
Metrogas filed an appeal before the Court of Appeals of Santiago in April 2015.
On April 8, 2016, the parties submitted a written statement to the Court, where Metrogas S.A. withdrew its appeal and the Superintendence of Securities and Insurance accepted that withdrawal. Subsequently, the SVS authorized that these changes could be implemented in the financial statements as of March 31, 2016, as recorded in its Official Bulletin 10,089 dated April 22, 2016.
This implies a change in the treatment of the Company's conversions, since expenditure on these conversions will be treated as an expense in the period in which they were incurred, instead of being capitalized as meter and regulator assets, which was their treatment until December 31, 2015.
- An Extraordinary Shareholders Meeting held on May 26, 2016 approved the division of Metrogas S.A., with the Company keeping the assets and liabilities associated with the concession sector. Aprovisionadora Global de Energía S.A. was spun off as a result of the division, and it was allocated all the assets and liabilities associated with the non-concession sector. This Extraordinary Metrogas Shareholders Meeting also approved the division coming into effect as of April 1, 2016 for accounting purposes. However, the legalization of the associated documents, and therefore the constitution of the new company was completed on June 1, 2016.
- The associate Laguna Blanca S.A. and its affiliates, which operate the Mina Invierno coal mine, faced a sharp drop in international coal prices at the end of 2015, completing four consecutive years of downward price trends. This led the Company to register an impairment loss compared to the book value of its assets and to reduce the book value of its coal inventories to their recoverable value.
The Company has implemented a series of measures over the last two years, to manage the fall in coal prices. In particular, production was adjusted, greater efficiencies were identified and costs were reduced. This was achieved 122 WorldReginfo - ac67c266-0300-451a-bf4e-1e511878acb1
through adjustments to the organizational structure, a plan to review and renegotiate supplier contracts, and various operational changes to improve mining productivity.
As a result, the Company managed to cope with historically low prices during the first half of 2016 and take advantage of recovering prices during the second half of the year. By the close of 2016, it had achieved a substantial improvement over the negative results for 2015.
Also, a capital increase in April 2016 enabled the Company to repay bank borrowing. Therefore, the Company now expects to have sufficient liquidity to meet its operational obligations without requiring additional funding to keep the business running.
d) Interests in joint arrangements
On May 31, 2016, the Arauco affiliate Inversiones Arauco Internacional Limitada acquired 50% of the shares of Tableros de Fibras S.A., a Spanish affiliate of SONAE INDÚSTRIA, SGPS, S.A. ("Sonae"), and from this date it has been renamed "Sonae Arauco S.A.". The price paid for this 50% interest was € 137,500,000 (equivalent to ThUS$ 153,135 at the date of acquisition). This transaction generated goodwill of ThUS$ 36,190 that is presented in the Statement of Financial Position within investment. This investment was valued using the equity method as of December 31, 2016, although the Company has yet to finalize its fair value.
Sonae Arauco will manufacture and market wooden MDF, PB and OSB panels and cut timber, at two panel plants and a sawmill in Spain; two panel plants and one resin plant in Portugal; four panel plants in Germany and two panel plants in South Africa.
Sonae Arauco's total production capacity of is approximately 1.45 million m³ of MDF, 2.27 million m³ of PB, 460,000 m³ of OSB and 100,000 m³ of sawn timber.
As of December 31, 2016, Arauco had contributed capital (ThUS$ 82,943 as of December 31, 2015) to two Uruguay companies, Celulosa y Energía Punta Pereira S.A. and Zona Franca Punta Pereira S.A., through its subsidiary Arauco Holanda Cooperatief U.A, with Arauco holding 50% ownership interest in the joint operation.
These contributions were invested in the construction of a state-of-the-art cellulose production plant with a guaranteed annual capacity of 1.3 million tons, a port and an electricity generation plant that uses renewable resources, located in Punta Pereira, department of Colonia, Uruguay.
The investments in Uruguay are considered a joint operation. The joint arrangement aims to provide the parties with an output, and as stated in the "Pulp Supply Agreement", both Arauco and its partner are obliged to acquire all the total annual production of pulp produced by the joint operation. Arauco has recognized assets, liabilities, income and expenses in connection with its ownership interest from January 1, 2013 in accordance with IFRS 11.
Moreover, Arauco has a 50% interest in a Brazilian company Unilin Arauco Pisos Laminados Ltda., and in Eka Chile SA, which sells sodium chlorate to pulp mills in Chile. Arauco has a contractual agreement with it that involves a financial undertaking under joint control, classified as a joint venture.
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In addition, the Group has an interest in Air BP Copec S.A. This company is the result of a joint venture established in 2001 between Copec and BP Global Investments Ltd., in which each partner holds a 50% interest. The company sells fuel for commercial and civil aviation. Currently, Air BP Copec operates in eight airports throughout the country and holds the leading market share in Chile, supplying the fuel needs of Latam and international airlines arriving in Santiago, such as American Airlines, Aerolíneas Argentinas, Delta, Varig, Avianca and Pluna, among others. The company also serves important consumers in the cargo air industry such as Polar Cargo and Cielos Airlines and numerous civil aviation customers.
Through affiliate Camino Nevado Limitada, the company has 50% ownership interest in Inversiones Laguna Blanca S.A. This company is the result of a strategic alliance started in 2007 between Empresas Copec S.A. and Inversiones Ultraterra in equal parts. The company was incorporated in order to undertake a project to explore and produce coal in Riesco Island, located north of Punta Arenas in the Magellan Region. For this purpose, in 2007 the company was awarded Corfo tenders through its investee Minera Invierno S.A. for coal exploration with purchase options on two coal areas located in that island, where the biggest proven sub-bituminous coal reserves in Chile are located.
During 2016 production of 2,442 thousand tons was achieved. The main destination of Mina Invierno production is the electricity generation industry in Chile, which represented 77% of sales. The main destination of international coal sales by December 2016 was India.
There are no contingent liabilities relating to the Group’s interest in joint ventures.
e) The most significant joint arrangements are outlined below:
December 31, 2016 Assets Liabilities Current Non-Current Current Non-Current Net Equity Revenue Expenses Gain (Loss) Eka Chile S.A. 15,817 31,690 4,348 5,021 38,138 48,276 (44,045) 4,231 Inversiones Laguna Blanca S.A. 74,381 353,701 14,477 16,725 396,880 84,108 (92,956) (8,848) Air BP Copec S.A. 28,756 11,978 24,194 1,345 15,195 276,384 (274,272) 2,112 Sonae Arauco S.A. 223,145 544,037 209,765 312,404 245,013 507,129 (492,117) 15,012
Joint venture Joint Unillin Arauco Pisos Ltda 7,900 5,094 3,549 18 9,427 1,305 (1,974) (669) Forestal Conor Sur S.A. 23,745 178,236 21,039 1,381 179,561 8,443 (2,876) 5,567 Eurofores S.A. 178,644 604,736 200,525 23,052 559,803 296,927 (280,054) 16,873
Joint Celulosa Energía Punta Pereira S.A. 173,258 2,131,266 182,834 735,679 1,386,011 680,819 (618,387) 62,432
Operation Zona Franca Punta Pereira S.A. 4,397 492,815 82,331 63,021 351,860 31,042 (25,966) 5,076
December 31, 2015 Assets Liabilities Current Non-Current Current Non-Current Net Equity Revenue Expenses Gain (Loss) Eka Chile S.A. 23,457 30,203 8,365 5,097 40,198 39,646 (36,355) 3,291 Inversiones Laguna Blanca S.A. 89,628 355,832 81,159 339,255 25,046 104,234 (316,680) (212,446)
Joint Air BP Copec S.A. 25,115 12,175 20,927 2,856 13,507 296,641 (294,804) 1,837
venture Unillin Arauco Pisos Ltda 5,943 3,544 2,304 37 7,146 112 (2,462) (2,350) Foresta Conor Sur S.A. 23,267 176,876 21,495 4,654 173,994 10,821 (12,000) (1,179) Eurofores S.A. 158,735 611,500 187,311 39,994 542,930 292,534 (297,291) (4,757)
Joint Celulosa Energía Punta Pereira S.A. 173,499 2,192,148 167,067 885,723 1,312,857 720,499 (612,101) 108,398 Operation Zona Franca Punta Pereira S.A. 11,582 494,585 71,202 88,182 346,783 19,079 (41,988) (22,909)
f) Dividends received from associates
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As of December 31, 2016, Empresas Copec S.A. received dividends from Metrogas S.A. of ThUS$ 14,505, from Puertos y Logística S.A. of ThUS$ 31, and from Aprovisionadora Global de Energía S.A. of ThCh$ 35,369 (as of December 31, 2015 it received ThUS$ 23,242 from Metrogas S.A. and ThUS$ 34 from Puertos y Logística S.A.).
Celulosa Arauco y Constitución S.A. received ThUS$ 4,772 in dividends from its associates during 2016 (as of December 31, 2015 it received ThUS$ 6,350).
Compañía de Petróleos de Chile Copec S.A. and affiliates received ThUS$ 15,918 in dividends from its associates during 2016 (as of December 31, 2015 it received ThUS$ 14,093).
Abastible S.A. received ThUS$ 13,899 in dividends from its associates during 2016 (as of December 31, 2015 it received ThUS$ 11,443).
Pesquera Iquique-Guanaye S.A. has not received dividends from its associates during 2016 (ThUS$ 5,097 as of December 31, 2015).
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NOTE 20. NATIONAL AND FOREIGN CURRENCY
12.31.2016 12.31.2015 ThUS$ ThUS$
Liquid assets 1,474,459 1,759,746
US Dollar 882,192 1,021,788 Euro 2,377 2,622 Other currencies 192,426 146,116 Non-indexed Chilean peso 397,456 589,213 U.F. 8 7 Cash and cash equivalents 1,289,413 1,584,765
US Dollar 760,502 927,935 Euro 2,377 2,622 Other currencies 192,104 143,288 Non-indexed Chilean peso 334,422 510,913 U.F. 8 7
Other current financial assets 185,046 174,981 US dollars 121,690 93,853 Euro 0 0 Other currencies 322 2,828 Non-indexed Chilean peso 63,034 78,300 U.F. 0 0
Short and long-term receivables 1,430,098 1,431,487 US Dollar 614,193 655,179 Euro 26,805 27,935 Other currencies 238,070 187,841 Non-indexed Chilean peso 542,440 556,759 U.F. 8,590 3,773
Current trade and other receivables 1,358,381 1,347,354 US Dollar 558,394 576,526 Euro 26,805 27,935 Other currencies 237,095 186,846 Non-indexed Chilean peso 531,212 552,274 U.F. 4,875 3,773
Current receivables from related parties 46,530 76,669 US Dollar 30,957 73,626 Euro 0 0 Other currencies 975 995 Non-indexed Chilean peso 10,883 2,048 U.F. 3,715 0
Non-current receivables from related parties 25,187 7,464 US Dollar 24,842 5,027 Euro 0 0 Other currencies 0 0 Non-indexed Chilean peso 345 2,437 U.F. 0 0
Other assets 18,541,949 16,734,381 US Dollar 12,968,328 12,306,746 0 157,061 4,115 Other currencies 3,192,942 2,035,481 Non-indexed Chilean peso 2,221,943 2,385,272 U.F. 1,675 2,767
Total assets 21,446,506 19,925,614 US Dollar 14,464,713 13,983,713 Euro 186,243 34,672 Other currencies 3,623,438 2,369,438 Non-indexed Chilean peso 3,161,839 3,531,244 U.F. 10,273 6,547
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12.31.2016 12.31.2015 ThUS$ ThUS$ Under 90 days 91 days to 1 year Under 90 days 91 days to 1 year
Current Liabilities
Other current financial liabilities 297,138 614,316 232,656 188,159 US dollars 242,406 504,758 189,151 111,294 Euro 0 0 0 0 Other currencies 38,856 2,755 28,951 4,057 Non-indexed Chilean peso 2,930 62,977 3,681 40,855 U.F. 12,946 43,826 10,873 31,953
Bank loans 206,890 172,162 151,021 150,680 US Dollar 166,865 114,200 120,071 109,857 Euro 0 0 0 0 Other currencies 38,356 1,517 28,541 2,771 Non-indexed Chilean peso 1,617 56,290 2,219 38,052 U.F. 52 155 190 0
Finance leases 11,328 32,759 10,201 29,317 US Dollar 1,077 0 145 433 Euro 0 0 0 0 Other currencies 500 1,238 410 1,286 Non-indexed Chilean peso 1,313 3,936 902 2,622 U.F. 8,438 27,585 8,744 24,976
Bank overdrafts 0 0 560 0 US Dollar 0 0 0 0 Euro 0 0 0 0 Other currencies 0 0 0 0 Non-indexed Chilean peso 0 0 560 0 U.F. 0 0 0 0
Other loans 78,920 409,395 70,874 8,162 US Dollar 74,464 390,558 68,935 1,004 Euro 0 0 0 0 Other currencies 0 0 0 0 Non-indexed Chilean peso 0 2,751 0 181 U.F. 4,456 16,086 1,939 6,977
Other current liabilities 1,323,826 377,645 923,970 578,544 US Dollar 538,918 255,977 300,688 510,853 Euro 12,842 1,028 9,995 0 Other currencies 387,220 44,861 322,137 139 Non-indexed Chilean peso 366,032 73,825 285,088 67,552 U.F. 18,814 1,954 6,062 0
Total current liabilities 1,620,964 991,961 1,156,626 766,703 US Dollar 781,324 760,735 489,839 622,147 Euro 12,842 1,028 9,995 0 Other currencies 426,076 47,616 351,088 4,196 Non-indexed Chilean peso 368,962 136,802 288,769 108,407 U.F. 31,760 45,780 16,935 31,953
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12.31.2016 12.31.2015 ThUS$ ThUS$ 13 months to 5 13 months to 5 Over 5 years Over 5 years years years
Non-current liabilities
Other financial liabilities, non-current 3,034,650 2,703,393 2,443,843 3,291,083 US Dollar 1,843,501 1,075,242 1,852,645 1,893,012 Euro 0 0 0 0 Other currencies 595,773 260,062 160,374 373,713 Non-indexed Chilean peso 154,118 118,044 59,834 34,308 U.F. 441,258 1,250,045 370,990 990,050
Bank loans 1,170,615 363,425 939,295 517,525 US Dollar 861,019 91,309 737,416 515,596 Euro 0 0 0 0 Other currencies 206,477 254,191 152,137 1,929 Non-indexed Chilean peso 102,928 17,925 49,379 0 U.F. 191 0 363 0
Finance leases 86,943 7,891 101,662 4,110 US Dollar 641 38 522 0 Euro 0 0 0 0 Other currencies 9,099 5,871 8,237 4,068 Non-indexed Chilean peso 14,289 924 10,455 0 U.F. 62,914 1,058 82,448 42
Bank overdrafts 0 0 0 0 US Dollar 0 0 0 0 Euro 0 0 0 0 Other currencies 0 0 0 0 Non-indexed Chilean peso 0 0 0 0 U.F. 0 0 0 0
Other loans 1,777,092 2,332,077 1,402,886 2,769,448 US Dollar 981,841 983,895 1,114,707 1,377,416 Euro 0 0 0 0 Other currencies 380,197 0 0 367,716 Non-indexed Chilean peso 36,901 99,195 0 34,308 U.F. 378,153 1,248,987 288,179 990,008
Other non-current liabilities 1,750,987 859,051 1,756,714 654,772 US Dollar 1,041,231 174,380 1,128,527 209,068 Euro 0 0 2 0 Other currencies 293,741 79,707 295,584 0 Non-indexed Chilean peso 414,843 125,203 331,527 58,063 U.F. 1,172 479,761 1,074 387,641
Total non-current liabilities 4,785,637 3,562,444 4,200,557 3,945,855 US dollars 2,884,732 1,249,622 2,981,172 2,102,080 Euro 0 0 2 0 Other currencies 889,514 339,769 455,958 373,713 Non-indexed Chilean peso 568,961 243,247 391,361 92,371 U.F. 442,430 1,729,806 372,064 1,377,691
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NOTE 21. EQUITY
1) Share capital
The Company's subscribed and paid capital as of December 31, 2016 was ThUS$ 686,114 (ThUS$ 686,114 as of December 31, 2015). This capital is composed of 1,299,853,848 ordinary shares, all of the same value (same number for 2015).
There were no capital increases during 2016 and 2015.
2) Reserves
As of December 31, 2016 and 2015 other reserves were as follows:
12.31.2016 12.31.2015 ThUS$ ThUS$
Legal and Statutory Reserves 3 3 Available-for-Sale Reserves (261) (468) Translation Adjustment Reserves (1,431,364) (1,679,567) Defined Benefit Plan Reserves (28,148) (21,924) Hedge reserves 9,900 (40,487) Other Miscellaneous Reserves 440,397 441,751
Total Reserves (1,009,473) (1,300,692)
Movements in reserves for the periods indicated are the following:
Legal and Available-for- Translation Defined Other Hedge Statutory Sale Adjustment Benefit Plan Miscellaneous Total Reserves reserves Reserves Reserves Reserves Reserves Reserves Opening balance 01.01.2016 3 (468) (1,679,567) (21,924) (40,487) 441,751 (1,300,692) Effect on comprehensive income 0 207 248,203 (6,224) 50,387 600 293,173 No effect on comprehensive income 0 0 0 0 0 (1,954) (1,954) Closing balance 12.31.2016 3 (261) (1,431,364) (28,148) 9,900 440,397 (1,009,473)
Legal and Available-for- Translation Defined Other Hedge Statutory Sale Adjustment Benefit Plan Miscellaneous Total Reserves reserves Reserves Reserves Reserves Reserves Reserves Opening balance 01.01.2015 0 (326) (974,990) (19,658) (41,622) 438,479 (598,117) Effect on comprehensive income 3 (142) (704,577) (2,266) 1,135 (783) (706,630) No effect on comprehensive income 0 0 0 0 0 4,055 4,055 Closing balance 12.31.2015 3 (468) (1,679,567) (21,924) (40,487) 441,751 (1,300,692)
3) Other comprehensive income
Under this concept, the Parent Company includes movements for conversion adjustments from the recognition of foreign investments, adjustments to financial instruments, its other adjustments, and those of its affiliates. The amount shown in the consolidated statement of changes in equity.
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4) Retained earnings (accumulated deficit)
Movements in retained earnings during the years ended December 31, 2016 and 2015 were as follows:
5) Non-controlling interests
Non-controlling interests as of December 31, 2016 and 2015 were as follows:
Non-controlling interests Non-controlling interests Chilean ID % non-controlling Equity Net Income Equity Net Income Company Number interest 12.31.2016 12.31.2016 12.31.2015 12.31.2015 ThUS$ ThUS$ ThUS$ ThUS$ Foreign Organización Terpel S.A. 41.49% 235,913 24,935 210,745 11,557 96,929,960-7 Orizon S.A. 33.20% 98,731 (3,701) 102,380 (4,804) Foreign Inversiones Nordeste Colombia SAS 49.00% 57,886 6,966 50,147 7,325 81,095,400-0 Sociedad Nacional de Oleoductos S.A. 47.20% 50,577 16,162 47,679 15,217 91,123,000-3 Pesquera Iquique - Guanaye 18.07% 38,990 (6,364) 44,932 (3,182) Foreign Arauco Forestal Arapoti S.A. 20.00% 29,409 3,057 23,194 4,420 78,049,140-K Forestal Los Lagos S.A. 20.00% 7,673 256 7,809 132 93,838,000-7 Forestal Cholguan S.A. 1.48% 5,020 456 4,826 429 91,806,000-6 Abastible S.A. 0.87% 3,447 634 2,344 493 93,458,000-1 Celulosa Arauco y Constitución 0.02% 1,528 47 1,451 80 Foreign Solgas S.A. 0.14% 372 2 0 0 96,668,110-1 Compañía Latinoamericana Petrolera S.A. 40.00% 243 (6) 235 (1) 96,657,900-5 Consorcio Protección Fitosanitaria Forestal S.A. 42.86% 218 (4) 0 0 76,268,260-5 Muelle Pesquero María Isabel Ltda. 32.00% 186 14 172 (10) Foreign Arauco Argentina S.A. 0.02% 113 (4) 115 4 Foreign Combustibles Ecológicos Mexicanos S.A. 3.33% 0 1 0 0 Foreign Lutexsa Industrial Comercial Cia. Ltda. 0.01% 0 9 0 0 96,657,900-5 Controladora de Plagas Forestales S.A. 42.27% 0 0 209 2 Total 530,306 42,460 496,238 31,662
6) Earnings per share
The Board of Directors of Empresas Copec S.A. agreed to establish as a general policy that the net income eligible for distribution as dividends shall be based on earned income, subtracting any significant variations in the value of unrealized assets and liabilities, which shall be returned when those assets and liabilities are recovered or settled.
Therefore, the Company’s net distributable income to calculate mandatory minimum and additional dividends excludes the following unrealized income for the period:
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a) Income related to the recording at fair value of forestry assets regulated by IAS 41; such income is reintegrated into net income when these assets are recovered. For this purpose, the portion of such increases in fair value is recovered when such assets are sold or disposed of by some other means.
b) Income from the acquisition of entities. These results will be reintegrated into net income upon recovery. For this purpose, this is when income is generated by the entities following their acquisition, or when these entities are sold.
The effects of deferred taxes associated with the items mentioned in points a) and b) will follow the same accounting procedure as the originating item.
12.31.2016 12.31.2015 ThUS$ ThUS$
Income attributable to owners 554,185 539,307 Adjustments: Biological assets
Unrealized (204,626) (205,482) Realized 210,177 203,685 Deferred taxes 2,090 (3,888) Deferred taxes, effect of changes to initial balance of biological assets 0 0 Biological assets (net) 7,641 (5,685) Income for incorporation of joint venture 0 0 Purchased goodw ill and others 0 0 Total adjustments 7,641 (5,685)
Distributable earnings 561,826 533,622
The general dividend policy for future periods consists of distributing 40% of distributable net income for each period, including the possibility of an interim dividend at the end of the year.
As of December 31, 2016, the minimum dividend provision for 2016 was ThUS$ 140,132 (ThUS$ 137,402 as of December 31, 2015) and was presented in the Consolidated Classified Statement of Financial Position under “Other current liabilities”.
Ordinary Shareholders Meeting 81 was held on April 27, 2016 and it approved a final dividend of US$ 0.105473 per share, which was paid on May 12, 2016.
On November 24, 2016 the Board agreed to distribute an interim dividend of US$ 0.066178 per share, to be paid on December 15, 2016, from net income for the year.
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On November 26, 2015 the Board agreed to distribute an interim dividend of US$ 0.059027 per share, to be paid on December 17, 2015, from net income for the year.
At Ordinary Shareholders Meeting 80 held on April 22, 2015, a final dividend of US$ 0.142471 per share was agreed, which was paid on May 14, 2015.
Earnings per share are calculated by dividing income attributable to the Company’s shareholders by the weighted average number of common shares in circulation. The Company does not have diluted shares.
Earnings (losses) per share 12.31.2016 12.31.2015 ThUS$ ThUS$
Earnings (loss) attributable to owners of the parent company 554,185 539,307
Weighted average number of shares 1,299,853,848 1,299,853,848 Earnings (loss) per share (US$ per share) 0.426344 0.414898
Rights, Privileges and Restrictions on Ordinary Share Capital:
Liabilities recorded under “Interest-bearing loans” require the Parent Company to have a consolidated borrowing ratio no greater than 1.2; otherwise the borrowing under these contracts could become due. As of the reporting date, the Group is in compliance with this restriction.
NOTE 22. OPERATING REVENUE
Operating revenue is as follows:
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NOTE 23. NET INCOME BY NATURE:
The detail of accumulated net income by nature for Empresas Copec S.A. as of December 31, 2016 and 2015 is as follows: Accumulated at Accumulated at Description 12.31.2016 12.31.2015 ThUS$ ThUS$ Cost of sales (13,936,759) (15,097,992) Distribution costs (1,196,570) (1,159,469) Administrative expenses (778,032) (819,344) Other expenses, by function (115,213) (131,266) Other income, by function 278,873 286,364
Cost of sales are presented as follows:
Accumulated at Accumulated at Description 12.31.2016 12.31.2015 ThUS$ ThUS$ Direct production costs 12,603,105 13,894,115 Depreciation 463,427 453,173 Remuneration costs 345,942 321,749 Maintenance costs 313,500 305,837 Other production costs 161,919 54,804 Amortization 48,866 68,314
Total cost of sales 13,936,759 15,097,992
Distribution costs are presented as follows:
Accumulated at Accumulated at Description 12.31.2016 12.31.2015 ThUS$ ThUS$ Transport of goods cost 558,486 571,658 Remuneration 86,153 64,303 Insurance and basic service costs 59,267 64,416 Marketing and promotion costs 195,777 197,532 Consultancy and professional service costs 57,927 28,210 Maintenance and repair costs 68,528 70,769 Other distribution costs 110,310 105,558 Lease costs 30,131 27,149 Depreciation 9,057 11,607 Unrecoverable taxes 19,538 18,267 Amortization 1,396 0
Total Distribution Costs 1,196,570 1,159,469
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Sales and administration expenses are presented as follows:
Accumulated at Accumulated at Description 12.31.2016 12.31.2015 ThUS$ ThUS$
Remuneration 329,854 346,331 Marketing and promotional expenses 12,936 12,817 Maintenance expenses 21,472 18,105 Insurance and basic service expenses 39,828 47,039 Consultancy and professional service expenses 89,565 78,181 Depreciation 65,161 53,741 Amortization 20,534 9,995 Subscriptions, property and municipal taxes 18,919 21,557 Computational services 43,850 39,147 Unrecoverable taxes 31,109 5,577 Donations 11,359 12,287 Lease expenses 17,438 14,403 Other administrative expenses 76,006 160,164
Total Administration and Sales Expenses 778,032 819,344
Other expenses by function are presented as follows:
Accumulated at Accumulated at Description 12.31.2016 12.31.2015 ThUS$ ThUS$ Loss on the sale of associates 10,369 0 Unrecoverable taxes 21,698 24,952 Plant closure expenses 21,748 21,009 Other expenses, by function 15,180 22,403 Consultancy and professional service expenses 3,563 5,938 Depreciation 2,119 3,707 Disposals of property, plant and equipment 14,979 12,320 Compensation 4,749 1,748 Accident expenses 17,150 35,902 Fines and penalties 1,842 1,287 Donations 1,816 2,000
Total Other Expenses by Function 115,213 131,266
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Other income by function is presented as follows:
Accumulated at Accumulated at Description 12.31.2016 12.31.2015 ThUS$ ThUS$ Fair value of biological assets 208,562 210,479 Other income, by function 18,639 29,907 Tax indexation, prepaid tax, tax credits 3,821 10,137 Reimbursement of costs and expenses 12,579 6,557 Dividends received 615 396 Export promotion income 2,350 2,692 Easements 3,756 8,160 Sale of fishing rights 631 0 Sale of fishing rights 18,892 13,142 Income from compensation claims 3,475 1,547 Real estate leases 5,552 3,346
Total Other Income, by Function 278,873 286,364
Finally, depreciation and amortization expenses for the periods indicated are presented as follows:
Accumulated at Accumulated at Description 12.31.2016 12.31.2015 ThUS$ ThUS$
Depreciation 539,764 522,228 Amortization 70,796 78,308 Total 610,560 600,536
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NOTE 24. FINANCIAL INCOME AND COSTS
Finance costs are detailed as follows:
12.31.2016 12.31.2015 ThUS$ ThUS$
Interest and inflation adjustments on bank loans 291,747 289,044 Financial cost of post-employment obligations 1,320 790 Other financial costs 31,829 37,211 Other interest expense 36,530 24,240 Amortization of complimentary costs 0 0 Exchange losses from foreign currency loans Foreign currency 0 0 Debt refinancing costs 0 0 Financial cost of remediation provision 94 0 Foreign currency translation (1) 50
Total finance costs 361,519 351,335
Finance income is detailed as follows:
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NOTE 25. EXCHANGE DIFFERENCES
The effect of exchange differences is as follows:
12.31.2016 12.31.2015 ThUS$ ThUS$
Exchange differences generated by assets Cash equivalents (3,523) 8,750 Mutual fund investments, term deposits and covenants 5,320 (42,068) Trade and other receivables 4,926 6,972 Tax receivables 2,538 (30,233) Receivables from related companies (11,958) (5,517) Other financial assets (118,949) (111,825) Other assets (8,103) (22,271) Total (129,749) (196,192)
Exchange differences generated by liabilities Trade and other payables 349 27,080 Payables to related companies 23,326 (22,681) Loans from financial institutions (includes bonds) 120,430 106,811 Dividends payable 13,062 10,505 Other financial liabilities (5,125) (64) Other liabilities 399 14,063 Total 152,441 135,714
Total 22,692 (60,478)
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NOTE 26. IMPAIRMENT OF ASSETS
Affiliate Celulosa Arauco y Constitución S.A.
An impairment provision was recorded to close the Arapoti Sawmill totaling ThUS$ 2,428 in 2015, leaving the recoverable value of these assets as zero.
Detail of Impairment Losses on Assets
As of December 31, 2016 and 2015 there are impairment provisions for property, plant and equipment as a result of obsolescence.
Disclosure of asset impairment
Principal asset classes affected by impairment losses and reversals Machinery and equipment
Principal facts and circumstances that led to impairment losses and reversals Technical obsolescence and claims
12.31.2016 12.31.2015 ThUS$ ThUS$
Impairment information 7,464 4,658
This impairment provision is being analyzed to write down the value of the associated assets.
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NOTE 27. ENVIRONMENT
Sustainability at Empresas Copec S.A. requires a management strategy that incorporates values, commitments and standards, together with the adoption of the best practices and technologies available in the industry, to secure constant improvements in the company’s environmental management. The Environment department has specialists in each business area, and ensures that these guidelines are put into practice every day.
All the production units at the affiliate Arauco have certified environmental management systems that reinforce the Company’s commitment to environmental performance and ensure the traceability of raw materials.
The affiliate Arauco uses various inputs, such as wood, chemicals, water, etc., in its production processes, which in turn generate liquid and gaseous emissions. Significant advances have been made in reducing consumption and emissions, in order to improve the company’s operating efficiency.
Environmental investments relating to atmospheric emission control, processes improvements, water management, waste management and sewage treatments have been undertaken, in order to improve environmental performance within business units of the affiliate Arauco.
The affiliate Abastible S.A. has continued to make investments this year that mitigate the impact on the environment, with regard to the Maritime Terminal located in the of Bio Bio Region. These investments are referred to within the environmental appraisal report on the project.
The indirect affiliate Orizon S.A. invested in its production facilities, which were aimed at recovering solids, avoiding unscheduled stoppages in productive processes, reducing thermal energy leakage, increasing the overall system efficiency, and ensuring compliance with environmental regulations. Similarly, improvements to the unloading and storage of raw materials systems increased the storage capacity in temperature controlled conditions so avoiding raw material deterioration, improved raw material unloading time, and ensured that rails complied with environmental commitments.
On August 16, 2016, the indirect associate Compañía Paso San Francisco S.A. submitted a mining closure plan to Sernageomin (Chilean Geology and Mining Service) in accordance with the requirements of Law 20,551. The plan is currently being processed within the deadlines established by Sernageomin.
Similarly, on July 25, 2016, Sernageomin approved the closure plan submitted by the indirect associate Compañía Minera Can-Can S.A. for the El Bronce mine, by issuing Resolution 1530, whose guarantee will be disclosed on January 26.
Expenditures incurred and committed during the period relating to environmental protection are detailed below:
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Forestry Sector
Committed Future 12.31.2016 Disbursements in 2016 Disbursements Company Project Value Asset Asset/Expense Value Estimated Project Status ThUS$ Expense Category ThUS$ Date
Arauco do Brasil S.A. Managing the implementation of environmental improvements In progress 285 Asset Property, plant and equipment 417 2017 Arauco do Brasil S.A. Managing the implementation of environmental improvements In progress 385 Expense Administrative expenses 1,231 2017 Celulosa Arauco y Constitución S.A. Investment projects for the control and management of gases produced in industrial processes In progress 1,585 Asset Property, plant and equipment 1,396 2017 Celulosa Arauco y Constitución S.A. Investment projects for the control and management of gases produced in industrial processes In progress 476 Asset Property, plant and equipment 8,085 2018 Celulosa Arauco y Constitución S.A. Managing the implementation of environmental improvements In progress 611 Asset Property, plant and equipment 20,658 2017 Celulosa Arauco y Constitución S.A. Managing the implementation of environmental improvements Finished 1,271 Asset Property, plant and equipment 0 Celulosa Arauco y Constitución S.A. Managing the implementation of environmental improvements In progress 1,218 Asset Property, plant and equipment 14,736 2018 Celulosa Arauco y Constitución S.A. Investment projects to control hazardous liquids and optimize the energy required for water in industrial plants In progress 51,703 Asset Property, plant and equipment 64,450 2017 Celulosa Arauco y Constitución S.A. Managing the implementation of environmental improvements In progress 26,990 Expense Operational costs 4,180 2017 Celulosa Arauco y Constitución S.A. Expansion of solid industrial waste landfill sites to manage future demand In progress 144 Asset Property, plant and equipment 0 Arauco Argentina S.A. Construction of outlets In progress 8 Asset Property, plant and equipment 824 2017 Arauco Argentina S.A. Expansion of solid industrial waste landfill sites to manage future demand In progress 187 Asset Property, plant and equipment 124 2017 Arauco Argentina S.A. Investment projects to control hazardous liquids and optimize the energy required for water in industrial plants In progress 183 Asset Property, plant and equipment 6,112 2017 Paneles Arauco S.A. Investment projects to control hazardous liquids and optimize the energy required for water in industrial plants In progress 1,332 Expense Operational costs 0 Paneles Arauco S.A. Expansion of solid industrial waste landfill sites to manage future demand In progress 465 Expense Administrative expenses 0 Paneles Arauco S.A. Managing the implementation of environmental improvements In progress 1,217 Asset Property, plant and equipment 304 2017 Forestal Arauco S.A. (formerly Forestal Celco S.A.) Managing the implementation of environmental improvements In progress 643 Expense Administrative expenses 946 2017 Forestal Los Lagos S.A. Managing the implementation of environmental improvements In progress 225 Expense Operational costs 18 2017
Total 88,928 123,481
Committed Future 12.31.2015 Disbursements in 2015 Disbursements Company Project Value Asset Asset/Expense Value Estimated Project Status ThUS$ Expense Category ThUS$ Date
Celulosa Arauco y Constitución S.A. Investment projects for the control and management of gases produced in industrial processes In progress 2,720 Asset Property, plant and equipment 0 Celulosa Arauco y Constitución S.A. Managing the implementation of environmental improvements Finished 27,868 Asset Property, plant and equipment 0 Celulosa Arauco y Constitución S.A. Managing the implementation of environmental improvements In progress 2,688 Asset Property, plant and equipment 1,057 2016 Celulosa Arauco y Constitución S.A. Managing the implementation of environmental improvements In progress 4,818 Expense Operational costs 0 Celulosa Arauco y Constitución S.A. Expansion of solid industrial waste landfill sites to manage future demand In progress 2,122 Asset Property, plant and equipment 1,420 2016 Celulosa Arauco y Constitución S.A. Investment projects to control hazardous liquids and optimize the energy required for water in industrial plants In progress 244 Asset Property, plant and equipment 0 Celulosa Arauco y Constitución S.A. Investment projects to control hazardous liquids and optimize the energy required for water in industrial plants In progress 6,668 Asset Property, plant and equipment 113,321 2017 Arauco Argentina S.A. Construction of outlets In progress 0 Asset Property, plant and equipment 805 2016 Arauco Argentina S.A. Expansion of solid industrial waste landfill sites to manage future demand In progress 165 Asset Property, plant and equipment 3,952 2016 Arauco Argentina S.A. Investment projects to control hazardous liquids and optimize the energy required for water in industrial plants In progress 38 Asset Property, plant and equipment 6,268 2016 Arauco Argentina S.A. Managing the implementation of environmental improvements Finished 117 Asset Property, plant and equipment 0 Paneles Arauco S.A. Investment projects to control hazardous liquids and optimize the energy required for water in industrial plants Finished 720 Asset Property, plant and equipment 0 Paneles Arauco S.A. Investment projects to control hazardous liquids and optimize the energy required for water in industrial plants In progress 1,627 Asset Administrative expenses 109 2016 Paneles Arauco S.A. Investment projects to control hazardous liquids and optimize the energy required for water in industrial plants In progress 555 Asset Property, plant and equipment 366 2016 Paneles Arauco S.A. Expansion of solid industrial waste landfill sites to manage future demand In progress 355 Expense Administrative expenses 355 2016 Forestal Arauco S.A. (formerly Forestal Celco S.A.) Managing the implementation of environmental improvements In progress 0 Expense Administrative expenses 0 2015 Forestal Arauco S.A. (formerly Forestal Celco S.A.) Managing the implementation of environmental improvements In progress 613 Expense Administrative expenses 783 2016 Forestal Los Lagos S.A. Managing the implementation of environmental improvements In progress 206 Expense Operational costs 208 2015 Arauco do Brasil S.A. Managing the implementation of environmental improvements In progress 32 Asset Property, plant and equipment 220 2016 Arauco do Brasil S.A. Managing the implementation of environmental improvements In progress 220 Expense Administrative expenses 699 2016
Total 51,776 129,563
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Fuel Sector
Committed Future 12.31.2016 Disbursements in 2016 Disbursements Company Project Value Asset Asset/Expense Value Estimated Project Status ThUS$ Expense Category ThUS$ Date
Compañía de Petróleos de Chile Copec S.A. Treatment plants for effluents and sewage Current 6 Asset Work in Progress 7 2,016 Compañía de Petróleos de Chile Copec S.A. Fire protection system Current 439 Asset Work in Progress 20 2,016 Compañía de Petróleos de Chile Copec S.A. Water outlet Current 69 Asset Work in Progress 4 2,016 Compañía de Petróleos de Chile Copec S.A. Environmental evaluation - 37 Expense Administrative expenses 0 0 Compañía de Petróleos de Chile Copec S.A. Waste disposal - 15 Expense Administrative expenses 0 0 Compañía de Petróleos de Chile Copec S.A. Liquid waste treatment - 5 Expense Administrative expenses 0 0 Transportes de Combustibles Chile Ltda. Disposal of oil, filters, batteries and other waste In progress 2 Expense Operating costs 0 0 Abastible SA Environmental legal requirements (ownership, permits) Process 6 Expense Expense 0 0 Abastible SA Samples of environmental parameters Process 1 Expense Expense 0 0 Abastible SA Maritime monitoring program Process 0 Expense Expense 0 0 Abastible SA Liquid waste handling Process 0 Expense Expense 0 0 Abastible SA Hazardous waste handling Process 112 Expense Expense 0 0 Abastible SA Household garbage handling Process 21 Expense Expense 0 0 Abastible SA Industrial liquid waste handling Process 25 Expense Expense 0 0 Abastible SA Environmental equipment Process 1 Expense Expense 0 0 Abastible SA Treatment plant maintenance and operation Process 16 Expense Expense 0 0 Abastible SA Vermin eradication and disinfection Process 12 Expense Expense 0 0 Abastible SA Asset Updating industrial technical qualification PAR Process 3 Investment Asset 2 2,017 Abastible SA Asset Hazardous waste handling plan - PLE Closed 6 Investment Asset 0 2,016 Abastible SA Water treatment plant at El Peñon Process 6 Investment Asset 69 2,017 Abastible SA Environmental monitoring at Trinorma Process 10 Investment Asset 0 2,016 Abastible SA Rendic project Process 2 Investment Asset 1 2,017 Abastible SA Sewerage treatment plant - POS Process 0 Investment Asset 72 2,017 Abastible SA Cylinder washing water treatment - PLE Process 0 Investment Asset 3 2,017 Abastible SA Hazardous substances storage - PCY Process 0 Investment Asset 3 2,017 Abastible SA Contain hazardous substance spillage IFSC-3b Process 9 Investment Asset 0 2,016 Sonacol S.A. Improvement of cathodic protection system Process 223 Asset Work in Progress 0 0 Sonacol S.A. Improving internal post inspection Q-CC-M-AAMB Finished 472 Asset Work in Progress 0 0 Sonacol S.A. Improving and deepening pipelines in agricultural areas SF-M Process 1,948 Asset Work in Progress 0 0 Sonacol S.A. Improving pipeline post inspection CC-M-LPG Process 519 Asset Work in Progress 0 0 Sonacol S.A. Pipeline joints CC-M16" in Santa Monica Process 1,425 Asset Work in Progress 0 0 Sonacol S.A. Qualitative risk management for pipelines Process 169 Asset Deferred charges 0 0
Total 5,559 181
Committed Future 12.31.2015 Disbursements in 2015 Disbursements Company Project Value Asset Asset/Expense Value Estimated Project Status ThUS$ Expense Category ThUS$ Date
Compañía de Petróleos de Chile COPEC S.A. Treatment plants for effluents and sewage Current 25 Asset Work in Progress 12 2016 Compañía de Petróleos de Chile COPEC S.A. Fire protection system Current 31 Asset Work in Progress 170 2016 Compañía de Petróleos de Chile COPEC S.A. Environmental evacuation In progress 2 Expense Administrative expenses 0 Compañía de Petróleos de Chile COPEC S.A. Water outlet In progress 486 Expense Administrative expenses 2 2016 Compañía de Petróleos de Chile COPEC S.A. Oils. filters, batteries and other waste removal In progress 43 Expense Administrative expenses 0 Compañía de Petróleos de Chile COPEC S.A. Liquid waste treatment In progress 3 Expense Administrative expenses 0 Abastible S.A. Environmental legal requirements In progress 7 Expense Administrative expenses 0 Abastible S.A. Sampling environmental parameters In progress 4 Expense Administrative expenses 0 Abastible S.A. Rendic project In progress 1 Investment Asset 0 2016 Abastible S.A. Hazardous waste handling In progress 65 Expense Administrative expenses 0 Abastible S.A. Household garbage handling In progress 12 Expense Administrative expenses 0 Abastible S.A. Industrial liquid waste handling In progress 27 Expense Administrative expenses 0 Abastible S.A. Liquid waste handling In progress 3 Expense Administrative expenses 0 Abastible S.A. Vermin eradication and disinfection In progress 12 Expense Administrative expenses 0 Abastible S.A. Treatment plant - El Peñon In progress 6 Investment Asset 76 2016 Abastible S.A. Updating industrial technical qualification PAR In progress 5 Investment Asset 5 2016 Abastible S.A. Maritime monitoring program In progress 43 Expense Administrative expenses 0 Abastible S.A. Treatment plant maintenance and operation In progress 16 Expense Administrative expenses 0 Abastible S.A. Truck parking lot Finished 7 Investment Asset 0 Abastible S.A. Environmentl monitoring at Trinorma In progress 0 Investment Asset 6 2016 Abastible S.A. Updating hazardous PLE waste plan In progress 0 Investment Asset 6 2016 Sonacol S.A. Leak detection system Finished 486 Asset Work in Progress 0 141 Sonacol S.A. Internal pipeline inspection with magnetic flux Finished 98 Asset Deferred charges 0
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Fishing Sector
Committed Future 12.31.2016 Disbursements in 2016 Disbursements Company Project Value Asset Asset/Expense Value Estimated Project Status ThUS$ Expense Category ThUS$ Date
Pesquera Iquique - Guanaye S.A. Adjustment of systems in plants Capitalized 254 Asset Property, plant and equipment 1 2017 Pesquera Iquique - Guanaye S.A. Improvements to unloading system for independent fishermen Capitalized 67 Asset Property, plant and equipment 1 2017 Pesquera Iquique - Guanaye S.A. Environmental impact studies Capitalized 212 Asset Property, plant and equipment 0 2016
Total 533 2
Committed Future 12.31.2015 Disbursements in 2015 Disbursements Company Project Value Asset Asset/Expense Value Estimated Project Status ThUS$ Expense Category ThUS$ Date
Pesquera Iquique - Guanaye S.A. Adjustment of systems in plants Capitalized 212 Asset Property, plant and equipment 0 2016 Pesquera Iquique - Guanaye S.A. Improvements to unloading system for independent fishermen In progress 0 Asset Property, plant and equipment 0 2016 Pesquera Iquique - Guanaye S.A. Environmental impact studies In progress 0 Asset Work in Progress 0 2016
Total 212 0
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NOTE 28. OPERATING SEGMENTS
Operating segments have been defined in accordance with the manner in which senior management internally analyze their segments in order to make operating decisions and to allocate resources. In addition, the availability of relevant financial information has also been considered when defining operating segments.
Segments have been defined according to the main direct affiliates: Celulosa Arauco y Constitución S.A., Compañía de Petróleos de Chile Copec S.A., Abastible S.A. and Pesquera Iquique-Guanaye S.A. These Companies together represent more than 90% of the sales, Ebitda, net income, and consolidated assets and liabilities.
Celulosa Arauco y Constitución S.A.
Arauco has established itself as one of the leading forestry companies in Latin America, in terms of area and plantation yields, kraft pulp manufacturing, and sawn timber and panel production.
Arauco's forest plantations and land cover 1.7 million hectares in Chile, Argentina, Brazil and Uruguay. Arauco has modern industrial facilities in these countries and in the United States, Canada, Spain, Portugal, Germany and South Africa that include seven cellulose plants with a production capacity of 3.9 million tons annually, 9 operating sawmills that produce 3.0 million m³ of lumber annually and 27 panel plants with a production capacity of 8.9 million m³ a year.
As of December 31, 2016, Arauco’s production totaled 3.7 million tons of cellulose and 7.9 million m³ of sawn timber and panels. Sales totaled US$ 4,761 million, of which 45.1% was for pulp, 52.4% for sawn timber and panels and 2.5% for other segments.
37.2% of total sales was sold in the Chilean market and the rest overseas, primarily to Asia and the Americas.
Compañía de Petróleos de Chile Copec S.A.
Compañía de Petróleos de Chile Copec S.A. is one of the country’s most important sellers and distributors of fuel for domestic and industrial use. It was established in 1934 and the following year began operations selling gasoline. Over time it expanded its business and diversified its activities. Copec has 633 service stations throughout the country, forming the most extensive network in Chile, which includes 85 Pronto convenience stores and 248 Punto stores. The company also manages an industrial channel that supplies nearly 4,000 customers, belonging to the most important segments of the Chilean economy. It manages the lubricant trademark Mobil and Esso for vehicles and machinery. This requires 15 fuel storage plants between Arica and the Chacabuco Port, with a total capacity of 384 thousand m³. It began to internationalize its fuels business following the takeover of the Colombian company Terpel in 2010, and now operates in five markets: Colombia, Ecuador, Panama, Peru and Mexico.
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Organizacion Terpel has a network of 2,217 service stations as of December 31, 2016, and 1,876 of these are service stations for liquid fuels in Colombia its home country.
The Company also has 287 natural gas sales points for vehicles in Colombia through its affiliate Gazel, which represents 44% of this segment in December 2016.
It is also the main wholesale distributor in Colombia with more than 1,000 customers in industry, transport and aviation, which represents 45.4% of this segment.
Its total market share of the fuel business in Colombia was 45.3%.
Abastible S.A.
Abastible S.A. was incorporated in 1956 to market liquefied petroleum gas for domestic, commercial and industrial use. Today this company has become a major player in the Chilean energy sector, basing its strategy on delivering a quality, safe and timely service to all customers. In 2011, Abastible S.A. started to internationalize through the purchase of a 51% interest in Inversiones del Nordeste, a Colombian company. Abastible S.A. acquired a Liquefied Petroleum Gas (LPG) business in Peru and Ecuador from Repsol S.A. in April 2016, and became the third largest LPG supplier in Latin America.
In June 2016, Abastible took operational control of Solgas S.A. and Solgas de la Amazonía in Peru. In October it took operational control of Duragas, in Ecuador.
The Company operates throughout Chile from the northernmost city (Arica) to the southernmost (Magallanes) with a complete and modern infrastructure for its liquefied gas business. The Company has 10 storage and filling facilities, plus 6 million cylinders and 55 thousand tanks, supported by a network of approximately 1,500 sales points and 23 sales offices in all the major cities of the country. Additionally, in the Biobio region it has a port terminal for loading and unloading liquefied gas and liquid fuels and a plant with a capacity for storing 40,000 m³ managed by a related company Hualpén Gas S.A.
During the year Abastible has been investing in the continuous modernization of its storage and filling plants.
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Pesquera Iquique - Guanaye S.A.
Empresas Copec S.A. has been present in the Chilean commercial fishing sector since 1980 through Pesquera Guanaye Ltda., which many years later merged with Pesquera Iquique S.A. producing Pesquera Iquique-Guanaye Igemar as a result.
Through its partner Corpesca S.A., Igemar operates in the north of Chile, and with its affiliate Orizon S.A. in the country’s central-south region.
These companies’ products include fishmeal, which is mainly used as a raw material in food production for aquaculture and livestock, due to its high level of protein, Omega 3 fatty acids and favorable digestibility. Another of its products is fish oil, which is used extensively in aquaculture. However, in recent years, it has been gaining importance as a nutritional supplement in human nutrition and the pharmaceutical industry. Canned and frozen products, using mackerel as the main raw material, are produced for human consumption. Canned and frozen mussels are produced. In an effort to expand its portfolio of products, the company entered the grocery market selling beans, rice and lentils under the brand San Jose, for the domestic market.
The primary destinations for these products are local, Asian, African and European markets.
Sociedad Nacional Oleoductos S.A.
The company's revenues are from transporting fuels through a network of 465 km of its own pipe lines from Quintero to San Fernando, which transport 98% of the fuel for the Metropolitan Region. Additionally, the company has 9 pump stations, a delivery terminal and a dispatch center strategically located at its corporate headquarters.
Sonamar has a fleet of four oil tankers with a total capacity to ship 152 thousand m3 of oil and its byproducts to the centers of greatest demand in Chile.
The financial figures associated with these segments, as of December 31, 2016 and 2015 are as follows:
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Arauco Copec Abastible Sonacol Igemar Other Subtotal Eliminations Total Segments 2016 ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$
Operating revenues from external customers 4,761,385 10,950,265 784,124 47,451 155,581 505 16,699,311 0 16,699,311 Inter-segment operating revenues 0 48,594 7,132 26,586 68 2,516 84,896 (84,896) 0
Interest Income 29,701 16,449 3,183 191 355 15,564 65,443 0 65,443 Interest expense (258,467) (81,876) (12,773) (4,418) (4,059) 74 (361,519) 0 (361,519)
Interest expense, net (228,766) (65,427) (9,590) (4,227) (3,704) 15,638 (296,076) 0 (296,076)
Operating income 291,538 353,478 100,186 50,359 7,795 (15,406) 787,950 0 787,950
Depreciation 394,835 67,626 45,492 9,076 21,657 940 539,626 0 539,626 Amortization 14,552 53,610 1,835 0 380 264 70,641 0 70,641 Fair value of timber harvested 340,199 0 0 0 0 0 340,199 0 340,199 EBITDA 1,041,124 474,714 147,513 59,435 29,832 (14,202) 1,738,416 0 1,738,416
Income (loss) from the reporting segment 217,577 217,862 79,773 34,242 (38,909) 86,100 596,645 0 596,645
Share in income (loss) of associates 23,939 16,320 13,877 0 (27,257) 69,795 96,674 0 96,674
Income tax expense (45,647) (72,178) (29,904) (10,889) 2,639 (1,502) (157,481) 0 (157,481) Investments by segment Additions to property, plant and equipment 356,153 206,197 63,541 10,107 0 9 636,007 0 636,007 Acquisitions of other long-term assets 140,707 0 0 0 16,613 0 157,320 0 157,320 Payments to acquire affiliates and associates 153,135 534,764 300,500 0 0 251,903 1,240,302 (251,726) 988,576 Acquisition of intangible assets 14,858 32,510 252 0 1 5,305 52,926 0 52,926 Payments to acquire other investments 0 0 0 0 0 0 0 0 0
Total investments 664,853 773,471 364,293 10,107 16,614 257,217 2,086,555 (251,726) 1,834,829
Country of origin of operating revenues Operating revenues from Chilean companies 3,085,642 5,982,248 441,929 47,451 155,581 505 9,713,356 0 9,713,356 Operating revenues from foreign companies 1,675,743 4,968,017 342,195 0 0 0 6,985,955 0 6,985,955
Total operating revenue 4,761,385 10,950,265 784,124 47,451 155,581 505 16,699,311 0 16,699,311
Assets by segment 14,157,950 4,395,622 1,155,423 287,044 501,574 948,893 21,446,506 0 21,446,506
Equity method investments 446,548 57,710 64,285 0 94,815 315,646 979,004 0 979,004
Segment liabilities 7,158,667 2,833,157 701,212 179,890 186,855 (98,775) 10,961,006 0 10,961,006 Country of origin of non-current assets Chile 7,087,876 1,464,496 481,420 279,932 405,127 613,714 10,332,565 0 10,332,565 Foreign 4,347,714 1,331,727 524,366 0 0 0 6,203,807 0 6,203,807
Total non-current assets 11,435,590 2,796,223 1,005,786 279,932 405,127 613,714 16,536,372 0 16,536,372 Cash flows by segment Cash flow provided by (used in) operating activities 773,584 545,528 132,261 13,233 16,975 8,903 1,490,484 21,363 1,511,847 Cash flow provided by (used in) investing activities (640,212) (818,855) (362,094) (9,963) (22,618) (318,093) (2,171,835) 350,570 (1,821,265) Cash flow provided by (used in) financing activities (38,484) 230,348 215,123 (3,593) (4,384) (64,453) 334,557 (372,473) (37,916) Increase (decrease) in cash & cash equivalents before effect of exchange rate variations 94,888 (42,979) (14,710) (323) (10,027) (373,643) (346,794) (540) (347,334)
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Arauco Copec Abastible Sonacol Igemar Other Subtotal Eliminations Total Segments 2015 ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$
Operating revenues from external customers 5,146,740 12,247,980 564,206 48,826 147,938 4,452 18,160,142 0 18,160,142 Inter-segment operating revenues 0 67,978 7,972 23,384 0 1,879 101,213 (101,213) 0
Interest Income 50,284 14,257 1,836 208 658 9,200 76,443 0 76,443 Interest expense (262,962) (71,081) (12,469) (5,382) (3,901) 4,460 (351,335) 0 (351,335)
Interest expense, net (212,678) (56,824) (10,633) (5,174) (3,243) 13,660 (274,892) 0 (274,892)
Operating income 554,868 407,781 85,775 48,875 3,190 (17,152) 1,083,337 0 1,083,337
Depreciation 388,192 62,062 37,544 8,568 24,715 1,147 522,228 0 522,228 Amortization 11,953 63,129 0 0 0 1,183 76,265 0 76,265 Fair value of timber harvested 306,673 0 0 0 0 0 306,673 0 306,673 EBITDA 1,261,686 532,972 123,319 57,443 27,905 (14,822) 1,988,503 0 1,988,503
Income (loss) from the reporting segment 367,711 313,169 60,463 32,239 (22,425) (180,188) 570,969 0 570,969
Share in income (loss) of associates 6,748 15,046 13,318 0 (7,964) (153,088) (125,940) 0 (125,940)
Income tax expense (129,694) (37,623) (19,456) (9,521) 4,103 5,751 (186,440) 0 (186,440) Investments by segment Additions to property, plant and equipment 321,385 209,066 46,561 14,467 12,324 292 604,095 0 604,095 Acquisitions of other long-term assets 126,132 0 234 0 0 0 126,366 0 126,366 Payments to acquire affiliates and associates 10,904 0 21,388 0 0 0 32,292 0 32,292 Acquisition of intangible assets 10,395 26,044 190 0 374 6,688 43,691 0 43,691 Payments to acquire other investments 0 0 0 0 0 0 0 0 0
Total investments 468,816 235,110 68,373 14,467 12,698 6,980 806,444 0 806,444
Country of origin of operating revenues Operating revenues from Chilean companies 3,308,870 7,064,708 425,695 48,826 147,938 4,452 11,000,489 0 11,000,489 Operating revenues from foreign companies 1,837,870 5,183,272 138,511 0 0 0 7,159,653 0 7,159,653
Total operating revenue 5,146,740 12,247,980 564,206 48,826 147,938 4,452 18,160,142 0 18,160,142
Assets by segment 13,806,907 3,542,866 684,692 268,689 538,119 1,084,341 19,925,614 0 19,925,614
Equity method investments 264,812 53,461 61,469 0 119,863 84,915 584,520 0 584,520
Segment liabilities 7,160,462 2,295,283 381,670 167,675 186,875 (122,224) 10,069,741 0 10,069,741 Country of origin of non-current assets Chile 7,091,995 1,180,595 439,838 260,854 420,994 336,295 9,730,571 0 9,730,571 Foreign 4,028,500 882,530 138,208 0 0 0 5,049,238 0 5,049,238
Total non-current assets 11,120,495 2,063,125 578,046 260,854 420,994 336,295 14,779,809 0 14,779,809 Cash flows by segment Cash flow provided by (used in) operating activities 853,650 556,390 131,121 20,382 17,969 (71,746) 1,507,766 18,503 1,526,269 Cash flow provided by (used in) investing activities (477,780) (227,728) (66,264) (14,415) (31,512) 239,345 (578,354) (258,478) (836,832) Cash flow provided by (used in) financing activities (812,176) (166,412) (40,808) (19,225) (7,436) (205,016) (1,251,073) 240,619 (1,010,454) Increase (decrease) in cash & cash equivalents before effect of exchange rate variations (436,306) 162,250 24,049 (13,258) (20,979) (37,417) (321,661) 644 (321,017)
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Revenue by country is detailed as follows: 12.31.2016 12.31.2015
ThUS$ ThUS$
Revenue by Country Argentina 360,224 481,881 Brazil 354,170 378,719 Chile 9,713,356 11,000,490 Colombia 4,091,115 4,472,241 Panama 503,681 530,377 Dominican Republic 119,454 - Ecuador 182,166 148,096 Mexico 18,018 30,292 Peru 214,956 17,493 Uruguay 181,993 190,233 USA/Canada 960,178 910,320
Total 16,699,311 18,160,142
Non-current assets by country are detailed as follows:
12.31.2016 12.31.2015
ThUS$ ThUS$
Non-current assets Argentina 960,596 978,285 Brazil 1,186,538 872,378 Chile 10,334,310 9,730,571 Colombia 694,086 840,210 Panama 152,444 121,855 Dominican Republic 4,760 5,014 Ecuador 35,390 13,028 USA 565,687 - Mexico 20,502 20,355 Peru 383,224 20,276 Uruguay 1,800,911 1,812,948 Canada 397,924 364,889 Total 16,536,372 14,779,809
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NOTE 29. BORROWING COSTS
The Group capitalizes interest on current investment projects. Interest is calculated using the average rate on loans intended to finance such investment projects.
NOTE 30. SUBSEQUENT EVENTS
After the consolidated financial statements were closed, the following essential facts have been communicated to the Superintendence of Securities and Insurance (SVS):
1. The related company Puertos y Logística S.A.:
1.1. On March 9, 2017, the following was communicated:
"In my capacity as Chief Executive Officer of Puertos y Logística S.A. (the "Company"), duly authorized and in accordance with Articles 9 and 10 of Law 18,045 regarding the Stock Market and as instructed by this Superintendency in Section II of General Standard 30 and in Circular 1737, I report the following essential event:
A letter dated March 8, 2017, addressed to Don Andrés Santa Cruz Lopez as Chairman of the Board of Directors of the Company, and brought to the attention of the Board at its meeting on that same date, reported that the shareholders Celulosa Arauco y Constitución S.A. and Empresas Copec S.A. intend to sell all their shares in the Company, which jointly represent approximately 23.32% of the issued shares with voting rights, using consultancy services provided by Credicorp Capital Asesorías Financieras S.A. The Board agreed at its meeting on that date to report this information as an Essential Event, given the size of this shareholding."
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2. Celulosa Arauco y Constitución S.A.:
2.1 On March 9, 2017, the following was communicated:
“The undersigned, in his authority as Chief Executive Officer of the publicly-held corporation EMPRESAS COPEC S.A., hereinafter the “Company" or “Empresas Copec”, both domiciled in the Metropolitan Region at Avenida El Golf 150, floor 17, Las Condes, registered in the Securities Registry as No. 0028, Chilean Identification Number 90,690,000-9, and fully authorized, communicate the following essential information about the Company and its businesses, its publically quoted securities or an offer for them, in accordance with Articles 9 and paragraph 2 of Article 10 of Law 18,045 and SVS General Standard 30:
Today, the affiliate Celulosa Arauco y Constitución S.A. ("Arauco") reports the following Essential Event, in order to complement the Essential Event reported on January 27 with regard to fires within its plantations:
1) As a result of wildfires that have affected the country during this year in various regions, in particular the Maule and Bio Bio Regions, approximately 80,000 hectares of Arauco’s forest plantations have been affected, with a book value of approximately MUS$ 240, according to IFRS. This figure is approximately 6% of the total IFRS value of the affiliate’s forest plantations, and approximately 2% of Arauco’s total assets.
2) The affected plantations are being managed by Arauco to minimize the damage caused by the fires. It is estimated that between 10% and 20% of the total amount of the aforementioned MUS$240 will be recovered.
3) In addition, the forestry plantations affected by the fires are covered by insurance policies, with their corresponding deductibles and limitations. Therefore, Arauco believes it will be able to recover up to MUS$ 35 from these policies.
2.2 On January 27, 2017, the following was communicated:
“The undersigned, as Executive Vice President of Celulosa Arauco y Constitución S.A., hereinafter the “Company" or “Arauco”, both domiciled in the Metropolitan Region at Avenida El Golf 150, floor 4, District of Las Condes, registered in the Securities Registry as No. 42, Chilean ID No. 93,458,000-1, and fully authorized, communicates the following essential information about the company and its businesses in accordance with articles 9 and 10-2 of Law 18,045 and SVS General Standard 30:
Since last week multiple fires have been burning across the country, and the fires in the Maule and Bío Bío Regions have affected the Company. Arauco has over 1,300 professional brigade members, properly trained and equipped to prevent and combat fires. It also has 8 aircraft, 10 helicopters, more than 100 mobile teams that
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can carry water, 120 surveillance towers, 19 airstrips and specialized equipment, in addition to support from national and international specialist companies. However, as a result of the high temperatures, the wind, the low humidity, and the complexity from combating multiple foci that simultaneously appear in various places, the fires have grown considerably.
The burned area includes approximately 80,000 hectares of plantations belonging to the Company. The impact can only be evaluated when conditions allow an assessment of the damage, which will depend on the age of the plantations, the intensity of the fire in various areas, and which parts were actually reached.
The El Cruce sawmill was also affected, which is owned by the affiliate Maderas Arauco S.A., and its damage is still being evaluated.
The forestry plantation and sawmill affected by the fire are covered by insurance policies, with their corresponding deductibles and limitations.
We are not in a position to identify the effects of these situations on the Company’s results.”
3. Affiliate Pesquera Iquique-Guanaye S.A.:
3.1 On March 8, 2017, the following was communicated:
“The undersigned, in his authority as Chief Executive Officer of PESQUERA IQUIQUE - GUANAYE S.A., both domiciled in the Metropolitan Region at Avenida El Golf 150, floor 17, Las Condes, registered in the Securities Registry as No. 0044, Chilean Identification Number 91,123,000-3, and fully authorized, communicates the following essential information about the Company and its businesses, in accordance with Articles 9 and paragraph 2 of Article 10 of Law 18,045 and SVS General Standard 30:
The related company Corpesca S.A. reported an Essential Event that at an Extraordinary Board Meeting held today agreements were approved on the following matters:
1) In accordance with International Financial Reporting Standards (IFRS), and as a result of market conditions, fish and production availability, Management at Corpesca S.A. has detected a difference between the recoverable value of its assets and their book value of ThUS$ 57,573 in 2016, generating an impairment loss on its assets for this amount. This impairment is mainly associated with ships and other assets that are no longer in operation, or with low projected utilization. This generated a net charge to income for 2016 of ThUS$ 44,767. This extraordinary accounting effect does not involve cash outflow.
2) It was agreed to convene an Extraordinary General Shareholders' Meeting of Corpesca S.A. in order to address a proposed capital increase of MUS$ 90, immediately following its Ordinary General
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Shareholders' Meeting in April, with the purpose of strengthening the Company’s financial position and enabling it to decrease its current borrowing.
3) The increasing complexity and requirements of the fishing business, as well as growth and challenges presented by other businesses within the Company other than fishing, make appropriate structures necessary to improve management and optimize the various business areas. Therefore, it was agreed to initiate research into a proposed restructuring plan, either through internal restructuring or through dividing the Company.
In respect of Agreement 1, in accordance with its interest in Corpesca S.A., Pesquera Iquique - Guanaye S.A. should account in its consolidated financial statements for an impairment loss in its associate of ThUS$ 13,717. This extraordinary accounting effect does not involve cash outflow for Pesquera Iquique - Guanaye S.A."
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