Argentina Enel Américas’ 2018 Analyst Update Meeting
Maurizio Bezzeccheri
Country Manager Enel Argentina Enel Argentina Positioning Enel * Not ( El Chocón Pcia including including de de Neuquén) Atacama Gas Foninvemem Américas in Américas (Buenos (Buenos Aires) DockSud (Buenos (Buenos Aires) Edesur Yacylec and Interconnection Líneas CTM/TESA Vuelta (Buenos (Buenos Aires) Costanera de Obligado with S.A. Brazil Argentina Generation Distribution Transpor 4,558 4,558 Trading Users 2.5 m MW t *
THERMAL HYDRO GAS ELECT. ELECT. 3,230 MW 1,328 MW FONINVEMEM Gas AtacamaGas Obligado S.A.Obligado Enel Generación El ChocónEl GeneraciónEnel Enel Generación CostaneraGeneraciónEnel CTM/TESA Vuelta de Vuelta Enel TradingArgentinaEnel Yacylec Edesur Dock Sud Dock Concession Installed Combined Installed Combined Installed Enel Argentina (860 Interconnection betweenArgentina andBrazil, Argentina side. Brazil side, CIEN (Enel Group). 2lines in 500 Combined Connection in 500 KV between Buenos Southern Concession Distributed Américas MW c/u) MW capacity capacity capacity Cycle Cycle : - Chile Aires Until cycle zone Energy CC’s CC’s Area participates : August gas : : customers Energymanagement. Marketing energyof and fuels large to 1,328 ( 870 MW 870MW 2,360 820 of (798 MW) Turbines Gas (72 MW) (798 MW) (1,186 pipeline : Federal 3 : MW) MW MW , 2023 ~ MW MW 304 18 MW) in the companyoperating San theCC'sMartin and led Kv TWh with km Capital by of 1,050 MW 1,050of andMW 135 each km Yacyretá 2 8 / SADESA . year 5 MMm and Power Steam and Resistencia ET (274Km) 3 twelve ( daily 56 Units Turbine(1,138 % ), capacity Enel municipalities (36MW) ( 41 % MW) ) and of Duke the Energy province Belgrano ( 3 3 % of ) Generation and Distribution Installed Capacity in Argentina
Nuclear 4.8 % Renewable 2.0 % Evolution of Total Country Capacity Power Increase - January 2017 33,950 MW 2,555 MW (*) - December 2017 36,505 MW
Thermal (others) 34.2% Participation by Business Group
Enel Américas; Generation capacity Thermal (CC) 28.6% 12.5% Others; 24.1% Total Argentina 36,505 MW SADESA; 10.8% Enel Argentina 4,558 MW (12.5%) 36,505 MW Hydro 30.4 % AES; 8.6% National Goverment; Provinces 19.9% Goverment; 7.9% Pampa; 9.8%
FONINVEMEM; 6.4%
5
*Source CAMMESA Distribution Sector
Participation of Distributors - Distributed Energy Pampa Holding (Edenor) Enel Américas (Edesur) Rogelio Pagano (Prov. Buenos Aires (EDELAP, EDEA, EDEN, Edesur; 15% EDES) – Salta (EDESA)) Cartellone (Tucumán (EDET) y Jujuy (EJESA)) Others; 32% Mendoza ((EDEMSA) y La Rioja (EDELAR)) 132 Edenor; 20% Other private (San Luis (EDESAL – Rovella Carranza), Sgo. TWh Del Estero (EDESE-ICK), San Juan (ESJSA – CGE), Rio Negro (EDERSA – Grupo Neuss)
Salta; 2% Provincial (Córdoba, Santa Fe, Entre Ríos, Chaco, Formosa, Corrientes, Misiones, Catamarca, La Pampa, Neuquén, Chubut, Edes; 2% Santa Cruz, Tierra del Fuego, Este de Mendoza) Edelap; 3% Santa Fe; 9% roups Edea; 4% G Cooperatives Eden; 6% Cordoba; 7%
Cooperatives; Pampa Holding; 16% 18%
Demand breakdown Corporate
Provincial; 26% 13,764 m Enel Américas; • 42% Residential clients 16%
• 13% Commercial Rogelio Pagano; 11%
• 15% Small and Medium Other private; 5% Cartellone; 4% Industries Mendoza; 4% • 29% Big industries 6 Source ADEERA, Ministry of Energy and Mining Transmission Sector – SADI
Corporate Groups Available Transport Capacity and 19,532 km of trunk distribution Delivery Point LITSA (Cartellone - Others; 14% 14,192 km in 500 kV Sideco) ; 6%
Transcomahue Transener (Prov. De Río (Pampa Energía Negro); 1% -ENARSA); Distrocuyo 35% Most of the corridors are near (Grupo Galicia); 34,292 km the limit of their capacity in 4% the moments of greater Transnea (Grupo Transnoa demand Desarrollo); 4% (Grupo Transba Desarrollo); (Transener); Transpa 12% 18% (Camuzzi - Aluar); 6%
TRANSPORT SYSTEM
MAIN REGIONAL FLOWS 7 Source ADEERA, Ministry of Energy and Mining Renewable Energy Tenders
Goals Progress
• Law 27,191 establishes a phased objective so that by 2025, • The Government launched the RenovAr Program in stages non-conventional renewable energy reaches a 20% share of to boost the renewable sector and reach the first goal of 8% the demand. (2018).
Wind Solar Biomass Biogás Biogás RS PAH TOTAL Percentage of total Bidding Results [MW] [MW] [MW] [MW] [MW] [MW] [MW] energy demanded Round 1 + Guests 707 400 15 9 11 1,142 Round 1.5 765 516 1,282 Resolution 202/16 445 10 45 500 Renovar 2 666 557 117 35 13 21 1,409 Renovar 2- Phase II 328 260 26 21 634 TOTAL 2,911 1,742 203 65 13 32 4,966(*)
Average Price 54 50 111 159 129 101 [U$S/MWh] Current Situation (2016) Participation of EE.RR in the demand = 1.8% - Installed Capacity = 0.8 GW (*) additionally 816 MW of private projects of bilateral contracts are added 8
Source: Ministry of Energy and Mining Distribution - Main KPIs
SAIDI (min) SAIFI (times)
-10.2% -1.3%
1,770 6.8 6.7 1,590
2017 2018 2017 2018
9 Generation - Main KPIs
Generation (GWh) Availability (%)
+7% - 2 p.p
85% 14,825 15,826 83%
81 78 12,798 12,866 Thermo Large hydro 94 92 2,027 2,960 2017 2018 2017 2018
Cash Cost (US$ bn)
+4%
0.18 0.18
Thermo 0.16 0.17 Large hydro
0.02 0.01 2017 2018
10 Enel X ENEL X Argentina Focus
E Industries •Distributed Generation: Delivering PV Implementations for Corporations to reduce cost and achieve RE target set by law 27191 •Energy Efficiency: Efficient Lightning, Climate Management & Optimization •Energy Infrastructures Solutions
E Cities •Smart Street Lightning, enabling Security & Connectivity •Artistic Lightning, Enel X transforms light into a tool to enhance the value of architectural works •Expand City Connectivity Leveraging Distribution Company’s network
E Home •Home Services & Smart Home Solutions •Distributed Generation •Home Assistance Services
E Mobility •Private Charging Infrastructure: On Going Partnership with car Manufacturers (Renault/Nissan) •Public Charging: Developing Agreements with key oil companies (PAE/Shell)
12 Digitalization Digitalization Enel Digitalization Key Levers
Key levers for digitalization
Asset Efficiency through full digitalization of back office processes and systems
Enrich products and services Customer People
Cyber security Cloud Deepen customer relationship and information processing
Platform Enhance infrastructure performance
Driving efficiency and best in class service
14 Asset
Customer People Digitalization Cyber security Cloud Full integration of Technical Solution Map Platform Monitoring & Tele-command of AT Assets Predictive Analysis & Alerts Integration with MT SCADA Cyber Security AT Go Live: 2015
Integration with AT and BT for Automation of Processes Monitoring & Tele-command of MT Assets SCADA MT Go Live: 2016 (STM)
Integration with MT Prediction of Possible Element of Failure, optimization of dispatch & reposition time. Customer Care OMS (CERTA) Workforce Management Go Live: 2017 Go Live: 2014 - Ongoing Improvement Go Live: 2018-2019 15 Asset
Customer People Digitalization Cyber security Cloud Market & Customer Care Solution Map Platform
Salesforce for Customer Care Customer Journey for Proactive Communications, SAP IS-U for Billing & Collection Interactions with Customers & Push Notifications Smart Metering for Automation of Reading Process Salesforce & Marketing Cloud Platform for Sales & Mobile Marketing Campaigns . Workforce Management Digital Invoice and Smart Invoice for Digitalization & Automation of Invoice Process . Apps Go Live: 2017-2018 . Web Go Live: 2018
Sales Care Billing & Collection . Campaigns . Claims . Smart Metering . Call Center . Sales . Process automatation . Customer Care . Marketing . Digitalization
IoT & Analytics Big Data & Business Analytics for Fraud . Data Discovery and Process Management Automation . Data Analytics Process Automation with Smart Metering & Big Data Automation of Dunning Process
Go Live: 2018-2019 16 Asset
Customer People ENEL Platforms Cyber security Cloud
Platform
Platform Description
• Based on AWS / Salesforce / Technicolor IoT • Core system (MVP) is under implementation • IOT business solution build on top
• Unified solution to virtually integrate business data-lake Big Data • Provide a unified data model • Enabler for engineering, data science, machine learning
• A common global framework to develop tailored business process Engagement • A wide range of API services to develop on the edge services • CRM platform as a data source with apps serving as data-integration packages
• Based on SAP/ISU Billing • Common core system • Specific business process implemented on top
Meter Data • Based on open & commercial platform (Postgre, Cloudera,Jboss, Red Hat, etc.) Management • Common core system • Specific business process implemented on top
GRID • Based on open & commercial platform (Oracle WLS & DB, Q-GIS) • Common core system ERP & GRID • Specific business process implemented on top
ERP • Based on SAP/ECC on HEC • Specific business process implemented on top 17 Sustainability Strategic Pillars of ESG
Pillars of ESG of Enel Integrated to the Industrial Plan Sustainability Plan Argentina 2018 Number of projects and actions of the investment plan linked to ESG strategy in Argentina
03 actions (Ex .: Investment in the distribution network / Improvement of quality of electricity supply) 02 actions (Ex .: Construction of a 100 MW Wind Generation plant in Chubut)
11 actions / projects related to the needs and potential of the neighboring communities and to issues of each business lines 09 actions of quality of life and development of employability of our collaborators (Ex.: Sports activities, special health care for pregnant women, professional development training in annual average of 26 hours per employee)
08 projects that offer new solutions to customers and contribute to the environment (Ex.: Enel X energy efficiency products and services)
Projects of data analysis (BI) and digitization of Market processes to improve customer service and be cost efficient.
More 19 other objectives and actions of the backbones of: Occupational Health and Safety, Compliance and Governance, Environmental Sustainability, Sustainability in the Supply Chain and Creation of Economic Value Beneficiaries in Argentina by SDG | Communities Beneficiaries by Projects related to the 4 SDG in which Enel is committed
Argentina Goal Argentina Enel SpA commitments to the global SDGs 2015-17 ✔ 2018-20 ✔ Adoption of the CSV model, which articulates 0.8 m people by 2020 Quality education 4,200 10,000 the requirements of the company and the needs and capabilities of the 3 m3mn people, people, mainly mainly in Africa, in Affordable and AsiaAfrica, and Asia Latin and America Latin by 29,490 96,000 communities where we clean energy America2020 by 2020 operate. This is our way of doing business, with a Decent work and 7,540 38,000 perspective linked to the 3 m people by 2020 economic growth commitment 2030 for the Sustainable < 350 gCO2 /KWh eq by Development Goals 2020 (-25% base year Climate Action 2007) promoted by the United Nations. Total beneficiaries SDG Argentina (2015-17) = 41,230 Involvement with local communities Projects highlighted 2018 and related ODS
We are Health We are Responsible We are Recycling We are Efficient We are Recycling Non-invasive diagnosis Consumption Agreement with Energy Circular economy in the for disease prevention Workshop on efficient Garrahan Foundation Cleaner Production community. and responsible use of Contribution to your Operational efficiency Reuse of wooden coils energy for the program, Collection of program in Costanera of company technical Pilot Program in the community, schools paper, keys and bottle plant in private public operations for the Community of Piletones and institutions caps agreement. construction of furniture Mainly directed to that return to the community communities where we To generate income for Operational advantage, make quality the institution and give contribution to the investments in the an environmentally environment and supply of electricity correct destination to economic. (clients in low-income waste areas)
21 Financial Focus 1Q 2018 Results Focus on Argentina (US$ m)
Generation Distribution Total1
1Q 17 1Q 18 % 1Q 17 1Q 18 % 1Q 17 1Q 18 %
Revenues 53 83 57% 336 448 33% 389 531 36%
EBITDA 25 54 115% 46 91 100% 71 145 105% Dock Sud 846 MW Net Income -4 39 - -52 22 - -57 63 -
Costanera Capex 3 8 174% 37 31 -15% 40 39 -2% 2.210 MW
Buenos Aires Net Production 4,155 3,761 -9% - - - 4,155 3,761 -9% Edesur El Chocón (GWh) Clients: 2.5 m 1,363 MW Energy Sales 4,635 4,626 0% - - - (GWh) Hydro plant Av. Spot Price N.A. N.A. - - - - N.A. N.A. - Thermal plant ($US/MWh) Distribution clients Clients (N) - - - 2,512 2,535 1% 2,512 2,535 1%
23
1. “Total” included Holding and Services adjustments. Financial Focus Focus on Argentina (US$ bn)
Revenues EBITDA and Margin EBITDA
1.58 0.3 0.3 27% 1.15 25% 24% 0.2 21% 0.2 0.70 0.63
2015 2016 2017 1Q18 2015 2016 2017 1Q18
CAPEX
0.29
0.22 0.23
0.05
2015 2016 2017 1Q18 24 Relevant Issues Relevant Issues – Argentina
Agreement with FMI
• Largest loan provided by the IMF in history (USD 50,000 million) + UDS 5,650 million (World Bank, Inter-American Development Bank, CAF) • Repayment has a grace period of 3 years and paid in 8 quarterly installments with a variable rate depending of funds activated; • Economical target: fiscal deficit 2018 = 2,7% GDP; 2019 = 1,3% GDP; 2020 = 0% GDP inflation: 2019 = 17%; año 2020 = 9%
Devaluation effects in the electricity sector
• The reduction of subsidies to Large Customers has not yet been completed: subsidized price paid by customers is $ 1010/MWh vs unsubsidized production cost of $ 1450/MWh; • Generation costs after Peso devaluation would be $ 1941/MWh considering social tarif for 8% of demand • Distributión and transportation costs will be adjusted by inflation rate • Taking in consideration all those adjustments price to customers would increase around 58%
Status of collections and payments of Cammesa • According to june situation Cammesa only reached the 70% of the total payments due to generators; • Cammesa paid 100% of invoices only to generators with contractual commitments (PPA, Foninvemen, etc); • Payments are expected to be regular starting from next month of august 26 Relevant Issues – Argentina
Changes en government team and Central Bank of Argentina
• Mr. J. Iguasel assumed as new Ministry of Energy, role previously held by Mr J. Aranguren • Mr. D. Sica assumed as new Ministry of Production, role previously held by A. Cabrera • Change in Central Bank of Argentina: Mr. L. Caputo assumed as new President, role previously held by Mr. F. Sturzenegger
Change in MSCI clasificación of Argentina
• MSCI will reclassify the Argentina index to Emerging Market status • Opportunity to attract institutional investors and funds to invest in Argentina • BYMA expectations for 3.500 – 5.000 M US$ of new investments in Argentinean companies
27 Argentinean Regulatory Framework
Juan Carlos Blanco
Head of Regulation Enel Argentina Energy market value chain situation
Production / Generation Transport Distribution Clients
A single Gx consumes. Enabled to Price: 52% of the FO Available capacity Available capacity Carbon buy and recognizes costs.
Liquid International Price Market price Infrastructure available Market price Infrastructure available Market price
Various sources of supply, with Definition of Rates in RTI 2017-21 • Definition of Rates in RTI 2017-21 • Industrial customers can sign different prices: include committed investments contracts • National Production: Sendero Regulated capacity auction • The Gx can sign contracts • Possibility of making Firm (restriction is the recognition of Natural • GNL: 7,15 US$/MMBtu(*) CAMMESA has transport capacity. It Distribution Contracts with Cut costs) should be assigned if generators Windows Gas • Bolivia: 5,96 US$/MMBtu(*) should procure their fuel
(*) source ENARSA – Año 2018
Various sources of supply, with Definition of Rates in RTI 2017-2021 • Definition of Rates in RTI 2017-2021 different prices: • Renewables can sign contracts • Existing Units (Res.19) Extensions: system to be defined but with GUs Electric • Quality regime to comply with in principle, decided by the • Hydro and nuclear investments to be made. • CAMMESA energy provider Power Government (PPP program), in charge • Contracts with CAMMESA (PPA) of the demand.
• The Economic Emergency Law and the Dto. of Emergency Energy ended on • The production of natural gas and generation requires investments to improve 12/31/17. domestic supply. • The concession sector has practically normalized the regulation of its revenues. • Generation improved its remuneration but still does not operate under a free and competitive market. 29 Measures for existence Market
The measures do not require the approval of new laws, ONLY regulatory changes to be made by the Authority.
• Nullifying suspension term market (nullifying section 9 of Resolution 95/2013).
Product • Establish a single Term Market Electric • Cammesa stops supplying the large users. power • Hydraulic concessions expire in 2023. Expiration can be extended in exchange for a PPA at a long-term marginal price Services • New Products and Services: Charging stations, energy storage, etc.
• Cammesa should marketing any fuel (nullifying the article 8 of Resolution 95/2013). Initially, CAMMESA may remain as a provider of last resort until full liberalization. Fuel • Cammesa must transfer gas transport contracts, with current mechanisms (Open Season) that guarantee equal conditions to all market agents. • Assign contracts to supply natural gas generation by implementing transparent mechanisms.
Gas • Allow access to the regasification capacity in the terminals and must define regasification cost. International • Open the possibility for the generator to buy gas from Bolivia / Chile Operations • Start working on the regulation of plants Electricity • Release export operations 30 EDESUR
RTI 2017 – EXECUTIVE SUMMARY Res. ENRE 64/2017 Methodology PRICE CAP Wacc REAL RATE +12.46% (before taxes) Base capital NRC depreciated value 30.240 MMar$ (≈1.900 MMU$D)* Currency unit Angentinian pesos Theoretical VAD resulting 14.540 MMar$ (≈ 910 MMU$D)* Increase in 3 installments with financial recovery in 48 monthly installments as of February 2018 Adjustment VAD update (Salaries, IPIM (wholesale price index), IPC (retail price index)) Stimulus Factor Efficiency X Factor and Q Investments Penalties Quality Path with increasing the exigency
As of February 1, 2018, EDESUR receives all of the income foreseen in the RTI and the deferred VAD fees 31
* Exchange Rate 1/2/2017 VAD Evolution
RTI 2017 "Gradualism" = Staggered increase in 3 sections Average rate customer evolution [$/MWh]
3rd step RTI VAD + MMC2 - deferred 48 Factor E + 48 RTI installments installments 2nd RTI step + MMC1 RTI adjustment completed 1° Step Feb-18 RTI
32 Pressure on the tariff - Devaluation effect
Other Services • Rates of public lighting, insurance, etc • 21% Residential IVA Different legislative projects press • 27% Industrial
to the reduction of the taxes that • 10% residential 27% Provincial Tax affect the electrical service • 0,6% provincial contribution Municipal Tax • 6%
• Semiannual Adjustment (IPC, DX IPIM & CVS) REMUNERATION National • Bill of Representatives and ($Arg) 34% Senators of the Opposition GX Subsidy (u$s) (Fiscal Retrieve rates to November deficit) • Semi-annual Adjustment (IPC, • cost TX 2017 (Adjusted for inflation) IPIM & CVS) ($Arg) 2% Vetado por el Presidente • Quarterly Programming in AR $ • Seasonal Price and Supply Cost Banned by the President FUEL GX Determination in AR $
(u$s) Production Seasonal Price • Rates transfer
($Arg) 37%
33 Distributed Generation Details of the national law project
• Applicable to customers of the distributor • Net Billing Balance System (Net Billing) • Injection rate = MEM purchase price • Obligatory installation of DG in public buildings • Distributor - Technical approval of access • Obligatory bidirectional meter installation (costs charged to the User Generator) • A Fund for the execution and financing of DG projects (FODIS) is created • A specific demand charge is created to finance the FODIS • Limit power is set at the Contracted Power • Another fund is created to encourage the national manufacture of systems and supplies for distributed generation
34 Smart Meters EDESUR Capital Areas Total Smart meter installed 4872 Total installed hubs 19
Lomas de Zamora area Total Smart meter installed 1172 Zone Avellaneda-Quilmes Total installed hubs 7 Total Smart meter installed 1681 Total installed hubs 6
Training for own staff Communication and Plan contractor staff
Variety of facilities 35 Expectations of Regulation
.
Stable • The RTI established the conditions until 2022 DX • The process set the basis for future tariff revision • In view of the upcoming revision, the regulator is defining a user characterization campaign
Transition to the market • Gradual elimination of subsidies (8% vs current 18%) Gx • Renegotiation of hydro concession • Start of Fuel Oil liberalization (nov '18) • Transfer gas and transport gas contracts (2019) • Greater development of renewables
Gradual evolution • Transfer of costs to demand RETAIL • Evolution of contracts with medium-term users • development of contracts with renewable • Sale of services 36 Corporate Presentation Contact us
Rafael De La Haza Head of Investor Relations Enel Américas
Jorge Velis Investor Relations Manager Enel Américas
Itziar Letzkus Investor Relations Enel Américas Email [email protected] Javiera Rubio Investor Relations Enel Américas Phone +562 23534682 Gonzalo Juarez IR New York Office Web site www.enelamericas.com Thank you.