A COMPROMISE THAT FLOWS ANNUAL REPORT / 2015 www.aguasandinasinversionistas.cl 2015/ Aguas Andinas Report Highlights Letter from the President 01/Our Company 02/Year 2015 03 /Corporate Governance 04 /Financial Statements DELIVERING WATER, DELIVERING LIFE Aguas Andinas manages the complete water cycle in the Santiago basin and in the Los Lagos and Los Ríos regions. Our commitment is to provide a sustainable, continuous and quality service for the generations of today and tomorrow. 2 2015/ Aguas Andinas Report Highlights Letter from the President 01/Our Company 02/Year 2015 03 /Corporate Governance 04 /Financial Statements Highlights / Chapter 01 / Chapter 02 / Chapter / 03 Chapter 04 / 2015 Milestones 5 Our Company Year 2015 Corporate Governance Financial statements 106 2015 in numbers 7 1.1 Who we are 16 2.1 2015-2020 challenges 38 3.1 Board of Directors 84 Sanitation industry tariffs 11 1.2 History 19 2.2 Aguas Andinas’ drought 39 3.2 Board of Directors’ Committee 88 1.3 Company ownership 21 management 3.3 2015 Board of Directors’ 89 Letter from the president / 12 1.4 Board of Directors 23 2.3 Transformation process 42 Committee report 1.5 Management 26 2.4 Transforming waste into resources 43 3.4 Board of Directors and Board of 93 1.6 Coverage map 28 2.5 Client service 44 Directors’ Committee remuneration 1.7 Group companies 31 2.6 Operational management 53 3.5 Managers and senior executives 94 2.7 Water cycle 61 1.8 Non-regulated companies 32 3.6 Other corporate governance 100 2.8 Aguas Andinas’s workers 1.9 Sustainable development 33 68 entities 2.9 Financial management 74 3.7 Material information 102 2.10 Main clients and suppliers 78 3.8 Sanitation regulation 2.11 Property, equipment, and insurance 79 103 3.9 Company identification 2.12 Dividend policy 80 104 2.13 Shareholder situation 81 3.10 Declaration responsability 105 3 2015/ Aguas Andinas Report Highlights Letter from the President 01/Our Company 02/Year 2015 03 /Corporate Governance 04 /Financial Statements Highlights 4 2015/ Aguas Andinas Report Highlights Letter from the President 01/Our Company 02/Year 2015 03 /Corporate Governance 04 /Financial Statements Highlights Challenging projects and big achievements that marked the 2015 beginning of a new era for the Company. Milestones Entrance into the Dow Jones Sanitation company with highest Efficient tariffs, maintained Sustainability Index Emerging value creation over time Markets and Dow Jones Aguas Andinas won in the category Highest In 2015 the new tariff period began for Aguas Sustainability Index Chile Value Creation in 2014 for the energy and utilities Andinas, which kept tariffs for clients constant in Aguas Andinas joined the Dow Jones sector in the Top 100 Ranking, prepared in 2015 real terms. Note that these values are among the Sustainability Index for Emerging Markets, making by Capital magazine and Santander Global lowest in Chile and the world. it one of three Chilean companies entering this Banking & Markets. reputed indicator in 2015. This indicator measures the performance of the top 10% of each industry. High standards of coverage Historic investment The Company also entered the Dow Jones 127 billion pesos was Aguas Group’ investment Sustainability Index Chile, the first sustainability in 2015, making it the second year with increased index of the Santiago Stock Exchange, which investment in the Company’s recent history. included only 12 companies in the country. The investment plan focused on investments in potable water production and distribution and increasing the capacity of the El Trebal-Mapocho 100% 98.7% 100% sewage treatment plant. Honorable mention in potable water sewage collection sewage ProHumana ranking treatment For the second consecutive year, Aguas Andinas was highlighted in the ProHumana ranking for corporate sustainability. In 2015, the Company went up 3 points from the previous year, landing at No. 14 (honorable mention). 5 2015/ Aguas Andinas Report Highlights Letter from the President 01/Our Company 02/Year 2015 03 /Corporate Governance 04 /Financial Statements Effective drought management The customer at the center More accessible information to Even though the Santiago Basin experienced its With the launch of the 2015-2020 Client Strategy, investors sixth consecutive year of drought, the supply of Aguas Andinas began developing major initiatives In April, the website www.aguasandinasinversionistas.cl potable water is ensured for all inhabitants of the with a focus on its clients and the city of Santiago. was launched with a modern look and easy navigation. Metropolitan Region, thanks to Aguas Andinas’ It includes financial analysis tools, all in Spanish and efficient management, investments, and a English, in order to provide more current information coordinated effort with stakeholders of the Maipo Transformations for better to its investors. River. management Because excellent service requires flexible organizations that are open to change, the Company launched a transformation plan to Hydraulic Efficiency Plan adapt the company to new corporate challenges. In order to be more efficient in the production and distribution of potable water, the Company is conducting a Hydraulic Efficiency Plan, which Avanza Project, a new relationship seeks to reduce resource losses from now until with the community 2020. Through this project of social entrepreneurship, called Advance (“Avanza”), Aguas Andinas has allowed the neighbors of El Trebal to be incorporated Labor relations into its value chain by creating shared value. After anticipated negotiations, the Company signed new collective agreements with Aguas Andinas’ and ANAM’s unions for the next three year period. 6 2015/ Aguas Andinas Report Highlights Letter from the President 01/Our Company 02/Year 2015 03 /Corporate Governance 04 /Financial Statements Financial summary (MM$) Highlights As of December 2011 2012 2013 2014 2015 2015 in numbers Potable Water Revenues 147,715 152,918 157,307 171,488 180,937 Sewage Revenues 166,504 174,839 184,299 202,001 220,706 Numbers and indicators that reflect Other Regulated Revenues 11,707 14,948 16,557 20,282 18,015 responsible and consistent management Other Nonregulated Revenues 36,842 40,181 45,716 46,963 53,739 over time. Total Revenues 362,768 382,886 403,879 440,734 473,397 Operational Result 173,230 187,194 183,828 207,521 214,232 Fiscal Year Income 111,479 121,738 116,676 119,422 129,008 Total Assets 1,469,996 1,546,225 1,577,711 1,606,472 1,691,198 Short-Term Liabilities 197,886 166,752 220,195 176,506 232,407 Long-Term liabilities 593,048 695,221 679,847 763,568 787,200 Minority Interest 64,974 62,498 61,128 55,634 54,395 Equity Attributable to Owners of the Parent Company 614,088 621,754 616,541 610,764 617,196 Operational background As of December 2011 2012 2013 2014 2015 Total Potable Water Clients 1,966,639 1,984,132 2,039,298 2,096,999 2,149,473 Total Sewage Clients 1,913,081 1,943,788 1,999,419 2,045,634 2,096,347 Total Water Billed (millions of m3) 535.5 539.2 548.9 558.6 562.2 Collection of Sewage Billed (millions of m3) 521.4 526.5 534.1 540.5 542.9 Treatment and Disposal of Sewage Billed (millions of m3) 454.2 460.4 466.9 473.7 473.7 Sewage Interconnection Billed (millions of m3) 118.9 119.6 119.1 119.3 121.8 Total Potable Water Coverage 100% 100% 100% 100% 100% Total Sewage Collection Coverage 98.80% 98.50% 98.67% 98.71% (1) Total Sewage Treatment Coverage 85.50% 100% 100% 100% 100% Total Employees 1,805 1,839 1,853 1,878 1,949 (1) Estimates by the Superintendence of Sanitation Services to be published in 2016. 7 2015/ Aguas Andinas Report Highlights Letter from the President 01/Our Company 02/Year 2015 03 /Corporate Governance 04 /Financial Statements Share performance (1) EBITDA - EBITDA Margin 350,000 100.00% 120% 90.00% 300,000 273,746 282,624 80.00% 115% 248,533 226,693 242,404 110% 250,000 70.00% 60.00% 105% 200,000 62% 63% 62% 62% 60% 50.00% 100% 150,000 40.00% 95% 100,000 30.00% 90% 20.00% 50,00 85% 10.00% 80% 0 0.00% 2011 2012 2013 2014 2015 EBITDA EBITDA Margin 1/1/2014 2/1/2014 3/1/2014 4/1/2014 5/1/2014 6/1/2014 7/1/2014 8/1/2014 9/1/2014 1/1/2015 2/1/2015 3/1/2015 4/1/2015 5/1/2015 6/1/2015 7/1/2015 8/1/2015 9/1/2015 11/1/2014 11/1/2015 10/1/2014 12/1/2014 10/1/2015 12/1/2015 AGUAS - A IPSA (1) Source: Santiago Stock Exchange, Base 100. 8 2015/ Aguas Andinas Report Highlights Letter from the President 01/Our Company 02/Year 2015 03 /Corporate Governance 04 /Financial Statements 2015 Revenue 2015 Investments 4% 4% Other Regulated Revenue Non-Regulated Activities 9% 11% Other Activities Non-Regulated Revenue 36% Sewage Treatment 10% Sewage Collection 47% Sewage 20% 38% Potable Water Potable Water Production 21% Potable Water Distribution 9 2015/ Aguas Andinas Report Highlights Letter from the President 01/Our Company 02/Year 2015 03 /Corporate Governance 04 /Financial Statements Aguas Group’s Accident Rate* Company 2013 2014 2015 Aguas Andinas S.A. 1.47 1.14 0.94 Aguas Cordillera S.A. 3.89 0.81 0.86 Aguas Manquehue S.A. 0.00 10.53 0.00 Empresa de Servicios Sanitarios de Los Lagos S.A (ESSAL) 1.34 0.34 1.56 Total 1.63 1.07 1.05 * Accident Rate: Number of accidents with time lost / Average number of workers during the period 10 2015/ Aguas Andinas Report Highlights Letter from the President 01/Our Company 02/Year 2015 03 /Corporate Governance 04 /Financial Statements Sanitation industry tariffs OECD Tariffs / Tariffs per cubic meter Chilean Tariffs / Tariffs per cubic meter (potable water and sewerage) in USD$/m3 (potable water, sewerage, and sewage treatment) in USD$/m3 .