Company Presentation 3Q 214
COLBUN AT A GLANCE Arica SING ~4, MW ~17 TWh Business Size Capacity Generation Power plants Power Generation 2 nd largest generator in Chile s Central Grid (SIC), with over 21% market share (MW) The SIC covers 75% of Chile s electricity demand 3,278 MW 48% hydro and 52% thermal 12,832 GWh in Sep.14 LTM 43% hydro and 57% thermal 16 hydro plants in 4 different basins 7 thermal plants in 4 different regions Ownership Matte Group: ~49% Angelini Group: ~1% Pension funds: ~17% and others: ~24% As of Sep. 214: Assets Equity Market Cap EBITDA US$ 6.5 billion US$ 3.5 billion US$ 4.5 billion Sep.14 LTM US$ 484 million Antofagasta Tal-Tal SIC ~14, MW ~51 TWh Santiago Chaitén Cochrane Pto. Natales Pto. Williams SEA SAM Source: CNE, December 213 2
CHILEAN POWER MARKET STRUCTURE 1 2 Electricity Market Structure Leading Player in the SIC GENERATORS Market Share 38% >15 players REGULATED CUSTOMERS UNREGULATED CUSTOMERS SPOT MARKET 21% 23% 18% DISTRIBUTION COMPANIES FREE CUSTOMERS CDEC Regulated Tender Tariffs Auctioned under the supervision of the National Energy Commission. Unregulated Tariffs Market Price: settled by both parties, generator and free customer. Spot Price /Marginal Cost The variable cost of the most expensive dispatched plant at each moment. Endesa Colbún Gener Others 3
Annual Power Generation SIC TWh GENERATION AND PRICE EVOLUTION IN CHILE S CENTRAL GRID Development based on hydro + competitive natural gas Power purchase agreements signed under fixed prices (set by regulator for distribution clients ) (+) Development based on gas turbine (diesel) (+) LNG re-gasification terminal since 29 (+) Coal- power plants New law: PPA tenders with price indexation 5 45 4 35 3 25 2 15 1 5 3 25 2 15 1 5 USD/MWh 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 Others Diesel-Fuel LNG Coal /Petcoke Gas Hydro Average SIC PPA Price Average Spot Market Price Source: CNE; CDEC; www.systep.cl 4
STEADY GROWTH OVER THE PAST DECADE 1 3,5 3,278 2 Capacity (MW) MW 3, 2,5 2, 1,5 1, 5 1,26 MW CAGR: 1% 23 24 25 26 27 28 29 21 211 212 213 3Q14 1,8 1,6 1,4 1,2 1, 8 6 4 2 USD 258 million Total Operating Revenues (MMUSD) USD 1,522 million CAGR: 18% 23 24 25 26 27 28 29 21 211 212 213 3Q14 LTM 3 4 6, Market Cap (MMUSD) USD 4,477 5, million 4, 3, 2, 1, USD 1,323 million CAGR: 12% 23 24 25 26 27 28 29 21 211 212 213 3Q14 4 35 3 25 2 15 1 5 3-year Moving Average EBITDA (MMUSD) USD 131 million USD 363 million CAGR: 1% 23 24 25 26 27 28 29 21 211 212 213 3Q14 LTM Source: Company Financial Statements; Bloomberg 5
GENERATION ASSETS 7 thermal power plants (1,689 MW) Combined Cycle Open Cycle Coal-fired NEHUENCO COMPLEX: 874 MW GAS/DIESEL Nehuenco I (368 MW) Nehuenco II (398 MW) Nehuenco III (18 MW) ACONCAGUA BASIN: 213 MW Chacabuquito (29 MW)* Blanco (6 MW) Los Quilos (39 MW)* Juncal (29 MW) * Hornitos (55 MW) Juncalito (1 MW)* 16 hydro power plants (1,589 MW) Run of the River (*NCRE mini-hydro) Reservoir CANDELARIA POWER PLANT: 27 MW GAS/DIESEL Candelaria Unit I (133 MW) Unit II (137 MW) SANTA MARIA I POWER PLANT: 342 MW COAL Santa María I (342 MW) LOS PINOS POWER PLANT: 1 MW DIESEL Los Pinos (1 MW) ANTILHUE POWER PLANT: 13 MW DIESEL Antilhue Unit I : 51 MW Unit II : 52 MW CARENA POWER PLANT: 9 MW Carena (9 MW)* MAULE BASIN: 63 MW Colbún (474 MW) Machicura (95 MW) San Ignacio (37 MW)* Chiburgo (19 MW)* San Clemente (5 MW)* LAJA BASIN: 249 MW Rucúe (178 MW) Quilleco (71 MW) BIOBÍO BASIN: 316 MW Angostura (316 MW) CHAPO LAKE: 172 MW Canutillar (172 MW) 6
GENERATION ASSETS MW 3,5 Capacity (MW) & *Estimated Generation (TWh/year) Breakdown 3,278 MW 19.5 TWh TWh 2 3, 581 4. 2,5 2, 1,5 766 342 5. 2.5 15 1 Colbún Reservoir 1, 5 1,589 8. 5 Capacity (MW) Generation (TWh/year) Hydro Coal CCGT Diesel/Gas Peaking Diesel/Gas Santa María I Coal-fired power plant *For hydro *For hydro considers considers medium-to-dry medium-to-dry hydrological hydrological conditions, conditions, for CCGT for CCGT and peakers, and peaking, estimated they are yearly estimated productions yearly (85% productions plant factor). (85% Gas plant generation factor). Gas will generation depend upon will gas depend availability. upon gas availability 7 7
INCREASINGLY EFFICIENT GENERATION MATRIX Colbún Total Production (GWh) Colbún Thermal Production Breakdown (GWh) 9% 11% 1% More Expensive 2,98 3,836 4,415 6,335 6,396 5,461 67% 43% 35% 51% 49% 52% 5,17 94% 35% 6,58 5,567 5,462 5,233 4,857 4,546 3,411 29 21 211 212 213 3Q13 3Q14 Hydro Thermal 55% 41% 4% 38% 33% 29% 6% 2% 29 21 211 212 213 3Q13 3Q14 Coal LNG/Gas Diesel Less Expensive Source: Audited consolidated financial statements. 8
INCREASINGLY BALANCED COMMERCIAL POSITION GWh 12, 1, 8, 6, 4, 2, Contractual Sales vs. Generation (GWh) 551 11,655 11,32 1,687 2,24 9,85 546 3,61 9,639 4,431 8,831 1,91 3,234 5,58 2,82 2,563 4,62 2,242 2,893 4,879 2,418 2,688 323 1,273 5,31 1,853 2,616 95 6,578 6,912 7,224 7,147 5,566 5,462 6,85 5,992 4,76 5,233 4,857 3,8 12% 1% 8% 6% 4% 2% 29 21 211 212 213 3Q14 LTM % Hydro Coal LNG Diesel Regulated Sales Unregulated Sales (Hydro+Coal+LNG)/Contractual Sales Graph Source: Colbun. Unregulated Sales 213 & 3Q14 LTM excludes sales to Codelco at Marginal Cost 9
EBITDA VS. HYDRO GENERATION EVOLUTION MMUSD 5 TWh 7 4 3 6 2 5 1 29 29 5 6 21 21 7 8 211 2119 1 212 21211 12 213 213 13 132 3Q14 LTM 14 LTM 4 EBITDA Hydro Generation 1
HIGH QUALITY CLIENTS 1 2 Unregulated Regulated Sales by Type of Costumer (%) 41% 59% Codelco (A/A+) 29% Sales Volume by Customer (%) Others 6% AngloAme rican (BBB/BBB +) 9% Saesa (Local AA) 16% Chilectra (BBB+/BB B+)* 22% CGED (Local A+) 18% 3 14, Historic Sales by Type of Costumer (GWh) 4 12, 1, 8, 6, 4, 2, 211 212 213 3Q13 3Q14 Regulated customers LTM LTM Nonregulated customers 15. 1. 5. - Average Historic Monomic Price (US$/MWh) Regulated Clients Unregulated Clients Graphs Sources: 1), 2), 3) Colbun as of Sep14 LTM. 4) Average monomic prices are calculated by dividing the total amount of sales in US$, by physical energy sales in MWh. 11
COMMERCIAL STRATEGY Maximize returns from our current and future assets Manage volatility given relevant hydro component Predictable Cash Flows 1. DEVELOPMENT COST 4, GWh OC 2. INCORPORATE INDEXATION FORMULAS IN SALE PRICES 3. DEFINE OPTIMAL PPA LEVEL 5, GWh Dual CCGT 2,5 GWh Coal 8, GWh Hydro(*) -Active Risk Management -Financial Hedges -Natural gas for certain periods (*) Under medium-to-dry hydrological conditions. For CCGT and peaking, estimated yearly productions (85% plant factor). Gas generation will depend upon gas availability 12
CHILE HAS GROWING ENERGY REQUIREMENTS In the next decade, Chile is expected to become the first developed economy (by OECD standards) in Latin America. We expect this transition to result in increased demand for power generation. The National Energy Commission projects a CAGR of electricity demand of 3.8% for Chile by year 22. MWh/person 2 18 16 14 Electricity per capita consumption 12 1 ~8.3 MWh/capita 8 6 ~3.3 MWh/capita 4 2 Source: World Bank, CNE ITD Oct-14 13
COLBUN HAS SEVERAL GROWTH OPPORTUNITIES La Mina - Hydroelectric Project 34 MW of Installed Capacity 18 GWh of expected annual generation Phase: Environmentally Approved Qualifies as NCRE Santa María II - Coal-fired Project 35 MW of Installed Capacity 2,5 GWh of expected annual generation Phase: Environmentally Approved San Pedro - Hydroelectric Project 15 MW of Installed Capacity 93 GWh of expected annual generation Phase: Existing Environmental Approval to be modified Searching for investment opportunities in the region: Special focus on assets in Colombia and Perú Country Attractiveness: Attractive business environment Positive economic perspective Well established regulatory framework Growing electricity consumption Diversification of: Geography Generation technology Access to fuel sources * Subject to securing competitive and long-term natural gas supply 14
COLBUN S CORPORATE STRATEGY Our Strategic Pillars 1. Strengthening Strengthen our organization and people Strengthen our operations Strengthen our financial position 2. Diversification and Risk Management Narrow our exposure to exogenous variables: diversified asset base (technology, fuel and location) and clients Risk-sharing mechanisms with our strategic clients and suppliers Active risk-management policy 3. Growth Identify and develop growth options to strengthen our competitive position based on efficient capacity Commercial strategy that generates long-term returns consistent with our asset base 15
OUR OPERATIONS ARE SUPPORTED BY A DEFINED CORPORATE SOCIAL RESPONSIBILITY STRATEGY EMPLOYEES INVESTORS ENVIRONMENT CLIENTS AND SUPPLIERS COMMUNITY AND SOCIETY CONTRACTORS AND PROVIDERS 16
IMPROVING RESULTS 1 2, 1,5 1, 5 Operating Revenues (US$ million) 1,696 1,333 1,49 1,159 1,24 1,522 2 5 4 3 2 1 Adj. EBITDA (US$ million) & EBITDA Mg (%) 337 331 352 287 32% 29% 25 2% 21% 15% 484 32% 5% 4% 3% 2% 1% 29 21 211 212 213 3Q14 LTM 29 21 211 212 213 3Q14 LTM % 3 4 3 Net Income (US$ million) 239 6 5 Cash Flow (US$ million) Capex EBITDA 2 116 148 4 3 1 5 29 21 211 212 213 3Q14 LTM 51 63 2 1 29 21 211 212 213 3Q14 LTM Graphs Sources: Colbún. 17.
SOLID INTEREST COVERAGE AND IMPROVING LEVERAGE 1 2 7. 6. 5. 4. 3. 2. 1.. Net Debt / EBITDA 5.9 5.2 4.1 2.4 211 212 213 3Q14 LTM 12. 1. 8. 6. 4. 2.. 1.9 Net Interest Coverage 1.4 7.8 8.3 211 212 213 3Q14 LTM 3 4 7% 6% 5% 4% 3% 2% 1% % 54% Net Liabilities / Equity 65% 63% 63% 211 212 213 3Q14 LTM 35% 3% 25% 2% 15% 1% 5% % Retained Cash Flow / Debt 24% 24% 19% 5% 211 212 213 3Q14 LTM Source: Colbún s Financial Statements 18.
A LOOK AT OUR DEBT AND LIQUIDITY 1 2 1 1, Banks Bonds 8 6 Amortization Schedule (MMUSD)* Average Maturity: 6.3 years Average Interest Rate: 5.% Local Rating Last Update Fitch Ratings A+ Jul-14 Humphreys AA- Jul-14 4 2 Avg. MMUS$ 5 for the next 3 years (*) Includes the prepayment of a MMUS$15 bank loan in Oct14 with original maturity in Jun15 14 15 16 17 18 19 2 21 22 23 24 25 26 27 28 29 International Rating Last Update Fitch Ratings BBB (Stable) Jul-14 Standard & Poors BBB- (Negative) Mar-14 3 4 5 Cash ~USD 88 million Liquidity Position Committed lines ~USD 2 million, unused, signed with local counterparties. Other sources of liquidity ~ USD 15 million in credit lines facilities, ~ USD 3 million registered domestic bonds ~ USD 1 million registered commercial papers Dividend policy 3% (minimum required by Chilean law). Debt by Currency UF 11% USD 89% Interest Rate Exposure Fixed 1% As of Sep14 19
KEY INVESTMENT HIGHLIGHTS Country: Operates in Chile, the highest-rated country in the region (Aa3/AA/A+) Size: Second-largest generation company in Chile s largest electricity grid Competitive: High-quality, diversified asset portfolio and flexible commercial policy. Stable: Diversified, solid and creditworthy customer portfolio Shareholders: Strong, reliable controlling group with a strategic and long-term vision for the business Management: Experienced management and high standards of corporate governance Projects: Strong pipeline of new projects with improving efficiency and diversification of generation sources Liquidity: Conservative financial strategy that emphasizes keeping a strong liquidity position 2