Santander Latin American Conference C a n c u n | J a n u a r y 2 0 1 9
Growth Opportunities & Valuation
Financial Highlights
ISA CTEEP
WHY TO INVEST AT
ISA CTEEP?
No demand risk and no default risk
Strong Cash Generation
Minimum payout of 75% (regulatory net
income)
Dividends
Reference Company for quality and O&M
Benchmark
Valuation Attractive valuation
Fitch: AAA(bra)
Investment Grade
Sustainable value
Profitability
Opportunities in grid reinforcements, greenfield projects and M&A
Growth
A successful story of growth, resilience and performance
1999 2013 2001 2012 2006 2007 2017 2016
‘000 km of transmission lines
Consolidated regulatory
EBITDA in BRL billion
0.1 0.7 1.4 1.6 0.2 0.7 1.4
11.5 12.3 15.4 17.7 18.6
Transmissão Paulista merger with EPTE
Origin from CESP spin off and creation of Transmissão Paulista
Set up of RBSE compensation
(Ordinance 120 Ministry of Mining
and Energy)
Winner bid for 3 lots in October
auction
Expansion to 17 Brazilian states through greenfield projects and acquisitions
ISA acquires CTEEP and
becomes the controlling
shareholder
Winner bid for 5 lots in April auction
Extension of Main Concession
Contract (059/2001) for 30 years
Winner bid for 2 lots in June auction
2018¹
18.6
2.3
Note: ¹ Last twelve months ending on September 30, 2018
Largest listed transmission utility in Brazil
51% IE Madeira
Revenue: BRL 497 million³
100% IENNE
Revenue: BRL 44 million
ISA CTEEP
Revenue: BRL 2.421 million
IE Serra do Japi 100%
Revenue: BRL 60 million
100% IE Pinheiros
Revenue: BRL 54 million
100% Evrecy
Revenue: BRL 7 million
100% IE Sul
Revenue: BRL 18 million
51% IE Garanhuns
Revenue: BRL 87 million³
100% IEMG
Revenue: BRL 18 million
Largest listed transmission utility in Brazil
Transmission of 24% of Brazil’s power generation
Transmission of 90% of the power load in the State of São Paulo
Benchmark player in cost and quality
18,600 km of transmission lines
126 substations
65,500 MVA of transformation capacity
IENS¹: 2.26 x 10-6
Availability Discount/Revenue: 0.68%
Regulatory Net Revenue²: BRL 2,800 million
Regulatory EBITDA²: BRL 2,300 million (margin of 84%)
Nota: ¹ Index of Non-Supplied Energy on 09/30/2018 ² Last 12 months ended on 09/30/2018 ³ Total revenue of the asset
100% IE Itaúnas
Revenue: BRL 47 million
100%² IE Biguaçú
Revenue: BRL 38 million
50% IE Paraguaçu
Revenue: BRL 107 million³
Largest listed transmission utility in Brazil
Sustainable growth
Nota: ¹ Average of last 5 revenue cycles ² ISA CTEEP’s investments in 10 projects acquired in 2016, 2017 and 2018 auctions ³ Total revenue of the project
Organic growth: capex of around
BRL 200 million/year and revenue
(RAP) of BRL 40 million/year¹
Greenfield Projects²: CapEx of BRL
2,900 million and revenue (RAP) of
BRL 448 million/year
+2,000 km of transmission lines
+8,000 MVA of transformation
capacity
50% IE Aimorés
Revenue: BRL 71 million³
50% IE Ivaí
Revenue: BRL 267 million³
100% IE Tibagi
Revenue: BRL 18 million
100% IE Itapura Lorena
Revenue: BRL 10 million
100% IE Itapura Bauru
100% IE Aguapeí
Revenue: BRL 11 million
100% IE Itaquerê
Revenue: BRL 46 million
Revenue: BRL 54 million
Tickers: TRPL3¹ and TRPL4²
Corporate Governance: Level 1 at B3
Average daily volume in 2018: BRL 27.0 million
Market cap³: BRL 11,400 million
Free Float: 77% of Brazilian investors 23% of foreign investors
ADR: “CTPTY” and “CTPZY”
Coverage of 15 institutions: 60% Buy 40% Hold
Common shares: 89.5% Preferred shares: 1.3%
ISA 35.8%
Common shares: 10.5% Preferred shares: 98.7%
Free Float 64.2%
Common shares: 9.8% Preferred shares: 51.9%
Eletrobras 35.4%
Common shares: 0.7% Preferred shares: 46.8%
Others 28.8%
Common shares: 64,484,433 Preferred shares: 100,236,393 Total: 164,720,826
CONTROLLED BY ISA FREE FLOAT OF 64%
ISA CTEEP
Notes: ¹ Common share l ² Preferred share l ³ On 12/31/2018
Shareholder Structure on 12/31/2018
Notes: ¹ Considers 2017 IFRS Results adjusted by participation l ² On 12/31/2018 | ³ ALAS20 - Sustainability Leaders Agenda 2020
Central America
Transmission Telecom
Brazil 34% of net income Transmission Telecom
Bolivia Transmission Argentina
Telecom
Peru 21% of net income
Transmission Telecom
Ecuador Telecom
Colombia 25% of net income Transmission Telecom Highway concessions Real Time Systems
Chile 18% of net income
Transmission Telecom
Highway concessions
Transmission: 77.2%
The largest energy transmission company in Colombia and Peru, with 70% of capacity in each market
2nd largest player in Chile with 18% of market share
2nd largest player in Brazil with investments in ISA CTEEP and TAESA
Highway concessions: 22.0%
Real Time Systems: 0.7%
Telecom: 0.1%
ISA CTEEP represents 31% of ISA’s¹ net income
2017 Net Income Breakdown:
Benchmark player in the sector
44,200 km of transmission lines
87,100 MVA of transformation capacity
907 km of highways
Controlled by the Colombian government (51.4% of shares)
Market Cap: USD 4,800 million²
Alas20 Award³ - Recognition in Corporate Governance
ISA INTERCONEXIÓN ELÉTRICA, S.A.E.S.P.
A multilatina company focused in transmission, telecom, highway concession and real time systems with growth opportunities in Brazil
Solid Presence in Latin America: 8 countries, 4 sectors, 40 companies
6
7
11
18
63
State Grid
Alupar
TAESA
ISA CTEEP
Eletrobras
2017 M a rk e t S h a re ( t hou s and km o f l i n e s )
T ra n s m is s io n R e v e n u e s ¹ ( 2017 /2018 c y c l e )
Total: BRL 37,000 million
IS THE PURE TRANSMISSION COMPANY IN THE SECTOR IN BRAZIL
Transmission companies are remunerated by the availability of its assets
Notes: ¹ Considers auctions held until June of 2018 | ² Interconnected National System| ³ National Electric Energy Agency | 4 National Operator of the Electric System
SIN² is composed of 135,000 km of transmission lines and serves 98% of the market
The transmission sector is regulated and monitored by ANEEL³ and coordinated and controlled by ONS4
Transmission companies are remunerated by the availability of its assets. There is no demand risk and no default risk.
38%
10% 8% 9%
31%
4%
Alupar Others Eletrobras ISA CTEEP State Grid TAESA
Source: ANEEL
STRATEGY BASED ON
Regulation
RBSE Receivables of ~BRL 9,200 million
Legal
Pension Fund Lawsuit receivables ~BRL 2,000 million
Growth
10 projects in execution with capex of ~BRL 2,900 million
Affiliates
EBITDA: BRL 400 million (87%margin)
Brownfield Projects
EBITDA: BRL 150 million (85% margin)
Operation and Maintenance
EBITDA: BRL 350 million (40% margin)
P E S S O A S
Regulação
Valor Justo
Jurídico
Gestão de Litígios
Crescimento
Disciplina de Capital
Integração
Subsidiárias
Projetos
Crescimento Orgânico
Operação e Manutenção
Eficiência, Qualidade, Segurança
SOLID & SUSTAINABLE RESULTS
Note: ¹ Regulatory results of the last 12 months ending on 09/30/2018
O&M Reinforcement Projects
RBSE Receivables
100% JV
Adjusted Net Revenue
799 179 1,619 176 258 3,031
Adjusted EBITDA
347 156 1,619 151 228 2,501
LAST 12 MONTHS¹
(BRL million)
OPERATIONAL HOLDING SUBSIDIARIES Total
Growth Opportunities & Valuation
ISA CTEEP
Financial Highlights
46.2% 51.3% 76.0% EBITDA Margin
85.3% REGULATORY RESULTS HIGHLIGHTS
STRONG CASH GENERATION BOOSTED BY RBSE
Note: ¹ Last twelve months ended on 09/30/2018
² Costs do not consider depreciation and contingencies
Net Revenue and EBITDA include only 100% owned subsidiaries. Shared control companies are accounted as equity shareholder.
NET REVENUE (BRL MILLION) O&M COSTS² (BRL MILLION)
EBITDA (BRL MILLION) NET INCOME (BRL MILLION)
143 181 82 129 220
747 675 671
694
689
2015
21 20
1,778
23 112 135
2016
172 22
2017
1,660
LTM¹
890 955
2,773
212%
180 195 20 120 157 197
747
191 199
244
246
75
2015
23
411
125 24
2016 LTM¹
148 21
2017
1,660
488
1,351
2,322
465%
404 439 472 472
15 7 19
430
2015
22 9 19
2016 2017
23 26
LTM¹
467 509 521
21%
247 246
635
2015 2016
1,075
2017 LTM¹
335%
O&M
Others
RBSE
New Investments
Subsidiaries
SOLID DEBT PROFILE WITH
Debt Amortization Schedule (BRL million) Debt Breakdown
55%
19%
26%
Local bonds - CDI/IPCA BNDES - TJLP Others - CDI
Debt Profile on 9/30/2018
Gross Debt: BRL 2,992 million
Average cost: 8.3% p.a
Average term: 3.3 years
Net Debt / Adjusted EBITDA: 0.6x
Investment Grade by Fitch: AAA(bra)
74
243 232
74 70
369
894
2025 + 2022 4Q18 2019 2020 2023 2021 2024
1,035
230 226
335
247
2016
585
2014 2018+ 2015 2017 2013
Note: ¹ The Company registered net loss due to the provision for losses related to Law 4,819/58
Strong cash generation allows higher dividends
(BRL million)
Regulatory Payout
N.A.¹ 91% 123% 108% 95%
Minimum payout of 75% of regulatory net income limited to the financial covenant of 3.0x Net Debt/EBITDA
Proceeds via interest on capital and dividends payments
BRL 1,985 million dividend payment in 2018 (BRL 12.05/share)
1,985
ISA CTEEP
Financial Highlights
Growth Opportunities & Valuation
C O N N E C T I O N S T O G E N E R A T E S U S T A I N A B L E V A L U E
Digitalization Real Estate Opportunities Energy Storage Distributed Energy Resources
Operational safety optimization with cost reduction through substation teleassistance
and substations retrofitting
Ancillary Services
NEW BUSINESSES EFFICIENCY
GROWTH OPPORTUNITIES
TO CREATE VALUE
Note: ¹ RAP based on RAP / Investment of 17.1% observed in the Auction 002/2018 l ² Source: PET/PELP, MME Study consolidating the expansion constructions
GREENFIELD PROJECTS AND GRID REINFORCEMENTS
ACQUISITIONS Always studying market opportunities
Recent acquisitions
IE Sul
Acquisition of 50% of shares from CYMI for BRL 20 million
ISA CTEEP holds 100% of IESUL as of 3Q18
IENNE
Acquisition of 50% of shares from ISOLUX and 25% of shares from CYMI for BRL 101 million
ISA CTEEP holds 100% of IENNE as of 3Q17
2027 Decennial Energy Plan
Increase of around 55,000 km of new transmission lines
Total investment in transmission of BRL 108,000 million
BRL 38,000 million in auctions
Reinforcements and improvements in the grid amount from BRL 70,000 million to BRL 110,000 million
P E S S O A S
Regulação
Valor Justo
Jurídico
Gestão de Litígios
Crescimento
Disciplina de Capital
Integração
Subsidiárias
Projetos
Crescimento Orgânico
Operação e Manutenção
Eficiência, Qualidade, Segurança
RISKS & OPPORTUNITIES
Tariff Reset
O&M, WACC & RAB
Pension Fund Lawsuit
Receivables of BRL 2,500
million
RBSE Receivables
Ke ~BRL 1,500
million
68
70
72
74
76
78
80
82
84
86
UBS
Brasil Plural
Eleven Financial
Goldman Sachs
BTG Pactual
HSBC
Santander
DOES NOT REFLECT ISA CTEEP’S CASH GENERATION
Bradesco
Itaú BBA
Credit Suisse
Merrill Lynch
Safra
JP Morgan Citi
TRPL4 TARGET PRICE (BRL/share)
63
65
67
69
71
73
75
77
79
81
83
85
Hold Buy Sell
UBS
Goldman Sachs
BTG Pactual
HSBC
Santander
Bradesco
Merrill Lynch
Safra Citi
Itaú BBA
Banco do Brasil
JP Morgan
XP
Brasil Plural
e-mail: [email protected] phone: +55 11 3138-7557
www.isacteep.com.br/ir
INVESTOR RELATIONS Rinaldo Pecchio Michelle Corda Lúcia Cesari Gabriela Bussotti Yuri Utino