ELÉCTRICAS DEL SUR S.A.
ANNUAL REPORT
2017
2017 ANNUAL REPORT
This publication is printed on Eco-label certified paper made from 100% ECF and acid free recycled (PCW) fiber. We have also reduced the use of ink and overprint varnishes, which results in lower use of solvents in the printing process. Financial Statements are only included in the digital version of the report, which allows us to reduce paper use by 50%.
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TABLE OF CONTENTS
LETTER FROM THE CHAIR
08
SECTION ONE
SECTION TWO
Our Company
14
Financial Highlights
32
Corporate Vision
14
Risk Factors
35
About Our Company
16
Organizational Effectiveness
40
Our Shareholders
17
Material Facts
47
Ownership Structure
18
Financial Management
48
Corporate Governance
19
Corporate Social Responsibility and Sustainable
20
Development Board of Directors
22
Management
24
Executive Committee
25
Organizational Structure
26
Overview of 2017 Activities
27
SECTION THREE Industrial Economic Sector
54
Activities and Businesses
58
Subsidiaries
69
Statement of Liability
100
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LETTER FROM THE CHAIR – GRUPO SAESA
In distribution, we supply power to 842,000 customers in 112 districts and townships in the south of Chile through 60,000 km of grids and in transmission, we operate in the Atacama, Antofagasta, Los Ríos and Los Lagos regions.
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D
uring 2017, Grupo Saesa strengthened its operational results and capacity building, reaffirmed its commitment to sustainability and furthered its efforts to maintain continuous, uninterrupted power supply. Our commitment to the development of Chile’s electric power industry is evidenced by the diversity of projects we undertake. In 2017, we successfully connected ESO’s Paranal Observatory located 130 km south of Antofagasta to the National Power Grid. The project involved a US$18 million investment and construction of a 50-km long, 66 kV transmission grid and two new substations, which will not only ensure continuous power supply for ESO’s Paranal observatory and soon for Armazones observatory, but also clean energy that will allow ESO to reduce its carbon footprint. Also this year, the Pichirropulli Substation and the 71-km long, 220 kV double circuit Ciruelos-Pichirropulli transmission line were commissioned in Los Ríos Region. Developed by Eletrans, a company established by Saesa and Chilquinta, these projects that have both contributed to the strengthening of the Chilean power grid and helped meet the increase in electricity demand in the south of the country called for a total investment of US$86 million.
Honoring our environmental commitments and aware of the importance of implementing the energy of tomorrow in increasingly smarter cities, in 2017 we: Added 10 electric vehicles to our fleet –the very first ones on the roads of southern Chile; developed, jointly with Wireless, Chile’s first photovoltaic rural electrification project in Isla Huapi, on Lake Ranco basin; launched the Smart Meter replacement project that will translate into higher quality of service for a faster, more efficient power supply and a stronger grid; and started exploring the possibility to expand into the air-conditioning business. In financial terms, our Ebitda amounted to CLP 99,229 million, up by 7.74% compared to the preceding year, which clearly demonstrates the Company’s efficiency gains. This in addition to the new revenues from commissioning of the new projects implemented by the Company for a total annual investment of CLP 106,671 million, which reflect our shareholders’ efforts and commitment to the sustainable development of the power sector.
AN ONGOING COMMITMENT At Grupo Saesa, our customers are the focus of our decisions. Accordingly, the quality of the service we provide to over 842,000 increasingly demanding customers in 8 regions in the north and south of the
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country is of utmost importance. Five years ago, we took up an ambitious, permanent pruning and tree-trimming plan in which we have invested three times the amount set in tariffs. We cut and prune trees along nearly 19,000 km, we increased the number of outage and safety response crews, and we invested in new technological tools like drones and other equipment to increase the productivity of our crews. Another challenge we tackled in 2017 was optimization of our customers’ experience. To those ends, we allocated resources to improving response times, training on outage response services, and protocol improvement. Fulfillment of this objective was supported by the customer services provided by our extensive office network, contact through social media, and implementation of a user-friendly mobile app. For Grupo Saesa, people are the main link to development. Consequently, we spare no effort to strengthen the safety, training, and well-being of our over 5,000 employees and contractors. We need to grow if our goal is to succeed in developing our projects and proving equal to the challenges of the electricity industry: Only in 2017, our head count grew from 950 to 1,100 employees, and from 3,000 to 4,000 contractor staff. The need for skilled labor is so ponderous that we created the Linemen Training Program to produce new linemen apprentices. In fact, the first 70 newly trained students are al-
10
ready at work and helping us provide a better service to our customers. In the area of safety, we have had four years without a fatal accident, which makes us a benchmark in the Chilean power industry. Even so, we continue to work hard to reduce the accident rate. To do so, we are launching further actions to promote self-care. It goes without saying that we set ourselves goals that are ever more challenging; however, these goals are true to our premise that taking care of our human resources is vital to achieving our common objectives. Grupo Saesa continues to grow but without neglecting our culture, our values, and an excellent work environment. Proof of our commitment to our employees, in 2017 we climbed from place 23 to place 13 in the 2017 Great Place to Work Ranking, we made the short list for the Carlos Vial Espantoso Prize, an award presented in recognition of best workplace practices, and we were singled out by Fundación Generación Empresarial for systematically promoting ethics and best corporate practices.
REQUIREMENTS AND CHALLENGES 2017 saw extreme weather events that hit the country and put the electricity industry’s commitment to the test: Maintain continuous, uninterrupted power supply.
Last summer, the highest temperatures of the past 50 years resulted in numerous wildfires, the ravaging effect of which exceeded all statistics: Over 500,000 hectares destroyed, thousands of households affected and homes leveled. Winter, in turn, brought heavy storms and unprecedented snowfalls that affected central and southern Chile, leaving hundreds of families cut off and thousands of households without power.
of the country, with an investment of US$271 million.
In both extreme situations, all our efforts and resources were allocated to restoring power as quickly as possible. Grid reconstruction and power restoration proved strenuous, but the commitment and hard work of our team enabled us to reach our goal. Likewise, we are living an era of regulatory changes that prompts us to rethink our internal processes and our contribution to the society.
To all of you, our employees and officers, thank you for your hard work. We call upon you to step up your efforts to honor our commitment to further strengthen the power transmission industry in Chile.
Over the past few years, we have seen consistent growth in terms of projects, customers, and assets. This has only been possible because of our organizational values and culture underpinned by pillars like dialogue, care for the environment, and the promise to continue to support the growth and well-being of the communities we serve.
The announcement of a new Technical Standard that redefines the level of service required from distribution companies comes to bolster our commitment to increasing service and quality to world-class levels. Implementation of the new regulation will call for major investments, an increase in the number of employees, and introduction of new technologies. We are committed to the long haul. As the new Transmission Law was enacted, the regulator awarded 19 projects to our company that represent a total investment of US$228 million. In addition to that, we are developing other 10 projects in the north and center
IvĂĄn DĂaz-Molina Chairman of the Board
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OUR COMPANY
CORPORATE VISION
ABOUT OUR COMPANY
OUR SHAREHOLDERS
OWNERSHIP STRUCTURE
CORPORATE GOVERNANCE
CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT
BOARD OF DIRECTORS
MANAGEMENT
EXECUTIVE COMMITTEE
ORGANIZATIONAL STRUCTURE
OVERVIEW OF 2017 ACTIVITIES
San Antonio de Colo Church. Quemchi , Chiloé island, Los Lagos Region.
OUR COMPANY
CORPORATE VISION
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nversiones Eléctricas del Sur S.A. (or the “Company”) is the investee through which Canadian investment funds Ontario Teachers’ Pension Plan Board ( OTPPB) and Alberta Investment Management Corporation (AIMCo) control Grupo Saesa companies, which are mostly involved in distribution and transmission of electric power and, to a lesser extent, in generation. Grupo Saesa consists of various operating companies, including power distribution companies Sociedad Austral de Electricidad S.A. (Saesa), Empresa Eléctrica de la Frontera S.A. (Frontel), Compañía Eléctrica Osorno (Luz Osorno), and Empresa Eléctrica de Aisén S.A (Edelaysen), power transmission companies like Sistema de Transmisión del Sur S.A. (STS), Sistema de Transmisión del Centro S.A. (STC), Sistema de Transmisión del Norte S.A. (STN), Sociedad Austral de Transmisión Troncal S.A. (SATT), and Línea de Transmisión Cabo Leones S.A., a power trading company, Sociedad Generadora Austral S.A. (SGA) and a generation company, Sagesa S.A. In addition, Saesa and Chilquinta Energía S.A. are the joint owners of Eletrans S.A., Eletrans II S.A., and Eletrans III S.A., the three of them dedicated to the development of national transmission projects. Finally, limited liability companies Inversiones Grupo Saesa, Inversiones Los Ríos and Inversiones Los Lagos IV are also part of Grupo Saesa. Grupo Saesa is organized under a decentralized operational structure and centralized management, which allows the operating companies to keep their presence and proximity to customers in the various concession areas, and to facilitate the development of new business alternatives in the electric sector.
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VISION To provide a reliable source of energy and thus contribute to the well-being and development of our country. Our work is based on a commitment with our customers, protection of the environment, and development and safety of our employees. We have a longterm vision and seek to ensure the creation of value for our shareholders.
MISSION Our mission for the next five years is to consolidate our operations and to redefine our trade-related capacities based on a customer-oriented philosophy. Accordingly, by 2020 we must be recognized throughout the industry for its superior management, high product quality, and strong links with the regulator and the communities we serve.
Crew member restoring power, AraucanĂa Region.
GROWTH AND 2020 VISION Over the coming years, Grupo Saesa will significantly increase its economic value and expand its business portfolio. To those ends, the Company must strive to develop a culture of innovation and anticipate future changes in the industry.
CORPORATE VALUES
ment the following core values in its daily activities: Integrity: We do the right things. Transparency: We act truthfully and honestly. Safety: Non-negotiable. Excellence: We do things impeccably. Customer focus: The center of our operations. Efficiency: Key in our industry. Sustainability: We are responsible regarding the future.
To achieve its objectives, the Company must aim at and uphold the highest work standards and imple-
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ABOUT OUR COMPANY
CORPORATE OVERVIEW
Company Name Inversiones Eléctricas del Sur S.A. Business Name Eléctricas del Sur Tax ID No. 76.022.072-8 Legal and Business Address Isidora Goyenechea 3621 Piso 20, Las Condes, Santiago Telephone +56 2 2414 7010 – 2 2414 7500 Fax +56 2 2414 4709 Company Type Closely Held Corporation Securities Register Reg. No: 1,016 Email infoinversionistas@saesa.cl Website www.gruposaesa.cl For Investor Relations +56 64 238 5400
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INCORPORATION DOCUMENTS The Company was incorporated as a joint-stock company by means of a public deed executed on June 10, 2008, at Santiago Notary Public’s Office of Raúl Undurraga Laso, the authorized abstract of which was registered under number 17,956 on page 26,156 of the Santiago Register of Commerce of 2008 and published in the Official Gazette’s issue of June 14, 2008. A public deed dated July 31, 2008 executed at Santiago Notary Public’s Office of Raúl Undurraga Laso converted the Company into a closely-held corporation called Inversiones Eléctricas del Sur S.A., the authorized abstract of which was registered under number 26,394 on page 38,356 of the Santiago Register of Commerce of 2008 and published in the Official Gazette’s issue of August 22, 2008.
OUR SHAREHOLDERS
As set out in Title XV in Law 18,045, the Securities Market Law, Inversiones Eléctricas del Sur S.A. is controlled by Inversiones Grupo Saesa Limitada, which
owns a 99.9% equity interest in the company. As of December 31, 2017, the company has two (2) shareholders, namely:
SERIES A SHARES
SERIES B SHARES
TOTAL SHARES
TOTAL INTEREST
INVERSIONES GRUPO SAESA LTDA.
60
71,581,000
71,581,060
99.999944 %
CÓNDOR HOLDING SpA
40
40
0.000056 %
71,581,100
100 %
100
71,581,000
There were no share transactions during 2017.
OWNERSHIP AND CONTROL The Company’s shares are divided into Series “A” shares, with all the rights accorded by law to ordinary shares, and Series “B” shares, with all the rights accorded by law to ordinary shares but also with a preferential right whereby the Board of Directors shall be required to call for a Regular or Extraordinary Shareholders’ Meeting whenever 5% of the Series B shares requests so, as well as a restriction, which is that Series B shares are not entitled to participate in Board of Directors elections. Series A and B shares were issued with 100year maturities on July 31, 2008.
equity rights in the company.
JOINT AGREEMENTS
Finally, the shareholders of subsidiary SAGESA S.A. and Sistema de Transmisión del Sur S.A., a subsidiary of Sociedad Austral de Electricidad S.A., executed shareholders’ agreements on June 22, 2012, whereby restrictions on free disposal of shares by shareholders are set forth.
The partners of Inversiones Grupo Saesa Limitada, the Company’s controller, executed an agreement on July 24, 2008, whereby a number of matters are regulated, including restrictions on the transfer of
Likewise, a shareholders’ agreement executed on the same date provides certain restrictions on free disposal of shares by shareholders. Moreover, the majority shareholders of Sociedad Austral de Electricidad S.A. and Empresa Eléctrica de la Frontera S.A. also executed an agreement on the same date referred to in the preceding paragraph whereby restrictions on free disposal of shares by shareholders are laid down.
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OWNERSHIP STRUCTURE As of December 31, 2017 the Company’s ownership structure is as follows:
50%
50% 0.000056%
99.999944%
INVERSIONES ELÉCTRICAS DEL SUR S.A.
0.002746%
99.997104% 0.0027543%
0.075094%
0.0750844%
0.002896%
INVERSIONES LOS RÍOS LTDA. 0.0003551%
99.9160014%
0.074354%
99.333455%
99.924906%
FRONTEL
SAESA
INVERSIONES LOS LAGOS IV LTDA. 0.000818%
0.443947%
99.9%
99.895356%
0.10%
50%
50%
90%
99.9%
18
0.104644%
0.01%
99.456047%
STS
EDELAYSEN
LUZ OSORNO
SGA
50%
93.217324%
99.898666%
SAGESA
0.099556%
0.001334%
ELETRANS S.A.
0.10%
99.99%
ELETRANS II S.A.
STC
ELETRANS III S.A.
STN
SATT S.A.
10%
0.1%
50.1%
0.000444%
0.000006%
CABO LEONES
CORPORATE GOVERNANCE
The Company is managed by the Board of Directors, which is vested with the broadest powers conferred by Law 18,046 on Corporations and its regulations to act in the name and on behalf of the company. The Board of Directors holds regular monthly meetings during which it oversees the matters of interest to the Company that fall within its field of competence and receives the CEO’s report on the management and operations of the Company. The Board of Directors might also need to meet occasionally to conduct special business. In any case, Directors have the right to be informed at any time of all matters inherent to Company affairs. The remuneration of Directors is set by the Regular Shareholders’ Meeting on a yearly basis.
This mentality has translated into a series of instruments, company policies and training courses, including the adoption and implementation of a Crime Prevention Model and a Compliance Policy:
Shareholders meet on occasion of Regular and Extraordinary Shareholders’ Meetings. Regular Shareholders’ Meetings are held once a year, within the first four months, to discuss and decide on matters within its field of competence. Extraordinary Shareholders’ Meetings may be held at any time, when required by company needs, to decide on any matter which according to the law or the company’s bylaws are within the field of competence of the Shareholders’ Meetings.
To enforce the Model, the Board appointed a Crime Prevention Officer who is self-governing in the sense that he is not required to report to the Management, counts all the necessary resources and materials for fulfillment of his task, and reports to the Board at least on a semi-annual basis.
The Company has a Manual on Acquisition or Transfer of Shares and Management and Disclosure of Information of Interest to the Securities Market, the latest version of which was approved by the Board of Directors on January 28, 2010. The manual is available on the Company’s Website.
CRIME PREVENTION MODEL AND COMPLIANCE POLICY Grupo Saesa companies abide by values and commitments that aim to promote a corporate culture that fully complies with the applicable laws and regulations and strives to ensure that all its companies and employees shall conduct themselves ethically, transparently, honestly, and with integrity.
CRIME PREVENTION MODEL In 2011, Grupo Saesa adopted and implemented a Crime Prevention Model in all its companies. This model was developed in accordance with the guidelines under Law 20,393 on the criminal liability of legal persons for the crimes of money laundering, terrorist financing and bribery of and by local and/or foreign public officials.
Grupo Saesa’s Crime Prevention Model has been certified by rating agency Feller Rate on a yearly basis since 2014. COMPLIANCE In 2017, Grupo Saesa undertook the implementation of a compliance program aimed to ensure compliance with the law and enforce good practices within the Company. Accordingly, two highly competent executives were appointed Compliance Officer and Compliance Manager, respectively. This first stage has been devoted to understand, control and keep all legal and regulatory compliance requirements up to date, structure processes, and assess risks and compliance policies.
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CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT DIVERSITY OF THE BOARD OF DIRECTORS AGE RANGE
MEN
WOMEN
TOTAL
Under 30
-
-
-
Between 30 and 40
-
-
-
Between 41 and 50
4
1
5
Between 51 and 60
1
-
1
Between 61 and 70
1
-
1
Over 70
1
-
1
SENIORITY (YEARS)
MEN
WOMEN
TOTAL
Under 3
1
1
2
Between 3 and 6
5
-
5
Between 6 and 9
1
-
1
Between 9 and 12
-
-
-
Over 12
-
-
-
CITIZENSHIP
MEN
WOMEN
TOTAL
CHILEAN
4
-
4
FOREIGN NATIONAL
3
1
4
DIVERSITY OF THE CEO’S OFFICE AND OTHER DEPARTMENTS AGE RANGE
WOMEN
TOTAL
Under 30
-
-
-
Between 30 and 40
7
-
7
Between 41 and 50
26
5
31
Between 51 and 60
4
-
4
Between 61 and 70
6
-
6
Over 70
-
-
-
SENIORITY (YEARS)
MEN
WOMEN
TOTAL
Under 3
5
-
5
Between 3 and 6
9
-
9
Between 6 and 9
2
-
2
Between 9 and 12
3
-
3
Over 12
24
5
29
MEN
WOMEN
CHILEAN
41
5
46
FOREIGN NATIONAL
2
-
2
CITIZENSHIP
20
MEN
TOTAL
DIVERSITY OF COMPANY EMPLOYEES AGE RANGE
MEN
WOMEN
TOTAL
Under 30
140
24
164
Between 30 and 40
362
99
461
Between 41 and 50
221
57
278
Between 51 and 60
77
14
91
Between 61 and 70
24
3
27
-
1
1
Over 70
SENIORITY (YEARS)
MEN
WOMEN
TOTAL
Under 3
245
51
296
Between 3 and 6
128
32
160
Between 6 and 9
83
30
113
Between 9 and 12
82
35
117
Over 12
286
50
336
CITIZENSHIP
MEN
WOMEN
TOTAL
CHILEAN
821
197
1,018
3
1
4
FOREIGN NATIONAL
DIVERSITY SUMMARY DIVERSITY
DEPARTMENTS
BoD
AGE RANGE
MEN
WOMEN
MEN
COMPANY
TOTAL
SHARE
WOMEN
MEN
WOMEN
MEN
WOMEN
MEN
WOMEN
Under 30
-
-
-
-
140
24
140
24
13.0%
2.2%
Between 30 and 40
-
-
7
-
362
99
369
99
34.2%
9.2%
Between 41 and 50
4
1
26
5
221
57
251
63
23.3%
5.8%
Between 51 and 60
1
-
4
-
77
14
82
14
7.6%
1.3%
Between 61 and 70
1
-
6
-
24
3
31
3
2.9%
0.3%
Over 70
1
-
-
-
-
1
1
1
0.1%
0.1%
SENIORITY (YEARS)
MEN
WOMEN
MEN
WOMEN
MEN
WOMEN
MEN
WOMEN
MEN
WOMEN
Under 3
1
1
5
-
245
51
251
52
23.3%
4.8%
Between 3 and 6
5
-
9
-
128
32
142
32
13.2%
3.0%
Between 6 and 9
1
-
2
-
83
30
86
30
8.0%
2.8%
Between 9 and 12
-
-
3
-
82
35
85
35
7.9%
3.2%
Over 12
-
-
24
5
286
50
310
55
28.8%
5.1%
MEN
WOMEN
MEN
WOMEN
MEN
WOMEN
MEN
WOMEN
MEN
WOMEN
CITIZENSHIP
CHILEAN
4
-
41
5
821
197
866
202
80.3%
18.7%
FOREIGN NATIONAL
3
1
2
-
3
1
8
2
0.7%
0.2%
81.1%
18.9%
1,078 (*)
*Including BoD
GENDER PAY GAP FEMALE
MALE
ADMINISTRATIVE
114%
100%
14%
UNIT MANAGER
83%
100%
-17%
DEPARTMENT HEAD
99%
100%
-1%
N.A.
100%
N.A.
81%
100%
-19%
SUPERVISOR
N.A.
100%
N.A.
TECHNICIAN
93%
100%
-7%
OFFICER
81%
100%
-19%
JOB LEVEL
LINEMAN PROFESSIONAL
DIFFERENCE
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BOARD OF DIRECTORS OF INVERSIONES ELÉCTRICAS DEL SUR S.A. AND SUBSIDIARIES In 2017, the Board of Directors of Inversiones Eléctricas del Sur S.A. and its subsidiaries consists of eight members, excluding alternate directors. Directors serve for a term of two years and may be reelected. Over the last three years, the members of the Board have been:
CHAIR
VICE-CHAIR
DIRECTOR
DIRECTOR
Iván Díaz-Molina
Jorge Lesser García-Huidobro
Juan Ignacio Parot
Waldo Fortín
DIRECTOR
DIRECTOR
DIRECTOR
DIRECTOR
Ben Hawkins
Stacey Purcell
Christopher Powell
Dale Burgess
Civil Engineer ID No. 14.655.033-9
Master of Business Administration Foreign National
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Civil Engineer ID No. 6.443.633-3
Business Administrator Foreign National
Civil Industrial Engineer ID No. 7.011.905-6
IEngineer and B. Sc. Foreign National
Lawyer ID No. 4.556.889-K
Accountant-Auditor Foreign National
Cathedral of Copiapó. Atacama Region.
NAME
ID
PROFESSION
POSITION
DATE LAST APPOINTMENT
IVÁN DÍAZ-MOLINA
14.655.033-9
CIVIL ENGINEER
CHAIR
05-15-2017
JORGE LESSER G.
6.443.633-3
CIVIL ENGINEER
VICE-CHAIR
05-15-2017
JUAN IGNACIO PAROT B.
7.011.905-6
CIVIL INDUSTRIAL ENGINEER
DIRECTOR
04-26-2016
WALDO FORTÍN C.
4.556.889-K
LAWYER
DIRECTOR
04-26-2016
MASTER OF
DIRECTOR
04-26-2016
BEN HAWKINS
FOREIGN NATIONAL
BUSINESS ADMINISTRATION STACEY PURCELL
FOREIGN NATIONAL
BUSINESS ADMINISTRATOR
DIRECTOR
04-26-2016
CHRISTOPHER POWELL
FOREIGN NATIONAL
ENGINEER AND B. SC.
DIRECTOR
04-26-2016
DALE BURGESS
FOREIGN NATIONAL
ACCOUNTANT-AUDITOR
DIRECTOR
04-26-2016
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MANAGEMENT
Francisco Alliende Arriagada CHIEF EXECUTIVE OFFICER
Business Administrator / ID No. 6.379.874-6 Appointed on February 1, 2012
Raúl González Rojas
Charles Naylor Del Río
Civil Electrical Engineer / ID No. 7.741.108-9 Appointed on September 10, 2012
Civil Industrial Engineer / ID No. 7.667.414-0 Appointed on May 15, 2014
Víctor Vidal Villa
Marcela Ellwanger Hollstein
Civil Industrial Engineer / ID No. 9.987.057-5 Appointed on April 11, 2012
Business Administrator / ID No. 12.752.648-6 Appointed on December 10, 2013
Sebastián Sáez Rees
Marcelo Matus Castro
Lawyer / ID No. 8.955.392-K Appointed on October 1, 2007
Electrical Engineer / ID No. 11.364.868-6 Appointed on November 1, 2015
Patricio Turén Arévalo
Leonel Martínez Martínez
Civil Industrial Engineer / ID No. 7.256.279-8 Appointed on September 24, 2012
Electrical Engineer / ID No. 14.556.330-5 Appointed on March 23, 2015
Marcelo Bobadilla Morales
Patricio Velásquez Soto
Civil Electrical Engineer / ID No. 10.151.086-7 Appointed on September 1, 2009
Risk Prevention Engineer / ID No. 12.540.271-2 Appointed on October 30, 2013
Paolo Rodríguez Pinochet
Jorge Castillo Quiroz
Electrical Engineer / ID No. 13.199.851-1 Appointed on October 1, 2017
Accountant-Auditor / ID No. 7.759.917-7 Appointed on January 1, 2009
Rodrigo Miranda Díaz
Lorena Mora Sanhueza
Civil Electrical Engineer / ID No. 10.784.472-4 Appointed on September 10, 2012
Journalist / ID No. 8.750.218-K Appointed on July 1, 2012
María Dolores Labbé Daniel
Jorge Muñoz Sepúlveda
Business Administrator / ID No. 13.117.638-4 Appointed on December 10, 2013
Civil Electrical Engineer / ID No. 11.694.983-0 Appointed on September 1, 2009
CHIEF OPERATIONS OFFICER
CHIEF ADMINISTRATIVE AND FINANCIAL OFFICER
LEGAL COUNSEL
COMMERCIAL OFFICER
TRADE OFFICER
ENGINEERING AND CONSTRUCTION OFFICER
REGULATION OFFICER
HR OFFICER
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BUSINESS DEVELOPMENT OFFER
STRATEGIC PLANNING, MANAGEMENT, AND RISKS OFFICER
TRANSMISSION OPERATIONS OFFICER
OPERATIONS OFFICER
RISK PREVENTION MANAGER
INTERNAL AUDIT DIRECTOR
CORPORATE AFFAIRS MANAGER
REGULATION MANAGER
EXECUTIVE COMMITTEE
25
ORGANIZATIONAL STRUCTURE
T
he Board of Directors, the CEO and the Executive Committee hold the same positions and perform the same functions at the Company and its subsidiaries, with the exception of Línea de Transmisión Cabo Leones S.A. (Cabo Leones), the Board of which consists of parent company officers, and Sistema de Transmisión del Centro S.A. (STC), the Board of which consists of
5 members, 2 appointed by each shareholder and where STS, in its capacity of shareholder, has appointed parent company officers, and one independent director. The consortium with Chilquinta S.A. (Eletrans S.A., Eletrans II S.A., and Eletrans III S.A.) is managed by directors and officers of both groups.
BOARD OF DIRECTORS
CORPORATE OPERATIONS DEPARTMENT
AUDIT COMMITTEE
LEGAL DEPARTMENT
OPERATIONS DEPARTMENT
ADMINISTRATION AND FINANCE DEPARTMENT
TRADE DEPARTMENT
REGULATION DEPARTMENT
ENGINEERING & CONSTRUCTION DEPARTMENT
HR DEPARTMENT
COMMERCIAL DEPARTMENT
RISK PREVENTION DIVISION
STRATEGIC PLANNING, MANAGEMENT AND RISKS DEPARTMENT
TRANSMISSION OPERATIONS DEPARTMENT
CORPORATE AFFAIRS DIVISION
BUSINESS DEVELOPMENT DEPARTMENT
CHIEF EXECUTIVE OFFICER
INTERNAL AUDIT
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OVERVIEW OF 2017 ACTIVITIES
JANUARY
AUGUST
Sistema de Transmisión del Sur S.A. bought Alumini Ingeniería Ltda.’s share in Sistema de Transmisión del Norte S.A.; hence, the latter became fully owned by Grupo Saesa companies.
In the framework of the newly enacted Transmission Law, the Regulator issued Exemption Decree No. 418 whereby it commissioned the development of 14 projects to STS and 5 projects to Frontel for US$200 million and US$28 million, respectively.
MAY SATT, a subsidiary of Grupo Saesa, acquired the 220 kV Maria Elena Substation for CLP 11,500 million and executed a tolling agreement for transmission of power generated by the Maria Elena Photovoltaic Power Station. Also in May, the Company executed an EPC contract with Isotron Chile for the expansion of the said substation.
JUNE The National Electricity Coordinator (CEN) awarded the contract for the “New 2x220 kV, 2x500 MVA Nueva Maitencillo - Punta Colorada - Nueva Pan de Azúcar Line” Project to the Saesa–Chilquinta Consortium for an estimated value of US$100 million. This award led to the incorporation of Eletrans III, the company that will develop the project. Also in June, Grupo Saesa officially inaugurated the facilities of the project to provide electricity to the European Southern Observatory (ESO). The US$18 million project involved the construction of a 50-km long, 66 kV transmission system, two new substations – Paranal (220/66 kV) and Armazones (66/23 kV) – and a 25-km long distribution line.
During the same month, a US$11.9 million EPC contract for expansion of the 220 kV San Andrés Substation was executed with HMV Chile.
SEPTEMBER Grupo Saesa’s subsidiary Eletrans successfully commissioned the Ciruelos-Pichirropulli transmission line. This line connects the towns of San José de la Mariquina and Paillaco in Los Ríos Region. The project developed by the Saesa–Chilquinta ‘Eletrans’ Consortium corresponds to the second stage of a project that required a combined investment of US$86 million.
NOVEMBER The National Electricity Coordinator confirmed that the lines that connect the SIC and SING grids at Kapatur Substation had been successfully energized. Kapatur is owned by Grupo Saesa’s subsidiary STN.
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OVERVIEW OF 2017 ACTIVITIES 2016 / 2010
The Company successfully issued corporate bonds for UF 3.0 million. The issue was so successful that there was overdemand in the local market.
2016: A new transmission system consisting of the new 220 kV Kapatur Substation, which enables sectioning of the existing Angamos Laberinto Line and a new 2x220 kV line between the Kapatur and O´Higgins Substations, the latter owned by Minera Escondida (a subsidiary of BHP Billiton), was commissioned in June. This new transmission system connects Minera Escondida’s O´Higgins Substation and the new 517 MW Kelar Power Plant, in turn connected to the Kapatur Substation, to the existing SING power grid. This project was developed by Sistema de Transmisión del Norte S.A. (STN) and involved an investment of USD 70 million. In July, Grupo Saesa’s subsidiary Sagesa acquired “Línea de Transmisión Cabo Leones S.A.,” the company that owns the “110-km, 2x220 kV Cabo Leones-Maitencillo Transmission Line.” The EPC contract for expansion of the Kimal Substation was awarded to the Isotron-Sacyr consortium in October. Also in October, subsidiary Sociedad Austral de Transmisión Troncal (SATT)” acquired the San Andrés Substation. In November, the EPC contract for expansion of the trunk portion of the San Andrés Substation was awarded to HMV Ingenieros. 2015: Sociedad Austral de Transmisión Troncal S.A. (SATT) was incorporated in October. Owned 99.9% by Saesa and 0.1% by STS, SATT would develop and operate the Nueva Crucero – Encuentro Substation trunk transmission (now national transmission) project previously awarded to Saesa. In December, subsidiary Eletrans commissioned Cardones-Diego de Almagro transmission between Copiapó and Diego de Almagro in Atacama Region. This project was developed by Saesa–Chilquinta Consortium and involved investment of USD 94 million.
the line the the an
2014: Sistema de Transmisión del Norte S.A. (STN) was incorporated in September. The company will concentrate its operations in the north of Chile. Saesa and Frontel issued bonds for UF 2.0 million and UF 2.5 million, respectively, for placement in the local market. The placements are intended to raise capital to finance investments and refinance liabilities. 2013: The consortium established by subsidiary Saesa and Chilquinta incorporated Eletrans II S.A. after it was awarded two new trunk transmission projects.
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The Chiloé Project, which increased power supply to the Chiloé Island from 55 to 110 MVA, was commissioned this year. 2012: Saesa and Chilquinta (a non-Grupo Saesa company) incorporated Eletrans S.A. after the consortium they established was awarded trunk transmission projects. The Puyehue-Rupanco was officially inaugurated. 2011: Canadian investment fund Alberta Investment Management Corporation purchased the 50% interest that was owned by Morgan Stanley. 2010: A massive earthquake and a tsunami hit the country, causing serious damage. Our employees and contractors had to work hard and for a long time to restore power supply for customers from Biobío to Chiloé. In November, the Company issued bonds for UF 4.0 million to raise funds to refinance its financial liabilities, improve finance terms, reduce its cost and extend the debt repayment period.
2009 / 2000 2009: Construction of the first rural electrification project connected to the SIC grid through overhead powerlines between islands was completed. The Retail department now consist of 58 PoS in the concession area. 2008: Ontario Teachers’ Pension Plan and Morgan Stanley Investment Funds acquired all of Grupo Saesa’s share capital. 2007: Construction started on the Chiloé Project, a 220 kV transmission system between Puerto Montt and the Chiloé Island. Retail sales kicked off this year as well. 2006: Quality of service indices were successfully improved to the level required by the regulator as a result of the investments made by the company. 2002: SGA was incorporated. 2001: Copec sold its interest in Saesa and Frontel to PSEG Chile Holding S.A. Alto Baguales, Chile’s first industrial-scale wind farm, came into operation. 2000: Saesa and STS upgraded the transmission facilities that supply power to the Chiloé Island to 110 kV. Saesa purchased a further 1.56% interest in Edelaysen from Corfo, thus increasing its share to 91.67%.
1999 / 1990
1926
1999: Saesa y Frontel acquired Creo Ltda.
Sociedad Austral de Electricidad S.A. was incorporated to supply electric power to Lebu, Arauco, Carampangue and later Puerto Montt, Osorno and Valdivia.
1998: Saesa acquired 90.11% of the Edelaysen shares tendered by Corfo. Consequently, its operation area now spans over 1,500 km between regions VIII and XI. 1996: Saesa purchased Transelec’s 39.9% interest in STS and now owns 99.9% of the share capital. The remainder 0.1% was purchased by Frontel. 1994: Saesa and Transelec jointly incorporated STS. The newly created company is 60% owned by Saesa and 40% owned by Transelec.
1949 / 1940 1946: Corfo and Endesa became majority shareholders of Saesa to spur Chile’s government-led Electrification Plan.
1989 / 1970 1989: Saesa and Frontel started transmission operations with 66 kV lines and 66/23 kV substations. 1988: Corfo transferred its facilities to Edelaysen and became a majority shareholder. 1986: Corfo, Edelaysen and Endesa kicked off construction of mini-hydropower plants and transmission lines along Carretera Austral highway. 1982: Saesa acquired 70% of Frontel’s equity capital from Copec. Frontel thus became Saesa’s subsidiary. 1981: Edelaysen was incorporated as a subsidiary of Endesa. The company would later become a joint stock company. 1980: Copec became the majority shareholder of Saesa and Frontel.
1969 / 1960 1960: A severe earthquake damaged over 70% of the grids and substations in Valdivia and Puerto Montt, as well as power facilities in the Osorno area. The company put all its crews and resources to work on restoring power.
1959 / 1950 1957: Endesa transformed Frontel into a joint stock company where it owns an 83.7% interest. 1956: Frontel started its power distribution activities as Endesa’s subsidiary, supplying the provinces of Concepción, Ñuble, Arauco, Biobío, Malleco, and Cautín. Laying of first power lines.
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FINANCIAL HIGHLIGHTS
RISK FACTORS
ORGANIZATIONAL EFFECTIVENESS
MATERIAL FACTS
FINANCIAL MANAGEMENT
Waterway Market. Valdivia. Los RÃos Region.
ELÉCTRICAS DEL SUR FINANCIAL HIGHLIGHTS
OPERATING FIGURES
FINANCIAL BACKGROUND 2017
CONSOLIDATED (CLP million)
518,007
Revenues
Gross Margin
Profit
478,596
177,818 24,312 19,483
1,261,449 1,159,049
3,426 3,348
842 817
1,070 973
Installed MVA (HV/MV)
2,639 1,028
Installed MVA (MV/LV)
840,061
987 953
742,012
421,388
HV lines (km)
417,037
106,671
Investments
32
Energy Sales (GWh)
Employees
Liabilities
EBITDA
2017
CONSOLIDATED
Customers (thousands)
205,520
Assets
Equity
2016
105,258
99,229 92,098
1,935 1,631
34,556
MV lines (km)
LV lines (km)
34,484
25,003 24,815
2016
CUSTOMERS
(in thousands)
SAESA
FRONTEL
EDELAYSEN
ENERGY SALES SAESA
LUZ OSORNO
(in GWh) FRONTEL
EDELAYSEN
LUZ OSORNO
900 800
4,000
3.27% CAGR*
700
4.29% CAGR*
3,500
600
3,000
500
2,500
400
2,000
300
1,500
200
1,000
100
500 0
0 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
*Compound Annual Growth Rate
*Compound Annual Growth Rate
INVESTMENTS
(CLP million)
SAESA AND SUBSIDIARIES
03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
FRONTEL
EBITDA
(CLP million)
SAGESA AND SUBSIDIARY
105,000 120,000 90,000
110,000 100,000 90,000
12.77% CAGR*
80,000
75,000
7.89% CAGR*
60,000
70,000 60,000
45,000
50,000 40,000
30,000
30,000 20,000
15,000
10,000 0
0 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
*Compound Annual Growth Rate
03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
*Compound Annual Growth Rate
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LOCAL RATINGS
GENERATION
RATING AGENCY
AA-
ICR / FELLER RATE
SAGESA
SAESA
AA+
ICR / FELLER RATE
Diesel
FRONTEL
AA+
ICR / FELLER RATE
ELÉCTRICAS DEL SUR
NUMBER OF POWER PLANTS
MW
BONDS
Gas/ Diesel
45.7
1
119.6
70
3.8
1
EDELAYSEN Wind Hydropower
24.6
7
Diesel
39.9
19
233.63
98
TOTAL
SAFETY INDICATORS FREQUENCY
SEVERITY
82%
2010
34
2011
2012
2013
2014
2015
2016
66%
2017
2010
2011
2012
2013
2014
2015
2016
2017
RISK FACTORS
T
he risk management strategy aims to protect the Company, its employees and its environment against situations that may impact them negatively. Risk management is orchestrated by the Company’s senior management and materializes both at a general level and at the individual level of each participating sector, considering the special characteristics of each one. To achieve the objectives, the financial risk management strategy seeks to hedge all significant exposures, provided there is an availability of suitable instruments and the cost is reasonable.
operate in compliance with the regulations in force. The foregoing considers facilities and an efficiently-sized organization to provide rated services.
The main risks the Company and its subsidiaries are exposed to are addressed below (supplemented by Note 4. To Financial Statements “Risk Management Policy” and section V in the Company’s Risk Analysis):
The electricity sector is governed by regulations in effect since 1982 and applicable to key industry aspects including tariffs, capacity of the companies to supply their customers, and quality of service, among others.
REGULATORY RISK The electricity market is a regulated sector. Rate cases regulate the energy distribution, transmission and transformation tariffs, as well as generation of medium-voltage grids like those served by subsidiary Edelaysen. Through the aforementioned rate cases, the Regulator sets tariffs based on product and operation quality standards as well as rights and obligations that are essential for provision of these services. The Regulator seeks to achieve optimal operation and investment in each grid based on tariffs ensuring recovery of the initial investment and coverage of the costs necessary to
The risk in this area is mostly associated to changes that the Regulator may initiate regarding Regulation and on occasion of each rate case, which could potentially affect the Company’s revenues. Accordingly, the main components of this risk are as follows:
A. CHANG ATIONS
To date, various amendments have been introduced to electric power regulations (See Note No. 3, item 3.4 Regulatory Framework of Financial Statements). In general, changes to the aforementioned regulatory framework may result in a risk for the Company and the power industry as those changes may affect operating aspects, the company’s margins and profits, and other key aspects. The Company is regularly monitoring potential regulatory changes to implement the necessary mitigation actions on a timely basis.
B. SETTING OF GENERATION TARIFFS At present, a generation company can play various ro-
35
les, both exclusively or simultaneously, regarding sales of the electricity produced by a power plant. On the one hand, it can act solely as a generator, that is to say, the company will sell all the energy produced by the power plant in the spot market; or as a generator-trader, in which capacity the company may execute supply agreements with customers not subject to tariff regulation, or it can also participate in electricity supply tenders for regulated customers called by the National Energy Commission. The energy sold in the spot market is priced at its hourly marginal cost in the busbar where the energy is injected, which for these purposes is calculated by the Toll Division of the Coordinator based on the variable costs of the units that were dispatched in the system to economically and safely meet its hourly demand. Power is priced according to the prices calculated by the National Energy Commission during rate cases conducted every six months. On the other hand, if the generation company has also executed supply agreements, it must buy the energy necessary to fulfill its agreements with the trader in the marginal market. The trader, in turn, will supply the energy to its customers at the price set in the said bilateral supply agreements. At present, subsidiary Sagesa S.A. is focused on selling the energy it produces to subsidiary SGA, which in turn sells it in the spot market in the Central Interconnected System Grid. In addition to the power purchased from Sagesa S.A., SGA sells energy purchased from other grid generation companies with which it holds purchase agreements. For medium-voltage grids, generation tariffs are set every four years based on the average efficient generation costs of the relevant zone and according to
36
a mandatory expansion work plan. The tariffs set are made part of the total tariff charged to end customers. The new tariffs applicable to medium-voltage grids between November 2014 and October 2018 were published in 2015.
C. SETTING OF DISTRIBUTION TARIFFS Power distribution tariffs (or Distribution Added Value – DAV / Valor Agregado de Distribución – VAD) are set every four years. The new tariff formula decree was published on August 24, 2017. This decree will be in force between November 2016 (retroactively) and October 2020. These tariffs are fixed and adjusted every year based on a scale economy factor (recognizing the efficiencies occurring at every company as a consequence of increased sales) and an indexation formula that considers monthly variations of the local inflation rate (IPC), the inflation rate in the U.S. (CPI) and the exchange rate. The new tariffs caused the Company’s revenues from regular activities to increase by roughly 1.0% in 2017 (compared to the revenues over the same period but without tariff changes). As to the rate case for electric power supply related services (SSAA) carried out every 4 years as part of the DAV rate case, new tariffs are expected for 2018, which should be informed through publication of the relevant decree. The decree corresponding to the previous rate case, published on March 14, 2014 is still in effect. The new technical standard on QoS in Distribution, which provides higher standards for the duration and frequency of power outages, higher commercial quality, and higher product and metering and monitoring
system quality levels, was published in 2017. Nevertheless, most of the aforementioned standards will be required once their implementation cost is reflected in distribution tariffs. A new rate case should take place in 2018, whereby companies should be able to finance these new requirements.
started in late 2016 and the related tariff decree is expected to be promulgated in early 2018. This law also provides a 4-year review period for assessment of the value of facilities classified as Zonal Distribution, applicable from 2020 onwards.
The risks related to the regulation of the Distribution business are permanently monitored for any changes the Regulator may introduce during each new tariff cycle in order to safeguard the assets and business profitability of the Company and its subsidiaries. To that end, the Company may turn to any of the entities identified in the current Regulation, i.e., it can submit its observations to the National Energy Commission (CNE) or its discrepancies to the Honorable Panel of Experts or the Office of the Comptroller General of the Republic, as the case may be.
E. SETTING OF NATIONAL TRANSMISSION TARIFFS (FORMERLY REFERRED TO AS TRUNK TRANSMISSION)
D. SETTING OF ZONAL TRANSMISSION TARIFFS (FORMERLY REFERRED TO AS SUB-TRANSMISSION) Pursuant to the current laws, the yearly tariff to be charged by Zonal Transmission grids must be set every four years, with two years of difference from DAV calculation. Law 20,805 enacted in 2015 extended the application of Executive Order No.14 that set the zonal transmission tariffs for the period comprised between 2011 and 2014 until December 31, 2015. Subsequently, Law 20,936 further extended the validity of EO No. 14 until December 31, 2017. In addition, the same law set forth a new regulatory framework for Transmission, mostly Zonal Transmission. In particular, the law laid down a new tariff structure for 2018-2019 that will allow the value of the existing facilities to be assessed. The calculation process
Law 20,936 renamed Trunk Transmission as National Transmission, maintained the valuation of the facilities recognized under Executive Order No. 23T, and laid down new mechanisms to establish transmission expansion plans and their valuation before they are transferred to end customer tariffs. The National Transmission tariff to be charged by facilities built as part of bidding processes required by Expansion Plans set by the Regulator will be set for a period of 20 years since commissioning, based on the price offered by bidders, while for all other existing facilities or after the aforementioned 20-year period, the tariff will be set every 4 years through a rate case, the first of which will set tariffs for 2020-2023. In the framework of the last national transmission rate case and once the 4-year Study (2016-2019) had been completed in early 2015 and the Executive Order No. 23T of 2016 (EO 23T) had been published, a change was made in the qualification of transmission facilities owned by Saesa and Sistema de TransmisiĂłn del Sur S.A. (STS), a subsidiary of Saesa, whereby the 220kV facilities enabling feeding from the Puerto Montt substation as far as the ChiloĂŠ substation were reclassified as National Transmission facilities. The risks related to the regulation of the National and Zonal Transmission business are permanently monitored for any changes the Authorities may introduce
37
during each new rate case in order to safeguard the Company’s assets and the profitability of the business. To that end, the Company may turn to any of the entities identified in the current Regulation, that is, the CNE, the Honorable Panel of Experts or the Office of the Comptroller General of the Republic, as the case may be.
B. ENERGY SUPPLY The security of energy supply for the entire Sistema Eléctrico Nacional–SEN Grid during future years could be affected by prolonged outages at thermal power plants and/or gas supply problems and/or drought or energy transmission constraints or delay in construction of generation projects. Nevertheless, these risks are mitigated because:
RISK INHERENT TO POWER SUPPLY AGREEMENTS A. AGREEMENTS TO SUPPLY REGULATED CUSTOMERS Electric power distribution companies are required to operate based on energy supply agreements awarded by means of bidding processes to supply their regulated customers for at least the following five (5) years. At present, supply is the matter of agreements executed as a result of the latest electricity supply bidding processes carried out jointly by distribution companies based on the Contract Documents published by CNE. It should be noted that the bankruptcy of a supplier does not jeopardize power and energy supply to regulated customers as a result of the legal changes introduced by Law 20,805 of 2015 that allow surplus energy to be transferred among distribution companies. After enactment of Law 20,085, during the first quarter of the year CNE requests all distribution companies to submit their regulated customer demand projections. Based on such information, as well as an adjusted projection by the Commission, the Regulator issues a Bidding Process Report on the overall requirements in terms of electricity supply. With that information, CNE launched bidding process 2017/01 (January 2024 – December 2043), which was awarded in October 2017 for 100% of the tendered energy. The latest results of the tenders for the supply of distribution companies have supported the development of new projects, including the development of renewable energy projects that will allow the future requirements of regulated customers to be met.
38
- Legislative changes fostered incentives to investments in electric power generation and transmission. - The regulator increased the available energy matrix through tenders for energy supply and transmission work. Still, the Company makes estimations for a deficit supply scenario in order to plan possible actions (agreements between distribution companies, reports to generation companies and authorizations from CNE) to transfer energy surpluses available at distribution companies or to include new requirements in forthcoming bidding processes.
FINANCIAL RISK Management of the financial risks of the Company and its subsidiaries is aimed to ensure that operating cash flows and financial liabilities are balanced. The Company and its subsidiaries’ cash flows, mostly generated by their interest in the electricity business, have a highly stable, long-term profile. Note 4. To Financial Statements “Risk Management Policy” specifies the financial risks inherent to financing, financial assets, return on investment time frames, and the cost and variability of funds, i.e., credit risk, liquidity risk, and market risk.
High Voltage Tower, Atacama Desert. Antofagasta Region.
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ORGANIZATIONAL EFFECTIVENESS
OPERATIONAL EXCELLENCE In the area of quality of service, 2017 proved to be an extremely challenging year for the power industry as a result of unusual extreme weather-related events of great intensity, long duration and geographical spread that affected mostly the south of Chile, which is precisely Grupo Saesa’s area of operation. Consequently, quality of service indices, specifically the average outage duration by customer measured by SAIDI (System Average Interruption Duration Index by Customer) and their frequency, measured by SAIFI (System Average Interruption Frequency Index) rose compared to last year, driven by an increase in the number of outages and customers without electricity.
SUSTAINABILITY Our mission is to provide a reliable source of energy and thus contribute to the well-being and development of our country. We have, therefore, a standing commitment to improving the quality of service. Likewise, we are aware that to meet that objective we must abide by principles of sustainable management, maintain a friendly, respectful relationship with the community, and a strong focus on environmental sustainability. Our Company is continuously taking initiatives that have advanced a growing “rapprochement” with the communities in the 8 regions in which Grupo Saesa operates. SOMOS VECINOS (WE ARE NEIGHBORS) PROGRAM: During 2017, this program was implemented in 109 of the 112 districts in Grupo Saesa’s area of operation through working groups organized with neighborhood leaders to provide the community with training and information on energy efficiency and solutions to issues like authorizations for pruning or trimming of trees near power lines or the need to increase the power supplied to a particular sector. This program has provided a space for meeting and dialogue with the community that has fostered progress and bene-
40
fits for all the participants. To support this effort, seven Community Relations Coordinators – a newly created position to further strengthen the relationship with the community that reports to the Head of Customer Service – were appointed in 2017. COMMUNITY CENTER CONNECTION PROGRAM: This program fully financed by the Company provides free-of-charge connection and power supply to community centers. Since its launch in 2013, 81 local community centers have been connected and supplied power under this program. Today, over 4,000 households can make use of facilities where the community can meet and enjoy a range of sports, cultural, and recreation activities. 20 new community centers were connected in 2017. A LA ESCUELA CON ENERGÍA (TO SCHOOL WITH ENERGY) CAMPAIGN: This social action campaign distributes school materials and audiovisual equipment to schools in rural communities. In 2017, 54 schools and a total of 4,300 children benefited from this campaign. Since its launch in 2011, this campaign has reached a total of 200 schools. In addition, an Energy Efficiency Contest was carried out this year to promote energy savings at beneficiary schools, in which schools competed for lowering their consumption compared to the previous year along a 5-month period. Participating schools also received energy savings tips during the contest period. The contest had 46 entrants and 5 winners: Escuela 3 Sauces from Cañete; Escuela Rural Pellinada from Pto. Octay; Escuela Las Campanas de Aldachildo from Puqueldón; Escuela San Andrés from Tegualda, Fresia, and Escuela Arnoldo Bilbao from Pelchuquín, which reduced their power consumption by 24%, on average. TECHNICAL SCHOOLS WITH ELECTRICITY SPECIALIZATION PROGRAM: This education-oriented program supports training on electricity for junior and senior-year students of tech-
nical high schools in Grupo Saesa’s area of operation. The program includes classes and hands-on training, personal protection equipment, and implementation of a training yard in the school, as well as visits to substations, capacity-building and job shadowing activities, and internships offered to advanced students. 350 students from 9 technical high schools participated in this program in 2017 and 23 students were chosen for an internship at Grupo Saesa. ENVIRONMENT:
and are deeply motivated to be part of a friendly work environment where they have opportunities to grow, that promotes good labor relations, and enhances the quality of life of its workers. This culture has strengthened over time. This is evidenced by the results obtained by the Company in the Work Environment Survey and Great Place to Work ranking. We are proud to report that according to the Work Environment Survey, employee satisfaction is as high as 87% and that we are ranked 13th among the Great Places to Work in Chile.
Household Battery Stewardship Program “RecoPila” is a greener solution for disposal of household batteries in an environmentally-friendly way implemented by Grupo Saesa in La Araucanía, Los Ríos and Aysén regions and several municipalities from the Bío Bío to the Los Lagos regions. As part of the activities carried out in 2017, 12.1 tons of used batteries were collected from elementary and high schools, and numerous collection points at Saesa’s bill payment centers, city halls and municipal libraries, raising the battery management and disposal rate by 92% compared to 2016.
Moreover, for the first time Grupo Saesa was an entrant for the Carlos Vial Espantoso Award for best workplace practices presented by the namesake foundation and was one of the 8 companies shortlisted. This also reflects our ongoing efforts to build collaborative working relationships with our employees, workers’ unions, health & safety committees, etc.
As to the Company environmental agenda, the tree trimming and pruning activities along power lines to ensure uninterrupted supply and clearing of the utility strip in preparation for construction of new grids prompted the company to develop a replanting program of tree species that had been affected by these projects. Accordingly, 68 hectares were replanted with native species and over 14 hectares of woods were reforested, with total of 113,000 and 23,000 tree species planted, respectively.
Maintaining a good work environment and promoting work/life balance is a top priority for Grupo Saesa. This is why the Company has put together the “Saesa Activo” (Active Saesa) program that consists of activities that pursue this objective, including “Our kids come to work with us,” special celebrations and the Christmas party for the children of our employees. Likewise, initiatives to promote work/life balance are developed, like Puntos Sonrisas (Smile Points) aimed to ensure that people will have spare time to enjoy special moments with their families or to pursue their personal interests and “Trabajo Flexible” (Flexible Work) to offer employees the chance to work one day from home. The “Healthy Life” pilot program was launched in 2017 and consisted of a series of sports, health, and leisure activities in which 200 employees participated.
OUR PEOPLE, A SHARED VALUE ORGANIZATIONAL CULTURE AND WORK ENVIRONMENT Promoting an organizational culture that is consistent with its business strategy is one of the continuing challenges faced by Grupo Saesa. This involves fostering high-performance teams who strive for excellence, work efficiently and safely, have a customer focus,
The excellent results obtained in 2017 are also a reflection of the various actions implemented with the Human Resources department in line with the strategic challenges of our business.
HUMAN RESOURCES DEVELOPMENT: As part of its professional development agenda, Grupo Saesa delivered 155,000 hours of training to over 2,100 employees and contractor staff in 2017. Training
41
topics included technical skills, safety, customer focus, leadership and management, electricity market diploma, linemen training, Crece program for graduate and post-graduate diplomas for our professionals, etc. The “Linemen Training Program” was offered for second consecutive year to young people seeking training and subsequent employment. It should be noted that the “Linemen Training Program” earned our Company the Award for Best Practices in the Human and Organizational Factors category presented jointly by Cámara Chilena de la Construcción (Chilean Chamber of Construction) and Mutual de Seguridad (Occupational Health Agency). 170 companies participated in this competition. In its two years of existence, this program has offered 6 training courses in different locations in Grupo Saesa’s area of operation with almost 84 graduates, 80% of which are currently working for our contractors. The Linemen Training Program is part of Grupo Saesa’s efforts to support the development of our contractors, our main partners in business. Among the activities carried out under the contractor development program are a work environment survey, training courses on leadership and supervision, and Supplier Development Programs aimed to improve business and quality management standards, among other aspects. Among the highlights of 2017 are three Working Sessions with Contractors during which Grupo Saesa’s senior management presented our Company’s challenges and vision of the future to the owners and managers of contractor companies. Grupo Saesa believes that lifelong learning from the perspective of how things are done on a daily basis is a critical factor for the development of our team. Accordingly, a new performance assessment, reward and recognition model was implemented in 2017 to fulfill the aforementioned goal, evaluate new skills, and introduce major changes into the assessment and feedback methodology. Consequently, the entire personnel was trained through 56 workshops held in all of our operation area. Since leaders play a key role in mobilizing their teams toward meeting our business objectives, in 2017 Grupo Saesa disseminated its Leadership Role statement throughout the Company. This statement is a simple, clearly stated definition in line with our business
42
challenges and organizational culture of what Grupo Saesa expects from its leaders that promotes actions consistent with that common understanding. Certainly, this statement was supported by training sessions to company leaders (230 employees and 10,088 total training hours). With very good results for our team in 2017, the Human Resources department continues to actively pursue a motivating work environment everybody can feel proud of.
WE TAKE CARE OF OUR PEOPLE People are Grupo Saesa’s most valuable asset, for their knowledge, skills, and hard work help us every day to become a better company. As the cornerstone of each of the activities they perform, the health and safety of our employees is a top priority and ‘non-negotiable’ at Grupo Saesa. Safety is a value, an ongoing effort, and a culture that must be maintained over time by everyone in the company. To maintain a healthy and safe work environment, Grupo Saesa ensures good labor, environmental, social, and relational conditions for all employees, which directly translates into better results in terms of safety and efficiency of each process. During 2017, activities focused on five great pillars upon which these behaviors are built: AWARENESS-BUILDING: - One-day awareness-raising events. - Visible health and safety leadership training course for officers. - Critical focus workshop. COMMITMENT: - Walk for Safety. - One-day meetings to review safety results.
RAPPROCHEMENT: - Safety at Work Fair. - Extended one-day meetings of Health and Safety Committees. CULTURE: - Cultural one-day activities including stage performances. - “Estoy Seguro”(I am safe) safety culture positioning campaign. - Linemen Training Program” model. WORK CONDITIONS: - Audits to contractor companies and regulatory compliance. - Development and implementation of standards on safety equipment, infrastructure and vehicles.
commissioning of the substation. PARANAL – ARMAZONES PROJECT (II REGION) The Paranal – Armazones Project was commissioned in June 2017. The project consisted of building the Paranal substation north of Paposo, in the Antofagasta Region and the new 49-km, 1x66 kV Paposo – Paranal line. In addition, the Paposo Substation was retrofitted to enable connection to the transmission line. The project also included all the civil works and tasks required for execution and commissioning, including upgrading protection and control systems, and connections. 110 kV MANTILHUE SUBSTATION PROJECT (XIV REGION)
Finally, our efforts have allowed us to meet with ample margins the safety challenges over the past few years, with excelling results in the electricity industry. The commitment and perseverance of our more than 4,300 employees and contractor staff have helped us build the safety culture we enjoy today. Geographical spread has not prevented us from reaching our goals, but rather encouraged our team to work as hard and indefatigably as ever along the entire country, from Antofagasta to Aysén. We are proud for what we have accomplished and we are ready to go for more to ensure even greater safety in the coming years.
The new Mantilhue Substation was commissioned in June 2017. This Project consisted of building one 110 kV busbar with two sections and room for a third one, two 110 kV line sections, one section for interconnection with existing facilities (only disconnect switch), 110 kV busbar potential section, common facilities like control room, grounding system, power supply related services, and ducts. This project is part of the works required to connect the HV Casualidad – Licán line to the 110 kV HV bay of the current Licán Substation to distribute the power generated by the power plants in the Casualidad area.
MAJOR WORKS
NEW 30-MVA, 66/23 kV TRANSFORMER AT OSORNO SUBSTATION (X REGION)
NEW 5-MVA, 66/13.2 kV SANTA BÁRBARA SUBSTATION (VIII REGION)
The new transformer of Osorno Substation was commissioned in July 2017.
The new Santa Bárbara Substation was commissioned in May 2017. This project consisted of building the new substation, which connected to a the 1x66 kV Duqueco – Faenas Pangue branch line, installing a new 5-MVA, 66/13.2 kV transformer, and building the corresponding bays and HV and LV sections for connection to the transformer. The project also included all the civil works and tasks required for execution and
This project involved installation of a new 30-MVA, 66/23 kV transformer at the Osorno Substation, construction of a new 23 kV busbar, modification of one portion the current 13.2 kV busbar, and construction of the connection sections to the corresponding HV double busbar system and MV single busbar. The project also included all the civil works and tasks required for execution and commissioning, including upgra-
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ding protection and control systems, and connections. INSTALLATION OF 2x1.8-MVA, 23 kV CAPACITOR BANK AT 110/23 kV QUELLÓN SUBSTATION (X REGION) Commissioned in July 2017, this project was aimed to improve the quality of service to customers in Quellón and neighboring areas. The project involved installation of a 2x1.8-MVAR, 23 kV static capacitor bank installed in an open yard configuration that required completing the section with a 23 kV busbar. CHANGE OF VOLTAGE LEVEL OF PICARTE SUBSTATION 13.2 kV BUSBAR Commissioned in July 2017, this project was aimed to release load from the T2 transformer at Picarte Substation because it was operating at nearly full nominal power and could not take in a 23 kV distribution load flow. To those ends, the 13.2 kV busbar was set to operate at 23 kV. By adapting the voltage of the T1 transformer, the substation now counts on two 30MVA, 66/23 kV transformers to transfer load and support the distribution grid at substation level and has the necessary power to support further growth in the Valdivia zone served by this substation. 2x220 kV CABO LEONES-MAITENCILLO TRANSMISSION LINE PROJECT (III REGION) The 2x220 kV Cabo Leones-Maitencillo transmission line that will convey the power generated by wind farms Cabo Leones I (2018) and Cabo Leones II & III (to be built) was commissioned in December 2017. The 110-km double circuit transmission line consists of 249 metal structures and over 60 km of access roads, and connects to the Maitencillo Substation through an underground cable in two GIS positions in SF6 in a double busbar-transfer bar arrangement situated at the existing GIS building, also built as part of this project. In addition, a separate telecommunications yard was built on a location adjacent to the Maitencillo Substation. Construction took 15 months, approximately.
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RURAL ELECTRIFICATION Grupo Saesa prides itself for its permanent commitment to the development and well-being of the communities where it operates. Rural Electrification Projects are a proof of it, as the company joins efforts with the 3-player partnership of the Government, the Society and the Beneficiaries to supply electricity to the most remote locations, including mountains, islands or archipelagos situated in different areas from the Bío Bío to Los Lagos regions. The distribution lines and in-house installation work for 59 Rural Electrification Projects in remote areas of 27 districts of the Bío Bío, La Araucanía, Los Ríos and Los Lagos regions were completed in 2017. Completion and commissioning of these projects has allowed 2,610 households from rural areas to have power supply. It should be noted that these projects involve 278 km of MV lines, 208 km of LV lines on individual poles, 61 km of LV lines on common poles, and 705 5-kVA to 15-kVA distribution transformers. In 2017, 61 new projects were signed for 29 townships of the Bío Bío and Los Lagos regions, which are currently at the engineering and construction stages.
BUSINESS MANAGEMENT Grupo Saesa’s business activity this year focused primarily on two major aspects: customer relations and development of new products and services. At the same time, we continued to improve internal processes to minimize the impact of power outages or disruption of supply, manage the information of those events and meet the requirements of empowered customers in an industry undergoing fast technological changes as a result of the emergence of Non-Conventional Renewable Energies (NCRE), energy efficiency, and smart metering. CUSTOMER FOCUS Customer relations are one of Grupo Saesa’s core strategies to create value propositions and thus meet
each customer’s interests and expectations. Accordingly, the business customer segmentation process launched in 2017 was based on five value-added action areas: 1. Individual or territorial outage or supply disruption response services. 2. The billing cycle, contractual relation with the Company, rates, and electronic payment methods. 3. Technical, price, and market information needs. 4. Demand for products and services enhancing energy consumption efficiency and their cost. 5. Access to unregulated supply tariffs to mediumand high-power consumption customers. Each customer segment features particular supply and service needs in each action area, which allows the Company to customize its value proposition, prioritize resource allocation, and manage gaps. The model is being implemented, roles and responsibilities are being established in the structure, contact and visit plans are being drawn up for each segment, systems are being adapted and indicators are being devised to assess the effectiveness of the strategy, based on which targets and incentives will be set. At the same time, a large number of initiatives were implemented and/or pursued during 2017 to enhance the customer experience by monitoring the customer service provided through various channels: face-to-face (commercial offices, Contact Center, and Operations Crews), Call Center, and online (website or mobile app). Among the initiatives kick-started are: - Development and dissemination of customer service protocols for commercial office, Contact Center, and Operations Crews personnel, in addition to training courses to a large number of staff members. - Data compilation and reporting of the processes to respond to power failures that lead to disruption of supply to ensure that customers without electricity are provided accurate information on the causes, contingencies and restoration times.
This is one of the most critical findings in customer satisfaction surveys. - A contingency service was implemented at the Call Center to manage call overflow during widespread outages or supply disruptions through the Callback system, which allows Call Center agents to return the call to the customers whose call could not be answered before. - Strengthening of billing cycle processes to improve efficiency. Change of Tax Certificate that allows online issuing of bills and invoices and packaging of bills in plastic bags. - Website and app upgrades, with new features added like processing of calls reporting outages, notifications of outages and bill payment status. Enhanced efficiency of payment buttons in both channels. - Customer service and visit plan to offer the possibility to sign power supply agreements with unregulated rates by paying distribution tolls. This option is available to customers with installed power in excess of 500 kW and has aroused great interest as a result of the declining prices shown by the large energy blocks market. Grupo Saesa continues to measure customer satisfaction through outsourced internal and external surveys. Results showed that customer perception was on the rise until the occurrence of the unusual weather-related events of last winter where falling trees, floods, and heavy snowfalls caused prolonged outages and delayed restoration because our crews did not have access to the affected areas. Consequently, customer satisfaction indicators slipped to a level comparable to that of 2014-2015 (massive adjustment of electricity prices). MANAGEMENT OF OUR PROJECTS AND SERVICES. 2017 was particularly successful in terms of project management, awarding, execution of work, and unregulated services in the field of energy. The Company’s sales of projects and materials to individual customers exceeded US$12.0 million, streetlight re-
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placement projects awarded by the Chilean Energy Efficiency Agency as well as other projects continued to be executed for a total annual revenue over US$8.0 million. The significance of this lies in the fact that roughly 50% of that revenue is associated to initiatives to supply energy to communities and organizations through non-conventional energy sources, like photovoltaic panels. Prominent among these initiatives is the supply, implementation and commissioning of energy solutions in schools and health clinics in the I Region and a pioneering project –Grupo Saesa’s first ever– awarded by Los Ríos Regional Government for implementation of 145 individual solar PV with batteries solutions for the residents of Isla Huapi in Lago Ranco, which allows each household to rely on continuous supply of electricity and dispense with diesel-fueled generators most of the day. Other projects worth mentioning are an energy-efficient heating solution implemented in schools of San Juan de la Costa, Los Lagos Region, and strengthening of Puerto Edén’s electricity grid, a contract awarded by the Regional Government of the XII Region. In addition to being present in the most extreme regions of the country, which are not part of its area of concession, Grupo Saesa is gaining valuable know-how and growing into a competitive player in a market fostered by technological changes that offers immense opportunities for growth. By late 2017, work was initiated on implementation of the new Technical Standard on Distribution, a challenge that will undoubtedly allow us to strengthen quality of service and the relationship with our customers. To that end, we are pushing forward a major grid upgrade project, a smart metering project, and an upgrade of our business information systems.
SMALL MEANS OF DISTRIBUTED GENERATION (PMGD) In 2017, three new renewable power plants (1.7 MW) were added to Grupo Saesa’s distribution grid, which now consists of 46 power plants and a total capacity of 122 MW.
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The projects developed this year are as follows: HIDRORIÑINAHUE: 0.9 MW run-of-the-river power plant located at Futangue Estate, Los Ríos Region, near the town of Lake Ranco. As part of the project Lago Ranco Riñinahue’s Cooper Power Control Form 5 recloser was replaced with a SEL351P3 model and a new SILO DBC with remote control was added. A particularity of this project was that the existing Zone Limit needed to be modified, which implies that the PMGD now injects power through the Pilmaiquén Mantilhue feeder, rather than through Futrono, which had reached its top capacity based on feeder characteristics. This project is owned by SCOTTA Chile S.A. and was commissioned on February 9, 2017. LAS VIÑAS: 0.552 MW run-of-the-river power plant that was connected to the MV grid of the Picoltué Substation’s Mulchén outgoing feeder, located in the Quitralman Estate in Mulchén. This power plant collects water from an irrigation canal fed by River Bío Bío and according to the new Technical Standard on Connection and Operation (NTCO) it has No Significant Impact (INS), which means that no additional work is required for connection to the grid. This project is owned by Hidro Minilque SPA and was commissioned on May 19, 2017. LA BIFURCADA: This 0.244 MW run-of-the-river power plant that was connected to the MV grid of the Picoltué Substation’s Mulchén outgoing feeder, located in Mulchén. This power plant collects water from an irrigation canal fed by River Bío Bío and according to the new Technical Standard on Connection and Operation (NTCO) it has No Significant Impact (INS), which means that no additional work is required for connection to the grid Owner: Hidro Munilque SPA.
MATERIAL FACTS
The material facts reported by the Company in 2017 are as follows:
ted to 71,581,100, for a total of CLP 13,352,067 thousand.
1. The Regular Shareholders’ Meeting held on April 27, 2017 agreed upon payment of a final dividend amounting to CLP 186.5306150800 per share charged to the income of the period ending on December 31, 2016. The dividend was paid in cash and the number of shares entitled to such payment amoun-
2. On occasion of the Board Meeting held on May 15, 2017, Mr. Iván Díaz-Molina was elected Chairman of the Board and President of the Company and Mr. Jorge Lesser García-Huidobro was appointed vice-chair.
Malleco Viaduct. Collipulli. Araucanía Region.
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FINANCIAL MANAGEMENT
DISTRIBUTABLE NET INCOME The company does not apply any adjustments to the item “Profit (loss), attributable to the parent company’s owners” in the Statement of Comprehensive Income. Consequently, the values of such item are taken as a base, minus accumulated loss, if any, and distributed dividends charged to the accounting period are deducted from such result. First IFRS adoption adjustments are not part of this calculation insofar as they remain unrealized.
This policy for calculation of the distributable net income is applicable since 2010, following adoption by the Board on October 7, 2010, and compliant with the instructions issued by the Securities and Insurance Supervisor (currently, the Financial Market Commission) in Circular Letter No. 1,945 of September 29, 2009. Accordingly, the distributable net income of 2017 is as follows:
DISTRIBUTABLE NET INCOME CLP thousand Profit (loss) attributable to the parent company’s owners
23,733,576
Retained profit
24,111,470
Dividends paid with a charge to 2017
-
Distributable Net Income of 2017
47,845,046
DIVIDENDS The dividends paid by the Company over the past 4 years are as follows: DIVIDEND HISTORY Paid on
CLP Per Share Constant Currency
Charged To
Final No. 9
09-06-2014
337.06069360
2013
Interim No. 3
09-06-2014
26.16367705
2014
Final No. 10
23-06-2015
125.73151290
2014
Final No. 11
23-06-2016
63.27341829
2015
Final No. 12
23-06-2017
186.53061508
2016
Dividend
The Board of Directors has agreed upon proposing to the Regular Shareholders’ Meeting to adopt payment of final dividend No. 13 amounting to CLP 178.955271154 per share charged to the income of
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the period ending on December 31, 2017. This dividend accounts for 60% of the net income of the period.
Conguillío National Park. Araucanía Region.
PROPOSED DIVIDEND
PROFIT SHARING The Board proposes that profits be distributed as follows:
CLP thousand Distributable Net Income of 2017
47,845,046
Final dividend No. 13 payable from Distributable Net Income of 2017
14,240,146
EQUITY CAPITAL As of December 31, 2017, the equity capital of the Company amounted to CLP 340,106,755 thousand, divided into 71,581,100 subscribed and paid up shares. Should the Ordinary Shareholders’ Meeting adopt the profit sharing proposal, the Company’s equity as of December 31, 2017 is as follows:
CLP thousand Issued capital
340,106,755
Retained profit (loss)
26,348,183
Other reserves
29,955,510
Equity attributable to owners of the parent
396,410,448
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REMUNERATION OF DIRECTORS AND SENIOR OFFICERS BOARD OF DIRECTORS In compliance with provisions under Law 18,046 on Corporations, remuneration of Directors is set annually at the Regular Shareholders’ Meeting of the Company. Directors Waldo Fortín Cabezas, Ben Hawkins, Juan Ignacio Parot Becker, Stacey Purcell, Christopher Powell, and Dale Burgess have waived their right to compensation as Directors of Eléctricas and its subsidiaries. Consequently, only the directors specified below received the aforementioned remuneration: REMUNERATION OF DIRECTORS 2017 Eléctricas
Saesa and Subsidiaries
Frontel
Sagesa
TOTAL
2016
Iván Díaz-Molina
1,593
32,816
26,444
1,593
62,446
61,170
Jorge Lesser García-Huidobro
1,593
32,814
26,444
1,593
62,444
61,152
TOTAL
3,186
65,630
52,888
3,186
124,890
122,322
In 2016 and 2017, the Company has made no payments to companies related to the Company’s directors. As of December 31, 2017, Subsidiary STC paid remuneration to independent director Mario Donoso Aracena for CLP 31.881 thousand. Likewise, in 2016, the aforementioned director was paid remuneration for CLP 28.623 thousand. In addition, the Board incurred no expenses in advisory or other services, incentives like bonuses, stock compensation, stock options, etc. Directors have no ownership interest in the parent company or its subsidiaries.
EXECUTIVE COMMITTEE COMPENSATION
SENIOR OFFICERS Senior Officers are directly compensated by the Company. Subsidiaries, however, have a performance incentive plan whereby senior officers are offered a share of the Company’s profits upon fulfillment of individual objectives. Incentives are structured according to minimum and maximum gross compensations and senior officers receive an advance payment equivalent to 25% of one gross compensation in the third quarter of every year and the balance on the first quarter of the following year. Senior Officers have no ownership interest in the parent company or its subsidiaries. The Executive Committee of the parent company and its subsidiaries received the following total compensation and incentives in 2017:
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CLP million
2017
2016
FIXED COMPENSATION
3,535
3,150
VARIABLE INCENTIVES
1,634
1,505
5,169
4,655
TOTAL
Seniority severance payments to senior officers of the parent company and its subsidiaries amounted to CLP 188 million and CLP 182 million in 2017 and 2016, respectively.
PERSONNEL As of December 31, 2017, the Company and its subsidiaries has the following employees: PERSONNEL SAESA AND SUBSIDIARIES SENIOR OFFICERS AND OFFICERS
FRONTEL
SAGESA
TOTAL
40
6
2
48
PROFESSIONALS AND TECHNICIANS
451
237
7
695
ADMINISTRATIVE STAFF AND ELECTRICIANS
196
123
8
327
TOTAL
687
366
17
1,070
FINANCIAL INFORMATION INVESTMENT AND FINANCING POLICIES
DIVIDEND POLICY
The Company and its subsidiaries will pursue their development strategy by strengthening the current businesses, consolidating their position as distribution, generation and zonal transmission company, within or outside its concession area, and continuously seeking new opportunities in the utility industry, sale of products and services associated to electric power distribution and transmission, and development of complementary businesses tapping into the companies’ extensive customer base in the south of Chile.
The dividend distribution policy for the coming years will be at last 30%, plus an additional percentage to be determined according to Company’s restrictions based on financial obligations and operational policies.
Investments are carried out based on strict financial, technical and strategic decision-making criteria. The basic guideline every new investment is to meet is clarity in the legal framework of the intended activity.
PROPERTIES AND INSURANCE In order to safeguard the activities of the industry in which it participates, the Company and its subsidiaries hold insurance policies according to the conventional practice of the electricity industry. The main insurance policies taken are civil liability for operations and third-party damage, all risk including business interruption of company business like facilities, power plants, substations, contents and inventory. Customarily, insurance policies have a 12-month term.
Financing sources are managed according to the long-term financial plan of the Parent, Subsidiaries, and Related Parties. Financial resources are obtained from own sources, traditional debt finance, private and public offering of securities and capital contributions, always based on stable structures and ongoing efforts to streamline use of the most advantageous products in the market.
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INDUSTRIAL ECONOMIC SECTOR
ACTIVITIES AND BUSINESSES
SUBSIDIARIES
STATEMENT OF LIABILITY
La Portada de Antofagasta (Gateway). Antofagasta Region.
INDUSTRIAL ECONOMIC SECTOR
THE LARGEST ELECTRIC POWER DISTRIBUTION COMPANY IN THE SOUTH OF CHILE
REGULATION AND OPERATION OF THE CHILEAN ELECTRICITY SYSTEM
rupo Saesa companies are mostly involved in distribution and transmission of electric power and, to a lesser extent, in power generation and trade. Consequently, the company’s main asset are its distribution and transmission grids. Through subsidiaries Saesa, Frontel, Edelaysen, and Luz Osorno, Grupo Saesa is the largest electric power distribution company between the provinces of Concepción (Bío Bío Region) and Capitán Prat (Aysén del General Carlos Ibáñez del Campo Region).
Chile’s electricity sector consists of generation, transmission and distribution of electric power. These activities are carried out by private companies and the Government plays a regulatory, oversight and subsidiary role. This structure implies that companies have decision-making capacity regarding investments, marketing of their services and operation of their facilities, which makes them responsible for the quality of service provided in each segment, as required by the sector regulatory framework.
G
With annual sales of 3,426 GWh and 842,000 customers in 2017, Grupo Saesa is the country’s third largest electric power distribution company, both in terms of sales and number of customers. The table below shows a breakdown of customers and sales by distribution company:
Through grids with an installed capacity equal to or higher than 200 MW, the various players of the electricity sector operate in concert and under the coordination of the National Electricity Coordinator (the Coordinator or CEN), which is responsible for:
- Preserving the security of supply of the power grid. - Ensuring the most cost-efficient operation of all the electricity system installations.
ELECTRIC POWER DISTRIBUTION
SAESA FRONTEL EDELAYSEN LUZ OSORNO
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DISTRIBUTION AREA
CUSTOMERS (in thousands)
Sales (GWH)
IX, X & XIV Regions
426
2,199
IIIV & IX Regions
348
941
X & XI Regions
46
141
X & XIV Regions
22
146
- Guaranteeing open access to all transmission systems, in compliance with the Law.
Chile’s two main power grids, which jointly account for over 99% of the country’s power generation, were interconnected in November 2017: The Sistema Interconectado del Norte Grande (“SING grid”) that supplies energy to the area between Arica and Antofagasta in the north of the country, and Sistema Interconectado Central (“SIC grid”), which covers from Tal-Tal to Chiloé. Together, they became the new Sis-
tema Eléctrico Nacional (SEN grid). The system also consists of various medium-voltage grids (SSMM grids), the installed generating capacity of ranges between 1,500 kW and 200 MW, that supply regions like Los Lagos, Aysén del General Carlos Ibáñez del Campo, and Magallanes y Antártica Chilena. These grids (like subsidiary Edelaysen) are usually operated by vertically-integrated companies, that is to say, they are responsible for generation, transmission, and distribution of electric power.
POWER GENERATION No concession or special authorization is required to engage in power generation in the SEN grid, but only for construction and operation of hydropower plants. The SEN grid consists of three main markets with different types of customers and tariffs.
A. Wholesale Market: Segment in which generation companies engage in transactions among them, either through contracts or sales at marginal cost. B. Unregulated Power Market: Market segment corresponding to customers with an installed capacity in excess of 5 MW that freely negotiate tariffs with the generation company. Customers with installed power between 0.5 MW and 5 MW may
opt to be treated as unregulated customers, which they negotiate for 4-year terms. C. Regulated Power Market: This segment corresponds to all energy transfers between generation and distribution companies aimed to supply power to customers subject to regulated power tariffs (hereinafter, “regulated customers”). Thus, distribution companies become generation companies’ customers.
The price at which energy is sold is set through open, transparent, and non-discriminatory tendering. Tariffs are usually set for a period of 20 years. It should be noted that electricity sales prices are set at national bar (national transmission) level. Subsequently, charges for use of zonal transmission grids are introduced as additional charges by the distribution company. Regardless of the end market established by a generation company, transfers between generation companies with surplus energy to those with energy deficit in the SEN grid are completed at the marginal hourly cost set by the grid. The entity responsible for such calculations is the Coordinator’s Toll Department. Medium-Voltage Grids differ greatly from one another; consequently, generation and transmission costs are set based on a tariff study conducted every four years. The Aysén, Palena, and General Carrera Medium-Voltage Grids are operated by the same company, which manages both generation facilities and transmission
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and distribution installations (vertically integrated like subsidiary Edelaysen) and is responsible for ensuring that the grid operates as efficiently and safely as possible. The CochamĂł Medium-Voltage Grid is a special case in the sense that the generation and transmission assets are owned by one company (Sagesa), while distribution to end customers is managed by a different one (Saesa). In the case of the HornopirĂŠn Medium-Voltage Grid, generation and transmission assets are owned by two different companies (Cuchildeo and Sagesa), whole distribution is carried out by Saesa.
TRANSMISSION
TRANSMISSION GRID
NATIONAL
100% charged to end users based on anticipated withdrawal. Tolls are determined by the National Energy Commission (CNE) every 4 years based on efficient investment, operation, maintenance and administration costs of the existing facilities or the costs of bidding processes for new facilities.
ZONAL
Tolls set by CNE every 4 years based on efficient investment, operation, maintenance and administration costs of the existing facilities and charged to end customers in their entirety based on anticipated withdrawal.
DEDICATED
Tolls freely negotiated by the owner of the transmission facilities and its users. Tariff regulated according to use of the facilities to supply regulated customers.
TRANSMISSION Since enactment of Law 20,936 in 2016, transmission grids are classified into National, Zonal and Dedicated Transmission, all of them open access grids and the first two subject to tariff regulation.
TOLLS
In dedicated transmission, charges for transport are regulated by private contracts executed by the relevant parties, while use of the grids to supply regulated customers is subject to regulated tariffs calculated by the regulator. The information used to set toll rates is publicly disclosed in all cases. Transmission companies charge tolls to generation companies and end users, which according to the Law will be gradually transferred to users in their entirety. Transmission tolls allow the owners of transmission facilities to recover and finance their investments in transmission assets and collect the costs associated to operation of such assets.
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DISTRIBUTION Pursuant to the law, distribution is any electricity supply up to 23 kV. Distribution companies operate according to concessions under which territories are defined for each company, which in turn has the obligation to supply regulated customers under a maximum tariff structure combined with an efficient business model set by the regulator. Given access barriers to this activity as a result of strong economies of density, distribution companies operate as a natural monopoly. Although
the regulator may grant overlapping concessions, in practice, existence of several distribution companies in the same area is discouraged because the tariffs set by the regulator aim at an optimal technical-economic scenario, that is to say, they do not finance distribution facilities which the company deems redundant or unnecessary to meet the existing requirements. Regulated and unregulated customers (either a customer of the distribution company or not) are to pay a distribution added value – DAV (VAD as per the Spanish acronym) for use of the grid.
A. REGULATED CUSTOMERS The tariffs charged by distribution companies to regulated customers consist of: - Average Node Price: This component reflects the average power and energy purchase price that is passed on to end customers through distribution companies. This price is set twice a year through an Average Node Price Decree issued in January and July and published in the Official Gazette. - Transmission Payment: Charged by national, zonal, and dedicated transmission companies to customers subject to regulated tariffs. - Utility Charge: Component that finances the budgets of the Coordinator, Panel of Experts, and utility strip study. - Distribution Added Value (DAV): Price component consisting of the cost of distribution assets capital and administrative, maintenance and operation costs of the grids, billing and customer service costs, and average losses incurred during distribution. The aforementioned amounts correspond to those of an efficient business model. Additionally, during the distribution rate case, tariffs may consider some of the services associated to power supply that have been previously set as part of the distribution added value.
The tariff charged by each distribution company is set by CNE according to a classification process of each company in typical distribution areas that takes into consideration economic criteria, such as population density, energy consumption per capita, and unit costs of distributed power. Various model companies are simulated, one in each typical distribution area, considering primarily construction and operational standards ensuring supply of an actual company’s supply based on characteristics of spatial distribution, category of customers, and other restrictions imposed by the concession area to the actual company called “company of reference.” The tariff is set based on a target internal return rate of 10% for each model company. To validate the tariffs so set, it should be ensured that the return of all the distribution companies in operation, taken as a whole, is within 4% of the theoretical 10% (between 6% and 14%). DAV comprises power (kW) and energy (kWh) charges, fixed charges and efficient loss level and is set every 4 years, same as its indexation formulas.
B. UNREGULATED CUSTOMERS These customers (whether served by a distribution company or not) are required to pay a distribution toll for use of the distribution grids they are connected to, which corresponds to the DAV of each distribution company plus energy and power tariff losses. These tariffs are set every 4 years during every VAD rate case.
C. OTHER SERVICES ASSOCIATED TO DISTRIBUTION In addition, distribution companies are paid for services associated (SSAA in Spanish) to electricity supply or provided in the capacity of utility concession holder, including meter rental, disconnection and reconnection, support to telecom companies, and late payment charges, among the core ones. Tariffs for these services are set every 4 years during every DAV rate case.
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ACTIVITIES AND BUSINESSES
CONCESSIONS
To conduct business, Grupo Saesa companies rely on electric power distribution concessions awarded through an Executive Order (EO) issued by the Ministry of Energy by order of the President of the Republic.
entitled to charge for the said supply, which are set every 4 years through a decree issued by the Ministry of Energy and set by means of formulas that that represent the cost of the resources used by users at generation – transmission, and distribution level.
Distribution concessions entitle the concession holder to develop, build, and operate overhead and underground electric power facilities within the concession area set by the relevant executive order and to supply electricity to the end customers situated in that area or to any customer outside the concession area that is connected to the concession holder’s facilities through its own or third-party lines. To lay their distribution grid within the concession area, distribution companies are entitled to use and go through national property for public use, as well as to occupy and use private property by means of voluntary or legal easements. In the latter, the owner of the relevant property is obligated to refrain from building or planting or using the land in any way that may interfere with the easement, provide access to the personnel of the concession holder to conduct maintenance, repair and other jobs in the distribution facilities located in the said property.
The concessions held by Grupo Saesa companies have been granted by the competent authority and are of indefinite duration.
On the other hand, the concession holder is obligated to supply electricity to any user located within the concession area that may so require, as set forth in the General Law of Electric Services and its Regulations. The concession holder is to provide a quality of service compliant with the regular standards laid down by the law, its regulations and the applicable technical standards, consistent with the tariffs the company is
58
As of December 31, the concession areas awarded to Grupo Saesa companies through concession decrees are as follows:
CONCESSIONS
AREA (km2)
AMOUNT OF DECREES
SAESA
13,525
127
FRONTEL
19,143
126
378
4
4,360
11
37,406
268
EDELAYSEN LUZ OSORNO TOTAL
SUSTAINED GROWTH IN DEMAND The concession areas in which Grupo Saesa companies operate are highly dynamic. The economic development shown by the south of Chile –driven mostly by the forest and salmon industries, and combined with strong urban development– has spurred solid growth of our operations over the last few years, both in terms of electricity sales and number of customers.
Over the past 15 years, sales of electric power have grown at an annual rate of 4.29%, while the number of customers has increased by 3.27%. Such level of growth is underpinned by ongoing efforts to supply electricity to all the sectors within the company’s concession area. Energy sales are highly correlated with economic growth, industrial and commercial activity.
CUSTOMERS
CUSTOMER STRUCTURE
(by company)
SAESA
FRONTEL
EDELAYSEN
2.6%
RESIDENTIAL
LUZ OSORNO
COMMERCIAL
INDUSTRIALIST
1.78%
5.4%
OTHERS
0.50% 0.96%
41.4%
50.6%
96.76%
CUSTOMER EVOLUTION SAESA
900 800
FRONTEL
(in thousands) EDELAYSEN
EVOLUTION OF SALES
LUZ OSORNO
3.27% CAGR*
700
SAESA
EDELAYSEN
LUZ OSORNO
4,000 3,500
4.29% CAGR*
3,000
600
2,500
500
2,000
400
1,500
300 200
1,000
100
500
0
FRONTEL
(in GWh)
03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
*Compound Annual Growth Rate
0
03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
*Compound Annual Growth Rate
59
MAIN SUPPLIERS AND CUSTOMERS
CASH FLOW GENERATION
Along 2017, suppliers Enel and Colbún accounted for virtually 90% of the distributed supply (purchase of energy and sub-transmission tolls), each of them with over 10% representativeness in distribution companies Saesa, Frontel y Luz Osorno.
Cash flow generation at the Company and its subsidiaries is highly stable, considering that it belongs to a regulated industry like electric power distribution. In the future, cash generation is expected to remain stable and on the rise.
In Sagesa and Edelaysen, mostly devoted to generation, Copec accounts for over 70% of diesel oil purchases. In the case of SGA, Enel Generación supplies roughly 90% of the energy SGA sells in the system. In STS, mostly devoted to transmission, 56.4% of its revenues are concentrated in Enel Generación and 36.8% in Colbún. In the case of SGA, a trading company, its revenues originate from some 75 unregulated customers, all of them with a share in total revenues below 10%. In the case of the Company’s distribution companies, no customer concentrates on its own account at least 10% of the companies’ total revenues.
EVOLUTION OF CONSOLIDATED CASH FLOW GENERATION (1) (CLP million) GAAP
IFRS
105,000 90,000 75,000
7.89% CAGR*
60,000
QUALITY OF SERVICE
45,000 30,000
2017 was an unusual year in terms of quality of service because the industry was affected by extreme weather-related events of great intensity and geographical spread. For Grupo Saesa, those events started in June, lasted until September, and involved heavy rainfall and wind storms unseen in the past 10 years. The foregoing translated into lower quality of service indices or, more specifically, 59% of our customers and 48% of feeders falling below the 2017 standard.
60
15,000 0 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
(1) EBITDA (GAAP): Operating income + depreciation + amortization + recurring non-operating income. EBITDA (IFRS): Income from ordinary activities + other income, by nature – raw materials and consumables used – employee benefit expenses – other expenses, by nature. * CAGR: Compound Annual Growth Rate
SUB-STANDARD FEEDERS - 12 ROLLING MONTHS FEEDERS - 12 ROLLING MONTHS 120
105
100
80
80
60
110
111
NOV/17
DEC/17
79
60
40
20
0
3
3
5
JAN/17
FEB/17
MAR/17
2 APR/17
4
7
MAY/17
JUN/17
JUL/17
AUG/17
SEP/17
OCT/17
INVESTMENT Grupo Saesa operates based on a 5-year investment plan that includes Distribution, Transmission, Generation and other activities for all group companies.
INVESTMENTS
(CLP million)
SAESA AND SUBSIDIARIES
FRONTEL
SAGESA AND SUBSIDIARY
120,000 110,000 100,000 90,000
12.77% CAGR*
80,000 70,000 60,000 50,000 40,000 30,000
On the one hand, the plan considers “base investments” related to the projects required to meet the demand and normal growth of the business, on the other, high-return projects. The annual investment plan amounts to CLP 40,000 million, approximately, financed with debt and own resources, based on the company’s financial policy. Among the largest investment projects of 2017 are commissioning of Paranal-Armazones projects, the purpose of which was to connect and supply electricity under a regulated tariff structure to ESO Astronomical Paranal and Armazones Observatories in compliance with the legislation in force, with an investment of CLP 13,000 million and the 220 kV Cabo Leones Transmission Line that connects Cabo Leones Wind Farm –a major wind-generation project that supplies clean, sustainable energy to the SEN grid, with an investment hovering CLP 32,000 million. Among the projects in progress in northern and central Chile are Ñuble, Kimal, San Andrés, and María Elena.
20,000 10,000 0 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
The total investment of 2017 amounted to CLP 106,671 million.
* Compound Annual Growth Rate
61
COMPANY’S ASSETS The Company’s subsidiaries own the properties and facilities specified below:
COMPANY
MAIN PROPERTIES
LOCATIONS
INSTALLED CAPACITY
Plants and equipment, consisting mostly
Cities and towns in Cautín, Valdivia, Ranco,
12,048 MV Lines (km)
of poles and conductors
Osorno, Llanquihue, Palena and Chiloé Provinces.
9,504 LV Lines (km)
247 HV Lines (km) SAESA
544 MVA (MV/LV)
118 HV Lines (km) FRONTEL
Plants and equipment, consisting mostly
Cities and towns in Arauco, Concepción,
16,843 MV Lines (km)
of poles and conductors
Biobío, Ñuble, Cautín, and Malleco Provinces.
13,765 LV Lines (km) 340 MVA (MV/LV)
LUZ OSORNO
STS
Plants and equipment, consisting mostly
Cities and towns mostly in the
of poles and conductors
Osorno Province.
3,739 MV Lines (km) 715 LV Lines (km) 62 MVA (MV/LV)
Melipulli Substation
Puerto Montt
330 MVA
Osorno Substation
Osorno
78.2 MVA
Picarte Substation
Valdivia
90 MVA
Valdivia Substation
Valdivia
180 MVA
Cholguán Substation
Cholguán
98 MVA
La Unión Substation
La Unión
42 MVA
Degan Substation
Cruce Dalcahue, Chiloé
40 MVA
Barro Blanco Substation
Osorno
70 MVA (*)
Los Lagos Substation
Los Lagos
Other substations
Various towns and cities in Ñuble
16 MVA 1,304 MVA
and Chiloé Provinces
EDELAYSEN
SAGESA
Tehuelche Power Plant
Coyhaique
17 MW
Lago Atravesado Power Plant
Coyhaique
10.5 MW
Chacabuco Power Plant
Chacabuco
9.3 MW
Aysén Hydropower Plant
System
Other power plants
Various locations in Aysén Region
22.9 MW
Coronel Power Plant
Coronel
45.7 MW
Chuyaca Power Plant
Osorno
12.5 MW
Calle Calle Power Plant
Valdivia
9.8 MW
Quellón Power Plant
Quellón
10.1 MW
Cañete Power Plant
Cañete
Other power plants
Various locations in Concepción
8.6 MW
4.8 MW 82.4 MW
and Chiloé Provinces
STN
(*) Transformer only for backup
62
Kapatur Substation
Atacama
800 MVA
TRANSMISSION The activities developed as part of the transmission business correspond mainly to conveyance of power from the generation plants with which supply agreements exist with distribution companies in the Bío
Bío, La Araucanía, Los Ríos, and Los Lagos, as well as provision of various services inherent to power transmission, like advisory services on design, construction, maintenance and operation of grids.
OPERATING FIGURES STS
EDELAYSEN
STN
FRONTEL
SAESA
SATT
1,093 328 TOTAL
138
HV lines (km)
1,924
118 247
Installed MVA 220-110-66 kV
1,148
TOTAL
1,148
1,100
Installed MVA 220-110-66/23-13.2 kV
257 80
TOTAL
1,437
In addition, subsidiary STS operates third-party facilities (11 km of HV lines).
GENERATION Subsidiary Edelaysen is a generation company that operates in the Los Lagos and Aysén Regions and owns a 3.8 MW wind farm and several diesel-fueled and hydropower generation plants. Affiliate Sagesa is a generation company that operates from regions Bío Bío to Los Lagos. Sagesa owns a 45.7
MW gas/diesel power plant and diesel-fueled power plants with total installed capacity of 119.6 MW. A portion of the power generated by this company is sold in CDEC-SIC’s spot market through subsidiary SGA, and its revenues originate from the sale of energy and power in that market, and the remainder from sales to related entities Saesa, Frontel, and Luz Osorno.
63
OFF-GRID SYSTEMS Grupo Saesa companies have developed generation and distribution projects aimed to supply isolated areas that are not connected to the SIC grid and require 24-hour power supply to support their sustainable development needs. One example of these projects is the “Enabling Electric Power Supply for 11 Islands of the Chiloé Archipelago” project, which gradually started to generate power in 2015. At present, the off-grid systems managed by subsidiaries Saesa, Frontel, and Edelaysen are as follows:
OPERATING FIGURES OFF-GRID SYSTEMS
682
ISLA TAC
64
98
193
331
ISLA CAGUACH
52
133
108
246
ISLA QUENAC
68
158
ISLA LLINGUA
49
114
ISLA ALAO
49
136
ISLA CHAULINEC
76
194
ISLA APIAO
91
210
ISLA LAITEC
67
144
60
157
ISLA COLDITA
3
34
SANTA MARÍA
879
646
3,743
1,201
809
497
1,027
323
509
276
8,528
5,449
ISLA CAILIN 2
CISNES
EDELAYSEN
HUICHAS VILLA O’HIGGINS AMENGUAL-LA TAPERA
TOTAL
64
551
ISLA MEULIN
ISLA CAILIN 1
FRONTEL
CUSTOMERS
AYACARA ISLA QUEHUI
SAESA
ENERGY SALES (MWh)
COMPANY TRADEMARKS Grupo Saesa owns 13 trademarks through which it develops various activities related to the electric power business along its operation area.
Sistema de Transmisiรณn del Norte
Sistema de Transmisiรณn del Centro
65
AREA OF OPERATIONS AND PRESENCE Grupo Saesa has operations in 8 regions of Chile. Although its business is mostly concentrated in the south of Chile, in 2014 the company expanded into the central and northern regions.
XV REGION I REGION
10
11
10
5
7
II REGION
III REGION
IV REGION
V REGION RM VI REGION
12
12
8
9
VII REGION
9
8
5
1
VIII REGION
12
5
2
1
IX REGION
12
5
3
2
XIV REGION
5
4
3
2
12
4
X REGION
XI REGION
FRONTEL Area of Operations: VIII & IX Regions Customers: 348,000 Sales: 941 GWh SAESA Area of Operations: IX, X & XIV Regions Customers: 426,000 Sales: 2,199 GWh LUZ OSORNO Area of Operations: X & XIV Regions Customers: 22,000 Sales: 141 GWh EDELAYSEN Area of Operations: X & XI Regions Customers: 46,000 Sales: 146 GWh STS Area of Operations: II, VIII, IX, X & XIV Regions Lines: 918 km of 220-110-66 kV lines SGA Activity: Development and marketing of own and third-party electric power systems. STN Area of Operations: II Region Activity: Transmission projects. SAGESA Area of Operations: VIII & X Regions Activity: Sales of energy in the spot market through SGA and related entities. STC Area of Operations: VII & VIII Regions Activity: Transmission projects.
XII REGION
SATT S.A. Area of Operations: II & III Regions Activity: Transmission projects. L.T. CABO LEONES Area of Operations: III Region Activity: Transmission projects. MĂ S CERCA Area of Operations: VIII, IX, X, XI & XIV Regions Activity: Retail.
66
CUSTOMER SERVICE CENTERS Grupo Saesa has customer service offices in 88 cities, towns and villages of 5 regions in the south of Chile.
FRONTEL
Angol
Julio Sepúlveda Nº 358
Antuco
Bernardo O’Higgins Nº 61
Arauco
Covadonga Nº 160
Bulnes
Aníbal Pinto Nº 560
Nueva Imperial Nueva Toltén Puerto Saavedra Purén
Cabrero
Membrillar Nº 55
Quilleco
Cañete
Villagrán Nº 850
Quillón
Carahue
A. Ercilla Nº 587
San Ignacio
Collipulli
Bulnes Nº 350
Concepción Cunco Curacautín Curanilahue El Carmen Florida Galvarino Gorbea Huepil Laja Lautaro Lebu
Manuel Rodríguez Nº 1161 La Concepción Nº 579 Manuel Rodríguez Nº 656 Bernardo O’Higgins Nº 289 Esmeralda Nº 415 Eleuterio Ramírez Nº 546 Freire Nº 99
Tirúa
Barros Arana Nº 297 Diego Portales Nº 161 Manuel Rodríguez Nº 740 Las Heras Nº 160 Lautaro Nº 350 Andrés Bello Nº 631 Bdo. O’Higgins Nº 346 Arturo Prat Nº 156
Traiguén
Saavedra Nº 488
Victoria
Pisagua Nº 1070
Vilcún
Camilo Henríquez Nº 180 Valdivia Nº 407-B
Yungay
Esmeralda Nº 468
Balmaceda Nº 152, José Miguel Carrera Nº 217 Pérez Nº 350 Luis Sáez Mora Nº 440
Lota
Carlos Cousiño Nº 206
Negrete
Teodoro Schmidt
Gamboa Nº 461
Yumbel
Los Alamos
Nacimiento
Temuco
Avda. Ejército Nº 1248
Av. Ecuador Nº 50
Bernardo O’Higgins Nº 1102
Mulchén
Santa Juana
Holanda Nº 405
Andrés Bello Nº 546
Lonquimay
Monte Águila
Santa Bárbara
Bernardo O’Higgins Nº 535
Ahumada Nº 251 Gana Nº 1095 San Martín Nº 595 Emilio Serrano Nº 03
67
Customer Service Centers
SAESA / LUZ OSORNO
Achao
Progreso Nº 033
Ancud
Pedro Montt Nº 482
Calbuco Castro
Bernardo O’Higgins Nº 494
Corral
Miraflores Nº 150
Entre Lagos Fresia
Manuel Rodríguez Nº 31 San Carlos Nº 379
Chile Chico Cochrane Coyhaique
Poblador Caleta A. S/N
La Junta
Esmeralda Nº 14
Futrono
Balmaceda Nº 880
Mañihuales
Lago Ranco Lanco Licanray
Serrano Nº 760 Concepción Nº 631 Yungay Nº 293 Gabriela Mistral Nº 398
Loncoche
Arturo Prat Nº 268
Los Lagos
Patricio Lynch Nº 138
Los Muermos
Balmaceda Nº 202
Maullín
Bernardo O’Higgins Nº 196
Osorno / Rahue
Victoria Nº 380 Local 6, 7, 8
Osorno Paillaco Panguipulli
Ramírez Nº 705 C. Henríquez Nº 64 Bernardo O’Higgins Nº 462
Puerto Montt
Concepción Nº 110
Puerto Octay
Germán Wulf Nº 598
Puerto Varas
San Francisco Nº 641
Purranque
21 de Mayo Nº 148
Quellón
Ladrilleros Nº 236
Río Bueno
Comercio Nº 296
Río Negro
Puerto Montt Nº 687
San José San Pablo Valdivia
Alejo Carrillo Nº 103 Paglieta Nº 497 Yungay Nº 630
Francisco Bilbao Nº 412
Huichas
Carlos Richter Nº 155
La Unión
San Valentín Nº 648 Manuel Rodríguez S/N
Frutillar
Diego Portales Nº 55
Lautaro Nº 191
Futaleufú
Lago Verde
Hornopirén
68
Arturo Prat Nº 111
EDELAYSEN
Palena
Camino Cacique Blanco Km. 1 Caupolicán Nº 197 Vicente Pérez Rosales Nº 529
Puerto Aysén
Serrano Montaner Nº 538
Puerto Cisnes
Juan José Latorre S/N
Villa O’Higgins
Río Los Ñadis S/N
SUBSIDIARIES
69
SAESA
Company Type: Closely Held Corporation Subscribed and Paid-up Capital: CLP 304,501,634 thousand Inv. Eléctricas del Sur S.A. Interest: 99.92%
SOCIEDAD AUSTRAL DE ELECTRICIDAD S.A.
Saesa is Grupo Saesa’s main operating company and is mostly devoted to distribution of electric power in the south of Chile. Saesa distributes electricity between the provinces of Cautín, Araucanía Region, and Palena, Los Lagos Region. Individually, Saesa supplies approximately 426,000 customers. It also has operations in the transmission and zonal transmission segment, with 247 km of High Voltage lines, the maintenance and operation of which are performed by subsidiary STS. Through subsidiary Edelaysen, a company involved in generation, transmission and distribution activities, it supplies electricity mostly to the Aysén Region. On September 11, 2014, Saesa and Alusa Ingeniería Limitada (currently Alumini Ingeniería Limitada) incorporated Sistema de Transmisión del Norte S.A., “STN”, with a 90% and 10% interest, respectively. STN’s line of business is construction, operation, and maintenance of power transmission facilities. On October 15, 2015, Sociedad Austral de Electricidad S.A.–Saesa (99.9% interest) and subsidiary Sistema de Transmisión del Sur S.A.–STS (0.1% interest) incorporated Sociedad Austral de Transmisión Troncal S.A., “SATT”, a company devoted to construction, operation and maintenance of power transmission facilities, development and marketing of own or third-party sys-
ENERGY SALES
(in GWh) SAESA
EDELAYSEN
tems for transmission and transformation of electric power. Over the past 10 years, Saesa’s compound annual growth rate has hovered 3.32%. One of the key drivers of such growth has been the significant development shown by the salmon industry and related sectors, particularly in the Llanquihue and Chiloé Provinces, forestry in the Valdivia Province, and the sustained growth of residential consumption all over its area of operation. At present, supply is the matter of contracts executed with Endesa, Colbún, Enel, Caren, ERNC, El Morado, Chungungo, SPV P4, San Juan, Pelumpen, Santiago Solar, Aela, Abengoa, Ibereolica, SCBII, and Amunche Solar. However, the companies awarded the contract under the last supply tender will join this group shortly. The National Energy Commission–CNE (Comisión Nacional de Energía) has advanced joint bidding processes intended to meet the regulated demand by the distribution companies supplied by the SIC grid. Accordingly, as part of one of such bidding processes, 91% of the tendered energy was awarded in December 2014, leaving only 9% yet to be tendered in future bidding processes. Given the enforcement of Law 20,085, supply bidding processes are managed by the CNE for the first time in 2015. During the first half of 2015, CNE requested
CUSTOMERS SERVED
(in thousands) SAESA
LUZ OSORNO
EDELAYSEN
LUZ OSORNO
3,000 2,500
600
2,000
500 400
1,500
300 1,000
200
500 0
100 0 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
Energy sales of Saesa and its subsidiaries amounted to 2,486 GWh in 2017.
70
03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
As of the end of 2017, Saesa and its subsidiaries had a customer base of 493,000 customers, higher by 3.35% compared to 2016.
all Distribution Companies to submit their regulated customer demand projections. Based on such information, as well as an adjusted projection by the Commission, CNE issued a Bidding Process Report on the overall requirements in terms of electricity supply. With that data, CNE launched two bidding processes: • Process 2015/02 (January 2017 – December 2036) launched in the first half of 2016, under which 100% of the tendered energy was awarded. • Process 2015/01 (January 2021 – December 2041) launched in the first half of 2016, under which 100% of the tendered power was awarded.
company. Only in the event of early termination of a supply agreement ordered by a court of law, would the concession holder be obligated to tender the consumption that fails to be covered by the supply agreement that was terminated in advance. To respond adequately and in a timely fashion to the demands of a growing area of operation, to supply remote areas and to deliver a constantly improving quality of service, in 2017 Saesa’s investments totaled CLP 15,928 million. Saesa represents 67.65% of Inversiones Eléctricas del Sur S.A.’s assets (indirect owner).
A new bidding process took place in 2017:
BUSINESS TRANSACTIONS WITH RELATED ENTITIES
• Process 2017/01 (January 2024 – December 2042) to be executed in the first half of 2018, under which 100% of the tendered power will be awarded.
Buying and selling electricity and tolls are the main business transactions with related entities. The electricity prices at which these transactions are carried out are set by the regulator or the market, while toll rates are controlled by the regulatory framework of the sector.
It is worth mentioning that by issuing Exemption Resolution No. 2.288 (ER 2288) on August 26, 2011, the Superintendence of Electricity and Fuels (SEC) provided that any supply intended for regulated customers that fails to be provided by a bankrupt company should be supplied by the other grid stakeholders included in transfer balances prepared by Toll Division of the Load Economic Dispatch Center of Central Interconnected System (CDEC–SIC) as a percentage of their firm energy and later as a percentage of the energy actually dispatched and at the same prices agreed to in the supply agreements executed with the bankrupt
CONSOLIDATED FINANCIALS
INDIVIDUAL OPERATING FIGURES 2017
Energy Sales (GWh) Customers (thousands)
Employees
2016
2,199 2,128
412
341,661 145,735 115,725 35,974 23,864
407
913,200
Assets
247 198
824,964 484,486
Liabilities
405,675
12,048
MV lines (km)
12,118
9,477 544 523
428,714
Equity
9,504
LV lines (km)
Investments
EBITDA
2016
377,577
Revenues
Profit
464
2017
CONSOLIDATED (CLP million)
Gross Margin
426
HV lines (km)
Installed MVA (MV/LV)
Other business transactions with related entities are the sale and purchase of materials at average wholesale price and short-term intercompany loans between related entities as a source of working capital. These checking account loans pay market interests calculated for the duration of the transaction and they are subject to a maximum amount, as provided in the bond contracts in effect.
419,290 80,677 74,371 78,135 62,676
71
FRONTEL
Company Type: Closely Held Corporation Subscribed and Paid-up Capital: CLP 133,737,399 thousand Inv. Eléctricas del Sur S.A. Interest: 99.33% (Indirect)
EMPRESA ELÉCTRICA DE LA FRONTERA S.A.
Frontel’s main focus is the distribution of electric power in the south of the country, in an area encompassing the provinces of Concepción (Bío Bío Region) and Cautín (Araucanía Region). It also has operations in transmission and zonal transmission with 118 km of 66 kV, 220 kV, and 257 MVA power lines connecting voltage regulation substations maintained and operated by STS. Finally, it also participates in generation to supply an off-grid system. At present, supply is the matter of contracts executed with Endesa, Colbún, Enel, Caren, ERNC, El Morado, Chungungo, SPV P4, San Juan, Pelumpen, Santiago Solar, Aela, Abengoa, Ibereolica, SCBII, and Amunche Solar. However, the companies awarded the contract under the last supply tender will join the process shortly. The National Energy Commission–CNE (Comisión Nacional de Energía) has advanced joint bidding processes intended to meet the regulated demand by the distribution companies supplied by the SIC grid. Accordingly, as part of one of such bidding processes, 91% of the tendered energy was awarded in December 2014, leaving only 9% yet to be tendered in future bidding processes.
ENERGY SALES
(in GWh)
1,000
Given the enforcement of Law 20,085, supply bidding processes are managed by the CNE for the first time in 2015. During the first half of 2015, CNE requested all Distribution Companies to submit their regulated customer demand projections. Based on such information, as well as an adjusted projection by the Commission, CNE issued a Bidding Process Report on the overall requirements in terms of electricity supply. With that data, CNE launched two bidding processes: • Process 2015/02 (January 2017 – December 2036) launched in the first half of 2016, under which 100% of the tendered energy was awarded. • Process 2015/01 (January 2021 – December 2041) launched in the first half of 2016, under which 100% of the tendered power was awarded. A new bidding process took place in 2017: • Process 2017/01 (January 2023 – December 2042) to be executed in the first half of 2018, under which 100% of the tendered power will be awarded.
CUSTOMERS SERVED
(in thousands)
350
900
300
800
250
700 600
200
500 400
150
300
100
200
50
100 0
03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
Energy sales amounted to 941 GWh in 2017.
72
0
03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
Frontel’s customer base in 2017 amounted to 348,000 customers, up by 2.4% from 2016.
It is worth mentioning that by issuing Exemption Resolution No. 2.288 (ER 2,288) on August 26, 2011, the Superintendence of Electricity and Fuels (SEC) provided that any supply intended for regulated customers that fails to be provided by a bankrupt company should be supplied by the other grid stakeholders included in transfer balances prepared by Toll Division of the Load Economic Dispatch Center of Central Interconnected System (CDEC–SIC) as a percentage of their firm energy and later as a percentage of the energy actually dispatched and at the same prices agreed to in the supply agreements executed with the bankrupt company. Only in the event of early termination of a supply agreement ordered by a court of law, would the concession holder be obligated to tender the consumption that fails to be covered by the supply agreement that was terminated in advance. In 2017, Frontel’s investments totaled CLP 11,294 million.
2017
Energy Sales (GWh)
HV lines (km)
941
348 340 366
118
Installed MVA (MV/LV)
(CLP million)
16,843 16,719 13,765 13,647
329
134,959 53,589 55,368 6,974 12,962
292,022 279,544 130,648
Liabilities
122,972 161,374
Equity
Investments
EBITDA
2016
138,647
Revenues
205 340
2017
Assets
118
257
Other business transactions with related entities are the sale and purchase of materials at average wholesale price and short-term intercompany loans between related entities as a source of working capital. These checking account loans pay market interests calculated for the duration of the transaction and they are subject to a maximum amount, as provided in the bond contracts in effect.
Profit
365
LV lines (km)
Buying and selling electricity and tolls are the main business transactions with related entities. The electricity prices at which these transactions are carried out are set by the regulator or the market, while toll rates are controlled by the regulatory framework of the sector.
Gross Margin
MV lines (km)
Installed MVA (HV/MV)
2016
931
Employees
BUSINESS TRANSACTIONS WITH RELATED ENTITIES
FINANCIALS
OPERATING FIGURES
Customers (thousands)
Frontel represents 26.38% of Inversiones Eléctricas del Sur S.A.’s assets (indirect owner).
156,572
11,294 11,769 19,303 26,716
73
SAGESA
Company Type: Closely Held Corporation Subscribed and Paid-up Capital: CLP 25,587,086 thousand Inv. Eléctricas del Sur S.A. Interest: 99,9% (Direct and Indirect)
SAGESA S.A.
Subsidiary Sagesa is a generation company that operates from regions Bío Bío to Los Lagos. It currently owns a 46 MW gas/diesel-fueled power plant and a group of mini diesel power plants with combined capacity of 165 MW.
Cabo Leones Maitencillo 2x220 kV” with a 99.99% and a 0.01% interest, respectively.
A portion of the power generated by this company is sold in CDEC-SIC’s spot market through related entity Sociedad Generadora Austral S.A (SGA), and its revenues originate from the sale of energy and power in that market, and the remainder from sales to related entities Saesa, Frontel, and Luz Osorno.
Sagesa represents 0.003% of Inversiones Eléctricas del Sur S.A.’s assets (indirect owner).
Sagesa was incorporated on December 30, 2011, after a corporate restructuring that resulted in the splitup of Sociedad Austral de Generación y Energía Chile S.A. (former Sagesa or Legal Successor) into the Legal Successor and Sagesa. Sagesa S.A. was assigned most of the assets and liabilities of the old Sagesa, and the line of business, that is, generation of electric power.
Buying and selling electricity and tolls are the main business transactions with related entities. The electricity prices at which these transactions are carried out are set by the regulator or the market, while toll rates are controlled by the regulatory framework of the sector. The company also participates in intercompany loans, which are checking account loans that pay market interests calculated for the duration of the transaction.
In July 2016, Sagesa and Inversiones Eléctricas del Sur acquired the company called “Línea de Transmisión
In 2017, Sagesa’s investments totaled CLP 1,945 million.
BUSINESS TRANSACTIONS WITH RELATED ENTITIES
CLASSIFIED STATEMENT OF FINANCIAL POSITION (AS OF DECEMBER 31, 2017 AND 2016)
CLP thousand
DEC-31-2017
DEC-31-2016
ASSETS Current Assets
6,081,360
5,193,718
Non-Current Assets
77,570,183
67,874,293
TOTAL ASSETS
83,651,543
73,068,011
CLP thousand
DEC-31-2017
DEC-31-2016
53,352,776
37,838,916
7,259,695
7,563,310
TOTAL LIABILITIES
60,612,471
45,402,226
TOTAL NET EQUITY
23,039,072
27,665,785
TOTAL NET EQUITY AND LIABILITIES
83,651,543
73,068,011
NET EQUITY AND LIABILITIES Current Liabilities Non-Current Liabilities
74
STATEMENTS OF COMPREHENSIVE INCOME BY (AS OF DECEMBER 31, 2017 AND 2016)
CLP thousand
DEC-31-2017
DEC-31-2016
Gross Margin
6,196,076
6,723,991
(4,309,094)
(2,096,225)
1,824,894
1,203,114
(2,484,200)
(893,111)
LOSSES BEFORE TAXES Income Tax LOSS
STATEMENTS OF CASH FLOW UNDER THE DIRECT METHOD (AS OF DECEMBER 31, 2017 AND 2016)
CLP thousand
DEC-31-2017
Net cash flows from (used in) operating activities
DEC-31-2016
2,378,696
5,784,806
Net cash flows from (used in) investing activities
(14,689,175)
(20,649,842)
Net cash flows from (used in) financing activities
11,356,253
15,400,180
(264)
221,912
(954,490)
757,056
977,194
220,138
22,704
977,194
Net increase (decrease) in cash and cash equivalents from foreign exchange rate variation NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of period CASH AND CASH EQUIVALENTS AT END OF PERIOD
STATEMENT OF CHANGES IN NET EQUITY (AS OF DECEMBER 31, 2017 AND 2016)
DEC-31-2017
DEC-31-2016
Restated Initial Balance
27,665,785
30,414,403
Changes in Equity
(4,626,713)
(2,748,618)
FINAL BALANCE OF CURRENT PERIOD
23,039,072
27,665,785
CLP thousand
OTHER FINANCIALS
(CLP million) 2017
Investments (consolidated)
14,700 19,118
EBITDA
2016
1,834 2,761
75
STS SISTEMA DE TRANSMISIÓN DEL SUR S.A.
STS’ main activity is providing energy transmission and transformation services to generation companies that hold supply agreements with distribution companies in the regions of Bío Bío, Araucanía, Los Ríos, and Los Lagos, including Saesa, Frontel, and electric co-operatives. The largest generation companies served by STS are Puyehue and Capullo. In addition, STS engages in the provision of various services inherent to power transmission, like advisory services on design, construction, maintenance and operation of grids. These services are compensated through the tolls paid by users of the various transmission facilities, the price, terms, and indexation formulas of which are laid down in Executive Order No. 14 of the Ministry of Energy, whereby zonal transmission tariffs are set and which was published in the Official Gazette’s issue of April 9, 2013. Sistema de Transmisión del Sur S.A. (“old STS”) was merged into Sociedad Austral de Generación y Energía Chile S.A. (current STS and legal successor) by acquisition on May 31, 2012. As part of the transaction Sociedad Austral de Generación y Energía Chile S.A. was assigned all the assets and liabilities of the old STS and the new company was renamed Sistema de Transmisión del Sur S.A., STS. On March 4, 2015, Sistema de Transmisión del Sur
76
Company Type: Closely Held Corporation Subscribed and Paid-up Capital: CLP 32,135,483 thousand Inv. Eléctricas del Sur S.A. Interest: 99.9% (Direct and Indirect)
S.A. and Eléctrica Puntilla S.A. incorporated Sistema de Transmisión del Centro S.A., “STC”, a company devoted to construction, operation and maintenance of power transmission facilities, development and marketing of own or third-party systems for transmission and transformation of electric power. In 2017, STS’s investments in projects and facility upgrades totaled CLP 23,149 million. STS represents 19.73% of Saesa’s assets.
BUSINESS TRANSACTIONS WITH RELATED ENTITIES Buying and selling electricity and tolls are the main business transactions with related entities. The electricity prices at which these transactions are carried out are set by the regulator or the market, while toll rates are controlled by the regulatory framework of the sector. On the other hand, there is the purchase and sale of materials that is carried out at average warehouse prices and the company also participates in intercompany loans, which are checking account loans that pay market interests calculated for the duration of the transaction.
INDIVIDUAL OPERATING FIGURES
CONSOLIDATED FINANCIALS 2017
2016
96
Employees
1,082 842
1,148
220-110-66 kV Installed MVA
730
220-110-66 /23-13.2 kV Installed MVA
1,100 829
30,424
Profit
11
14,984 10,995
251,271
Assets
216,938
107,897
Liabilities
Investments
11
54 34
25,768
71,425
143,373
Equity
THIRD PARTY FACILITIES OPERATED BY STS
110-66/23-13.2 kV Installed MVA
26,165
Gross Margin
220-110-66 kV HV lines (km)
EBITDA
2016
30,730
Revenues
78
OWN FACILITIES
110-66 kV HV lines (km)
2017
(CLP million)
145,514
23,149 15,818
24,086 20,104
77
EDELAYSEN
Company Type: Closely Held Corporation Subscribed and Paid-up Capital: CLP 37,005,894 thousand Inv. Eléctricas del Sur S.A. Interest: 93.22% (Indirect)
EMPRESA ELÉCTRICA DE AISÉN S.A.
Edelaysen engages in electric power generation, transmission and distribution activities in the province of Palena, Los Lagos Region, and Aysén Region through five off-grid systems: Cisnes, Huichas, Villa O’Higgins, Amengual-La Tapera, and Santa Bárbara; and three medium-voltage grids: Aysén, Palena, and General Carrera. Edelaysen is essentially a vertically-integrated generation company that distributes electric power in the areas in which it was awarded a concession and where it holds municipal permits. It also sells medium voltage power to Saesa in Palena. In order to meet demand, support growth and reliability of its grid, the company invested a total of CLP 4,440 million in 2017.
POWER PLANT CAPACITY NUMBER OF POWER PLANTS
Edelaysen represents 9.65% of Saesa’s assets.
BUSINESS TRANSACTIONS WITH RELATED ENTITIES Edelaysen’s main business transactions with related entities include the sale and purchase of materials at average wholesale price and short-term intercompany loans that pay market interests calculated for the duration of the transaction.
ENERGY SALES
(in GWh)
MW
WIND
1
3.8
HYDROPOWER
7
24.6
DIESEL
19
39.9
TOTAL
27
68.3
CUSTOMERS SERVED
(in thousands)
50
160 140
40
120 100
30
80
20
60 40
10
20 0
03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
Energy sales amounted to 141 GWh in 2017.
78
0
03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
Edelaysen’s customer base at the end of 2017 was 46,000 customers.
OPERATING FIGURES
FINANCIALS 2017
141
Energy Sales
Customers (thousands)
Employees
(CLP million)
2016
2017
21,964
Revenues
141
19,422 17,362
Gross Margin
46 45
Profit
92 72
11,954
5,663 2,936
92,362
Assets
HV lines (km)
328
1,926
MV lines (km)
LV lines (km)
Installed MVA (MV/LV)
86,905 14,322
Liabilities
328
12,831 78,040
Equity
74,074
1,902
1,019 Investments
1,003
41 39
EBITDA
2016
4,440 5,156
9,412 5,802
79
LUZ OSORNO
Company Type: Closely Held Corporation Subscribed and Paid-up Capital: CLP 10,557,505 thousand Inv. Eléctricas del Sur S.A. Interest: 99.9% (Indirect)
COMPAÑÍA ELÉCTRICA OSORNO S.A.
Luz Osorno S.A. engages in distribution and sales of electric power in rural areas of the province of Osorno and in some towns in the provinces of Valdivia and Llanquihue. At present, supply is the matter of contracts executed with Endesa, Colbún, Enel, Caren, ERNC, El Morado, Chungungo, SPV P4, San Juan, Pelumpen, Santiago Solar, Aela, Abengoa, Ibereolica, SCBII, and Amunche Solar. However, the companies awarded the contract under the last supply tender will join this group shortly. The National Energy Commission–CNE (Comisión Nacional de Energía) has advanced joint bidding processes intended to meet the regulated demand by the distribution companies supplied by the SIC grid. Accordingly, as part of one of such bidding processes, 91% of the tendered energy was awarded in December 2014, leaving only 9% yet to be tendered in future bidding processes. Given the enforcement of Law 20,085, supply bidding processes are managed by the CNE for the first time in 2015. During the first half of 2015, CNE requested
ENERGY SALES
(in GWh)
all Distribution Companies to submit their regulated customer demand projections. Based on such information, as well as an adjusted projection by the Commission, CNE issued a Bidding Process Report on the overall requirements in terms of electricity supply. With that data, CNE launched two bidding processes: • Process 2015/02 (January 2017 – December 2036) launched in the first half of 2016, under which 100% of the tendered energy was awarded. • Process 2015/01 (January 2021 – December 2041) launched in the first half of 2016, under which 100% of the tendered power was awarded. A new bidding process took place in 2017: • Process 2017/01 (January 2024 – December 2042) to be executed in the first half of 2018, under which 100% of the tendered power will be awarded. It is worth mentioning that by issuing Exemption Resolution No. 2,288 (ER 2288) on August 26, 2011, the Superintendence of Electricity and Fuels (SEC) provided that any supply intended for regulated custo-
CUSTOMERS SERVED
(in thousands)
25
160 140
20
120 100
15
80
10
60 40
5
20 0
03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
Energy sales amounted to 146 GWh in 2017.
80
0
03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
Luz Osorno’s customer base at the end of 2017 was 22,000 customers.
mers that fails to be supplied by a bankrupt company should be supplied by the other grid stakeholders included in transfer balances prepared by Toll Division of the Load Economic Dispatch Center of Central Interconnected System (CDEC–SIC) as a percentage of their firm energy and later as a percentage of the energy actually dispatched and at the same prices agreed to in the supply agreements executed with the bankrupt company. Only in the event of early termination of a supply agreement ordered by a court of law, would the concession holder be obligated to tender the consumption that fails to be covered by the supply agreement that was terminated in advance. Investments in 2017 totaled CLP 1,417 million, mostly to satisfy demand growth and increase geographic coverage.
OPERATING FIGURES
THIRD PARTY TRANSACTIONS Buying and selling electricity and tolls are the main business transactions with related entities. The electricity prices at which these transactions are carried out are set by the regulator or the market, while toll rates are controlled by the regulatory framework of the sector. Luz Osorno also engages in the sale and purchase of materials at average wholesale price and short-term intercompany loans that pay market interests calculated for the duration of the transaction.
FINANCIALS 2017
146
Energy Sales
Customers (thousands)
Luz Osorno represents 2.17% of Saesa’s assets.
2016
2017
148
19,231 7,165
Gross Margin
22
5,170
21 2,838 2,130
20 22 26,408
Assets HV lines (km)
22,777
11 11
10,049
Liabilities
3,739
MV lines (km)
3,746
6,918 16,358
Equity
15,859
715
LV lines (km)
Installed MVA (MV/LV)
2016
21,332
Revenues
Profit Employees
(CLP million)
689
62 61
Investments
EBITDA
1,417 1,266 4,632 3,510
81
SGA SOCIEDAD GENERADORA AUSTRAL S.A.
SGA focuses on the development and marketing of own or third-party systems for transmission and transformation of electric power. Similarly, it provides advisory services in engineering, design, construction, maintenance, and operation of third-party transmission grids, and engages in energy trade and other related activities. SGA was incorporated on March 31, 2003 as a result of STS’s split-up, as adopted on occasion of the Extraordinary Shareholders’ Meeting held on June 25, 2003. Accordingly, SGA was assigned assets and liabilities at the book value of March 31, 2003. SGA’s EBITDA as of December 31, 2017 amounted to CLP 1,053 million.
Company Type: Closely Held Corporation Subscribed and Paid-up Capital: CLP 3,160,921 thousand Inv. Eléctricas del Sur S.A. Interest: 99.9% (Indirect)
STS represents 0.63% of Saesa’s assets. BUSINESS TRANSACTIONS WITH RELATED ENTITIES Buying and selling electricity and tolls are the main business transactions with related entities. The electricity prices at which these transactions are carried out are set by the regulator or the market, while toll rates are controlled by the regulatory framework of the sector. The company also participates in intercompany loans, which are checking account loans that pay market interests calculated for the duration of the transaction.
CLASSIFIED STATEMENT OF FINANCIAL POSITION (AS OF DECEMBER 31, 2017 AND 2016) CLP thousand
DEC-31-2017
DEC-31-2016
7,664,307
8,604,867
489,093
146,879
8,153,400
8,751,746
DEC-31-2017
DEC-31-2016
3,425,026
3,154,364
-
-
TOTAL LIABILITIES
3,425,026
3,154,364
TOTAL NET EQUITY
4,728,374
5,597,382
TOTAL NET EQUITY AND LIABILITIES
8,153,400
8,751,746
ASSETS Current Assets Non-Current Assets TOTAL ASSETS
CLP thousand NET EQUITY AND LIABILITIES Current Liabilities Non-Current Liabilities
82
STATEMENTS OF COMPREHENSIVE INCOME BY (AS OF DECEMBER 31, 2017 AND 2016) CLP thousand
DEC-31-2017
DEC-31-2016
Gross Margin
1,094,452
694,746
INCOME BEFORE INCOME TAXES
1,739,411
1,257,945
Income Tax
(284,938)
(182,051)
NET PROFIT
1,454,473
1,075,894
STATEMENTS OF CASH FLOW UNDER THE DIRECT METHOD (AS OF DECEMBER 31, 2017 AND 2016) CLP thousand
DEC-31-2017
DEC-31-2016
Net cash flows from (used in) operating activities
(296,400)
1,185,182
Net cash flows from (used in) investing activities
2,303,622
(6,038,104)
Net cash flows from (used in) financing activities
(1,740,419)
-
2
2
266,805
(4,852,920)
85,448
4,398,368
352,253
85,448
Net increase (decrease) in cash and cash equivalents from foreign exchange rate variation NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of period CASH AND CASH EQUIVALENTS AT END OF PERIOD
STATEMENT OF CHANGES IN NET EQUITY (AS OF DECEMBER 31, 2017 AND 2016) CLP thousand
DEC-31-2017
DEC-31-2016
Restated Initial Balance
5,597,382
5,174,266
Changes in Equity
(869,008)
423,116
4,728,374
5,597,382
FINAL BALANCE OF CURRENT PERIOD
83
STC SISTEMA DE TRANSMISIÓN DEL CENTRO S.A.
On March 4, 2015, Sistema de Transmisión del Sur S.A. and Eléctrica Puntilla S.A. incorporated Sistema de Transmisión del Centro S.A. (STC), a company devoted to construction, operation and maintenance of power transmission facilities, development and marketing of own or third-party systems for transmission and transformation of electric power.
Company Type: Closely Held Corporation Subscribed and Paid-up Capital: CLP 23,238,005 thousand Inv. Eléctricas del Sur S.A. Interest: 50.1% (Indirect)
Sistema de Transmisión del Sur S.A.’s interest in STC is 50.1%, while Eléctrica La Puntilla owns 49.9%. At present, STC is developing the 2x220 kV San Fabián-Ancoa Transmission Project, which will be managed and operated by STC upon commissioning. STC’s investments in 2017 totaled CLP 12,873 million.
CLASSIFIED STATEMENT OF FINANCIAL POSITION (AS OF DECEMBER 31, 2017 AND 2016) CLP thousand
DEC-31-2017
DEC-31-2016
ASSETS 5.011.947
3.205.051
Non-Current Assets
42.993.522
33.644.359
TOTAL ASSETS
48.005.469
36.849.410
DEC-31-2017
DEC-31-2016
Current Assets
CLP thousand NET EQUITY AND LIABILITIES
25,723,805
12,822,190
16,006
9,907
TOTAL LIABILITIES
25,739,811
12,832,097
TOTAL NET EQUITY
22,265,658
24,017,313
TOTAL NET EQUITY AND LIABILITIES
48,005,469
36,849,410
Current Liabilities Non-Current Liabilities
84
STATEMENTS OF COMPREHENSIVE INCOME BY FUNCTION (AS OF DECEMBER 31, 2017 AND 2016) CLP thousand
DEC-31-2017
Gross Margin
DEC-31-2016
-
-
PROFIT (LOSS) BEFORE INCOME TAX
296,078
(27,040)
Income Tax
(58,051)
39,753
NET PROFIT
238,027
12,713
STATEMENTS OF CASH FLOW UNDER THE DIRECT METHOD (AS OF DECEMBER 31, 2017 AND 2016) CLP thousand
DEC-31-2017
Net cash flows from (used in) operating activities
DEC-31-2016
(48,293)
(68,451)
Net cash flows from (used in) investing activities
(13,873,093)
(13,798,379)
Net cash flows from (used in) financing activities
13,910,943
13,814,313
(4,062)
14
(14,505)
(52,503)
15,735
68,238
1,230
15,735
Net increase (decrease) in cash and cash equivalents from foreign exchange rate variation NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of period CASH AND CASH EQUIVALENTS AT END OF PERIOD
STATEMENT OF CHANGES IN NET EQUITY (AS OF DECEMBER 31, 2017 AND 2016) CLP thousand
DEC-31-2017
DEC-31-2016
Restated Initial Balance
24,017,313
11,844,160
Changes in Equity
(1,751,655)
12,173,153
22,265,658
24,017,313
FINAL BALANCE OF CURRENT PERIOD
85
STN SISTEMA DE TRANSMISIÓN DEL NORTE S.A.
On September 11, 2014, Saesa and Alusa Ingeniería Limitada (currently Alumini Ingeniería Limitada) incorporated Sistema de Transmisión del Norte S.A. (STN), a company devoted to construction, operation and maintenance of power transmission facilities, and transmission and transformation of electric power. In January 2017, Alumini Ingeniería Ltda. sold its share
Company Type: Closely Held Corporation Subscribed and Paid-up Capital: CLP 16,630,018 thousand Inv. Eléctricas del Sur S.A. Interest: 100% (Indirect)
to Sistema de Transmisión del Sur S.A. Consequently, Saesa’s share in the company amounts to 90%, while Sistema de Transmisión del Sur S.A owns 10%. STN’s investments in 2017 totaled CLP 84 million.
CLASSIFIED STATEMENT OF FINANCIAL POSITION (AS OF DECEMBER 31, 2017 AND 2016) CLP thousand
DEC-31-2017
DEC-31-2016
2,883,617
12,540,594
Non-Current Assets
41,527,533
45,437,325
TOTAL ASSETS
44,411,150
57,977,919
DEC-31-2017
DEC-31-2016
24,247,186
56,250,751
3,126,445
884,725
TOTAL LIABILITIES
27,373,631
57,135,476
TOTAL NET EQUITY
17,037,519
842,443
TOTAL NET EQUITY AND LIABILITIES
44,411,150
57,977,919
ASSETS Current Assets
CLP thousand NET EQUITY AND LIABILITIES Current Liabilities Non-Current Liabilities
86
STATEMENTS OF COMPREHENSIVE INCOME BY FUNCTION (AS OF DECEMBER 31, 2017 AND 2016) CLP thousand
DEC-31-2017
DEC-31-2016
Gross Margin
6,698,470
4,012,083
INCOME BEFORE INCOME TAXES
2,050,023
1,242,039
Income Tax
(520,186)
(303,251)
NET PROFIT
1,529,837
938,788
STATEMENTS OF CASH FLOW UNDER THE DIRECT METHOD (AS OF DECEMBER 31, 2017 AND 2016) CLP thousand
DEC-31-2017
Net cash flows from (used in) operating activities
DEC-31-2016
15,345,601
(1,075,491)
Net cash flows from (used in) investing activities
(71,978)
(18,965,680)
Net cash flows from (used in) financing activities
(14,939,014)
19,654,238
Net increase (decrease) in cash and cash equivalents from foreign exchange rate variation
(15,987)
(14,740)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
318,622
(401,673)
1,881
403,554
320,503
1,881
Cash and cash equivalents at beginning of period
CASH AND CASH EQUIVALENTS AT END OF PERIOD
STATEMENT OF CHANGES IN NET EQUITY (AS OF DECEMBER 31, 2017 AND 2016) CLP thousand Restated Initial Balance Changes in Equity
FINAL BALANCE OF CURRENT PERIOD
DEC-31-2017
DEC-31-2016
842,443
(463,226)
16,195,076
1,305,669
17,037,519
842,443
87
SATT S.A. SOCIEDAD AUSTRAL DE TRANSMISIÓN TRONCAL S.A.
On October 15, 2015, Sociedad Austral de Electricidad S.A.–Saesa (99.9% interest) and subsidiary Sistema de Transmisión del Sur S.A.–STS (0.1% interest) incorporated Sociedad Austral de Transmisión Troncal S.A. (SATT), a company devoted to construction, operation and maintenance of power transmission facilities, development and marketing of own or third-party sys-
Company Type: Closely Held Corporation Subscribed and Paid-up Capital: CLP 354,377 thousand Inv. Eléctricas del Sur S.A. Interest: 100% (Indirect)
tems for transmission and transformation of electric power. SATT represents 0.19% of Saesa’s assets. In 2017, SATT’s investments totaled CLP 22,786 million.
CLASSIFIED STATEMENT OF FINANCIAL POSITION (AS OF DECEMBER 31, 2017 AND 2016) CLP thousand
DEC-31-2017
DEC-31-2016
ASSETS 6,971,687
2,357,390
Non-Current Assets
32,240,435
12,045,190
TOTAL ASSETS
39,212,122
14,402,580
DEC-31-2017
DEC-31-2016
37,746,505
13,964,955
60,695
23,034
37,807,200
13,987,989
1,404,922
414,591
39,212,122
14,402,580
Current Assets
CLP thousand NET EQUITY AND LIABILITIES Current Liabilities Non-Current Liabilities
TOTAL LIABILITIES TOTAL NET EQUITY TOTAL NET EQUITY AND LIABILITIES
88
STATEMENTS OF COMPREHENSIVE INCOME BY FUNCTION (AS OF DECEMBER 31, 2017 AND 2016) CLP thousand
DEC-31-2017
Gross Margin
DEC-31-2016
980,842
109,564
INCOME BEFORE INCOME TAXES
1,091,803
53,048
Income Tax
(255,940)
(33,354)
NET PROFIT
835,863
19,694
STATEMENTS OF CASH FLOW UNDER THE DIRECT METHOD (AS OF DECEMBER 31, 2017 AND 2016) CLP thousand
DEC-31-2017
Net cash flows from (used in) operating activities
DEC-31-2016
803,742
(27,635)
Net cash flows from (used in) investing activities
(23,943,953)
(12,965,475)
Net cash flows from (used in) financing activities
23,142,698
12,652,122
768
(11,854)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
3,255
(352,842)
Cash and cash equivalents at beginning of period
2,948
355,790
CASH AND CASH EQUIVALENTS AT END OF PERIOD
6,203
2,948
Net increase (decrease) in cash and cash equivalents from foreign exchange rate variation
STATEMENT OF CHANGES IN NET EQUITY (AS OF DECEMBER 31, 2017 AND 2016) CLP thousand
DEC-31-2017
DEC-31-2016
Restated Initial Balance
414,591
355,472
Changes in Equity
990,331
59,119
1,404,922
414,591
FINAL BALANCE OF CURRENT PERIOD
89
INVERSIONES LOS RÍOS LTDA. INVERSIONES LOS RÍOS LIMITADA
On July 1, 2009, Inversiones Eléctricas del Sur S.A and Inversiones Grupo Saesa Ltda. Incorporated Inversiones Los Ríos Ltda., with shares of 99.997104% and 0.002896%, respectively. The purpose of the company is to invest in all kinds of tangible assets and to pursue business for its own or for third parties. On July 1, 2009, Inversiones Eléctricas del Sur S.A. contributed, assigned and transferred its interest in Inversiones Los Lagos Ltda. to Inversiones Los Ríos Ltda. Subsequently, on August 5, 2009, Inversiones Grupo Saesa Ltda. Sold, assigned and transferred its entire interest in Inversiones Los Lagos Ltda. to Inversiones Los Ríos Ltda. As a result, Inversiones Los Ríos Ltda. acquired 100% of the equity rights, which led to dissolution of Inversiones Los Lagos Ltda. and all its rights and obligations
Company Type: Limited Liability Company Subscribed and Paid-up Capital: CLP 464,393,585 thousand Inv. Eléctricas del Sur S.A. Interest: 99.99% (Direct)
were therefore transferred to Inversiones Los Ríos Ltda. The Company’s EBITDA as of December 31, 2017 amounted to CLP 99,263 million. Inversiones Los Ríos Ltda. represents 83.17% of Inversiones Eléctricas del Sur S.A.’s assets. BUSINESS TRANSACTIONS WITH RELATED ENTITIES Buying and selling electricity and tolls are the main business transactions with related entities. The electricity prices at which these transactions are carried out are set by the regulator or the market, while toll rates are controlled by the regulatory framework of the sector. The company also participates in intercompany loans that pay market interests calculated for the duration of the transaction.
CLASSIFIED STATEMENT OF FINANCIAL POSITION (AS OF DECEMBER 31, 2017 AND 2016) CLP thousand
DEC-31-2017
DEC-31-2016
ASSETS 197,639,825
171,829,561
Non-Current Assets
1,061,292,673
983,881,444
TOTAL ASSETS
1,258,932,498
1,155,711,005
DEC-31-2017
DEC-31-2016
Current Liabilities
373,877,095
276,878,596
Non-Current Liabilities
272,311,106
276,905,216
Current Assets
CLP thousand NET EQUITY AND LIABILITIES
TOTAL LIABILITIES
646,188,201
553,783,812
TOTAL NET EQUITY
612,744,297
601,927,193
1,258,932,498
1,155,711,005
TOTAL NET EQUITY AND LIABILITIES
90
STATEMENTS OF COMPREHENSIVE INCOME BY FUNCTION (AS OF DECEMBER 31, 2017 AND 2016) CLP thousand
DEC-31-2017
DEC-31-2016
Gross Margin
205,519,994
177,817,740
54,201,769
46,745,484
Income Tax
(13,811,201)
(10,955,349)
NET PROFIT
40,390,568
35,790,135
INCOME BEFORE INCOME TAXES
STATEMENTS OF CASH FLOW UNDER THE DIRECT METHOD (AS OF DECEMBER 31, 2017 AND 2016) CLP thousand
DEC-31-2017
DEC-31-2016
Net cash flows from (used in) operating activities
133,023,409
117,760,487
Net cash flows from (used in) investing activities
(126,972,189)
(123,763,501)
Net cash flows from (used in) financing activities
(5,283,275)
(8,369,822)
7,154
383,691
775,099
(13,989,145)
Cash and cash equivalents at beginning of period
19,633,230
33,622,375
CASH AND CASH EQUIVALENTS AT END OF PERIOD
20,408,329
19,633,230
Net increase (decrease) in cash and cash equivalents from foreign exchange rate variation NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
STATEMENT OF CHANGES IN NET EQUITY (AS OF DECEMBER 31, 2017 AND 2016) CLP thousand Restated Initial Balance Changes in Equity
FINAL BALANCE OF CURRENT PERIOD
DEC-31-2017
DEC-31-2016
601,927,193
599,910,322
10,817,104
2,016,871
612,744,297
601,927,193
91
INVERSIONES LOS LAGOS IV LTDA.
Company Type: Limited Liability Company Subscribed and Paid-up Capital: CLP 25,061,634 thousand Inv. Eléctricas del Sur S.A. Interest: 99.92% (Indirect)
INVERSIONES LOS LAGOS IV LIMITADA
Inversiones Los Lagos IV Ltda. was created on August 5, 2009, upon Inversiones Los Lagos Ltda.’s split up into four different companies. The purpose of the company is to invest in all kinds of tangible assets and to pursue business for its own or for third parties. The Company’s main asset is its interest in Sagesa S.A. Its EBITDA as of December 31, 2017 amounted to CLP 1,828 million. Inversiones Los Lagos IV Ltda. represents 3.86% of Inversiones Eléctricas del Sur S.A.’s assets (indirect owner).
BUSINESS TRANSACTIONS WITH RELATED ENTITIES Buying and selling electricity and tolls are the main business transactions with related entities. The electricity prices at which these transactions are carried out are set by the regulator or the market, while toll rates are controlled by the regulatory framework of the sector. The company also participates in intercompany loans, which are checking account loans that pay market interests calculated for the duration of the transaction.
CLASSIFIED STATEMENT OF FINANCIAL POSITION (AS OF DECEMBER 31, 2017 AND 2016) CLP thousand
DEC-31-2017
DEC-31-2016
6,101,158
5,208,353
Non-Current Assets
78,239,375
68,547,716
TOTAL ASSETS
84,340,533
73,756,069
DEC-31-2017
DEC-31-2016
53,564,719
38,038,428
7,259,694
7,563,310
TOTAL LIABILITIES
60,824,413
45,601,738
TOTAL NET EQUITY
23,516,120
28,154,331
TOTAL NET EQUITY AND LIABILITIES
84,340,533
73,756,069
ASSETS Current Assets
CLP thousand NET EQUITY AND LIABILITIES Current Liabilities Non-Current Liabilities
92
STATEMENTS OF COMPREHENSIVE INCOME BY FUNCTION (AS OF DECEMBER 31, 2017 AND 2016) CLP thousand Gross Margin
PROFIT (LOSS) BEFORE INCOME TAX
Income Tax
PROFIT (LOSS)
DEC-31-2017
DEC-31-2016
6,196,076
6,723,991
(4,250,370)
(2,053,352)
1,826,285
1,204,711
(2,424,085)
(848,641)
STATEMENTS OF CASH FLOW UNDER THE DIRECT METHOD (AS OF DECEMBER 31, 2017 AND 2016) CLP thousand
DEC-31-2017
Net cash flows from (used in) operating activities
DEC-31-2016
2,378,696
5,784,806
Net cash flows from (used in) investing activities
(16,977,539)
(20,731,709)
Net cash flows from (used in) financing activities
13,644,617
15,482,047
(262)
221,912
(954,488)
757,056
977,194
220,138
22,706
977,194
Net increase (decrease) in cash and cash equivalents from foreign exchange rate variation NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of period CASH AND CASH EQUIVALENTS AT END OF PERIOD
STATEMENT OF CHANGES IN NET EQUITY (AS OF DECEMBER 31, 2017 AND 2016) CLP thousand
DEC-31-2017
DEC-31-2016
Restated Initial Balance
28,154,331
30,855,247
Changes in Equity
(4,638,211)
(2,700,916)
FINAL BALANCE OF CURRENT PERIOD
23,516,120
28,154,331
93
L.T. CABO LEONES S.A. LÍNEA DE TRANSMISIÓN CABO LEONES S.A.
On July 19, 2016, Sagesa S.A. and Inversiones Eléctricas del Sur acquired the company called Sociedad Línea de Transmisión Cabo Leones S.A., the owner of the 110-km, 2x220 kV Cabo Leones-Maitencillo Transmission Line Project, with shares of 99.99% and 0.01%, respectively. The main business of this company is construction, operation and maintenance of power transmission facilities, development and marketing of own or
Company Type: Closely Held Corporation Subscribed and Paid-up Capital: CLP 13,585 thousand Inv. Eléctricas del Sur S.A. Interest: 99.99% (Direct and Indirect)
third-party systems for transmission and transformation of electric power. L.T. Cabo Leones S.A. represents 0.02% of Sagesa S.A.’s assets. In 2017, L.T. Cabo Leones S.A.’s investments totaled CLP 12,775 million and its EBITDA amounted to CLP 198 million.
CLASSIFIED STATEMENT OF FINANCIAL POSITION (AS OF DECEMBER 31, 2017 AND 2016) CLP thousand
DEC-31-2017
DEC-31-2016
4,172,627
1,891,803
Non-Current Assets
27,208,022
16,080,493
TOTAL ASSETS
31,380,649
17,972,296
DEC-31-2017
DEC-31-2016
31,245,640
17,964,294
-
23,907
31,245,640
17,988,201
ASSETS Current Assets
CLP thousand NET EQUITY AND LIABILITIES Current Liabilities Non-Current Liabilities TOTAL LIABILITIES TOTAL NET EQUITY TOTAL NET EQUITY AND LIABILITIES
94
135,009
(15,905)
31,380,649
17,972,296
STATEMENTS OF COMPREHENSIVE INCOME BY FUNCTION (AS OF DECEMBER 31, 2017 AND 2016) CLP thousand
DEC-31-2017
Gross Margin
208,810
-
PROFIT (LOSS) BEFORE INCOME TAX Income Tax PROFIT (LOSS)
DEC-31-2016
312,921
(47,153)
(113,676)
17,802
199,245
(29,351)
STATEMENTS OF CASH FLOW UNDER THE DIRECT METHOD (AS OF DECEMBER 31, 2017 AND 2016) CLP thousand
DEC-31-2017
Net cash flows from (used in) operating activities
DEC-31-2016
(13,764)
-
Net cash flows from (used in) investing activities
(14,651,952)
(16,953,800)
Net cash flows from (used in) financing activities
14,666,165
16,954,529
Net increase (decrease) in cash and cash equivalents from foreign exchange rate variation
2,831
-
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
3,280
729
729
-
4,009
729
Cash and cash equivalents at beginning of period CASH AND CASH EQUIVALENTS AT END OF PERIOD
STATEMENT OF CHANGES IN NET EQUITY (AS OF DECEMBER 31, 2017 AND 2016) CLP thousand
DEC-31-2017
DEC-31-2016
Restated Initial Balance
(15,905)
5,146
Changes in Equity
150,914
(21,051)
FINAL BALANCE OF CURRENT PERIOD
135,009
(15,905)
95
SUMMARY OF JOINT BUSINESSES ELETRANS S.A., ELETRANS II S.A. y ELETRANS III S.A.
Company Type: Closely Held Corporation Subscribed and Paid-up Capital of ELETRANS S.A.: US$39.0 million Subscribed and Paid-up Capital of ELETRANS II S.A.: US$1.0 million Subscribed and Paid-up Capital of ELETRANS II S.A.: US$2.0 million Inv. Eléctricas del Sur S.A. Interest: 50% (Indirect)
BOARD OF DIRECTORS:
REGULAR DIRECTORS: CHAIR, Waldo Fortin Cabezas, Chilean ID No. 4.556.889-K VICE-CHAIR Carlos Mauer Diaz Barriga, Foreign National Francisco Mualim Tietz, Chilean ID No. 6.139.056-1 Francisco Alliende Arriagada, Chilean ID No. 6.379.874-6 Allan Hughes García, Chilean ID No. 8.293.378-6 Juan Ignacio Parot Becker, Chilean ID No. 7.011.905-6
ALTERNATE DIRECTORS ELETRANS S.A. & ELETRANS II S.A.: Jorge Lesser García-Huidobro, Chilean ID No. 6.443.633-3 Marcelo Luengo Amar, Chilean ID No. 7.425.589-2 Víctor Vidal Villa, Chilean ID No. 9.987.057-5 Ben Hawkins, Foreign National Alberto Abreu, Foreign National.
ALTERNATE DIRECTORS ELETRANS III S.A.: Jorge Lesser García Huidobro, Chilean ID No. 6.443.633-3 Marcelo Luengo Amar, Chilean ID No. 7.425.589-2 Víctor Vidal Villa, Chilean ID No. 9.987.057-5 Ben Hawkins, Foreign National José Lau, Foreign National Alex Hernández, Foreign National
MANAGEMENT: GERENTE GENERAL Fulvio Stacchetti Encalada, Chilean ID No. 6.617.581-2 Civil Industrial Engineer DEPUTY GENERAL MANAGER: Julio Herrera Mahan, Chilean ID No. 13.225.404-4 Civil Electrical Engineer.
96
In June 2012, subsidiary Saesa and Chilquinta Energía S.A. (a non-Saesa Group company) incorporated Eletrans S.A. In June 2013, they incorporated Eletrans II S.A., and in June 2017 they incorporated Eletrans III S.A., all of them equally owned (50% interest each), to build and operate the trunk transmission (now called national transmission) projects awarded to a consortium established by both companies. The sole purpose of Eletrans S.A., Eletrans II S.A., and Eletrans III S.A. is the construction, operation, and maintenance of power transmission facilities; and the development, operation and trading of electric power systems owned thereby or by third parties, intended for transmission and transformation of electric power. Their main market segment is National Transmission, where they provide power transmission services to generation companies that hold supply agreements with distribution companies or unregulated customers. Eletrans S.A. and Eletrans III S.A. represent 1.32% and 0.08% of Saesa’s assets respectively. Eletrans II has a negative equity, therefore, it does not represent a percentage of Saesa’s total assets.
Statement of Financial Position of ELETRANS S.A. (functional currency US$) US$ thousand ASSETS
CLP thousand
DEC-31-2017
DEC-31-2016
DEC-31-2017
DEC-31-2016
22,294
14,598
13,705,237
9,772,923
NON-CURRENT ASSETS
150,600
121,453
92,581,350
81,309,140
TOTAL ASSETS
172,894
136,051
106,286,587
91,082,063
DEC-31-2017
DEC-31-2016
DEC-31-2017
DEC-31-2016
140,439
147,652
86,334,875
98,848,584
-
-
-
-
32,455
(11,601)
19,951,711
(7,766,521)
172,894
136,051
106,286,587
91,082,063
JAN-01-2016 DEC-31-2016
JAN-01-2017 DEC-31-2017
JAN-01-2016 DEC-31-2016
CURRENT ASSETS
EQUITY AND LIABILITIES CURRENT LIABILITIES NON-CURRENT LIABILITIES EQUITY TOTAL EQUITY AND LIABILITIES
Statements of comprehensive income
JAN-01-2017 DEC-31-2017
Income from ordinary activities
13,358
9,343
8,211,831
6,254,858
Cost of sales
(2,992)
(2,023)
(1,839,332)
(1,354,338)
GROSS PROFIT
10,366
7,320
6,372,499
4,900,520
Other income (losses)
6
(28)
3,689
(18,745)
Administrative expenses
(766)
(679)
(470,899)
(454,570)
GAINS FROM OPERATING ACTIVITIES
9,606
6,613
5,905,289
4,427,205
482
3,455
296,310
2,313,019
(5,047)
(4,902)
(3,102,643)
(3,281,742)
Capitalization of interests
2,169
1,495
1,333,393
1,000,858
Exchange rate differences
(1,108)
(3,795)
(681,143)
(2,540,639)
5
386
3,074
258,415
6,107
3,252
3,754,278
2,177,116
(1,755)
(1,034)
(1,078,886)
(692,232)
INCOME
4,352
2,218
2,675,392
1,484,884
Income attributable to owners of the controller
4,352
2,218
2,675,392
1,484,884
INCOME
4,352
2,218
2,675,392
1,484,884
Financial income Financial expenses
Profit and loss per adjustment unit INCOME BEFORE TAXES Expense from income taxes
Statement of comprehensive income
JAN-01-2017 DEC-31-2017
JAN-01-2016 DEC-31-2016
JAN-01-2017 DEC-31-2017
JAN-01-2016 DEC-31-2016
INCOME
4,352
2,218
2,675,392
1,484,884
Income related to hedge derivatives
2,189
3,045
1,345,688
1,465,470
Income taxes for cash flow hedges
(485)
(676)
(298,154)
(452,562)
TOTAL COMPREHENSIVE INCOME
6,056
4,587
3,722,926
3,070,859
97
Statement of Financial Position of ELETRANS II S.A. (functional currency US$) US$ thousand ASSETS CURRENT ASSETS
DEC-31-2017
DEC-31-2016
DEC-31-2017
DEC-31-2016
18,286
11,512
11,241,319
7,706,939 26,897,966
NON-CURRENT ASSETS
49,341
40,178
30,332,380
TOTAL ASSETS
67,627
51,690
41,573,698
34,604,904
DEC-31-2017
DEC-31-2016
DEC-31-2017
DEC-31-2016
70,744
53,433
43,489,874
35,771,791
87
3,159
53,483
2,114,856
EQUITY
(3,204)
(4,902)
(1,969,659)
(3,281,742)
TOTAL EQUITY AND LIABILITIES
67,627
51,690
41,573,698
34,604,904
JAN-01-2017 DEC-31-2017
JAN-01-2016 DEC-31-2016
JAN-01-2017 DEC-31-2017
JAN-01-2016 DEC-31-2016
EQUITY AND LIABILITIES CURRENT LIABILITIES NON-CURRENT LIABILITIES
Statements of comprehensive income Income from ordinary activities
-
-
-
-
Cost of sales
-
-
-
-
GROSS PROFIT
-
-
-
-
Other income Administrative expenses GAINS (LOSSES) FROM OPERATING ACTIVITIES
73
-
44,877
-
(27)
(21)
(16,598)
(14,059)
46
(21)
28,279
(14,059)
184
50
113,114
33,474
(2,489)
(1,648)
(1,530,113)
(1,103,287)
Capitalization of interests
1,740
1,230
1,069,665
823,448
Exchange rate differences
(204)
(685)
(125,409)
(458,587)
Financial income Financial expenses
-
-
-
-
(723)
(1,074)
(444,464)
(719,011)
196
290
120.491
194,146
LOSS
(527)
(784)
(323,973)
(524,864)
Loss attributable to owners of the controller
(527)
(784)
(323,973)
(524,864)
LOSS
(527)
(784)
(323,973)
(524,864)
Profit and loss per adjustment unit LOSS BEFORE TAXES Revenue (expense) from income taxes
Statement of comprehensive income
98
CLP thousand
JAN-01-2017 DEC-31-2017
JAN-01-2016 DEC-31-2016
JAN-01-2017 DEC-31-2017
JAN-01-2016 DEC-31-2016
LOSS
(527)
(784)
(323,973)
(524,864)
Income related to hedge derivatives
3,049
3,858
1,874,373
2,582,815
Income taxes for cash flow hedges
(824)
(1,041)
(506,554)
(696,918)
TOTAL COMPREHENSIVE INCOME
1,698
2,033
1,043,846
1,361,033
Statement of Financial Position of ELETRANS III S.A. (functional currency US$)
ASSETS CURRENT ASSETS NON-CURRENT ASSETS TOTAL ASSETS
EQUITY AND LIABILITIES CURRENT LIABILITIES NON-CURRENT LIABILITIES
US$ thousand
CLP thousand
DEC-31-2017
DEC-31-2016
1,222
751,225
835
513,316
2,057
1,264,541
DEC-31-2017
DEC-31-2016
27
16,598
-
-
EQUITY
2,030
1,247,943
TOTAL EQUITY AND LIABILITIES
2,057
1,264,541
JAN-01-2017 DEC-31-2017
JAN-01-2016 DEC-31-2016
Statements of comprehensive income Income from ordinary activities
-
-
Cost of sales
-
-
GROSS PROFIT
-
-
Other income (losses)
-
-
Administrative expenses
(5)
(3,074)
LOSSES FROM OPERATING ACTIVITIES
(5)
(3,074)
Financial income
5
3,074
Financial expenses
-
-
Capitalization of interests
-
-
41
25,205
-
-
41
25,205
(11)
(6,762)
INCOME
30
18,443
Income attributable to owners of the controller
30
18,443
INCOME
30
18,443
Exchange rate differences Profit and loss per adjustment unit INCOME BEFORE TAXES Expense from income taxes
Statement of comprehensive income
JAN-01-2017 DEC-31-2017
JAN-01-2016 DEC-31-2016
30
18,443
Income related to hedge derivatives
-
-
Income taxes for cash flow hedges
-
-
TOTAL COMPREHENSIVE INCOME
30
18,443
INCOME
99
STATEMENT OF LIABILITY In compliance with provisions under General Standard No. 30 issued by Securities and Insurance Supervisor (currently, the Financial Market Commission) and its subsequent amendments, the undersigned, in their capacity of Directors and Chief Executive Officer of the Company, hereby acknowledge and take responsibility for the accuracy of the information contained in this Annual Report as of December 31, 2017.
Iván Díaz-Molina / 14.655.033-9 CHAIR
Stacey Purcell / Foreign National REGULAR DIRECTOR
Ben Hawkins / Foreign National REGULAR DIRECTOR
Juan Ignacio Parot B. / 7.011.905-6 REGULAR DIRECTOR
Christopher Powell / Foreign National REGULAR DIRECTOR
Waldo Fortín Cabezas / 4.556.889-K REGULAR DIRECTOR
Dale Burgess / Foreign National REGULAR DIRECTOR
Francisco Alliende Arriagada / 6.379.874-6 CHIEF EXECUTIVE OFFICER
100
Jorge Lesser García-Huidobro / 6.443.633-3 VICE-CHAIR
Maintenance works. AysĂŠn Region.
ELÉCTRICAS DEL SUR S.A.
ANNUAL REPORT
2017