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13th Itaú BBA LatAm CEO Conference
M A Y | 2 0 1 8
Sustainable Value
Financial Highlights
Who we are
Largest publicly traded pure transmission utility in Brazil
Responsible for the transmission of 24% of Brazil’s power generation
Present in 17 Brazilian States
Responsible for >90% of the power load in the State of São Paulo
Benchmark player in operational efficiency and indicators of quality
18,600 km of transmission lines
126 substations
65,100 MVA of transformation capacity
Regulatory Net Revenue¹: BRL 2.2 billion
Regulatory EBITDA¹: BRL 1.8 billion (margin of 82%)
14,300 km of transmission lines
110 substations
Substation
Line Entrance
Transmission Lines (TL)
In operation
Nota: ¹ Last 12 months ended on 03/31/2018
Organic growth: Average CapEx of BRL 205 million/year and average revenue (RAP) of BRL 35 million/year
Auctions¹: CapEx of BRL 2.5 billion and revenue (RAP) of BRL 400 million/year
+1,200 km of transmission lines
+6,000 MVA of transformation capacity
Current investments
Note: ¹ ISA CTEEP’s investments in 8 projects acquired in 2016 and 2017 auctions
Largest publicly traded company in Brazil’s transmission sector Under construction
Substation
Line Entrance
Transmission Lines (TL)
In operation
A successful story of resilience and increase in operational assets and financial results
1999 2013 2001 2012 2006 2007 2017 2016
Km of transmission lines
Consolidated regulatory
EBITDA in BRL millions
133.8 705.6 1,128.8 1,575.8 194 738.1 1,350.8
11,548 12,317 15,388 17,688 18,642
Transmissão Paulista merger with EPTE
Origin from CESP spin off and creation of Transmissão Paulista
Set up of RBSE compensation
(Ordinance 120 Ministry of Mines
and Energy)
Winner bid for 3 lots in October
auction
Expansion to 17 Brazilian states through greenfield projects and acquisitions
ISA acquires CTEEP and
becomes the controlling
shareholder
Winner bid for 5 lots in April auction
Main Concession Contract (059/2001) extended for 30 years
Tickers: TRPL3¹ and TRPL4²
Average daily volume in 1Q18: BRL 18 million
Market cap³: BRL 10.5 billion
Free Float: 77% of Brazilian investors 23% of foreign investors
American Depositary Receipt (“ADR”): “CTPTY” and “CTPZY”
Coverage of 15 institutions: 60% recommend Buy 40% recommend Hold
Common shares: 89.5% Preferred shares: 1.3%
ISA Capital do Brasil
35.8%
Common shares: 10.5% Preferred shares: 98.7%
Free Float 64.2%
Common shares: 9.8% Preferred shares: 51.9%
Eletrobras 35.4%
Common shares: 0.7% Preferred shares: 16.8%
Others 46.8%
Common shares: 64,484,433 Preferred shares: 100,236,393 Total: 164,720,826
CONTROLLED BY ISA FREE FLOAT OF 64%
ISA CTEEP
Notes: ¹ Common share l ² Preferred share l ³On 03/31/2017
Shareholder Structure on 03/31/2018
Notes: ¹ Considers 2017 IFRS Results adjusted by participation l ² On 03/31/2018
Central America
Transmission Telecom
Brazil 34% of net income Transmission Telecom
Bolivia Transmission Argentina
Telecom
Peru 21% of net income
Transmission Telecom
Ecuador Transmission
Colombia 25% of net income Transmission Telecom Highway concessions Real Time Systems
Chile 18% of net income
Transmission Telecom
Highway concessions
Transmission: 77.2%
The largest energy transmission company in Colombia and Peru, with 70% of capacity in each market
2nd largest player in Chile with 18% of market share
2nd largest player in Brazil with investments in ISA CTEEP and TAESA
Highway concessions: 22.0%
Real Time Systems: 0.7%
Telecom: 0.1%
ISA CTEEP represents 31% of ISA’s¹ net income
2017 Net Income Breakdown:
Benchmark player in sector
44,200 km of transmission lines
87,100 MVA of transformation capacity
907 km of highways
Controlled by the Colombian government
Recognition in Corporate Governance
Market Cap: USD 5.3 billion²
ISA INTERCONEXIÓN ELÉTRICA, S.A.E.S.P.
Solid Presence in Latin America: 8 countries, 4 sectors, 40 companies
Corporate Governance Structure
Remuneration Committee
Audit Committee
CFO and IRO COO
Institutional Relations Department
Rinaldo Pecchio Carlos Ribeiro Rafael Noda
Project Director
Weberson Abreu
Board of Auditors 8 effective members, of which 2 are independent and one is elected by the
employees
5 effective members
and 5 substitute members
Board of Directors
Reynaldo Passanezi Filho
CEO
Ethics and Transparency recognized at ISA and at ISA CTEEP levels
Financial Highlights
Sustainable Value
Who we are
P E O P L E
STRATEGY BASED ON
Regulation
Fair Value of Rights
Legal
Contingencies Reduction
Growth
Value Accretiveness on Greenfield and Brownfield
Projects
Subsidiaries
Corporate Governance
Projects
Value Accretiveness on Reinforcements and
Improvements
Operation and Maintenance
Cost efficiency, Service quality, Operational safety
P E S S O A S
Regulação
Valor Justo
Jurídico
Gestão de Litígios
Crescimento
Disciplina de Capital
Integração
Subsidiárias
Projetos
Crescimento Orgânico
Operação e Manutenção
Eficiência, Qualidade, Segurança
SOLID & SUSTAINABLE RESULTS
EXECUTION OF STRATEGY GENERATES
O&M NI RBSE Controlled Shared Control
Adjusted Net Revenue
729.2 163.0 1,195.6 154.7 248.2 2,490.7
Adjusted EBITDA
355.7 155.4 1,195.6 124.2 215.4 2,046.4
LAST 12 MONTHS¹
(BRL million)
OPERATIONAL HOLDING SUBSIDIARIES Total
Note: ¹ Regulatory results of the last 12 months ending on 03/31/2018
NO DEMAND AND DEFAULT RISKS ON REVENUES
Annual Costs of
Electric Assets
(CAAE)
O&M Revenue
(AOM) Gross Investment x
%O&M
+ Gross Investment x
Depreciation Rate
Net Investment x
Regulatory WACC
Composition of Annual Allowed Revenue (RAP)
PV
RBSE¹
(CAEE)
O&M²
(AOM)
NI³
(CAEE & AOM)
PA5
PV
6
OTHERS4
Note: ¹”RBSE” receivables related to the non depreciated assets in operation in May/2000 | ²“O&M” revenues related to the operation and maintenance services | ³“NI” organic growth (new investments) | 4Other revenue considers bilateral and sharing contracts | 5“PA” compensates excess or deficit of revenues in the previews tariff cycle| 6“PV” revenue reduction due to unavailability
Focus in cost efficiency, service quality and operational safety to maximize results
0.0206%
0.0034%
0.0033%
0.0020%
0.0010%
0.0006%
88.51
14.05
12.64
6.7
3.83
1.86
1.44
0.4
0.26
0.11
0.1
0.093 ISA CTEEP
South
Southeast/ Midwest
SIN
Northeast
North
FREQ (times) Equivalent Frequency of Interruption
DREQ (minutes) Equivalent Duration of Interruption
ISA CTEEP
Southeast/ Midwest
South
SIN
Northeast
North
IENS (%) Index of Non Supplied Energy
ISA CTEEP
Southeast/ Midwest
South
SIN
Northeast
North
Focus in efficiency results in reduction of 41% of PMSO, excluding contingencies, going from BRL 915 million in 2006 to BRL 542 million in 20171
1
DREQ/FREQ indicators, in March/18, suggest that for every 10 years and 9 months, there would be 1 total shutdown of ISA CTEEP’s system of approximately 20 minutes
2
In the city of São Paulo, ISA CTEEP is
responsible for 3 minutes of every 16
hours of interruption
3
Note: ¹ Considers controlled and affiliates weighted by the Company’s share
2017 Numbers
220 198
214
147
210 239
Reinforcements and Improvements CapEx (BRL million)
Average: BRL 205 million/year
ORGANIC
FROM REINFORCEMENTS & IMPROVEMENTS
Opportunity for organic growth (transmission capacity increase)
Execution and project selection to guarantee proper profitability
2013 2014 2015 2016 2017 2018e
28 26 31
47 41
2013/2014 2014/2015 2015/2016 2016/2017 2017/2018
Reinforcements and Improvements RAP (BRL million)
Average: BRL 35 million/year
IENNE (100%) TL: 710 km (500 kV) Substation: none RAP: BRL 43 million
IE Garanhuns (51%) TL: 842 km (230/500 kV) Substation: 2,100 MVA RAP: BRL 42 million
IE SUL2 (100%) TL: 175 km (230kV) Substation: 750 MVA RAP: BRL 18 million
IE Madeira (51%) TL: 2,375 km (±600 kVCC) Substation: 6,100 MVA RAP: BRL 263 million
IE Pinheiros (100%) TL: 1.8 km (345 kV) Substation: 4,200 MVA RAP: BRL 56 million
IE Serra do Japi (100%) TL: 137 km (230 kV) Substation: 2,000 MVA RAP: BRL 56 million
IEMG (100%) TL: 172 km (500 kV) Substation: none RAP: BRL 17 million
Evrecy (100%) TL: 154 km (230 kV) Substation: 450 MVA RAP: BRL 13 million
MANAGEMENT OF SUBSIDIARIES WITH GOVERNANCE AND INTEGRATION
8 subsidiaries fully in operation
14 concession contracts
4.5 thousand km of transmission lines
17 substations
16 thousand MVA of power transformation capacity
RAP of ~BRL 508 million¹
Notes: ¹ RAP weighted by ISA CTEEP’s participation | ² Celebration of Purchase Agreement to acquirë 50% of Share Capital in April/18. The closing of the deal is subject to approvals.
Substation
Line Entrance
Transmission Line (TL)
In operation
RBSE (BASIC NETWORK OF EXISTING SERVICE) CASH FLOW BOOSTS CASH GENERATION FOR THE NEXT YEARS
RBSE: receivables related to the non depreciated assets in operation in May/2000
BRL 12 billion to be received of which approximately BRL 1.1 billion was paid between August/17 and March/18
April of 2017 injunction determined temporary exclusion of Ke
ANEEL recalculated the RAP for 2017/2018 cycle , excluding Ke¹
Bill for the restructuring of the electric sector proposes change from Ke to WACC from the financial component
Notes: ¹ Technical Note 170/17 | ² Net of PIS/COFINS in June of 2017
RBSE Receivables Schedule² (BRL million)
819 770 722 673 624 575 453
712 712 712 712 712 712 712
712
240 240 240 240 240 240 240
240
1,771 1,722 1,673 1,624 1,575 1,527 1,404
951
2017/2018 2018/2019 2019/2020 2020/2021 2021/2022 2022/2023 2023/2024 2024/2025
Financial Component
Economic Component Financial Component ex-Ke Ke
Assumptions pursuant to RES ANEEL
762/2017
IPCA (Dec/12-Jun/17): 34.45%
WACC: 6.64% p.a.
Cost of Equity (Ke): 10.74% p.a. (1H13) and 10.44% p.a. (Jul/13 to Jun/17)
Estimated amounts. WACC will be defined in tariff reset and asset base is subject to write-offs.
TO GUARANTEE
FAIR TARIFF RESET
ANEEL still has not disclosed the results of the analysis of the contributions
Possibility to postpone RTP from 2018 to 2019, with retroactive effects
Transmission concession contracts renewed in 2013 are subject to periodic tariff reset (“RTP”) every five years
ANEEL opened public hearing 41/2017 to discuss and improve 2018 RTP rules
Regulatory Operational Costs (O&M)
Cost of Capital (WACC)
Regulatory Asset Base & Regulatory Price Reference
SUCCESS IN AUCTIONS ALLOWS GROWTH OF UP TO 40% IN ASSET BASE AND 80% IN RAP UNTIL 2022
EXTENSION OF LINES (KM)
CAPEX (BRL MILLION)
CAPACITY (MVA)
RAP (BRL MILLION)
4,504
1,352 5,856
Operational Auctions¹ Total
+30% 15,750
6,585 22,335
Operational Auctions¹ Total
+42%
6,375
2,508 8,883
Operational Auctions¹ Total
+39%
498
399 897
Operational Auctions¹ Total
+80%
Note: ¹ 8 projects acquired in 2016 and 2017 auctions
GROWTH OPPORTUNITIES
TO CREATE VALUE
Note: ¹ To be updated by IPCA (Source: IBGE) on the closing of the deal l ² The closings is subject to approvals l ³ Source: PET/PELP, MME Study consolidating the expansion constructions
AUCTIONS
2 transmission auctions expected for 2018
Preliminary list of projects: 31 lots for the construction of 5.8 thousand km of transmission lines and 20 thousand MVA of capacity
ANEEL capex estimated at BRL 15 billion, with RAP of BRL 2 billion
June/2018 Auction
24 lots divided into 74 projects: 47 projects of 3.9 thousand km of transmission lines and 27 substations for the installation of 14 thousand MVA
ANEEL capex of BRL 8.8 billion, with RAP of BRL 1.5 billion
Average weighted deadline of 55 months
Average Regulatory WACC of 7.91%
Maximum RAP/ANEEL investment of 17.2%
ACQUISITIONS Always studying market opportunities
Active player in the consolidation of the sector
IE Sul Acquisition
Purchase Agreement with CYMI to acquire 50% of share capital for BRL 20 million¹in April of 2018
After the closing of the acquisition, ISA CTEEP will hold 100% of the shares²
IENNE Acquisition
Acquisition of 50% of shares from ISOLUX and 25% of shares from CYMI for BRL 101 million
ISA CTEEP holds 100% of IENNE as of 3Q17
New auctions expected until 2022 amount to BRL 30 billion of total investments and RAP³ of BRL 5 billion
C R E A T E C O N N E C T I O N S T O G E N E R A T E S U S T A I N A B L E V A L U E
Digitalization
Operational reliability and safety optimization with cost reduction
Real Estate
Development of real estate ventures
Energy Storage
Ancillary business and new business models
Leadership in transmission sector transformation in Brazil
Proactivity in regulatory, legal and technological affairs
CONNECTIONS THAT CREATE VALUE THROUGH
Forest projects that reduce the impact of greenhouse gases
Climate change mitigation
Conservation of biodiversity in jaguar’s habitat
JAGUAR CONNECTION: Carbon neutral until 2020
Barretos Cancer Hospital
GRAACC – Support group of teenagers and children with cancer
32nd Bienal of Art in São Paulo
SOCIAL RESPONSIBILITY:
ACTIONS
CONEXIONS THAT INSPIRE
Sustainable Value
Financial Highlights
Who we are
890 955
1,778
2,242
2015 2016 2017 LTM¹
NET REVENUE (BRL MILLION)
EBITDA (BRL MILLION)
46.2% 51.3% 76.0% EBITDA Margin 81.6%
507
469
483 477
2015 2016 2017 LTM¹
O&M COSTS ex-depreciation (BRL MILLION)
247 246
635
850
2015 2016 2017 LTM¹
NET INCOME (BRL MILLION)
747
1,195 411 488
604
RBSE
2015 2016 2017 LTM¹
1,829 1,351
634
REGULATORY RESULTS HIGHLIGHTS
STRONG CASH GENERATION BOOSTED BY RBSE
Note: ¹ Last twelve months ended on 03/31/2018
Net Revenue and EBITDA include only 100% owned subsidiaries. Shared control companies are accounted as equity shareholder.
SOLID DEBT PROFILE WITH
435
72
429
225
71 67
237
Debt Amortization Schedule (BRL million) Debt Breakdown
2019 2018 2020 2021 2022 2023 2024 2025-2029
51% 31%
18%
Debentures - CDI/IPCA BNDES - TJLP Others
359
Debt Profile on 3/31/2018
Gross Debt: BRL 1.9 billion
Net Debt / Adjusted EBITDA: 0.7x Average cost: 7.9% per year
Average term: 3.6 years
Low leverage allows growth cycle financing Investment Grade by Fitch: AAA(bra)
230 226
335
247
2016
585
2014 2018+ 2015 2017 2013
Note: The Company registered net loss due to the provision for losses related to Law 4,819/58
Strong cash generation allows higher dividends for the next years
Dividend Payment (BRL million)
GROWING
Regulatory Payout
N.A. 91% 123% 108% 95%
ACCORDING TO CASH GENERATION
66
68
70
72
74
76
78
80
82
84
Hold Buy Sell
TARGET PRICE (BRL)
UBS
Brasil Plural
Eleven Financial
Goldman Sachs
BTG Pactual
HSBC
Santander
DOES NOT REFLECT ISA CTEEP’S CASH GENERATION
Bradesco
Itaú BBA
Credit Suisse
Merrill Lynch
Safra
JP Morgan
COVERAGE TARGET PRICE
RATING DATE OF UPDATE
Banco do Brasil BRL 73.00 Hold 02/27/18
BofA-Merrill Lynch BRL 75.00 Hold 10/31/17
Bradesco BRL 82.00 Hold 11/17/17
Brasil Plural BRL 81.00 Buy 02/27/18
BTG Pactual BRL 70.00 Buy 02/27/18
Citi BRL 71.20 Neutral 05/13/18
Credit Suisse BRL 77.00 Hold 12/31/17
Eleven Financial BRL 84.00 Buy 02/27/18
Goldman Sachs BRL 78.00 Buy 02/28/18
HSBC BRL 80.00 Buy 01/16/18
Itaú BBA BRL 78.00 Hold 04/20/18
JP Morgan BRL 71.00 Hold 04/04/18
Safra BRL 73.40 Hold 02/20/18
Santander BRL 73.82 Buy 02/27/18
UBS BRL 72.00 Buy 04/2418
Average Target Price BRL 75.96
TRPL4 1Q18 Average
BRL 66.26
Citi
11
WHY INVEST IN
ISA CTEEP?
No demand and no default risks
Strong Cash Generation
Fair remuneration of capital, according to
cash generation
Dividends
Most efficient company
Benchmark
Valuation Attractive valuation
Fitch: AAA(bra)
Investment Grade
Sustainable value
Profitability
Organic growth, Greenfield & M&A
Growth
