#1Brazil Enel Américas' 2018 Analyst Update Meeting Carlo Zorzoli Country Manager Enel Brasil enel#2Enel Brasil Positioning enel#3ene Presence in Brazil Distribution Transmission Trading Thermal Generation Renewable Enel X Present in 21 states AC AM RO RR MT AP CE MA PA RN ΡΙ PB PE AL ΤΟ SE BA DF GO Renewable MS Distribution SP Trading PR MG ES Distribution Thermal Generation Enel X Trading 1,355 MW installed capacity Hydro Thermal 1,355 MW In Operation 1,036 MW 319 MW Renewable Trading Distribution 2,200 MW Interconnection Brazil -Argentina 17 million of customers, 4 distribution companies Commercial agents: PA, RR, BA, PI, SP, MG, ES, DF, GO, MT, PR, SC, RS. Enel X Trading Distribution SC Enel X Trading RS Transmission Trading States with Trading Clients 4#4Generation and Distribution enel LO 5#5Sectorial Context | Gx Market Generation in 2017 Generation: Market (Installed Capacity) Companies fleet breakdown enel Generation by source (GWh) ELETROBRAS 24.9% ENEL 76% 24% Hydroelectric 72.0% ENGIE 6.1% ELETROBRAS 87% 6% 2% PETROBRAS 3.9% CEMIG 3.6% ENGIE 85% 14% 3% Thermoelectric 19.1% COPEL 3.0% PETROBRAS 98% 2% THREE GORGES 2.2% 158 GW CEMIG 90% 2% 8% Wind 7.2% 550 GWh AES 2.1% STATE GRID 2.0% THREE GORGES 99% 1% IBERDROLA 1.5% Biomass 1.7% COPEL 100% EGP 1.1% ENEL 0.9% STATE GRID 43% 6% 20% Solar 0.0% OTHERS 48.9% ■ Hidro ■ Termo ■Nuclear ■Wind ■Solar Main Players Generation: 髮 COPEL AES enel 3/ Installed Capacity (GW) IBERDROLA 158 1/ CPFL ENERGIA 2/ edp ENGIE CEMIG ⑪CTG +58% 100 Generation: Installed Capacity by Technology (%) HPP 63.9% O TPP 18.6% NCRE 17.5% 1/ State Grid 2/ China Three Gorges (CTG) 3/ In Brazil through Neoenergia 2007 2017 5#6Sectorial Context | Enel's assets in Brazil Generation assets Volta Grande Large Hydro: 380 MW Concession: 2017 - 2047 (30 years) Energy generation: 2,020 GWh/year Physical warranty: 230.6 MWavg Sales: 70% Regulated / 30% Free Market EGP Cachoeira ◉ Large Hydro: 658 MW Concession: 1997 – 2027 (30 years) Energy generation: 3,076 GWh/year Physical warranty: 394.3 MWavg Sales: Free Market *Data base as of December 31, 2017 enel Enel Fortaleza ☐ ☐ ☐ Thermoelectric plant: 327 MW Authorization: 2001 - 2031 (30 years), can be extended Energy Generation: 1,983 GWh/year Physical Warranty: 318.5 MWavg Sales: 100% regulated, PPA with Enel CE until 2023 Gas supply: Built under the Thermoelectric Priority Program Gas supply guarantee for 20 years 60#7Sectorial Context | Dx Market Distribution in 2017 Main Players CPFL ENERGIA 1/ enel Distribution: Market (Revenue) enel Distribution: Market (Customers) ENEL * 19.3% 2/ edp STATE GRID IBERDROLA CEMIG 13.3% 12.5% ENEL IBERDROLA STATE GRID * 19.6% 16.5% 11.3% 8.7% CEMIG 10.1% ENERGISA 8.1% LIGHT 7.2% 41 bi US$** 3/ COPEL 6.0% ENERGISA EQUATORIAL ELETROBRAS 8.1% 6.1% 82 million 5.7% IBERDROLA ELETROBRAS 5.7% COPEL 5.5% EQUATORIAL 5.0% LIGHT 4.7% EDP/CTG 4.3% EDP/CTG 4.1% OTHERS 9.9% OTHERS 8.2% GRUPO energisa CEMIG equatorial ENERGIA 1/ State Grid 2/ China Three Gorges (CTG) 3/ In Brazil through Neoenergia *Considering Eletropaulo numbers in 2017 Number of costumers (Million) +32% 82.3 60.5 2007 2017 **Brazil Market / Exchange rate: 3,19 BRL/US$ Energy Consumption 4% 5% 24% 44% ■ Residential ■ Industrial ■ Rural ■ Government ■Comercial 5% ■Public Service 7% 11% ■Public Lighting 7#8Sectorial Context | Enel's assets in Brazil Distribution assets enel Enel Distribuição Rio Concession area: 32,600 Km Cities: 66 Consumers: 2.7 million Grid: 59 thousand km Energy distributed: 11.4 TWh Concession contract: 1996-2026 (Renewable for + 30 years) Enel Distribuição Ceará Concession area: 148,921 Km Cities: 184 Consumers: 3.5 million Grid: 146 thousand km Energy distributed: 11.5 TWh Concession contract: 1998-2028 (Renewable for + 30 years) Enel Distribuição Goiás Concession area: 337,000 Km Cities: 237 Consumers: 2.9 million Grid: 215 thousand km Energy distributed: 13.3 TWh Concession contract: 2015-2045 (Renewable for + 30 years) Eletropaulo Concession area: 4,526 Km Cities: 24 Consumers: 7.2 million Grid: 43.3 thousand km Energy distributed: 43 TWh *Data base as of December 31, 2017 8#9* DEC hours FEC frequency Quality of Service Hours and Frequency of interruptions Enel Rio 21.08 enel Regulatory limits Contract limits (only Rio and Goiás) Enel Ceará* Enel Goiás 37.48 31.78 - 29.24 26.91 22.06 18.21 16.81 12.09 11.51 10.90 14.94 14.01 13.69 11.2 10.8 10.5 8.81 8.78 9.39 2016 2017 mar.-18 2016 2017 mar.-18 2016 2017 mar.-18 11.6 24.55 18.42 17.98 16.48 12.02 9.87 8.61 8.83 8.45 7.79 12.84 11.51 11.03 9.19 8.51 7.92 5.04 5.37 5.83 2016 2017 mar.-18 2016 2017 mar.-18 2016 2017 mar.-18 Data includes March's 2018 Blackout at northeast region. Values without it – DEC: (9,38 - 1,21= 8,17 Hours) / FEC: ( 5,83 – 0,55 = 5,28 times). - 6#10Enel X enel 10#11Enel X e-Home B2C Q e-Industries B2B enel B2G Micro-insurance Third Party Billing and Collection (Cobrança na fatura) Financial Products New Projects to Home Solutions Electrical Infrastructure Distributed Generation Energy Efficiency Utility Bill Management Management Platforms Demand Response PPP of Public Lighting B2B/B2G Electric Pole and Recharge Feasible Business Model 11#12Digitalization enel 13#13Digitalization programs Overview of relevant programs for Brazil 2018-22 Customer Asset Program Rethinking of customer 14 Customer Journey experience CRM Platform A DGPlant K Big Data / IOT BEAT ✓ GDS Global Distribution System Unique solution for all markets Operation and maintenance digitalization in thermal plants Advanced loT sensors and sophisticated analytical models New global platform for smart meter2.0 Integration and standardization of technical systems Employee as internal client to on Employee Journey unlock their full potential People on HRM Platform Infrastructures & Networks Unique front end and integration among functions Thermal Generation יח. There is no power ■ I want to be known Info on my billing Main initiatives Emergency management Customer Care Heat Rate Optimization Advanced Process Control Predictive maintenance ■ Losses reduction " Automatic Meter Mgnt Meter data Mgnt ERP Grid ■ I am interested in this job I am a new hire Frequent events Discovery / new job Market Non Staff enei ■ I have to pay my bill I am interested in your offer ■ Sales " Mobile, App & One hub Digital Worker Transf. ■ Remote predictive diagnostic ■ Work-force Mgnt ☐ I am travelling for job Get to now the organization Productivity ■ Reward & Development 13#14Digitalization Digital Relation 15.228.139 Support in 2018 (2017 x 2018 = +24%) I 9.841.064 Automatic Channels = (2017 x 2018 +46%) 65% Automatic Support 35% Store Support+Call Center *Data of March/2018 IVR 23% App 13% enel 5.258.205 Conventional Channels (2017 x 2018 = -4%) Self attendance 10% Others 1% SMS Twitter Facebook Auto 24hs Website 53% 14 I#15Digitalization enel What else are we doing to make our service more efficient C ☐ CHATBOT MEGA CE GO RJ HOME A ENEL AGENCIA VIRTUAL PARA VOCÊ FATURA POR E-MAIL CORPORATIVOS E GOVERNO Informações Sobre Serviços ENEL E A SOCIEDADE ATENDIMENTO Ouvidoria Perguntas Frequentes Fale Conosco Lojas Enel Você E O Presidente enel Assistente Virtual Enel-Brasil Olá Sou o assistente virtual da Enel, para iniciarmos você pode escrever sua pergunta em poucas palavras ou escolher um dos assuntos ao lado. Se preferir, digite "Duaro falar com um atendente" para enviar uma mensagem a nossos consultores Digte aqui sua pergunta INF 24 via INF Atualização cadastral INF Parcelamento de débito INF Encerramento Relação Contratual INF Religação (II) Self attendance Video // | \\ Share stores Large Curtomers Support Service 15#16Sustainability enel 17#17Sustainable Strategy Enel commitments to the global SDGs - 2017 Contribution Enel Brasil 2015 to 2017 enel Main Challenges Enel Brasil 4 QUALITY EDUCATION 400,000 people by 2020 119.738 24% 7 AFFORDABLE AND CLEAN ENERGY 3 million people by 2020, mainly in Africa, Asia and Latin America 891.884 52% 13 DECENT WORK AND ECOMONIC GROWTH 1.5 million people by 2020 CUMATE eq < 350 g CO2/kWheg by 2020 (-25% vs base year 2007) 181.563 12% < 90,7 g CO₂ /kWheq by 2017 2 Expand integrated work with the business lines to solve questions as losses, billing defaults and community relations Expand the measurement of the value returning for the company and the projects I develop for the society Application of the Shared Value Creation tools in all assets of the company Use digitalization in the community projects and in our internal processes Maintain the contribution with Agenda 2030: Sustainable Development Targets 17#18Value creation enel 252 Social projects, cultural and environmental 6.8 million benefited people 18 states benefited 2.4 million of income generated 431 Community leaders engaged Brazilian Committee of the Global Compact board member Strategic goals for 4 of the 17 UN sustainable development goals Recognized by "Guia Exame de Sustentabilidade" and as a Pro-Ethics company Enel Distribuição Ceará won first place in the Abradee Prize - 2017 in Social and Environmental Responsibility category Sustainability report in the GRI guidelines | Gold Community THE GLOBAL COMPACT NÓS APOIAMOS O PACTO GLOBAL EMPRESA PRO ETICA 2016 guia EXAME Sustentabilidade 2015 GRI Empowering Su Decision 26/06/2018 19#19Financial Focus enel 20#20Financial Focus Focus on Brazil (US$ bn) Revenues CAGR 2014-2017: 31,8%. 5.2 3.0 2.8 1.2 EBITDA and Margin EBITDA 0.5 0.6 0.9 enel 20.6% 0.3 2015 2016 2017 1Q18 2015 2016 2017 1Q18 Net Income Net Debt 0.27 0.24 0.18 0.09 0.6 0.7 1.9 1.6 2015 2016 2017 1Q18 2015 2016 2017 1Q18 20 20#21Financial Focus Gross Capex (US$ m) By Activity By Business enel 851 851 98% 33% 445 445 411 411 42% 37% 95% 92% 139 139 1% 67% 58% 63% 64% 97% 36% 8% 5% 2% 2% 2015 2016 2017 1Q18 2015 2016 2017 1Q18 ■Generation ■Distribution Others ■Maintenance ■ Growth * Not considering M&A. Estimated investment 2018-2020: 1.5 €bn* 21 21#22Hot topics enel 22 22#23Brazil | Follow-up Termo Fortaleza Unilateral termination of the gas supply contract by Petrobras - Status, June 2018 Regulatory Legal Actions taken Presentation of two alternatives to the MME: Amendment to the provisional measure "MP814" (Eletrobras): Increase of gas cost - pass through to all consumers MP 814 expired: Congressmen decided not to vote the MP Revision of interministerial ordinance: increase of gas cost-pass through to Enel CE × Lawsuit closed due to Arbitration (appealed) ✔ New injunction to restore gas supply State of Ceara presented a new lawsuit to restore gas supply ✔ Arbitration: Actions questioning its validity Next Steps Structural Solution: New MP; Specific Law proposal; Inclusion of amendment on the Sector Reform's Law proposal Interministerial ordinance (Ministries of Mines and Energy + Finance): increase of gas cost-pass through to Enel CE Updating from Rio and Ceara's lawsuits; Arbitrator to be nominated by ICSID (likely): parties will agree about deadline to present defenses. Legal Actions ongoing to cancel Arbitration Timeline enel September 2017 Notification from Petrobras ending the gas contract November 2017 Enel attained an injunction ensuring the gas supply February 2018 Judge denied the injunction March 2018 Gas Supply was interrupted Termofortaleza out of operation Institutional and Media Newspaper Article explaining the cost of activities thermal interruption for the consumers Work with Government and Congressmen to support the structural solution June 2018 New injunction ensuring gas supply Termofortalzeza restored operation 23#24enel Brazilian Regulatory Framework Anna Pacheco Head of Regulation Enel Brasil 24#25Sectorial Context | Sector Governance Main government agency Monitors the Safety and Efficiency of Energy Supply CMSE Electricity Sector Monitoring Committee CNPE Advises the Presidency and develops policies for the National Council for Energy Policy sector. MME MME Ministry of Mines and Energy Promotes investment, finances research and implements government policies Responsible for developing integrated and long- term planning of the electricity sector EPE epe Energy research company Coordinates and controls the generation and transmission of electricity ONS Operador Naciona ONS de Sistema Eletrice National Grid Operator enel Others Agencies IBAMA (FUNAI) ANEEL ЄANEEL A Brazilian Electricity Regulatory Agency Independent Regulator IPHAN anp Agência Nacional do Petróleo του ANA AGÊNCIA NACIONAL DE ÁGUAS CADE Conselho Administrativo de Defesa Económica CCEE ccee Electric Energy Trading Chamber Coordinates the electricity markets 25#26Sectorial Context | Energy Market Structure Rules and structure Buyers Market Mechanisms Sellers ◉ ■ enel REGULATED MARKET (~70%) Generators Traders (only existing energy) Public Auctions (conditions defined by Government) Long terms PPA FREE MARKET (-30%) Generators Self-producers Traders Bilateral Trading (conditions defined by the agents; freely negotiated) Who can participate? Large consumers (>= 3 MW) Special consumers (0,5 MW ≤ cl <3 MW) renewable energy only What is the term of PPAs in regulated auctions? New energy: 15-30 year contracts Existing energy: 1-15 year contracts Distribution (regulated consumers) Free Consumers Short term Settlement Market How does Settlement Market work? Monthly settlement of the difference between generation and contracts at Spot Price (PLD) 26#27Sectorial Context | Regulated Auctions Promoted by MME to guarantee energy supply Energy Existing energy supply start: same year (A) - until 5th year (A-5) PPA: between 1-15 years New energy supply start: from 3rd year (A-3) to 6th year (A-6) PPA: between 15-30 years enel New energy + Transmission ■ supply start: from 5th year (A-5) to 7th year (A-7) PPA: between 15-30 years supply start A-7 A-6 A-5 A-4 A-3 A-2 A-1 Energy contract types (PPA) Fixed: assets remuneration and fixed costs Availability ◉ Variable: declared cost in auction x MWh Quantity ■ Thermal, wind and solar plants Other Auctions 15 year 30 year MWh x Price (auction) – function of amount of energy contracted Hydro, wind and solar sources Adjustment Auction: Up to 5% of the Dx load with supply up to 2 years Reserve Auction: Objective of guaranteeing energy security. Paid by all consumers (Sector Charge) 27#28Sectorial Context | Electricity Market reform Draft bill 1917/2015 Gradual opening of the free market to all consumers until 2028 3 MW I Hoje 2 MW 2020 Free Market Growth By 2022 the government will have to present a study to extend liberalization to the low voltage (LV) market 1 MW 2021 500 kW 2022 300 kW 2024 End of Market reserve for Renewables Separation energy and capacity Separation of capacity and Energy from 2021: capacity paid through sectorial charge by all consumers Auctions segmented by energy source, attributes valuation, hybrid projects and storage Carbon Market enel All clients with tensión >2,3 kV 2026 Possibility minimum renewable purchase requirement for each consumer (free and regulated) Creation of a low carbon emission market on 2021 CO₂ All clients 2028 28#29Sectorial Context | Electricity Market reform Draft bill 1917/2015 Price and Operation enel Possibility of change from computer system cost optimization model dispatch to price offer dispatch Hourly SPOT price starting from 2020 Medidor de Ponteiros Distribution tariff model Possibility of distribution tariff independent of the distributed energy volume ~99% of the Enel Dx meters (~ 10 million) needed to be replaced to be able to apply the binomial rate Delinquency and losses Legal reinforcement of actions to combat loss and delinquency Compulsory adhesion to prepaid tariff modality for customers with recurring delinquency The law proposal is not very specific, relevant details that can make the difference will be defined in subsequent secondary regulation 29 29#30Sectorial Context | Main events in coming months Next generation, transmission and distribution auctions enel Distribution Auctions: - - 6 distributors from the states of Amazonas, Acre, Roraima, Rondônia, Piauí and Alagoas 4,6 million consumers (5,7% of Brazilian market) Approximately 2,46 million km² (29% of the national territory) Scheduled for July 26 A-6 Energy Auctions: - Scheduled for August 31 1.090 Registered Projects - 59 GW capacity Registered Projects GW 27.1 28.7 Transmission Auction: - - Scheduled for June 28 24 lots with 60 projects located in 18 states: 3.954 Kilometers of transmission lines 1.3 1.0 0.9 Wind Gas Hydro Biomass Coal 30#31Dx Regulation | Tariff Structure The tariff is divided into two parts, Components A and B. Component B -20% Distribution Component A + Taxes -80% Energy Purchase Transmission Sector Charges Taxes Power Purchase enel ■ Public auctions based on lowest price (negotiations between Dx and Gx are not allowed) ◉ Obligation of 100% long term contractual coverage (with pass-trough tariff up to 105%) Transmission ■ National grid costs are shared between Dx, Gx and free consumers (50% for Gx side and 50% for consumption side) Sectorial Charges ■ Tariff subsidies costs are shared between all Dx (low income customer, renewable generation, thermal power plant fuel costs, etc) Distribution ■ Distribution Opex and Investment Remuneration Regulatory losses and delinquency costs 31#32Dx Regulation | Tariff Structure The tariff is divided into two parts, Components A and B enel How is Component B defined in the Tariff Reviews? When Tariff is update? Annually in the Tariff Adjustment ■ Every 4/5 years in the Periodic Tariff Reviews Operational Costs OPEX Benchmarking Analysis How Tariff is update? ■ Component A items: The new costs are pass-through to consumers annually (in the Annual Tariff Adjustment and in the Periodic Tariff Reviews) ■ Component B: Investment remuneration Net Remuneration Asset Base x WACC Depreciation Gross Remuneration Asset Base x % of depreciation - Annual Tariff Adjustment: Component B is update by market growth + inflation (discounted factor of quality and productivity) Losses and default rate Periodic Tariff Reviews: Component B is recalculated Non Technical Losses and delinquency rate based on socioeconomic model and benchmarking 32 32#33Dx Regulation | Regulatory vs. Real Current situation Key issues Enel Rio: The main offenders remain the non-technical losses, delinquency rate and the adequacy of the quality indicators the company's service to the regulatory standards Enel Ceará: The Company is in a better position than the defined regulatory parameters. Losses remain a regulatory challenge Enel Goiás: 2018 tariff revision should increase the gain from October. The main challenge is to adapt the quality of service indicators to the regulatory standards EBITDA Enel Dx BRL millions 2,265 1,874 1,831 2017 EBITDA Enel Rio BRL millions 2018* EBITDA Enel Ceará BRL millions 1,160 829 792 637 638 620 2017 2018* 2017 2018* Source: Aneel *Based on the result of 2018 tariff adjustments defined by Aneel enel ■Regulatory ■Current EBITDA Enel Goiás BRL millions 407 402 485 2017 2018* 33 33#34Dx Regulation | Ongoing actions What is being discussed with the Regulator enel Enel Rio Energy losses The new contract addendum and the 2018 Tariff Review led to a partial recognition of the risk areas and to the full recognition of the technical losses of the distributor Enel is working with the Pontificia Universidade Catolica of Rio, the Federal University Fluminense and Siglasul consultants to ensure the recognition of losses in the areas of Risk The non-technical regulatory losses of Enel Rio should be defined until March 2019 Enel Rio Energy Losses from apr/2017 to mar/2018 % Energy demand ■Regulatory ■ Current + 2,44 p.p. 20.66% 17.30% 16.82% 14.86% Current 2014 Tariff Revision New contract 2018 Tariff Revision ■ New Contract: partial recognition of Risk Areas ■ Tariff revision: New Regulatory Technical losses 34 =4#35Dx Regulation | Ongoing actions What is being discussed with the Regulator enel Enel Rio Delinquency Enel is working with the Pontificia Universidade Catolica of Rio, the Federal University Fluminense and Siglasul consultants to ensure the recognition of delinquency rate in the risk areas The issue should be discussed with Aneel together non-technical losses Enel Rio Quality of Service Enel has been working with Aneel to ensure a flexibility in the quality of service targets with the recognition of the impacts of risk areas During 2018 will be discussed by Aneel changes in the methodology used to defined the financial compensation for noncompliance with quality indicators 35 55#36Enel Américas' 2018 Analyst Update Meeting Contact us enel Email [email protected] Phone +562 23534682 Web site www.enelamericas.com Rafael De La Haza enel Head of Investor Relations Enel Américas Jorge Velis Investor Relations Enel Américas Itziar Letzkus Investor Relations Enel Américas Javiera Rubio Investor Relations Enel Américas Gonzalo Juarez IR New York Office 38#37enel