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Company Presentation 3Q14
Investor Relations
Disclaimer
This presentation contains forward-looking statements concerning the business prospects, estimates of operating and financial results and growth outlook of Arteris, which are based exclusively on the expectations of the management of Arteris concerning the future of its business and its continued access to capital to fund its business plan.
These forward-looking statements may be affected by on changes in market conditions, government regulations, industry performance, new highway privatization programs, the economic scenario and other factors, as well as the risks described in the disclosure documents filed by Arteris, and are subject to change without prior notice.
index
3 Investor Relations
1. Arteris and the Toll Road Industry
2. Highlights: Operating and Financial
3. Strategic Priorities
4. Appendix
3.1 Investiments 3.2 Efficient Operations 3.3 Strengthening of corporate image and social responsability
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4 Investor Relations
Arteris and the Toll Road Industry
Arteris and the toll road industry
Centrovias (SP)
1
1. Arteris and the Toll Road Industry History and Profile
Largest company in Brazil’s toll-road industry in kilometers managed: 3,250 km in operation
Presence in 5 states, that concentrates: - 65% of country’s GDP
- 43% of country’s population
- 2/3 of country’s vehicle fleet
17% market share of total kilometers of highway operated under concession
16% market share of total toll plazas revenues of highway operated under concession
Traffic: 717.1 million vehicles in 2013
Average remaining term of contracts of 14 years
Total employees: 6,632 (September 2014)
ANTT’s Auction
IPO Vianorte Acquisition
2nd Round of the Federal Highway
Concession Program
1997
Launch of operations in
Brazil Acquisition of 6% of Autovias
Autovias Acquisition
Centrovias Acquisition
Launches operations of Litoral Sul, Planalto Sul, Fluminense, Régis
Bittencourt and Fernão Dias
1998
2001
2002
2004
2005
2007
2008
Intervias Acquisition
2006
2012 Abertis and Brookfield as new
controlling shareholders
CAGR 07-13 32.80%
CAGR 07-13 22.17%
5
616
3,377
430
1,429
2007 2013
Net Revenue – R$ million
Adjusted EBITDA – R$ million
Thousand vehicles/day
concessionaires
KM under management
1997
Consolidation Profitability and value creation
Market Entry
Portfolio Expansion
• Launch of Operations in Brazil
• Regulatory framework being developed, higher execution and country risk
1998 - 2007
• Acquisitions of 4 State Concessions (1998-2005)
• 2nd Round of the Federal Concession Program (2007) – winning of 5 roads
• Arteris breaks the paradigm of high toll tariffs
• Political and economic stability
2007 - 2012
• State concessions became cash cows
• Federal roads in full operation and capex delivery
• Regulatory framework well consolidated
• Brazil reaches investment grade
• Strong competition for new projects
2012 - Today
• Abertis and Brookfield as new controlling shareholders (2012)
• Capex delivery, best practices and synergies plan
• Brazilian government releases a large concessions package on highways and railways
1. Arteris and the Toll Road Industry Arteris Evolution in a Nutshell
6
Operation of highways delegated to the private sector through concession contracts
Granting of concession preceded by bidding process
Charging of tolls
Economic and financial equilibrium
Annual toll adjustment based on inflation
Concessionaires assume operational risks and investments in highways
Public assets returned in good conditions at the end of the concession period
Basic principles
Reduction in Accidents
Reduction in “Brazil
Cost” Significant
increase in service quality
History of the Regulatory Framework
1993 Passing of Law 8.666 establishing concession contracts and bidding processes
1993 Launch of federal highway concession program
1996 Law 9.277 authorizes federal government to delegate to states and municipalities the management and operation of certain federal highways
1997/8 States of São Paulo, Paraná and Rio Grande do Sul conduct their own highway concession programs
2001 Launch of restructuring process in the transportation sector by the federal government, creating CONIT, ANTT and DNIT
2002 Creation of São Paulo State Public Transportation Services Regulatory Agency (ARTESP)
Concession Authority
Regulatory Agency
Concessionaire
Grant the right to operate public assets
Develop concession models
Manage contracts and ensure economic and financial equilibrium
Supervise and control compliance with contractual terms
Responsibilities
User
2003
Dissolution of DNER; DNIT and ANTT assume respectively highway construction / maintenance projects and the regulation, granting and supervision of concessions
Improve transportation infrastructure
Operate highways
Provide high quality services to users
2013 Resolution of Artesp and ANTT about the marginal cash flow to enable new investments on the existing concession contracts
1. Arteris and the Toll Road Industry Concessions in Brazil
7
8
Federal Highways
In operation
State Highways
In Operation
(4)
1.473,5 km
CONCER RJ BR 040 - Rio de Janeiro - Juiz de Fora 179,7 km
CRT RJ BR 116 - Rio de Janeiro - Teresópolis - Além Paraíba 142,5 km
Ponte RJ BT 101 - Ponte Rio-Niterói 13,2 km
Nova Dutra RJ-SP BR 116 - Rio de Janeiro - São Paulo 402 km
CONCEPA RS BR 290 - Osório - Porto Alegre 112,3 km
Ecosul RS BR 116-293-392 - Pólo de Pelotas 623,8 km
Second Round 2.620,8 km
Régis Bittencourt SP-PR BR 116 - São Paulo - Curitiba 401,6 km
Fernão Dias MG-SP BR 381 - Belo Horizonte - São Paulo 562,1 km
Litoral Sul PR e SC BR 116-376 e BR 101 - Curitiba - Florianópolis 382,3 km
Fluminense RJ BR 101 - Rio de Janeiro - Espírito Santo 320,1 km
Transbrasiliana SP BR 153 - São Paulo - Paraná 321,6 km
Planalto Sul SC BR 116 - Curitiba (SC e RS) 412,7 km
Rodovia do Aço RJ BR 393 - Minas Gerais - Rio de Janeiro 220,4 km
Second Round 680,6 km
Via Bahia BA BR 116 - Feira de Santana 554,1 km
BR 324 - Salvador - Feria 113,2 km
BR 526 - BR 324 - BA 528 9,3 km
BR 528 - BA 526 - Aratu 4,0 km
Third Round 475,9
ECO101 ES BR 101 ES – between RJ and BA limits 475,9 km
First round
Phase 1
Phase 2
Phase 2
1. Arteris and the Toll Road Industry Concessions in Brazil
Third Round 4.872,8 km
BR 050 GO-MG Limits SP/MG - BR 040 436,6 km
BR 163 MT Limits MT/MS - Sinope 850,9 km
BR 060/153/262 DF/GO/MG Brasília - Uberaba - Betim 1.176,5 km
BR 163 MS Limits MT/MS - Limits MS/PR 847,2 km
BR 040 DF/GO/MG Juíz de Fora - Belo Horizonte - Brasília 936,8 km
BR 153 GO/TO Anápolis/ GO - Aliança do Tocantis/TO 624.8 km
Phase 3
State Contracts 8.935 km
SP 18 5.390 km
PR 6 2.474 km
RJ / BA / ES/ MG/ PE 6 1.071 km
9
State highways (São Paulo State) In operation
(40%)
aprox. 3.600 km
Autoban SP SP 330 (Anhanguera) - São Paulo - Cordeirópolis 147,1 km
SP 348 (Bandeirantes) - São Paulo Cordeirópolis 158,6 km
SP 300 - Dom Gabriel Paulino Couto - Jundiaí 2,6 km
SP 102/330 - Adalberto Panzan - Campinas 7,5 km
Autovias SP SP 255 - Ribeirão Preto - Araraquara 80,4 km
SP 318 - São Carlos - Rincão 44,6 km
SP 330 - Santa Rita do Passa Quatro - Ribeirão Preto 78,0 km
SP 334 Ribeirão Preto - Franca 88,0 km
SP 345 Itirapuã - Franca 25,5 km
Centrovias SP SP 225 - Itirapina - Bauru 143,6 km
SP 310 - Cordeirópolis - São Carlos 74,5 km
Ecovias SP SP 150 (Anchieta) - São Paulo - Santos 55,9 km
SP 160 (Imigrantes) - São Paulo - Praia Grande 58,5 km
SP 040/150 Interligação Planalto - São Bernardo do Campo 8,0 km
SP 059/150 - Interligação Baixada - Cubatão 1,8 km
SP 248/55 (Cônego Domênico Rangoni) - Guarujá - Santos 8,5 km
SP 055 (Padre Manoel da Nóbrega) - Santos - Praia Grande 44,1 km
Intervias SP SP 147 - Itapira - Piracicaba 97,5 km
SPI 157/340 - Contorno de Mogi Mirim 6,9 km
SPI 165/330 - Contorno de Araras 4,7 km
SP 191 - Mogi Mirim - Rio Claro 46,9 km
SP 215 - Casa Branca - São Carlos 46,0 km
SP 330 - Cordeirópolis - Santa Rita do Passa Quatro 82,0 km
SP 352 - Itapira - Divisa Minas Gerais 22,6 km
Renovias SP SP 340 - Campinas - Mococa 167,6 km
SP 342 - Mogi Guaçu Águas da Prata 79,6 km
SP 350 - Casa Branca - SãoJosé do Rio Pardo 33,7 km
SP 215 - Vargem Grande - Casa Branca 20,2 km
SP 344 - Aguaí - Vargem Grande do Sul 42,5 km
Colinas SP SP 075 - Itu - Campinas 62,6 km
SPI 27 - Rio Claro - Tatuí 98,0 km
SP 280 - Itu - Tatauí 50,2 km
SP 300 - Jundiaí - Tietê 88,3 km
SPI 102/300 - Contorno de Itu 7,9 km
SPVias SP SP 280 (Castello Branco) - Tatuí - Santa Cruz do Rio Pardo 185,4 km
SP 127 - Tatuí - Capão Bonito 97,3 km
SP 270 (Raposo Tavares) - Araçoiaba da Serra - Itapetininga 52,7 km
SP 258 - Capão Bonito - Itararé 119,9 km
SP 255 - Avaré - Itaí 50,4 km
Tebe SP SP 323 - Taquaritinga - Pirangi 44,1 km
SP 326 - Bebedouro - Barretos 47,0 km
SP 351 - Bebedouro - Catanduva 64,8 km
Triângulo do Sol SP SP 310 - São Carlos - Mirassol 226,5 km
SP 326 - Matão - Bebedouro 86,3 km
SP 333 - Sertãozinho - Borborema 129,4 km
Vianorte SP SP 325/322 (Bandeirantes) - Ribeirão Preto - anéis viários 8,6 km
SP 330 (Anhanguera) - Ribeirão Preto - Igarapava 131,2 km
SP 322 - Ribeirão Preto - Sertãozinho 9,7 km
SP 328 - Sertãozinho - Bebedouro 54,9 km
SP 322 - Anel Viário Sul (Ribeirão Preto) 18,3 km
Viaoeste SP SP 270 (Raposo Tavares) 81,5 km
SP 280 (Castelo Branco) 66,0 km
SP 091 6,7 km
SP 075 15,0 km
First Round aprox. 1.600 km
Via Rondon SP SP 300 - Bauru - Castilho 313,1 km
Cart SP SP 225 - Bauru - Santa Cruz do Rio Pardo 82,7 km
SP 270 (Raposo Tavares) - Ourinhos - Presidente Epitácio 273,0 km
SP 327 - Santa Cruz do Rio Pardo - Ourinhos 32,4 km
Rodovias do Tietê SP SP 300 Tietê - Bauru 177,6 km
SP 209 Itatinga - Botucatu 21,1 km
SP 101 - Campinas - Tietê 71,2 km
SP 113 - Tietê - Rafard 14,4 km
SP 308 - Salto - Piracicaba 59,8 km
Rota das Bandeiras SP SP 065 (Dom Pedro I) - Jacareí - Campinas 145,5 km
SP 083 - Campinas - Valinhos 12,3 km
SP 332 Campinas - Conchal - Mogi Uaçu 77,0 km
SP 360 Itatiba - Jundiaí 19,3 km
SP 063 - Itatiba - Louveira 17,1 km
Ecopistas SP SP 070 (Ayrton Senna e Carvalho Pinto) São Paulo - Taubaté 119,2 km
SP 019 - Guarulhos - Aeroporto de Cumbica 2,4 km
SP 099 - Rodovia dos Tamoios - São José dos Campos 7,0 km
SP Mar SP SP 021 - Rodoanel Mário Covas (South Stretch) 61,4 km
SP 021 - Rodoanel Mário Covas (East Stretch) 43,5 km
Rodoanel SP SP 021 - Rodoanel Mário Covas (West Stretch)) 32 km
Second Round
São Paulo State
1. Arteris and the Toll Road Industry Concessions in Brazil
STATE CONCESSIONS
FEDERAL CONCESSIONS
1. Arteris and the Toll Road Industry Concessions in Brazil
10 *Updated on 2012
Freight transport matrix National vehicle fleet – MM
Public Highways Concession Highways
Source: CNT 2014 Highway Survey and Denatran
General conditions of Brazil’s highways
61%
21% 14%
4% 0.4%
Rail
Excellent
Good
Fair
Poor
Very poor
Good
Excellent
Poor
Fair
Intervias (SP)
1. Arteris and the Toll Road Industry The Sector in Numbers
11
Road
Waterway
Air
Pipeline
45.4
14.1
21.4
0.7
Light Commercial Motorcycle Other
86% 14%
91%
9%
28%
13% 6%
53%
São Paulo: 18
Paraná: 6
PE/BA/ES/MG/RJ: 8
Federais: 21
Source: ABCR
Brazil’s Road Network Paved
R$ 12.2 bi Taxes R$24 bi
Investments
37,200 Km Paving and Resurfacing
47,000 Jobs
+R$35 MM Social
Responsibility
Paved
Unpaved
Key figures in the private sector (2008-2013)
No Concession
Under Concession
53 Concessionaires
19,058 Km
Granted
1.6 bi Vehicles
2013
Under Concession
19,058 Km 1.6 MM Km 214,413 Km
Concessionaires
1. Arteris and the Toll Road Industry The Sector in Numbers
12
Marginal IRR New Resolution to determine IRRs for ammendments to existing contracts
2000s 1990s New reality
Start of concession program
Unknown regulatory framework
Higher execution risk
Higher country risk
Lower competition for assets
Political and economic stability
BNDES financing up to 70% of the capex
Regulatory framework well consolidated
Execution track record
Brazil reaches investment grade
Strong competition for projetcs
Uncertainties among the new concession programs: execution risks and fair IRRs discussions
Regulatory framework new test: Tarriffs readjustments
Arteris – Federal Concessions
Arteris – State Concessions
Profitability achieved despite low tolls tariffs
and capex execution
Evolution of the real interest rate*
IRR* 17-20%
IRR** <8%
* Real Project IRRs (contract) ** Estimates based on information from market´s analysts
2007 Arteris breaks the
paradigm of high toll tariffs
IRR* 8-9%
* CDI annual – IPCA annual (sources: CETIP, IPEA and Focus Report )
13
1. Arteris and the Toll Road Industry Concessions in Brazil: Project´s Rate of Return
1. Arteris and the Toll Road Industry Current Portfolio
14
17%
18%
19% 16%
3% 5%
7%
10% 6% 14%
15%
16%
13% 4%
7%
10%
12%
9%
Key financial data for concessions – R$ MM State
Federal
Toll Plaza Revenue 2013 EBITDA 2013
Federal
State
* The Adjusted EBITDA does not consider the effects of the Provision for Highway Maintenance as a cost, since it has no cash effect, and only an accounting effect. **Excludes revenue from construction
Autovias
Centrovias
Intervias
Vianorte
Litoral Sul
Régis
Fernão Dias
Fluminense
Planalto Sul
Vianorte
Planalto Sul
Fluminense
Fernão Dias
Régis
Litoral Sul
Autovias
Centrovias
Intervias
1. Arteris and the Toll Road Industry Current Portfolio
15
* ** * **
Average duration of concessions in our portfolio is 14 years
Federal Concessions State Concessions
1. Arteris and the Toll Road Industry Term of the Concessions
16
15 15 14 15
6 6 6 6 6
5 6
14
5
19 19 19 19 19
Years elapsed Years pending
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Investor Relations
Highlights Operating and Financial
Highlights Operating and Financial
18
2. Highlights – Operating and Financial 3Q14 Highlights
Growth of 2.3% of tolled traffic in 3Q14.
Growth of 21.6% of net revenues compared to 3Q13 and 21% against 9M13.
Increase of 12.3% in the adjusted EBITDA in the quarter and 6.1% YTD.
Expansion of 1.9 p.p. in the margin for the quarter.
Investments of R$ 489.4 million in 3Q14, reaching R$ 1.3 billion YTD.
Signature of a contract ammendmet in Autovias with extension of the
concession term
The Federal concessions signed with ANTT a new TAC to settle contractual fines
Opening of the new toll plaza (P5) in Litoral Sul in July
Elasticity
Toll Plaza– Autopista Fernão Dias (MG)
2. Highlights – Operating and Financial Tolled Traffic
19
13,50%
6,72%
4,10% 3,40%
3,02% 2,33%
6,60% 6,19%
-0,34%
11,01%
3,88%
4,10%
9,10%
3,16% 3,96% 6,09%
5,17% -0,33%
7,53%
2,73% 0,90%
2,30%
2005 2006 2007 2008 2009 2010 2011 2012 2013*
Federal State GDP
*Comparable basis by adjusting the non-recurring effects of the closure of the toll plaza P5 on Autopista Litoral Sul
** Comparable basis by adjusting the non-recurring effects of the closure of the toll plazas P1 and P2 on Autopista Fluminense and toll plaza P5 on Autopista Litoral Sul
3Q13 3Q14Var.
3Q13/3Q14
Comparable
Basis*9M13 9M14
Var.
9M13/9M14
Comparable
Basis**
State 55,916 54,833 -1.9% -1.9% 151,755 158,969 4.8% 4.8%
Autovias 12,787 12,525 -2.0% -2.0% 34,938 36,527 4.5% 4.5%
Centrovias 15,044 14,949 -0.6% -0.6% 41,001 43,401 5.9% 5.9%
Intervias 17,861 17,231 -3.5% -3.5% 48,167 49,997 3.8% 3.8%
Vianorte 10,224 10,127 -0.9% -0.9% 27,649 29,044 5.0% 5.0%
Federal 126,650 131,892 4.1% 0.5% 380,361 377,278 -0.8% 1.1%
Planalto 7,244 8,321 14.9% 14.9% 21,293 22,613 6.2% 6.2%
Fluminense 12,305 12,471 1.4% 1.4% 35,926 35,679 -0.7% 2.8%
Fernão 42,285 41,620 -1.6% -1.6% 122,587 121,835 -0.6% -0.6%
Regis 38,214 37,177 -2.7% -2.7% 111,236 109,707 -1.4% -1.4%
Litoral 26,602 32,302 21.4% 4.3% 89,320 87,445 -2.1% 5.0%
Total 182,567 186,724 2.3% -0.2% 532,116 536,247 0.8% 2.2%
2. Highlights – Operating and Financial Tolled Traffic
State
Federal
Commercial vs. Light - % Vehic. Equivalents Electronic Toll Collection (AVI) - % Vehic. Equivalents
20
The tolls charged by state concessionaires are adjusted annually, on July 1 of each year, by the annual rate of inflation measured by IPCA index.
On federal highways the adjustments are implemented each year also based on IPCA inflation in the 12 months as from the previous adjustment, and adopting the criteria of rounding to the first decimal place. The toll adjustment is implemented in February for Autopista Fluminense and Autopista Litoral Sul and in December for Autopistas Fernão Dias, Régis Bittencourt and Planalto Sul.
2. Highlights – Operating and Financial Average toll tariff
21
Avg Toll Tariff
(R$ / Vehicles
Equivalents)
3Q14 2Q14 3Q13Var.
3Q14/2Q14
Var.
3Q14/3Q139M14 9M13
Var.
9M14/9M13
State 6.83 6.50 6.47 5.1% 5.6% 6.60 6.47 2.0%
Autovias 7.16 6.86 6.75 4.4% 6.1% 6.95 6.78 2.4%
Centrovias 6.52 6.18 6.15 5.5% 5.9% 6.28 6.17 1.9%
Intervias 5.89 5.62 5.62 4.7% 4.7% 5.72 5.62 1.7%
Vianorte 8.46 8.01 8.05 5.7% 5.2% 8.17 8.02 1.9%
Federal 1.98 1.97 1.89 0.5% 4.7% 1.97 1.88 4.9%
Planalto Sul 3.80 3.80 3.60 0.0% 5.6% 3.80 3.60 5.6%
Fluminense 3.40 3.40 3.30 -0.1% 3.0% 3.39 3.28 3.4%
Fernão Dias 1.50 1.50 1.40 0.0% 7.1% 1.50 1.40 7.2%
Régis Bittencourt 1.80 1.80 1.80 0.0% 0.0% 1.80 1.80 0.0%
Litoral Sul 1.80 1.80 1.70 0.0% 5.9% 1.78 1.66 7.6%
Total 3.41 3.34 3.30 1.9% 3.4% 3.34 3.19 4.8%
Adjusted EBITDA and Margin* – R$ MM / %
Gross Revenue – R$ MM
Net Income – R$ MM
Toll Plaza - Autovias (SP)
* Excludes revenue from construction
2. Highlights – Operating and Financial Main Figures
22
Traffic – MM vehicle equivalent units
2. Highlights – Operating and Financial Costs and Expenses
R$ MM
Cash costs as % Net Revenue (ex. construction)
Cash Costs – 9M14
23
26%
29% 15%
5%
3% 4% 2% 0% 1%
15%
Third Party Services
Personnel
Conservation
Inspection fee
Costs with granting authority
Insurance and guarantees
Directors' compensation
Civil, labor and tax risks
Tax expenses
Other operating expenses, net
Gross Debt – R$ MM
Debt Composition (3Q14) Leverage Ratio and Net Debt – R$ MM
Amortization Schedule – R$ MM
TJLP + 2.2% up to 2.6%
IPCA + 8%
CDI + 0.8% up to 1.4%
BNDES
Other
Debentures
Federal
Other
State
2. Highlights – Operating and Financial Indebtedness
24
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Investor Relations
Strategic Priorities
Strategy
Capex delivery as top priority
3
Compliance with Capex delivery
Economic, social and environmental sustainability
Efficient operations:
Compromise on quality of service to users. Comfort and safety.
Strengthening of corporate image and social responsibility
3. Strategic Priorities
26
Arteris LONG TERM strategy focused on three axes
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3.1 Strategic Priorities Investments
Since 2008 Arteris invested more than R$ 7.0 billion in its federal highways
Consolidated Capex – Arteris highways (R$ million)
• Recovery works at federal concessions
• Serra do Cafezal duplication (Autopista Régis Bittencourt)
• Contorno Avenue (Autopista Fluminense)
• BR-101 highway duplication (Autopista Fluminense)
• BR-116 highway duplication (Autopista Planalto Sul)
• Betim beltway (Autopista Fernão Dias)
Main construction works:
3.1 Investments Capex Delivery
28
0.7
0.8
0.7
1.0
1.2 1.3 1.3
Scheduled Total* – R$ ´000 • Key challenges in the last 5 years
• Remodeling of old projects to meet the new Brazilian reality
- Difficulties to obtain environmental licenses;
- Expropriations and project approvals deadlines;
• New TAC (Conduct Adjustment Term) and investment schedule to be signed with ANTT
- A more realistic schedule;
- A new monitoring scheme by the ANTT;
- New penalties rules will have a direct impact on tariffs: reduction factors from 0,9% up to 1,5%;
- Possibility to recover deadlines within the plan;
* Not considering new contractual amendments.
Capex until the end of all concessions terms (by 2033) are expected to reach around R$ 6.7 billion* including maintenance
Full commitment to accomplish the schedule of federal investments
3.1 Investments Capex Delivery
29
0.5
1.6
0.9 0.8
2.9
In previous years elasticity has been much higher than the market expectations
Traffic Elasticity x GDP
• In many of our roads, major construction works will remove logistic bottlenecks and boost traffic:
• Autopista Régis Bittencourt (Serra do Cafezal duplication).
• Autopista Litoral Sul and Autopista Planalto Sul, as extensions of Autopista Régis Bittencourt, should also be indirectly benefited by Serra do Cafezal duplication.
• Autopista Fluminense (duplication of BR-101)
• In all roads, improvements contribute to addition of new users
Consensus forecasts for traffic don´t take into account ramp-ups
3.1 Investments Capex Delivery
30
0.9 x 0.6 x 1.1 x 1.2 x (1.0) x
1.8 x 2.5 x 4.6 x
13.50%
6.72%
4.10%
.3,40%
3.02% 2.33%
6.60% 6.19%
-0.34%
11.01%
3.88%
4.10%
9.10%
3.16% 3.96% 6.09%
5.17%
-0.33%
.7,53%
2.73%
0.90%
.2,30%
2005 2006 2007 2008 2009 2010 2011 2012 2013
Federais Estaduais PIB
1.5 x 1.4 x 4.6 x 4.0 x
1.5 x
State
Federal
The year of 2013 in the federal concessions was affected by the closing of toll plaza P5 (Palhoça) of Litoral Sul. The growth number presented for 2013 uses comparable basis with 2012, excluding the effects of the referred plaza.
Federal State GDP
Recovery works at federal concessions
31
Repaving
Grass cutting
Signage
Before After
3.1 Investments Capex Delivery
31
Recovery works at federal concessions
Recovery works at federal concessions
32
Drainage
Recovery of guardrails
Before After
Embankment
3.1 Investments Capex Delivery
32
Total – R$ ´000
The construction works were divided into three stages:
Initial stretch: (7.3 km) 1
2 Intermediate stretch: (19 km) – 2.9 km were completed in 2014
3 Final stretch: (4.2 km)
Serra do Cafezal comprises the stretch of 30.5 kilometers between the cities of Juquitiba (SP) and Miracatu (SP) Only single lane stretch of the entire highway
Mountain range with challenging geographic characteristics
Concentration of slow traffic. One of the major bottlenecks in the connection that links the South and Southeast of Brazil
Logistics bottleneck with
retention of large volumes
of heavy vehicles
Miracatu km 367.2
Juquitiba km 336.7
30.5 km Curitiba São Paulo
Work completed in March 2012
Environmental license issued in January 2013
Start of construction in 2013. Complete job to be delivery in the next 3-4 years
34 bridges and 4 tunnels
Work completed in December 2012
km 344 km 363
4.2 km 19.0 km 7.3 km
Duplication requires care to
preserve important
environmental protection areas
3.1 Investments Capex Delivery – Serra do Cafezal duplication
Autopista Régis Bittencourt
33
1,4
Km
were c
om
ple
ted
in
20
14
km 361,6 km 349 km 347.5
Tunnel in progress
Tunnel not started
1,5
Km
were c
om
ple
ted
in
20
14
34
Tunnel 1 Construction of bridge
Serra do Cafezal comprises the stretch of 30.5 kilometers between the cities of Juquitiba (SP) and Miracatu (SP) with the construction of 34 bridges and 4 tunnels
3.1 Investments Main works
Serra do Cafezal duplication – BR-116/SP (Autopista Régis Bittencourt)
35
General View General View
Works of improvement and extension of Contorno Avenue in Niterói, which will bring significant improvements to this stretch of highway with the expansion of road capacity.
3.1 Investments Main works
Contorno Avenue – Autopista Fluminense
20 km have already been concluded and were opened to traffic on February 2014
13 additional kilometers concluded on July of 2014
Completed stretches:
Contractual obligation for diverting the long distance traffic out of the urban perimeter of the City of Campos dos Goytacazes
Long-distance traffic as priority
Benefits for the local community and regional traffic
Improvement of traffic in the urban perimeter
Highway with controlled access, not allowing local access
Project for the west side
As requested by ANTT and the municipality, two
projects were studied east and west side.
It was taken into
account:
• Environmental impacts • Execution deadlines • Social impacts • Connection with
logistics corridors (Port of Açu)
• Single or double lanes
• After the studies, the project for the west side was approved
Characteristics of the work:
Campos Beltway
Alternative
3.1 Investments Main works
36
Campos Beltway – Autopista Fluminense
37
Pavement General View
The project is one of the major works to be executed by Autopista Fluminense and will duplicate 176.6 km of highway, between Rio Bonito e Campos dos Goytacazes.
3.1 Investments Main works
Duplication of BR-101 – Autopista Fluminense
38
North Stretch
Intermediate Stretch
South Stretch
38 - - - Tunnels
(6 units)
3.1 Investments Main works
38
Florianópolis Beltway – Autopista Litoral Sul
Divided into three stretches (North, Intermediate and South) Florianópolis Beltway is the most relevant contractual work of Autopista Litoral Sul, and includes the construction of a bypass of 50 km approx. in double track as an alternative to heavy traffic that cross the region, easing traffic of light vehicles in the neighboring towns to BR – 101.
Works started in May 2014, shortly after the issuance of the IBAMA Environmental Installation License for a stretch of 14 Km;
Work started in May 2014.
Duplication of BR-116/PR (Autopista Planalto Sul)
39
General View Concluded stretch
Duplication of 25 kilometers of BR-116 between Curitiba (PR) and Mandirituba (PR)
3.1. Investiments Main works
40
Concluded Concluded
The main work at Autopista Fernão Dias was the implementation of the Betim (MG) beltway, enabling the creation of an alternative route to long-distance traffic that currently runs through the city.
3.1 Investments Main works
Betim Beltway (Autopista Fernão Dias)
41
Original Access Construction works in progress
The remodeling of the main access to the city of Ribeirão Preto with:
8 viaducts - 630 m
20 new access – 11,8 km
Pedestrian walkway - 440 m
Ramps for walkways - 213 m
Total remodeling of the device
3.1 Investments New investments - Amendment
Main access to Ribeirão Preto – Autovias e Vianorte
42
Works access:
Technical characteristics: • Duplication of 13.6 kilometers • 1 pedestrian walkway • Remodeling of devices Investments: R$ 91 million Deadline: June/2016 Main benefits: • Increase the security for users • Organization of traffic return and
access devices • Safety of pedestrians in the path of
Varjão neighborhood
3.1 Investments New Investments - Amendment
42
Duplication of SP – 318 (Autovias)
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Strategic Priorities Efficient operations
Centrovias (SP)
3.2
• A more efficient and leaner organization
• Redefinition of corporate policies
• Abertis best practices model as a reference
• Cost breakdown focus: manageable costs
• Administrative shared services center
• Centralized purchasing
• Implementation of SAP
• CAPEX and OPEX control
• Toll collection process improvement
• Remuneration based on performance
• Commitment to improve safety:
• Reduction in the number of accidents and deaths at our roads
• Different initiatives
First stage analysis
Potential cash costs reduction up to
R$ 60 million
per year after full implementation of the
efficiency plan
3.2 Efficient Operations Main initiatives
44
3.2 Efficient Operations Centralized Purchasing (Electronic Auctions)
Corporate Health Insurance Purchase
Technology provided by abertis
Multiple Real Time Bids
Instant Savings
Real example on how the electronic auctions can save OPEX
Several players bidding
45
46
3.2. Efficient Operations Focus on security
46
Escape area • BR 376 - km 671,7
• Serves as a refuge for large vehicles that lose their brakes
on the descent of mountain hill
• Comprising cinasita (clay balls)
• It has been used by 80 trucks and 1 bus
• No injuried and minimal damage to trucks
47
3.2 Efficient Operations Focus on Security
47
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Estrategic Priorities Strengthening of Corporate Image 3.3
What image we want for Arteris?
• Public and institutional relations. Public institutions as our partners.
• Closer and more active relationship with journalists
• Investments in marketing and advertising
• Intense relationship with highway users
• Active social responsibility
Action plan
Investor Relations - Action plan
• Increase the Company´s visibility with the market
• Diversify the shareholder base and increase liquidity
• Increase the sell-side coverage
• Improve the disclosure and the quality of our market releases
• Improve corporate governance
3.3 Strengthening of Corporate Image Strengthening of Corporate Image
49
Initiatives that result in improved quality of life of users and the surrounding highways population.
Projects on Education, Health, Environment, Volunteering, Sports and Culture.
Hospital São José de Joinville/SC Helipad
Ballet Bolshoi de Joinville/SC
Ribeirão Preto Orchestra
Viva Saúde Program
17
3.3 Strengthening of Corporate Image Social Responsability
50
51
3.3 Strengthening of Corporate image Campaigns
51
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Investor Relations
Appendix
Appendix
4
• Significant opportunity for Value creation:
• Need for new construction works to solve current bottlenecks and improve quality on the roads
• New resolutions on marginal cash flow to enable new investments in existing contracts
• Reinvestment in contracts with attractive returns and lower risks
• New investments compensated with contract extensions in state concessions and tariff increases in federal concessions
New amendments resolutions
ARTESP RESOLUTION (SP-STATE)
• Published on March 2013
• 8.2 – 8.8 % real unleveraged IRR for 2013
• IRR will be revised annually
• No traffic risk
• Compensation through contract extensions
ANTT RESOLUTION (FEDERAL)
• Published on April 2013
• 6.6% up to 8.0% real unleveraged IRR depending on concession maturity
• IRR will be revised every five years
• No traffic risk
• Compensation through tariff increases
4. Appendix Contractual Amendments
53
• Autopista Fernão Dias: Betim beltway
• Autopista Régis Bittencourt: Duplication of final 19 kilometers of Serra do Cafezal
• Autopista Fluminense: Campos dos Goytacazes ring road
• Autopista Litoral Sul: Florianópolis ring road
• Autopista Planalto Sul: Duplication of 25 kilometers of Highway BR-116 between Curitiba and Mandirituba
Federal Concessions
• Autovias and Vianorte: Ribeirão Preto road intersection and beltway (Signed – R$ 120 million)
• Autovias: Duplication of SP – 318 (Signed – R$ 91 million)
State Concessions
4. Appendix Contractual Amendments
Pipeline (up to now)
54
• The federal government announced in August 2012 a new round of toll roads concessions to take place during 2013-2014
• The State of São Paulo also plans to launch a new package of road concessions
• Other states lacking infrastructure as opportunities
• Successful track record in bidding processes
A long-term investor with a selective, sustainable and defined growth strategy
Exclusive focus on toll roads
New auctions Secondary market
• 53 toll road concessions (~19,058 kilometers) under private administration in Brazil
• Abertis and Brookfield support with a world-class M&A team – analysis and execution
• Successful track record in M&A (Arteris acquired 4 concessions in the state of São Paulo)
4. Appendix New Projects
55
• In November 2012 the government announced the bidding process of BR-116 and BR-040 (within the pipeline of toll roads released in August). The auction in January 2013 was postponed, since there wasn´t enough bidders
• The failure of the first attempt was due to unfavorable conditions:
- Huge investments to execute with aggressive
deadlines (all the capex to be delivery in the
first 5 years)
- Start of toll collection only after 10% of the
total investments is completed
- Estimated toll tariff based on low project IRR
(5.5% real unlevered) and aggressive assumptions
• The government took a step back revised the feasibility studies, increased the cap tariff (using a 7.2% IRR), increased the concession terms, offered better financing conditions and stated that will mitigate environmental and execution risks
• On September 2013, the government auctioned BR-050 (Winner: Planalto Consortium) and failure to auction BR-262 due lack of proposals
• On November 2013, the government auctioned BR-163 Mato Grosso strecht (Winner: Odebrecht).
• On December 2013, three more lots were auctioned: BRs 060-153-262 (Triunfo), BR-163 (CCR) e BR-040 (Invepar).
• On May 2014, the government auctioned BR -153 (TO-GO) (Winner: Galvão Engenharia).
Highways
Programed Federal Concessions 2012
The market will continue to generate new opportunities
4. Appendix New Projects
56
• Definition of hurdle rate according with the project risk
• Capital discipline with standard 9% - 11% real shareholders IRR range
• IRR on base case (project IRR and shareholders IRR) considering downside scenarios
• Modeling and valuation expertise and track record
• Analysis of assumptions (traffic, opex, capex) and financing conditions to create proprietary feasibility studies
Value creation to shareholders is the main driver
4. Appendix New Projects
The internal rate of return
57
BNDES – R$ thousand
4. Appendix Capital Structure
Debentures – R$ thousand
58
Autovias Issue Cost DueRating
Moody's
1st Issue/Serie2 120,000 IPCA+8,00% March-17 Aa1.br Baa3
3rd Issue 300,000 CDI + 0,83% p.a. August-17
Total 420,000 National Global
Centrovias Issue Cost DueRating
Moody's
1st Issue/Serie2 120,000 IPCA+8,00% March-17 Aa1.br Ba1
2nd Issue 400,000 CDI + 0,99% p.a. June-18
Total 520,000 National Global
Intervias Issue Cost DueRating
Moody's
3rd Issue 600,000 CDI + 1,09% p.a. September-18 Aa1.br Baa3
4th Issue/Serie1 150,000 CDI + 1,10% p.a. October-19
4th Issue/Serie1 225,000 CDI + 5,96% p.a. October-19
Total 975,000 National Global
Vianorte Issue Cost DueRating
Moody's
1st Issue/Serie2 100,000 IPCA + 8,00% March-17 Aa1.br Ba1
2nd Issue 150,000 CDI + 0,86% a.a. March-17
Total 250,000 National Global
Fernão Dias Issue Cost DueRating
Moody's
1st Issue 33,700 CDI + 1,40% p.a. July-15 N/D N/D
Total 33,700 National Global
Fluminense Issue Cost DueRating
Moody's
1st Issue 22,500 CDI + 1,40% p.a. July-15 N/D N/D
Total 22,500 National Global
Litoral Sul Issue Cost DueRating
Moody's
1st Issue 26,100 CDI + 1,40% p.a. July-15 N/D N/D
Total 26,100 National Global
Planalto Sul Issue Cost DueRating
Moody's
1st Issue 13,900 CDI + 1,40% p.a. July-15 N/D N/D
Total 13,900 National Global
Régis Bittencourt Issue Cost DueRating
Moody's
1st Issue 39,400 CDI + 1,40% p.a. July-15 N/D N/D
Total 39,400 National Global
Arteris Issue Cost DueRating
Moody's
1st Issue 200,000 CDI + 1,40% a.a. July-15 Aa1.br Ba1
2nd Issue 300,000 CDI + 1,28% a.a. October-19
Total 500,000 National Global
General Total 2,800,600
BNDES
Planalto Amount Cost Term
Total 331.344 TJLP + 2.58% p.a. Until 144 months
Fernão Amount Cost Term
Total 702.754 TJLP + 2.21% p.a. Until 144 months
Régis Amount Cost Term
Total 1.069.495 TJLP + 2.21% p.a. Until 144 months
Litoral Amount Cost Term
Total 810.137 TJLP + 2.32% p.a. Until 144 months
Fluminense Amount Cost Term
Total 780.819 TJLP + 2.45% p.a. Until 144 months
General Total 3.694.549
54.116 (7,5%)
R$ 15,70 (-16,6%)
Stock Performance (Basis 100 Jan- Set/2014)
Stock Liquidity
Shareholder Base (Free Float) – Base Date 6/30/14
Analyst Coverage
Number of trades (daily average)
Financial Trading Volume (daily average) – R$ MM
Institutional Brazilian
Individuals
Institutional Foreign
ARTR3
Shares: 344,444,44
Total: 19 institutions
4. Appendix Capital Markets
Ágora Banco do Brasil Banco Safra Bradesco Brasil Plural Citigroup Coinvalores Credit Suisse Fator Corretora HSBC
Insight Research Itaú JP Morgan Merrill Lynch Morgan Stanley Nau Securities Santander UBS Votorantim
59
4. Appendix Shareholder remuneration
Adjusted Net Income (ex. legal reserve) and Proposed Dividens (R$/MM)
50% 50% Payout 25%
Div
ide
nd
s
Ad
just
ed
Net
Inco
me
60
53%
Div/Share R$ 2.83 R$ 0.54 R$ 0.59
3.0% 3.2% Div. Yeld* 5.1%
*Total of dividends per share in the fiscal year/ share price in the last trading day of the year.
Dividends
69.3%
100.0%
100.0%
4.68%
100% 100%
Participes en Brasil S.L.
Federal Concessions SÃO PAULO - State Concessions Other
51.0% 49.0%
Brookfield Asset Management Inc
4. Appendix Ownership Structure
61
* Source: IBGE, FGV, BACEN, CETIP, Focus Report and BNDES
GDP (%)
Interest Rates (%)
Inflation (%)
62
4. Appendix Macroeconomic Scenario
Av. Pres. Juscelino Kubitschek, 1455 – 9th floor
Itaim Bibi – São Paulo – SP
Zip Code 04543-011
Tel: +55 11 3074-2410
Visit our website:
ir.arteris.com.br
Investor Relations