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Company Presentation May 2014 Investor Relations
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Company Presentation May 2014
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
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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
16.5% 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: 6,804 (December 2013)
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, Municipal and PPP 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
State Contracts 10.054 km
SP 18 5.299 km
RS / PR 13 4.270 km
RJ / BA / ES 4 485 km
PPPs Contracts 377 km
MG 1 371 km
PE 1 6 km
Municipal Contracts 35 km
RJ 1 35 km
1. Arteris and the Toll Road Industry Concessions in Brazil
Third Round 4.248,0 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
Phase 3
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
Freight transport matrix National vehicle fleet – MM
Public Highways Concession Highways
Source: CNT 2013 Highway Survey and Denatran
General conditions of Brazil’s highways
61%
21% 14%
4% 0.4%
Rail
49%
36%
14% 1%
3%
24%
38%
25%
10%
Excellent
Good
Fair
Poor
Very poor
Good
Excellent
Poor Fair
Intervias (SP)
43.3
13.6
20.4
0.4
Light Commercial Motorcycle Other
1. Arteris and the Toll Road Industry The Sector in Numbers
11
86% 14%
91%
9%
27%
13% 9% 5%
46%
São Paulo: 19
Paraná: 6
R.G. do Sul: 7
PE/BA/ES/MG/RJ: 9
Federais: 14
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
59 Concessionaires
19,702 Km
Granted
1.6 bi Vehicles
2013
Under Concession
19,702 Km 1.6 MM Km 214,413 Km
Concessionaires
Federal: 19
1. Arteris and the Toll Road Industry The Sector in Numbers
12
8
25,04%
15,93%
18,26%
27,04%
15,36%
10,82% 9,05%
5,81%
12,71%
7,97%
12,66% 11,77%
7,10% 6,03% 5,44% 3,68% 4,83%
2,46% 2,02% 4,32% 5,66%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015E
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
138 140 152
170 180 182 188 196 204 197 208 214 218 220 219 230 224
58 60 70 79 88 88 101 97 104 95 103 103 110 109 110 108 103
42,0% 42,9% 46,1% 46,5%
48,8% 48,3%
53,6% 49,4% 50,8%
48,1% 49,6% 47,9% 50,6% 49,7% 50,0%
46,9% 45,9%
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14
Net Revenue Adjusted EBITDA Adjusted EBITDA Margin
360 465 507 546
617 724
776
896 996
1.108
1.233
307 218
305 344 383 441
544 578 690
780 873
999
251
60,5% 65,6% 67,9% 70,2% 71,5%
75,1% 74,5% 77,0% 78,4% 78,8% 81,0% 81,7%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 1Q14
Net Revenue Adjusted EBITDA Adjusted EBITDA Margin
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
1Q14 4Q13 1Q13Var.
1Q14/4Q13
Var.
1Q14/1Q132013 2012
Var.
2013/2012
State 51,489 55,109 46,437 -6.6% 10.9% 206,864 189,694 9.1%
Autovias 11,847 12,484 10,709 -5.1% 10.6% 47,422 44,102 7.5%
Centrovias 14,182 15,232 12,768 -6.9% 11.1% 56,233 50,696 10.9%
Intervias 16,197 17,312 14,601 -6.4% 10.9% 65,479 60,471 8.3%
Vianorte 9,262 10,080 8,359 -8.1% 10.8% 37,729 34,425 9.6%
Federal 124,107 129,871 127,294 -4.4% -2.5% 510,233 506,993 0.6%
Planalto Sul 7,245 7,411 6,906 -2.2% 4.9% 28,704 27,945 2.7%
Fluminense 11,359 12,496 12,045 -9.1% -5.7% 48,422 48,913 -1.0%
Fernão Dias 40,147 42,627 39,478 -5.8% 1.7% 165,213 160,707 2.8%
Régis Bittencourt 36,833 38,870 36,076 -5.2% 2.1% 150,105 146,097 2.7%
Litoral Sul 28,523 28,468 32,789 0.2% -13.0% 117,787 123,331 -4.5%
Total 175,596 184,980 173,731 -5.1% 1.1% 717,096 696,687 2.9%
Elasticity
Toll Plaza– Autopista Fernão Dias (MG)
2. Highlights – Operating and Financial Tolled Traffic
18
13.50%
6.72%
4.10%
0.60% 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
2. Highlights – Operating and Financial Tolled Traffic
58% 60% 62% 61% 61% 62% 63% 62% 61%
64% 64% 65% 65%
40% 42% 44% 44% 45%
47% 47% 47% 47% 49% 49% 51% 51%
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14
State Federal
73% 76% 76% 74% 72%
75% 75% 73% 71% 76% 75% 73% 72%
27% 24% 24% 26% 28%
25% 25% 27% 29% 24% 25% 27% 28%
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14
Commercial Light
60% 62% 64%
62% 60% 62% 64%
62% 60% 63% 65% 63% 62%
40% 38% 36%
38% 40% 39% 36%
38% 40% 37% 35%
37% 38%
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14
Commercial Light
State
Federal
Commercial vs. Light - % Vehic. Equivalents Electronic Toll Collection (AVI) - % Vehic. Equivalents
19
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
20
Avg Toll Tariff
(R$ / Vehicles
Equivalents)
1Q14 4Q13 1Q13Var.
1Q14/4Q13
Var.
1Q14/1Q13
State 6.47 6.48 6.48 -0.1% -0.1%
Autovias 6.81 6.79 6.80 0.2% 0.1%
Centrovias 6.15 6.17 6.17 -0.4% -0.4%
Intervias 5.63 5.61 5.62 0.2% 0.1%
Vianorte 8.03 8.04 8.02 -0.1% 0.1%
Federal 1.95 1.90 1.85 2.6% 5.3%
Planalto Sul 3.80 3.63 3.60 4.8% 5.6%
Fluminense 3.36 3.30 3.23 1.7% 4.1%
Fernão Dias 1.50 1.41 1.40 6.2% 7.2%
Régis Bittencourt 1.80 1.80 1.80 0.0% 0.0%
Litoral Sul 1.74 1.70 1.58 2.4% 10.2%
Total 3.28 3.26 3.09 0.4% 6.1%
1.899 2.108 2.300
537 575
896 1.117
1.259
227 378
105
103 43
27 14
2011 2012 2013 1Q13 1Q14
Others
Construction
Toll
404 404
466
93 101
2011 2012 2013 1Q13 1Q14
1.195 1.314
1.428
328 355
66% 66% 67% 64% 67%
2011 2012 2013 1Q13 1Q14
669 697 717
174 176
2011 2012 2013 1Q13 1Q14
Traffic – MM vehicle equivalent units
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
21
34,3% 32,6%
35,9%
32,7%
2012 2013 1Q13 1Q14
29%
33%
15%
5%
3% 4%
3%
1%
1%
6%
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
(687) (690)
(184) (173)
(1.117) (1.259)
(227) (378)
(236) (196)
(49)
(38)
(242) (286)
(66)
(78)
(2.282)
(2.430)
(525)
(666)
2012 2013 1Q13 1Q14
Cash Cost
Cost of Construction Services
Provision for highway Maintenance
Depreciation and Amortization
2. Highlights – Operating and Financial Costs and Expenses
R$ MM
Cash costs as % Net Revenue (ex. construction)
Cash Costs – 1Q14
22
1.453 1.575 1.611
1.797 1.883 2.139 2.237
2.420 2.488 2.706 2.817
3.084 3.258 1,5 1,5 1,5 1,6 1,6
1,8 1,9 1,9 2,0 2,1 2,1 2,3 2,4
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14
Net Debt Net Debt/Adjusted EBITDA - Fixed Concession Charge (last 12 months)
54,7% 40,6%
4,7%
51,7% 48,2%
0,1%
51,7%
39,0%
9,3%
303
779 766 751
464
218 234 251 270 290 220
67 19
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
873 908 552 426 414 432 453 473 457 466
963 288 405
1.8
82
1.8
62
2.4
11
2.6
72
2.6
90
2.7
13
2.7
47
2.7
62
2.7
21
2.6
74
3.0
97
3.8
36
4.2
28
2.754 2.770 2.963 3.098 3.104 3.145 3.200 3.235 3.178 3.141
4.060 4.125
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14
Short term Long term
Gross Debt – R$ MM
Debt Composition (1Q14) 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 1.7%
BNDES
Other
Debentures
Federal
Other
State
2. Highlights – Operating and Financial Indebtedness
23
4,632
Balance Sheet Highlights
Recurrent dividend policy: 50% payout in the past three years
03/31/14
Total Assets R$ 8.0 billion
Cash Position R$ 1.4 billion
Intangible Assets R$ 6.2 billion
Current Liabilities R$ 1.0 billion
Non Current Liabilities R$ 5.0 billion
Total Equity R$ 2.0 billion
Strong balance sheet
Market cap of R$ 6.3 billion (03/31/14)
Dividends
2. Highlights – Operating and Financial Balance Sheet and Dividends
24
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Investor Relations
Strategic Priorities
Strategy
Capex delivery as top priority
3
Capex delivery
Efficient operations
Strengthening of corporate image
Growth: Contractual amendments & New projects
Capital structure and Shareholders remuneration
3. Strategic Priorities
26
Since 2008 Arteris invested more than R$ 5.7 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. Strategic Priorities Capex Delivery
27
0.7
0.8
0.7
1.0
1.2 1.3
Scheduled Total* – R$ ´000 (2013) • 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$ 6.5 billion* including maintenance
Full commitment to accomplish the schedule of federal investments
3. Strategic Priorities Capex Delivery
28
1.8
1.2
0.6 0.6
2.6
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. Strategic Priorities Capex Delivery
29
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
30
Repaving
Grass cutting
Signage
Before After
3. Strategic Priorities Capex Delivery
30
Recovery works at federal concessions
Recovery works at federal concessions
31
Drainage
Recovery of guardrails
Before After
Embankment
3. Strategic Priorities Capex Delivery
31
Total – R$ ´000
The construction works were divided into three stages:
Initial stretch: (7.3 km) 1
2 Intermediate stretch: (19 km)
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. Strategic Priorities Capex Delivery – Serra do Cafezal duplication
Autopista Régis Bittencourt
32
33
Construction works pace:
3. Strategic Priorities Capex Delivery – Serra do Cafezal duplication Autopista Régis Bittencourt
34
3. Strategic Priorities Capex Delivery – Serra do Cafezal duplication Autopista Régis Bittencourt
Construction works pace:
The project is one of the major works to be executed by Autopista Fluminense and will duplicate 176.6 km of highway.
1st stretch (59 km) between the cities of Macaé and Campos dos Goytacazes. Construction began in late 2011.
20 km have already been concluded and were opened to traffic at the beginning of 2014.
Environmental license issued in April 2013 for the 2nd stretch (71 km). Construction began in May 2013
Environmental license pending for the 3rd stretch
Duplication of the 1st stretch
3. Strategic Priorities Capex Delivery – Duplication of BR-101
Autopista Fluminense
35
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. Strategic Priorities Capex Delivery – Campos Beltway
Autopista Fluminense
36
37
Since October 2012, the Company has been performing the 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.
Construction of walkways between Niteroi and Rio
Bonito
Current lane
New lanes
Project to increase the traffic capacity – Contorno Avenue
3. Strategic Priorities Capex Delivery – Contorno Avenue and walkways
Autopista Fluminense
37
38
North Stretch
Intermediate Stretch
South Stretch
Divided into three stretches: North, Intermediate and South
• North - Km 177 + 500 (Rio Inferninho) to SC 408 Project: Executive project approved by ANTT Environment: Previous Environmental license granted by IBAMA. Expropriation: Public Utility Decree at the Transportation Ministry, waiting for publication.
• Intermediate - SC 408 to SC 407 Project: Executive project approved by ANTT. Environment: Previous
Environmental license granted by IBAMA. Expropriation: Public Utility Decree partially published, and being analyzed by ANTT. Work: Bidding process for selecting the contractor in progress.
• South - SC 407 to km 220 Project: Executive project under analysis by ANTT. Environment: Previous
Environmental license granted by IBAMA. Expropriation: Public Utility Decree under analysis by ANTT.
38 - - - Tunnels
(6 units)
Strategic Priorities Capex Delivery – Florianópolis Beltway Autopista Litoral Sul
38
Previous Environmental license and layout approval granted by the agencies
Duplication of 25 kilometers of BR-116 between Curitiba (PR) and Mandirituba (PR)
• 5.4 km of duplication completed, between the cities of Curitiba (PR) and Fazenda Rio Grande (PR)
• Ongoing 17 kilometers between Fazenda Rio Grande (PR) and Mandirituba (PR).
3. Strategic Priorities Capex Delivery – Duplication of BR-116 stretch
Autopista Planalto Sul
39
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.
• In 2012 were completed 2.7 kilometers of the first stage of the project, including the construction of a clover
• In 2013 works of the remaining 5.4 kilometers were completed and delivered to traffic in September, concluding the Beltway.
1st stage of the Betim beltway – 2.7 km
3. Strategic Priorities Capex Delivery – Betim Beltway
Autopista Fernão Dias
40
The remodeling of the main access to the city of Ribeirão Preto will bring the following benefits: Driver´s safety
Organization of heavy and light traffic
Pedestrian safety
Current condition
8 viaducts - 630 m
20 new access – 11,8 km
Pedestrian walkway - 440 m
Ramps for walkways - 213 m
Total remodeling of the device
Start of construction: May 2013 To be delivered in 36 months
Total population benefited: 1.5 million people
The project
3. Strategic Priorities Capex Delivery – Main access to Ribeirão Preto
Autovias and Vianorte
41
• 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
42
3. Strategic Priorities Efficient Operations
43
3. Strategic Priorities 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
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. Strategic Priorities Strengthening of Corporate Image
44
• 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
• On February 2013 Arteris signed the first amendment with ANTT using the marginal IRR methodology for the additional investment of around R$ 175.0 million at Autopista Litoral Sul
New amendments resolutions
ARTESP RESOLUTION (SP-STATE)
• Published on March 2013
• 8.2% 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
3. Strategic Priorities Contractual Amendments
45
• Autopista Régis Bittencourt: Duplication of final 19 kilometers of Serra do Cafezal
Up to R$ 1.2 billion*
• 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
R$ 120 million*
More than R$ 1.3 billion on potential amendments based on marginal cash flow resolution
State Concessions
• Autopista Fernão Dias: Betim beltway
* 2013 figures. These investments are schedule to be disbursed until 2020 being 80% of that until 2017
3. Strategic Priorities Contractual Amendments
Pipeline (up to now)
46
• 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
• 59 toll road concessions (~19,702 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)
3. Strategic Priorities New Projects
47
• 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 the government auctioned BR-050 (Winner: Planalto Consortium) and failure to auction BR-262 due lack of proposals
• On November, the government auctioned BR-163 Mato Grosso strecht (Winner: Odebrecht).
• On December, three more lots were auctioned: BRs 060-153-262 (Triunfo), BR-163 (CCR) e BR-040 (Invepar).
Highways
Programed Federal Concessions
The market will continue to generate new opportunities
3. Strategic Priorities New Projects
48
• 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
3. Strategic Priorities New Projects
The internal rate of return
49
• Strong expertise in project finance globally
• Access to long term non recourse financing in local currency
• BNDES as main partner in Federal Roads.
• Low cost of debt due to BNDES financing for the federal concessions
Leverage Ratio and Net Debt – R$ MM
Moody´s
• Autovias: Aa1.br (National); Baa3 (Global)
• Centrovias: Aa1.br (National); Ba1 (Global)
• Intervias: Aa1.br (National); Baa3 (Global)
• Vianorte: Aa1.br (National); Ba1 (Global)
Ratings
Debt Composition (1Q14)
• Good ratings at the state concessions
• Low leverage level considering the nature of long-term projects
• Advent of Law 12,431 (Infrastructure debentures – with tax exemptions for foreigners and individual investors)
3. Strategic Priorities Capital Structure
50
51,7%
39,0%
9,3%
TJLP + 2.2% up to 2.6%
IPCA + 8%
CDI + 0.8% up to 1.7%
1.453 1.575 1.611
1.797 1.883 2.139 2.237
2.420 2.488 2.706 2.817
3.084 3.258 1,5 1,5 1,5 1,6 1,6
1,8 1,9 1,9 2,0 2,1 2,1 2,3 2,4
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14
Net Debt Net Debt/Adjusted EBITDA - Fixed Concession Charge (last 12 months)
Traffic Upsides
Contractual Amendments
New projects
Assumptions not yet considered in the market´s models
Value Creation
Efficient operations and
Capital structure
3. Strategic Priorities Value Creation
51
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Investor Relations
Appendix
Appendix
4
51.627 (2,6%)
R$ 18,42 (-2,2%)
Stock Performance (Basis 100 Jan-Apr/2014)
Stock Liquidity
Shareholder Base (Free Float) – Base Date 3/31/14
Analyst Coverage
Number of trades (daily average)
Financial Trading Volume (daily average) – R$ MM
Dividends
Institutional Brazilian
Individuals
Institutional Foreign
ARTR3
Shares: 344,444,44
Total: 20 institutions
Ágora Banco do Brasil Bradesco Brasil Plural Citigroup Coinvalores Credit Suisse Fator Corretora Goldman Sachs HSBC
Itaú JP Morgan Merrill Lynch Morgan Stanley Nau Securities Planner UBS Santander Votorantim Insight Research
4. Appendix Capital Markets
53 *
Year Div. / Share Payout
2011 $2.83 52%
2012 $0.54 50%
2013 $0.59 50%
3,391
2,661 3,072
1,880
1,238
1Q13 2Q13 3Q13* 4Q13 1Q14
28 22
70
12 6
1Q13 2Q13 3Q13* 4Q13 1Q14
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
54
19,0
23,2
16,2
19,1
15,2
11,9 12,3
10,0 9,8 11,6
8,4 8,0
11,0 12,0
10,0 11,0
9,8 9,8
6,9 6,3 6,3 6,0 6,0 6,0 5,5 5,0 5,0 5,0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015E
CDI TJLP
2,7
1,1
5,7
3,2
4,0
6,1
5,2
-0,3
7,5
2,7
0,9
2,3 1,7 1,9
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015E
25,3
8,7
12,4
1,2
3,8
7,8 9,8
-1,7
11,3
5,1
7,8
5,5
7,2
5,5
12,5
9,3 7,6
5,7
3,1 4,5
5,9
4,3
5,9
6,5
5,8
5,9
6,4
6,0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015E
IGP-M IPCA
* Source: IBGE, FGV, BACEN, CETIP, Focus Report and BNDES
GDP (%)
Interest Rates (%)
Inflation (%)
55
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:
www.arteris.com.br/ir
Investor Relations
