Aguas Andinas S A : Consolidated Earnings Release for Aguas Andinas as of December 31 2021

Earnings Release

Aguas Andinas

Fiscal year ended December 31, 2021

1. Summary of the exercise

Aguas Andinas is focused on the management and mitigation of climate change impacts.

The climate in the world has changed and in Chile we are experiencing one of the most severe droughts in our history, which has been going on for more than 12 years and has deepened in the last 3 years. This climate crisis has strongly affected the central area of the country, being 2021 the fifth driest year since records have been kept, with a precipitation deficit of close to 70%. This has strongly affected the flow of the rivers that supply the city, the Maipo and Mapocho Rivers, which have seen their flows reduced by 60% compared to historical averages. Both rivers maintain the condition of Shortage Decree granted by the regulatory authority.

In this context, the Company has continued to manage water scarcity by prioritizing water transfer agreements with other users, which has allowed it to maintain the security level of the El Yeso reservoir. At the end of 2021, the volume stored is 158.2 hm3, which represents a 13% increase compared to the 140.1 hm3 volume stored at December 31, 2020.

A major action plan to address water scarcity and the effects of climate change has been deployed during the year 2021.

1. Signing of a historic collaboration agreement with the Irrigation Associations of the First Section of the Maipo River that establishes a series of measures to lay the foundations for a solution that reinforces the supply of water to the population and, at the same time, the use necessary to sustain the agri-food industry, improving the water efficiency of the basin.

1. High level of progress of the new Lo Mena - Cerro Negro water well system, which will provide a flow of 1,500 l/s to supply 400,000 customers.

1. Modernization of the Padre Hurtado potable water plant, which supplies more than one million people.

1. Expansion of the Agua Potable Quilicura plant to increase water availability in the northern sector of the capital.

1. Modernization of the Vizcachitas plant, generating greater efficiency in water consumption due to the implementation of new filters.

1. New ponds in San Antonio, San Enrique, Talagante and Parque Bicentenario.

1. Water efficiency plan, with deployment of all available technologies for water recovery.

In order to face this emergency, the Company has maintained its investment efforts, executing an investment plan that reached $154,239 million at year-end 2021.

Positive Pandemic Management:

At year-end 2021, we continued to experience the direct and indirect impacts resulting from the exceptional situation due to Covid-19.

This situation requires us to continue making a great effort to adapt in order to supply citizens with a resource essential for life, water, for which we continue to deploy an intense preventive strategy. In view of this, at Aguas Andinas we continue to have all the economic, technical and human resources available to ensure the continuity of the operation, ensuring a safe supply at a crucial time, together with protecting the health of our workers, their families and the community.

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Complementing the above, we estimate an overall impact of $30,740 million for the direct and indirect effects derived from the exceptional situation due to Covid compared to a normal year without pandemic, mainly associated with lower non-residential consumption (20 hm3), higher uncollectible expenses (% uncollectible over revenues 3.1% vs. 0.8% in the pre-pandemic period) and direct preventive expenses.

Global context and operational costs:

In the current context of extreme drought, generalized increase in the costs of raw materials, labor and transportation, the Company has experienced higher operating costs at year-end 2021, mainly associated with the purchase of water due to the effects of the drought, and maintenance of networks and operating equipment as a result of the significant increase in customer requirements and workload, together with higher prices due to the increase in labor and construction material costs.

In addition, the significant increase in the CPI of 7.2% had a negative impact on our financial costs associated with the readjustment of the UF debt.

Transformation Project:

The Company is implementing a Transformation plan, with a vision of a new sustainable business model focused on mitigating risks, capturing efficiencies, prioritizing investments and incorporating technology, supported by a new organizational culture.

EBITDA as of December 31, 2021 amounted to $262,818 million, an increase of 11.7% compared to the previous year. The main variations are shown in the following chart:

EBITDA (millions of $)

1. Higher sanitary revenues of $20,887 million, mainly associated with higher average tariffs of $18,314 million due to the latest tariff indexations by polynomial and the entry into operation of new investment projects (Pirque Ponds, La Farfana Nitrates and Aguas Cordillera safety ponds). In addition, higher sales volumes were recorded for $1,755 million, mainly explained by an increase in sales to residential customers by 0.7% and non-residential customers by 0.9%.

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1. Higher non-sanitary business margin of $2,713 million, mainly due to higher activity in agreements with developers, home services to customers, technical advisory services for rural potable water and higher activity in non-sanitary subsidiaries, partially offset by non-recurring effects.

1. Higher network and operating equipment maintenance costs of $7,577 million were generated due to the significant increase in customer requirements and work volume, together with higher prices due to the increase in labor and construction material costs.

1. Higher raw water and electric power purchase costs of $2,726 million necessary to continue facing the extreme drought situation that the region has been experiencing for the last 13 years.

1. It is important to note that the volume stored in the El Yeso Reservoir as of December 2020 was 140.1 hm3 vs. 158.2 hm3 as of December 2021. Also, in August a historic collaboration agreement was signed with the Irrigation Associations of the First Section of the Maipo River, which includes commitments to develop a Master Plan for the Management of the Maipo River Basin, and will allow promoting new investments to provide additional resources to the system, such as the reuse of treated water from the Biofactories for exchange with raw water.

The collaboration agreement with the Irrigation Associations is in operation, and thus, the Board of Directors of the Junta de Vigilancia de la Primera Sección del Río Maipo (Maipo River First Section Oversight Board) has coordinated water transfers during the summer period, ensuring sufficient reserves in the El Yeso Reservoir to face the winter of 2022.

The agreement has also established an update in the price of transfers, making it consistent with the value of raw water from the Maipo River used in the tariff processes. In addition, it includes thresholds that define high and low demand prices based on the river's water scarcity.

1. Covid situation: since March 2020, the Company has maintained an action plan to ensure continuity of service, implementing various measures to manage the exceptional situation resulting from the Coronavirus pandemic.
   It should be noted that at the end of December 2021, an allowance for doubtful accounts of $15,695 million was recorded, generating a lower bad debt expense of $4,477 million with respect to 2020.

1. In the last quarter of 2020, the settlements signed by SERNAC, Conadecus and Aguas Andinas were recognized in the amount of $11,000 million, in which the Company compensated customers who were affected by the massive outages of 2016 and 2017.

Net income as of December 31, 2021 amounted to $100,645million, representing an increase of 2.0% compared to the previous year. The main variations are presented in the following chart:

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+2.0%

Millions of $

	Revenues	Costs	Depreciation & Amortization	Financial Results	Income Tax and Others	ESSAL
							Dec. 21
Dec. 20

At the non-operating level, there is a lower financial result of $29,800 million compared to the previous year, mainly associated with a higher revaluation of the financial debt due to the variation of the Unidad de Fomento (6.6% in 2021 versus 2.7% in 2020)..

Income tax and other presented a higher result of $10,151 million, mainly explained by the monetary correction effect of the Tax Equity, which was partially offset by non-recurring costs associated with the Transformation Plan being implemented by the Company.

The Essal impacts correspond mainly to the net result from the sale of this company in 2020 for $7,325 million, together with the profit obtained for $4,346 million. The above is partially offset by the reversal of the provision associated with the termination of the expiration process of the Osorno concession ($7,848 million after tax).

Cash Generation and Position. At the end of 2021, the balance of cash and cash equivalents decreased by $11,432 million compared to the end of December 2021, reaching $163,513 million. The decrease in this item is mainly explained by the payment of investments together with the payment of dividends made in the months of May and November, which was partially offset by the higher operating cash flow. The cash balances allow the Company to have a buffer to face the uncertainties of the current environment.

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