OUR COMPANY

1 OUR COMPANY

CONTENT

Corporate Identification Information

Company Name: Empresa de Transporte de Pasajeros Metro S.A.
Business Name: Metro S.A.
Company Type: Public Limited Company
Address: Avda. Libertador Bernardo O’Higgins Nº 1414, Santiago
ID No.: 61.219.000-3
National Securities Registry: NO. 0421, September 22,1992
Independent Auditors: KPMG Auditores Consultores Ltda.

Incorporation Documentation

Law No. 18.772, published in the Official Gazette on January 28th, 1989, establishes the regulations to turn Dirección General de Metro, under the purview of Ministry of Public Works, into a public limited company. Law No. 18,772 was amended by Article 55 of Act No. 18,899, published in the Official Gazette on December 30th, 1989, and by Article 3º, letter a), of Act No. 19,046, published in the Official Gazette on February 20th, 1991.

Incorporation: public deed dated January 24th, 1990 executed before Raúl Undurraga Laso, Notary Public.

An excerpt thereof was published in the Official Gazette on January 25th, 1990, and amendments were published in the Official Gazette on January 26th, 1990.

Registration: The Company was registered on January 25th, 1990 on page 2,681, under No. 1,427 of the Trade Registry at the Santiago Office of Property Registration.

Addresses

Corporate Headquarters: Avda. Libertador Bernardo O’Higgins Nº 1414
City: Santiago de Chile
Municipal District: Santiago
Telephone: +56 2 2937 3000
+56 2 2937 2000
Website: www.metro.cl
E-mail: comunicaciones@metro.cl

Workshops

Neptuno: Avda. Dorsal Nº 6252
Municipal District: Lo Prado
Telephone: +56 2 2937 2490
Lo Ovalle: Callejón Lo Ovalle Nº 192
Municipal District: San Miguel
Telephone: +56 2 2937 2975
San Eugenio: San Eugenio Nº 997
Municipal District: Ñuñoa
Telephone: +56 2 2937 2979
Puente Alto: La Balanza Nº 1018
Municipal District: Puente Alto
Telephone: +56 2 2937 7357

Our History

In 2015, Metro commemorated 40 years of operations. Over the last four decades, the underground train has grown and expanded alongside Santiago and the city’s inhabitants, thereby becoming part of its history. On average, Metro makes more than two million rides daily and more than 60% of all commutes in Santiago involve the Metro.

1968

On October 24th, Eduardo Frei Montalva, President of the Republic, signed the decree that gave birth to Metro de Santiago, a important means of transportation in the history of Chile. The Administration commissioned the Planning Department of the Office of Public Works with the project.

1969

On May 29th, works began on the San Pablo–La Moneda section of Line 1 and the Neptuno Workshop, marking the beginning of a subway network that originally consisted of five lines for a total length of approximately 80 kilometers.

1975

May 15th marked the beginning of the commissioning period, with the first train rolling down the tracks between San Pablo and Central Station.

In September, Metro de Santiago officially opened its doors and began operations on lines running between the San Pablo and La Moneda stations. During the first few months of operations people would visit Metro’s facilities to look around, ride on the escalators and marvel at the modern, clean, high-tech venue.

1977

The first network expansion was commissioned in March, extending Line 1 to the Salvador Station.

1978

Line 2 from the Los Heroes to Franklin Stations was opened, resulting in an additional six stations on December 21st that same year up to Lo Ovalle Station.

1980

Extension works on Line 1 were completed up to the Escuela Militar station, resulting in a total network of 25 kilometers.

1987

On September 15th, two new stations were added: Santa Ana and Mapocho. The name of the latter was subsequently changed due to the remarkable discovery of the remains of the Cal y Canto Bridge during ensuing excavations. This bridge was a flagship construction for over a century in the city.

August marked the beginning of the Metrobus system, with 11 bus lines departing from the Escuela Militar, Lo Ovalle and Las Rejas stations.

1989

In January, Act 18,772 was enacted, whereby Dirección General de Metro, so far under the purview of the Ministry of Public Works, became a public limited company, whose shareholders were Corporacion de Fomento de la Producción (Corfo) (Chilean economic development agency) and the State, represented by the Ministry of Finance.

1990

Starting in 1990, Metro de Santiago implemented a cultural affairs policy, which would make the company unique benchmark in art promotion and endorsement in our country.

1993

The first MetroArte project was formalized by public art exhibitions at Metro stations. The first show entitled “Interior Urbano” by Hernán Miranda, was placed on display at the Universidad de Chile station.

1996

An agreement between the Council on Libraries, Archives and Museums (Dibam) and Metro de Santiago, the BiblioMetro initiative took off, a book lending system comprising of several booths located at different stations with a view to promoting reading among Metro users.

1997

The first section of Line 5 was opened in April, running from Vicuña Mackenna Av. Stop No. 14 (Bellavista de La Florida station) up to Plaza Italia (Baquedano station), for a total length of 10.3 kilometers.

1998

In February, the company began expansion works on Line 5 up to the Santa Ana station. The method used in this project was the NATM (New Austrian Tunneling Method), consisting of interstation and station tunneling, that is, no surface excavations were conducted, thereby minimizing disturbance in the community and making works more efficient.

1999

In keeping with its commitment to make the most diverse artistic expressions available to all Chileans, Metro de Santiago created the MetroArte Cultural Trust (Corporación Cultural MetroArte).

2000

Three new stations running through Santiago’s historic district were opened on March 21st on Line 5: Bellas Artes, Plaza de Armas and Santa Ana stations, connecting Line 5 with Line 2. At the time, Metro’s ridership amounted to one million passengers per day along its 40.4 kilometers and 52 stations.

2002

As announced one year earlier, construction began on Line 4 to Puente Alto, connecting 11 municipal districts and serving more than one million inhabitants.

2004

On March 31st, the westbound expansion of Line 5 was opened, thereby adding two new stations, Cumming and Quinta Normal.

The underground crossing of the Mapocho River completed on September 8th became a new landmark, in order to commission two new stations named Patronato and Cerro Blanco on the northbound track of Line 2.

On December 22nd, the El Parrón and La Cisterna stations on Line 2’s southbound track began operations. This expansion process also involved intermodal or hub stations that improved the connectivity between the underground train and other means of transportation, mainly buses. Nowadays, these facilities are also available at the Vespucio Norte, Pajaritos, La Cisterna, Lo Ovalle and Bellavista de La Florida stations.

2005

On November 25th, the Cementerios and Einstein stations were commissioned on Line 2’s northbound track. Meanwhile, on November 30th, the first section of Line 4 was opened. It comprised an underground stretch between the Tobalaba and Grecia stations and an elevated railway between Vicente Valdés and Plaza de Puente Alto.

2006

The last section of Line 4 was opened in March, finally connecting the Puente Alto and Tobalaba stations. Up until then, that was the longest stretch of the entire subway system running 24.7 kilometers with 22 stations, connecting the districts of Providencia, Ñuñoa, La Reina, Peñalolén, Macul, La Florida and Puente Alto.

The Line 4A opening was conceived as a supplement to Line 4, which allowed Metro to connect lines 2 and 4 as of that year. Finally, the section between the Dorsal and Vespucio Norte stations was added in order to complete the Line 2 expansion to date.

2007

The City of Santiago’s new transit system, Transantiago, was inaugurated in 2007, with Metro serving as the backbone for Santiago residents’ commuting needs. Consequently, new users came on board, doubling Metro’s demand and social profitability. Expansion works on Line 1 eastbound and Line 5 westbound began simultaneously, as well as construction of the new San José de La Estrella Station on Line 4.

2008

During the year of Metro’s 40th anniversary, the Vespucio Norte intermodal station was inaugurated, and the first bicycle storage racks (BiciMetros) and SubCentro underground shopping district were opened at the Escuela Militar Station. In terms of operations, the Metro Expreso service hours were extended along Line 4 and the system was also implemented on Line 5.

Green and Red routes were launched in 2007. That same year, the Chilean Transportation Engineering Society presented Metro with an award for the best Transportation System Intervention, in recognition of this measure.

2009

In November, in the midst of a major consolidation phase, the company inaugurated the San José de La Estrella Station (in La Florida district) on Line 4.

2010

Three new stations: Manquehue, Hernando de Magallanes and the Los Dominicos terminal were added to the eastern end of the line. The first section of Line 5 expansion up to Pudahuel entered into operation, adding five new stations: Gruta de Lourdes, Blanqueado, Lo Prado, San Pablo and Pudahuel.

2011

Line 5 expansion was opened in February with seven new stations: Barrancas, Laguna Sur, Las Parcelas, Monte Tabor, Del Sol, Santiago Bueras and Plaza de Maipú, for a total of 8.6 kilometers.

Line 5 demand (Quinta Normal – Plaza de Maipú) is estimated at 80 million rides annually or 300,000 a day.

In July, the company announced the layout of two new lines: Lines 3 and 6. Scheduled for completion in 2017 and 2018, respectively, this expansion is the consolidation of the most ambitious project by Metro de Santiago, representing the integration of five new districts to the network and improved travel performance.

Early engineering works and technical processes began for the development of the new lines.

2012

Metro began on-site works for Lines 3 and 6 by officially opening preliminary works in various districts of Santiago. Citizens were involved in the process as required by the Environmental Impact Declaration for Shafts and Drives.

As a clear sign of service improvement and in keeping with citizen demands, the first trains with air-conditioning started operating on Line 1 during the second semester.

2013

The tunneling and drives excavation phase began on the Lines 3 and 6 Project.

The contract for trains and a modern driving control system was awarded.

Metro is responsible for managing the prepaid card (bip!) for the entire transit system citywide. In December 2012, the company signed a contract with the Ministry of Transportation and Telecommunications appointing Metro as the sole operator of the bip! card until 2019. Transantiago Financial Administrator (AFT) originally performed this task. The formal handover began on July 1st, 2013 and by September of that same year Metro has assumed full control.

2014

During 2014, the most challenging project in the history of Metro, i.e., construction of Lines 6 and 3, continued its progress: bidding processes were completed for the construction of tunnels, shafts and drives, as well as most of the main system components.

Furthermore, in order to fund the construction of Lines 3 and 6, as well as other improvements to the existing network, Metro successfully carried out its first bond placement on the international market amounting to US$500 million. This operation was formalized in New York. Additionally, in December Metro signed the largest international banking contract for a total of US$800 million, with BNP Paribas and Sumitomo Mitsui acting as agent banks for the operation.

In December 2014, Metro de Santiago published its HighImpact Failure Improvement Management Plan in order to minimize the impact its service shutdowns were having on its ridership and the city. This plan is framed by the company’s new administrative approach.

Fed by in-house studies, suggestions issued by the Committee of Experts, worker input and international best practices, this initiative aims to reduce the failure rate and time required to bring the Metro service back on line when these situations arise. The initiative entails short- and medium-term actions in maintenance, operations and passenger communications.

2015

the Company focused on improving the reliability of its services. In keeping with its Improvement Plan, Metro worked on bringing down its breakdown rate. As a result of these efforts, the company successfully cut its high-impact failure rate in half, which, in turn, softened the impact on customers, resulting in quicker service restitution time when facing contingencies.

Thanks to this effort the company’s prestige and reputation indicator rebounded by 28%, according to the GFK Adimark Image and Positioning survey conducted in December, which reported a rate of -1% in December 2014 and 27% in December 2015.

This shows a substantial improvement in the community’s perception of the company’s image. Additioanlly, more than 400 new bip! Card loading points were added to the Full Carga network and 169 were added to the retail network. Ever since Metro took over bip! Card administration, it has endeavored to improve and expand card coverage by redistributing card loading points throughout high-traffic areas and adding new payment methods to the system such as Webpay. This ongoing effort paid off in 2015 with more than 2,200 bip! Card points.

Construction on Lines 3 and 6 also continued to move forward and the company hit a very significant milestone when it connected all Line 6 tunnels. During the period that company also reinforced its community relations management plan by focusing on being actively involved in the various municipalities that will soon be part of the Metro network through the new lines, not to mention the municipalities currently involved in today’s operations. More than 400 activities were carried out in these municipalities over the year.

Regarding cultural events, the Mario Toral mural entitled “Visual Memory of a Nation” was finally completed and included a painting alluding to the case of burn victims, entitled “The Martyrdom of Carmen Gloria Quintana and Rodrigo Rojas.”

Metro’s Strategic Priorities

Metro defined the following four strategic areas of action for 2015:
In keeping with these strategic areas, nine corporate strategic projects were identified to enable Metro to meet its strategic objectives. The Executive Committee reviews these projects on a monthly basis and project performance is intertwined with organization-wide company targets.

  • Regain Operational Excellence
  • Optimize Operations and Maintenance processes.
  • Implement high-impact failure improvement plan.
  • Project Management on time, on budget and in form
  • Develop Project P63.
  • Implement the Line 2 & 3 Extension Development Plan and assess Network impact.
  • Make Organizational Health the basis for an inclusive and motivating company culture
  • Implement a Collaborative Management Model.
  • Implement a new Labor Relations Model.
  • Financial Sustainability
  • Define a Non-Tariff Revenue Development Strategy
  • Lock in a long-term efficient energy supply model as of 2017.
  • Work toward a sustainable technical tariff.

Mission, Vision, and Values

Since beginning operations forty years ago, Metro has taken on many tasks and challenges in keeping with its sense of duty regarding Chile’s development and individuals’ quality of life. A mere few thousand of us move millions, and we are committed to doing our very best to provide quality services that make Santiago a better place to live.

The company’s mission and vision are defined as follows:

To guarantee a sustainable, efficient, high-quality, reliable and safe travel experience on electric means of transportation, in our role as a backbone of the public transit system.

Additionally, to provide services which contribute to the company’s profitability in order to fund its expansion and improve citizens’ quality of life by wisely using public resources.
To be a state-owned company respected for its efficiency, safety and commitment to the environment and society.

To be a company capable of attracting very good talent and for being known for our merit-based talent management approach.

Our values are based on five core principles. These values help us reinforce the decisions and actions adopted by all company employees; they are complementary in nature and reflect who we are as Metro personnel and what we aspire to become. These values are summarized as follows:

  • Customer care: we strive to be one of the best service-based companies in the country.
  • Safety and security: Your safety comes first.
  • Efficiency: We want to be a global benchmark for underground trains.
  • Collaboration: We meet our goals faster when we work together.
  • Transparency: Transparency is at the core of all our actions.

Industrial Sector

The company operates in the Greater Santiago passenger mass transit market, which consists of individuals looking for a quick and safe way to get around the city. At present, more than 60% of all public transit trips in Santiago involve Metro.

In addition, as of July 2013, Metro took full responsibility for managing credits made to the bip! card under the system, adding street-level reloading stations to the underground card-loading network.

The company also operates in other areas: renting advertising space, leasing retail premises and commercial space, and a new international consulting business area.

Activities and Business

Corporate Objective

Law No 18,772 from 1989, passed by way of an amendment to Article 55 of Law No. 18,899 and Article 3, Paragraph A, of Law No. 19,046 from 1991, established the regulations to transform Metro’s General Management into a public limited company. In keeping with said regulations, by way of a public deed dated January 24th, 1990 executed before Santiago Notary Public Raúl Undurraga Laso, the Chilean Treasury and the Corporación de Fomento de la Producción (CORFO) formed Empresa de Transporte de Pasajeros Metro S.A..

Pursuant to the legal authority vested in the text constituting the company’s by laws, Article Two defines the company’s corporate objective as “to carry out all activities pertaining to passenger transit service on metropolitan railways or other supplementary electric means and those connected to such lines of business.”


Broadened Scope of Business

On November 30th, 2015, Law No. 20,877 was published in the Official Gazette, providing for improvements to the fare-based public passenger transit system, and authorizing Metro S.A. to expand its scope to business to include the provision of street-level transit services by bus or by any other vehicle technology.

Pursuant to the new regulations, Metro’s corporate objective was amended as such: “to carry out all activities pertaining to passenger transit service on metropolitan railways or other supplementary electric means, and the provision of street-level transit services by bus or by any other vehicle technology, in addition to activities connected to such lines of business, thereby entitling Metro to set up or take part in companies and perform any action or operation related to its social purpose. However, pursuant to that which is set forth under Article 2, Law No. 18,772, the company shall not give up nor transfer any ownership rights over its main line of business which are the transportations services it currently renders on the Metro de Santiago tracks or tracks built exclusively by this company.

Regarding street level transportation services, the company may provide public passenger transit services under a concession for use of tracks as provided under Law No. 18,696 or another modality, directly or indirectly through a related company or subsidiary, under the terms established in the paragraph hereinabove.”


Metro’s scope of action is within the Santiago Metropolitan Region, specifically, Greater Santiago, where it carries out the following business:



Network Operations

Ridership

In 2015, network ridership totaled 661.2 million rides, representing a 1.0% decrease when compared to 2014. Thirty-one percent of all rides took place during peak hours while 69% took place during non-peak hours. The underground train continues to be the backbone of the capital city’s mass transit system.


The 2015 ridership breakdown is as follows: Line 1, 38.9%; Line 2, 18.0%; Line 4, 18.1%; Line 4A, 3.1%; and Line 5, 21.9%. Mean ridership per working day in 2015 amounted to 2,242 rides.
Metro ridership has undergone an 81% increase since implementation of the Santiago Mass Transit System in 2007.




2015 RIDERSHIP BY LINE

Millions of Passengers

0
LINE 1
0
LINE 2
0
LINE 4
0
LINE 4A
0
LINE 5



ANNUAL METRO S.A. RIDERSHIP

Millions of Rides

331
2006
601
2007
642
2008
608
2009
621
2010
640
2011
649
2012
667
2013
668
2014
661
2015
Line 1
Line 2
Line 4
Line 4a
Line 5

Transit Market

As far as kilometers are concerned, in 2015 more than 137.8 million car/kilometers were recorded on the network.

Meanwhile, the train breakdown index per million cars/kilometer of trains, with an impact greater than five minutes (all hours), amounted to 0.85 breakdowns/MMCkm, up 25% from last year. Nonetheless, in 2015 Metro successfully reduced its high-impact failure rate (energy-, track- and system-related failures) by 41.6%, which also brought down its customer time delay impact rate by 63.8%

Vendors

The table below lists Metro’s top vendors in 2015:



TOP VENDORS IN 2015
NO. VENDORS Total in$
Total 9,283,663,902
1 Alstom Chile S.A. 1,595,666,078
2 Thyssenkrupp Elevadores S.A. 1,247,308,557
3 Suministros y Soluciones Técnicas 893,974,251
4 Faiveley Transport Chile Ltda. 840,451,957
5 Mersen Chile Ltda. 746,110,008
6 Compagnie Francaise de Promotion Industrielle (COFIE) 704,574,602
7 Geinse Ingeniería S.A. 670,947,519
8 Grupos Diferenciales S.A. 629,637,162
9 CAF S.A. 605,733,725
10 Ascensores Otis Chile S.A. 358,569,988
11 Hoerbiger de Chile S.A. 296,955,058
12 Precisión Técnica y Mecánica Ltda. 235,354,130
13 Soc. Comer. y Dist. Ruiz y Cía. Ltda. 233,296,843
14 Vossloh Cogifer 225,084,024


Customers

Metro’s main customers are riders of Lines 1, 2, 4, 4A and 5, as well as the companies advertising in the network through JC Decaux—a company that markets advertising space on trains and at stations—and lessees of stores and retail space at stations. Additionally, since 2013 all passengers using bip! cards are among our customers.



Trademarks and Patents

As of December 31, 2015, the company owns the following trademarks registered under various classes, with the National Industrial Property Institute of Chile:

“Metro”, “Metrobús”, “Metropolitano”, “Subterráneo”, “Metro a Metro”, “El Ferrocarril Metropolitano”, “Metrovisión”, “Metropublicidad”, “Metroclub”, “Club Metro”; “Metromático”, “El Metro te cuida, Cuida el Metro”, “Metro Chile”, “MetroChile”, “Red Metro”, “Metro Red”, “Metropolitana”, “Metro de Santiago”; “Cuentos en el Metro”, “Cuentos Metro”, “Cuentos Urbanos”, “Cuentos Urbanos de Metro”, “Cuentos Urbanos en el Metro”, “Metro Cuentos Urbanos”, “Metrocuentos”, “Metrourbano”, “Multired”, “Multitrans”, “Bici Metro”, “Metro Bici”, “Te llevo bajo la piel”, “Metroboutique”, “Metro, pasa por ti”, “Red de Clientes Metro”, “Te-Guio”, “Multivia”.
Labels: one label registered under various classes.
Mixed brands such as “Metro,” “Metrobús,” “Metrotren,” “Metroexpreso,” “Metrotaxi,” “MetroInforma,” “Metro S.A.,” “MetroArte,” “El Metro en la Cultura,” “Metroeventos,” “Metrored,” “Ventana Cultural,” “Metroservicios,” “Metro a Metro,” “Metro de Santiago,” “Conozcámonos,” “Metronet,” “Metro Cultura,” “Metroexpress,” “Redmetro,” “Metrocard,” “Metro en la Cultura”; “Carga Fácil,” “MetroTV,” “Multired,” “Multitrans,” “TVMetro,” “Metro Bici,” “Te llevo bajo la piel,” “Metrociudadano,” “Red Bip!,” “Santiago matemático un desafío entretenido.”
Slogans such as: “El Metro te cuida, Cuida el Metro,” “Metro, pasa por ti,” “Metro de Santiago, pasa por ti,” “Metro ciudadano pasa por ti.”


Patents for Inventions

In 2015, Metro continued to process its patent applications in Europe and Venezuela for invention patents related to Tarjeta Multivía (“A Security and Control Device that records loading and electronic charging of fares on a contactless Card with a predefined amount in a Passenger Transit System”).


Patent applications submitted in other countries for the same invention were granted in the United States, (Registration No. 7,229,016, February 9th, 2007); Mexico (Registration No. 253570, December 3rd, 2007); Peru (Registration No. 5070, August 22th, 2008); Argentina (Registration No. AR048314B1, June 14th, 2010); and, finally, in Ecuador toward the end of 2011 (Registration No. PI-11-2072, on September 30th, 2011).


In Chile, a patent was granted on August 11th, 2009 under Patent Registration No. 45,663, thereby completing the patent application process for the invention entitled, “System and Method used for Detecting Brushes or Negative Contacts for Train Positioning on a Railway Track, specifically for trains with rubber tires.”


A patent was previously granted on December 31th, 2008, under Patent Registration No. 44,277, which completed the patent application process for the invention of a “tire pressure control system for drive rubber tires as well as horizontal guiding wheels on metropolitan trains.”



Property and Equipment

The company is the sole owner of all the facilities and equipment it utilizes in performing its activities, such as: stations, tunnels, rolling stock, tracks, electrical equipment, tools, spare parts, retail space and buildings, etc., and they are located in the Metropolitan Region.

Buildings owned by Metro are, among others:


1

Corporate Building and SEAT: The company’s main office is located on an 11,250-m2 plot with close to 33,781 m2 of built building floor area on the corner of Lord Cochrane Street and 1414 Alameda Ave., right above La Moneda Metro Station, in the District of Santiago.

2

Workshops and Car Yards for Train Maintenance and Storage: The following facilities make up the total surface area of 488,539 m2:

a

L1 Neptuno Workshop: Located on #6252 Dorsal Ave., Lo Prado, with a total surface area of 220,455 m2.

b

L2 Lo Ovalle Workshop: Located on #1001 Lo Ovalle Ave., San Miguel District, with a total surface area of 54,038 m2.

c

L4 Intermediate train yards: Located on #3652 Américo Vespucio Sur Ave., Peñalolén District, with a total surface area of 59,486 m2.

d

L4 Puente Alto Workshop: Located on Nemesio Vicuña Ave., Puente Alto District, with a total surface area of 104,000 m2.

e

L5 San Eugenio Workshop: Located on #1290 Vicuña Mackenna Ave., Ñuñoa District, with a total surface area of 50,560 m2.

Two new workshops and train yards will be added when lines 3 and 6 are completed, one for each new line.

f

L3 North Terminal Workshop: Located on the corner of Américo Vespucio Ave. and Autopista Los Libertadores (Ruta CH 57), Quilicura District, with a total surface area of 133,806 m2.

g

L6 Suiza Workshop: Located on the corner of Pdte. Salvador Allende Ave. S/N, Cerrillos District, with a total surface area of 47,886 m2.

3

Metro’s network covers 103 kilometers, and consists of 108 stations, four workshops, seven cultural areas and facilities. It also has six types of trains, the difference being the kind of rolling undercarriage (rubber-tired or steel-on-steel) and the assembly date. Metro has a total fleet of 1,093 cars, all of which operate in the Metropolitan Region.

Insurance

Metro S.A. currently has several valid insurance policies described below: a general liability insurance policy is held with RSA Seguros Chile S.A.; fire and additional risks insurance policy covering the Main Administrative Building, Metro S.A Offices on Miraflores, Neptuno Workshop, Lo Ovalle Workshop, San Eugenio Workshop, Puente Alto Workshop, Intermediate Car Yards Line 4, Vasconia Warehouse, Pajaritos Intermodal Station, Vespucio Norte Intermodal Station, Estación del Sol Intermodal Station, La Florida Intermodal Station, and Lo Ovalle Intermodal Station, with additional risk coverage for Edificio Casona and General Management Offices is held with Mapfre Seguros Generales de Chile S.A.; a Life Insurance Policy for Senior Management at Metro S.A. is held with Compañía Metlife Chile Seguro de Vida S.A.; a Passenger Accident Insurance Policy is held with Bice Vida Compañía de Seguro S.A.; a Life Insurance Policy for Private Security Guards is held with Chilena Consolidada Seguros de Vida Chile S.A.; and a Floating Insurance Policy for Transporting Cargo is held with RSA Seguros Chile S.A.


Metro S.A. also keeps the following current and valid policies for Projects on Lines 3 and 6 covering specific risks pertaining to those works: a Civil Liability Policy is held with RSA Seguros Chile S.A., and a Fully Comprehensive Construction and Assembly Insurance Policy is held with Seguros Generales Penta - Security S.A.


Seguros

Contracts

The company has entered into various contracts with third parties, the most significant of which are described as follows:

  • Contract with JCDecaux for leasing advertising space at Metro stations and on trains.
  • Contract with Banco Santander Chile for checking accounts and other banking services.
  • Contract with Banco del Estado de Chile for Metro’s Financial Investment Portfolio Management.
  • Contract for network hardware maintenance, user support and network administration with Integración de Tecnologías ITQ Ltda. and an ERP SAP Financial and Accounting Support contract with Novis S.A., among others.
  • Contracts with cleaning and maintenance service providers for workshops, trains, stations, tracks and buildings, and other services: Servicios de Aseo y Jardines Maclean Ltda.; ISS Servicios Integrales Ltda.; Consorcio Rojas Sinel S.A.; Alstom Chile S.A.; CAF Chile S.A.; Balfour Beatty Chile S.A.; Sometec S.A.; Thyssenkrup Elevadores S.A.; Siemens S.A.; Bitelco Diebold Chile Ltda.; Inversiones Cosenza Ltda.; and Proyectos y Productos Profesionales Ltda.
  • Contracts with catering service providers, security guards, telephone operators, auditing and other general services: Central Restaurantes Ltda.; Support Services Ltda.; Securitas S.A.; Esert Servicios Integrales de Seguridad Ltda.; GTD Telesat S.A.; Entel PCS Telecomunicaciones S.A.; KPMG Auditores Consultores Ltda.; Dimacofi S.A., among others.
  • Contracts with underground-level Points of Sale operators: EME Servicios Generales Ltda., Consorcio GSI SPA, and Ingeniería en Electrónica Computación y Medicina S.A.
  • Contracts with street-level Points of Sale operators: Fullcarga Chile S.A., Soc.de Recaudación y Pagos de Servicios Ltda. (Servipag), and BancoEstado Centro de Servicios S.A.

Financial Activities

The company has checking accounts at Banco Santander Chile, Banco de Chile, Banco BICE and Banco del Estado de Chile, in order to facilitate payment of its obligations with different vendors for goods and services, as well as with its workforce. The company’s main financial assets are term deposits and repurchase agreements (fixed income securities), the details of which are provided in the company’s financial statements. Local banks with credit ratings equal to or higher than N1+ and AA- for short and long-term deposits, respectively, manage these operations, or they are managed by brokerage firms that are jointly or severally liable with those banks, and by international banks with a credit rating equal to or higher than A1 or equivalent. Financial operations must be carried out in accordance with the Financial Investment Policy set forth by Metro S.A., which in turn is pursuant to regulations provided for by the Ministry of Finance to that effect. As of December 31, 2015, the company’s financial investment portfolio is managed by the Banco del Estado de Chile, as a third party.

Strategic Analysis: Risk Factors

Metro is exposed to a variety of market-related and business-specific risks. In order to address this matter, the company has developed organizational structures to develop strategies that help minimize those risks and reduce the potential adverse effects thereof.


Regarding passenger demand, it should consider the country’s economic activity, its unemployment and inflation rates, as well as other the relevant factors. In terms of Metro’s technical fare, its purpose is to cover the company’s costs, which consist of operating costs, and asset replenishment and debt for a 40-year horizon. The technical fare is updated on a monthly basis by way of a polynomial, which reflects variations in the variables making up the company’s long-term cost structure (CPI, dollar, euro, price of power and electric power). This allows for a natural indexation to cost variations resulting from an increase in any one of the variables making up the polynomial.


It must be noted that the fare paid by riders is different from the fare that Metro receives per transported passenger. Although in December 2015 customers paid a fare of $720 during peak hours, $660 during intermediate hours and $610 during off-peak hours, on average the company received a technical fare of $372.92 per passenger that month.

The risks described below constitute the most significant ones that could possibly affect Metro’s performance:

1

Financial Risks: This category includes market risks, liquidity and credit risks.

At December 31st, 2015, 59% of Metro’s financial debt was denominated in UF (inflation adjusted units) and the remaining 41% in US dollars. The latter exposes the company to exchange-rate risk, which results in a “natural hedge” for long-term because of the polynomial used to update the technical fare in the event of dollar and euro fluctuations, among other variables.

Regarding interest-rate risks (Libor) associated with the company’s variable interest rate loans, Metro has a Hedging Policy that allows for trading derivatives such as cross currency swaps (CCS) and placing fixed-rate UF denominated bonds.

In February 2014, for the first time ever, Metro S.A. placed bonds on the international financial market in the amount of US$500 millions at a 4.85% rate, which underscores the remarkable interest among international investors who offered 7.6 times the amount of the placement.

As far as liquidity is concerned, income from the passenger transit business is subtracted on a daily basis from revenues collected by Metro’s Points of Sale, providing the company with the funds it need to meet its financial obligations. In addition, Metro has duly approved bank credit lines, which help lower liquidity risks.

There is very little credit risk arising from accounts receivables or commercial debtors, in connection with income from retail space leases, advertising or invoices due, since this income only represents 21% of the company’s regular income. The remaining 79% comes from the technical fare. The arrears associated with this type of debtor are considered low.

Likewise, the company’s Financial Investment Policy establishes the level of exposure to financial asset risk the company is allowed to accept. The purpose of this policy is to reduce risk by diversifying the portfolio and by setting maximum investment levels permitted per bank, in addition to taking into consideration lender banks’ minimum credit risk ratings.

2

Capital Risk: Regarding capital management, Metro aims to have an optimal capital structure by reducing its costs and ensuring long-term financial stability, in addition to overseeing the fulfillment of its debt-related financial obligations and covenants.

Every year Metro holds a Special Shareholders’ Meeting in order to capitalize on capital and Treasury contributions linked to its expansion projects. Additionally, the company controls its capital structure by keeping a watchful eye on its financial leverage position.

3

Electric power-related Risks: Should there be a power outage, Metro has two direct power supply connections to the Main Grid (SIC), which supply Lines 1, 2 and 5, as well as two direct connections supplying Line 4. Additionally, those power supply systems are and designed under redundant criteria, that is, they are “stand by,” thus, should one of them fail, the other one will immediately come on line, thereby ensuring the power supply for normal operations of the underground network.

In terms of the power supply for Lines 1, 2 and 5, in the event of a power outage on the SIC’s main grid, by definition, the power utility company’s first priority involves restoring power to the government sector in downtown Santiago. The latter makes it possible for Metro’s network to simultaneously resume operation since Metro’s power supply comes from the same system.

Likewise, it must be noted that in addition to the current electric power supply agreement the company holds with Enorchile S.A., effective until March 31st, 2017, in September 2015 the company entered into a new electric power supply agreement with Chilectra S.A. at a fixed rate for up to 40% of Metro’s total demand curve. The effective term of this agreement begins on October 1st, 2015 and expires on December 31st, 2023.

Investment Plans

Investment and Financing Policies

Metro de Santiago allocates significant resources to studies and investment projects aimed at expanding our network in addition to up keeping and improving our current infrastructure. Investments in network expansion seek to consolidate Metro as a backbone of the capital city’s public transportation system, whereas our investments on maintenance and infrastructure improvements are earmarked for the following areas: improving the quality of our services; bolstering operational safety and stability; preserving and maintaining our facilities and grounds; and updating, renewing and modernizing technology used by our equipment and systems, all with a view to better serve our customers.

In 2015, infrastructure and equipment improvements and renewals were financed by operations and capital contributions. Regarding network expansions, however, generally speaking Metro S.A. finances imported equipment and parts through borrowed funds, which are paid back through increases in Metro S.A.’s technical fare, whereas domestically-obtained components—consisting of infrastructure, civil works and other expenses, in addition to entry import duties and tariffs placed on imported goods—have been financed by contributions from the State, which are subsequently capitalized.

Metro’s Development Plan

Construction of New Lines 6 & 3

The most challenging project undertaken by Metro since founded was still underway in 2015. Investments in Line 6 and Line 3, scheduled for completion in 2017 and 2018, respectively, involve a financing structure consisting of partner contributions (two thirds of the total investment was furnished by State and Corfo) and Metro contributions (one third of the total investment).

This is a high-level project involving the best international practices in areas such as: platform doors, overhead electric-power cabling, automated train control system, cameras on-board cars, air conditioning, passenger information systems, and universally-accessible stations throughout the entire network including the new transfer stations involved in this project.

In 2015, excavation works were completed on the 15 kilometers making up Line 6 tunnels, the construction contacts for Line 6 stations were awarded, and construction began during the last quarter of 2015. Approximately 85% of Line 3 tunnels were dug in 2015. Regarding systems and rolling stock, the automated driving system was put to test with trains on test tracks. The rest of the systems are undergoing preliminary testing and being installed, while work on tracks and overhead power cables began in the second half of the year. In short, as far as Line 6 is concerned, tunnel excavation is complete, the stations are under construction, workshop are 75% complete, and the tender process for stations is currently underway. In terms of the various items required for systems and rolling stock (platform doors, electric system, tracks, overhead power cables, etc.), they are currently being installed, built or delivered.

At 2015 year-end, overall project progress was 54.1% (up from 27.1% at 2014 year-end), broken down as follows: 68% of Line 6 construction is complete (with 97% of the shafts, tunnels and drives and 9% of the stations complete); 46% of Line 3 construction is complete, including 80% of the shafts, tunnels and drives. Regarding systems and rolling stock, the cumulative weighted progress percentage is 36%.

Operation-Related Projects

In 2015, the following improvements were made to Metro’s current network:

Remodeled Trains: new air conditioning systems

Started in October 2013, this project aimed to improve riders’ experience on underground trains by installing air conditioning on all Line 1 cars. To this end, train manufacturers were hired to install AC equipment on the entire Line 1 fleet.

By the end of 2015, 29 trains had been successfully modified, in addition to the 14 new trains added to the fleet during the September 2012 to October 2013 period—bringing the amount of Line 1 fleet cars with AC up to 88%. The company expects to have all Line 1 trains equipped with AC at some point during the second half of 2016.

Installation of Automated Train Control System

In 2015, the project’s main focus was system start up, which began in April and was completed in June. During this process, the company was able to determine the system’s capacity and stabilize operations with trains under manual driving mode. During the second half of the year, the project entailed a series of activities aimed at preparing the Automatic Train Control System for Line 1 trains. Metro expects to begin operating the automated system during the second half of 2016. This system will provide many benefits, such as, shorter travel times, improved energy consumption, greater operational availability and flexibility.

Universal Access Project (Elevators)

In 2015, the engineering studies on four stations (Lo Ovalle, El Llano, Toesca and La Moneda) were completed, while engineering studies on four additional stations (Lo Vial, Departamental, Alcántara and El Golf) were initiated.

Regarding tendering, the company opened its public bidding process during the second half of 2015 with a view to contract out civil works for the Neptuno and Parque O’Higgins Stations.

Metro expects to begin the civil works on the Neptuno, Parque O’Higgins, La Moneda, Toesca, El Llano and Lo Ovalle stations, and the engineering for República, Unión Latinoamericana, San Alberto Hurtado, Santa Ana, Universidad de Santiago, Santa Lucía, Pedro de Valdivia and Estación Central stations in 2016.

March Plan

In March 2014, the company submitted a plan to address the increase in its passenger rate, which tends to occur after city residents return from summer vacation. A series of operational measures were implemented at critical points along the Metro network, especially along the highest traffic sections. Metro increased its capacity by nearly 5,000 passengers (3.5%) during rush hour, which is equal to adding more than three trains.

Moreover, several other actions were taken in the operations, services, maintenance, and passenger communication departments, such as strategically adding longer trains to Line 1 headed to Los Dominicos during the morning rush hour; in addition to decreasing the number of containment measures and improving the flow of passengers at the busiest line transfer stations during morning rush hour (Baquedano and Los Héroes). Furthermore, short routes on the Pajaritos-Manquehue stretch remained the same.

In addition, the company increased its security staff by 30% during the month of March. It added female security guards to its ranks, gave passenger support staff new uniforms so that they were easier for passengers to identify, and beefed up the police presence at all network stations, particularly at line transfer stations.

Bolstering the bip! card Loading Network

Ever since the company began managing the bip! card in mid- 2013, Metro has come up with a series of measures aimed at expanding and improving the card loading network, all with a view to facilitating greater access to the capital’s transit system. These measures have focused on expanding coverage of the card-loading network, activating more card-loading points in heavy passenger traffic area, and adding technological improvements to the system.

In keeping with the abovementioned goals, in 2015 Metro added 400 new card-loading points to its network after signing a contract with a new street level card-loading network operator.

Moreover, retailers joined the network for the first time ever after Metro signed agreements with Unired and Walmart, thereby adding a total of 169 supermarkets from the Unimarc, Líder and SuperBodega Acuenta chains, accounting for 8% of the total card-loading network.

Improvement Plan

Well aware of the fact that a complex system such as the Metro is not except from system failures, in 2015 Metro reinforced its preventive and corrective maintenance area with a view to reducing its breakdown rate.

The plan also entailed improvements to operations and passenger communications, which were two critical areas for Metro operations in 2014, not to mention being vital to Metro’s goal of providing good services.

The plan, with a 2018 horizon, included some immediate, medium- and long-term measures. Actions taken by the company in 2015 successfully stabilized the system, thereby cutting in half the rate of track and system failures (those that have the greatest impact on service) when compared to the 2014 rate.

Measures Implemented

All measures scheduled for immediate action in the maintenance area as part of the improvement plan were implemented in 2015. One of these measures was an exhaustive inspection of all tracks and track components making up the network, in addition to a series of additional maintenance activities, such as inspecting cables, replacing insulators, and making improvement to rails, roll ways, guide bars and switching devices.

At present, the company is implementing its medium- and long-term plan focused on bolstering system reliability and carrying out 50 projects primarily aimed at foreseeing equipment obsolescence, redefining the role of maintenance within the operations management group, and reinforcing support processes such as planning and supply.

In the operations area, with a view to mitigating the impact operational failures may have on riders and on the Santiago public transit, several actions were taken to fine tune the Metro and its staff’s response to emergencies, in addition to the company’s coordination with the Metropolitan Public Transit Authority (DTPM).

In 2015, Metro worked on improving its Passenger Communication system in order to facilitate a smoother commute in the event of breakdowns affecting service. To this end, the company is working on setting up an instant alert system that will sound off when Metro services are interrupted, and on installing more entrance area screens to the 44 panels already installed at 18 stations.

Likewise, passenger information is available at:

  • Mobile traffic lights located in front of ticket counters, broadcasting service status information.
  • Fixed screens on platforms and at ticket counters.
  • Flyers with information about street level bus stops and bus lines available near stations.
  • Mobil screens located at station entrances.
  • Metro Mobile app and on-line information at www.metro.cl.
  • Additional information on emergency procedures located in the area above doors on all trains.
  • A massive information distribution campaign was carried out, providing passengers with information and guidelines on what to do during different types of emergencies.

Passenger Information

Toward the end of 2014, spurred on by operational issues during the year, Metro adopted a new customer-centered managerial approach with a view to mitigating the impact of service shutdowns on customers. Accordingly, in 2015, the company put a great deal of effort into redefining its Service Strategy, in order to better manage the passenger experience during each stage of the commute.

This new approach aims to tackle service pillars, specific moments during the commute, the service schedule and certain service attributes, in order to better handle the most critical and necessary service aspects so that Metro’s services are more in keeping with its passengers’ needs.

Specifically in terms of broadcasting passenger information during network emergencies, the company has implemented a series of measures to aid passengers and provide them with clear, useful and timely information so that they may make the best decisions according to their stage in the commute.

Some of the projects currently under development involve improvements to the station public announcement system, providing better information to users during emergency situations, installing more access information screens to the 78 already existing screens located at 44 entrances at 18 stations, and mobile traffic lights located at turnstiles to provide riders with service status messages before they go through the turnstile.

Moreover, Metro launched a media-based information campaign to make passengers more aware of what procedures they should follow during emergencies. Signs were hung up describing proper emergency procedures on trains, the company mass distributed guidelines telling passengers what to do during emergencies, and information was handed out along the Transantiago routes linked to each Metro station, so that passengers may continue their commute even when Metro services are discontinued. Finally, Metro beefed up its other information outlets such as fixed information panels along the platforms and at ticket counters, mobile panels, the Metro Mobile app, the Call Center, its website “http://www.metro.cl” www.metro.cl, and others.

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