Enel Chile Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
July 26, 2023

There are 5 speakers on the call.

Operator

Good morning, ladies and gentlemen, and welcome to Enel Chile First Half and Second Quarter 2023 Results Conference Call. My name is Gigi, and I will be your operator for today. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.

Operator

During this conference call, we may make statements that constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward looking statements reflect only our current expectations, are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those anticipated in the forward looking statements as a result of various factors. These factors are described in Enel Chile's press release reporting its first half and second quarter 2023 results. The presentation accompanying this conference call and in Nautilus Annual Report on Form 20 F included under Risk Factors.

Operator

You may access our first half and second quarter 2023 results press release and presentation on our website at www.enl.clandr20f on the SEC's website, www.sec.gov. Readers are cautioned not to place undue reliance on these forward looking statements, which speak only as of their dates. Enel Chile undertakes no obligation to update these except as required by law. I would now like to turn the presentation over to Mrs. Isabella Clemens, Head of Investor Relations of Enel Chile.

Operator

Please proceed.

Speaker 1

Good morning, and welcome to Enel Chile 2nd Half twenty twenty three and First Half Results Presentation. Thanks to all for joining us today. Joining me this morning is our CEO, Fabrizio Barderi and our CFO, Giuseppe Turcierelli. Our presentation and related financial information are available on our Web In addition, a replay of the call will be soon available. At the end of this presentation, there will be an opportunity to ask questions via phone or webcast chat Through the link, ask your question.

Speaker 1

Media participants are connected only in listening mode. In the following slides, Fabrizio will open the presentation with our key Thank you for your attention, and let me now hand over the call to Fabrizio. Fabrizio?

Speaker 2

Thank you, Isabella. Good morning, and thanks for joining us. Let's start our presentation with our main highlights on Slide 2. The first topic I would like to highlight and will give you more context is the status of our several portfolio management actions. Together, these actions target the optimization and Flexibility of our portfolio in the energy transition scenario.

Speaker 2

Having followed this path during the 1st semester, We received the commercial operation authorization for more than 1 gigawatt of our renewable project. All the growth projects added 0.8 terawatt hour of additional production to our portfolio. Another important topic was all the management and timely effective measures carried out by our team to continue the operation of our plants and safeguard the neighboring communities after the heavy rains during June. These heavy rains contributed to accumulating almost 1 terawatt hour of water in our reservoirs for the following period, which will be very positive also in terms of reducing spot market prices for the 2nd semester of this year. In terms of market context, the most expected positive news has arrived.

Speaker 2

The PEG II factoring process is very close to being initiated. On the regulatory side, we have some updates on the government's efforts to continue pursuing the faster decarbonization path for Chile. On the performance of our business, the 2nd quarter presents a temporary mild performance taking into account the complex pricing environment as expected. But looking at the first half results overall, We continue to see a significant improvement in terms of EBITDA increasing by 50%, mainly due to all the gas optimization efforts we have been Net debt has temporarily increased, mainly due to the delay in the FACT 2 factoring execution. Debt, once executed, could add $300,000,000 to our cash flow.

Speaker 2

Higher contribution of our generation business in the second half of this year due to the seasonality embedded in the business and the closing of an asset rotation transaction named Arcadia are going to allow us to reach a stronger level of net debt by the end of the year. Finally, let me then talk about Arcadia. As we announced 2 weeks ago, we signed an agreement to sell 4 Non strategic solar power plants in the north of the country. We expect this to be concluded at the end of 2023. I will give you more details on this later.

Speaker 2

We continue to develop our strategy toward a cleaner and more efficient generation matrix. During this 1st semester, we connected 98 megawatts of additional net capacity related to the final phase of our wind farm, Reinaikodos and the first phase of our solar plants at Tierra Gorda. New renewable projects added around 1.4 terawatt hour of additional generation. During this year, we have also received the commercial operation approvals from the system operator for around 1.1 gigawatts related to Campus de Sol, Vale de Sol, Finisterre Extension and Finisterre Tres and Guan Choi, the latter being the largest solar power plant in Chile with a capacity of 3 98 Megawatts. All these projects together prevent the emission of around 2,500,000 tons of CO2 into the atmosphere.

Speaker 2

We are maximizing all efforts to advance in the construction of diversified projects in different zones of the country, fully aligned with our strategy to increase exposure to wind, storage and solar close to the center of consumption. In the following days, we are also going to receive the authorization for Enaico DOS, our 144 Megawatt wind project located in the south. Today, we have around 0.7 gigawatts of projects in construction, which is performing as expected. The deployment of our renewables plant aims to improve our generation mix and increase the flexibility of our portfolio, which today is 76% renewable based. Now on Page 4, let's take a look at the hydrological condition and the outlook for the second half of the year.

Speaker 2

By the end of June, there was a significant increase in rainfall, especially in the south of the country. In fact, in the 7th and 8th regions where the basins of Maule and Biobio are located, the rainfall almost reached The level of hydrology for a normal year. Fortunately, we had no damage to the infrastructure of our hydropower plant. We also manage our reservoirs in a timely manner, regulating the flows permanently, enabling us to avoid impact on the neighboring communities. In addition, as you can see on the right side of this slide, snowcover in demand since has been improving in Maule Laca, particularly during July.

Speaker 2

So far, we cannot predict the volume of NOP. We expect We'll have more details in August once the system coordinator performs a new inspection. The situation allows us to foresee an optimistic hydro scenario for the second half of this year. Based on this, we can fairly estimate at least 1 Up to 2 terawatt hour of additional hydro generation for the full year 2023 when compared to our last strategic plan. Regarding our gas trading activities, let me highlight some topics on Slide 5.

Speaker 2

During the last semester, we have continued having plentiful gas availability, thanks to the long term LNG agreement with Shell and the contracts signed with Argentinian gas suppliers. Given the availability of Argentinian gas in the central It has been possible to carry out LNG swaps in the Northern zone, where natural gas is not unavailable enough. Multiple gas shipments have been sent from Quintero to Mercilones during the first half of twenty twenty three, totaling around 12 terabtu, and we expect to continue sending gas to the north during the rest of the year. As you may recall, during the Q1 of this year, we executed some opportunistic sales negotiated during the year end 2022, taking advantage of attractive prices of natural gas in the international market. These transactions Sections contributed around $150,000,000 in the period.

Speaker 2

In addition, we have continued to perform Trading activities with local industrial and mining customers that continue to bring additional margins for our business. In the 2nd semester, we have already granted some additional sales for the end of the year, expecting an additional $50,000,000 to come To conclude, let me say that we are also anticipating additional volumes of gas from Argentina for the October, April 24 period. On Page 6, let's review our performance and new initiatives in Distribution and Energis with focus on electrification and And decarbonization in the public and private sectors to face climate change properly. As a result, We have taken an active role and expanded our efforts to speed up these main goals. Let me highlight some indicators and projects executed during the last Starting with the distribution business.

Speaker 2

In our concession area, the number of customers and distribution areas continue to grow. Therefore, new opportunities and challenges will arise. The important message is that looking at the last 12 months, We see a sound improvement in the SID index of around $4,000,000 In distribution, we continue to review our processes and intelligence and energy losses to better respond to the current environment and the current sound indicators levels are a result of it. Finally, regarding digital payments, we have continued promoting payments through digital channels. Regarding Enel X, some important milestones focused on electrification and decarbonization of our clients' energy consumption have occurred.

Speaker 2

Let me go through some examples from this period. Regarding the decarbonization of households, this semester, we have replaced 1420 hood stools with efficient air conditioners contributing to a reduction of around 2,600 tons of CO2 per year. Most of these replacements are due to contracts assigned with companies that seek to offset their CO2 emission. In the field of efficient lighting in our cities, Enel X has replaced the National Stadium sliding system for the 2023 Pan American game, bringing efficiency and quality to this important event. 3rd, as leaders in electric public transport, we continue participating in new projects.

Speaker 2

We have signed an integrated offer with a bus operator This offer includes 212 e buses, 2 terminals and the PPA for 10 years. To conclude, we continue working to increase the number of public and private charging points for electric vehicles and to be awarded more lighting projects throughout the country. All these efforts are noticeable once we look at electrification indicator that is showing a significant improvement in the period. Now regarding market concepts, let me comment on major updates on Slide 7. Chile is a reference in the region for its Commitment towards the net zero emissions and decarbonization of the markets.

Speaker 2

Faster renewables growth An increase in electrification required the country's prompt response. Regulation should continuously adapt to continue giving the right signs for the further and faster achievement over the country's goals. In that sense, we received positive news on the changes in the main characteristics of the 2023 regulated auction, which introduced the concept of segmentation. Now the generators And choose the zoneal areas they would like to bid in the auction and clear benefit for EBIT project. In other words, renewable energy plus storage system of Also, the government has just submitted a draft bill related to energy transition.

Speaker 2

The government is proposing the realization of a storage auction in 2024 in the North and the definition of a national energy plan to better anticipate and efficiently plan the new transmission infrastructure required for the country. This process is still in the beginning phase. So throughout the year, we might have further details to share with you and how this draft bill fits with our strategy. Now let's share some more good news. The factoring process of PEG2, also known as Tumor protection mechanism is very close to being concluded.

Speaker 2

At the end of this quarter, we accumulated around 6 $133,000,000 relating to this instrument. The important and most expected news arise allowing Gencos to start recovering the crisis through a factoring mechanism guaranteed by the Chilean Treasury. Around half of the accounts receivable accumulated since the second half of twenty twenty two will be paid through an additional fee levied on the final tariff, requiring the publication of decrees for recovery. A second decree is expected to be issued in the following months related to the 2nd half twenty twenty two period in order to reduce the gap between the tariff and the contract line, normalizing the process. Regarding the distribution tariff review, we expect the regulator to publish the final report in the following weeks.

Speaker 2

As for the process, we still see several lines for improvement, but we managed to achieve some positive outcomes as the panel recognized some of our players. Now I will hand it over to Josep.

Speaker 3

Many thanks, Fabriz. Good morning to all connected. I will start the financial analysis on Slide 8, Introducing a summary of our main results for the period. In order to better evaluate the earning performance of our company. The 2022 figures are shown as a pro form a, where we are including Two main adjustments in the first half and the second quarter of 2022.

Speaker 3

The EBITDA was adjusted by the impairment made to the call stock of the period, which amounted to $63,000,000 $42,000,000 respectively. These adjustments had an effect on the bottom line of $43,000,000 in the first half and $29,000,000 in the Q2 of 2022. The second adjustment and the most relevant one If to exclude from 2022 figures, the contribution of Enel Transmission, considering the sales This company executed in December 2022. We excluded from our analysis the EBITDA of Enel Transmission for the first half and the second quarter of 2022, which amounted to $54,000,000 $22,000,000 respectively. In terms of FFO, we are also excluding from 2022 figures The contribution of INL Transmision in terms of cash $2,000,000 in the first half of twenty twenty two and minus $19,000,000 in the Q2 2022.

Speaker 3

And in 2023, we are excluding the payment of taxes related to the capital gain of this transaction of $310,000,000 So taking into the mind, let's see how the earnings indicator and FFO performed in the period. In the first half, EBITDA and net income showed improvement versus last year indicator, mainly as a result of the trading activity, improvement in hydrology and new renewable contribution. The quarter earnings performance on the other end was more challenging, particularly due to the temporary effect of higher And I will give you more detail in the next slide. In terms of FFO in the first Alfa, figures continue to be impacted by the accumulation of the PAC accounts that reached $189,000,000 during 2023. The FFO in the quarter also demonstrates the same impact, but I will give you more details later.

Speaker 3

Let's review our CapEx on Slide 9. Our first half twenty twenty three total CapEx reached $372,000,000 74% of our total CapEx deployment was related to the renewables and 91 percent of the total CapEx was linked to the SDG goals. Customer CapEx totaled $41,000,000 14% higher than the previous year, mainly associated to the new customer connection in the period. Other investments reached $83,000,000 mainly as a consequence of the several maintenance and repair Activities to guarantee the continuity and resilience of our operation in our power plants. Development CapEx reached $24,000,000 representing a decrease of 39% versus last year figures, in line with the remaining portfolio under construction.

Speaker 3

The 2023 CapEx shall be committed to confirming our strategy of growing in the center part of the country and in the south with the wind project. Let's move now to Slide 10, where we have the summary of the 2nd quarter EBITDA breakdown accounting for $55,000,000 Let me remind again the change in the company consolidation perimeter, mainly as a consequence of the sales of Enel Transmission in Chile in December last year. We have included the pro form a of our EBITDA for Q2 2022 for comparison purposes. 2nd quarter 2023 EBITDA is $18,000,000 lower than 2022 pro form a, mainly explained by the following: $55,000,000 increase in thermal generation costs, mainly related to lower thermal generation and lower positive effect of aging instruments in 2023 versus in 2023 versus 2022, partially offset by lower commodity costs versus 2022 And a $36,000,000 higher spot price in the period is a consequence of the Higher dispatch cost of the Chilean thermal fleet, particularly coal units during the 2023, Also as a consequence of the unavailability of different power plants in the system increasing the spot prices. And the lower effect of gas optimization activities, which decreased $7,000,000 mainly related to lower gas trading sales of around TRY 3.6 btu in the period versus last year figures.

Speaker 3

The above mentioned effect were partially offset by $34,000,000 from Higher PPA sales in the 2nd Q2023, primarily due to higher average PPA prices, mainly related to the contract indexation, higher ancillary system services and capacity payment revenues, Well, the last one is mainly due to the two factors, delay in the code of some market renewable projects that increased the payment for all the other projects in operation and the new power plant connected and commissioning during the second half of twenty twenty two and twenty twenty three. Improved hydrology contributed $19,000,000 to our margin, $24,000,000 contribution from renewable volume mainly related to the new capacity added. The remaining variation of our EBITDA comes from $6,000,000 due to the grid remuneration related to Higher OpEx and other costs, mainly in the generation business by $2,000,000 associated to the new Renewable capacity in operation and inflation. And now let's move to Slide 11, where we have the summary of the As we did in the Q2, we are excluding the 2022 EBITDA of Enel Transitions for comparison purposes and for a better understanding of the 2023 results. Energy EBITDA increased 50% or $133,000,000 mainly explained by $124,000,000 from higher PPA sales in the first half twenty twenty three, primarily due to $83,000,000 Of higher average PVA price, mainly related to indexation, dollars 42,000,000 mainly due to Higher ancillary services system and capacity payments revenues, where the last one is mainly due to 2 factor.

Speaker 3

1st, delay in the code of some market renewable projects that increased the payment for all on the project in operation and 2, the new power plant connected and commissioned during the second half twenty twenty two and twenty twenty three. $110,000,000 of gas optimization activities versus previous year, mainly due to higher volume and higher commercialization prices, improved hydrology volume contributing $33,000,000 to our margin and $33,000,000 contribution from renewable growth Volume mainly related to the new capacity added. The above mentioned effects were partially offset by A $152,000,000 increase in variable costs, mainly related to $129,000,000 related to higher thermal generation costs due to commodity prices Lower term and donation, dollars 24,000,000 related to higher purchases in the period as a consequence Of the higher commodity prices during 2023 and for the availability of different power plants in the system and partially compensated by an agreement with 1 of our PPA supplier. The remaining variation of our EBITDA comes from $7,000,000 due to grid remuneration related to the indexation, Lower fines and compensation and higher demand. Higher OpEx, mainly in generation business, by $40,000,000 associated to new renewable capacity and inflation across all the business.

Speaker 3

Let's move now to Slide 12 to take a look at our generation KPI. Net electricity generation totaled 10.6 terawatt hour as of June 2023, 3% higher than the level recorded in the first half of twenty twenty two. This was mostly due to the higher solar and hydro generation during the current year, reflecting The contribution of new projects and higher water availability, respectively. During the Q2 of 2023, Net generation reached 5.5 terawatt hour, increasing 8% when compared to the Q2 2022, mainly due to higher renewable generation. Our energy sales totaled 15.5 Terabat Tower, during the first half of twenty twenty three, maintaining the level recorded as of June 2022.

Speaker 3

This was mainly explained by lower sales of 2 3 markets, offset by improvement in the sales to regulated customers. During the last quarter, physical sales increased 3%, mainly due to the higher sales to Field Gas Met. As a result, in terms of energy balance, the amount of energy purchased in the spot market, both in solar and non solar hour, was basically in line with the last year figures. Now on slide 13, let's go through the main drivers of our group net income. Net income from the first half this year increased 90 explained in the previous slides.

Speaker 3

Flat depreciation and amortization impact as higher depreciation related The new renewable project in the operation are fully compensated by lower bad debt in Essential and Distribution, mainly related to the client's debt recovery as a result of the several commercial action, including disconnection in commercial Slide financial results and equity investment considering Higher financial income in the period, mainly explained by greater returns on the short term fixed income investment related to the higher cash availability and interest rate lower debt costs, mainly to lower debt level and higher capitalization interest Higher financial costs, mainly due to the factoring of accounts receivable executed in 2022 versus the one executing in 2023. Lower financial Revenue related to the commissioning of our former core fleet, partially offset by higher income tax that increased by $61,000,000 mostly due to the higher EBITDA results and higher monetary correction. The Q2 of 2023 net income reached a negative $33,000,000 mainly related to lower EBITDA, As detailed in the previous slides, lower depreciation and amortization essentially due to the lower bad debt in distribution, mainly related to the client debt recovery as a result of several commercial Action, including disconnection and agreement, partially offset by higher depreciation related to the new renewable project in operation.

Speaker 3

Higher financial results and equity investment of $70,000,000 mainly related to lower financial Revenue related to the decommissioning of our former coal fleet Higher financial costs due to factoring of accounts receivable executed in 2022 versus the ones executed in 2023. Higher financial income in the period mainly explained by greater return on short term fixed income investment related to the higher cash availability interest rate, lower debt costs, mainly due to lower debt level and higher capitalized interest. Higher income tax, that increased by $14,000,000 mostly due to provision related to the classified NARCADA as a held for sale, higher monetary correction, partially offset by lower Moving to FFO analysis on Slide 14. Let's now see in more detail the FFO for this period. The pro form a FFO in 2023 that The $310,000,000 payment on taxes from the capital gains Generated with Enel Distinguished reached a negative $5,000,000 which reflects A $217,000,000 improvement once comparing to last year's pro form a figures, Resulting from $400,000,000 coming from EBITDA, driven by better hydrology, higher renewable contribution and gas Trading activity in the period.

Speaker 3

Dollars 118,000,000 negative impact from The cumulative stabilization mechanism affecting our receivable, reducing the cash conversion of the period. The situation has slightly improved since the tariff deficit for July 2022 period was published, enabling us to start the process of recovery of part of this receivable. According to the mechanism and the process We expect to recover an important part of the balance accumulated during this year. So in August, we expect around $300,000,000 from the factoring process with IDB. Working capital negative reached a negative balance of $111,000,000 as a consequence of Energy and CapEx rebound from 2022 last month, partially offset by cash management action and cash in from the sales of Santa Rosa Building.

Speaker 3

Working capital improvement once compared with the last figures here mainly comes from Santa Rosa, Billing and Other Managerial section. Income tax reached $2,000,000 mainly related to better results in generation business in both 2022 and first half twenty twenty three, offset by tax recovery from previous period of both Generation and Distribution business. Once compared the income tax paid in 2023 versus last year, the main difference comes from the tax recovery from previous period of To conclude, now on financial expenses that reached $103,000,000 mainly due to the debt interest paid during the year, higher factoring costs, partially offset by higher cash interest. Financial expense figures are in line with the last year. Now let's take a look At our liquidity and leverage position on Page 15, our gross debt increased around $400,000,000 to $5,000,000,000 as of June 2023 when compared to December 2022.

Speaker 3

This increase was mainly related to the delay of PEG2 payment and other network capital mix as the tax payment of the sales of Enel transaction executed in the last year. It should be noted that this debt increase is a temporary effect as we should receive Part of the Phase 2 Fund, hopefully within August, and we will start to see higher income from Our operating business coming from the better hydrology and later this year, the sales of Arcadia assets. All in all, The average of our debt maturity reached 5.7% year at the end of the last semester, maintaining the largest portion of the fixed rate with 77% of the total debt. Regarding our maturity during In the slide, we are seeing a $200,000,000 maturity for this year of 2023. This amount was already paid early July using a bridge issuance that shall be paid once the PEP Two factors in resources are Cushing.

Speaker 3

The average cost of our debt reached 4.7% at the end of last June, little bit higher than December figures due to the new profile of our debt, prepayment of some pretty I would like to reinforce the message that the current debt levels are temporary, Considering all the sources generated by our assets during the second half of this year, as you may be aware that our generation business It has an important seasonality during the rainy season and by the sources coming from our Cadet transaction. Fabrizio will give you more detail. Many thanks. Now I will hand over to Fabrizio.

Speaker 2

Many thanks, Giuseppe. Now on Page 15, as part of our goal to continue optimizing our portfolio, reinforcing the value of our assets and as a consequence, Strengthening the sustainability of our balance sheet, I would like to speak on the recent announcement of the sale of our subsidiary LCAD. On July 12, Energir signed an agreement with Sonadix to sell its entire stake in Arcadia and Eneracion Solas. Arcadia operates and owns a portfolio of 4 16 Megawatts of Generation Assets that includes 4 solar power plants named Diego del Magro, Carrera Pinto, Pampa Solarte and Domingo. The agreement provides that SonaeDix will pay an equity value of $550,000,000 for the entire stake held by Enel Chire, and shares secure back to back PPAs to Enel with different tenures of around 80% of the production of the power plant defined in the contract.

Speaker 2

The capital gain embedded in this transaction will generate an estimated impact in our net income of $110,000,000 in 2023 and the cash impact of around $500,000,000 net of taxes of about $50,000,000 The purchase and sale transaction is subject to certain condition precedents The closing of the transaction is expected by the end of this year. Finally, this transaction is part of our asset rotation initiatives and unlocking value goals, targeting the optimization and diversification of our portfolio. The funds generated with the sale will create further space for our company to execute our CapEx deployment plan, while at the same time strengthening our financial position in a virtuous cycle. With the execution of the annual transmission sale and the share agreement, Both executed last year and the closing of this transaction, we have in Chile in a much more comfortable position to continue targeting Now I will point out some closing remarks on Slide 17. The 1st semester showed a solid operating performance.

Speaker 2

The elements that we have now catalyzed by Better than expected hydrology, full natural gas availability and the quality of our assets support our view for a solid 2023 Our business has progressed in line with our expectations, and visibility for the rest of the year allows us to be fully confident in reaching the upper range of our targets provided back in November 2022. The repositioning of our generation portfolio, growth actions and diversification of our sources continues to evolve. The Arcadia transaction was an important and well designed action that will support the execution of our committed plan. The growth of our renewable fleet is well on track and will continue to bring additional value to our portfolio, complementing and diversifying our metrics Thanks to the portfolio optimization actions that we have been constantly pursuing This will allow us to leverage our strong positioning in the energy transition context and exploit the opportunities that will materialize. Let me now hand over to Isabella.

Speaker 1

Thank you, Fabrizio. Thank you all for your attention. Now let's begin the Q and A

Operator

Our first question comes from the line of Beatriz Giannola from Mediobanca.

Speaker 4

Yes. Good morning, everybody, and thanks Thank you for taking my questions. IFRS 3, my first question regards to Slide 14. I can see there has been some cash flow absorption related to the stabilization mechanism. Can you provide more color on how do you expect this amount to evolve by year end?

Speaker 4

And related to these, how do you see debt Has been positively impacted by good hydro output? How do you see this evolving in 2023? And how do you see this in the years And a very last one, you confirmed your earnings guidance for 2023. What about the one for EBITDA? Is that still confirmed?

Speaker 4

Can you please provide more color on this? Many thanks.

Speaker 2

Well, I think that I can answer the second question about Hi, Liam, Generation, and let Giuseppe answer to the first and the third question. As I mentioned during my presentation, basically, we already have 1 terawatt hour more than expected in our reservoirs. So that it's quite easy to predict that At least 1 terawatt hour we will exceed at least 1 terawatt hour our expectation of Hydro generation for this year. As for the following years, well, probably a good level of Hydro inflows during 2023 could in some way also benefit the beginning of 2024. But for sure, this is, of course, a temporary effect.

Speaker 2

Let me say that structurally, it's something that's Difficult to comment that we could be more optimistic on the following year. For sure, we are quite optimistic for this year and some probably also some Potential positive effect on 2024.

Speaker 3

Okay. For what concerns the effect So as I said in the first half, we accounted $189,000,000 And we believe that we are going to Accrued at the end of the year, something like more than $700,000,000 All in all, Not coming from the 2023, I'm talking about the full amount of back receivables. Clearly, in August, we expect to perform the first part of Factoring that is going to be around $300,000,000 and another $100,000,000 a little bit more Factoring OpEx by the end of the year. So let me say Full year, it should be around $400,000,000 Fact. For what concern the Guidance, basically, we are confirming the upper side of our target in terms of EBITDA Because on one side, the remaining margin Coming from the trading activities is going to be already is already closed.

Speaker 3

So we are going to perform The margin in the last quarter, but in the same time, the positive effect of hydrology It's going to guarantee a certain level of confidence in reaching the EBITDA. This is basically the situation. We have to remember that more ideology doesn't mean only Energy available during the night, so but also a reduction in the spot price. So basically, we are Benefiting from both sides. So this is the reason because we believe the target that we had

Speaker 1

Thank you. Thank you, Giuseppe and Fabrizio. Gigi, do you have more questions on the line?

Operator

Thank you. Yes, one moment for our next

Speaker 1

question. Our next question comes from the

Operator

line of for Florencia Mayorga from MetLife.

Speaker 4

Hey, everyone. Thanks for taking my question. I have two questions. One is regarding your expectation on prices for the generation business, the spot one Regulating for free clients. And the other one is more regarding your expectation on leverage by year end, considering both the asset sales recently announced?

Speaker 4

Thank you.

Speaker 2

Okay. Let me address the first question And then I hand over to Luiseppe for the second one. Well, in terms of spot prices, as I said, given the Reduction of international commodity prices would be reflected in lower costs In the system and also thanks to the good hydrological conditions, The 2nd part of the year, we would expect a significant lower prices in the spot market. That is good news, Cora. As for the pre clients, I think I guess you are referring to long term contrast prices for free clients.

Speaker 2

In that respect, we are seeing some positive trend in the market in the sense that Due to the financial problems experienced From some renewable player in the last month, we are seeing a context That in the medium, long term seems to be a little bit more tighter, reflecting in Better prices for in the free market. In the last regulated auction last year, but I think this trend has been Reinforcing in the last month. So we are enjoying More comfortable prices, selling our energy to free customers.

Speaker 3

Okay. For what concerns the leverage that we're going to have at the end of this year, According to our projection, we are going to be below the 3 times net debt to EBITDA. Thanks to the Confirming the EBITDA of our guidance and supporting our leverage with the cash

Speaker 4

Thank you so much.

Speaker 1

Thank you. Gigi, do we have more questions on the line?

Operator

Thank you. At this time, I'm showing no further questions. I would like to turn the conference back over to Isabella Clement.

Speaker 1

Perfect. So we have some The first one is coming from Andrew McCartney. Andrew McCarthy is Asking, did I understood correctly that you expect 1 up to 2 terawatt hours more of hydro generation in 2023 Versus the strategy planned forecast of $9,300,000,000 how much additional EBITDA should that Your $1,200,000,000 EBITDA target for 2023. Fabrizio Giuseppe?

Speaker 2

Yes, yes. I can address. We have just mentioned from a physical point of view that it's True. So confirming that we are expecting from 1 terawatt hour to 2 terawatt hour more of hydro generation 2023 compared to our forecast of 9.3. So it was correct what Andrew was referring to.

Speaker 2

It is quite easy to say that, as I mentioned, we have already 1 terawatt hour more in our reserve work. It's quite easy to be in the first part of the range, but I'm quite optimistic seeing also some short term forecast that we Could also have something more of that. And in terms of EBITDA, let me say that approximately each Ceravatawa could add like $50,000,000 more in our EBITDA, and that was the reason why I also was Quite comfortable in mentioning that we are in the upper range of our guidance.

Speaker 1

Okay. Thank you, Fabricio. We have another question coming from Rodrigo Mora from Moneza. Rodrigo is asking more details about the Arcadia transaction. He is asking if we could give more details about the PPA, Security did operation in terms of the duration of these PPAs.

Speaker 2

Okay. Let me say that this PPAs is absolutely Like a mirror PPA of what originally these plants have in different times of recent years when they were built. So each PPA started in a different year. And so as a consequence, also have a different expiry in the future. So We are saying that these PPAs start declining In 2029 and the last one that refers to the recent the more recent plan that is Domingo is going to hand The original PPAs that each of these plants signed at the moment of their Construction and of course, we have mirror sales in our portfolio that would be, of course, addressed Also from the 80% of our energy sourcing that we continue to have, thanks to this mirroring PPA.

Speaker 1

Okay, Fabrizio, many thanks. So we are All for the questions. So I would like to thank all for your attendance today. And any other information you may need, the Investor Relations teams will be available. Okay?

Speaker 1

Thank you. Have a good day.

Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.

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Earnings Conference Call
Enel Chile Q2 2023
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