Enel Chile Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
February 29, 2024

There are 5 speakers on the call.

Operator

Good afternoon, ladies and gentlemen, and welcome to Enel Chile's Full Year and Fourth Quarter 2023 Results Conference Call. My name is Carmen, and I will be your host for today. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please note that today's conference is being recorded. 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.

Operator

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 full year and 4th quarter 2023 results, the presentation accompanying this conference call and Enel. Shilis annual report on Form 20F included under Risk Factors. You may access our full year and Q4 2023 results press release and presentation on our website, www.nl.cl, and our 20 F on the SEC's website, www.sec.gov.

Operator

Readers are cautioned not to place undue reliance on those forward looking statements, which speak only as of their dates. Enel Chile undertakes no obligation to update these forward looking statements or to disclose any development as a result of which these forward looking statements become inaccurate, except as required by law. I would now like to turn the presentation over to Ms. Isabella Clemes, Head of Investor Relations of Enel Chile. Please proceed.

Speaker 1

Good afternoon, and welcome to Enel Chile's 2003 4th quarter and full year results presentation. Thank you all for joining us today. Joining me this morning is our CEO, Fabrizio Bardelli and our CFO, Giuseppe Turcierelli. As announced yesterday by our Board of Directors, today is the last day of our CEO, Fabrizio Bardi, after 2 years in charge of our company, assuming a new position with Bingo NOSPA in Italy. During the period that the new CEO shall be designing, Giuseppe Turcierelli shall step in as interim CEO of Enero Chile.

Speaker 1

I opportunity to thank you, Fabrizio, for all his contributions to our company over the years. Now our presentation and related financial information are available on our website, www.enel.cl, in the Investors section and in our app Investors. 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 a Question. Media participants are connected only in listening mode.

Speaker 1

In the following slides, Fabrizio will open the presentation with our key highlights of the period, then go through our portfolio management actions, regulatory contest updates and guidance achievements. Finally, Giuseppe will give us a view of our business economic and financial performance. Thank you all for your attention. And now let me hand over the call to Fabrizio.

Speaker 2

Thank you, Isabella. Good afternoon, and thanks for joining us. Let's start our presentation with our main highlights on Slide 3. I want to start with our portfolio management highlights. During the year, we added around 600 megawatts of new renewable energy capacity, including our 1st best project.

Speaker 2

All these additions will support us in our long term ambition of decarbonization and the continued optimization of our portfolio. As of today, we have received a commercial operation data, the cost from the system operator for around 1.4 gigawatts, which is in line with our expectations announced in our last 2 Investor Day. This year, we had a remarkable performance of our generation performance. The better than expected hydrology due to the El Nino phenomenon and all the gas trading activity outstanding performance supported the achievement of our goals and targets. On the regulatory side, we have some important news to share.

Speaker 2

1st, the Chilean government presented a draft bill to Congress introducing the stabilization mechanism. The fact 3.0, a very important positive and important sign of stability to the energy market. At the same time, the regulator has published the final technical distribution report referring to the 2020, 2024 cycle. This step was very important to reduce eventual uncertainty to the distribution business remuneration. I will deep dive into both topics later.

Speaker 2

Finally, I'm pleased to announce that we beat all our financial targets for 2023, which reflects our confidence in Energia's future and solidity. Giuseppe will give you more color on this. To conclude, during 2023, we recovered around 3 $58,000,000 related to the stabilization mechanism, the PEG-two, and closed the Arcadia project, which represented around $180,000,000 of positive impact in our net income. Now let us move to Slide 4 to review how we executed our goals and strategies towards a more efficient generation portfolio. Over the last few years, we have significantly increased our renewable capacity through a diversified pipeline across different areas of the country, increasing our exposure to solar close to the center of consumption, to wind and more recently to storage.

Speaker 2

During 2023, we connected almost 600 megawatts of additional net capacity. In Q4, we connected 106 megawatts related to the last phase of our solar plant Tierra Gusta, 34 megawatts of La Cabana best and 39 megawatts of some solar PMKD. During the year, we have also executed some asset rotation in the form of the sale of 4 16 megawatts of solar generation assets to Sonmezic in the North of Chile and the sale of our Wazco gas turbine power plant. Both were initiatives aimed at optimizing our portfolio and recycling our capital. Regarding cost, since January 2023, we have received the authorization from the National Electricity of Ozanator to begin commercial operation for 1.4 gigawatts.

Speaker 2

This includes projects such as Campos del Sol, Vale del Sol, Simister Rai, One Choice, Reinai Podol and the recently announced El Manzano and La Cabana. Now let's look at some updates on the hydrological situation and gas optimization activities on Slide 5. Pavorable hydrological conditions during 2023 allowed us to reach a higher than expected hydro production, exceeding by 25% the level recorded in 2022 and totaling 12.2 terawatt hour of hydro generation, a scenario that we had not seen since 2010. The hydrological situation in our reservoir is also very positive. Year to date, was compared to last year's figure, especially in the South.

Speaker 2

We have included an updated view of our reservoir levels in the annex of our presentation. Rainfall during 2023 surpassed the last 10 year average period, allowing us to have comfortable water availability until the end of Q1 of 2024. In fact, as of February 1, 2024, water available for generation was equivalent to 1800 gigawatt hour, 150 Gigawatt Hour More Than the Same Date in 2023. Regarding our gas optimization and drilling activities, we have guaranteed natural gas and LNG supply to our fleet and executed some very profitable sales to local industrial and mining customers and also to foreign markets. The foreign market sales were negotiated during 2022 at very attractive price.

Speaker 2

And the deliveries were mainly concentrated during the 1st and the 4th quarters of 2023, totaling 4 cargoes sold abroad. All the above contributed around $300,000,000 at margins for 2023. For 2024, we also see the situation as very comfortable. For reference, we have already executed a new firm agreement with several Argentina suppliers for up to 4,000,000 cubic meters per day that are already in operation from October 1 until April end of April 2024, allowing us to optimize our combined cycle generation costs. In addition, we have already secured new agreements for 2024 winter period with Argentine supplies for up to 2,600,000 cubic meters per day from May to September 2024, giving us security to optimize our portfolio during 2020 4.

Speaker 2

Now let's look at some important updates related to the regulatory context on Slide 6. In January this year, the Ministry of Energy presented a draft deal related to the stabilization energy mechanism with the purpose of continuing the effect mechanism and mitigating the projected tariff increases to final capital. At the same time, they aim to improve the mechanism known as MPC mechanism to allow gradual repayment of accumulated debt with the generators and establish a transferable subsidy for the most vulnerable clients. Also, during January, the draft bill was reviewed and approved by Special Energy Commission from the CNM. And now, after the Congress annual leave that ends during the month of February, the draft will be discussed first in the Senate plenary and then in the chamber of debt.

Speaker 2

Let me say that we consider the government proposals very solid and aligned with Chile's position and goals in incentivizing investments towards the reconciliation. Let me quickly explain the PDP proposal, starting with how this mechanism is financed. The PDS considers the 3 sources of finance. 1st, a temporary state subsidy until 2026 of total $20,000,000 per year. Then the public service charge, which involves the regulated and pre client and that amounts to around $200,000,000 annually.

Speaker 2

And finally, the client protection maintenance charge that will be applied only to regulated customers up to 2,035. Both charges shall have different fees depending on the consumption of each finance mechanism in place and also the gradual increase in the tariff, which will depend on the plant consumption, should support the recovery of the generators' accounts receivable generated since the enforcement of PEC1 and PEC2. In our case, on December 31, we had an account receivable related to the PEG already net of tax filing of $759,000,000 In addition, the PDL has confirmed that PEC 1 settlement shall occur up to 2027. Also, the PDL modifies the PEC 2 by extending the settlement lease period from 2,032 to 2,035 and increasing the total amount of the fund by $3,700,000,000 totaling $5,500,000 We expect that the PDL will be approved and published soon in the 1st semester of 2024, considering the urgency of the decision and the fact that the next regulatory option is scheduled to be held during Q3. Regarding the distribution tariff review, the regulatory final report for the 2020 2024 cycle was published early this month of February.

Speaker 2

And the tariff decree on the distribution 2020 2024 remuneration cycle shall be published within the next few months. And let me say that we had a more positive view of the process once comparing to its beginning. Additionally, by November 2024, we should start the distribution regulatory cycle comprising the 20242028 period. We are still at the very beginning of this process. Currently, the external consultant responsible for realizing the reference model company study has started its work.

Speaker 2

The results of this study shall be noted in the following months. Now let us move to Slide 7 to review our main KPIs of 2023 versus our guidance. In terms of renewables and best execution, we have achieved our goal, reaching 77% of renewables and best contribution in our metric on December 31, 2020 3, contributing to our commitment to the country's energy transition. The latter also enabled us to reach our goal of 74 greenhouse gases free production over the total during 2020. Let me point out that our efforts intended to improve efficiency and quality of service in the distribution business have led us to the increased indicators such as TIDI and also to achieve our goal regarding network losses despite a more complex market scenario.

Speaker 2

On the electrification efforts, we have all to achieve our goals. Now let us review on Slide 8 our main financial indicators by 2017. During 2023, we experienced a significant improvement in our operation, mostly explained by a more efficient generation mix related to a better agerosh situation and the contribution of our optimization portfolio action plan developed and executed during the last year. The latter, coupled with the conclusion of optimization initiatives such as the sale of Arcadia last October, enabled us to achieve our EBITDA and net income commitment. On the last financial indicator, we have reached the upper range of the guidance announced during 2023 Investor Day.

Speaker 2

Giuseppe will provide details on our performance on EBITDA and net income in the following slides. All the above guaranteed our leverage and net debt to EBITDA commitment, making us comfortable recommending the maintenance of the committed payout, which was also the company's Board of Directors' recommendation and was also in line with our guidance. Now, I will hand over the call to Josep. Josep, the floor is yours.

Speaker 3

Thanks, Fabrizio. Good afternoon to all our investors connected. I will start my presentation with a summary of our main results of the year. To better evaluate our company earnings performance, we present the 2022 figures as a pro form a that includes the following adjustments. First, the full year 2022 EBITDA has been adjusted by the impairment of the coal stock in the right of haul generation project totaling $134,000,000 This adjustment was $63,000,000 in Q4.

Speaker 3

Likewise, this adjustment affected the bottom line by a total of $83,000,000 in the full year and $41,000,000 in the Q4 of 2022. Additional, we have excluded from these figures in order to better evaluate the operational performance of our company through one off effects. The operational results and capital gain of the sales of Enel Transnacion and the impact of the agreement with Shell, both executed in December 2022, totaling $643,000,000 in the full year and $768,000,000 in the Q4. These adjustments affected the bottom line by a total of $1230,000,000 1185 $1,000,000 in the full year and in the Q4, respectively. Regarding the FFO, the figures for 20232022 have been adjusted only by the sales of Enel Satishion.

Speaker 3

It means that 2022 figures include the special agreement. In 2022, in terms of cash, the adjustment amounted to $20,000,000 in the full year and $2,000,000 in the Q4. In 2023, we have excluded $310,000,000 paid in taxes on capital gain obtained from this transaction. Considering these adjustments, let's see how the earnings indicator and FFO performed. As you can see, in the full year period and the Q4 of 2023, our earnings indicator presents an important improvement compared to the 2022 figures.

Speaker 3

Regarding EBITDA and net income, the improvement is mainly explained by a more efficient generation mix, thanks to the outstanding hydro and renewable personnel and due to greater gas trading activities. We will see more detail in the following slides. Regarding the FFO, the 2023 full year figures show a relevant improvement impacted mainly by the FACT two factoring executed for around $345,000,000 and other cash management optimization actions. Let me remind you that the Q4 2022 afterthought includes $520,000,000 shell agreement. We will see more detail later on.

Speaker 3

Let's review now the progress on CapEx. Our 2023 total CapEx reached $804,000,000 basically in line with our guidance for the year. I would like to highlight that 78% of our total CapEx was related to the renewable and storage in line with our strategy of rebalancing our portfolio to adapt it to the new market context. In addition, 15% of our CapEx was mainly related to clients' new connection in Greece, considering the growth in our customer base. Customer CapEx totaled $78,000,000 7% higher than the previous year, mainly associated with the new customer connection.

Speaker 3

Asset management CapEx reached $129,000,000 36% lower than previous year, mainly due to lower maintenance activity in conventional duration of plants and distribution business. Development CapEx reached $597,000,000 representing a decrease of 33% versus last year figures, in line with the remaining renewable portfolio under construction. Let's now take a look at the Slide 12, where we have the summary of the Q4 2023 EBITDA breakdown accounting for RMB471,000,000. First of all, let me remind you that we have included the pro form a of our 4th quarter strength ratio EBITDA for Compayton Pharmacy. We have excluded from the 2022 EBITDA the impact of the one off effect from the sales of transmission that we see on Chile and the agreement signed with Chichl.

Speaker 3

Taking this into the consideration, our 4th quarter 2023 EBITDA was around $71,000,000 higher than 20 22 performance, mainly explained by the following. 1st, a positive contribution from hydro and renewable assets totaling $41,000,000 mainly related to the improved hydro in the quarter. 2nd, a positive effect of $83,000,000 on variable costs, mainly explained by lower withdrawal, spot price, lower transmission fees and savings due to lower fuel consumption, both as a consequence of the best rate rollers in the period. In addition, a positive contribution of $80,000,000 related to the gas optimization activity, mainly due to increased gas trading activity for SEK 0.9 million made in Q4 2023 at the very increasing prices negotiated in the end of 2022 when the international prices were very contracted. The above management effects were partially offset by $150,000,000 from lower PPA sales in Q4 2023, primarily due to lower average PPA price, mainly related to lower commodity indexation in the regulated market, $18,000,000 in OpEx and other costs, mainly explained by our new renewable capacity, inflation across all three businesses and negative effects in NLS due to a higher recognition of gross margin in 2022.

Speaker 3

Partially offsetting the positive effect in distribution margin of $3,000,000 mainly due to the depreciation. Let's move on to the next slide, where we will review the full year EBITDA breakdown summary accounting for EUR 1237,000,000. In the full year 2023, our EBITDA increased $358,000,000 versus 2022 pro form a, mainly explained by the following effects. 1st, a positive contribution from hydro and renewable totaling $213,000,000 mainly related to improved hydroly volume second, a positive effect of $94,000,000 in variable costs, mainly explained by lower spot price in the period due to a better hydroelectric since June 2023, a one off effect of an agreement with 1 of our TPA supplier and lower transmission fees, partially offset by a lower thermal generation margin. In addition, a positive effect of $81,000,000 related to the gas optimization activities, mainly due to increased gas trading activities from TRY 1 in the full year.

Speaker 3

And finally, a positive contribution of $27,000,000 in grid margin, mainly due to grid remuneration related to indexation, lower finance and compensation and higher demand. The above maintenance effect were partially offset by $17,000,000 from lower PPA sales in the full year 2023, mainly due to lower average PPA price due to indexation, partially offset by higher capacity payments in this year. $41,000,000 in OpEx and other costs, mainly in donation business, explained primarily by our new renewable capacity and maintenance of plants and inflation across all the business. Let's move on to Slide 14 to take a look at our generation business in KPIs. Net electricity totaled 24.1 terawatt hours as of December 2023, exceeding by 9% the production during 2022, mainly due to higher hydro and solar generation, resulting from the improved hydrology and the addition of new projects, respectively.

Speaker 3

These also offset the lower thermal dispatch, mostly relating to the disconnection of Bocha Mihno Tools in September 2022. If we exclude the production of Bocamina 2 in 2022, the real increase in the component generation was equivalent to a growth of 15% coming mainly by hydro, hydro and renewable growth contribution. During 4Q 2023, net generation grew by 15% to 6.6 terawatt hour, mainly due to higher hydro, solar and wind generation. Our energy sales totaled 30.9 terawatt hour in 2023, 0.5% higher than the level recorded in 2032, primarily due to higher sales to free customers. It's worth mentioning that our commitment with our clients were fulfilled with a higher portion of our renewable generation, which also led us to lower energy purchases in the spot market, mainly the no solar hour.

Speaker 3

During Q4 2023, typical energy sales increased by 2.2% to 7.6 terawatt hours, mainly due to higher sales to pre customer. Let me point out that during the last quarter of 2023, our increased renewable production also allowed us to reach 0 net purchases in the spot market. Now on Slide 15, let's go through the main drivers of our group net income. Our net income increased by 60% excluding the net impact of Ascadia sales of 183 $1,000,000 versus last year pro form a figures. Let me drive you through the main FX.

Speaker 3

A greater EBITDA of 3 $58,000,000 as already explained, higher depreciation and amortization of $222,000,000 mainly resulting from our new renewable project in operation, which was offset by lower depreciation in Enel Escrenacion, mainly as a consequence of new investment in power plants that increase the average useful life of property, plants and the keeping. Higher amortization intangible assets in Enel Distribucion due to the new ITC sand development, partially offset by lower depreciation and amortization due to the sales of Anel Transficient in December 2022. Lower bad debt mainly related to the client's net debt recovery due to several commercial actions. Regarding financial results and net debt investments, we reported a $35,000,000 improvement, primarily explained by $98,000,000 related to higher interest and adjustment due to Spec 2 recognition, dollars 10,000,000 mainly due to equity income linked to non consolidated companies and capital gains basically associated to the sales of Wasco thermal power plant, all the above effects were partially offset by lower income related to monetary adjustment, higher financial costs associated to payment schedule optimization agreement with supplier and higher financial expense linked to the sales of part of an electricity bucket business. Income tax increased by $138,000,000 mainly related to the income associated to the sales of Ascadia of $148,000,000 During the 4th quarter of 2023, net income increased 44 percent to $426,000,000 primarily explained by higher EBITDA as detailed in previous slide, higher depreciation and amortization for $10,000,000 is mainly explained by the generation business due to new renewable energy projects in operation, higher financial results and equity investments of $15,000,000 This is explained by $84,000,000 related to the previously mentioned structural adjustment, partially offset by higher financial expense linked to the sales of an elasticity basis, higher financial costs related to the payment schedule optimization agreement with supplier, higher transfer costs mainly related to the higher cost of debt.

Speaker 3

And basically, slight variation on the quarter in terms of income tax. Moving to the FFO analysis on the next slide. Let's review in detail our FFO for this period. Regarding the FFO, the figures for 2023 to 2022 has been adjusted only by the sales of Anel Transregion, but not by the shell agreement executed in 2022. Last year, in terms of cash, the adjustment amounted to $20,000,000 in the full year.

Speaker 3

In 2023, we have excluded $310,000,000 paid in taxes on capital gains obtained from this transaction. Our FFO in 2023 reached $986,000,000 representing an improvement of 3 $34,000,000 The main effects that explain our FFO in this period are the following: $1,300,000,000 coming from EBITDA driven by the strong hydrolysic contribution, gas trading activity and better results in the distribution business. Dollars 406,000,000 negative impact from the cumulative stabilization mechanism affecting our receivable, reducing the cash conversion of the period. This situation has been improved by the impact of the execution of the IDB factor neutrality to Phase 2, which amounted to $345,000,000 Working capital reached a positive balance of $88,000,000 as a consequence of cash cash from the sales of Santa Rosa Building and cash management optimization, partially offset by VAT payment related to stabilization mechanism. Working capital improvement once compared to last year figures mainly comes from the sales of Santa Rosa Building and other managerial action as well as better collection on distribution business.

Speaker 3

Dollars 3,000,000 to $4,000,000 income tax net payments mainly related to tax payments in generation business in 2023, offset by tax recovery from previous periods for both generation and distribution business contribution. Once compared to the income paid in contract paid in 2023 versus last year, the main difference comes from the tax recovery from trade experience obtained during this year. To conclude, regarding financial expense, we paid $299,000,000 This is explained mainly due to the debt interest related to the average interest on the gross debt of 4.9% that reflects also the new interest curve associated to the revolving credit facility. Once we compare the 2023 financial expenses with last year figures, we see an increase also explained by higher average interest rate on the gross debt and monthly payments relative to the revolving credit facility as a bridge instrument for the FX 2Q delay. Now, let's look at our liquidity and leverage position.

Speaker 3

Our gross debt decreased around $300,000,000 to $4,400,000,000 as of December 2023 compared to December 2022. This decrease was primarily due to the repayment of revolving credit lines, partially thanks to the use of the proceeds from Ascadia sales concluded last October 2023. The average of our debt maturity increased to 6.1 years as of December 2023, also improving the portion of the fixed rate to 88% of total debt from 77% in September 20 33. The average cost of our debt reached 4.9% as of December 2023, mostly owing to the new profile of our debt, the financial market condition and the prepayment of some bridge short and instruments. In terms of liquidity, we have a comfortable position in order to support upcoming debt maturity in 2024 and also to cope with possible headwinds in the debt market related to the economic situation.

Speaker 3

Talking about 2020 20, we had approximately $750,000,000 maturing in 2024, including $400,000,000 of the Yankee bonds, in line with our financing strategy and according to our 2024 financial plan, we are evaluating the vessel benefits to face this maturity. This could be done through the payment with cash, the use of long term committed credit lines, executing a new financing at an initial level or a mix between alternatives. Currently, we are in advanced conversation with several banks and financial institutions, which has shown great interest in participating in possible new financing. In the Q1, we'll give you more color on it. Now, I will hand over to Fabrizio for closing remarks.

Speaker 2

Thanks, Josep. Energy's sustainable business model demonstrated its reliability and optionality. And this outstanding operating and financial results gave the management room to pursue the company's strategy toward decarbonization, electrification and profitability. As planned, the Arcadia transaction was concluded last October. With this, our asset rotation plan was successfully concluded.

Speaker 2

The 2023 results show a solid operating performance. The better than expected hydrology and the gas trading activities during this year, complemented by the several managerial actions we have taken over the last year, supported us in achieving our commitment to all our shareholders. Finally, we would like to announce that a 2024 Annual General Meeting will be held on April 29, during which our shareholders will deliberate on the final dividend for the 2023 fiscal year. Let me now hand it over to Isabela.

Speaker 1

Thank you, Fabrizio, and thank you all for your attention. So now let's begin the Q and A session. The Q and A section is open. Operator, please you may start.

Operator

Thank you so much. And our first question comes from the line of Javier Suarez with Mediobanca. Please proceed.

Speaker 4

Hi, good afternoon and thank you for the presentation. Several questions on side. On Slide 6, you detail several significant improvement in the outlook for regulation when it comes to the stabilization mechanism and also the regulation for distribution. So the question for you is, if you can again clarify the amount of receivable that you have on your balance sheet related to the stabilization mechanism and your latest expectations on the time frame for the recovery of this amount? And how these new guidance may impact your guidance as presented in the pension business plan of November 2023?

Speaker 4

And a similar question for the distribution regulatory cycle. You are expecting the publication of the decree by during the second half twenty twenty four. You can share with us your latest expectations on this regulatory review and how this compare with the assumptions embedded in your business plan. Then the third question is related to the hydro production and reservoir levels. If you can kindly elaborate on how these higher reservoir that you have for 2024 compared with your assumption in the business plan for 2024?

Speaker 4

And what we may expect in terms of additional contribution from this additional hydro capacity, I guess? And the final question is, this year, we have seen a significant contribution as well from gas trading optimization opportunity. You can share with us the expectation for 2024. Many thanks.

Speaker 2

Okay. Thank you very much. Several questions. So let me try to answer something from the last one. And I will probably change the order in my answer.

Speaker 2

So, gas trading is pretty simple. In the end, we usually have, let me say, between $30,000,000 $40,000,000 dollars margin in a normal year. And 2024 will be a normal year. So this is the range in which you have to consider our gas trading margin activities for 2024. As we usually experienced those in the past, we have some, let me say, growth in this, but it's, as I said, dollars 10,000,000 that we are talking about that.

Speaker 2

The order of magnitude changed drastically in the last 2 years because of the very particular condition we experienced in the international LNG market in 2022. That was the moment in which we materialized all our sales that we benefited from in 20222023 performance. So basically, this is the standard, let me say, expectation for natural gas trading activities is between $30,000,000 $40,000,000 Then hydro production, as I said, we have some through we have some higher than expected levels in our reservoir. And of course, it would help us to probably perform better than expectation in our Q3. It is difficult to project this in terms of yearly production because starting from the 1st April, the smelting period would end and new rainfall would affect the overall production of the year.

Speaker 2

So what can I say? It is that we are pretty confident that Q1 results will be boosted by this additional hydro production and additional water in our reservoir that we have been experiencing in this first part of the year. Distribution, regulatory, yes. Well, as I mentioned that this is a positive piece of news. Of course, we still have to wait for the final degree and for the process, the review process from Control OREA.

Speaker 2

But we are quite optimistic that this will be the final numbers for VAD for our distribution activity. And there are some upside compared to what we registered in the last 3 years because I remember that in the last 3 years, we had to, of course, make our P and L assumptions about the 2020, 2024 distribution tariff. So we have some upside there, and we have probably also some upside compared to what we now can expect for 2024. In the range of $20,000,000 more. This is more or less what we can expect as an upside in our distribution business as a consequence of this final report from the regulator.

Speaker 2

And then your first question about the PAC, I will give you a very general answer and then I will let Joseph to add some more color on that. As I mentioned during my speech, the amount of receivables, net of what we already factored, is $759,000,000 This is the figures that we have in our account for this item. Of course, once the draft bill will be hopefully approved. There will be a path to recover all these accounts receivables that we already registered and, of course, also the evolution of what is going to accumulate in the next month. So it's quite a little bit complex between what we are going to anyway have as an early payment and what it is going to accumulate more.

Speaker 2

And so I will give you I will leave Giuseppe to add some more color on that.

Speaker 3

Yes. Thank you, Fabrizio. Basically, we believe that if the law is going to be approved in end of March beginning of April, we are assumed to recover $450,000,000 approximately. It's the amount that we expect to be collected in and pasteurized in 2024 and this is what we put in our projection for the year.

Speaker 1

Okay. Thank you, Giuseppe. Thank you, Fabricio. I think we have reached all the questions from Javier. So now, do we have any other questions coming from the line, operator?

Operator

No, we don't have any more. I can it back to you for to mention any questions we have on the

Speaker 1

chat. Definitely. We have received some questions here from the audience coming from the chat. So I will start with the first question here that I received from Felipe Torres from AFP EBITDA. Felipe Torres is asking us about, can you give us more detail regarding the extraordinary shareholders meeting to be held after the ordinary shareholders meeting in April 29?

Speaker 1

So Felipe, I will answer this one here. So soon, all the topics of our shareholders meeting will be available in our website, okay? And then once it's available, we will be here, the Investor Relations team, available for your questions and other requirements you may have, Okay? So coming from the second question now from Martin Arunset from Balance Capital. Martin is asking about the PEG, Fabrizio Giuseppe.

Speaker 1

Will the IDB offer to monetize the PEG III receivables as they did with PEG2, do you expect any financial costs from generators?

Operator

Giuseppe?

Speaker 3

Yes. Well, consider that the new system was seen a full pass through cost for what concern the generation every time that they're going to do the factoring except for the legal costs associated to the deal. And IDB is going to already got the mandate from the government in order to arrange the new factoring. So we believe that the situation is going to be smoother than the previous one. So we can expect significant cost associated to the factoring.

Speaker 1

Okay. Thank you, Giuseppe. So now let's go to another question coming from Francisco Paz from Santander. The first question of Francisco is what level of gas commercialization do you expect for this year? I think we have already answered on this one.

Speaker 1

And the second one, what level of hydro generation are you forecasting for this year in the context of El Nino, La Nina phenomenon, if you see any kind of a change in the forecast because of these events that we might have this year. Thank you. Beatriz?

Speaker 2

Yes. Let me give a very general answer to that. We already experienced in the past that having a El Nino phenomenon or La Nina phenomenon doesn't imply as a direct consequence a drastic change in hydrology in Chile. Sometimes it happens, sometimes not. So hydroxyure condition in Chile has not, as in other countries, natural consequence of this phenomenon.

Speaker 2

So of course, we monitor this phenomenon, and we also adjust when we have some strong evidence of these phenomenon affecting our hydrological condition. But so far, we don't see any particular, let me say, impact on what we could expect on 2024. So we have elaborated our budget, and we are still projecting an overall hydrology and overall directed production for the year in line with the last 5 years average, so meaning 9.6 terawatt hour. This is the reason why we have not changed at least so far our assumptions about hydro production for this year.

Speaker 1

Okay. Thank you, Fabrizio. We have one more question coming from Florencia Mallorca from MetLife. So the question is from Florencia. First, she's giving us the congrats from the results.

Speaker 1

And then how much of PEG-two receivables are you expected to monetize in 2024? What's your plans for the 2024 notes due in April? Clarissa is asking about the Yant bond. Okay? Thank you, Giuseppe.

Speaker 3

Yes. I mean for what concerns the factoring of PEG 2 in 2024 basically I've already answered. So we are talking about around $450,000,000 in the second half of this year. Concerning the maturing of linked bond that is going to be repaid in the Q2 of 2024. As I said in my speech, we are basically exploring all alternatives that we have in our hands.

Speaker 3

So it's going to be we are going to use cash that is available, but also the committed lines that we have outstanding and not to use. And we are exploring also the possibility to issue a new loan. Now we are, as I said already, in advanced stage of negotiation with some banks and institutions. And we are deciding this in this month, we are going to deciding during the March basically, which kind of alternative to apply benefit for our program. Again, in the Q1, the results we are going to give you more color on that.

Speaker 1

Okay. Thank you, Giuseppe. Now question is coming from Rodrigo Mora from Moneta. Rodrigo asked about Los Condores. So the first question, Rodrigo, is coming about how if we have some news on the project, Los Condos, and also how much resources we will need to end the construction during this year of 2024?

Speaker 1

This is the first question. And then the second question that Rodrigo is asking is about the agreement with the Argentinian gas So he's asking more details about what we have already signed with the Argentinian gas producers for 2024. Thank you, Rodrigo, for the question. Mauricio?

Speaker 2

Okay. Well, look, regarding Los Condres, we are finally at the end at the final stage of this very particular project, very challenging project. And let me comment first of all that all the main civil works that were related to all excavation in demand. And so the promise that we experienced with this project are concluded. So this is something that, of course, is really important for us to announce that main work that were, let me say, a little bit more risky from a geological point of view are finalized.

Speaker 2

They will finalize at the end of this year. So about the time we could expect Los Condes online, it would be in the 2nd semester. This is some months a little bit more of what we projected previously. And this is related to the big rainfall that we had last year that, of course, on the one hand, were really positive to our performance in 2023, but unfortunately, on the other hand, make us impossible in some months to continue working on Los Condres project. And so we have some months delay due to this unexpected stuff that is related to the heavy rainfall that we experienced last year.

Speaker 2

In relation with how much investment we need to finalize the project, well, I would say relatively small amount because we are talking about $60,000,000 This is our projection for 2024 CapEx need to conclude the correspondent project. So as I said, finally, we are expecting these important projects to be online this year. And we are also pretty optimistic since the main critical works were already finalized. 2nd question, Rina, about Argentina and gas.

Speaker 1

Yes.

Speaker 2

Well, I can repeat the numbers I gave you during the speech. But let me first make a general call. We have been committing to sign several agreements with Brazilian suppliers because we want to be, let me say, sure about gas availability because you know the risk profile is really asymmetric in case hydrological condition could change versus the ones that we projected in our budget. So of course, we wanted to be sure and to secure enough gas availability in order to be ready to face adverse hydrochloric conditions in case more gas production would be needed from our plants and from also from competitors' power plants. So the figures I was referring to, it is 4.1 cubic meters per day in the current period, so starting from October 23 to August 24.

Speaker 2

Then in the winter period, we secured 2.6 1,000,000 cubic meters per day, of course, sorry, and 2,600,000 cubic meters per day. And then in the following period, October 24 December 24, 3.5 million cubic meters per day.

Speaker 1

Okay. Tricio, now we have last question coming from David Barra from Itau. David is asking about the transmission costs that we had during 2023. So he's asking I would like to ask about the transmission costs. In Q4, we can see a lower cost in comparison to the other quarter of this year.

Speaker 1

What explains this difference? Can we expect the same level going forward?

Speaker 3

Well, in the 4th quarter, the cost of transmission has been offset by the recovery of the carbon cost to the submission tools. So basically, it's the net cost on the 3rd quarter. It's difficult to predict whether we are going to have again this kind of recovery. So the kind of stuff that require more analysis once we have the closing of the book. So right now, I cannot say that we are going to repeat this report.

Speaker 1

Okay. Thank you, Giuseppe. Then we have a last question coming from Fernan Gonzalez from BTG. So Fernan Gonzalez is asking about the reservoirs. So the question is, given the current levels at reservoirs and assuming dry conditions, do you see that it could support hydro generation beyond the Q1 and into the Q2 as well?

Speaker 1

So the question is about reservoabs throughout the next month.

Speaker 2

Well, of course, this is a very challenging question because it will depend, of course, also on the level that we are going to experience in the next weeks about inflows generated by the last part of the smelting season. Of course, the inflows are decreasing as expected, of course, as always during the Brexit season. But it is true that this year, we are experiencing a smoother netting season when compared to the last year. So that is the reason why we have been accumulating more water in our reservoirs, and we are generating more hydro production compared to our budget expectation. Now saying commenting if it's possible to predict if it would be also of some comfort in April or during the Q2.

Speaker 2

It's difficult to say. It will depend also on the level of inflows that would materialize in the next week. Anyway, as I said, of course, it's a very good piece of news for Q1, difficult to comment about Q2.

Speaker 1

Okay. Thank you, Fabrizio. As there are no more questions, I will hand over to you, Fabrizio, for your final words. Thank you.

Speaker 2

Thank you, Isabella. Well, as you might know, today is my last day as CEO of Enel Chile. Tomorrow, I will assume another position within the Enel Group back to Italy. And I would like to take this opportunity to thank all the colleagues in Enel Chile and the management team who worked together with me for all the support during this year, during which we worked together to unlock the value of this asset and to reshape the financial sustainability of energy, being able to deliver all the commitments agreed to with our shareholders. Also, I would like to sincerely thank all of you for all the engaging interactions we had during our call and meeting.

Speaker 2

It has provided me with considerable professional growth. So thank you very much again, and all the best.

Speaker 1

Thank you, Fabrizio. Thank you all. So with this, we conclude our conference call. The Investor Relations team is available for any doubt you may have. Many thanks for your attention and see you soon in our Annual Shareholders Meeting in the end of April.

Speaker 1

Thank you. Bye bye.

Operator

Thank you everybody for your participation and you may now disconnect.

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Earnings Conference Call
Enel Chile Q4 2023
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