Enel Chile Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
July 25, 2024

There are 6 speakers on the call.

Operator

Good morning, ladies and gentlemen, and welcome to Enel Chile's First Half and Second Quarter 2024 Results Conference Call. My name is Carmen, and I will be your operator for today. Please be advised 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 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.

Operator

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 2024 results, the presentation accompanying this conference call and Enel Chile's Annual Report on Form 20 F included on the risk factors. You may access our first half and second quarter 2024 results press release and presentation on our website, www.nl.cl and our 20 F on the SEC's website, www.sec.gov. 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.

Operator

I would now like to turn the presentation over to Ms. Isabella Clemens, Head of Investor Relations of Enel Chile. Please proceed.

Speaker 1

Good morning, and welcome to Enel Chile 20 24 Second Quarter and First Half Results Presentation. Thank you for all joining us today. My name is Avela Clemens, and I'm the Head of Investor Relations. Joining me this morning is our CEO, Giuseppe Turcchiele. Our presentation and related financial information are available on our Web website, www.nl.cl, in the Investors section and also in our app Investors.

Speaker 1

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, webcast, chat through the link Ask a question. Media participants are connected only in listen mode. In the following slides, Giuseppe will open the presentation with our key highlights of the period, then go through our portfolio and regulatory contest update. And finally, we'll give us a view of our business economic and financial performance.

Speaker 1

Thank you all for your attention. And let me now hand over to Giuseppe.

Speaker 2

Thank you, Isabella. Good morning, and thanks for joining us. Let's start our presentation with our main highlights of the period on Slide 2. During the Q2, our hydro portfolio performed outstandingly, repeating the good performance of the Q1. This resulted from higher reservoir level at the beginning of the year due to El Nino phenomenon last year, coupled with strong weather events during this quarter.

Speaker 2

This gave us a robust and efficient generation portfolio mix for the cement. We added approximately 250 megawatts of new renewable Energy Capacity and BEST projects. All these additions will support our long term ambition of decarbonization and the ongoing optimization of our portfolio. Furthermore, I would like to mention that we have received the commercial operation date from the system operator for around 410 megawatts this year, totaling 0.6 gigawatts since January 2023. Moreover, during this period, Enel Energia, a subsidiary of Enelchina, secured a 20 year term regulated PPA, representing a sales of around 3.6 terawatt hour in the regulated auction starting to deliver around 1.5 terawatt hour since 2027 and the remaining part to reach 3.6 terawatt hour in 2028.

Speaker 2

This continued Enel Egencion goal to diversify its sales and include more long term PPA in its portfolio. On the regulatory side, we have some important news to share. First, as you may know, the Chilean Congress approved the law related to the stabilization mechanism Type 3. In July, the decree with the updated regulated tariff was published. Now we are awaiting the sovereign guaranteed decree during the Q3 to enable to start the factoring process.

Speaker 2

2nd, the distribution tariff for 2020 2024 came into effect in June of this year. The review process for the distribution tariff for 2024, 2028 has already begun and is progressing as expected. I will give you more color on this topic later on. Regarding profitability, I'm pleased to announce that the first half showed solid EBITDA and net income results. This reflects our confidence in our guidance for this year.

Speaker 2

We achieved a positive FFO despite the PECO receivable. As you know, we expect to recover a portion of it during the second half of this year. The positive effect of FFO reflects our solid operational performance during this semester. And finally, we have a solid level of liquidity to be used for future cash CapEx deployment. I will provide more detail on this later.

Speaker 2

Now let's look at some updates on the hydrological situation on Slide 3. Positive hydrological condition during 2023 allowed us to have greater water availability during the Q1 of this year. In addition, higher than expected rainfall during the Q2 of 2024 allowed us to increase our hydro production, exceeding by 72% the level recorded in the Q2 of 2023. Therefore, during the first half of twenty twenty four, we have accumulated 2.1 terawatt tower of hydro generation compared to the last year. The hydrological situation in our reservoir is also very positive year to date once compared to the last year figures, especially in the South.

Speaker 2

In fact, with the water accumulated in our reservoir to date, we have sufficient availability to supply our energy demand until the end of this year, even with the possibility of a weak La Nina phenomena in August September. Based on these results, we have updated our hydro generation estimate to approximately 12 terabatavar for 2024. We expect to complement this information once we know the results of the rupa denier studies, which will be carried out in the coming months, so that we can better estimate the snow melt forecast for the Q4. Now let's move to the next slide to review how we continue improving our portfolio of generation assets. We continue developing our strategy toward a more efficient generation matrix, increasing our renewable capacity across different areas of the country, focusing on solar close to the center of consumption and incorporating more battery in our portfolio project.

Speaker 2

During this first half, we reached a total net installed capacity of 8.7 gigawatts. We connect almost 250 Megawatts of additional net capacity related to our solar plant with batteries, Sonuberto, located in the metropolitan region and 2 more projects with batteries. These are El Manzano Base, which is also in the metropolitan region and La Cabana Base, 2 in the south part of the country. During this half, we received authorization from the National Electricity Coordinators to begin commercial operation for 4 10 megawatts released to the 2 solar planes, La Salinas in the North Zone and hybrid project that is located in the same field as Tierra Volta Estes, a 112 Megawatt wind farm and El Montano, a solar plant located in the metropolitan region of Santiago, very close to the consumption center. And finally, our wind farm La Cabana located in the south of Chile.

Speaker 2

In addition, let me inform you that we are concluding the X Los Condore. Either of our plans in September, we will have the important milestone. We will start filling the tunnel with water to execute what we call the wet test. Following it, coordinated with the system operator, we will start the testing process of Los Comba. Our goal is to have the connection and testing concluding during 2024.

Speaker 2

The deployment of our renewable plants aim to increase the flexibility of our portfolio, which is today 77% renewable base. It should be noted that with everything mentioned above, we have completed the 1st wave of growth projects that were part of our plan. Now on the next slide, we will review the performance of our generation KPIs. Net electricity generation totaled 12.1 terawatt hour as of June 2024, exceeding by 15% the production during the first half of twenty twenty three, mainly due to higher hydro and renewable generation, resulting from the improved hydrology and the operation of the new project, respectively. During the Q2 of 2024, net generation grew by 11% to 6.1 terawatt hour, mainly due to higher hydro and wind generation.

Speaker 2

Our energy sales totaled 17 terawatt hour in June 2024, 10% higher than the level recorded in the 1st semester last year, resulting from higher sales to both regulated customer and fixed clients. It was mentioning that our commitment in our client were fulfilled with a higher portion of our renewable generation, which also led us to lower energy purchases in the spot market, mainly in our solar hour. During the Q2 of 2024, physical energy sales grew by 11% to 8.5 terawatt hours, mainly due to higher sales to regulating customers. In terms of our balance, during the 1st semester, we increased our purchases from 3rd parties by 1.5 terawatt hour as part of our continued effort to diversify our sourcing. Now on the next slide, we will review the performance of our main KPIs.

Speaker 2

In the Generation business, during this semester, we have seen relevant improvement in our KPI. In terms of renewable and best increased capacity reaching 6.8 gigawatts of net capacity, representing a 77% stake in our generation portfolio. This enabled us to reach 74% CO2 free production, which is 13 basis points higher than in the first half twenty twenty three. Additionally, the energy sold in the generation segment reached 17 terawatt hour, representing an improvement of 10% compared to the last year. I would like to highlight now the great contribution that Enel X is making in terms of our integrated offering that allow us to continue driving the electrification process.

Speaker 2

We improved our figures in this semester compared to the last year period. We have increased the number of public and private charging points for electric vehicles by 25%, reaching almost 3,000 charging points. Regarding eHOME services and the electrification indicator, we also improved our number by 40% 60%, respectively, compared to the last year. And regarding the public lightning, we reached 372,000 lightning points, 1% higher than last year, mainly due to the maintenance contract with La Porida, Castro and Wechuraba Municipal. Regarding the distribution segment, the number of clients and distributed energy in our concession area continue to grow by 2% 3%, respectively, compared to last year.

Speaker 2

It is relevant to mention that this quarter we had some critical weather events with heavy rains and snow that affected the stability of the electricity supply impacting our quality indicator such as SAIDI, SAIFI and losses. Regarding SAIDI and SAIFI, as a matter of comparison, the number presented on this slide do not include the impact of the maintenance event. Now on the next slide, let's look at some of the issues related to the regulatory content. As you may recall, last call, we indicated that in January this year, the Minister of Energy presented a bill related to the stabilization energy mechanism with the purpose of continuing the fact mechanism and mitigating the project's tariff increase to final customer. At the same time, they also aim to improve the client protection mechanism known as MPC mechanism to allow gradual repayment of accumulated debt with the generators and establish a transitory subsidy for their most vulnerable clients.

Speaker 2

This new law was discussed and approved by the Chilean Congress in April, published and came into force last Tuesday, April 30. In June, the P and P decree was published and with this publication, the tariff of the regulated clients started to be updated, indicating their location and monthly consumption. Clients with consumption below 350 kilowatt hours had their generation components of the tariffs updated by inflation and clients with consumption above 350 terawatt hours, 12 per feet and higher amount increase of around 35% related to the starting to pay the real price of electricity plus a new charge NIM MPC. We are now waiting for the issuance and publication of the sovereign guarantee decree as well as a complementary set of rules and regulations to the new law needed to start the factoring process. This guarantee will be presented to investors as part of the issuance coordinated by the IDB expected in the next few months.

Speaker 2

As of June 2024, we had an account receivable related to the fact already net of factoring of $904,000,000 considering the readjustment in the interest of around $115,000,000 we reached an accrual of $1,000,000,000 approximately. With the issuance and publication of the pending regulation, we expect to execute the factoring of the current accounts receivable during the second half of this year, ranging from $550,000,000 to $650,000,000 We expect that by the end of 2024, the accounts receivable net of should range between $350,000,000 to $450,000,000 Now all the discussions are centered on the subsidy in place, which could increase the number of family that will receive subsidies and avoid further tariff increase. According to the law approved today, dollars 100,000,000 are coming from consumer, particularly the free customer and $20,000,000 are coming from the treasury of Chira. This $120,000,000 would support around 1,200,000 families. The family that will be beneficiated shall be known during September and the distribution company shall apply retroactively since July this benefit during October this year.

Speaker 2

Now Congress is discussing with the executive authorities a potential increase of this benefit to increase the number of families supported by this subsidy to around 4,700,000 families, increasing the total annual subsidy to around $300,000,000 per year versus the current 120,000,000 dollars in place. The potential changes to increase the subsidy are still under discussion by the government and the Congress. We expect final proposal to be submitted by the middle of August. On the distribution side review, the regulatory final decree for 2020 2024 cycle was published in early June, and therefore, the new distribution tariff represents an increase in the tariff for the finance customer in our concessionaire of around 5%. Regarding the 2024, 2028 cycle, in July, the consultant taking the reportable review that was received and is currently being reviewed by a committee.

Speaker 2

The final record is foreseen to be published early in the Q4, 2024. We expect that by the end of this year, the regulator shall publish the preliminary statement or report on this new site. We are more confident regarding this process, considering that the consultant who is working is the same one who worked in the previous cycle period. Therefore, we understand that some topics already discussed before the previous cycle shall be automatically applied to this process. Now let's review on the next slide our earnings indicator platform.

Speaker 2

Our economic and financial performance was very solid in the first half and second quarter of twenty twenty four. As you can see on the slide, in the first half and second quarter of twenty twenty four, we had an important improvement in EBITDA and net income versus last year figures. This is mainly explained by the outstanding hydrological situation and a more efficient generation mix. In the 1st semester of 2024, the FFO also showed an improvement compared to last year, reaching $52,000,000 This is mainly explained by the improvement in EBITDA, offset by negative impact due to higher tax payments related to Arcadia operation and a more significant Pekka cumulation. Regarding the Q2, FFO improved by $27,000,000 in 20.24 versus 20.23 due to the same impact already mentioned in the segment.

Speaker 2

We will review more detail on the following slides. Now on the next slide, let's review the progress on CapEx. Our total CapEx reached $290,000,000 this first half, 9% lower than last year considering the conclusion of several renewable and storage projects since the Q2 of 2023. 66 percent of our total CapEx equivalent to $190,000,000 was related to renewable and storage and 22% equivalent to 60 $3,000,000 was related to Greece, mainly due to new customer connection associated with the growth of our customer base and corrective maintenance of the network. Asset Management CapEx reached $87,000,000 which represents 30% of our total CapEx.

Speaker 2

It decreased by around 22% compared to the last year figures, mainly explained by increased CapEx in the distribution business, mostly related to activities in the low and middle voltage and maintenance activity in our generation fleet, particularly in our hydro and gas facility. Finally, development CapEx reached $167,000,000 representing 58% of our total CapEx, a decrease of 21% compared to last year figures. Considering that we are finalizing our renewable and best portfolio under construction. Let's now move to the next slide where we have a summary of the Q2 EBITDA breakdown. In the Q2 of 2024, our EBITDA reached $301,000,000 6.4 times higher than the Q2 of 2023.

Speaker 2

Let me explain the main effects on this quarter. I will start with the positive effect. First, I would like to highlight relevant contribution from PPA sales equivalent to $150,000,000 primarily related to higher volume, mainly in regulated market as we have viewed in the preliminary slide and indexation in the free market. Another relevant effect this quarter is related to industrial sourcing for $70,000,000 mainly explained by lower variable costs coming from lower commodity prices in thermal generation, considering this quarter's hydrological situation and more efficient generation mix. 3rd, there is a positive contribution of $60,000,000 related to commercial sourcing, primarily due to lower purchasing in the spot market, mainly explained by lower prices as a result of more significant higher penetration in the period.

Speaker 2

In addition, we had a positive effect of $12,000,000 related to the grid margin, mainly explained by the grid remuneration associated with the VAD 202024 regulatory report publication. Finally, we had a positive effect of $13,000,000 from OpEx and other. This is mainly explained by higher capacity payments coming from new projects, which more than offset higher OpEx related to these new renewable projects. The above mentioned effect was partially offset by negative effect of $7,000,000 related to the largest gas activity carryout during the Q2 of 2023. And finally, we had a negative effect of $10,000,000 related to the Mexica PPA agreement, which was signed in 2023.

Speaker 2

Let's move on to the next slide to review the main impact on the EBITDA during the first half. In the first half, our EBITDA was 74% higher than last year, reaching $597,000,000 Let's start by explaining the positive effect. First, we had a positive contribution from BPH sales equivalent to $168,000,000 mainly related to higher volume in the regulated market and indexation in the pre market in line with the effect explained previously in the quarter. 2nd, there is a relevant effect of $160,000,000 related to industrial sourcing, primarily explained by lower variable cost due to lower thermal generation as a consequence of the remarkable hydrology of the period and a more efficient generation mix and by a positive effect of the AG instrument versus 2023. 3rd, there is a positive contribution of $108,000,000 related to the commercial sourcing, primarily explained by lower prices and volume associated with the purchases in the spot market.

Speaker 2

This effect is partially offset by higher purchases from third parties. In addition, we had a positive effect of $16,000,000 related to the grid margin, primarily explained as in the quarter by the recognition of the past 20 twenty-twenty 24 in the period. Now on OpEx and other, we had a positive effect of $16,000,000 from OpEx and other, which is mainly explained by the same effect as I already mentioned in the quarter linked to the higher capacity payment coming from the new projects, which offset higher OpEx related to them and higher costs for contingency plan after the climate events during the Q2 of 2024. The above mentioned effects were partially offset by: 1st, a negative effect of $124,000,000 related to the remarkable gas trading activity carried out during the first half of twenty twenty three for around 20 perabitu. Finally, there was a negative effect of $35,000,000 related to the Mexico PPA agreement signed in 2020.

Speaker 2

Let's move on to the next slide, where we will review the net income evolution accounting for $267,000,000 Our net income increased by 2.2 times versus last year's figures, mainly explained by the EBITDA results. Let me drive you through the additional effect for the first half. Higher depreciation, amortization and bad debt of $3,000,000 $4,000,000 mainly resulting from higher depreciation in Energy Power due to the new renewable capacity coming into operation. However, higher bad debt occurring rate due to a higher credit losses expected associated with the residential customer. Regarding financial results and equity investments, we recorded a $6,000,000 reduction versus last year, mainly explained by higher interest related to the tax receivable offset by higher financial expenses and lower financial income linked to the lower average interest rate.

Speaker 2

Income tax increased by $57,000,000 mainly due to better results in the period. This was partially offset by lower costs related to the reclassification of assets held for sale in 2023, specifically those related to Ascadia. Focusing on the quarter, our net income increased by $137,000,000 This increase is mainly explained by the rise in EBITDA contribution, which was partially offset by an increase in D and A and the debt of $21,000,000 primarily due to a $15,000,000 linked to the operation of new renewable capacity, net debt increased by $6,000,000 primarily due to higher credit losses among the residential capital in the distribution business. These dynamics closely mirror but observed in the first half. Higher financial expenses and lower financial income linked to the lower average interest rate an increase in tax of $58,000,000 in the period, mainly due to the earnings before tax losses recorded in the Q2 of 2023 and positive EBITDA in 2024.

Speaker 2

Moving to SFO analysis on the next slide. Regarding SFO, the figures for 2023 have been adjusted by $310,000,000 paid in taxes on capital gains obtained from the sale of Enel Transmission in 2022. The first half of twenty twenty four, our FFO reached $52,000,000 representing an improvement of $56,000,000 compared to the same period in 2023. Let's see the comparison of our first half 2024 FFO and the balances versus 2023, starting with EBITDA. Dollars 597,000,000 coming from EBITDA in 2024 and a variation of $254,000,000 versus last year's figures, primarily due to higher PPA sales and positive performance of the industrial and commercial sourcing as already explained.

Speaker 2

$260,000,000 negative impact coming from the cumulative stabilization mechanism effect in our receivables. This negative effect is partially offset by the execution of IDB factoring related to the fact, which amounted to $70,000,000 this first half. Once compared with the last year figures, the net impact of the effect adjusted by factoring in the figures, totalized $147,000,000 an amount of $13,000,000 higher than last year figures. Working capital reached a negative balance of $142,000,000 mainly due to the payment from 2023. Once compared last year figures, the working capital was $19,000,000 lower, mainly explained by the sales of our export in Santa Rosa Basin in 2023, partially offset by higher correlation of VAT tax credits and payments associated with Santa Rosa Ibasis Lane.

Speaker 2

Income tax also negatively impacted our FFO result by $137,000,000 mainly explained by higher tax payment in generation business in 2024 and taxes paid on the sales of Arcadia assets. Once comparing the income tax paid in the first half of 2024 versus first half twenty twenty three, we see a negative balance of $135,000,000 The main differences come from the tax payments of our SCAD operations, the recovery from various periods obtained during 2023 and lower tax payment in Generation B. To conclude, regarding financial explain, expenses, this first half of $120,000,000 has a negative effect, primarily explained by the payment of debt related expenses. Once we compare this first half financial expenses with the last year figures, we see a variances of $32,000,000 mainly explained by lower financial income linked to both reduced cash level and lower average interest rate. Now let's take a look at our liquidity and leverage position.

Speaker 2

Our gross debt increased by 8% to BRL 4,800,000,000 by the end of June 2024 compared to December 2023. This higher debt was mainly due to higher working capital and CapEx needs for 2024. This increase in gross debt should reverse during the second half of twenty twenty four, considering the seasonality of our generation business and the upcoming factoring under the fixed fee mechanism, which we expect to be carry out soon. The average term of our debt maturity slightly decreased to 5.9 years by the end of the first half 2024 versus the 6.1% year ending December 2023. And the portion of the fixed rate was 76% of the total debt.

Speaker 2

The average cost of our debt reached 5% as of June 2024 and slightly above the 4.9% recorded in December 2023, primarily due to the Enercare Non Yinki bond maturity in April 2024 for $400,000,000 at 4.25%. Regarding liquidity, we are in a comfortable position to support our capital needs for the upcoming months and cope with the next year maturity. As of June 2024, we have available committed credit line for $750,000,000 and cash and cash equivalents for $305,000,000 Now, I will conclude this presentation with some closing remarks. The first half of this year was very important regarding update in the regulatory framework. The VAS 202024 decrease in the approval of the Phase 3 were followed by the publication of the PNP decree, which was a significant milestone for the generator starting to execute factory in the Q3 of 2024.

Speaker 2

Today, the regulatory agenda is centered on the potential increase of subsidies for vulnerable families. We understand the importance of this moment, and we are constantly monitoring the situation. We will provide any necessary feedback to the authority association according to formal processes. However, we hope that the state of Chile will make the best decision for all, maintaining the security of the regulatory and market environment. An important message that I would like to leave here concern the increase of flexible technology in our generation market.

Speaker 2

As you can see, all the committed megawatts of renewable generation and BEST were successfully delivered. As I mentioned before, we are also concluding the Los Condo hydropower plant by the end of this year. To conclude, in this quarter, you can also see that we have been able to deliver a more than solid operating and financial performance in the 1st semester. These are the results of our action to unlock value and give us enough support to be confident about our 2024 guidance. Let me now hand over to Isabela.

Speaker 1

Thank you, Giuseppe. Let's now begin with the Q and A session. We will receive questions via phone and chat in the webcast. The Q and A session is open. Operator, please you may start.

Operator

Thank you so much. And it's from Alessandro de Vito with Mediobanca. Please proceed.

Speaker 3

Hi, thanks for taking my question. I have 3. The first one is on the back mechanism. So I wanted to understand, you said that you have more or less EUR 1,000,000,000 to recover. I wanted to understand if this amount can move or is it still because I saw that on your cash flow, you booked 200 additional €200,000,000 in the first half.

Speaker 3

So I wanted to understand if you could either move upwards or downwards. And then you said that you expect that you expect to recover, let's say, EUR 600,000,000 of receivables by the end of the year, but the whole amount is going to be fully recovered by 2,035. So I wanted to understand the trajectory of the remaining EUR 400,000,000. This was the first question. The second question is on the update of distribution tariffs.

Speaker 3

I wanted to understand if the conclusion of the review for 2020 for tariffs had some impacts on your numbers. And you also said that you expect a 5% increase in tariffs for the next update for 2024, 2018. So I wanted to understand which impact this may have on your numbers. And the last question is on guidance. So you confirmed the guidance for 2024.

Speaker 3

If I remember correctly, the guidance was based on an assumption of 10 terawatt hour hydro output. But now we see that the projection are pointing more towards 12 terawatt hours. So I wanted to understand whether this guidance is conservative. Because looking at the numbers, they're more or less we're more or less halfway through to the year and they're half the number of the guidance. So I just wanted to square the circle on this matter.

Speaker 3

Thank you.

Speaker 2

Okay. Starting from the first one. As I said, we have at the end of June, we have EUR 1,000,000,000 that includes also around EUR 150,000,000 in terms of interest. Now the evolution of the PEC is based on the exchange rate U. S.

Speaker 2

Dollar pesos because I remind you that we have the PPA in dollar even if the payment of the private payment. So we have a certain trend at the end of the year. But again, this trend is strictly linked to the exchange rate effect. The recovery that we expect in 2024, of course, are split within this factoring process. The remaining part is going to be to recover between 2025 2020.

Speaker 2

I would like to remind you that the PEC-one foreseen to have a mechanism of recovery that is going to finish in 2027. So approximately, we are but again, this is just an estimation so far, we are going to recover another $200,000,000 in 2025 and the remaining part between 2026 2027. These are basically the current estimation that we have today. For what's concerned, 5 update on 2020, 2024. As I said, we have an increase in our number of around $16,000,000 in June versus last year.

Speaker 2

You have to consider that this amount is the include also around $7,000,000 that are the part of recognition that is referring to the previous year. You have to consider that this tariff decree is basically adjusting a situation that was absolutely extraordinary because we are at the end of the process and only now we got the final tariff. So part of these increases related to the adjustments for from 2020, 2023. And for what concerned the next regulatory cycle on the 2024, 2028, Let me say that the technical report that we have received so far it's in line with our strategic plan. So basically, we don't see any kind of situation that could so far could affect the strategic plan.

Speaker 2

Clearly, we are going to give us our feedback and we are going to try to understand which is the best type for covering the several aspects of the distribution company. But as of today, we don't have any kind of issue for the fact that I'm taking to report. In terms of guidance, well, what I can tell you is that as of today, we confirm our guidance. Of course, what we declared the last Capital Market Day was the range. And as of today, I can confirm that we are in a range in this range.

Speaker 2

Clearly, we are still trying understand which are which is the result of the Ruta de Nueva and that will give us further information to understand how the mending season will be in the following month. But as of today, I can tell you that we are in the range of the guidance.

Speaker 1

Okay. Thank you, Giuseppe. Operator, do we have more questions coming from

Operator

the line? Yes, thank you. One moment for our next question. That is from Maria Florencia Mayorka Torres with MetLife. Please proceed.

Speaker 1

Thanks, Jose Lopez, Adela. Thanks for taking my question. Just a follow-up regarding the receivables. So for this year, how much are you expecting to be able to monetize? Thank you, Florenta.

Speaker 2

Yes. Well, from what concerned, the receivable that is currently affecting our generation companies, as I said, in June in the June closing, we have approximately $1,000,000,000 And if everything is going as expected in the second half between, I would say, September October, we're able to make the to proceed with the factoring process. So we should have around $550,000,000 6 $100,000,000 of capital. This is the EBITDA.

Speaker 1

Okay, perfect. Thank you. Thank you, Florenta. Operator, more questions coming from the line.

Operator

Yes, I have one more question from the line of Martin Aranzet with balance. Please proceed.

Speaker 4

Hi. Thank you, Giuseppe for the presentation and for taking my questions. I have 3 questions. I would like to run them 1 by 1, if that's okay. First, we learned that Super Ignacio de la Presidade Compostible expressed a desire to see the Santiago electrical grid strengthened in order to address potential issues with quality of service.

Speaker 4

I was wondering if this could affect the energy solution to OpEx and CapEx plan and if so by how much?

Speaker 1

Thank you. Giuseppe?

Speaker 2

Yes. I mean, really on the extreme weather events that we had in May affected our supply of energy to our workers. It was very, very complicated because of rain and also temperate. And we had some cost associated approximately $3,000,000 And clearly, we are in discussion with tech to understand how to manage this situation. We don't have so far any other information about that.

Speaker 4

Okay, okay. Well, following up then on Energy Solution, and I'm sorry because I think that you already mentioned this, so I may be asking you to repeat yourself. But I want to understand the situation around current household power bills. So if you could please tell us which hikes have already been implemented by July. I guess that the ones related to Valoradigado or the institution are already implemented.

Speaker 4

I was wondering which hikes have been implemented in the energy component? And also specifically about the surcharge for large customers related to the tech credits repayment, if that has been already included in the power bills also.

Speaker 1

Okay. Thank you.

Speaker 2

For what concerned the tariff adjustment in the distribution of segment, we have 2 kinds of adjustment depending on the cluster. So we have the clients that consume lower than 3 50 kilowatt hours, which the increase is going to be around 16%, 16%. And this increase is basically the results of 3 components. The first one is the update of VAD 2020, 2024 that represents 5%. So basically, the increased tariff associated to the bad 2020, 2024, the distribution company is around 5%.

Speaker 2

The remaining part is split between an increase in the type coming from the updating transmission regulatory framework that is around 4%. And finally, we have 8% that is associated to the generation segment. This is for what's concerned that the cluster of clients lower than 3.50 kilowatt hour. From the other one, more than 350, the increase of tariff is higher because we have an increase in distribution segment 5%, transmission 4% and an increase in the segment for the generation company that is going to be around 33%. And this is because basically for this customer, we are going to apply basically the cost of PPA that the tenders in the past year has been resulting.

Speaker 2

For what concerns the PEC, the PEC that we are going to factorize by the end of the year includes also the interest.

Speaker 4

There is a date for these increases, sorry?

Speaker 1

The date of this increase, is

Speaker 2

it It's already in place.

Speaker 4

Okay. Thanks. Well, my last question then regarding the El Manzano and Lan Cabana batteries, I think that they were collected, if I'm not mistaken, before they are co located generation plants started operations. So I was wondering what is the remuneration mix that you expect to receive from these for the moment, salon batteries. It's just spot trading or also capacity payments and perhaps some ancillary services as well?

Speaker 4

And also who will be in charge of deciding the charging and discharging times of these batteries, if it's going to be an LTV or the corneal?

Speaker 2

Okay. Look, for what's concerned, these 2 battery, basically the composition of the revenues are basically coming from the capacity payment and the energy shift. These are the main components of the remuneration of this plant. In the ancillary services, we are waiting for an update of the regulation by the end of this year and Extonate is going to be in force. We are going to have also an additional effect coming from this stream of revenue.

Speaker 2

And these two projects are projects retrofitting, so basically are jointly to another renewable project. In this case, the Lumberto, Montana, in this case, we are talking about solar power plants. So basically, they are charging from the solar power plants, but the regulation allow us to charge the battery also by the grid. So depending on the situation, we are going to use 1 of the 2.

Speaker 1

Thank you, Giuseppe. Operator, do you have more questions coming from the line?

Operator

Yes, I do. One moment for a follow-up from Alessandro DiVito with Mediobanca. Please proceed.

Speaker 5

Hi, hi, again. Thanks for taking my questions. I have a follow-up a couple of follow ups actually. Well, the first one is on PEG. So you said that the general framework to

Speaker 2

recover the PEG III receivables goes up to 2,035,

Speaker 5

but you want to recover receivables goes up to 2,035, but you want to recover all the €1,000,000,000 before 2027. Is this correct? And you said that you have this €1,000,000,000 less than €224,000,000,000 of which €150,000,000 is related to interest and EUR 850,000,000 is related to tax receivables. Is this correct? Because in this sense, the EUR 850,000,000,000 is what I mean still and the EUR 150,000,000 related, let's say, related to interest is the amount that is going to change that may change in the coming months?

Speaker 5

So this is the first follow-up. The one follow-up is just a clarification on the update of tariffs. So you said that you expect a 5% tariff increase on the next regulatory period, so EUR 24, EUR 28,000,000, but the EUR 16,000,000 that you, let's say, that you are counting in your numbers, it's related to the update, so the one that have been concluded, the EUR 20 20, EUR 2024. I just wanted to have a confirmation on this. Thanks.

Speaker 1

Thank you, Alejandro. Giuseppe?

Speaker 2

Yes. I mean, we'll try to be more clear. So as I said, as of today, we have EUR 1,000,000,000 that includes EUR 1,000,000,000 credit coming from the PAC-three that includes EUR 115,000,000 in terms of interest. And by the end of the year, we are going to factorize around $550,000,000 $650,000,000 The remaining part is going to be recovered, not necessarily through the factoring, but according to the regular mechanism, by the end of 2027, okay? This is for what concern the outstanding credit that we have today.

Speaker 2

Really, from now onwards, we are going to accumulate depending on the market conditions. We're going to accumulate another remaining part that is going is not going to be a huge part of our credit, but we are going to recover it in the next year. And The second question on tariffs. The second question on tariffs. The update type in the distribution, as I said, the impact for the distribution, so the remuneration that is going to impact the distribution company is only related to the 5% increase that the company is going to receive because, of course, the remaining components transmission and generation is going to be pass through to the generation company and serviceional company.

Speaker 2

So the amount that you see there in terms of margin, of course, is linked exclusively to the 5%. And as I said, we are sorry?

Speaker 5

For the next regulatory period, 2024, 2018, right?

Speaker 2

No. For the 2024, 2018, we are still understanding how it's going to be Okay. Okay. I just want to understand

Speaker 5

the water regulatory period was related to EUR EUR16 1,000,000, which relates to the 5% increase. So it's EUR25 1,000,000.

Speaker 2

That's the last one. Okay. No, as I said, this one as of today, at least the information that we got are in line with our expectations. So we don't see as of today, we don't see any kind of worries, but it's too early to understand how it's going to be the tariff.

Speaker 5

Okay. Thank you so much.

Operator

And I'm not showing any further questions in the queue. I will pass it back to Isabella for any additional questions on your side.

Speaker 1

Okay. Thanks.

Operator

Sabella, your line is muted if you're reading the questions.

Speaker 1

Thank you, operator. I was in mute, sorry. So the first question is coming from Felipe Torres from ISP EBITDA. So the question is, could you explain the better results in the distribution segment? Is it related to the tariff decree of June?

Speaker 2

Yes. As I said, basically the tariff decree allows Energy Solutions to adjust the provision made in the past regarding the VAD 2024. So basically, up to June, we used to make an estimation on the provision point of view, an estimation of the time. Right now, we have the final type. So we started applying the final type that we received and we are recovering part of the adjustment that we made in the previous year.

Speaker 2

So this is basically the main reason of increase in the distribution company. Clearly, we have all several other assets on the demand, the inflation. But basically, in terms of the decrease, this amount is clearly significant for a company because it's recovering the gap that we had in the last year.

Speaker 1

Okay. Thank you, Giuseppe. Also now on distribution, we have received some also questions coming from our e mail, okay? So some retail investors are asking us regarding the impact of the current tariff discussions on El Chile. The question is whether the published tariff decree explain the results of Enel Chile as indicated by the press?

Speaker 2

Well, let me clarify a point. For what's concerned the generation company, the tariff decree doesn't have any kind of impact in terms of EDA because since the first pact law has been issued, we started to register to make a provision according to the PPA in place. So basically, we don't have any kind of increase in terms of EBITDA because of these tariff effects. Rate. And this is the reason because we have the back refillable.

Speaker 2

So we continue since the beginning to reduce the current PPA price, but we receive in terms of payment only a part of this EBITDA price. This is the reason because we have the best receivable. For what concern the tariff decree, the only impact that we can that is related to the increase of our performance is on the distribution company. So basically, what we have already said, distribution is after 3 years and half roughly starting to accrue accruing the current tariff and this is explained around $16,000,000 not more, not less, of which half of it approximately is coming from the adjustment of the previous year. So basically, in a very short way, I would say that the tariff decrease impacted our performance in a very, very low amount.

Speaker 1

Okay. Thank you, Giuseppe. Let's go to another question now coming from the second question is coming from Fernan Gonzalez from BTIGI. So Fernan is asking us how and when do you expect to receive in the payments from the accumulated debts in the distribution segments from the delayed 2020, 2024 decree?

Speaker 2

Okay. Well, our estimation is that we're going to receive the quality debt at the beginning of next year, in the Q1 of next year. This is the the estimation that we have as of today. I don't believe that we are going to get any kind of adjustment by the end of this year.

Speaker 1

Okay. Thank you, Giuseppe. And now I will join 2 questions here. One from Fernan Gonzalez, still from BTK. So how do you feel about your medium to longer term contracted portfolio?

Speaker 1

Are you still participating in the new unregulated option to try to wield new PPAs? Or do you believe you don't have much room left? So also there is a very similar question coming from Candy Shao from Morgan Stanley. He's also asking us about, are you still on track to hit the 33 terawatt hour sales by 2024, 2026? You have several regulated contracts ending.

Speaker 1

So how will you source additional contracts?

Speaker 2

Well, as of today, we don't see any we don't have any kind of information about new priority plan. In general, of course, as already explained several times, I mean, we don't have any kind of prejudice in our customers. So the best CPA we are going to choose. So for what concerned the 33 service tower this year, we don't see any kind of issue. We basically all the contact has been already in place.

Speaker 2

For the next year, we are in negotiation with several customers in order to fulfill the amount of service tower that is going to expire according to the PPA in the regulatory segment. So as of today, we confirm our target in terms of sales and we are confident to reach.

Speaker 1

Okay. We have other questions in terms of the guidance that you have already answered. So the other question is coming from Ignacio Lanios from Penta. He's asking, can you give us some color on the cost for a new solar and wind project per megawatt? Related to that, what about the cost of battery?

Speaker 2

Yes. I mean, in terms of wind, I would say it's around $1,600,000 per megawatt approximately. Of course, we said several times, depending on the project, how if it is an extension of an existing one, how much is close to the grid. But in general, EUR 1,600,000 is a good proxy of the cost. For what concerns the solar, I would say that we are close between $7,000,000 $800,000 per megawatt.

Speaker 2

Let me remind you that in our plan as of today, we are not expecting any other solar power plant. And for what's concerned the best, we believe that something is improving the best cost because we are we believe that we're able to reach $1,000,000 per megawatt in the best power plant for our.

Speaker 1

Perfect. Thank you, Giuseppe. We do not have any more questions. So we would like to thank you all for being connected today. And as always, if you have any other doubts, the Investor Relations team will be available.

Speaker 1

Have a great end of week. Bye bye.

Operator

And thank you all for participating in today's program. And you may now disconnect.

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Earnings Conference Call
Enel Chile Q2 2024
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