Enel (BIT:ENEI) Chile (ENIC) has reported a solid financial and operational performance in its first half and second quarter of 2024, as detailed in a recent earnings call led by CEO Giuseppe Turchiarelli. The company highlighted significant improvements in hydro generation and the addition of 250 MW of new renewable energy capacity.
With the company's EBITDA for Q2 2024 hitting $301 million and net income for H1 2024 increasing notably compared to the previous year, Enel Chile is pushing forward with plans to diversify sales and boost its renewable capacity.
Key Takeaways
- Enel Chile reported strong hydro generation and added 250 MW of renewable energy capacity.
- The company received commercial operation dates for 410 MW of capacity in 2024 and secured a 20-year regulated power purchase agreement.
- Regulatory updates include the approval of an energy stabilization law and a decree updating regulated tariffs.
- The financial performance in H1 and Q2 2024 showed improvements, with EBITDA for Q2 2024 at $301 million.
- Net income for H1 2024 increased significantly year-over-year, and FFO for H1 2024 was $52 million.
- Gross debt stood at $4.8 billion as of June 2024, but the company anticipates a decrease in the second half of the year.
- Enel Chile reaffirmed its guidance for 2024, despite higher hydro output projections.
Company Outlook
- Enel Chile plans to diversify its sales and increase renewable capacity.
- The company aims to reach 33 terawatt hours of sales by 2024-2026, with contracts already in place and ongoing customer negotiations.
Bearish Highlights
- Gross debt increased to $4.8 billion by June 2024 due to higher working capital and CapEx needs.
- The average term of debt maturity decreased slightly to 5.9 years.
Bullish Highlights
- Enel Chile confirmed guidance for 2024, with expectations of debt reduction in H2 2024.
- Regulatory changes are expected to increase subsidies for families, potentially expanding the customer base.
Misses
- There were no specific misses mentioned in the provided context.
Q&A Highlights
- The company discussed the factoring of receivables, expecting an outlook of $450 million to $600 million in H2 2024.
- Tariff adjustments will result in a 16% increase for clients consuming less than 350 kilowatt hours.
- Clients consuming more than 350 kilowatt hours will see a larger increase, particularly in the generation segment.
- Enel Chile is not currently participating in new regulated contracts but is focused on customer negotiations.
In summary, Enel Chile is experiencing a strong financial year, with improvements in key performance indicators and a strategic focus on renewable energy and sales diversification. The company is navigating regulatory changes and market conditions to maintain its growth trajectory and meet its future sales targets.
InvestingPro Insights
Enel Chile's (ENIC) performance in the first half of 2024 underscores the company's resilience and strategic focus on expanding its renewable energy portfolio. Here are some insights based on data from InvestingPro that shed additional light on the company's financial health and market position:
- With a market capitalization of $3.95 billion and a notably low P/E ratio of 4.87, Enel Chile is trading at a valuation that suggests the market may be undervaluing its earnings potential. This is particularly interesting as the company is making significant strides in adding renewable energy capacity, which is a positive indicator for future growth.
- The company's dividend yield stands at an impressive 13.33%, indicating a substantial return to shareholders relative to the share price. This is in line with the company's history of maintaining dividend payments for nine consecutive years, demonstrating a commitment to rewarding investors.
- Despite a slight revenue decline of 1.49% over the last twelve months as of Q2 2024, Enel Chile has shown remarkable quarterly revenue growth of 38.99% in Q2 2024. This suggests that the company is capable of achieving strong revenue spikes, possibly linked to the successful commissioning of new capacity and favorable regulatory developments.
InvestingPro Tips for Enel Chile highlight the company's significant dividend payments and its status as a prominent player in the Electric Utilities industry, which may be of interest to investors looking for stable income-generating stocks within this sector. Additionally, the company's ability to maintain profitability over the last twelve months, as well as analysts' predictions of profitability for this year, could provide reassurance to potential investors about the company's financial outlook.
For those seeking a more comprehensive analysis of Enel Chile, InvestingPro offers additional tips that delve deeper into the company's financials and market performance. By using the coupon code PRONEWS24, readers can get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, unlocking access to valuable insights that can aid in making informed investment decisions. There are 6 more InvestingPro Tips available for Enel Chile at https://www.investing.com/pro/ENIC, providing a richer understanding of the company's financial nuances and investment potential.
Full transcript - Enel Chile (ENIC) Q2 2024:
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. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. [Operator Instructions] 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. 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.enel.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. I would now like to turn the presentation over to Ms. Isabela Klemes, Head of Investor Relations of Enel Chile. Please proceed.
Isabela Klemes: [Foreign Language] Good morning and welcome to Enel Chile 2024 second quarter and first half results presentation. Thank you for all joining us today. My name is Isabela Klemes and I'm the Head of Investor Relations. Joining me this morning is our CEO, Giuseppe Turchiarelli. Our presentation and related financial information are available on our website, www.enel.cl in the Investors section and also in our app Investor. 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 the question. Media participants are connected only in listening mode. In the following slide Giuseppe will open the presentation with our key highlights of the period then go through our portfolio and regulatory context update. And finally he'll give us a view of our business economic and financial performance. Thank you all for your attention, and let me now hand over to Giuseppe.
Giuseppe Turchiarelli: Thank you, Isabela. Good morning and thanks for joining us. Let's start our presentation with our main highlights of the period on slide 2. During the second quarter, our hydro portfolio performed outstandingly, repeating the good performance of the first quarter. 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. This gave us a robust and efficient generation portfolio mix for the semester. We added approximately 250 megawatts of new renewable energy capacity and BESS project. 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 1.6 gigawatts since January, 2023. Moreover during this period Enel Generación a subsidiary of Enel Chile 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 hours till 2027 and the remaining part to reach 3.6 terawatt hour in 2028. This contain Enel Generación 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 III. In July, the decree which updated the regulated tariff was published. Now, we are awaiting the sovereign guarantee decree during the third quarter to enable to start the factoring process. Second, the distribution tariff for 2024 came into effect in June of this year. The review process for the distribution tariff for 2028 has already begun and is progressing as expected. I will give you more color on this topic later on. Regarding profitability, I am pleased to announce that the first half showed solid EBITDA and net income results. This reflects our confidence in our guidance for this year. We achieved a positive FFO despite the tax receivables. 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 operation performance during this semester. And finally, we have a solid level of liquidity to be used for future cash CapEx deployments. I will provide more details on this later. Now, let's look at some updates on the hydrological situation on Slide 3. Positive hydrological conditions during 2023 allowed us to have greater water availability during the first quarter of this year. In addition, higher than expected rainfall during the second quarter of 2024 allowed us to increase our hydro production, exceeding by 72% the level recorded in the second quarter of 2023. Therefore, during the first half of 2024, we have accumulated 2.1 terrawatt hour of hydro generation compared to the last year. The hydrological situation in our reservoir is also a very positive year-to-date once compared to the last year. Especially in the south. 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 phenomenon in August and September. Based on these results, we have updated our hydro generation estimates to approximately 12 terrawatt hour for 2024. We expect to complement this information once we know the results of the Ruta de Nieve studies, which will be carried out in the coming months, so that we can better estimate the snow melt forecast for the fourth quarter. Now, let's move to the next slide to review how we continue to improve our portfolio of generation assets. We continue developing our strategies towards 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 batteries in our portfolio projects. During this first half, we reached a total netting soil capacity of 8.7 gigawatt. We connect almost 250 megawatt of additional net capacity related to our solar plant with batteries, Don Humberto, located in the metropolitan region, and two more projects with batteries. These are El Manzano BESS, which is also in the metropolitan region, and La Cabaña BESS, too, in the south part of the country. During this half, we received authorization from the National Electricity Coordinator to begin commercial operations for 410 megawatt related to the two solar plants, Las Salinas in the north zone, a hybrid project that is located in the same field as Sierra Gorda Este, a 112 megawatt wind farm, and El Manzano, a solar plant located in the metropolitan region of Santiago, very close to the consumption center, and finally, our wind farm La Cabaña, located in the south of Chile. In addition, let me inform you that we have concluding Los Condores a hydro power plant. 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 Condores. Our goal is to add the connection and testing concluding during 2024. The deployment of our renewable plants aim to increase the flexibility of our portfolio, which is today 77% renewable-based. It should be noted that with everything mentioned above we have completed the first wave of growth projects that were part of our plan. Now on slide -- on the next slide, we will review the performance of our Generation KPIs. Net electricity generation totaled 12.1 terawatt hours, as of June 2024, exceeding by 15% the production during the first half of 2023 mainly due to higher hydro and renewable generation resulting from the improved hydrology in the operation of the new projects respectively. During the second quarter of 2024, net generation grew by 11% to 6.1 terawatt hours mainly due to higher hydro and wind generation. Our energy sales totaled 17 terawatt hours in June 2024, 10% higher than the level recorded in the first semester last year resulting from higher sales to both regulated customers and frequent clients. 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 in solar hour. During the second quarter of 2024 physical energy sales grew by 11% to 8.5 terawatt hours mainly due to higher sales to regulated customers. In terms of our balance, during the first semester, we increased our purchases from third-parties by 1.5 terawatt hours as part of our continued effort to diversify our sourcing. Now on the next slide, we will review the performance of our main KPIs. In the generation business, during this semester, we have seen relevant improvement in our KPIs. In terms of renewable and BESS 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 of 2023. Additionally, the energy sold in the generation segment reached 17 terawatt hours, representing an improvement of 10% compared to the last year. I would like to highlight now the great contribution that [indiscernible] is making in terms of our energy offering that allow us to continue driving the electrification process. 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 cycles by 25% reaching almost 3,000 charging ports. Regarding e-Home services and ectrification indicator we also improved our number by 40% and 60% respectively compared to the last year. In regarding the public lighting, we reached 372,000 lighting poles 1% higher than last year mainly due to the maintenance contract with La Pincoya [ph], Castro and Huechuraba Municipality. Regarding the Distribution segment the number of clients in distributed energy in our concession area continued to grow by 2% and 3% respectively compared to last year. 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 indicators 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 updates related to the regulatory content. As you may recall last call we indicated that in January this year the Ministry of Energy presented a bill related to the stabilization of energy mechanism with the purpose of continuing the PEC mechanism and mitigating the projected increases to final customers. At the same time, we also aim to improve the client protection mechanism known as MPC mechanism to a low gradual repayment of accumulated debt with the generator and establish a transitory subsidy for the most vulnerable clients. This new law was discussed and approved by the Chilean Congress in April published and came to force last Tuesday, April, 30. In June, the P&P decree was published. And with this publication the tariff of the regulated clients started to be updated maintained their location and monthly consumption. Clients with consumption below 350 kilowatt hours had their generation component of the target updated by inflation and clients with consumption above 350 kilowatt hours shall foresee a 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 regulation to the new law needed to start the factoring process. This guarantee will be presented to investors as a part of the issuance coordinated by the IDB expected in the next few months. As of June 2024, we had an account receivable related to the PEC already net of factoring of $904 million. Considering the readjustment in the interest of around $115 million we reached an accrual of $1 billion 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 million to $650 million. We expect that by the end of 2024, the accounts receivable net of factoring should range between $350 million to $450 million. Now all the discussions are standard on the subsidy in place which could increase the number of family that will receive these subsidies and avoid further tariff increase. According to the law approved today, $100 million are coming from subsidies paid by the consumer particularly repeat customer and $20 million are coming from the treasurer of Chile. This $120 million would support around 1.2 million 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. Now Congress is discussing with executive authorities a potential increase of this benefit to increase the number of families supported by the subsidy to around 4.7 million families increasing the total around subsidy to around $300 million per year versus the current $120 million in place. The potential changes to increase the subsidies are still under discussion by the government and the Congress. We expect the final proposal to be submitted by the middle of August. On the distribution tariff review the regulatory final decree for 2020-2024 cycle was published in early June, and therefore the new distribution tariff will represent an increase in the tariff for the finance customer in our concessionaire of around 5%. Regarding the 2024-2028 cycle in July, the consultant technical reportable review was received and is currently being reviewed by the committee. 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 technical report on this new cycle. We are more confident regarding the process considering that the consultant who is working is the same one who was in that previous cycle period. Therefore, we understand that some topics already discussed for the previous cycle shall be automatically applied to this process. Now let's review on the next slide our earnings indicator. Our economic and financial performance was very solid in the first half and second quarter of 2024. As you can see on the slide, in the first half and second quarter 2024, we had an important improvement in EBITDA and net income versus last year's figures. This is mainly explained by the outstanding hydrological situation and a more efficient generation mix. In the first semester of 2024, the FFO also showed an improvement compared to last year, reaching $52 million. This is mainly explained by the improvement in EBITDA, offset by a negative impact due to higher tax payments related to Arcadia operations and a more significant PEC accumulation. Regarding the second quarter, FFO improved by $27 million in 2024 versus 2023 due to the same impact already mentioned in the slide. We will review more detail on the following slide. Now on the next slide, let's review the progress on CapEx. Our total CapEx reached $290 million this first half, 9% lower than last year considering the conclusion of several renewable and solar projects since the second quarter of 2023. 66% of our total CapEx equivalent to $190 million was related to renewable and storage, and 22% equivalent to $63 million was related to [indiscernible], mainly due to new customer connections associated to the growth of our customer base and corrective maintenance of the network. Asset management CapEx reached $87 million, which represents 30% of our total CapEx. It decreased by around 22% compared to the last year's 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 facilities. Finally, development CapEx reached $167 million, representing 58% of our total CapEx, a decrease of 21% compared to last year's figures, considering that we are finalizing our renewable and BESS portfolio under construction. Let's now move to the next slide where we have a summary of the second quarter EBITDA breakdown. In the second quarter of 2024, our EBITDA reached $301 million, 6.4 times higher than the second quarter of 2023. Let me explain the main effects on this call. I will start with the positive effects. First I would like to highlight a relevant contribution from PPA sales equivalent to $150 million, primarily related to higher volume, mainly regulated market as we have view in the preliminary slide and indexation in the free market. Another relevant aspect of these quarters is related to industrial sourcing for $70 million, mainly explained by lower variable costs coming from lower commodity prices and thermal generation, considering this quarter's hydrological situation and more efficient generation mix. Third, there is a positive contribution of $60 million related to commercial sourcing, primarily due to lower parties in the stock market, mainly explained by lower prices as a result of more significant higher generation in the period. In addition, we had a positive effect of $12 million related to the grid margin, mainly explained by the grid remuneration associated with the VAD 2024 regulatory report publication. Finally, we had a positive effect of $13 million from OpEx and others. 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 effects were partially offset by a negative effect of $7 million related to the largest gas activity carried out during the second quarter of 2023. And finally, we had a negative effect of $10 million related to the Metka PPA agreement, which was signed in 2023. Let's move on to the next slide to review the main impact on EBITDA during the first half. In the first half, our EBITDA was 74% higher than last year, reaching $597 million. Let's start by explaining the positive effect. First, we had a positive contribution from PPA sales equivalent to $168 million, mainly related to higher volume in the regulated market and indexation in the pre-market in line with the effects explained previously in the quarter. Second, there is a relevant effect of $160 million related to industrial sourcing, primarily explained by lower variable costs due to lower thermal generation as a consequence of the remarkable hydrology of the period, and a more efficient generation mixing by positive effects of the AG instrument versus 2023. Third, there is a positive contribution of $108 million related to the commercial sourcing, primarily explained by lower prices and volume associated with the purchases in the spot market. This effect is partially offset by higher purchases from third parties. In addition, we had a positive effect of $16 million related to the grid margin, primarily explained, as in the quarter, by the recognition of the VAD 2020-2024 in the period. Now, on OpEx and others. We had a positive effect of $16 million from OpEx and others, which is mainly explained by the same effect as I already mentioned in the quarter, linked to the higher capacity payments coming from the new project, which offset higher OpEx related to them and higher costs for contingency plan after the climate events during the second quarter of 2024. The above-mentioned effects were partially offset by a negative effect of $124 million related to the remarkable gas trading activity carried out during the first half of 2023 for around 2020 tera btu. Finally, there was a negative effect of $35 million related to the Metka PPA agreement signed in 2026. Let's move on to the next slide, where we will review the net income evolution accounting for $267 million. Our net income increased by 2.2x versus last year's figures, mainly explained by the EBITDA results. Let me drive you through the additional effects for the first half. Higher depreciation, amortization, a bad debt of $34 million, mainly resulting from higher depreciation in energy and power due to the new renewable capacity coming into operation, higher bad debt accrual in Green due to higher credit losses expected associated with the residential customer. Regarding financial results and equity investment, we recorded a $6 million reduction versus last year, mainly explained by higher interest related to the PEC receivables, offset by higher financial expenses and lower financial income linked to the lower average interest rate. Income tax increased by $57 million, 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 Arcadia. Focusing on the quarter, our net income increased by $137 million. This increase is mainly explained by the rise in EBITDA contribution, which was partially offset by an increase in D&A and the debt of $21 million, primarily due to a $15 million linked to the operation of new renewable capacity. Bad debt increased by $6 million primarily due to higher credit losses among the residential customer in the distribution business. These dynamics closer in euro but offset in the first half. Higher financial expenses and lower financial income linked to the lower average interest rate. An increase in tax of $58 million in the period is mainly due to the earnings before tax losses recorded in the second quarter of 2023 and positive EBITDA in 2024. Moving to FFO analysis on the next slide. Regarding FFO, the figures for 2023 have been adjusted by $310 million paid in taxes on capital gains obtained from the sale of Enel Transmission in 2022. In the first half of 2024, our FFO reached $52 million, representing an improvement of $56 million 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. $597 million coming from EBITDA in 2024 and a variation of $254 million versus last year period, primarily due to higher PPA sales and positive performance of the industrial and commercial sourcing, as already explained. $216 million 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 PEC, which amounted to $70 million this first half. Once compared with the last year figures, the net impact of the PEC adjusted by factoring in the period totaled $147 million, an amount of $15 million higher than last year figure. Working capital reached a negative balance of $142 million, mainly due to the payment from 2023. Once compared to last year's figures, the working capital was $19 million lower, mainly explained by the sales of our headquarter in Santa Rosa building in 2023, partially offset by higher accumulation of VAD tax credit and payments associated with the Santa Rosa feedback explained. Income tax also negatively impacted our FFO results by $137 million, mainly explained by higher tax payment in generation business in 2024 and taxes paid on the sale of Arcadia assets. Once comparing the income tax paid in the first half of 2024 basis, first half 2023, we see a negative balance of $135 million. The main differences come from the tax payment of Arcadia operation, the recovery from previous periods obtained during 2023 and lower tax payment in generation business. To conclude, regarding financial explain -- expenses, this first half of $120 million 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 balances of $32 million, 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. Our gross debt increased by 8% to $4.8 billion 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 2024 considering the seasonality of our generation business and then currently factor under the PEC we're making 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 of 2024 versus the 6.1 years in December 2023. And the portion of the fixed rate was 76% of the total debt. 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 Enel Generacion Yankee bond maturity in April 2024 for $100 million at 4.25%. Regarding liquidity we are in a comfortable position to support our capital needs for the coming months and cope with the next year maturity. As of June 2024, we have available committed credit line for $750 million and a cash and cash equivalent for $305 million. Now, I will conclude this presentation with some closing remark. The first half of this year was very important regarding update in the regulatory framework. The VAD 2020-2024 decree and the approval of the PEC three were followed by the publication of the PNP decree which was a significant milestone for the generator starting to execute factoring in the third quarter 2024. Today, the regulatory agenda is centered on the potential increase of subsidies for vulnerable family. We understand the importance of this moment and we are constantly monitoring the situation. We will provide any necessary feedback to the authority and association according to former 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 concerns the increase of flexible technology in our generation markets. As you can see all the committed megawatts of renewable generation and BESS were successfully delivered. As I mentioned before, we are also concluding the Los Condores 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 first semester. These are the results of our actions to unlock value and give us enough support to be confident about our 2024 guidance. Let me now hand over to Isabela.
Isabela Klemes: Thank you, Giuseppe. Let's now begin with the Q&A session. We will receive questions via phone and chat in the webcast. The Q&A session is open. Operator, please you may start.
Operator: Thank you so much. [Operator Instructions] One moment for our first question and it is from Alessandro Di Vito with Mediobanca (OTC:MDIBY). Please proceed.
Alessandro Di Vito: Hi, thanks for taking my question. I have three. The first one is on the PEC mechanism. So, I wanted to understand you said that you have more or less $1 billion 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 additional $200 million in this first half. So, I wanted to understand if you could either move upwards or downwards? And then you said that you expect to recover let's say $600 million of receivables by the end of the year but the whole amount is going to be fully recovered by 2025. So I wanted to understand the trajectory of the remaining $400 million? This was the first question. The second question is on the update of distribution tariffs. I wanted to understand if the conclusion of the review for 2020-2024 tariffs had some impact on your numbers? And you also said that you expect a 5% increase in tariffs for the next update for 2024-2028. 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. If I remember correctly the guidance was based on an assumption of a 10 terawatt hours hydro output. But now we see that the projections are pointing more towards 12 terawatt hours. So I wanted to understand whether this guidance is conservative? Because looking at the numbers they are more or less we're more or less halfway through the year and they're off the number of the guidance. So I just wanted to square the circle on this matter. Thank you.
Giuseppe Turchiarelli: Okay. Starting from the first one. As I said we have at the end of June, we had $1 billion. That includes also around $150 million in terms of income. Now, the evolution of the PEC is based on the exchange rate U.S. dollar-pesos because I remind you that we have the PPA in dollar even if the payment of the [indiscernible]. So, we have a certain trend at the end of the year but again this trend is strictly linked to the exchange rate FX. The recovery that we are -- the recovery that we expect in 2024, of course, are strictly linked to this factoring process. The remaining part is going to be recovered between 2025 and 2026 [ph]. I would like to remind you that the PEC 1 was seen to have a mechanism of recovering that is going to finish in 2027. So, approximately we have but again this is just an estimation so far. We are going to recover another $200 million in 2025 and the remaining part between 2026 and 2027. These are basically the current estimation that we have today. For what concern the tariff update 2020-2024, as I said, we have an increase in our number of around $15 million in June versus last year. You have to consider that this amount include also around $7 million that are 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 externally because we are at the end of the process and only now we got the final tariff. So, part of this increase is related to the adjustment from 2020-2023. And for what concerns the next regulatory cycle 2024-2028, let me say that the technical report that we have received supplies 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. Clearly we are going to give us our feedback and we are going to try to understand which is the, best tariff for covering the several aspects of the distribution company but as of today we don't have any kind of issue for the PEC a technical 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 on the last Capital Market Day was the range. And as of today I can confirm that we are in a range -- in this range. Clearly we are still trying to understand which are -- which is the results of the [indiscernible] and that will give us further information to understand how the amazing season will be in the following months. But as of today I can tell you that we are in the range of the guidance.
Isabela Klemes: Okay. Thank you, Giuseppe. Operator, do we have more questions coming from the line?
Operator: Yeah. Thank you. One moment for our next question and that is from Maria Florencia Mayorga Torres with MetLife (NYSE:MET). Please proceed.
Maria Florencia Mayorga Torres: Thank you. Thank you for taking my questions. Just a follow-up regarding the receivables, so for this year how much are you expecting to be able to monetize?
Isabela Klemes: Thank you, Florencia.
Giuseppe Turchiarelli: Well, for what concern the receivable that is currently affecting our generation company. As I said in the June closing we have approximately $1 billion. And if everything is going as expected in the second half between I would say, September and October we were able to make the -- to proceed with the factoring process so we should have around $450 million and $600 million of outlook.
Maria Florencia Mayorga Torres: Okay.
Giuseppe Turchiarelli: This is the EBITDA.
Maria Florencia Mayorga Torres: Okay. Perfect. Thank you.
Isabela Klemes: Thank you, Florencia. Operator, more questions coming from the line?
Operator: Yes. I have one more question from the line of Martín Arancet with Balanz. Please proceed.
Martín Arancet: Hi. Thank you for the presentation and for taking my questions. I have three questions. I would like to run them one by one, if that's okay. First we learned that Santiago electrical expressed a desire to see the Santiago electrical that was even stimulated in order to address potential issues with quality of service. I was wondering if this could affect the distribution of Chile Opex and CapEx plans and if so, about how much?
Isabela Klemes: Thank you, Giuseppe.
Giuseppe Turchiarelli: Yeah. I mean maybe the extreme weather events that we had in May, affected our supply of energy into our work. It was very, very complicated, because of rain and also temperature. And clearly we had some cost associated with it which are approximately $10 and clearly we are in discussion with BESS to understand how to manage this situation. We don't have so far any other information about that.
Martin Arancet: 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 poor 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 Valor Agregado the distribution already implemented. I was wondering which hikes have been implemented in the energy component? And also specifically about the surcharge for large customers related to the PEC grade payment if that has been already implemented in the power bills also?
Isabela Klemes: Okay. Thank you. Giuseppe?
Giuseppe Turchiarelli: For what concern the tariff adjustment in the distribution segment, we have two kind of adjustment depending on the cluster. So we have the clients that consume lower than 350 kilowatt hours, which the increase is going to be around 16%. And this increase is basically the result of three components. The first one is the update of VAD 2020-2024. That represents 5%. So basically the increased tariff associated to the VAD 2020-2024 the distribution company is around 5%. The remaining part is split between an increase in the tariff coming from the updating transmission regulatory framework so this is around 4%, and finally, we have 8%, which is associated to the generation segment. This is for what concerned the cluster of clients lower than 350 kilowatt hours. For 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. For what concern the PEC the PEC that we're going to factorize by the end of the year includes also the interest.
Martin Arancet: There is a date for these increases sorry?
Isabela Klemes: The date of this increase?
Giuseppe Turchiarelli: It's already in place.
Martin Arancet: Okay. Thanks. Well, my last question then regarding the El Manzano and La Cabaña batteries. I think that they were connected if I'm not in mistaken before. They are co-located generation plants start the operations. So I was wondering what is the remuneration mix that you expect to receive from these? For the moment sale on batteries is shut spot trading or also capacity payments and perhaps some ancillary services as well? And also who will be in charge of deciding the charging and discharging times of these batteries? Is it going to be Enel Chile or [indiscernible]?
Giuseppe Turchiarelli: Okay. Look for what concern this battery basically the composition of the revenues are basically coming from the capacity payment and the energy shift. These are the main component of the remuneration of this plant. The ancillary services we are waiting for an update of the regulation by the end of this year. And as soon as it's going to be in force, we are going to have also an additional FX coming from this stream of revenue. And these two projects are projects retrofitting. So basically are jointly to another renewable project in this case the El Manzano [ph]. And in this case, we are talking about solar power plant. 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 one of the two.
Isabela Klemes: 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 Di Vito with Mediobanca. Please proceed.
Alessandro Di Vito: Hi, again. Thanks for taking my questions. I have a follow-up -- a couple of follow-ups actually. Well, the first one is on PEC. So you said that the general framework to recover the PEC-3 receivables goes up to 2025, but you want to recover all the $1 billion before 2027. Is this correct? And you said that you have this $1 billion at June 2024, of which $150 million is related to interest and $850 million is related to tax receivables. Is this correct? Because in this sense the $850 million is what is still and the $150 million related to -- let's say, related to interest is the amount that is going to -- that may change in the coming months. So this is the first follow-up. The second 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 2024-2028 but the $16 million that -- let's say, that you are accounting in your numbers, it's related to the update so the one that's been concluded the 2020-2024. I just wanted to have a confirmation on this? Thanks.
Isabela Klemes: Thanks, Alessandro. Giuseppe?
Giuseppe Turchiarelli: Yes. I mean we'll try to be more clear. So, as I said, as of today, we have $1 billion that includes $1 billion credit coming from the PEC-3. That includes $150 million in terms of interest. And by the end of the year, we are going to factorize around $550 million $650 million. The remaining part is going to be recovered not necessarily through the factoring but according to the regular mechanism. By the end of 2027, the increase for what concern the outstanding credit that we have today. Clearly from now onwards, we are going to accumulate -- depending on the market conditions, we're going to accumulate another remaining part that is going to -- is not going to be a huge part of our credit but we are going to recover it in the next year. And...
Isabela Klemes: The second question...
Giuseppe Turchiarelli: For what concern the update tariff in the distribution, as I said, the impact for the distribution -- sorry 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 component transmission international is going to be passed through to the international company and the establishment company. 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?
Alessandro Di Vito: For the next regulatory period 2024-2028, right?
Giuseppe Turchiarelli: No. For the 2024-2028, we are still understanding how it's going to be the...
Alessandro Di Vito: Okay. I just wanted to understand the -- what regulatory period was related to $15 million which relates to the 5%. So it's -- .
Giuseppe Turchiarelli: First one.
Alessandro Di Vito: Okay.
Giuseppe Turchiarelli: As of today, at least the information that we got are in line with our expectations. So, we don't see a drop today, we don't see any kind of worry, but it's too early to understand how it's going to be, the tariff.
Alessandro Di Vito: Okay. Thank you so much.
Operator: And I'm not showing any further questions in the queue. I will pass it back to Isabela for any additional questions on your side.
Isabela Klemes: Okay. Thank you.
Operator: Isabela, your line is muted if you are reading the questions.
Isabela Klemes: Thanks, operator. So the first question is coming from Felipe Torres from ISP Abita [ph]. So the question is, could you explain the better results in the Distribution segment? Is it related to the tariff decree of June?
Giuseppe Turchiarelli: Yes. As I said, basically, the tariff decree allows energy distribution 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, estimation of the tariff. Right now, we have the funnel size. So we started applying the funnel size that we received, and we are recovering part of the adjustment that we made in the previous year. So this is basically the main reason of increase in the distribution company. Clearly, we have all -- several other effects, the demand, the inflation. But basically, in terms of the decree, this amount is clearly significant for a company because it is recovering the gap that we had in the last year.
Isabela Klemes: Okay. Also now on distribution, we have received some also questions coming from now our e-mail, okay? So some retail investors are asking us, not regarding the impact of the current tariff discussions on Enel Chile. The question is whether the published tariff decree explain the results of Enel Chile as indicated by the press?
Giuseppe Turchiarelli: Let me clarify the point. For what concern the generation company, the tariff decree doesn't have any kind of impact in terms of EDA because since the first PEC 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 PPA because of this tariff increase. And this is the reason because we have the PEC receivables. So we continued since the beginning to repeat the correct PPA price. What we received in terms of payment only a part of this PPA price. This is the reason because we have the PEC receivable. For what concern the target 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 three years roughly starting to accrue according the current tariff, and this is explained -- and this explains around $15 million, 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 current decree impacted in our performance in a very, very low amount.
Isabela Klemes: Okay. Thank you, Giuseppe. Let's go to another question now coming from -- the second question is coming from Fernan Gonzalez from BTG. So Fernan is asking us how and when do you expect to receive in the payments from the accumulated debt in the distribution segments from the delay of 2020-2024 decree?
Giuseppe Turchiarelli: Okay. Well our estimation is that we are going to receive the accumulated debt at the beginning of next year – in the first quarter of the next year. This is the estimation that we have as of today. I don't believe that we're going to get any kind of adjustment by the end of the year.
Isabela Klemes: Okay. Thank you, Giuseppe. Now we joined two questions here one from Fernan Gonzalez from BTG. So how do you feel about your medium to longer-term contracted portfolio? Are you still participating in the new unregulated option to try to win new PPAs? Or do you believe you don't have much room left? So also there is a very similar question coming from Ken Shao [ph] from Morgan Stanley (NYSE:MS). He's also asking us about are you still on track to hit the 33 terawatt hours sales by 2024-2026? You have several regulated contracts ending. So how will you source additional contracts?
Giuseppe Turchiarelli: Well as of today we don't see any -- we don't have any kind of information about new regulated trends as of today. In general of course as I already explained several times I mean we don't have any kind of prejudice in our customers. So the best PPA in we are going to choose. So for what concern the 33 terawatt hour this year we don't see any kind of issue. We basically -- all the contracts have been already in place. From the next year we are in negotiation with several customers in order to fulfill the amount of terawatt hours 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.
Isabela Klemes:
[indiscernible] [68: 26] :
Giuseppe Turchiarelli: Yes. I mean in terms of wind I would say it is around $1.6 million per megawatt approximately. We said several times it's depending of the project how it is an extension of an existing one how much it's close to the grid. But in general $1.6 million per megawatt is a good proxy of the cost. For what concern the solar I would say that we are close between $0.7 million and $0.8 million per megawatt. Let me remind you that in our plan as of today we are not expecting any other solar power plant. And for what concern the best [ph] we believe that something is improving the best cost because we are -- we believe that we're able to reach $1 million per megawatt in the best power plant per hour.
Isabela Klemes: 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 doubt the Investor Relations team will be available. 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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