Aguas Andinas S.A. ($AGUASA)

Good morning all. Thank you for accompanying us, and this Aguas Andinas webinar in order to review the results of the company during the first 2026. The panelist, we will have Miguel Sans, CFO of the company. And also Christian Torres, who is management control and accounting manager. And in the last section, we will have Edson Landeros, who is the Plant Manager of the Planning and Engineering and Construction in the department of Aguas Andinas. Today, we will talk about the results in general of the company in 3 chapters. The first chapter will be to review the financial and economic context. And then in the second chapter, we will go into details about the results of the company during the first 3 months of the year. And in the end, we will carry out an analysis on the climate projections and also talk about climate change in the strategy of the company, and this will be given by Edson Landeros. As usual, you may ask your questions by writing them in the chart, which is for this purpose. And in the end of the event, as usual, you'll be able to replay the event through the web page of Investor Relations of Aguas Andinas. So thank you again. And I give the floor now to Miguel Sans for the first part. Thank you, Denise.

Good morning. Thank you for being with us today. in the of results for the 6 versus 3 months and go into details of the results. I would like to give some context about this. Let us talk about the conflict in Iran and the general uncertainty that this causes. And the parity that we have in the market today, we see that the stock is dropping. But we just wanted to give our point of view about the effects that we may have. On the one hand, we have the logistics part, our products come from Europe and China. And from that side, we have not seen many effects given the interrelation of the international markets, we could have some indirect impacts. Today, we're not seeing them that we are monitoring them continuously. In order to anticipate any disruption. Regarding the macroeconomic aspects, on the financing area today, we don't anticipate going into the market for the rest of the year. So we don't see any impact for us regarding the U.S., we see an increased trend more than 4% by the end of the year in the CPI. And given that our debt is indexed to the U.S., this will have an impact in our profits. And also this month, given the evolution of the indices, as you might remember, we have an index in polynomial 3 indicators CPI manufacturing and imports. With the combination of 3 factors, we index Aguas Andinas 90% regulated, and you will be able to see this in the second quarter. And regarding the dollar COP exchange rate we have an exchange rate for most of our exposure for the year. So we are not then exposed to the evolution that we're seeing in the market. On the third pillar, the OpEx, most of our contracts are long term, medium and long term. So we have pending on contracts. And some of them are indexed to the CPI to the fuel and with indexings that have different periods, yearly 6 months or quarterly. The impact should be gradual. So we are protected by the polynomial, which also gathers all the evolutions happening in the market. Now regarding the tariffs and the index in this 6 months, we indexed 1% more that was established in the 8 tariff process. And at the end of the January, we have rate associated to La Parfana, which was implemented in January, and then we could start acknowledging it in the rate. And if we talk about hydrology since Edson Landeros will talk about our vision in depth for this year. But in the end of March, and it is over 80%. Today, it is around 70%, and we have had a summer with more range than in previous numbers. And as Christian Torres will explain in the financial aspects and before going to the results, we need to remember that in the general Shareholders' Board in April we approved the distribution of 75% of the profits of 2025, and this dividend was paid on April 30. So now I give you Christian Tore, so that he can go in depth about the financial aspects of the first quarter.

Thank you, Miguel. Good morning, all. It is a pleasure to be with you once again to explain and to comment about the evolution of the first quarter of this year. As we have [indiscernible] results companies have followed the same trend as we have seen in the quarter with stable and consolidated growth, both in terms of revenues, EBITDA and the net income. First of all, when we see the evolution of revenues of where we go from CLP 197 million to CLP 210 million in the first quarter of this year. This is explained mainly by what Miguel said before. The rate impact as a result of the agreement of the eighth process both for Aguas Andinas and Aguas Cordillera [indiscernible] So this is basically incorporated in the rates that are being applied gradually. We have the results of our Aguas Andinas which is and this increase was applied gradually 1% in December of last year, and the last 1% was in March of this year. To this, we had Aguas Cordillera, was applied at the mid -- middle part of the last year, 1% in December and 1% will be applied in May. And finally, [indiscernible] 5% that is that was collected in June of last year. So here, we have the base rate already incorporated to the results of the last rate and we need to add the additional rate that is due to the water committed in this rate fixing and also, it has to do with La Carfana, and it will start -- it started in 27 January of this year. And also the alternative plans that have been enforced since June of last year. In the area of consumption, it is important to say that during the first quarter of this year, they're basically the same as volumes and that were supplied in the first quarter of last year. There is no evolution in this case, even though the conditions, the climate conditions have been a little different as we will see in detail in the next slide. So to finish with the income, at the level of non sanitation income, there is a positive evolution that is explained by 4 aspects. First, non sanitation branches. The nonregulated brand has had a dynamic activity, particularly in terms of logistics. And we have had more activities regarding the client services and also the engineering services. Finally, the agreements and works that are carried outside military and we had the results during the first quarter. So in summary, the revenues are increased stable -- in a stable a consolidated manner at a rate of 6.6%. Now to review EBITDA, we now go to the next slide, where we can see the composition of this growth of 7.5%. First, we had already anticipated the effects associated to the rates. And when we talk about consumption, this is a neutralized factor that we already mentioned. And on the other hand, we have costs associated to sanitation services. And we need to consider here that -- we have additional rates associated to this new scope of the service. For example, the alternative supply plan and the entry in operation of the authorization module of [indiscernible] We also have a positive EBITDA because of the margin of the non sanitation that I mentioned and also COP 734 million positive because of the management of bad debt. And in the first quarter, it was 1.2% over the income versus 1.4% during the same period of last year. Regarding the organics and vegetative growth of cost, we have the part that is associated to inflation as well as to the dollar exchange rate. And on the one hand, we have the effect of greater costs increases due to inflation of COP 1.5 billion associated to the inflation during the period. But on the other hand, we have the positive effect by the evolution of the exchange rate. When we compare quarter-by-quarter, there's an average of 8% less. Later, if we examine the cost or the evolution of the main costs in the company, we see the effect on the staffing, COP 2 billion that are applying basically to 4 [indiscernible] As of all, we have the regulatory effect. We have commented that a new loss are in force related to the provision of funds and also the law for 40 working hours that implied OCP 329 million. On the other hand, we have the effort of the actuarial calculation for the long-term commitments that we have engaged in with a different bargaining agreements with the different unions in the company. We also have a increase of the staffing related to ensuring the standards of the service quality in the company and also related to the health insurance and also other lines of staffing. In general terms, this is in benches on the line of staffing. Then we have $125 million in the overheads of the company, including the chemical supplies and also the optimization for the consumption as a result of the application of some initiatives that are targeted to upgrade the utilization of the chemical supplies in the biofactories. We have less water transfer on and electricity, we also have lower costs related to the effect of the price. Although we had a higher consumption of energy because there is a greater consumption of the underground sources. It was offset by the lower prices. Next, we have the IT services. And here, we have an increase of the costs related to the main licenses acquired by software used by the company. And then we have the cost of essence in the first quarter of COP 184 million that are leveraged in our programs of efficiency and also for the strategy plan, allowing to capture different initiatives to this amount. Finally, we have the cost related to the transitional effects of the paid patterns and contributions that will be normalized at the end of the financial year. It is important to highlight concerning the evolution of the cost of 4.5% increase 4.3% is accounted by the amount of revenues. And they have 2.4% is related to regulation and 0.7 is related to the real increase of the costs during the same period of time. And this is consolidating there the improving of the margin that we have observed in the last quarter, consolidated, therefore, this growth rate of the EBITDA of 7.5% at the closure of the first quarter of this fiscal year. Next, we have here Zoom concerning the correlation for the weather-related factors and the consumption rate. I was anticipating that the consumption in the first quarter is exactly the same as we saw in summer time last year. Although that in terms of the average temperatures, particularly in the month of January were lower compared to last year, and we also observed more rainfalls registered in the first quarter as we can observe in the first chart on the right-hand side. This is being monitored constantly in a way to anticipate and to analyze the evolution of the consumption rates in metropolitan area. Now in the next slide, and to conclude this presentation in the results. I was explaining before and the evolution of the EBITDA. And then we have important topics. First of all, the depreciation and amortization, which has increased as a result of the new assets that have been in our balance sheet as a result of the investments that the company is developing right now. At the level of the financial results, the sale is translated to higher revenues because of 3 reasons. First of all, the evolution of the monetary correction related to the financial debt that is nominated in U.S. And this accounts for well CLP 4.3 billion, considering that the evolution of in the first quarter of the present of this current year was 0.3% compared to 1.2% last year in the same period of time addition this will the positive evolution of the financial expenses that represent billion because of the change in the makeup of our financial debt, and we had reduce also the part related to the stock of bank loans. Then finally, $2 billion of improvement in financial results as product of what Miguel commented before and is allowed to consolidate -- these are the closure of the first quarter. Not at the level of taxes, we have more taxes because of 2 major reasons. First of all, because we have more income before taxes, and we have a lower or monetary correction of the tax-related income. And then we have these benefits of CLP 62 billion, that represents over 2% concerning the same period of the [indiscernible] the previous year. if I continue with the presentation. Here, we can observe now the evolution of the cash flow that is solid throughout the first quarter. And this is leveraged by the operational flows with an increase collection rate is 0.7% higher than last year. In the tax-related area, we are paying less taxes. And we are now recording a lower rate of provisional payments on a monthly basis out of this CLP 6 billion of tax in the first quarter. Then we have the investments mainly we have the seasonality that takes place by performing the projects of investment. And we have free flow that is that represents around CLP 12 billion compared to the same period of time last year. And to conclude this part of the explanation, we have some selling of the assets in the dividends, it is important to consider that in January last year, we paid the provisional dividend. And concerning now the retentions of the payments of dividends of foreign shareholders. And therefore, we had a disclosure of the quarter of this amount that represents CLP 49 billion additional assets compared to last year. And this is reflected in the following charts. And we see the evolution of the cash flow and our financial debt. First of all, we cannot observe the position of the cash flow that is the same one that we had at the beginning of the quarter because with this positive growth, we have amortized the debt we had with some banks, and we closed the same level of cash flow of the beginning of the -- and this is can be observed also in a positive manner as compared to debt that grows as the effect of the monetary action also have the positive effect of the generation of cash flow. The makeup of these debt observe here on the graph and were on are the main instrument of financing that we have different finance contributions and bank loans. Our debt is basically with a fixed rate within 98%. This allow us to amortize any a fluctuation in the market. And the rest is nominated in UF. And as you know, we also have international debt in Japanese yen in the Australian model and right now 1/3 of our debt is in green social that continues to be steady and positive in terms of what we have realized in the quarter, as we will see in the last slide is the evolution of the financial indexes. Next, I would like to further elaborate about the plan of investment robust investment plan. We have CLP 42 billion that have been performed in the first quarter, and we have an investment plan that is highly focused on the water security operational resilience and sustainability. Everything is well leveraging our bio city plan. Most of our investments are being developed in the renewal area for the total order and also for the wastewater. And additionally, we continue to work in the operating and the higher ability of water treatment in the localities of the country and everything related to the plan of quarter efficiency continues to be a fundamental pillar in order to improve the resilience and the efficiency of the system as well. As said, the management of assets with a long-term outlook the fixed assets of the company. As a summary, we have the investment plan that continues to be active, very highly focused on the commitments of water sustainability. And all of this honey had with our bio city agreements and respecting all the agreements that we had with the investment that will be continuously performed in the 5-year period. So we can see in these slides -- in the next slide, we can see more precisely the evolution of our main indicators -- financial indicators that still reflect our structural financials situation standing. We have the EBITDA that is 9x with the return of the employed capital that has been capped between 9.6% and we have the gains or profits over 20 per share the indicators of liquidity and leverage that are very healthy, very stable in time and over the standards of the industry. And to conclude, we have the net debt at below 3.4x. And we can say that in May, we had a pay out of the dividends that Miguel was commenting at the beginning of the presentation as summary at operational level, the company continues to consolidate the evolution and with efficient management for the operation cost and nonoperational costs of the company together with the growth of the rates, and we and if management of our cash flow and our debt, which allows to ratify again, the refinancing for our investment plan without affecting significantly our financial indicators, and we can be always at a healthy and stable standing. Next, I will give the floor to Edson Landeros, who will share with us a very important talk regarding the weather conditions.

Thank you, Christian. Good morning. I will talk about the climate context. And how we consider that climate will be for the next months of the year. First, we're going to talk about the present context. So this is what we are experiencing right now. As we all know, we are going through a climate scenario that has brought mega drought for more than 14 years between 2009 and 2023. There were many consecutive years and cost of deficit. So this was broken in '22, '23, '24, where we had relatively normal years. But last year, in 2025, 2026, we started having a dry year again. And this was characterized mainly by phase of the El Nino phenomenon, which was a neutral phase, and this caused less flows in the river and less rainfall compared to the average. Now the present scenario is El Nino that is receding. We're leaving the neutral phase -- right now, we are at the natural phase, but the trend is that we will go into a linear phase in the next few months. Well, we see for the next months, particularly for the winter, which is what we are interested in because we want to have a range in that period. the projections indicate a no condition between mid and moderate. And this will increase as the year progresses in order to have a spring and summer with a projection in men with probabilities are being moderate to strong mine phenomenon. This is same in the forecast. Here, you see how the [indiscernible] 3, 4 zone is warming up. And this is a zone that is used to define the El Nino phenomenon. And this provides more probabilities for rainbow during the end of the winter months. Now we need to be clear that El Nino has some uncertainties. To the left, we see several years -- each circle is 1 year. And what we see in this graph is that the general trend in El Nino is that although there are wet years, there are also years where their dry years, for example, 2015 and 2016. And it was forecasted that we will have [indiscernible], but in terms of rainfall, it was rather dry. A rainy year, El Nino year, what does it cost? Well, more snow accumulation, particularly if the rainfall is during the winter. And this will allow us to have flow rates in the rivers during the spring and also during the summer. It will be more sustained during this period at the end -- until the end of the summer. And also, there is an increased recharge of the aquiforce,ow which will allow us to accumulate water for the future when there are uncertainties in terms of rainfall. And also, there is a greater storage of water in the [indiscernible] reservoir, which is a strategic reserve for the city. El Nino, particularly if it brings greater strength during the summer and the spring will bring higher temperatures and maybe there will be some heat waves during the summer. Also, there is a probability of extreme precipitation events, particularly convective storms with [indiscernible] And this could lead to a greater sediment transport. And in this sense, this could affect some of our intake points for the production of drinking water. Now the company has implemented several measures. This is what we have today. We have 37 hours of autonomy in our pre-adaptation plans and mitigation measures for these turbidity events. Today, we have 37 hours where we can be disconnected from the turbidity moment of the rivers. We have a big reservoir with 1 billion cubic meters and also groundwaters that will allow us to continue the service during these periods. And also, we have a power backup that has more than 300 generators, and this will allow us to have resilience given possible blackouts. And this could be associated to intense rainfalls and also a supply plan, an alternative supply plan. If there is a greater incidence, we will have drinking water available for the city if there is a greater incidence. Now this is a tactical aspect. This is what lies behind our strategy in our adaptation strategy to climate change. This for many years, Aga Santinas has been developing a strategy in order to adopt concrete solutions. And this increases our resilience and also maintain in the long term a sustainable water supply to the city that has more than 7 million inhabitants. And this is done in a resilient manner. This is a set of projects that allows us in a concrete and innovative manner and also friendly with the environment to have solutions in order to guarantee water supplies for the population. These are 5 pillars: resilience, where we want to increase these 37 hours of autonomy, new water sources to incorporate new resources in our productive matrix. Also the optimization of groundwater sources in order to increase our ground water sources and be able to use it and also to implement solutions that are nature-based that will allow us to do a recharge of the aquifer in these years that are more abundant in terms of rainfall and also promote the use of -- the responsible use of water in both internal as well as external in order to have better measures and more efficiency in the use of our resources.

Thank you. Thank you. With this, we finished the presentation that we have prepared. And now we will begin the questions-and-answer session. The first question that we have is regulatory. In May 2026, we expected the execution of the last base rate increase in Aguas Cordillera according to what was established in the rate review. And is this effective? Or has the decree not been issued? So this is for Christian Torres.

Yes. As I was saying in Aguas Cordilleras in the last rate process approved a 12% increase in the base rate. 6% was already made effective in July, 1% in November of last year and the remaining 1% will be affected starting May of this year. And this is contained in the agreement in the rate decree that was signed with the superintendency. So we don't need an additional authorization, and we are applying this already starting in May of this year.

Thank you, Christian. We have another question regarding the results. The administration and sales expenses increased almost 12% during the quarter. We understand that the main increase comes from the indemnizations aspect. And we attribute this to a specific effect? Or do we see this greater level as something that is more structural from now on forward? This question is for Miguel.

Thank you, Denise. Regarding costs in general, Christian was saying that there have been increases associated to income. Specifically in these expenses with an increase of 12%, indemnizations or compensations have to do with the time factor. There were similar amounts compared to last year's. But what happens is that maybe there are some seasonal effects, and this will be happening for the rest of the year. And they should be normalized to levels that are similar to the previous years.

Now one question for Edson Landeros regarding the announcement of the government regarding the expansion of sanitation works. What is happening with this? Under which criteria will these expansions be done? And what is the perspective of the company regarding this context?

Thank you, Denise. Well, there are announcements about the concession areas of the sanitation companies. There is an expansion that occurred about 200 meters in the sanitation law, which is restricted to certain types of housing, social type housings. And that does not affect more than 5% of the production in each locality. Now regarding other announcements, there are conversations being held, particularly for the urban territories, and this implies investments and also we need to talk and adjust because we require new infrastructures that the company does not have in order to cover the whole urban area. So there are several things that need to be defined in an area where there are the sanitation areas, who will take charge of these expansions. There are many topics that we need to talk about. There is a housing shortage and the company is interested in helping and collaborating in order to reduce this deficit. But this needs so as to provide a proper service.

Thank you, Ed. There is a question related to results as well. The non-sanitation income increased significantly, fostered by the liquid industrial weight. And how would -- do we see this growth from now onwards? Is this due to a specific situation or just because there is a low comparison foundation? This is for Christian Torres.

Thank you. In the case of the structural profits that are in line with the projection and the internal budget that we have already managed. In logistics, it is different because of its nature, the business has to do with the renewal of networks and materials, and that is seasonal. But both branches are in line with our projections for this year. And the trend globally will remain, and we hope that it remains stable during the year.

The next question is for Miguel Sat regarding CapEx. We see that the execution pace of CapEx is in line with the guidance that is given yearly. Do we hope to maintain this trend in the following quarters or something?

Well, the CapEx in the first quarter that was anticipated. In many fiscal years, the first quarter tends to be a quarter that is a little lower than the previous one. So it is not that the trend is to multiply it by 4. We hope that it's greater than that. And we hope that it is between CPL 250 billion per year. So we have works that are about to be awarded. And maybe in the next quarters, this will increase a little bit. But as I was saying, it is within the parameters that we have anticipated the previous year.

One question, climate change. Considering that the burden of the [indiscernible] River has had many years due to the -- with the drought, how resilient is the operation of the company if this condition goes beyond 2026?

As I said, during this mega drought, we have had consecutive years with dry scenarios between 60%, 70% of deficit in the flow rate of [indiscernible] River. During that period and due to the way the company has improved its infrastructure and operations due to water scarcity, we have not had any effects during this drought, no effects in the population. Of course, with the infrastructure that we have, with the agreement with the irrigation of the Maipo River, we should maintain this resilience condition for the next few years beyond 2026 and are perceived to be drought.

Thank you, Ed. Now we have a question regarding the operations and consumption. How can we interpret the fact that the volumes of drinking water are increasing in a limited manner. Is this something that we are approaching in some way? Or do we see this as a normal phenomenon, taking into consideration the general circumstances of the climate? This question is for Christian Torres.

First of all, I would like to give you the overall context. When we see those statistics that are published by the sanitation services brings tenancy at the level of the country, we see a trend between the per capita consumption rates, which show a downward trend. And this is something that we observe everywhere in the cities of the country. And therefore, Santiago is not an exception to that. When we further analyze the consumption rates throughout time and this particular time in the summertime, there are some weather conditions that do affect, for example, the effect of the drain and a lot of important things are the initiatives that help improving the measuring as part of the quarter in order to have the right measuring to the customers. And this is something that we should consider in the longer period of time, not only seasonally, we can resonation wide trend and worldwide trend where Santiago and Aguas Andinas are not accepted, but there are also some weather-related factors and the rainfalls that affect the evolution. As a company, we continue to develop further initiatives to optimize of measuring.

And the next question goes to Edson Landeros that the basin of [indiscernible] has a long series of drought. I would like to know how reside the operation of the company speak of the resilience and the robustness of the company. And if this condition goes beyond 2026.

I think I already answered that question. But however, to strengthen or to reinforce these alerts scenarios in consecutive years already been observed in 14 years between 2010 and 2020. And we didn't have nature effects through the investments that we carried out and these trends should [indiscernible] and we also have an agreement with the irrigators of the [indiscernible] and this allows to guarantee the supply of water for the next coming years.

And now we have a question for Miguel Sans concerning the project of freeform that is being discussed by the present administration and a potential rebate for the tax rate. And what is the impact that we can foresee for the company in terms of the rates fixing and also the state income in the future.

And I would like to say that as a reminder, what we are in the scheduling is the reduction for the next 25% for next year, 24% for next 23% by reducing the tax rate, we will have an impact on the regulated rates that have a factor of correct but due to the variations of the tax rate because this is a rate applied after taxes. There is this lowering of the tax rate, there would be a reduction. And approximately, we speak that 3 percentage of tax rate represent CLP 4 billion of less income. And we have a table that is attached to each one of the rate fixing agreement and it shows the impact of the modifications or alterations in the tax rate scheme. And we will have a saving because this is a lower the amounts that we are discussing here. And finally, we will have an accounting impact of the net profit because the updating of the reversal rate as a fashion of the schedule will have an impact when we expect to recover those taxes, we calculate that it would be is CLP 8 billion or CLP 9 billion because of these taxes inferred. In the case of the schedule of the application is the one that is being discussed today.

Thank you very much, Michael. Now we have another question concerning the climate change, but focused on BioCity, and we ask this question to Edson Laderos which are the benefits of BioCitiplan related to all the impacts of the climate change that we are approaching here and developing the presentation.

That's a company considered necessary to have complementary projects additionally to what we already have in the portfolio described. Concerning the possible effects of the climate change that are projected for the future, the projects of BioCity, on one hand, more guarantee of [indiscernible] availability and water supplied by optimizing our underground water and also incorporating new sources of water, the alternative of free use that we have in the portfolio of BioCity, and then we have all the other projects related to resilience and other effects of the climate change. For example, the frequency that is increased and we can adapt ourselves and have solutions allowing to be more autonomous in terms of the expectation of the river. And we are designing our strategy of Bio city based on all these criteria. And also how we can support these solutions in the long run. Related to the exploitation of groundwater more sustaining time and also how we can work also in the demand and supply of the responsible use of water. Concerning now the project portfolio, these projects are very concrete down to earth, but are not close standard. And they are developed and they are updated from time to time. At the same time, are analyzing different options to render them more efficient and also including which is allowing to add more resilience in terms of a we observed for the climate change provisions. And this is a portfolio that is constantly under state and development, therefore, having the right planning have a constant study in order to adapt ourselves to the new phenomenon that are arising.

Thank you very much, Edson. And that was a very photons. And now to conclude this event, we have the last question. and we'll address this question to Christian Torres. This is related to the inflation rate. And concerning inflation that has been observed, how many indexations the company would expect to have for this present year.

First of all, as a remain the polynomial has 3 variables where the inflation rate is more important and the other ones are related to the prices of manufacturing and the prices of the or goods and the indexation polynomial tries to recover the first the best cost structure of the company and the indexation should reflect the increment when it is convenient and when it goes over 3%. As Miguel said beforehand, in the present year, we already activated there by the polynomial indexation with a rate weighted rate of -- and it is highly possible that the same applies to Aguas Cordillera and [indiscernible] as of June this year. As a matter of the projections of the inflation rates, are close to 4% or over 4% as analysts project to have a higher level and this will accelerate the polynomial indexation, but it will depend on the 2 other factors, including the manufacturing and the import of imported goods. So there should be a tendency to 3% for the current year. As there is no other change in the area of variables that I was describing before. But as of May, as a mine has disposed on index of 9.1% of weighted average value is. And I would like to take this opportunity to thank the speakers today and your participation today. All of the who have joined. And any -- in case that you have any further questions, do not hesitate to contact the group Investor Relations. And this presentation will be uploaded in our website so that you can review that later on. And we'll be expecting to provide you more results and have a great day and a wonderful week. Thank you.