Colbún S.A. (COLBUN) Q4 FY2025 Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and I'd like to welcome you to Colbún's Fourth Quarter 2025 Results Conference Call on the 30th of January 2026. [Operator Instructions] So without further ado, I would now like to pass the line to Miguel Alarcon, the CFO. Please go ahead.

Thank you for joining us once again in reviewing our quarterly results. My name is Miguel Alarcon, I'm Colbún's CFO. And joining me today are Soledad Errázuriz, Isidora Zaldívar and Carolina Plasser from our Investor Relations team. I hope you have received our earnings report and an earnings review presentation that we have prepared to complement the analysis of our figures. Otherwise, you can download them from the Investors section in our website. On this occasion, we will review the highlights of the quarter, our liquidity and debt position and to conclude the company's consolidated results for the fourth quarter of 2025. Now please go to Slide #4 to review the highlights of this year. First, regarding our commercial strategy. During 2025, power purchase agreements were signed in Chile with 92 clients for an annual volume of 846 gigawatts hour per year. In Peru, supply contracts were awarded to 26 clients for a total contracted capacity of 63 megawatts. Second, regarding the purchase of renewable energy from third parties. The company entered into a power purchase agreement with Atlas Renewable with a term of 15 years. Under this agreement, Atlas will build the battery energy storage system, while Colbún will purchase the energy supply by the project. Third, regarding dividend distribution. In May 2025, the company distributed a final dividend of $27 million, which added to the $100 million paid in December of 2024, corresponding to 50% of the distributable net income for the year 2024 in accordance with the company's dividend policy. In December 2025, the company distributed an interim dividend of $78 million charged to 2025's net income. Fourth, regarding financing activities. In September of 2025, Colbún issued its second green bond in the international market for a total amount of $500 million with a 10-year maturity and a coupon rate of 5.4%, achieving the lowest spread for Chilean corporate bond in the last 20 years. Of the proceeds obtained from the issuance, $266 million were used to partially refinance the company's outstanding $500 million bond of the same type maturing in 2027. In December 2025, Fenix Power signed a 5-year bullet bank loan with MUFG and Mizuho for an amount of $200 million. The proceeds were used to fully prepay the $186 million bond held at this affiliate company maturing also in 2027. Fifth, regarding M&A activities. In August 2025, Colbún completed the acquisition of the 41% ownership in Inversiones Las Canteras S.A, the controlling shareholder of Fenix Power Peru. As a result of this acquisition, Colbún reached 100% ownership of Fenix Power. Sixth, regarding our pipeline of projects. During 2025, the company's main advances in renewable energy and storage projects were the following: -- in Chile, Horizonte Wind Farm reached full commercial operation, achieving a total installed capacity of 816 megawatts. BESS Chaca, formerly known as Celda Solar. The project reached 70% progress. The installation of battery containers and power conversion systems was completed. Equipment interconnection works commenced and construction of the Chaca Substation and the transmission line was finalized. BESS Diego de Almagro Sur. Construction of the project is underway with overall progress reaching 14%. The installation of battery containers and power conversion systems was completed. Equipment interconnection works commenced and construction of the Chaca Substation and the transmission line was finalized. Don Eduard substation, formerly known as [ Llullaillaco ]. Construction works commenced during this quarter. And finally, [ Junquillos ] Wind Farm, the environmental impact assessment was approved on December 22, 2025. Now regarding Peru. Bayóvar Wind Farm, the environmental impact assessment was approved in the first quarter of 2025. Algarrobal Photovoltaic Plant. During the quarter, the environmental impact assessment was approved. Both projects remain under business evaluation. Seventh, regarding our power plant operations. During the fourth quarter of 2025, the company continued to focus on ensuring the reliable operation of its generation fleet while progressing with scheduled maintenance activities and the resolution of previously reported inc. In March, the Santa María Thermal Power Plant became unavailable due to a loss of lubrication in the steam turbine. Repair works were completed as planned and the unit resumed operations on October 23, 2025. In July, an incident occurred at Unit #1 of the Ucúe Hydroelectric Power Plant for 90 megawatts of installed capacity during major maintenance activities caused by an ignition following a gas leak during metallization works. As of the fourth quarter of 2025, repair works showed 87% overall progress. The unit is expected to return into service by mid-February of 2026. It is worth noting that the company has insurance coverage for this type of events. Now continuing with the conference call, please go to Slide #8 to analyze the liquidity position and consolidated financial debt held by the company. Total financial debt on a consolidated basis this quarter reached $2.6 billion with an average life of 5.6 years and an average interest rate of 4.3% in consolidated terms. Net debt-to-EBITDA as of December '25 reached 2.7x. Now I will turn to Isidora, who will speak about the main drivers of the results for the fourth quarter of 2025.

Thank you, Miguel, and hello to everyone. Before starting with our quarterly results review, I would like to highlight some relevant data about the system operation on Slide #10. In Chile, the average marginal cost measured at Alto Jahuel increased compared to last year, averaged $39 per megawatt hour. Electricity demand grew by 1% during this quarter compared to the same quarter of last year. As of December 2025, the current hydrological year, which began in April, has presented a probability of exceedence of 94%. In Peru, Santa Rosa's average marginal cost increased 1% compared to the fourth quarter of 2024, averaging $28 per megawatt hour. Electricity demand also continued to expand, growing 2% compared to the same quarter of last year. Additionally, as of December 2025, corresponding to the first 3 months of the hydrological year, the same has experienced favorable hydrological conditions reflected in an exceed probability of 7%. Now please go to Slide #11 to review the quarter's physical sales and operating income figures. In Chile, physical sales during the quarter reached 2.6 terawatt hour, decreasing 10% compared to the same quarter of last year. This decline was mainly explained by, one, lower consumption from unregulated clients largely associated with the mining industry; and two, lower physical sales to the spot market due to lower generation recorded during the period. The effects were partially offset by higher sales to regulated clients driven by increased consumption during the quarter. In Peru, physical sales during this quarter reached 0.9 terawatt hour, decreasing 3% compared to the same quarter of last year, mainly due to lower sales in spot market. This effect was partially offset by: one, higher sales to regulated clients driven by the entry into force of a supply contract with Electro Oriente; and two, higher sales to unregulated clients, mainly due to the entry into force of a contract with Distriluz and increased consumptions by Minera Volcan. For the fourth quarter of the year, consolidated operating income amounted to $393 million, increasing 2% compared to the operating income recorded in the fourth quarter of 2024, mainly driven by higher physical sales to regulated clients in both Chile and Peru and by higher income from unregulated clients associated with higher average sales price in Chile and higher volumes from this segment in Peru. These effects were partially offset by lower physical sales in the spot market in both countries, mainly due to the lower generation levels recorded during the period. Now please go to Slide #12 to review the generation on the raw materials and consumable used cost figures. In Chile, total generation of the quarter reached 2.5 terawatt hour, decreasing 12% compared to the fourth quarter of last year. This was mainly explained by lower hydroelectric generation associated with significantly less favorable hydrological conditions. This effect was partially offset by: one, higher wind generation, mainly driven by the entry into commercial operation of Horizonte Wind Farm; and two, higher gas-based thermal generation, explained by increased economic dispatch of Nehuenco Complex in a context of lower hydrological availability during the period. In Peru, total generation reached 0.9 terawatt hour during the quarter, decreasing 5% compared to the same quarter of last year. This decline was mainly explained by forced outage associated with the steam turbine, together with more favorable hydrological conditions in the system, which reduces the plant's economic dispatch. Consolidated raw materials and consumable use costs this quarter amounted to $182 million, increasing 7% compared to the same quarter of last year, mainly due to, first, higher gas consumption costs in Chile associated with higher generation with this fuel; and second, higher transmission costs resulting from tariff adjustments recorded during the quarter. These effects were partially offset by lower energy and capacity purchases associated with adjustments related to capacity payments that took place during the quarter despite higher energy purchases in the spot market. Now please go to Slide #13 to review the main differences in the consolidated EBITDA for this quarter. Consolidated EBITDA reached $165 million during this quarter, decreasing 5% compared to the same quarter of last year. EBITDA in Chile amounted to $143 million, decreasing 4% compared to the same quarter of last year. This decline was mainly driven by higher variable costs, particularly, one, higher gas consumption associated with higher gas-based thermal generation; two, higher transmission costs; and three, an increase in other expenses by nature, resulting from the reversal of nonrecurring provisions recognized in 2024. This decrease was partially offset by an improvement in the company's net position in the spot market, mainly reflecting lower net energy and capacity purchases and higher revenues from regulated clients associated with higher consumption during the period. And finally, an increase in other income, mainly related to the pass-through of certain costs establishing contracts with unregulated clients and higher revenues from unregulated clients primarily driven by a higher average sales price reflecting contract indexation. EBITDA in Peru amounted to $21 million this quarter, decreasing 10% compared to the same quarter of last year. This variation was mainly explained by, first, a weaker net position in the spot market, reflecting higher levels of contracted sales and lower generation during the period; and second, higher transmission costs. This decrease was partially offset by higher sales to regulated and unregulated clients. Now please go to Slide #14 to review the consolidated net income of the quarter. Nonoperating income for this quarter posted a loss of $56 million compared to a loss of $46 million in the fourth quarter of 2024. This increase was mainly explained by, first, higher financial expenses, mostly associated with the end of capitalization of interest related to Horizonte Wind Farm following its commissioning operation date and by a higher average financial debt recorded during the quarter; and second, higher other profit and losses associated with the recognition of asset impairment provisions during the period. The company reported a net profit of $31 million this quarter compared to $54 million profit obtained in the fourth quarter of 2024, mainly explained by, first, a higher depreciation and amortization and lower operating results driven by a lower EBITDA; and second, a lower nonoperating result recorded during the period, partially offset by lower income tax expenses. Now please go to Slide #15 to review the consolidated cash flow. The company began the period with a cash balance of $949 million and ended with $883 million. Regarding operating activities during this quarter, an inflow of $131 million was generated compared to the inflow of $201 million during the fourth quarter of 2024, mainly due to the lower receivables compared to the previous quarter associated with the sale of receivables on October 2024. In terms of financing activities, they generated an outflow of $111 million, which compares to the inflow of $72 million during the fourth quarter of 2024, mainly explained by the distribution of an interim dividend in December and the partial prepayment of a loan of Colbún Peru. On the other hand, the cash inflow recorded in the fourth quarter of 2024 is mainly explained by the $200 million disbursement of the green loan signed by BBVA and Bank of America, partially offset mainly by the payment of an interim dividend by interest payments during the quarter. Lastly, investment activities generated a cash flow of $92 million during this quarter compared to the outflow of $433 million in the fourth quarter of 2024, primarily explained by the acquisition of ILAP companies. This effect was partially offset by higher CapEx disbursements during 2025, driven by progress in the construction of BESS projects. This concludes Colbún's fourth quarter of 2025 results review. Thank you for listening, and now we are open to answer your questions.

[Operator Instructions] So our first question is from Francisco Bertin from Patria Investments.

Do you hear me?

Yes, we can hear you.

My question was first regarding more market questions. The first one, have you studied or have you analyzed the implications on the investments on BESS given that -- and the whole portfolio, the price of the power will be changed in the next resolution for changing from a gas turbine, as my understanding, correct me if I'm wrong, to a BESS system, a battery storage system. How this price like the [ precio básico de potencia ] will go -- will be higher or will be lower for the new scheme. And the second one, have you analyzed how it's going to go the demand factor for the sufficiency -- and correct me if I'm wrong, the sufficiency power, definitive switching power with the BESS penetration? And what happened if you do a sensitization on this? What happened to the price? And last one, but not least, how -- have you ever studied the impact that will come to contract firm gas from Argentina? Have you ever take that option to add to your portfolio? Hello?

Isidora or Miguel, I think you're muted. We cannot hear you.

Can you hear us now, Francisco? Hi.

Yes.

We can hear you.

Okay. Great. So this is Miguel speaking. How are you?

Hey, very well. Thank you...

I will try to address the first 2 questions, and then Carolina will take the third. I would say, first of all, that, of course, BESS technology is evolving rapidly in Chile as CapEx is going down significantly as has been the case in the last, I don't know, 12, 18 months maybe worldwide. Because of that, I think it's too soon to tell the potential impact going forward of that technology and how can that affect capacity payments in the future. As you know, we cannot provide any type of forecast around that, especially regarding pricing. So I would just say that it is clear to us at this point that BESS technology will play a significant role in the system going forward. And you can tell that by the numerous projects trying to incorporate more installed capacity. We with the 2 projects are part of that system. But we'll have to wait to actually analyze the impact on that, again, on capacity payments and how the system will be dispatched and remunerate going forward. Regarding your second question, the only thing we know as of today is what's been stated in the legislation, which is basically a 98% recognition for the capacity payment up until 2034. We, of course, have done many sensitivity analysis around different possibilities regarding pricing and capacity recognition, but we cannot share those publicly. Carolina will take the final question you have.

Hello, Carolina speaking. Related with your question about gas. First to start, I would like to mention what happened during 2025 that we developed the strategy that we are designing for 2026. So as you know, in 2025, our gas strategy was mainly based on interruptible contractual contracts with the Argentine gas. And we deliberately choose not to nominate LNG cargos given the market conditions that we saw at the end of 2024. But what we didn't anticipate was the combination of, for example, pipeline maintenance, a very strong cold wave that pushed the domestic demand in Argentina higher and some production issues, all happening at the same time. So of course, that materially reduced gas availability during the during parts of the year. So to manage that situation, we turned to spot LNG purchases under [indiscernible]. And these contracts were designed to preserve the flexibility, avoid take-or-pay exposure and ensure the dispatch priority even if the variable cost was high. Having said that, why we are looking into 2026 is we are taking an approach more balanced. We are combining firm Argentine gas from May onwards and plus LNG under contractual options, mainly for the early part of the year. And that idea is not to increase LNG structurally, but to diversify supply, reduce risk and keep the flexibility, especially under different hydrological conditions.

Just to understand the Argentina gas that you are -- that Colbún are looking for, if you can disclose like the range of the prices that Colbún are targeting to gas and to just to understand how will be the variable cost of those plants?

No, we can reveal the level of the prices of the fuel.

Our next question is from Tomas Pallotti from Balanz Capital.

Can you hear me?

Yes.

I have 3 questions. First, could you provide guidance on expected CapEx for the next year, particularly regarding the remaining investments required to complete BESS Chaca and BESS Diego de Almagro Sur? Second, we have seen narrower energy arbitrage spreads for battery storage in recent months. Do you see this as a headwind for BESS returns? And could it affect your capital allocation for the new BESS projects in Chile? And finally, regarding the Peru expansion plan, do you have a defined construction start time line and CapEx expectations for the Bayóvar and Algarrobal projects?

Hello, Tomas. Isidora on the line. So related to CapEx for 2026, we are expecting disbursements about $50 million for BESS Chaca, $130 million for BESS Diego de Almagro Sur and $24 million for Don Eduardo substation. And in the other hand, related to maintenance CapEx for 2026, we expect an addition of $70 million for the CapEx. And related to the BESS and the arbitrage that the market is seeing well, the idea and the logical of constructing BESS for the company is always linked that project with a PPA. So we do not rely on the difference of the prices for the profitability of that project. And related to when do we expect to start the Bayóvar Algarrobal project in Peru as well as we do in Chile, first, we wait to sign new PPAs in order to link that energy to the projects.

[Operator Instructions] Our next question is from Fernan Gonzalez from BTG.

Thank you for the presentation. I was wondering if you could share your thoughts on the opportunities there may be on the commercial front, both in Chile and Peru, if you have an idea of a pipeline of auctions being carried out in 2026 in both countries either regulated or unregulated, if you can give us any color on that, it would be great.

Hi, Fernan. Thank you for your question. So regarding opportunity, we are seeing for next year, main opportunities on the unregulated segment. There are significant auctions we are expecting on the coming months are enough to approximately 3 terawatt hours.

Thank you Fernan, we cannot hear you. I don't know if you have a follow-up.

Yes. Maybe an additional question. Do you think there is a business opportunity for Colbún to add more energy storage capacity on top of BESS Chaca and Diego de Almagro Sur perhaps elsewhere in the country to improve the quality of the Colbún's portfolio other than winning new contracts.

Fernan, this is something that we are constantly evaluating. It, of course, will depend on the reliability of PPA opportunity because we analyze our projects with a PPA in the long run. And we also compare these technologies with others available. That's the reason why we have a diverse portfolio of projects, both in terms of technologies and geographies. So we're constantly seeing how this -- the cost of these technologies are evolving and where are the PPAs available at the specific zone of injection of each project. So something to be seen.

We have a question from Francisco Bertin from Patria.

I want to understand if you have seen higher cost prices in the international market, because there's some new -- there's like some market -- the coal markets such as the Australian market price that has been rising a little bit, have you see a concern that the Santa María power plant could increase the variable costs and given that it could be less dispatch for your portfolio?

Hi, Francisco, thank you for your question. So regarding the coal supply, the last auction we made for our supply was in 2023. And with that, we still have secured the supply of coal in the medium center. So we haven't seen an impact on the -- and increased price in the international markets.

Our next question is from [ Ignacio Galves ] from Santander Asset Management.

Could you please give us more details about the impairment performance in the fourth quarter of 2025?

Hi, Ignacio. Miguel here. I cannot give you specific details apart from saying that as part of the accounting measures, IFRS 36, in particular, we have the obligation of always analyzing the value of our assets against the expected future cash flow they will provide. And based on that we make decisions about those provisions for impairment because these are provisions is an actual impairment on the assets. And that's a typical exercise we do towards the end of each year. Just to put things in perspective, we had also same effects in 2024. And because of that, the net difference in the total account registrating those amounts equals $15 million, and part with that has to do with other things apart from impairments, for example, $8 million that we spent in prepaying existing financial debts. So then again, nothing concrete I can comment apart from an obligatory exercise mandatory by accounting standards.

So we have a question from Jay Samani from Scotiabank.

Are you seeing any traction in demand from growing data centers in Chile? And how would Colbún prepare to benefit from this demand?

Hi, Jay. Miguel here. Yes, we are, in fact, seeing potential opportunities in data centers. That, of course, has to do with the space available in some zones in Chile and the potential resource in terms of renewable energy from supplying those data centers. We are -- we have been studying the potential business opportunity for quite some time. It is part of our potential expansion strategy. But unfortunately, we cannot comment more until we have more concrete data to share with the market. But again, yes, we do see a potential business opportunity going into data centers.

Could you please give us more color on the Atlas renewable supply agreement?

Yes. This is an agreement that we signed in 2025, which basically consists in gaining renewable energy from that BESS project that is being built by Atlas renewal and should be available at the beginning of 2027, if I recall correctly. Basically, the agreement consists in all of that production will be directed to Colbún.

Okay. It looks like we have no further questions. I'll now hand it to the Colbún team for the concluding remarks.

Okay. So thank you again for joining this conference call for the fourth quarter of 2025, especially at this time of the summer. Hopefully, you all have a great weekend, great vacations, if that is soon in the horizon, and we'll see you again for the first quarter of 2026 results. Thank you very much.

That concludes the call for today. Thank you, and have a nice day.