Enel Américas S.A. (ENELAM) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. [Foreign Language] and welcome to the Enel Americas 2022 Investor Day. Thanks to the people here in the room, and thanks to the ones connected online. I'm Rafael de la Haza, Head of Investor Relations. As you know, this is a hybrid event. It will be conducted in English, and all today's event presentation are already included into our company's website, www.enelamericas.com, and our Investor Relations. Joining me this morning are our CEO, Maurizio Bezzeccheri; and our CFO, Aurelio Bustilho. Before going in detail into agenda, let's see a short corporate video of our company. On the screen, please. [Presentation]

Thank you. We now move into the agenda that you see on the screen and we will have allowed 1.5 hours for the presentation and for the Q&A session. Maurizio will begin with a vision about the challenging global and regional scenario we foresee for the upcoming years, and also for the utility sector and how our company, after its integration with EGP Americas in 2021 and further simplification actions targeted in this plan, is ready to lead this new scenario in those countries that are plenty of opportunities. Subsequently, he will comment on the main pillars of our strategy for the next 3 years. Then, Aurelio will share with the audience how this strategy translates into financials and targets for the same period. The Q&A session will be run at the end of this presentation as usual and after some closing remarks. Analysts and investors that are physically or connected via Microsoft Teams can participate. [Operator Instructions] Thank you all for your presence. And now, I will hand over to Maurizio. Maurizio, the floor is yours.

Thank you, Rafael. Good afternoon, everybody, and welcome to our 2023-2025 Strategic Plan Presentation. First of all, I would like to begin with the outlining that as was announced by Enel Group, we are planning an asset rotation plan which implies to exit from Argentina and Peru. In that sense, we are going to show 2022 numbers considering the new perimeter. After 2 years of pandemic, political crisis derived from the conflict between Russia and Ukraine with economic aftershock and the social crisis in Latin America which has caused increased social spending, we are now facing a challenging scenario in terms of macro indicators across the region, which we expect will remain during the period of our strategic plan. Inflation has increased in a significant manner since last year. We expect a slow recovery for the next year, and we expect that it will coverage to convert to reasonable levels by the end of our plan period. Currencies in the region are still significantly devaluated compared to pre-pandemic levels, but we have seen a recovery in some of them, mainly the Brazilian real. We do not foresee significant variation compared to their current levels, and are in line with market expectations. Regarding GDP growth, 2022 has shown an important increase compared to 2021, which was still affected by the pandemic. For the coming years, we see growth level between 2% and 4%. Let's continue to Slide 5. Government and regulator authorities have taken measures in order to face the challenging scenario. Between 2020 and 2021, they had to face the economic difficulties caused by the pandemic. Measures aimed to help our customers like payment postponement and the direct impact on -- had a direct impact on our cash flow. Despite some help received like the Conta COVID in Brazil, we had to rapidly adapt to this crisis and try to be part of the solution. Now, the pandemic is over, but we are facing a severe inflation problem. Again, our sector has taken steps to diminish the economic impact on our customers through tariff adjustments like we have seen in Brazil and Colombia. In the coming slide, we will see the path towards the sector is moving. In addition to the difficult environment we have faced during the last years, we have to add the energy crisis in Europe and worsening of the climate change impacts all over the world. These events forced us to accelerate the implementation of energy policies through broad transition and the evolution of market design to enable a faster pace in the energy transition. In that sense, we believe that clean electrification is the most important trigger to create affordable, secure and sustainable energy system in LatAm. The countries where we operate are moving ahead in terms of electrification rate and renewable generation. As we can see on this chart, by 2050, the energy metrics should be almost 100% renewable in Brazil and Central America, and the electrification rate should increase significantly. Let's move on to Slide 7. This is a very challenging goal, but we think we are well positioned to achieve it. According to an internal analysis that we conducted together with different consulting companies for the perimeter of Brazil, Colombia and Central America, residential and transportation electrification rate in the countries where we operate should grow by about 3.6x by 2050. At the same time, we should reach more than 850 gigawatt of renewable generation capacity and over 2,800 terawatt hours of renewable production at LATAM level, reflecting a very significant growth potential on a country level. Enel Americas is a key player in each country where it operates, and we are ready to do our part in this important challenge. In order to achieve this, we had specific actions to be taken as we see on Slide 8. We need to be supported in the following issues. Stable regulatory frameworks, which incentivize and ensure our path to a 0 emission target, allowing companies to make the significant investment needed. Public and private energy transition support, permitting the collaboration between different players in order to promote electrification and decarbonization. A modern energy sector looking for new technology in renewed generation and boosting digitalization of the grid. And finally, agile administrative processes paving the way to accelerate and facilitate the permit and investment processes in renewables, grids and new services and products. Let's now have a look at Enel Americas' track record for the last few years. Since 2016, year in which Enel America was born after the spinoff with Enel Chile, we have been able to make a fast transformation of our company into a much more renewable and diversified company. We have put our growth focus on renewable generation and modernization and digitalization of our grids, aiming towards the energy transition. Enel Americas has become a more sustainable company with all its growth in generation coming from renewable sources. Our investment in grids, including new connections, digitalization and efficiency, are contributing to create the electricity grids of tomorrow: secure, resilient and reliable. Complementing this, we increased our commercial offering to our residential and businesses customers, as well as cities and municipalities with value added service and infrastructure they need for their own electrification. With this track record, we are now in the position to begin a new phase that we will describe now. Our strategy aims at establishing an integrated position across the value chain in core countries to serve our customers in their electrification journey. Toward this goal, we will implement 4 strategic actions over the next 3 years. First, we are going to concentrate our efforts on the countries we believe are more aligned with the acceleration of energy transition and our electrification and decarbonization strategy. Second, we will continue reinforcing the development of renewable generation, supported by a strong pipeline and adding the implementation of stewardship model that will allow us to keep a healthy financial position too. Grids are the enabler in the energy transition processes. Thus, we are going to continue boosting digitalization and modernization of our grids through significant investments. Four, finally, we will boost customer centricity, promoting and facilitating electrification through an integrated offer and new services and products to our customers while promoting the liberalization of energy market. Let's begin by analyzing our geographical simplification on Slide 13. We have decided to focus our effort on the countries where we see that the evolution towards energy transition is moving at a fastest pace. This means that we are going to focus on Brazil, Colombia and Central America, where our integrated position across the value chain can create the most value. Just to illustrate this, in Brazil, we have added close to 400 megawatts of renewable installed capacity in 2022 and currently have close to 1,600 megawatts under construction. At the same time, we are digitizing the grid with a very ambitious smart meter plant in Sao Paulo that has deployed 180,000 smart meters as of 2022. In the case of Colombia, we have added close to 40 megawatts of renewable capacity in 2022 and add close to 840 megawatts under construction. We have more than 1,500 electric buses in the public system, and after some regulatory changes, we are able now to begin the implementation of smart meters. In addition to this, we are going to continue selling assets that are not strategic for us, like we did with Fortaleza and Enel Dx Goiás this year. For 2023, we are going to begin a disposal process for Enel Dx Ceará, as well as the exit process of Argentina and Peru. This new asset portfolio will allow us to be an almost 100% renewable company and advance toward our 0 emission target. Let's analyze our CapEx on Slide 14. Our investments for the next 3 years will be USD 5 billion. Grids will be the main focus with 51% of the total, while renewable generation will represent 41%, from which 31% will be direct investment and 10% will be executed through the stewardship model. Retail and Enel X will receive 4% and 3% of the total investments, while thermal generation will only represent 1%. In terms of geography, 61% (sic) [ 51% ] of our investment will be allocated in Brazil, from which 10% corresponds to the stewardship model and 33% will be in Colombia. Net of the direct of the disposal considered in this plan, total CapEx increases compared to the previous year -- the previous plan. In this important -- it is important to highlight that nearly 100% of our CapEx is aligned with [ ODS ] 7, 9 or SDG 7, 9, 11 and 13. Investment in grids and renewable generation will allow us to continue our path toward energy transition, as we see on Slide 15. As we can see in this timeline, Enel Americas begun its decarbonization and electrification journey just after we completed the spin-off of former Enersis. The purchases of Volta Grande hydropower plant and of distribution companies, Enel Sao Paulo, paved the way towards this target. Then, we had a significant capital increase aiming to be prepared to face the new challenges we were foreseeing. This was reflected in the merger with Enel Green Power Americas asset, which put our company in a much more advanced position regarding our decarbonization target. After we conclude the disposal of Argentinian and Peruvian assets, we will be a company with an almost 100% renewable generation metrics, putting us in a very advanced position regarding energy transition targets, which are to be out of coal by 2027 and out of gas by 2040. On Slide 16, we can see our -- how our metrics is becoming greener. Our decarbonization goal will be supported by significant investment in renewable generation, during the next 3 years, we expect to invest USD 2.1 billion in generation business, from which 98% will be in a renewable capacity. Installed capacity will go from -- being 71% renewable by the end of this year to 98% renewable by the end of 2025, reaching a total installed capacity of 12.6 gigawatts after the disposal of Argentina and Peru. Net production will grow by 35% during the period while energy sales will increase by 44%, reaching almost 48 terawatt hours. This shows that we have a well-balanced portfolio where our energy sales are almost fully covered by our production. In addition, we have a strong pipeline as we can see on Slide 17. As we just mentioned, renewable capacity will be our growth focus in generation business. We currently have 2.4 gigawatts of new capacity under construction, mainly located in Brazil, and well balanced between wind and solar technology. This new capacity will be fully in operation between 2023 and 2024. Regarding our long-term pipeline, we have 60 gigawatts of new projects, from which 36 gigawatts are in early stage and 24 gigawatts in mature stage. This pipeline is 79% solar, 19% wind and includes 2% of storage systems. In terms of geography, 74% is located in Brazil, 25% in Colombia and 1% in Panama. Let's move on to grids business on Slide 18. Along with the carbonization, we are focused in positioning our grids as the enabler for electrification, helping to move towards the energy transition. In this sense, we are aiming at 3 main actions. First, modernization of grids, driven by electrification and digitalization. Secure -- second, secure a stable energy supply, leading market liberalization. And third, develop new services and products to our customers, promoting energy efficiency, circular economy and new facilities. Grids CapEx and the main KPIs ahead on Slide 19. Investment of USD 2.5 billion will support modernization of the grid during the next 3 years, from which 66% will be allocated in Brazil, 29% in Colombia and 5% in Peru, considering only the first 9 months of 2023. Unitary margin will grow by 2%, reaching USD 28 per megawatt hour by 2025, while energy distributed will reach almost 73 terawatt hours by the end of 2025, 6% more than 2022 expected. Total customer will move from 15.1 million by the end of this year, excluding Argentina, Peru and Enel Ceará, to 16 million by the end of the period. Finally, in terms of energy losses, we will see an important -- an improvement during the next 3 years, reaching 11% as an average by the end of the period. Let's move on to Slide 20. Our investment plan will allow us to continue moving towards digitalization, while at the same time, we will boost our regulatory asset base. In terms of RAB, we will move from USD 7 billion to USD 7.6 billion, which imply an increase also in terms of RAB per client. Regarding OpEx, we will see a reduction in OpEx per customer, reaching less than USD 28 per customer by the end of 2025, a decrease of 8%. This is in part explained by development of smart meters in our concession areas which will significantly increase during the next years, especially in Sao Paulo where we are implementing a very relevant smart meters plant. Smart meter is the enabler of the digital distribution company for the energy transition, bringing significant benefit to society and the economy. Digitalization is a key element on the modernization of the grid, as we show on Slide 21. Digitalization of our grids is essential to offer our customers a better experience. We are growing in a significant way in that matter and will continue doing so in the coming years. We are expecting an improvement in our metrics for the taxable customer e-billing and direct debit-linked payment which will benefit our collection metrics and our relationship to our customers. These improvements will help us achieve a better net promoter score. Let's see Enel X business on Slide 22. We will leverage our long-term commodity contracts and relationships with our existing customers to continue boosting our analytics business in line with our electrification strategy, looking to offer new services and products fueled by renewable energy. In order to do this, we will invest around USD 140 million that will be allocated mainly in Brazil and Colombia. We expect to have a significant growth in all our KPIs, reflecting the potential of this business line. As you can see on the slide, all our services and products will increase by 2025, such as in mobility, in charging points and flexibility services such as demand response, accelerating the rollout of value-added services and next-generation infrastructures. Let's move on to retail business on Slide 23. The electrification process will also drive forward in the market liberalization. We plan to invest around USD 200 million in the next 3 years in retail business, with over 85% of CapEx in Brazil. This lines are up with the current evolution of regulation in Brazil, where market liberalization for high-voltage consumption was approved by the Energy Ministry for 2024 with current discussion for liberalization, low voltage consumption timing for 2026. Both energy sold, a number of customers will significantly increase by 2025. This will lead us to an increase in market share of this business, mainly driven by Brazil. We anticipate liberalization trends to accelerate, and we aim at covering free customer demand with our renewable production. Everything we have presented up to now will be done with a comprehensive, sustainable focus as we show on the coming Slide #24. As we have always said, sustainability is a core of our strategy, and we do not think it's possible to create long-term value without this in mind. ESG dimension are integrated in our business, and our vision of the economic progress is even more connected with social and environmental progress. Our sustainability strategy is based on decarbonization and electrification using the grid as an enabler supporting the [ just ] energy transition. We measure our sustainable business, environmental and social performance by over 30 indicators along all the value chain. These are the KPIs that our investors are primarily used to monitor, and therefore, are the ones we consider a reference for us. Every year, we published our integrated and sustainability report, where you can find detailed information about each one of them based on global reporting initiative grid and task force on climate-related financial disclosures and sustainability accounting standards board frameworks. Let's move ahead to Slide 25. This sustainable strategy will allow us to create value for all our stakeholders for a long time. Company has been pursuing profit in the sole interest of creating shareholder value. The focus was, for years, on short terms and purely on financial results. We believe this has the potential to increase the risks that the company is facing in the future, and particularly under the present circumstances, and we have evidence that a more sustainable approach is resulting in a more robust proceeding vis-a-vis the opportunities and the challenges of an accelerating energy transition. Summarizing, our company will grow in a sustainable way, improving its KPIs in every single aspect. Shareholders, companies, employees, customers and suppliers, among others, will be part of this value creation. As an example, our total tax contribution for 2021 was USD 3.9 billion, which is an important wealth redistribution mechanism that contributes to the growth of societies and communities. Lets see some of our main recognition on the coming Slide #26. This sustainable growth strategy has been recognized by some of the most relevant international ESG raters. As we have already mentioned on previous occasions, these recognitions reflect how we embedded sustainability in our operation and strategy. With our ethical social responsibility, environmental and corporate governance behaviors are part of our culture and the day-to-day actions of our operations. Our ESG commitment is reflected in the improvement that we have seen in the main international ESG ratings every year such as the case in Standard & Poor, where we are in the top 10 of the best rated utilities worldwide on a global level. Notwithstanding these excellent results, we will continue to improve given our solid sustainable business strategy, looking for synergy in the social and environmental aspects to create value for our stakeholders. Now on Slide 28, I'll show you our long-term vision of the companies. As a consequence of our current strategy and the actions that we intend to implement during next years, we see our company as a leading integrated company with the best ESG standards in the industry. Before 2030, we are going to be 100% or almost 100% renewable, and we'll continue developing new clean energy projects. All the same time -- at the same time, we will promote and develop the use of batteries energy storage system, BESS, in order to facilitate a 0 emission sector in the region. In grids, we will be focused in large cities with a relevant customer base and highly committed towards digitalization and smart meters deployment. We intend to be leaders in electrification process in the region, and we'll promote market liberalization. I now hand over to Aurelio for a deep dive into the financial plan.

Thank you, Maurizio. Good afternoon, everybody. In the coming slides, I will show you how our strategy reflects into our numbers. Let me begin by giving you more details about our asset disposal announcement. We will streamline our portfolio of geographies to create more sustainable growth and value to our stakeholders. As Maurizio explained it before, we have decided to focus our effort on countries where we see a higher growth based towards energy transition. That's why we are going to focus in Brazil and in Colombia. Within Brazil, we are going to sell Enel Ceará as our strategy in grids is to operate in large metropolitan areas, quickly implementing our unique expertise in digital evolution. In this plan for our estimates, we are considering Argentina completely out of the company since 2023, and for Peru and Enel Ceará, we are considering only 9 months of operations in 2023. Having said this, we can see that the expected impact of these operations will be around minus USD 3.4 billion of EBITDA level and minus USD 1.4 billion at net income level. In terms of CapEx, we'll see an impact on our investment of minus USD 2.2 billion due to a perimeter effect. Finally, this corporate simplification will have a potential impact on our net debt of about USD 7.1 billion, a reduction that we will analyze later on. Let's analyze our stewardship model and CapEx evolution on the next slide. Along with the geographical simplification, we are going to incorporate on our strategy, the stewardship model. This means that we are going to develop some projects together with a financial partner who is going to contribute with the majority stake of the capital needed for the project while we are going to have a minority stake, but we will develop and manage the project. This model will allow us to reduce our risk and optimize our debt, giving us more financial flexibility. We are going to analyze later how this new model complements our development strategy and its financial effects. Total CapEx for cumulative 3-year period will be USD 5 billion, which is considerably lower than USD 8.9 billion that we announced on our previous strategic plan. This is substantially explained by the perimeter changes and by this new stewardship model, along with lower investments in thermal generation. From a business point of view, we are going to increase our investments in renewables, grids and retail businesses, while Enel X will remain in line with the previous plan. The same applies when we compare 2022 expected CapEx with 2025 CapEx in the lower chart of the slide. It is much lower, but due to corporate simplification of stewardship model and thermal generation that we are exiting. In summary, we will invest in those geographies that are considered core where our integrated positioning generates a higher value. Let's analyze EBITDA in the coming slide. EBITDA will reach a range between USD 11.1 billion and USD 11.6 billion for the accumulated 3 years, with Brazil contributing with 51% of total and Colombia, 40%. Central America and Peru, remembering that only 9 months in 2023 for Peru, will represent 4%. In terms of business lines, renewables and grids will be the most relevant, with 45% and 44% respectively. Retail will contribute with 8%, Enel X 2% and thermal generation, only 1%. Compared to our previous strategic plan, EBITDA is lower due to the new geographical perimeter. As you can see, growth will come in mainly from our renewable generation business, which is consistent with the EBITDA growth evolution, so after the integration of Enel Green Power Americas into our perimeter. I will make a focus on each business line in the coming -- in the next slides. Generation business will grow from USD 1.5 billion expected for this year to a range between USD 1.7 billion and USD 1.9 billion by 2025 driven by renewable generation. About USD 100 million of this EBITDA increase will be attributable to stewardship model with renewable sources in Brazil. Our EBITDA growth in this business segment reflects the right strategy of replacement of thermal production with renewable sources, reducing the exposure to the wholesale market. As our CEO mentioned before, this company has substantially doubled the renewables capacity when compared to 2016. CapEx for the accumulated 3 years period will be USD 2.1 billion, from which 98% will be in renewable generation, including 24% coming from a stewardship model project as explained before. Thermal generation will represent only 2% of the total. On the right side of this slide, you can see the improvement along the planned period of representative KPI of this business, which is EBITDA per megawatt hour. In terms of OpEx per megawatt, we see an improvement due to a replacement of expensive thermal capacity with renewables. On Slide 35, let's see the impact of stewardship model. As just mentioned, we are going to implement the stewardship model in renewables projects in Brazil. This new model will allow us to ensure construction and share the financial risk with our partners. USD 3.2 billion will be implemented under this model, from which we are going to disburse USD 0.5 billion as CapEx. From the remaining amount, USD 2.5 billion will be contributed by third parties and USD 0.1 billion will be equity injections made by Enel Americas in this model. EBITDA coming from the projects developed under stewardship model will be around USD 230 million in the planned period, and will continue adding value to the company. Installed capacity of this project will be 2 gigawatts by 2025, while net production will reach 6.2 terawatt hour. These new results will be very appropriate to continue adding further renewable production to the electrification path of our customers. Let's move on to Slide 36 to see our additional capacity. Considering the projects developed with stewardship model already mentioned, we are going to increase our renewable capacity in 3.5 gigawatts in the next 3 years. For this, we are going to invest USD 1.7 billion, from which 29% corresponds to stewardship projects discussed in the previous slides. And the rest will be 42% in Colombia, 24% in Brazil, 4% in Peru and 1% in Central America. The 3.5 gigawatts will be located in Brazil and Colombia, except for 1%, which is in Central America. In terms of technology, 1.9 gigawatts will be solar and 1.6 gigawatts will be wind. New renewable capacity is also key in order to achieve our decarbonization targets. Let's move to Grids business on Slide 37. Modernization of the grid is essential to accelerate electrification. We are going to invest $2.5 billion in grids during the plan, 66% located in Brazil and 29% in Colombia and our remunerated asset base will grow from $7 billion to $7.6 billion in the coming years. EBITDA increase by around 2% during the period, mainly explained by higher demand and lower OpEx, partially offset by FX and CPI impacts. Main KPIs will show positive trends, unitary margin, OpEx per customer and RAB or remunerated asset base per customer will improve by 2025. Our new geographical perimeter reflects the importance that in our strategic view grids have. They are -- they neighbor towards the [indiscernible] and only through a modern grid in urban areas it is possible to offer our customers, our clients, clean renewable energy with stable and affordable prices and with high level of security and reliability. I would like to recall the message of our CEO at the beginning of this presentation in related to have necessity of having stable regulatory frameworks accommodative to our macro disruptions. This is essential to create the right conditions to accelerate and ensure CapEx plan. On Slide 38, we'll see Enel X and Retail businesses. At the same time, we'll continue to boost the retail and Enel X businesses in order to offer customers clean and affordable energy and new products and services. In retail business, we are aiming to at a higher liberalization of the market, mainly in Brazil, which will allow us to increase our client base and energy sales. EBITDA in this business will decrease by 10% due to higher OpEx and FX and inflation effects. In terms of operational results, retail business will grow by around USD 30 million. Figures in -- of retail business are not capturing those during this planned '23, '25, the high potential of the market liberalization in Brazil as the most relevant part of this liberalization will be expected in the coming years, in 2026 and in the coming -- in the next years, in the following years. Regarding Enel X, we are -- we will continue looking for innovative ways to satisfy our customers and necessities and help them to move towards electrification. EBITDA in this business will almost double by 2025 despite the negative impacts coming from FX and inflation and by the higher OpEx. Now on the coming slides, we will discuss about our financial management. Due to the consolidation of Argentina, Peru and Ceará, our net debt ratio will be close to 0 by next year. This will give us plenty flexibility to better face the difficult macro condition that we are foreseeing in the region. Rates are very high, as you can see here. And probably will remain high in the short term. Giving our CapEx commitments of USD 3 billion in Brazil and $1.6 billion in Colombia, it is a good thing to be unstressed in terms of debt during this period. This financial position, this unique financial position, let me emphasize, will allow us also to pay expensive debt, financial new projects without issuing new debt at least meanwhile, that conditions keep unfavorable, as you can see. Let's move to the coming slides to see our debt breakdown. Gross debt will reach $5.6 billion by 2025 from which 62% will be in Brazilian reals, 36% in Colombian pesos and 2% in U.S. dollars. On a country basis, 62% will be allocated in Brazil and 38% in Colombia. Finally, 90% of our debt will be issued at a floating rate and 10% at fixed rate. Our debt strategy is to issue debt in the same currency of our cash flows that we'll receive -- that we will receive, reducing this way our financial exposure. On the coming slide, we'll see our liquidity position. We currently have a liquidity position of $2.5 billion between cash and committed credit lines. For the next 3 years, we have a very affordable maturities calendar with $4.3 billion maturing. Most part of the debt will mature after 2025. This healthy financial position allows us to have solid credit ratings and flexibility to face our coming challenges. Let me conclude with a summary of our financial targets. This new strategic plan is very impacted by the parameter, of course, that we are announcing for the company. So the guidance that we are delivering is not comparable with the numbers of previous year. What is relevant here is that we are positioning our company in the best possible scenario in order to continue moving towards the energy transition being a completely renewable company and promoting as much as we can -- the -- as much as we can, the electrification of our customers, of our cities. With that in mind, we are going to reach an EBITDA between $11.1 billion and $11.6 billion, accumulating for the next 3 years. While net -- group net income will be in the range of $3.2 billion and $3.4 billion. Our CapEx plan is much more financially responsible, thanks to the implementation of the stewardship model and will reach $5 billion during the plan. Finally, in terms of dividends, we expect to distribute $1 billion to our shareholders in the next 2 years. Now Maurizio will conclude this presentation with some closing remarks.

Thanks, Aurelio. We are focusing our effort on those countries where we see that the evolution towards energy transition and electrified cities is moving in a fastest pace. Our strategy is to continue developing renewable generation aiming at our decarbonization target and in a modernized -- in modernize our grids, which we truly believe are the enabler that will allow us to offer our customers clean, affordable, secure and the reliable energy, along with innovative new products and services that will simplify their life. The asset disposal that we are announcing along with the stewardship model that we are implementing will allow us to have a strong and healthy financial position, finance our new project and have flexibility to face the challenging scenario that we have [indiscernible] this action reflects that sustainability is in the heart of our strategy, and we will continue in that part.

Many thanks, Maurizio, Aurelio. We will now start the Q&A session. Let's start first receiving questions from the audience present in this room. [Operator Instructions]

Hi. Good afternoon. I'm Fernan Gonzalez from BTG Pactual. And I basically have 2 questions. One is about the stewardship model in Brazil. Could you provide perhaps a bit more details about this type of projects? Are they going to be focused on urban areas, more rural ones? Is this a big threat also for the distribution concessions because I presume it relates to distributed energy project, a small scale. And since you have this bulletproof balance sheet after the asset disposals, what's the logic of -- to -- at this model this way and not go in it by yourselves? And my second question relate to the Central American assets and how do they fit in this strategy of digitalization, electrification and no meaningful CapEx being deployed in that region as well?

I will start replying the second, and I will leave Aurelio for the first one. Central America assets, as you know, where -- have been combined to the Colombia asset in electrification and digitalization, even though we have no grids over there, it's something that is imminent to the development of some Central American countries. You can see that electrification in transportation, for example, is going ahead in the country where we are. And of course, we are following, for example, the next tender on electric buses. But not only you have a solution regarding as well energy efficiencies. Regarding for this reason, electrification is there in Central America, and renewable is there. Central America is an area in which energy -- renewable energy has developed quite a lot. And finally, there is some strategic thoughts that we have regarding the possibility that finally, the integration of Central America with Colombia can go ahead. And this will open up an important market as well for generation -- energy generation in Colombia, even though you know exactly that today, for example, Guatemala is one of the bigger exporters of energy in Mexico as well. So this is in -- the view is in the integrated possible strategic evolution in the area. So electrification and renewable is already there, will continue to grow. And there is this strategic view in the next future of integration between Central America and Colombia. And finally, just to recall that we have 10% of the company that makes the integration of the electricity system in Central America. We are 10% of the [indiscernible] company. And we actively participate in the Mercato Electric Regional nerve. Regarding stewardship...

Fernan Go. Stewardship -- we are doing this to do more, right? The challenging is enormous to capture opportunity in renewables. So with this model, we can do more, we can do it and focus our whole as operator as we develop the projects, right? We are talking about -- you asked about where, in Brazil. We have 4 projects, Lagoa dos Ventos, AroeiraI, Pedra and Arinos. I mean, this is where we have the best resource because as Maurizio explained, we have a huge pipeline. So we have a very interesting projects. With this model, Fernan, we can do more. That's the logic behind. I don't know Maurizio, because you are -- you did this in other geographies also.

It's obvious that we are stressing here the needs to accelerate energy transition. The experience that right now we have in Europe, in which big, huge crisis on gas has put a strong pressure on the entire system, not only on companies, but on society. And this is the reason why we think that we need to accelerate the energy transition moving into the direction of -- to have renewable energy, reliable grids and offering electrification solutions to our customers.

And this is added with -- with also with the PPA [indiscernible] the partner can purchase the energy. I mean, this is a very good combination to test that we did in other geographies with Enel Group, and we want to bring and push here in our perimeter.

Well, thank you -- thank you, Fernan Go. More questions from the audience, we have presented the room.

Martin Perez from SMBC. Regarding the stewardship model, again, the execution, are you going to seek a partnership when you have a pipeline? Or are you going to develop, build, achieve COD and then bring a partner? How is it that you are think of it?

As Aurelio mentioned, the 4 projects have already very well developed. We need to start the construction. So we are -- we have already clear idea of what kind of projects would be involved in the stewardship process. The 4 projects accounts for almost 2 gigawatts. And of course, you need to look for a partner that wants to share with you in a mechanist 80-20s the cost for the construction of this megawatts. But the megawatt is already very well selected, picked up and with all definition. So you need to remove if you want to look for a partner, you need to remove obviously all uncertainty. It's full permitted with ready to be constructed in the reality, some of them are already in construction. So the selection of Stewardship is, yes, in development phase, but as well in construction Phase too.

Rodrigo Mora from Moneda. I have one question and is related to -- there is something that I am not understand very well is the company. It seems the company will have net EBITDA almost 0 or not?

Net debt-to-EBITDA? Correct.

Net debt-to-EBITDA at the next couple of year, almost 0.

Yes. Correct.

With a dividend policy of 30%. I would like to know why. Because it seems that if you have net debt-to-EBITDA almost 0, why does the company want to pay only 30% in dividends?

Yes. Correct. Rodrigo, the -- of course, having 0 net debt EBITDA, that make too much sense. What we want to show here is simply the fact that we are moving to the direction to get more flexibility on what we need to do, of course. And on one side, what we will do with the proceeding of the sales, for example, renegotiate a very expensive debt, okay? Then, of course, during these 3 years, we will decide exactly how to continue to grow. But for sure, the 0 net debt EBITDA does make too much sense. And we will find out a solution of a more sustainable balance sheet from the financial point of view. If the question is, what will happen with dividend, of course, we need to manage these issues with the Board of Directors and what will be the situation in the next 3 years. If for example, we have, as Aurelio said, the majority of that in Brazil, the situation from the point of view of interest rate, we pay a substantial burden in terms of financial costs. Of course, we will, for example, move in direction to reduce the debt quickly and then be prepared for the future more sustainable growth. This is the philosophy.

I don't know if -- is there any news about the São Paulo Pension Fund? Because I remember that the company had to put approximately $1 billion in order to take it out. What happened with São Paulo Pension Fund?

Okay. We went through the process. We were expecting at the end of this month the Previc final approval. You know that the reason why we want just to move the beneficial definitely in contribution definida is related exactly to the reevaluation along the times with the older funds. A few weeks -- 1 week ago, the Previc sent us a request for further information. So we are providing because it looks like that a trade union make not against us but against the stake some observation regarding constitutionality of the law. We -- personally, we don't see any rooms for this possibility to go ahead. And this is the reason why we are providing information to the Previc. At the same time, there is a report to the Supreme Court. We believe that this will be solved at the beginning of 2023, and we can expect now, not in the approval -- the final approval of the Previc more or less in June, July. And in this way, close the -- when Previc will approve, we will stop the revaluation of these funds, and we expect to close the operation at the beginning of 2024.

Andrew McCarthy, CrediCorp Capital. I was wondering if you might be able to provide some more color on the portfolio optimization process in terms of the status of each of the processes in Peru, Argentina, Ceará. And in particular, in Peru, if you could comment about -- because there was already the prior announcement about the reorganization with the merger of the renewables assets into Enel generation crew. Maybe you could comment on how that fits into the sort of the chain of the events in those processes.

Yes. Regarding the merge of renewable asset was the case of Peru and we will -- are completing the process of merging the renewable asset into the generation -- conventional generation asset. The process is ongoing. We expect that would be finalized soon. This was in line exactly what we did in the reality in Colombia and in Brazil at the end of [indiscernible]. Regarding the other process, as we said in the -- during the presentation, some process is already in a stage in which we received interest -- offer of interest. So we need to structure. As we said as well, for example, the case of Peru, we see -- we maintain Peru for the first 9 months of 2023. And we will continue to speed up the contract for the other dismission. That means Argentina and Ceará. So the process is ongoing, and we expect to have the majority of this deal closed in 2023 or beginning of 2024. And the hypothesis beyond the number is Argentina already out of the number because, as you know, even though we are dealing with Argentina coal, in which everything is generated in Argentina, is reinvested in Argentina, that's contribute too much to the number. And Peru is in our number for the first 9 months. And Ceará as well, that are first contact, but the process is at the beginning and in the early stage.

Alexander Varschavsky from LarrainVial. Given that your parent company, Enel SpA, already announced that further simplification in Latin America should be expected, what can you tell us as Enel América of the next steps of this simplification and maybe the use of the proceeds from all these asset sales could be used to buy minority interest or maybe some share buybacks?

It's a combination of the reply we did to the last one and Rodrigo, and I mentioned the process. As I said, regarding Peru, we consider Peru in our numbers presented here for the first 9 months. Argentina is not there because it's immaterial in the numbers that we, of course, already received the request of interest for Argentina. And Ceará, we will see in 2023 the win out from Ceará. Regarding the proceed, in -- for the time being, we are looking. As Rodrigo observed, that have too much sense having a net debt-to-EBITDA at 0 for a company like us. And we will use, depending from the evolution of the situation in Latin America, to reduce essentially very expensive debt because we are paying quite a lot in terms of interest rate. And we will -- we need as well to finance the growth of the company that still keep a substantial pack. These 2 things. Then we will see what will be the evolution, and we will take decision just to increase the value for the -- of the company for shareholders.

Mario Estrella from Itaú. I wanted to understand a little bit more about the spread on what that you show in your presentation. I wanted to know more what are your main assumptions in that figure because -- what interest rate are you assuming? And more important, what energy prices in Brazil are you assuming? Because I understand that Brazil is currently facing a high risk of oversupply. So I wanted to understand more what are the main assumptions on that number.

Okay. I will let Aurelio reply, but just an observation -- to share an observation with you guys. If you look at the last tender for regulated energy in Brazil and as well we are here in Chile, you are observing quite a shortage. There is not enough coverage for this tender. And we are observing in general certainly increasing price, okay, in sales price. And this is the reason why we are stressing the fact that we will be an 100% renewable generation company in the next years because this -- considering the instability and the fluctuation of the price of gas or fossil fuel, this will allow us just to catch a better margin in our sales in the future, even though there is a tendency to have as well on free market to PPA of 5 years, in some cases, 10 years. So this is -- we are observing in terms of general movement. In terms of numbers that you are asking, I will let Aurelio reply.

You can take a look at the slides. If you have the presentation, I think it's publicly -- it's already public, 40%. But anyway, we are talking about, as you can see, our debt in Brazil, we have a Selic that we are estimating for the end of this year about 13%, right, a small reduction. But anyway, it's higher than that today. And we have a spread of cost of 150 basis points more or less, no? Also for Colombia, Colombia, we have 10.8% of internal costs. I mean -- anyway, we are facing, as we were explaining, a period that we have higher costs, higher financial costs, and we want to be positioned at this time in a very conservative way in order to be exposed to this variation, right? At the same time, we have, as Maurizio was explaining, higher cost in terms of the inflation. We are seeing, let's say, some -- it's a special moment in terms of politics in our region, right? And we have seen even here in Chile tax reforms and also Brazil. Maybe we'll have -- probably we'll have next year. But anyway, we are positioning ourselves in a conservative way and reaching the best -- the unique position of utility can have today in terms of financeability in terms of renewables. In terms of exposure to climate, we have complementary regions if you see Colombia and Brazil in terms of El Niño, La Niña in terms of hydrology. So this brings a unique position, not only mentioned the ESG position in terms of social and recognition to better rating in order to approach the coming years. They will be challenging, and we are preparing and reaching at this moment in the best position that we can in terms of utility in this business. You can see -- you can compare to other one, you see this. So in any case -- and all of this, not only that we have the best condition in terms of procurement being part of Enel Group in terms of purchase. It's not easy to all the company. So we are getting a benefit for this procurement capacity. And last but not least, we are reaching a very interesting cost or returns in terms of renewable projects. As you can see in the slide, if I can see here, 34%, we see a spread of 200 basis point over our cost of capital, which means that we are presenting a very solid plan in terms of returns also. So we are confident with this plan that we are in a best position that we can.

I am [indiscernible] Would your plan consider payment of the related company debt?

The related company debt?

Yes.

We are estimating this plan a liability management, especially for the -- I mean we will reduce costs as we were explaining, right? The parent company is arm's-length debt. I mean we are maintaining this debt since we see that the same -- the conditions are the same compared to the market. There's no special points related to the company. In this plan, we are maintaining the company because the cost is not higher than other debt that we have. So we are -- I mean we are -- the typical liability management strategy, we are picking the higher-cost debt and refinancing this and -- not especially a focus to the corporate or intercompany laws. I repeat this is arm's length. This -- and thanks, God, we have this intercompany loans to grow. But anyway, in any case, this is arm's-length market conditions. There's no big issue regarding this. Thank you.

Okay. I think that we do not have more questions here in the room. So let's move to the online to Teams. Okay. So we have received 3 questions from Bradesco, Brilon. The first question is, are you willing to grow inorganically in Colombia? The second one, what are your plans for Enel Rio? Do you see this concession in your portfolio in the future? Do you plan to make any other acquisition in the region, particularly regarding light? Third question from Bradesco, considering the apparent scenario of energy oversupply and rising construction costs of new renewable projects, what are your plans for the generation segment in Brazil and levels of profitability that you are looking for?

Okay. Inorganic acquisition in Colombia is not in the plan, as you can see. Of course, as we always say, we will keep maintain under observation the market. In the case that something of interesting will come up, we will take in into analysis. So for the time being, this plan does include any inorganic growth in Colombia, is only organic growth, mostly in renewable energy sector. But of course, we will continue and maintain out under analysis whatever opportunity makes sense in Colombia. Regarding the Rio de Janeiro, Rio de Janeiro is in and will remain in our portfolio. The logic, as we explained, is more or less to be concentrated in urban areas. Recall that this strategy is focused, I repeat once again, is focused to accelerate energy transition. And we consider, for example, that distribution grids in cities where like at least 80% of the Latin American population is the place in which the energy transition will be speed up. And this is the reason why we will maintain our focus on São Paulo Rio. Regarding -- the last one was the generation plan?

Yes. Considering the apparent scenario of energy's oversupply and rising construction cost of new renewable players.

Let's see. I recall the other concept that is beyond the business plan. We developed what we call integrated margin. That means when -- we will not be short on our commercial portfolio. And we will continue to make attention to increase the margin, the price versus the cost of supply. For this reason, for example, in this plan that you observed, you will see that there are 2-terawatt towers in Brazil for 2025 or 3-tera towers that comes from the acquisition of PPA or existing plan of PPA plant under construction from third parties. So we will continuously met a mix regarding the possibility to buy third-party energy in the case this will increase our margin, the famous integrated margin. So the strategy is there. And this is one of the important pillar of our generation generations will be related to. If we will get a cheaper source of generation, we will catch it and we will not build up new megawatts. The idea of stewardship is just to have a partner and have a total or partial buyback of the energy produced by these plants, and this will allow to cash the opportunity of the -- opportunity of privatization market in Brazil that we mentioned. As we mentioned, 2024 already ongoing for high voltage. That means medium, high-voltage customers. And we will see if with new government this will continue and to catch up to 2026. So the evolution as well of the demand will depend from the speedup of the liberalization market, and we will observe always the possibility to buy energy from third party to sustain our portfolio. Regarding...

Profitability, right? Profitability or what?

Profitability.

Profitability, considering our average cost around 10.5% in our perimeter, adding this 200 basis point, I mean, we are between 12% and 13% of profitability that we are reaching right now. In terms of our generation portfolio and also future projects, of course, distribution has another dynamic regarding the regulated business. But anyway, we are talking about between -- talking -- if we focus only, of course, in Colombia and Brazil, right? It is between 12% and 13%.

Okay. Thank you, Aurelio. And 3 final questions before finalizing this event from Henrique Peretti, JPMorgan. First question, net debt reaching 0 in 2023. What are the projections for leverage in 2024 and 2025? How will the company leverage via higher dividends, buybacks? Does Enel considering a potential delisting in Chile of Enel Américas? This is the first question.

First question, I'll leave. Regarding the delisting of Enel Américas, we have not this in our plan. The plan that we presented, there is no hypothesis of delisting Enel Américas. The listing -- we delisted Enel Américas from U.S. market -- but if delisting is related to the vesting of Enel América, no hypothesis in the plan.

In terms of leverage, yes, we saw in our presentation that we are reaching 0 debt by the end of '25. Your question, Henrique, if we'll releverage the company, what we'll do, I mean what we are showing here is that we are reaching a unique position in terms -- and considering the environment to face this these coming years. Of course, in terms of dividends, as Maurizio was explained, this is a decision from the shareholders. I mean the -- and seeing how it will develop in the next coming years, probably or maybe we can see any movement on this. But the main issue here is that we are reaching this solid financial position to face this challenging next 3 years and -- I mean in order to grow and to accelerate decarbonization. And again, we consider the minimum dividend payout as our current policy. But there's no big issue if -- in the future, the company can review -- the shareholders can review this. Anyway, the biggest thing here is that we are reaching a very good solid financial position.

Okay. And second and third question. Together Peru, Argentina and Goiás, will they be accounted asset -- asset for sale and hence, no longer part of EBITDA starting in fourth quarter 2022? And third question, stewardship model, if Enel Américas has a minority stake, will it be accounted as equity income?

I didn't understand the first question.

The second question is if Peru, Argentina and Goiás are accounted asset for sale starting in the second -- in the fourth quarter 2022.

No. No, no, no. As we said, Argentina, full year 2033; Peru, Maurizio explained, 9 months for 2023 in this plan; and also Enel Ceará, 9 months for 2023.

Perfect. And the last one, stewardship model. If Enel Américas has a minority stake, will it be accounted as equity income?

No. It will be -- of course, we are working and planning. Our -- the model that we are constructing and working on is to have a financial investment, not -- I mean it's a 20% equity. But accounting, we are working with the assumption that would be considered a financial investment and will not consolidate this investment. Lots of issues that we need to see. And we are working on the conditions for this model, but that's our intention and what -- and the direction that we are working on.

So thank you very much. With these questions, we finalize and we conclude this event. Thank you, again, for joining us. And as usual, the Investor Relations team will be available for any question you may have in the next coming days. Thank you.