Enel Américas S.A. ($ENELAM)

Good day, ladies and gentlemen, welcome to Enel Americas First Quarter 2026 Results Conference Call. My name is Victor, and I'll be your operator for today. This presentation contains statements that could constitute forward-looking statements. These statements appear in a number of places in this presentation and include statements regarding the intent, belief or current expectations of Enel Americas and its management with respect to, among other things, Enel Americas business plans, trends affecting Enel Americas' financial condition or results of operations, including market trends in the electricity sector and Chile, the countries where the company operates or elsewhere -- supervision and regulation of the electricity sector in Chile, the countries where the company operates or elsewhere and the future effect of any changes in the laws and regulations applicable to Enel Americas or its subsidiaries. Such forward-looking statements reflect only our current expectations, are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of various factors. These factors include a decline in the equity capital markets, an increase in the market rates of interest in the United States or elsewhere, adverse decisions by government regulators in Chile, the countries where the company operates or elsewhere and other factors described in Enel Americas' integrated annual report. Readers are cautioned not to place undue reliance on those forward-looking statements, which speak only as of their date. Enel Americas undertakes no obligation to release publicly the result of any revisions to those forward-looking statements, except as required by law. I will now turn the presentation over to Mr. Jorge Velis, Enel Americas' Head of Investor Relations. Please proceed.

Thank you, Victor. Good afternoon, ladies and gentlemen, and welcome to our first quarter 2026 results presentation. I'm Jorge Velis, Head of Investor Relations of Enel Americas. In the coming slides, our CEO, Giuseppe Turchiarelli; and our CFO, Rafael de la Haza, will be presenting the main figures for this period. Let me remind you that this presentation will follow the slides that have already been uploaded to the company's website. Following the presentation, we will have the Q&A session. If you want to make a question, please send it through the webcast or write us to our corporate e-mail, [email protected]. Now let me hand over the call to Giuseppe, who will start by outlining the main highlights of the period on Slide 3.

Thank you, Jorge. During the first quarter of this year, our results reflect solid execution across investment, financial performance and profitability, fully aligned to our strategic plan. Regarding investment, total CapEx reached $0.45 billion, representing a 10% year-on-year increase. In Argentina, we increased our investment in Grids, supported by implementation of the new tariff scheme. In Brazil, we saw a 42% increase in Grids CapEx, focused on digitalization and network resilience. This was partially offset by lower investment in generation in Colombia, mainly due to the completion of Guayepo III project. Regarding our financial performance, EBITDA reached $1.17 billion, an increase of 16% compared to the same period of 2025. Growth was driven by strong results in Grids due to better tariff indexation and higher energy distributed and the positive effect of the currency appreciation, particularly in Brazil and Colombia. Finally, net income increased 9% compared to the same period of the last year, reaching $0.27 billion, supported by higher EBITDA and stable financial results. The news highlight that this morning, our shareholder meeting approved the final dividend for the year 2025, which implies a total payment to our shareholder of $280 million. In addition to this, our shareholders approved the cancellation of the 4% of treasury shares in connection with the buyback program that we executed last year. Now in the coming slide, let's see the main regulatory news for the period. Starting with Argentina, [indiscernible] reached a framework agreement with the Energy Secretariat that recognized electricity consumption in low-income neighborhoods, with compensation through energy purchases from CAMMESA during 2024, 2025 and first quarter 2026. This agreement corresponds to the subsidies given by the state and translates into a positive EBITDA effect of approximately $18 million. There is still pending to reach an agreement with the province authority of Buenos Aires. In Brazil, ANEEL has initiated an administrative process to assess a possible recommendation regarding the termination of the Sao Paulo distribution concession. We expect to present our defense to the regulator before May 13. After that, we expect to have more visibility regarding the coming steps of the process. Concession renewal processes continue at different stages. We are waiting for the Ministry of Energy approval for Rio and Ceara after ANEEL gave its positive recommendation. For Sao Paulo, process is currently suspended. At the same time, annual tariff adjustments were concluded for Enel Rio and Enel Ceara with an average increase of 15.5% and 5.8%, respectively, while Sao Paulo is expected by July 2026. Finally, in Colombia, the recent emergency decree issued in February 2026 foresees a direct onetime impact for Enel Colombia through Decree 0173 related to the state tax of $19 million on EBITDA for this first quarter. Now let's analyze our investment for the period on the coming slide. During the first quarter of the year, CapEx increased by 10% year-on-year, reaching $446 million, mainly driven by higher investment in Grids. From a geographical perspective, 68% of the total investments were allocated to Brazil, 21% to Colombia and the remaining 11% to Argentina. By business line, Grids represents 88% of the total CapEx, while the integrated business accounted for the remaining 12%. Focusing on Grids, investment rose by 3% compared to the same period last year with network upgrade initiative increasing by a strong 50%, reflecting our continued commitment to improving quality, reliability and resilience across our network. Let's now analyze Grids operational highlights on Slide 6. Electricity distributed reached 28.2 terawatt hour in the first quarter, an increase of 2% compared to the same period of the last year. This is explained by higher sales in Brazil, Colombia and Argentina. Regarding number of customers, we had an increase of 377,000 in the last 12 months, reaching 23.1 million customers. Smart meters increased by 65%, reaching almost 2.5 million in this period due to our deployment plans in Sao Paulo. Net RAB and net RAB per customer increased 11% and 9%, respectively, isolating the impact of exchange rate. This reflects the significant investment that we are making in our Grids. In terms of quality indicators, we can see that SAIDI improved in all subsidiaries, except for Sao Paulo and Edesur. In the case of Sao Paulo, it is explained by the severe climate event in December 2025, while in the Edesur, this KPI had a worst performance during the [indiscernible] month of the last year. SAIFI improved in Colombia and Enel Rio, while Edesur, Enel Sao Paulo and Enel Ceara increased due to climate events and the transmission line failure in the case of Ceara. Finally, regarding energy losses, we improved in Edesur, while the rest of subsidiaries presented an increase in the losses. Let's continue with generation operational highlights on Slide 7. Installed capacity reached 12.1 gigawatt from which 96% is renewables. Compared to the last year, we added 0.3 gigawatts of solar capacity from Guayepo III project in Colombia and a decrease of 1.3 gigawatts of hydro capacity related to the non-renewal of El Chocon hydropower plant in Argentina. We are currently working on additional 0.3 gigawatts capacity related to the Atlantico project, a solar power plant in Colombia. Regarding the net production, we recorded an 8% decrease at the consolidated level. This was mainly driven by lower wind output in Brazil due to a weaker wind condition during the period as well as reduced hydro generation in Colombia. Let's see our energy balance on the next slide. At a consolidated level, energy sales declined by 8% year-on-year. This decrease was mainly driven by lower production already discussed together with a strategic reduction in trading activity as we outlined during our strategic plan presented in February. On the sourcing side, total energy availability fell from 12 terawatt hours to 11 terawatt hours. This reflects both lower generation output and reduced third parties purchases with very negative net spot activity during the quarter. From a sales mix perspective, we observed a decline in nonregulated sales, partially offset by an increase in regulated sales consistent with our commercial strategy. Looking at the individual market, energy sales in Brazil decreased by 9% year-on-year while Colombia [indiscernible] were down 5%. Now Rafael will comment on financial results for the [indiscernible].

Thank you, Giuseppe. [Foreign Language] EBITDA this quarter reached USD 1.2 billion, which represents an increase of 16% compared to the first quarter of 2025. This result is mainly explained by better results in Grids in Brazil, Argentina and Colombia due to improvements in tariff indexation and higher sales. Currency appreciation also helped to boost EBITDA. Net income reached USD 0.3 billion in this quarter, which is 9% higher than the first quarter of last year. This is mainly explained by better EBITDA. This was partially offset by higher tax expenses due to the better results that the company presented. Funds from operations remained positive in this period, reaching USD 0.1 billion and this represents a decrease of 84% compared to last year, mainly explained by higher net working capital in Brazil due to temporary higher CVA related to the higher energy costs in 2026. Let me remind you that CVA is a regulatory balance sheet account that records differences between [indiscernible] energy book as a source. Ahead on this presentation, we will see more details about funds from operations. On Slide #11, we will see this quarter's EBITDA evolution and breakdown. Page #11, starting from an EBITDA of around USD 1 billion in the first quarter of 2025. We can see the year-on-year evolution by this slide. Integrated business recorded a decline of USD 64 million, mainly driven by generation, reflecting lower energy production in Brazil and Colombia as previously discussed. This was more than offset by a very strong performance in Grids, which increased EBITDA by USD 124 million, supported by solid operational results across the 3 countries where Enel Americas operates. As a result, adjusted EBITDA reached USD 1.070 billion, representing a 5% year-on-year increase. In addition, currencies appreciation had a positive impact of USD 103 million within the quarter, leaving a reported EBITDA USD 1.174 billion, up 16% compared to the first quarter of last year. In terms of geographical contribution, 50% of reported EBITDA came from Brazil, 39% of the total from Colombia and approximately 5% from each Argentina and Central America. By business line, Grids accounted for 65% of the total EBITDA while integrated business represented 34%, highlighting the increasingly [indiscernible] contribution of our [indiscernible] to overall performance of the company. Now on Slide #12, we will focus on the cash flow of Enel Americas. Starting from EBITDA USD 1.17 billion, which is a net working capital for the period amounted to minus USD 0.79 billion, higher than the last year [indiscernible] by Brazil with higher CVA as explained before. Taxes, [indiscernible] in this chart [indiscernible] in the period amounted to USD 0.18 billion, an increase of nearly USD 80 million, mainly due to better results in the period. Net financial expenses slightly increased, reaching USD 0.13 billion, mainly explained by higher net interest rates. With this, funds from operations remain positive, amounting to nearly USD 0.1 billion. [indiscernible] USD 0.45 billion with a free cash flow of minus [indiscernible]. Let me now analyze the debt of our company in the following slide, Slide #13. Gross debt amounted to USD 7.4 billion, an increase of 8% compared to December 2025, mainly explained by higher debt in Brazil [indiscernible] in Brazil and Colombia. Net debt reached USD 5.6 billion, an increase of 17% compared to the end of 2025. This includes negative free cash flow of USD 0.4 billion, net dividends paid of USD 0.1 billion and negative FX impact of USD 0.4 billion. In terms of currency and country, we see that Brazil remains as the largest contributor, while [indiscernible] 8% of the total. Finally, regarding the cost of debt, we can see [indiscernible] an increase for this period, going from 11.4% to 12.8%, explained by higher interest rates in Brazil and higher debt in Argentina. As you all may know, Brazil yesterday decreased the interest rates to 14.5%. On the next slide, Giuseppe will complete the presentation with some closing remarks.

Well, disciplined capital allocation remains at the core of our strategy. We continue to prioritize investment in Grids, focusing on improving the resilience and quality of our customers. First quarter results demonstrate the strength of this strategy. Performance was solid across all countries, led by Grids and further supported by favorable currency trends. Finally, we remain strongly focused on regulatory advocacy. Constructive engagement with regulators and stakeholders is essential to ensure business continuity and long-term sustainability. Now I will give the floor to Jorge for the Q&A session.

Thank you, Giuseppe. Thank you, Rafael. We now begin the Q&A session. Let me remind you that you can send your questions through the webcast. So first question about the concessions in Brazil. We have some questions about this topic. So basically about an update on the status of the concession in Sao Paulo. And can you share an indication of the reimbursement you will receive in case the concession is not extended?

So as I said in the beginning of the presentation, ANEEL on April 7 decided to open [indiscernible] procedure to [indiscernible] a possible recommendation [indiscernible]. We are preparing our [indiscernible]. We have time till May 13. And after that, we are going to see how -- which are the next steps. You have to consider that ANEEL doesn't have any kind of restriction in terms of time for taking this decision. So it's difficult to understand which will be the timing in which we are going to receive the recommendation. For what concerning the reimbursement, I mean, the regulation is pretty clear even if it's never been applied. But according to the regulation, the company is entitled to receive the net [indiscernible] -- consider that December 2025, the amount of the net [indiscernible] was $2.9 billion. Of course, it depends a lot of -- how many CapEx is going to be put in place and when the process will have the effective date. But these are the rules.

Thank you, Giuseppe. Continuing with the situation in Sao Paulo, which would be the overall impact on your numbers in case the concession does not get renewed? Do you believe that the asset disposal is a possible solution to overcome the regulatory deadlock?

Okay. For what concern -- Rafa will answer to the first question. For what concern the second question, what I can say is that as of today, there is no issue on the table about possible disposal. So it is not a matter of discussion. We are working to defend our concession. Brazil is a strategic country for Enel Americas. And so as of today, we don't have any kind of -- made a discussion about possible disposal.

Well, thank you, Jorge, for your question. Okay. In relation to the numbers, so the potential impact, as you know, in the [indiscernible] that we announced for the period 2026-2028 February this year, we announced that total CapEx for this division of business in Brazil that totalizes around USD 5 billion. This will be the impact in terms of [indiscernible]. This is CapEx announced by the company for the 3-year period. In terms of EBITDA, our aim, let me say, expectation is to reach an EBITDA for the entire period of around USD 6 billion in the Distribution business in Brazil. I think that those are the most relevant indicators. Of course, as Giuseppe mentioned before, in case this -- in a potential case that there is no resolution for this concession, there is a mechanism to compensate a relevant number, as Giuseppe said before, which totalizes close to USD 3 billion [indiscernible].

Still in Brazil, could you share an update also on the regulatory process to renew the other 2 concessions you have in Brazil, Enel Ceara and Enel Rio?

Well, for what concern Enel Rio and Enel Ceara, the situation is completely different because we have already received a positive recommendation from ANEEL for the renewal of the concession. So right now, we are waiting for the Ministry of Mines and Energy in order to implement the early renewal of the concession. And we believe that during this year, we are going to complete this process.

Next question is, is the company considering some M&A operation also in light of the significantly low leverage ratio? In your view, which would be the best use of this balance sheet headroom?

Enel Americas is continuing monitoring of the opportunities that we can find in the market. So M&A operation is possible. So [indiscernible] opportunity is up-to-date [indiscernible] possibility in order to improve our financials. Of course, M&A is not the only way in order to utilize -- in order to use our headroom. We have also the construction of new projects, especially in Colombia like we presented in the last strategic...

Next questions come from Andrew McCarthy. In light of the results and regulatory developments over the last few months, are you seeing any changes to EBITDA, CapEx or FFO strategic guidance for this year 2026?

Well, thank you, Andrew, for the question. The answer is no. We do not foresee any changes to EBITDA, CapEx or funds from operations at this moment. As you know, based on the results [indiscernible] delivered and the regulatory developments to date, we are not seeing changes to our 2026 strategic plan guidance for EBITDA, CapEx or funds from operations. It is important to underline that our current guidance already incorporates the main operational, regulatory and macroeconomic assumptions across all our geographies, different countries in which we operate. And we continue executing the plan as outlined. So no news here. For sure, we continue monitoring any potential effect or changes in regulation, macroeconomic conditions. But as you know, Enel Americas [indiscernible] which is certainly renewable 100% -- close to 100% renewable. So [indiscernible] completely isolated from our operational activities [indiscernible] the commodities like oil, et cetera [indiscernible].

Thank you, Rafa. Next question from Isabella Pacheco from Bank of America. How will you proceed with the October 2026 bond maturity?

Well, thank you, Isabella. This is a very good question. As you know, Enel Americas is in a healthy situation from a financial perspective. Our metrics are really solid at this moment, we have a positive cash position. So we are expecting in October 2026 to cover -- to pay the international bonds, USD 600 million to be paid this year. As of March 2026, Enel Americas has a strong cash and liquidity levels, both at consolidated and holding levels supported by committed credit lines, as you know. So the 2026 [indiscernible] plan expected dividends inflows from our subsidiaries in Brazil and Colombia. So we are very comfortable, really comfortable from the situation -- with the situation. And for sure, if we do not have different opportunities, the company will be paying this international bond in October.

Thank you, Rafa. Next question is from Fernan Gonzalez from BTG. Do you see an opportunity to invest in generation in Argentina? Or will you continue to focus exclusively on Grids?

Thank you for the question. I mean Argentina definitely remains an attractive market. Having said that, as of today, Grids is our priority. We saw a lot of improvement in the market, and now we are focusing on increasing our CapEx in order to improve the quality of services. So Grids is definitely priority #1. I believe that it is too early to discuss about possible investment in different business as of today for Enel Argentina.

Thank you, Giuseppe. Well, as there are no more questions, I conclude the results conference call. Let me remind you that the Investor Relations team is available for any doubt that you may have. Thank you for your attention.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.