Enel Chile S.A. (ENELCHILE) Earnings Call Transcript & Summary

[Foreign Language] A Well, warm welcome to our 2022 Investor Day now in a hybrid event. So we have you here, connected and also investors and analysts and also some colleagues connected via Microsoft Teams. Okay. Joining us today is our CEO, Fabrizio Barderi; and our CFO, Giuseppe Turchiarelli. Our event to be conducted in English and all the presentation that we are showing here today for you is already available in our website, www.enel.cl or in our investors in our app. For getting to our agenda before, let's just see a video that we understand that it's very important to us, to our road and also to our country, the energy transition. You're going to see that how Enel Chile is leading this transformation in Chile, in terms of decarbonization and also electrification, supporting our clients in this process. Also, here with this strategy, we are aiming to deliver a sustainable strategy and value for all. We hope you embrace these calls with us. Video on the screen, please. [Presentation]

Let's now look at our agenda on Slide 1, please. Thank you. So here, Fabrizio Barderi, is starting our presentation, showing us our market context, our main management goals and actions and also how we're going to achieve these goals. Later, Giuseppe Turchiarelli will show us the plan in numbers, our financial management and also our earnings evolution and then the targets for this period 2023, 2025. Now before we start, I would like to say that, [indiscernible] going to be available in any other questions you may have that defined on the presentation, we're going to have a Q&A session in which who is present here could ask a question and also those connected via Microsoft Teams. So before we start, a welcome message from our Chairman, Mr. Herman Chadwick. Please on the screen.

[Foreign Language]

So Thank you all for your presence. So let's now start. Fabrizio, the floor is yours.

Many thanks, Isabela, and welcome all to our 2022 Investor Day. The time to act is now, as a significant difference with the pandemic, there is no vaccine for climate change nor for its consequence for humankind, especially the most vulnerable ones. So there is no room for more delays. Playing in our favor is that we have a new type of customer more digitalized with higher expectations and more aware of the products and services they consume. Additionally, the current commodity scenario has added a new challenge to us all, making clear that we need to continue accelerating the carbonization and diversifying the world energy metrics. Technology is playing in our favor as we are advancing with giant steps coupled with innovation. Both are bringing new opportunities for the energy sector. Let us now see how Chile's account is in certainly in these new context. Let's start with the account reposition on decarbonization, electrification field on Slide 4. Chile offers an extraordinary renewable potential that could reach 70x the current installed generation capacity according to government screening. In the last 10 years, Chile has increased 2.7 times its renewable capacity, which totaled 16.9 gigawatts by the end of 2021. According to the national energy policy and the government Net Zero commitment, 80% of the installed capacity is expected to be renewable by 2030. It is worth mentioning that Chile also has an important attractiveness in terms of the potential growth of energy consumption when compared to more developed economies. Bear in mind, the counties development through recent years, which will also continue to be boosted by decarbonization, digitalization and electrification. Energy demand is expected to grow 28% when compared to 2021, reaching to 96 terawatt hour by 2030 according to the government's projections. In addition, all the potential that Chile has in terms of renewables, coupled with the global need for clean energy will enable the country to become a competitive relevant player in the green hydrogen industry over the coming years. We are part of this strategy. As in a few weeks, you will see the first green hydrogen project in Chile into operation through a partnership with Enel Green Power and other important local and international players. On that, Bloomberg has recently published the ranking of the best emerging countries in 2022 to attract investments in the renewable segment and not to our surprise, Chile was ranked as the first in the list. The new market scenario has been challenged, but also has brought new opportunities as we can see on Slide 5. We are living in a new era that has brought several changes and headwinds. Today, we are witnesses to a paradigm shift that is taking place. Together with the perfect storm faced by the industry in Chile in the last years, there are several factors that have kept the energy sector under pressure. Of course, this is a clear sign that we must change the way we have been doing things. Business as usual is no longer an option. And therefore, we decided some time ago to be proactive and take action. This allowed us to identify several opportunities to continue growing and to include sustainability at the core of our strategy. We have also mentioned several times the opportunities coming from the just energy transition, which include the evolving attitude of clients and their requirements for clean energy and energy sustainable services is a growing opportunity with an integrated approach offer of green commodity and energy services. Green hydrogen evolution may also play a significant role in the midterm. Portfolio enhancements and asset rotation mechanism may also be key to constantly unlocking and catalyzing our portfolio's value. All in all, we have been able to overcome the challenge that we are grappling with. At the core of our strategy stands our integrated approach. Now on Slide 7. Since electrification has become an essential driver to achieve our Zero emission target, we have developed and strengthened a commercial offer increasingly focused on our customers' needs understanding their requirements and focusing our efforts by playing the reliant at the center. The integrated offering approach also allows us to sell integrated production and services for our B2B clients, supporting them in their climate ambitions, efficiency needs and reliable sourcing. Electrification is key to it, and grids will also play a significant role in this process. On the final consumer side, the households and cities, we have also been developing a wide range of products to make our customers to [ lives ], easier and better. Supporting this strategy, let us take a look now at our managerial actions that our company will be focusing on, on Slide 8. Our main strategy actions have an integrated and sustainable approach divided in 4 main initiatives. The first one is to enhance the resiliency and flexibility of our portfolio mix, supporting the decarbonization process. The second action refers to putting our clients in the center with an integrated commercial strategy based on electrification. The third one is based on grids digitalization to continue enabling the just energy transition. And finally, our fourth action is to strengthen our balance sheet metrics by sustainable growth unlock the value of our assets and consequently be better positioned for future opportunities. All in all, these actions will allow us to reach an affordable, secure and sustainable energy system. Let's see all these actions in detail. But before, let me recall how we got here and what we are expecting for the next 3 years on Slide 10. Enel Chile has had an interesting journey since its creation in 2016. In 2018, Enel Chile carried out and completed a corporate reorganization, which included the acquisition of Enel Green Power Chile, strengthening its leadership position in renewables. From this point onwards, all the company efforts have been in order to boost its transformation, facilitating the energy transition in Chile. In that sense, in 2019, Enel Generación signed an agreement with the government regarding the decarbonization of its generation metrics, which include the closure of its 3 coal-fired plants. In September this year, 18 years earlier than initially committed, Enel Chile became the first electric company in Chile to cease using coal. Following the just energy transition, we are at the forefront of renewable energies in the country. Since 2019, we have connected almost 2 gigawatts of new renewable capacity to the system. In the last 2 years, several headwinds imposed by the market climate and global context, challenged our resilience. But as I will explain in the next slide, our agile managerial actions catalyzed by the strength of our portfolio, we're able to offset part of these headwinds, letting the room for a new one in Chile focused in a more circular, resilient and integrated company with leverage capacity to new market opportunities and disruptions. The new market scenario has brought new opportunities that were able to size through several managerial actions, as you can see on Slide 11. Active natural gas purchases this year due to the increased availability of Argentinian gas and LNG cargoes from different players have allowed us to optimize the operation of our combined cycle power plant and furthermore, to carry out gas trading activities. Our newly connected renewable projects, including those that obtained our commercial operation in the third quarter and our commodity hedging instruments also contributed to the improvements recorded to date. We are conducting some commercial negotiations to better realize our portfolio, which should generate additional value for our assets. Our long-term LNG supply agreement is under negotiation and expected to be closed by year's end. This initiative will enable us to monetize the value of this contract and to reduce our exposure to potential natural gas surpluses in the future. This transaction is another example of how we are unlocking the value of our business trends that could have not been entirely perceived or evaluated. All these managerial actions will enable us to surpass our 2022 EBITDA guidance by 41%, totaling approximately $1.5 billion. In addition, we expect to complete the sale of Enel Transmissión Chile in December and used these proceeds to reduce our debt by $1 billion approximately. Therefore, all these actions are aligned with our value proposition and commitment to our shareholders. We will continue reviewing our assets, looking for value that is locked or not well valorized. Finally, all these measures support the faster deleverage of the company, letting Enel Chile be more prepared in terms of the capacity to reach new opportunities that might arise from the electrification process. Now let's move to Slide 12 to quickly review Enel Chile at the end of this year. As you can see, we can proudly state that we are a unique integrated utility in the country. We have consolidated our position as the largest operator of renewables in Chile expecting to reach 76% by the end of this year. Since September, we became the first energy company to completely phase out coal in Chile. On the distribution side, we are the largest network operator in terms of energy distributed, serving 33 mulicipalities in the metropolitan region of Santiago, with over 2 million clients. Now let's review our actions in order to respond faster in the new market context we described earlier. Our strategy is based also rebalancing our energy portfolio to increase our flexibility and resilience. I'm now on Slide 14. The challenging scenario of the last 2 years has had a strong impact on the sector. However, we have not changed either our goals or our long-term strategy. In fact, spot prices have strongly increased in the last 2 years, mainly due to commodities, demand evolution and transmission bottlenecks leading to high hourly price volatility and increasing location spreads. Therefore, we have carried out several managerial actions in order to accelerate the rebalancing of our portfolio in the generation business to improve our diversification in terms of technology, location and sources. In addition, we will put in place some portfolio flexibilization programs to blend several front lines. Aiming to continue reducing our spot exposure and diminishing the volatility of our integrated portfolio. Let's now see it more in detail on Slide 15. Market conditions made a rebalance of our growth strategy on renewable essential. We will continue developing new projects to add capacity by the end of 2025 with a more diversified geographic location to cope with our sales portfolio and transmission bottlenecks, especially in the North and South. New projects will be mostly located close to consumption centers near our clients. This will also provide us with more favorable conditions for construction and labor contracting and a more comfortable transmission situation. New projects shall include the larger developments of storage systems along with the new renewables facility such as La Cabaña and Rio wind projects in the South and other projects in the center. Consequently, our installed capacity will comprise 79% of clean renewable energy by the end of 2025, and our running development initiatives should bring us several opportunities in the future. Let's see our additional initiatives we have carried out to decrease our exposure to spot market on Slide 16. We signed some renewable PPAs of which the biggest 2 ones are shown here on the slide to purchase energy from third parties such as solar and wind. This is a new action we will continue to pursue as a more flexible and less capital-intensive way to keep growing on sales and strengthen our portfolio. Let's review now some additional actions developed to improve our flexibility on Slide 17. We are increasing our hydro flexibility through several projects we are working on, optimize our several regulation capacity to modulate better the load in our hydropower facilities. This will benefit our energy balance through additional production that will be shifted to peak hours. In line with this, we will do some upgrades in our CCGT units in order to be more efficient and flexible in terms of energy produced. We continue working on developing LNG trading activities and gas swaps to the north of the country to provide efficient thermal supply through our Atacama power plant and to add flexibility to the system. All these initiatives together are supporting us not only to modulate and sources better, reducing the purchases in the spot market, but also optimizing its cost in terms of zonal and our hourly purchase as we are detailing in this slide. As the total spot exposure will decrease 26%, spot purchases during non-solar hours will drastically decrease almost beheld. Furthermore, most of the spot exposure will be opportunistic with CCGT capacity being available as backup in case it is needed. Now on Slide 18, just to recap the consequences of our actions. As we mentioned at the beginning of the presentation, there is no way back in the just energy transition, the time to act is now. And therefore, we have taken our commitments to climate goals and sustainable development very seriously. This is why we were front runners and carried out our coal phase-out process started in 2019 and ended last September with the disconnection and closure of Bocamina II. With this milestone, we began a new green start in our operations, being the first Chilean generator to complete this process. We are replacing the 0.6 gigawatt of coal capacity with almost 1.8 gigawatt of renewable capacity from 2020 to 2022. This is a huge step in our decarbonization process. The Chilean system still have an important step to give to reduce the presence of the coal facilities in its metrics. And we as Enel, we continue supporting this process by investing in renewables and flexible sources such as storage capacity with gas playing its transient role during the path to zero carbon. Now moving to our commercial strategy on Slide 19. We have constantly developed a long-term diversified portfolio of contracts in our generation business, including regulated and free customers. This strategy, along with the diversified generation mix has enabled us to increase our share in a more resilient industry, including the mining sector and other large free market clients. Our contract portfolio will increase by 4% between year-end 2022 and 2025 with an improved diversification in terms of off-takers. The lower stake of regulated customers is mostly due to the termination of a reduction of some regulated contracts, such as the 2008 and 2013 auctions by the end of 2024 partly offset by the beginning of the public bidding we were awarded in October 2017. Another relevant strength of our commercial strategy is the geographic diversification of our off-takers. This factor is highly relevant since it reduces exposure to price volatility. In addition, the long-term duration of our portfolio is a strong point including 45% of contracts with a tenure longer than 2030. The average duration of our PPAs is 7 years, which led us to be a stable long-term commercial position and the recurring EBITDA generation in the following years. On the integrated offering, let's now see the value-added services and products for our customers on Slide 20. When the customer needs to evolve, adapting to the changes is a must. That is why we have developed a wide range of services and products in a context where customers are improving their awareness of the environment, sustainability and efficient use of energy. In that sense, Enel X Chile plays a key role as an agent of change, boosting the electrification in the country by offering new products and advanced energy solution. On the B2G segment, we will continue supporting municipalities to reach their targets of reducing carbon footprint and improving citizens' quality of life. In that sense, we are focused on developing different initiatives related to lighting, infrastructure, transportation and urban design. We are empowering the circular and smart city evolution for the people and the environment. Regarding B2C, we continue working on delivering innovative and smart energy solutions aiming to contribute to the decarbonization of consumption in households. In that sense, we are enabling smarter and better living through cutting-edge technology, making our homes increasingly sustainable and environmental friendly. On the B2B segment, which is an important part of our integrated margin strategy, we continue promoting electrification positioning ourselves as energy partners of our clients by developing an integrated commercial offering for our customers. We are helping our clients to trip in a new, decarbonized, electrified and digitalized economy. In line with that, we continue developing different projects related to the renewable of transportation fleets to electric vehicles, infrastructure, data centers, implementation of energy efficiency in buildings, lighting for private areas, among others. As you can see, our integrated strategy of energy services and products together with the sale of energy will allow us to ensure sustainable growth increasing our customers' loyalty and preserving our margins. Therefore, another important part of our efforts must also be dedicated to our grid business. As we will review on Slide 21. Electrification, grid infrastructure and service quality are essential to achieve our goal of maximizing the value for our clients. Through new technological solutions, we are implementing a new business model to recognize, anticipate and solve the needs of our clients, bringing a higher continuity and quality services, preparing our grids physically and digitally. Intensive training for all our internal staff and contractors also supports this. In terms of main KPIs, we are forecasting an increase of around 2% of the distributed energy in our concession area for 2025, reaching 2.2 million users. In addition, we will continue to focus on keeping elevated levels of quality indicators, reaching the 5% threshold for energy losses again and supporting the high standards of quality through the connection of more than 3,000 telecontrol equipment. In connection with the aforementioned, let's review our focus on customers and now we are determined to improve our clients' needs now in -- on Slide 22. In the current context of just energy transition and electrification, customer centricity is reshaping what energy company aims to be. Technological advances are pushing increasingly fast changes in customer needs, and this is a clear sign for adapting quickly in this digital age. Therefore, we are enhancing our grids and the cultural transformation of our teams to place the customer at the center of our activity. Today, our focus is on recognizing, satisfying and anticipating customers' needs by understanding their context, behavior, feelings, concerns and expectations regarding their relationship with us. This is why we are boosting the digitalization of our clients, and we have carried out different initiatives to improve our clients' experience. This includes, for instance, websites, app, e-mails, social media and WhatsApp as means of customer service and support. On payments, we continue boosting a comprehensive set of payment channels, including various digital and face-to-face options. Summarizing now on Slide 23. In our 2023, 2025 plan, we will continue to lead the country's decarbonization and electrification supporting its transformation into a greener one and also complying with its climate ambitions and targets in line with the Paris Agreement. And definitely, we will be a relevant player in this process, ready for all the new opportunities that the future will bring us. Another important commitment for our company is to create value for all our stakeholders as we will review in the following slides. For a long time, companies have been pursuing profit in the sole interest of creating shareholder value. During several years, they focus one on short-term growth and purely on financial results. Therefore, we measure value creation not only from the perspective of our investors. In fact, the company's strategy will be beneficial to all our stakeholders creating value for all our stakeholders in the long term in a sustainable way. Now I will hand over to Giuseppe to present our strategic plan for the period with details regarding financials and targets for our businesses. Giuseppe, the floor is yours.

Thank you, Fabrizio, and good morning, everyone. I will begin by presenting our new investment plan for the coming year on Slide 25. Our investment plan will allocate $1.7 billion in the period 2023 to 2025. The investment will be focused mainly on our generation business through renewable development. Part of this CapEx will be focused on providing higher quality and resiliency to the grids, anticipating our clients' needs as part of our electrification strategy. 90% of our CapEx is aligned to the sustainable development goals. In addition, more than 85% is aligned to the European Union taxonomy. This strategy will allow us to catch possible opportunity to increase our portfolio capacity. On generation CapEx, let me highlight on Slide 27. We all have witnessed the rapid growth of renewable prices in the hand, during the last few years, we have led the renewable growth in Chile, focusing all our efforts on promoting the development of several technology and have contributed the energy transition in the country. This process has meant concentrating most of our efforts and resources on keeping our strategy on track, and we have been able to consolidate our position and build the foundation for the sustainable development. Today, we are at the door of a new step where we are putting our effort into rebalancing our portfolio to adapt it to the new market context through selected growth. Therefore, we are reshaping our portfolio mainly focusing on storage and solar development in the country central zone next to the center of consumption and avoiding curtailment but still taking advantage of the renewable potential. In line with our total generation CapEx plan amount $1.4 billion for the next 3 years, including $1.1 billion for project development allocated in several technology as shown in this slide. Our other investment will be also focused mainly on guaranteeing the continuity and efficiency of our thermal business since it plays a key role in ensuring flexibility for our operations. In that sense, we are developing projects to improve the CCGT power plant through repowering activities, mainly in San Isidro and water usage in the combined side. Now on Slide 28, let's review the expected evolution of our production mix. With the beginning of the new project operation, we will reach 8.8 terawatt hour of renewable energy by 2025 increasing the stake of renewables in our portfolio. We continue with more conservative view of hydrology. We foresee that hydro production to be flat in the period with Los Cóndores project operation offsetting the early reduction in hydrology that we expect as a part of new climate condition. In terms of thermal capacity, our CCGT will still contribute as a transitory technology supporting the replacement of several coal units that shall be disconnected in the Chilean system during the planned period. As detailed by Fabrizio, we are strongly working to rebalance our portfolio to improve diversification and reduce our exposure to the spot market by modulating our purchases during solar hour at the lower pricing account. With the flexible measures that we are taking, we will significantly avoid price decoupling and bottleneck in the transmission system, reducing the spot price volatility risk in our portfolio. Our contract portfolio will increase by 4% with an improved diversification in terms of off-taker, lower stake of regulated. Sales is primarily due to the termination of regulated contracts, such as the 2008 and 2013 auctions by the end 2024, partially offset by the beginning of the 2017 auction and the estimated increase in the 2015 auction. Finally, our portfolio optimization will allow us to reduce the net-spot purchases by 26%. And most important, we are reducing by 47%, the purchases in non-solar reducing significantly our exposure of commodity embedded in the wholesale market. Let's take a look at our integrated margin EBITDA evolution on Slide 29, where we include the performance of our integrity business generation and NLX. Our commercial strategy has evolved according to the new customer needs. We conceive energy as a services and not just a commodity. Therefore, the results of this strategy has been a solid diversified client portfolio that enabled to secure a recurring EBITDA generation and a long-term partnership with all of our customers, as I will detail now. As you can see, our 2022 adjusted EBITDA will reach $1.4 billion, of which $0.5 billion will come from the gas valorization one-off effect as a part of the agreement negotiated with Shell. Excluding this effect, our 2022 integrated pro forma EBITDA will reach $0.9 billion, comparing it with the 2025 EBITDA figures of $1.3 billion, we see an increase of 41% EBITDA. As you know, with the termination of the old regulated PPA index by commodity, our average PPA price shall reduce that is why we have been devoted investment to make our portfolio more flexible. The average PPA price will move from $74 per megawatt hour in 2022 to $64 in 2025. This is referred only to energy prices. The rebalancing strategy of our portfolio shall bring a positive effect as identified in sourcing in the graph. In this group, we are incorporating the contribution of our renewable projects and the renewable purchases PPA that in combination will support the reduction of average cost of our sourcing resulting also in a more opportunistic purchases in the spot market. In our assumption, the commodity pressure shall be normalize in 2025, reducing significantly the opportunity that we have been benefiting in 2022 through the gas trading activity as we are showing here. Now let's see the performance of our Grids business on Slide 30. Our strategy was built on the belief that the resilient and efficient grid is a key factor to support the electrification process while we offer a better services for our customers. Around 44% of our CapEx shall be devoted to new connection as part of the growth in our customer base and evolution and of electrification and e-mobility in our concession area. We are still working to accelerate the transmission of the electricity distribution network, aiming to deliver a new year of sustainable and reliable smart grid. In line with that, 25% of our CapEx will be deployed to digitalize our grids. Around 31% of our investment will be focused to announce our grids by improving quality and resiliency. Since it will be key to support the electrification that are required us to deliver sustainable and reliable smart grids. Our grid EBITDA shall increase by 17% by 2025, mainly as a result of the volume and indexation offsetting the increase of inflation. Regarding the distribution business regulation, no news from our last quarter call we expect that after a quite long period definition for the technical report, the final distribution tariff decree is expected to be released during 2023. We will continue working together with the regulator to improve the framework aiming to support the digitalization and electrification in the account. Let's move to Slide 31 to review the consolidated EBITDA evolution. Excluding the one-off impact and the EBITDA of Enel Transmission that shall be out of our perimeter, the more efficient portfolio mix for the planned period is offsetting the reduction in the PPA prices and natural gas trading activity. The total contribution when comparing 2025 versus 2022 is $0.4 billion. We can also see the contribution of our plan once comparing the old figures with the new one. Comparing the same perimeter, we can see a sustainable increase even considering a more challenging macro environment. Now on Slide 33. Let's take a look at our debt evolution and funds allocation. The fund, we are expecting from the operation of our business will be in the range between $3 billion and $3.2 billion as cash generation in the 2023, 2025 period. That discounting the CapEx and dividend shall lead to a positive impact on that. By the end of 2022, we will record a significant decrease in our net debt due to the proceeds from the sales of Enel Transmissión Chile that will lead us to An important improvement of our credit profile, reaching a net debt-EBITDA of around 2.4x. When excluding the one-off effect of our gas valorization, including in our 2022 expected figures, our net debt-EBITDA will still be comfortable, positively better than last year planned figures. You may recall that we were expecting a 4.8x ratio for the 2022. The figures forecasted in the plan shall enable to maintain a comfortable net debt-EBITDA ratio, letting Enel Chile in a better credit perspective and with a better balance sheet, opening the space for potential business opportunity not included in the plan. Let's then now see our debt position in Slide -- on Slide 34. As previously mentioned, for the following year, we will pursue a conservative financial policy, focused on maintaining a stable debt level with an optimal financial cost. Debt maturity in the coming year present a comfortable and smooth maturity profile after the repayment of short-term debt that will be made by the end of this year. Our total debt will amount to $3.3 billion by the end of 2025, out of which 27% will be SDG linked. We will continue pursuing more efficient structure in our plan, goal is to increase the share of sustainable finance in our portfolio, enhancing our level of fixed interest rate debt in line with our risk policy. And improving the average term of our total debt in order to maintain a higher flexibility in the coming year. Moreover, we will maintain a significant position of our debt as U.S. denominated since a large percentage of our renewable are U.S. linked. Now on Slide 36, let's -- the net income evolution. We expect to reach a $1.4 billion adjusted net income in 2022, mainly resulting from the one-time effect of Enel Transmisión sale and the gas valorization. When excluding this effect, amounting to $1.1 billion, the adjusted pro forma net income is expected to reach $0.3 billion by the year-end 2022. Comparing 2025 versus 2022 on the same bottom line perimeter, we can see an increase of 38 percentage primarily explained by the expected EBITDA growth as already shown in the previous slide. Depreciation/amortization will evolve according to the new renewable projects that will start operating in the plan period. In addition, we expect to maintain steady financial charges through the period, in line with our conservative financial policy. I conclude with the summary of our target on Slide 38. Our plan will contribute to a cumulative EBITDA ranging from $3.8 billion to $4 billion from 2023 to 2025. Looking at the 2025 figures, the growth in EBITDA will result in a target ranging between $1.2 billion and $1.4 billion, translating into earning ranging from $0.3 billion and $0.5 billion. We are confirming the dividend payout ratio from the former plan, a minimum ratio of 50%, letting a potential window to increase it, depending on the future opportunity that we may have in the market and the discussion with our shareholders during the next annual shareholder meeting to take place on April each year. We are convinced that this dividend ratio will allow us to continue going ahead with our sustainable strategy, maintaining adequate shareholder remuneration and financial position and create value for all our shareholder. I will now leave the floor to Fabrizio for the closing remarks.

Thank you, Giuseppe. Finally, before we move to Q&A session, let me add some closing remarks. The 2022 challenging scenario has not changed our goals and long-term strategy for our company. Indeed, it has made us reflect and put in place several actions to reshape and rebalance our strategy. The added renewable capacity, coupled with several commercial initiatives carried out this year should bring additional flexibility and more resiliency to our portfolio, allowing us to keep focusing on integrated commercial strategy. Focused on decarbonization, electrification will remain. We continue to be front runners in our industry to anticipate our commitments towards zero emissions from 2050 to 2040 , being the first conventional utility already out of coal generation this year. We will continue to promote the electrification of the country through an integrated offer of new products and services for our clients, including business platforms, charging points, electric mobility, higher electrification at the households, replacement of wood heating, among others. Our value proposition to our stakeholders and shareholders, it to be a viable or sustainable growth with ESG high standards fully integrated into our strategy. To conclude, as a result of our actions and the strategy we have just presented, we believe Enel Chile is very well positioned in the market, having recovered the profitability and financial strength to be ready for capturing all future opportunities. Thank you very much. I will hand it over to Isabela for the Q&A session.

Thank you, Fabrizio. Thank you, Giuseppe. So now we're going to starting our Q&A section. So if you hear the -- who is in the audience, just raise your hand, and you can send the microphone, please? And also the ones connected to Microsoft Teams can also make questions and any time you can send also questions to us through our email of investors, ir.enel.cl. We have one here. Thank you, Rodrigo. Rodrigo Mora from Moneda. Thank you.

Can you hear me?

Yes, we can. Thank you, Rodrigo.

I have 2 questions. The first one is related to the announce of selling LNG cargoes. I would like to ask, could you give us some more details about, for example, how many LNG cargoes contemplate the transaction? And also in relation to reduce the exposure volatility, maybe the capital market expected more investment in battery energy storage. And when we see the investment plan, the amount that we can see it's approximately $154 million in batteries. I would like -- could you explain -- give us more detail about how to reduce the exposure? It's only through PPAs with the third part in this hour at night? And finally, a question related to the dividend policy is for 2022, this year, we will 2 main important transactions . The first one is the selling of the transmission line in Enel Transmisión. And the second one is the selling of the LNG cargoes. I would like to know if the policy will maintain in 30%, including a part of the selling of these assets.

Thank you, Rodrigo. Fabrizio?

Yes. Let me address the first question. Unfortunately, I cannot give much disclosure. We already published material effects on Friday, stating what it is possible to say at the moment since this is an operation that is still under implementation with third parties and some approvals are still in process. And so it's difficult for us to give some more details. But of course, we will be ready to disclose it once these approvals are concluded. In general terms, let me say that it is not going to change our overall business in -- nor in -- neither in the natural gas trading activities nor in our CCGT operations. And is this something that allow us to, let me say, exploit the current conditions of the market to reduce potential exposure that we could have in the future. It's already occurred in the past. This is not a secret that we had to face some surplus -- gas surplus in the past. We had also to pay to manage that. And now there is a window of opportunity in the market that is really attractive, as I said, to partly manage this potential exposure in the future and crystallizing some interesting value at present. So as for the second question, well, the second question is a little bit complex to address in a very few words. But anyway, let me try stating like that. First of all, our goal is to be balanced in our portfolio -- in our generation portfolio. What it is included in our plan is some spot exposure, but it is an opportunistic spot exposure that is mostly concentrated in solar hours where we expect to have a very low spot prices and is better for us to buy energy in the spot market while producing it with our own CCGT plants that will be anyway available to cap these purchases in case the scenario is different and it is needed, okay? So -- let me say that in general terms, we want to be balanced. As for batteries for storage technologies, we think that, of course, Chile is a very interesting country to invest in batteries. I think that Chile needs investment in storage, especially in the future. So we are investing, at the moment, what we see is rational from the dynamics of the market, but we also believe that in the future, there will be additional room for investing in that. We are going to, of course, revise every year the market conditions and look for additional opportunities if they arise. And in the long term, yes, we strongly believe there is a strong case in Chile for storage technologies. And we are also open to exploit all the companies that we have as part of the more -- a bigger group at a global level where Enel is conducting several initiatives in different technologies to be ready for the future also in this field. And let me -- Giuseppe answer you about the third question.

Yes. Well, on dividend policy, let me say that nothing changed in comparison with the last year plan. So -- for 2022, we assume to have a payout of 30% while in the rest of the plan, we are going to have a minimum 50% dividend policy. And of course, this will be discussed in April with our shareholders for what concern Enel Transmisión. So the income -- extra earning income coming from the sales of Enel Transmisión, these will be part of the regular distribution of dividends. So the 30% will be done taking into the consideration the earnings coming from the sales of the company.

Thank you, Giuseppe. Do we have more questions here from the audience? Yes, please. Also another one.

I've got 3 questions. The first one comes on the back of the main KPIs that you were presenting in this plan in comparison to the prior. We see a significant increase in spot prices expectation going forward. And it would be very interesting to see how that changed within the solar and the -- solar hours and nonsolar hours because that difference has been huge in the past, and it will be interesting to see what are you projecting to the future. That's the first one. And in the same -- in that very same part, KPIs for adjusted EBITDA per megawatt hour is dropping significantly in comparison to the prior plan. So we'd be keen to see more detail on that. Second question comes from the gas monetization I don't know if I've get it right, but this monetization comes from the sales of future cargoes from the years 2023, 2024 and 2025. And if that's the case, can you please explain a little bit of what's kind of the price that you are embedding on those sales -- on the future sales? And the last one on my side is, looking at the distribution business, last year plan was considering $160 million in EBITDA on 2024 or within the plan, and now you're aiming $110 million. So it seems like a big difference with no material change on what we're seeing either on [ EBITDA ] or the current regulation. So would be also keen to see what is changing on the distribution side.

Okay. Let me try to address the questions. Since there are more general questions, more specific questions, let me try first to address the question about the gas deal that I understand perfectly that this rising curiosity -- but as I said, unfortunately, this is something that we cannot disclose details so far. It's of course, a sale of some volumes that we have in our contracts. As I said, we have never basically used all the amount, all the volume of our -- the total amount that we have under our contract, our long-term contract in LNG. And we also faced in the past some costs because we are not able to consume all the gas that we have contracted in our contracts. So when it comes to the future, and of course, we were expecting all the renewable developments that we have commented also during the presentation, it's still the case that we foresee some gas potential surplus in the future that we thought is a very interesting moment now to put in value, of course, considering the market conditions that we have. So again, I cannot disclose the price, of course, of this deal. But of course, it's in line with the current market conditions, okay? Of course, there are some more liquid and clear price signals in the short term for 2023, for 2024, a little bit less leeway than transparent for the longer term. But anyway, of course, the price is in line with the current market conditions. And -- about the solar -- the spot expectation, as I said, this is something -- well, first of all, in general terms, of course, the spot prices are higher in this plan because it's a different commodity context. If you look at also the -- a comparison between our old plan commodity scenario and current plan commodity scenario, of course, now the scenario is pretty higher. And this is -- and this reflects, of course, also our expectations in spot prices for the future. But as I said, we are not particularly concerned about that because our portfolio will be balanced. We are forecasting some purchases in the spot market, but as I said, mainly opportunistic and be backed up anyway from available capacity from our own generation fleet. Of course, we are also expecting there is an increasing difference between the price in solar hours and in nonsolar hours. That is one of the drivers, by the way, why we are now investing in storage technologies. So this is something, as I said, we don't see -- we are not concerned about. Our plan is consistent with that. And well, this is basically about your question, I hope to have addressed it about solid prices. And the third question, if I remember well, is about distribution business and a comparison with the old plan, and I ask Giuseppe to explain.

Yes. Let me start with one, it is the easier one, because last year in the plan, we included also the Enel Transmisión EBITDA. This is basically the reason because we have such an important difference between the EBITDA last year and to the planned EBITDA. For what concern the other question about the decrease, in terms of KPI, the EBITDA per megawatt hours this year comparison with the last year, we have to consider 2 main points. The first one is that this year, we are going to use the 2025. So last year of the plan is 2025, where we have the expiration of some regulated PPA with a very high price. So this is the reason because we have a slight drop in 2025. And the second one is related to the fact that the commodity scenario are completely different between this year and the last year. So -- this is the reason because you see EBITDA per megawatt hour so different in comparison with the last year.

Thank you. We have a question here from Andrew McCartney, please. And also then -- okay, sorry, you can go ahead. Please just present yourself and the firm that you are representing, please.

Okay. I'm Fernan Gonzalez sales from BTG Pactual. And I have 3 questions for you. From your presentation, I don't know if I read it correctly, but are you strategically less interested in the regulated segment going forward because of the obvious things that have happened in recent years? My second question is about the regulatory framework in the wholesale market in generation in the short term. Do you foresee any changes because we've heard several people start talking about potential overhaul of the framework, perhaps moving away from the marginless model into more of a supply or day-ahead mechanism. What are your thoughts on that? And what do you think that could happen to the system if that were to materialize at some point? And my third question is about gas but not about the announcement, per se. But whether or not have you been able to secure LNG cargoes for '23 or not? Because we've heard about some other companies facing issues on that matter.

Thank you, Fernan.

Well, let me say -- let me try to address one by one. The first one was related about strategy...

On the regulated market.

Regulated. Okay. Well, let me say that in general terms, we have always been shifting our sales from the regulated part of the business to the free market segment. And this is a process that is taking place from several years, okay? So it's not strictly related to what happened to with PEC 1, PEC 2 discussions, okay? Why that? Well, for several reasons, one of which being something that is materializing right now, that is the fact that the customers will be increasingly interested in electrify their processes. So we are being able to provide them this integrated offers, not only selling them energy, but also some services. And this is something strategically important to us for the future. So having some, let me say, real clients, industrial clients, where I can also offer some additional services in addition to the commodity to the energy is something that is important for us in the long term for our strategy. And let me say that, yes, with what happened in the last year, so this is a strategic move. Let me say, it's also be reinforced by what happened because in general terms, the direct relationship with the free market clients is also more regular in terms of predictivity of what happen in your portfolio. So it gives you more visibility in addition to the strategic reason I commented before. As for the second question, well, it's a very interesting question. What is going to happen? I mentioned the generation part of the business. I would complement also on the distribution because Chile -- as some parts of its regulation that is quite old fashioned, let me say. There's no spot -- a real spot market, as you mentioned, in the generation business. In the distribution, there is a model regulation that is basically not applied in any other country in the world. So there are -- there is room for improvement. And as you correctly mentioned, the -- some comments already arose about the possibility to introduce a real market in the generation business. But in general terms, let me say we are very open to this discussion. Of course, we are also trying to give our contribution. We have several expertise, of course, being part of a global group, of a global company in several other markets. We can also contribute to this discussion. And we are positive on that, of course. Everything that will improve the regulation, both in generation and distribution business, is something that is more than welcome and we will support it. But this is something that is stated clearly that is not part of our plan. The plan that we presented to you don't include -- doesn't include nothing about that because usually, this kind of discussions take time. If we look back to what happened, for example, in the transmission part of the business, it took like several years from the initial discussion to a complete regulation put in place. So we thought that it's more realistic and prudent not to put nothing in this business plan as part of this potential discussion. But we are looking at this potential changes in a positive way, of course. And as for your third question about LNG cargoes in 2023, let me say that we don't have absolutely any concern about our supply in the next year. Well, actually, we are actively managing it also on a very small part, but it's part of this deal. We cannot give you -- we cannot provide you with some more details, but we are absolutely in line with our expectations. So the gas planning for the next year is already concluded. And well, I would say that in addition to that, there is also some potential additional opportunities that could arise from Argentinian gas auctions that will take place soon because the very good piece of news -- recent piece of news is that there is an important amount of Argentinian gas that will be available also next year, both for winter and summer period. So as we did this year, we will participate in this auction, and we are -- we have a positive expectation about that.

Thank you. Now we have a question here, please.

My first question is regarding the hydrology sensitivity you're showing in the appendix. Recall that last year, you were talking about a 10% differential there, up or down, leading to $100 million EBITDA impact. This year, the effect is looking rather less than that. So just wondering if you could provide some more color as to why you're seeing a lower sensitivity there? Second question is with respect to gas availability in 2025. You talked about the importance of having this 4.8 terawatt hours of CCGT production. So I just wanted to know where are you sourcing that gas from in your planning. What's the split there between LNG, gas from Argentina, spot purchases? if you could provide some more color there, that would be really helpful. And then the final question, just noticed in the financial targets, you have the EBITDA lower in 2025 versus 2024. I think you mentioned there, Giuseppe, a little bit about the importance of the regulated PPA, some of those running off in 2025. But if you could maybe share some of the other variables that might be driving a decline in EBITDA in that year, that would be great.

Thank you, Andrew. Now Fabrizio?

Yes. Well, first of all, I think that we'll have to end over to Giuseppe for some debates about these questions. But let me say that as far as the hydrology conditions are concerned, let me highlight at least some -- 2 general comments about it. Well, first of all, I don't know if -- I don't remember, sorry, if Giuseppe mentioned explicitly during his speech. But we revised downwards the hydro production hypothesis that are embedded in this plan compared to the plan that was presented last year. Not so much because a huge shift was done last year. And so -- but we lowered a little bit more our expectation to be more prudent in our approach. So the figures that we presented in this plan assume a lower hydrology compared to the previous plan. And why we did that and why we are not so concerned and probably also the -- our exposure in our sensitivity to hydro condition is lowering is because of the actions that we put in place. As I said, we undertook several actions in order to balance our portfolio. And so to be more resilient and more ready also to face potential words hydrological conditions in the future. So there is the more general -- a more general answer about your first question. I don't know if Giuseppe wants to add some more details on that?

Just to say that in the annexes , we had the usual sensitivity. And you can see that changes of 10% of the hydrology assumption were roughly $50 million. In the plan, we -- our assumption is to have a hydrology of 9.3 terawatt hour that will increase at the end of 2025 because of Los Cóndores production that will start the operation in 2024.

Now we can go to the second question, that is the gas availability and how is this ...

Yes,You mentioned explicitly, I think, to 2025. I'm not sure I got exactly the figures who were referred to, but let me comment this way. What we have in our plan, of course, is something that is consistent with our LNG long-term contract, let me say, volumes after the negotiation that is under discussion. And on top of that, we are also assuming some spare gas from Argentina during the summer period, but it's a very small amount of gas and a prudent assumption about this potential opportunity from Argentina. But as I mentioned before, our needs, our gas needs are well balanced with our LNG contracts. Also after the review that is under discussion. And this additional Argentinian availability would be just a window of opportunity for us to have some more optimization in our portfolio. And as I said, we factored in some very prudent hypotheses on that in our figures.

And again, for what concern the -- in the comparison '25 versus '24 is just the expiration of these 2 regulated PPA, one that was related to the '28 auction and the other one related to the 2030 auction. This is basically the main reason because we have such a drop in 2025.

Okay. Do we have more questions here in the audience? Otherwise, we're going to -- no? So please, on the Microsoft Teams. I think we have a question on Microsoft Teams. Please, could you open your audio? Perfect. So we have the question from Martin from Balance. Please?

Yes. Martin [indiscernible] here from Balance Capital. I have one question. It is, when do you think that PEC 2 could be implemented? And how much money do you expect to collect from the excess PEC 1 that was moved to PEC 2 when that happens?

Thank you, Martin. Fabrizio?

Okay. I will -- Well, let Giuseppe comment on this very specific and financial matter question.

Yes. We believe that we are going to have the decree confirming our receivable in 2023. In the first quarter, we assume to be there. And we expect to recover around $400 million.

Okay. Do we have more questions from Microsoft Teams? We have some on email now? No. Okay. So we have a question that just arrived from [ Morino ] [hindiscernible] from Bradesco. The first question is what level of price are you playing for the energy brought through the PPA? I mean, we wanted to know the price that the PPA -- purchases PPAs that is in our strategy. The second question is, what will the shape of spot exposure be in the coming years? And could you explain again how you have decreased so fast this exposure on the spot market? And the third question is, could you provide us with the cost per megawatt of capacity and profitability you are looking for the projects of solar and also the storage ones? This is the 3 questions.

Okay. Let me try to address one by one. For what concern the level of price in our purchases through long-term PPAs from third parties, well, let me say that, of course, we cannot disclose precise prices for every deal. But we have already built quite important, quite a significant PPA portfolio. And let me say that, of course, the price is also depending on the technology and on the offtake details agreements that we have in each PPA. Each PPA is different. And so it leads to very -- quite different prices. As you can imagine, it's different if we can -- if we buy solar production in solar hours or if we buy wind production with a base load profile. It's very different. So it's difficult to compare. But let me say that on average, the price would be in the range from EUR 30 to EUR 40 per megawatt hour. This is a reasonable range we can look at when we see PPA -- our PPA portfolio.

Fabrizio, just a precision. Dollars. Dollars -- yes.

Dollars, I said euros, sorry. Today is not a big difference but anyway, yes. Well, spot exposure, I think that, as I commented, we have put in place several actions to reduce it drastically in the next years, leaving just a small amount of opportunistic spot exposure that we will benefit from in the next -- in the future. And of course, as I said, we were really focused also on the specific characteristics of this exposure in terms of [ hourly profile ] of this exposure, in terms of seasonal profile of this exposure, in terms of location profile of this exposure, with the final goal to be balanced as much as we can in this. And we will also adjust our investment plan, our PPA purchases from third parties in order to be as much as balanced as we can and leaving just the room for additional opportunities in terms of short-term optimization in our portfolio, both in power and gas activities. And as far as our investment costs are concerned, Giuseppe, can you provide some details, a little bit?

For what concern, the solar power plant, we are talking about $0.9 million per megawatt. Of course, that is an average number, it depends on the characteristics of the project. While for what concern the wind project, we are around $1.4 million per megawatt.

Okay. Thank you, Giuseppe. We have more questions coming from our email. So I would try to summarize some of these because some we have already answer. So the first question here is regarding the use of proceeds of Enel Transmisión sales. So if you could give more details on what's the expectation, if you are seeing that could have a window to increase the dividends regarding these proceeds that was not planned? The second one is just to give more detail on the PEC 2. So when you are expecting to receive the cash of PEC 2, okay?

Giuseppe?

Yes. For what concern the usage of proceeds for the sales of Enel Transmisión, we are going to repay our debt according to the maturity date, and giving priority to the loan that will not have any breakage fee. While talking about the PEC [ dosser ], PEC 2, we are in -- we are waiting for, as I said before, we are waiting for for the decree in -- at the beginning of the next year. And we are in talks with some banks in order to factorize the credit that should be certified by the decrease. So -- next year, we are going to have the positive effect in terms of cash. The big difference in comparison with previous one, the PEC 1, is that the credit that we are going to have includes the interest. So in terms of factoring, it shouldn't be a significant impact in our financial expense.

Okay. So we have another question also coming from our email. So could you comment on the expected cash generation over the next few years comparing to the planned net income you expect to generate, especially with depreciation [ charges ] becoming much higher now and as well as the expected unwinding of receivables? How does this influence your dividend payment outlook? So several questions. If you -- let me do the first one. So is the cash generation, how we're expecting that the source of funds? No -- So what are expectations?

Our expectation, we are basically assuming a cash conversion of around 70% and EBITDA cash conversion of around 70%. And on top of that, as I said before, we are assuming to recover the receivable coming from the PEC 2 and PEC 1 that is smaller one, with the usual net working capital measure that we used to make. I mean, this is the source of fund. The other question was...

About the -- considering the [indiscernible] on the receivables. Probably referring to the PEC 2 to, what's going to be the policy -- the dividend policies of the company?

The dividend policy, as I said, is going to be, again, the 50% starting from -- minimum 50% starting from 2023 year onward. Minimum, so there is a phase to increase, but we would like to see how the next year is going to be in order to have a better view of the situation. But as of today, this is our plan.

Perfect. And then we have -- I think it's the last question that we received. What is the strategy for Enel Chile after the end of the current investment cycle? Keep development more renewables or increase the payout?

Well, I think that I hope we already addressed this question during our presentation. But let me anyway, again, comment on the fact that, of course, we are continuing pursuing our developments in renewables, both investing directly in our generation projects, we showed a very significant pipeline that we have been able to develop during these years. And we are -- think we have plenty of opportunities on that. And also implementing it through available energy from long-term PPA purchases from third parties that we think is an additional action that is important to us also to bring some more flexible reacting way to keep growing in the business. And so let me say that in general terms, the company will be close its industrial plan with enough financial strength to keep growing in the future. and leveraging on all the future opportunities that will arise. And of course, every year, we are going to carefully revise the use of our funds and guaranteeing this is the policy, the minimum of the 50% payout about our dividends, but revising it year-by-year, taking into account all the financial performances and the growth opportunities that the company will have.

Okay. Thank you. In case we do not have any other questions here from the audience, I would like to thank you all for joining us today, and to mention that our team, Investor Relations team will be available for any further questions you may have. Thank you very much.