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

Good morning, ladies and gentlemen, a warm -- to our 2023 Enel Hybrid Investor Day. Many thanks to our investors, analysts, media, rating agents and colleagues here in the room with us and also the ones connected. Also, I would like to thank our Chairman, our senior management team that is also here present here with us. And now our team of IR, okay? I am Isabela Klemes, the Head of Investors Relations. Joining me this morning our CEO, Fabrizio Barderi; and our CFO, Giuseppe Turchiarelli. Our event to be conducted in English, our investors can make questions during the Q&A event, okay, during the Q&A section. The presentation that we are going to show today are already included in our website, www.enel.cl, and our app investors. Now let's please look the agenda on Slide 2. So here in the agenda, Fabrizio will drive us through the energy context in Chile, the pillars of our plan and our value proposition embedded in this 2024, 2026 window period. Then Giuseppe will present a financial update of our strategic plan and our targets for this year. The Q&A session will be run at the end of the presentation after the closing remarks. Analysts and investors who are here today in the room are connected via Microsoft teams can participate. For those connected, please raise your hands to book yourself, and we will open your line and video for the ones that are connected through teams, okay? We ask for those who are eventually connected by streaming, not via Microsoft teams to kindly send us your questions through our mail [email protected]. As ours, our team will continue to be available to provide you with any other information or details you may need with respect to the figures presented today. Thank you. And now let me hand over to Fabrizio. Fabrizio, please.

Many thanks, Isabella, and welcome to our 2023 Investor Day. Chile is committed to the Paris agreement and formally indicated its commitment to CO2 neutrality by 2050. Therefore, Chile offers impressive sizable renewable potential coming from diverse sources that can support the country to reach its net zero goal. Decarbonization and electrification will be key drivers for net zero. From this perspective, the evolution of energy demand will be linked to the potential penetration of electricity in the country's energy consumption. On this, it is worth highlighting the e-mobility strategy developed in the country so far, including the public transportation system in Santiago and charging point infrastructure, both initiatives that we have supported and designed with other apartments. On the other hand, the market scenario has been challenging during recent years including COVID contingency, the Russia-Ukraine war, faster-than-expected adverse outcomes of climate change, inflationary pressure, among others. These factors, of course, have also directly impacted the energy sector in Chile, bringing several headwinds and new opportunities. So this new macro and market conditions have raised several discussions, and therefore, we have a variety of topics under the country's regulatory agenda. Let's move on Slide #5. The country's energy agenda is extensive, considering not only the topics related to achieving long-term climate change national commitments, but also some structural reforms needed in the short term to guarantee the equilibrium of our system. For example, the energy storage framework and the review of the short-term system operation are needed to continue replacing fossil oil and coal thermal plants with renewable plus batteries. On this topic, we believe all the authorities have understood the importance of a fast response to market goals. On distribution, it is a consensus in the Chilean market that the current regulatory model should be quickly updated. The current model has been in operation for more than 40 years. Clearly, the change in the clients' needs and all investments required to attend the electrification demand is something fundamental that may be due to other priorities were left aside for a while. We intend to bring it back to the priority list. Finally, all the market expectations are now on the proposal, which is to be presented by the government to give a final solution to the back topic, providing the right sign to market, clients and investors. We expect to have more details on a government proposal to Congress within the next few days. As you can see, all these topics pursue the same result, bringing the country to the next level to deal with the new electric utility paradigm, bringing additional complexity, but several opportunities to our company. Business as usual is no longer an option. And therefore, the whole industry must evolve and there is no time to lose. Now let's see on Slide 7, the journey of our company Enel Chile in this fast-moving environment. In 2018, Enel Chile completed a corporate reorganization, including the acquisition of Enel Green Power Chile. Since then, all the company's efforts have focused on boosting Chile's energy transition and its decarbonization through renewable capacity. Moreover, we finalized our decarbonization process in September 2022, with the closure of the third and last coal-fired unit, much earlier than the previously scheduled 2040 shutdown. Therefore, Enel Chile became the first electric company in Chile to cease using coal. During these last 2 years to cope with the challenging market conditions, we have carried out several managerial actions to improve our flexibility and resiliency. We also focused on creating and unlocking value putting in place successful asset rotation transactions such as the sale of Enel Transmission Chile and the sale of the nonstrategic solar assets at Arcadia. Also, we [indiscernible] the value of our long-term cash contract with Shell. All the proceeds from this transaction were used to reduce the debt and bring additional room to continue our investment program. We added 1.7 gigawatt of renewable capacity with approved code, enhancing our portfolio flexibility and diversification. During the next 3 years, we will continue promoting decarbonization and sustainable growth in our generation and grid businesses, developing a selective and flexible portfolio according to new market conditions. All we did an integrated and financially sustainable approach, letting us be prepared for new opportunities that could arise. Now let's see what this more resilient and prepared Enel Chile is on Slide 8, please. We have strengthened our position as Chile's largest renewable operator with 6.5 gigawatts of net renewable capacity, equivalent to 76% of our total generation assets. In 2023, more than 70% of our generation is greenhouse gases free production. On the distribution side, we are the largest network operator in terms of energy distribution, serving 33 municipalities in the metropolitan region, including more than 2 million clients with high-quality service and the comprehensive integrated approach to continue promoting electrification and decarbonization of the country. All in all, with our service company and LX, we are also contributed to increasing the electrification standards and opening new markets and opportunities. Now on Slide 10, let us look at the strategic pillars. We will focus on to enhance Enel Chile's value as a sustainable and integrated company. We will continue actively managing the portfolio we have developed during the last years to boost our asset-based resiliency, flexibility and value. This includes -- the renewable capacity added since 2021 and that we will continue developing through a selective capital allocation according to market condition. The continuous optimization of our combined cycle power plant operation and gas trading activities, thanks to the increased availability of Argentinian gas and our long-term LNG supply contract. The net effect of Arcadia capital gain sale recorded last October and the use of these proceeds to reduce debt. We will continue promoting efficiency and excellence across all our business segments, including a strict operating cost discipline to improve profitability and value. In addition, we will also focus on strengthening our financial position through sustainable growth and seizing market opportunities to add value for all. Let's see how are we going to achieve these goals on Slide 12, starting with our generation business. Since the last couple of years, we have carried out several managerial actions in the generation business that will continue in this new strategic plan. Let me give some examples. We will continue to develop a selective and diversified sourcing strategy. We will continue to invest in wind facilities and solar power near the consumption center and also through [indiscernible] and we will increase our capital allocation into more flexible technologies like batteries that help us to cover the new dynamics of the market. Also, considering our operations size and maturity, we will continue adding new flexibility and efficiency. Our priorities are to continue balancing our sourcing portfolio, looking at electricity and commodities jointly and shielding our margins. I will give more details on this later. Finally, we know we cannot develop the entire country's capacity needs as much as we want, so we will seek leverage on partnership to tackle this. I will give more color to this in the upcoming slides. Let me talk now about an important topic that is at the core of our strategy and how we are strengthening our integrated margin now on Slide 13. As you are aware, during 2024 and 2025, we are experiencing the termination of some regulatory contracts, such as the 2008 auction by the end of 2024 and 2006 and 2013 ones by the end of 2025. This termination translates into an expected decrease in our average contracted portfolio when you compare current figures with 2026 ones. We have been assessing several scenarios over the last 2 years to design the best strategy for our company. In that regard, the rise in the current electricity prices is clearly there, opening a new market opportunity for long-term contracts in the free market. This is a very interesting moment in which we are able to sign profitable long-term contracts from the free market. Giving not only a solution for 2026, but also more predictability to our shareholders in the medium and long term. All in all, it gives us the possibility to grow with profitable investments. Now let me drive you through one very relevant topic, how we are strategically managing our sourcing portfolio, one important level of this strategy. As we are showing there as the B effects in the graphic, sourcing strategy is going to materialize a significant improvement in our portfolio. Declining gas prices will drive down thermal costs and spot prices with effective PPA buy strategy and increasing production in renewables, complementing the effects and lowering the cost of sourcing. Let me detail this optimization further, starting with our integrated margin strategy on Slide 14. Our portfolio of PPAs is evolving to become more free market oriented. For 2026, there is an open position that is not already strategically contracted considering the current repricing movement that we are taking advantage of. Our integrated offering allows us to sell integrated products and services for our clients in regulated and free markets, helping them pass through the electrification process in line with our strategy of going beyond commodity. But let's now review the outcome of our commercial strategy. Please on Slide 15. Through our recent years, we have developed a long-term diversified portfolio of contracts in our generation business, including regulated and free customers. This strategy is supported by diversified renewable generation mix has enabled us to increase our share in more resilient and profitable business segments including the mining sector and other industrial free market clients. Considering our sales target, our contract portfolio will increase by 9% between year-end 2023 and 2026. The lower stake of regulated customers is primarily due to the termination of some regulated contracts, as I have mentioned before. Another relevant strength of our portfolio is the geographic diversification of our off-takers, which enables a relevant reduction in price volatility exposure, which is very important in a market with bottlenecks in the transmission infrastructure. The fundamental quality of our portfolio is related to its long-term structure with a 10-year average duration, which allows us to ensure a significant level of stable and recurring revenues and EBITDA in the following years. Let's take a look at our sourcing allocation that we have designed and developed in order to backbone this commercial strategy. Please now on Slide 16. Our sales are expected to increase by 2.6 terawatt hour by the end of 2026, mostly owing to higher sales to free clients. In the same period, we are going to increase the structural sourcing of energy by 3.9 terawatt hour coming from the growth in renewables of 1.2 terawatt hour and the new long-term by PPA of 2.7 terawatt hour. To complement this position and cover the additional sales, we have our very competitive CCGT fleet, which can be used depending on prices and system operator dispatch, giving us an additional buffer in cases needed, that we are representing in the chart as the spare thermal production. The potential generation of our CCGT totals around 10.6 terawatt hour. All this would create a balanced portfolio, reducing risks compared to past years, naturally hedged against commodities [indiscernible]. Now on Slide 17, let me show you why we are comfortable with our thermal position backboned by our active commodities portfolio management actions. Gas portfolio is really important for us. Gas activities are crucial both for securing our thermal production and generating additional opportunities that represent a perfect natural hedge complement to our electricity portfolio. I would like to point out that we have an important competitive advantage in the local market related to our long-term LNG supply contract with Shell, which is the basis for planning our thermal operation. Additionally, this long-term contract is supplemented by several agreements with Argentinian gas suppliers. Both allow us to have a significant gas availability to operate our efficient combined-cycle thermal power plants to support the stability of the electricity system and also to carry out gas trading activities, taking advantage of local and international prices opportunities. Before concluding this topic, let's talk about Chile's potential growth in terms of energy demand and how we are preparing our company to pursue profitable opportunities on Slide 18, please. As you can see, according to different scenarios depicted by various sources, the demand will potentially have an important growth in the following decades, some more than others. However, there is still a consensus on the massive potential in terms of energy that will be required to fulfill the national demand, including a peak in the electromobility, the National Green hydrogen strategy that the country is pursuing and the employment of more secure and clean energy into the national mining industry. This is a clear opportunity. We have a robust pipeline, well diversified in terms of technology, locations that supports these scenarios to take advantage and respond quickly to these market needs, maintaining the financial sustainability of our company. This is why we commit to promoting partnership to deploy our growth ambitions with higher investment return and fully eligible for hedging risk assessment. Now on Slide 19, let me show you how we are focusing on rebalancing our portfolio to adapt to the new market dynamics and to continue taking feasible market opportunities. In the context of the rapid growth of renewable presence in the country, we shall continue to concentrate most of our efforts on reshaping our portfolio considering 2 factors: flexible technologies and the diversified geographic location. We are indeed increasing our capital allocation to more flexible technologies. We already have some projects under construction, including the development of storage system and new renewable facilities. For example, we have our wind project, La Cabaña, located in the south of the country and 2 solar projects, El Manzano and Don Humberto here in the Metropolitan region. In line with this, our total generation CapEx plan amounts to USD 1.9 billion for the next 3 years, including $1.5 billion for project development allocated to several technologies. We will continue developing new projects to add 1.3 gigawatt of capacity by the end of 2026, improving the presence of storage in our energy metrics. As I have anticipated, to execute it with a smooth impact on our cash flows, we are also introducing the strategy of working through partnership to maintain control of our assets while ensuring at the same time our financial sustainability. In this context, we are considering a record to third parties in future renewable projects to support capacity growth. This reshuffle in our capital allocation will bring more flexibility and optionality, translating into higher returns and into a lighter capital stretch. Now I will close this chapter and start to talk about our view of our distribution assets and what we have been executing to improve its value in our portfolio. Please now on Slide 20. We continue to be committed to our long-term view business model, which promotes the decarbonization and electrification of final consumption over the following decades. Over the last several years, we have developed a sound commercial strategy, aiming at new client solution through a more comprehensive integrated offer. In addition to an enhanced platform-based business model, websites, apps, email, social media, WhatsApp for customer service and support. The resilience of our Grids and our efficiencies have been fundamental pillars of our digitalization strategy and we have made investments accordingly over the past years. Given the current context, our efforts will continue to be focused on supporting electrification, mainly by reshaping our Grids operation to obtain additional efficiency coupled with other digitalization investments. Regarding those mentioned earlier, I would like to point out that we will continue working with the authorities and all relevant stakeholders to achieve a regulatory modification that needs to support investments and promote electrification and digitalization. This is a must since electrification is a crucial part of the energy transition scenario. And the current regulatory model has not yet been adapted according to this new reality. Let's say all the factors I've just mentioned combined into our distribution plan on Slide 21. In order to support electrification, it is mandatory to be resilient and efficient. For 2024, 2026 period, we are designating $0.3 billion of CapEx to ensure new connections, reshape our grace and focus on quality and digitalization. Most of our CapEx will be devoted to new connections, which result from the growth in our customer base and the evolution of electrification in our concession area. We are forecasting an increase of around 8% of the distributed energy in our concession area by 2026, considering a customer base of 2.2 million clients. 37% of our CapEx will be used on grid management, in line with our strategy, elevating the transformation of the electricity distribution networks to deliver sustainable and reliable smart Grids. Around 70% of our investments will be focused on improving the quality of our Grids and increasing digitalization. It is important to highlight the big effort we are making to make our processes more efficient. The OpEx per client ratio will decrease by 19%, reaching $45 per client into 2026. Now I want to highlight an important pillar of our business plan on Slide 23, where I will summarize all the efficiencies we are engaged in. Renewable capacity will amount to 7.8 gigawatts, around 79% of the total generation capacity with emission-free production potentially reaching 82%. The energy sales will reach around 33 terawatt hour in 2026, covered by our efficient and balanced portfolio through our renewable and thermal production plus PPAs long-term purchases. Greece business will remain stable in terms of quality indicators and we expect an increase in consumption apart from potentially better regulatory cycle dynamics for the 2024, 2025, '28 cycle, not considered in our planned figures. We will continue to see additional value creation from our integrated offering strategy increasing our electrification KPI to over 3.3 gigawatt hour in 2026 compared to 2019. This is a remarkable indicator that highlights the progress of our electrification strategy. Now on Slide 24, let's see how everything mentioned before is reflected in our main targets. Looking at the EBITDA, we are seeing a 15% improvement between 2023 and 2026 figures in our new plan. And also when compared to the previous plan as a result of the unlocking value strategies carried out over the last 2 years is better. The increase in EBITDA will translate into a target of between $1.3 billion and $1.5 billion in 2026, resulting in earnings ranging between $0.4 billion and $0.6 billion which also reflects the improvement when compared to the previous strategic plan. Now I will hand over to Giuseppe, who will guide you through our numbers and targets. Giuseppe?

Thank you, Fabrizio, and good morning, everyone. I will begin now on Slide 26 to present our new investment plan for the coming years. Our investment plan will allocate $2.3 billion in the 2024-2026 period. Continuing with our strategy started some years ago. This investment will be focused mainly on our generation business through renewable development, strengthening our commercial strategy profitability. Most of the projects shall be executed through a partnership in order to continue boosting decarbonization and at the same time, maintaining a comfortable and healthy financial position. More than $300 million will be allocated to continue improving our Grids, their quality of services and resilience and our wide offer of products and services, increasingly in line with the evolution of our customer needs. As you can see, our new plan include a moderate increase in investment when compared to the previous plan. This is mainly explained by better current market condition with more attractive expected returns. Therefore, our CapEx level are back to the previous year levels will be mainly assigned to renewable growth as we will see in the next slide. So let's take a look at the capital allocation for our generation business on Slide 27. During the last decade, we have led the renewable growth in Chile, focusing on our efforts on promoting the development of several technology that have contributed to the energy transition of the country. Since last year, we have been putting our effort into rebalancing our portfolio to adapt it to the new market context through selective growth. Hence, we have been reshaping our portfolio accordingly. In fact, in this new plan, we are strongly increasing our investment in storage system, moving from 0.2 gigawatts in the previous plan to 0.7 gigawatts in this new one. In addition, we are focusing on solar development in the country central zone, mainly distributed energy next to the center of consumption, minimizing curtailment. We confirm our focus on wind project, targeting 0.3 gigawatts of additional capacity in the current plan. All in all, we will increase our renewable capacity by 1.3 gigawatts in 2026. In terms of asset maintenance, investment considered plan will also be focused on guaranteeing the continuity and efficiency of our thermal plants since they play a key role in ensuring flexibility for our operation. Therefore, we are devoting investment in several of our thermal facility to announce their efficiency and to reduce their NOI emission. In addition, we have also a one-off CapEx to recover the efficiency and the production level of Ralco Hydro project in 2026. In connection to this, let us now look at the expected evolution of our EBITDA for the generation business in the coming year on Slide 28. Our generation margin is expected to add around $0.4 billion to our EBITDA by the end of 2026 when compared to 2023 figures, reaching an amount between $1.5 billion to $1.7 billion, despite the termination of several regulated PPAs. As you already know, with the termination of the old regulated PPAs indexed by commodity, our average PPA shall be reduced. As already anticipated by Fabrizio, the average PPA price will move from USD 75 per megawatt hour in 2023 to USD 65 per megawatt hour in 2026. In addition, our commercial trends taking advantage of the current favorable market condition, we will continue to target new energy sales contract [indiscernible] customer given the market opportunity at a controlled risk return ratio. As a part of it, we will be able to partially offset the impact of the expiration of the old regulated contracts in our EBITDA. As we mentioned before, the strengthening of our integrated margin is at the core of our strategy. And therefore, the strategy of our sourcing is fundamental to ensure the value creation. Considering our commodity scenario and the evolution of the energy market in Chile with the addition of a new renewable and storage facility, we expect contribution related to a lower thermal variable cost in connection to commodity price evolution and our diversified LNG supply and the lower average spot price enabled opportunistic purchases in the spot market. Now entering into the other effect, let's see the performance of trading activity. To be conservative and aligning with our commodity scenario, we are not considering extraordinary gas trading activity in the 2024 to 2026 period. And therefore, the impact you see in the slide is related to the high variable trading deals we performed during 2023. All in all, our EBITDA is expected to increase 6% by the end of 2026 when compared to the 2023 to reach an amount between $1.2 billion and $1.4 billion. Now let's see the performance of our Grids business on Slide 29. In Grids, our capital allocation is designed to bring efficiency and resilience to support electrification and being able to keep going with new investments in the next future. For the 2024-2026 period, we've foreseen investment of $0.3 billion in the distribution business, very similar to the old planned figures. These resources will be concentrated on new connection and grid management. We expect our Grids EBITDA to increase around 48% by 2026 due to the following effect: first, a recovery of the volume and higher tariff indexation because of the local CPI; second, regulated improvement taking into the consideration, the release of the BNR study, new replacement value for the new regulatory process, 2024, 2028 published at the end of September, which expert panel shall be held at the end of this year. And because of the outcome coming from the BNR study, also a better assuming assumption of earning cost recognition for the new 2024, 2028 cycle. And third, efficiency initiatives planned for the period focused on optimization of the processes and improving the effectiveness of our activities. This will allow us to reduce our OpEx ratio, client per ratio. Now let's look at the consolidation, EBITDA in energy evolution in the coming years on Slide 30. Consolidated EBITDA in 2026 reaches between $1.3 billion and $1.5 billion. an increase of approximately 15% compared to 2023. This is mainly due to the positive performance of our energy margin and our Grids businesses, partially offset by the gas sales trading activity performed in 2023. And so far, not projected to 2026 because of the different commodity scenario in the plan. We can also see the contribution of our new plan for the period 2024 versus 2025 versus the old plan figures with plus 3%, mainly explained by the better Grid performance and efficiency overall in the business and that stuff, mainly due to higher productivities. Now let's move on to Slide 32 to review our financial plan. The improvement we are seeing in our EBITDA will free up resources. Therefore, in the 2024, 2026 period, we expect funds equivalent to $3.4 billion, up to $3.8 billion from the operation of our businesses already including the contribution of partnership structure that will be a lever to improve our profitability, as Fabrizio has already mentioned. It allows us to shift toward a lighter capital model company to support our commercial ambitions. As of today, we are expected something between $0.5 billion to $0.9 billion within our planned horizon. All these funds will allow us to finance our accumulated CapEx plan for $2.3 billion and dividend of $1 billion, reaching a comfortable net debt-to-EBITDA ratio of less than or equal to 2.5x by the end of 2026. It should be noted that by the end of this year, we will see a decrease in our net debt, thanks to the proceeds coming from the effect of the solar project sales in October 2023, reaching a net debt of $3.8 billion and debt-to-EBITDA ratio below or equal to 3x. We expect to maintain this comfortable financial position over the next 3 years period, leaving room for new opportunity not included in the plan. Let's move on to the Slide 33, to take a look at some financial indicator of our debt position. As previously mentioned for the following year, we will pursue a conservative financial policy focused on reducing our debt level and optimizing our debt structure. Our average cost of debt will remain at trend through the 2024-2026 period. And the portion of the fixed rate debt will increase to 100%. We will reduce average term of our total debt from 7.7 years to 6.2 years in order to maintain an higher flexibility in the coming years. Also, we will maintain a significant portion of our debt as U.S. dollar denominated. Since a large percentage of our revenue are also USD linked, that maturities present a comfortable profile. Our total debt will amount to $3.6 billion by the end of 2026, out of which 36% will be SDG linked. Now on Slide 35, let's see, the net income evolution. We expect to reach between $0.6 billion and $0.8 billion of net income in 2023, resulting from business operations as expected, and the one-off effect related to the capital gain associated to the sales of solar project in October 23. Excluding it, net income will be between $0.5 billion and $0.7 billion, translating into an important improvement versus the guidance for 2023 we gave last year that was around $0.3 billion and $0.5 billion. Comparing total net income from '26 versus '23 on the same bottom line perimeter, we can see an important contribution from our EBITDA. Also, we see an increase in the depreciation and amortization that will evolve accordingly the new renewable project that will start operating in the planned period as well as Los Cóndores hydro project plan. In addition, we expect to maintain steady financial charges through the period in line with our conservative financial policy. Our taxes will increase following the increase in our operational results, followed by an increase in minority as part of the flexibility of our investment strategy I have mentioned before. Regarding our target for the following here on Slide 37. Our plan will contribute to cumulative EBITDA for the 2024, 2026 period ranging from $4.2 billion to $4.4 billion. Looking at the 2026 figures, EBITDA target will range between $1.3 billion and $1.5 billion, translating into a net income ranging from $0.4 billion to $0.6 billion. Regarding the shareholder remuneration, we are confirming the dividend payout ratio from the previous plan, a minimum ratio of 50%, leaving room for a possible increase depending on the future opportunity and market condition. Of course, this shall be further discussed with all our shareholders during the Annual Shareholder Meeting to take place every April. We are convinced that this dividend policy will allow us to continue going ahead with our sustainable strategy, maintaining an adequate financial position and creating value in the long term. I will now leave the floor to Fabrizio for closing remarks.

Thank you, Giuseppe. Before we move to the Q&A session, let me add some forward-looking remarks. In the long run, our value proposition will benefit from being a unique and integrated utility. And the company will be in a better shape to continue addressing the challenges and taking advantage of the opportunities we see ahead through the decarbolization of our metrics and electrification of consumption. But there are many more things to come, I think, such -- for example, the country's green erosion potential and the electric utilities are in the right place to benefit from this new industry. The proliferation of the best in the electrical system is still pending. And there is no doubt that this technology will be a key element in the future system. All in all, energy transition and electrification are changing the game. And this is why it is imperative to carry out structural reform, both in the generation and distribution businesses, which could produce additional opportunities for structured and well positioned companies such as Enel. Thank you very much for your attention. I will hand it over to Isabela for the Q&A session.

Thank you. So let's now start the Q&A section. [Operator Instructions]

Fernan Gonzalez from BTG Pactual. Probably 2 questions on my end. The first is that you mentioned that you plan to grow new capacity, but closer to where consumption is and also build a lot of energy storage. Can we assume that by 2026, your portfolio will be balanced, both from a geographical point of view and the need from the spot market? And the second one is probably more philosophical, but it's on distribution. We talked a year ago in the same event about the urgent need for distribution reform, but I haven't seen any real progress yet. I agree on the urgency. And now we're starting a new cycle, meaning that whether that reform gets to Congress next year, it will take maybe 2 years of debate and its implementation, if approved, maybe by the end of the decade. So my question is, is that enough for you? Or are we extremely late on changing this framework?

Well, let me address first our -- your first question. And yes, of course, as I think highlighted since the very beginning, I was assumed in this role. My first strategic goal that by far, the most important in terms of financial and economic performance of the company is to be balanced. Our portfolio, energy portfolio absolutely must be balanced. And in that respect, I think that we carried out several actions in the last 2 years. So starting with buying long-term PPAs also from other renewable developers, consolidating our gas supply and now pushing forward, again, our investments in our own projects because I think it's quite clear that analysts, a very huge pipeline in terms of projects. So the problem is just having the right profitable conditions to materialize these investments, and we are in a good moment this year. If you looked at the numbers we are presenting more CapEx in renewable investments this year compared to the numbers that we showed you last year. And that's a consequence of this, that we have better market conditions that allow us to be more reasonably optimistic about the new investments, profitability. But all in all, going back to your third question, absolutely, yes, we want to be balanced. The market in Chile, of course, is particularly in that respect because you cannot adjust your portfolio because there is not a wholesale market -- forward market in Chile. And sales are very -- usually contracted well in advance with very long-term contracts. And so of course, it's not possible to be really precise in balancing your portfolio in the short term, but this is our strategic goals, being balanced. And we have always to keep in mind that we have to consider in that respect, both electricity and gas portfolio. That is what happened in the last 2 years. In 2022, 2023, gas prices were high, also coal prices were high up to the first semester of this year. And so costs were higher for us in terms of producing our electricity, in terms of buying electricity in the spot market when needed. But at the same time, we enjoy selling gas at very high prices. And so all in all, when you look at combined electricity and gas portfolio, we were able to deliver very sound results. Second question, distribution. Again, from the very beginning, when I started with this challenging role, in my first contracts also with the previous Ministry of Energy. Since the very beginning, I highlighted the need of distribution reform. And this was not just because, of course, I have distribution assets that I have -- I need to assess the value from this asset, but also because I was a little bit concerned about what could potentially go on in the future if something doesn't change structurally in the way the distribution assets are remunerated. Because the current model is not giving certainty to investments doesn't recognize good performance. Yes, I have some clear benchmark to cope with. But if I do really better than this, I don't gain any money. So also this part because we always talk about investments. That's true. That's the basic point. But also the lack of incentives to improve quality is another part that is not addressed in the current regulation. So yes, I think that it's absolutely imperative that distribution have to change completely the way it is regulated, and it is remunerated. And yes, we commented last year, and it's true that it has not progressed apparently in the political discussion. But we have to recognize that in the last year, at least, also as a consequence probably of advocating this reasonable change in the distribution regulation. There is an increase in consensus in the market. I think something has changed in that respect. In the last year, there is an increase in very strong consensus and not only in the sector, not only among different distribution companies, but also in the academic world, also in political world, a couple of -- last month, there was -- can I say, similarly that was organized by the energy and mining commission of the Senate where it was impressive how everybody was absolutely convinced about the urgency to change the regulatory framework for the distribution business. So it's true, probably it's not yet -- what in the I can say, in the top part of the political agenda. But what I can see now is that an increase in consensus about the need to face these changes. Of course, it's there. It's there. So I think that once the problems with the PEC and tariffs would be solved, I think it could be eventually the right moment to bring back this topic on the agenda and to face it with the needed urgency.

Thank you, Fabrizio. Do you have any more questions here in the room? Yes, we have one here, please. Constanza.

Here, Constanza Gonzalez from Quest Capital. I have 2 questions regarding the distribution business specifically for what you said before, I understand that you have -- or you try to have a portfolio, a diversified portfolio. But considering the last result of the company, it's hard to understand what you are expecting to spend more than $400 million in CapEx for this business. I would like if you can clarify this information, what do you expect to do with this money? And specifically, when you spend have an EBITDA almost lower than that until 2026? And also, are these -- are still this asset strategic for the company. Considering that the situation, it's high in comparison to the last year. And also, most of your EBITDA and net income came from generation business. So thank you for that. And please, I would like you to clarify that information.

Okay. Thank you very much for your question. Well, let me address first the question from a more, let me say, philosophical point of view, a strategical point of view, then I will hand over to Giuseppe, if you want to add some details about what you mentioned, how the EBITDA, the CapEx will be allocated in the distribution business. What -- it is definitely true that Enel Chile is mainly a generation company. And with some surprise when I had my first talks with the most relevant stakeholders with also ministries of energy, they always were a little bit like skeptical why I was so focusing on distribution? But in the end, it's like 10% of our business, more or less. Because I think that once a company commits itself to a long-term scenario, that is a long-term scenario in which we believe in a world totally reshaped from the energy transition, and that means always -- we have always to consider that is like it's not just 1 leg, it's 2 legs. There is the decarbonization of our metrics, and this is something we were really focusing on. We were pioneers in this 7 years ago, we are, by far, the most -- the biggest player in the renewable business. But there is also another leg, there is electrification of final consumption. And this is the -- their activities have just started, okay? When you see all the scenarios about the future, the definition of consumption is absolutely needed if we strongly believe in an energy transition new world. And this is something that has just begun. And that's the reason why from the very beginning, I was calling from a complete structure reform of regulatory framework in the distribution business because, of course, it's needed. It's clearly needed that you have a stable clear regulatory framework that of course, supports investments because investments will be needed in the distribution business. And on the other hand, we want also to be a partner for our clients in this electrification journey. So that's the reason why I think that from a strategical point of view, distribution is important for Enel. And the presence in the distribution part of the business will be anyway a key presence for us also for the future. I don't know if Giuseppe wants to add some more details on numbers.

Yes. In terms of CapEx, let me say, first of all, that we put in our 3 years investment plan, $300 million roughly of investment in grids, mainly associated to the new connection coming from the estimation that we made according to the following year. So the request that we assume we are going to have from our clients. And this part is around EUR 160 million. The remaining part is associated to the maintenance of the grid. So in order to guarantee the resiliency and the efficiency of the grid. In general, the CapEx, this $300 million are in line with the estimation that we have in terms of BAED 2024, 2028. So we basically in line with the regulation, the current regulation that we expect to have at the end of the process.

Okay. Thank you, Giuseppe. Thank you, Fabrizio You have more questions, Constanza or not. Yes. Do you have any other questions? Yes, we have there, please.

[indiscernible]. I got 2 questions. One is on relationship in relation with PPA purchases, in this plan, it's 1.4 terawatt hours more than the last one. And by what is presented in the slide is $100 million in additional cost for PPAs. So my question goes, how much of that is on solar hours because it seems to be the price that implied mostly solar or pricing? Or is that 24 hours because last time that you did the Investor Day and last year, you put a very keen effort to show us the reduction of the exposure to nonsolar hours. So that would be the first one. And the second one is on relationship in relation to when we look to the total investments, it came to my attention the reduction of the CapEx on batteries, which is now kind of 0.6 million per gigawatt hour in comparison to much higher figures than we have from consultants. So just trying to see how much of a cost reduction on batteries, are you implying on the numbers that you already given us in the numbers? That will be from my side.

Look first question. And in our long-term PPA purchases, of course, we are seeking all different opportunities with the same strategic objective that I already mentioned during my first answer. We want to be balanced. So it means that in terms of evaluating the different opportunities that we can find in the market, we will choose the ones that are more fit with our portfolio exposure in terms of geographical location, in terms of complementing our own production. So always looking for be balanced also in the specific geographical location with a specific consumption profile of our clients. In that respect, what I can tell you is that we -- the purchases that we already signed are both for solar profile, for 24-hour profile. We are also very close to sign some PPAs in just non-solar hours. So like probably with some plants that is using batteries to back this cell to us. So all different kind of opportunities that we find in the market and that best fit with our portfolio. On the other hand, the second question about investments, cost invest, I guess, but I leave the answer to Giuseppe because I guess that there is a misunderstanding. I really would like to be in the position of having a very competitive cost in batteries, but it doesn't seem the case. Well, actually, we were like improving our costs for batteries recently to match what we are finding in the market once we are negotiating this PPA -- purchased PPA backed by batteries. So it sounds strange to me that we are putting some very challenging figures about battery costs. That sounds very lean.

Yes. In terms of battery, as we said, we are going to increase the CapEx because we moved in comparison with the previous plan because we moved from 0.2 giga to 0.7. And the battery that we put in our plan as of today, 2 hours battery. And the cost is roughly between $0.9 million and $1 million per megawatt. So these are basically the situation that we have clearly the 2 hour batteries and assumption. And we are going to see whether the profitability of the product could be increased with a different kind of battery. But as of today, these are -- yes, the cost.

That was -- that could be the point actually 2 hours versus 4 or 5 hours batteries but we also are assessing different opportunities. It's true that the numbers you find in the plan now are related to 2 hours battery. But we are evaluating to introduce 4 or 5 hours batteries in our projects. We are carefully analyzing profitability. It's like a very close to close dynamics. So we are currently evaluating this, but it's true probably the reason why you were finding this very attractive cost was just because we were comparing not the same kind of batteries.

Okay. Thank you. So one question here from Floresa, please.

[indiscernible] I have 3 questions, 2 regarding the generation business, one on the balance sheet. So the first question is regarding the upcoming regulation auction in December. You mentioned your efforts to focus on the free market, but just to be sure that if we can assume that we will not participate on that. The other one is regarding one of the sentences that you highlighted at the beginning of the presentation, a structural reforming generation business. If you can provide more color on that. And the last one on the balance sheet. How are you expecting to address the next sizable maturity of the '24 notes?

Look, first of all, a very general answer to your first question because we are going to participate in the regulatory auctions, always of course, at least with the -- let me say, we will be always, let me say, compare market conditions, current market conditions in the free market, where we are a very dynamic player. So of course, we know quite well the dynamic of the market, the current dynamic of the market. And of course, we are going to participate in the regulatory auction at least with the same level of, let me say, prices and conditions. Also, of course, we have to compare detailed conditions. But -- so yes, for sure, we will going to participate. Why we are not assuming new regulated contracts in our plan, where there is -- there are 2 reasons. The first one is very simple that the first delivery of new contracts will start from 2027 that is not part of this plan. So this is a very simple reason why it's not possible to show an increase in our regulatory contracts because even if we participate and we win part of the auction, this new energy will materialize from 2027 onwards. So it's not part of our current plan. And on the other hand, in general terms what we have experienced in the last years in the last few years was that basically regulated auctions were really like -- really competitive. So with prices that were not in line with our expectations. And usually, we were able to sign contracts in the free market at the best condition compared to what the regulated auction we are delivering. So we are going to participate, absolutely, yes, but without an aggressive approach. We will go with an opportunistic approach, always comparing market conditions in the free market and in the regulatory action. And let me just add in that, that if by chance, I would have like the same price, the same conditions in the contracts regulated and free market, I would go for free-market. Why? Because, of course, a free market means there is a client, a client that has a direct relationship with us that I probably can sell this client also some additional services. And so that's the reason why in general terms, we are pushing forward to have more clients in the free market. But of course, we are not saying that we are not going to participate in the regulatory auction. We will go to the regulator auction so let's see what happens. About structural reform in generation, why I mentioned that? Because what distribution we already addressed, I think it's really clear there is a strong consensus everywhere that this regulatory framework has to change. In generation is not -- it's not the same in the sense that it's not so clear that it's not this clear evidence, but there is an increasing concern about how the market structure is in generation. There was in the last year, a lot of, let me say, criticalities discussed about renewables, operators about the problems with the other prices, differences in prices between the Northern region and the Central region. But I think that this is part of a more general discussion where I think that there is a need to go more in a market-oriented direction in terms also on generation market structure. And I think that there is an increasing consensus also in that respect because if I look back at Chile 20, 30 years ago, both distribution and especially generation, well, it was like one of the best-in-class regulatory framework, market framework with centralized dispatch with other prices, with free market and regulated markets. So let's say, very well positioned. But nothing has changed also in the generation business for the long term, for a long while. So I think that there is an increasing challenges that new technologies are bringing to the system. So batteries, for example, how storage system will be managed under the current regulatory framework is not clear. And we used to invest in batteries. And so also in that respect, it would be much better to have an evolution in how the generation market is regulated. And I think that there is an increasing step-by-step consensus towards that. And I leave Giuseppe answering the question about bond.

Yes. As I presented in the slide, in 2024, we have 0.7% debt maturity, out of which 0.4% is associated with the Yankee bond in [indiscernible]. Now for what concern, the second one, we can repay according to our cash flow. So basically, our own cash generation is enough to repay the Yankee bond, we are evaluating it. In any case, if it is necessary, we can authorize a new net at level of Enel Chile according to our strategy. But in any case, we don't have any kind of problem with this expiration.

Okay. Thank you, Giuseppe.. Let's now open the line for Alessandro De Vito, Megabanca. He's on Microsoft Teams.

I have 2. The first one is related to the batteries business. I wanted more color on the business model that you want to implement. So do you exclusively seek to develop batteries coupled with generation assets, so the remuneration related to generation? Or are you also considering to implement batteries with the regulated remuneration. So for example, providing services to the grid. This was the first one. And the second one is related to networks. So besides the long-term reforms that you were mentioning before, I wanted to ask you if you can provide, again, more color on the short-term open regulatory dossier regarding REITs. When do you expect to receive the final rulings and what are the most likely outcomes from these rulings?

Okay. About batteries. Well, the business model, I was just mentioning before that we are currently reviewing it in terms of making the choice between the 2 hours batteries and the 4 or 5 hours batteries. But in terms -- more in general, because you also asked about in general business model, the storage systems, we are investing in at the moment are, of course, associated with generation plans. But it doesn't mean that they don't provide ancillary services on -- while on the contrary, the 2 hours batteries, the business model for 2 hours batteries heavily rely on revenues coming from ancillary services, while the 4, 5 hours batteries, of course, are more dependent on energy shifting business model. But all different batteries that we are developing, of course, are both seeking for ancillary services opportunities and energy shifting opportunities. While on the other hand, let me say that battery as the part of the grid system is something that is not so clear how we could be involved in that. An auction for batteries was announced from the government and it's a part of energy bill that is under discussion in the Congress. But again, it's not really clear how they would like to organize this auction and let's see if in the end, they will succeed to deliver this bill because there is an increase in concern -- there are increasing concerns about that. So -- so far, we are investing in storage systems from a generation company perspective. But as I said, looking for both ancillary services and energy shifting opportunities in the market. About distribution, it's true. We also -- we only mentioned the necessity, the need for structural reform in the medium, long term, of course. While in the short term, we are still waiting for the finalization of the 2020-2024 regulatory process. It's a little bit on delay on that. But anyway, it seems that in these days, they are finalizing this process. And so I think that very soon, we will have some piece of news about that. And from the first analysis, we are getting out, it seems that there could be some upsides that could materialize for our company. And it is for 2020-2024 cycle, while at the same time, as we mentioned before, the process for 2024-2028 already started. And I think that -- I hope that we will be a little bit more like fluent in the process. And from the first -- from the first things that were designed in the process, I can see that -- I can say that we can be a little bit more optimistic about the final outcome of the process. But of course, here, we are just moving the first steps.

Okay. Perfect. So we have a question that I just received here from Enrique Peretti from JPMorgan. The question of [indiscernible]. What is your view regarding future power prices in Chile? Do you see upside from the current prices being negotiated in the market, what level of price makes sense under the industry conditions?

Well, I already commented about the current level of prices before during the presentation and also during the first question, if I remember well. And let me put it this way. Market conditions are good in this moment, okay? We are negotiating several opportunities. Among them, there are also some very big contracts that are under negotiation in these weeks with big mining customers. And the feeling is, as I said, is a good moment to sign some long-term contracts that are also not only securing and giving us more visibility long term but also make viable some investment with a very good level of profitability. Of course, as we mentioned, there is also a regulatory auction that is coming. So I cannot give like precise figures about that because -- but let me say -- let me put it this way. For mining industry, what you saw also in the last regulated auctions, the price at a certain point in Chile was like around -- from $40 to $50. That is not anymore the case. That is not anymore the case for several reasons. One of them being probably the consciousness that some players in the market have consolidated about the volatility implied in the spot prices in the Chilean market, the exposure to transmission bottlenecks. So of course, there are some additional risks that is needed to consider when you're in your offer. And so as I said, $40 to $50 prices are not any longer present in the Chilean market. I feel that it's a good moment now to enter into some long-term contracts negotiation and finalize some opportunities because, as I say, it's not just securing revenues for the future. It's also make our investments more profitable.

Okay. Thank you, Fabrizio. We also have another question coming from Rodrigo Mora, Moneda. He's asking us an update on Los Condores project regarding the end of construction and the COD of this hydropower plant.

Well, we don't have any main -- fortunately main big piece of news about Los Condores. And we had very well, well, at least we are familiar with Chile know very well that we experienced a couple of very big rainfalls during the last month, of course, also causing problems, disasters in some parts of the country. One most affected zone was the region of Maule where the Los Condores project is located. So of course, we suffered some stop to our works. And so of course, there are some delays that we are trying to manage in our original schedule. But let me say that we are talking about months. We are not talking about years. Los Condores will produce the first kilowatt hour next year. So this is something that will not change. I mean, it was expected to enter into operation at the end of the first semester. We are not sure that we can meet this deadline. But as I said, we are talking of potential delays of some months, nothing more than that. And the project is already at a very advanced stage of construction. The more critical civil works are going to be finalized in the next few weeks before the end of the year. So also, the project itself doesn't have any main construction risk ahead of us. So I think that -- as I said, I can understand the question because there has been some problems in iterated projects in Chile and Colombia. But as I said, I don't see anything of this kind of risk related to those Condores project, just probably some few months delay due to the extreme adverse condition that we suffered a couple of times this year in the Maule region due to this exceptional rains.

Okay. Thank you, Fabrizio. Do we have any other questions here come from the room? No. From the line also? No. Okay. So thank you very much for your presence today. And hope to see you soon again and any other questions you may have, our Investor Relations team will be available. Okay. Thank you. Have a nice day. Bye-bye.