Engie Energia Chile S.A. ($ECL)

Good afternoon, everyone, and welcome to Engie Energia Chile's First Quarter 2026 Results Conference Call. If you need a copy of the press release issued on April 29, it is available on the company's website at www.engie.cl. Before we begin, I would like to remind you that this call is being recorded, and information discussed today may include forward-looking statements regarding the company's financial and operating performance. All projections are subject to risks and uncertainties, and actual results may differ materially. Please refer to the detailed note in the company's press release regarding forward-looking statements or contact Investor Relations Officer, Marcelo Munos. We would like to advise all participants that this call is dedicated to investors and market analysts, not for the press. We ask all journalists to contact Engie Energia Chile's PR department for details. I will now turn the call over to Mr. Vincent Sorel. Please go ahead, sir.

Hello, everyone. Today, I'm here with Juan Villavicencio, Chief Executive Officer; Alison Saffery, Head of Corporate Finance; Marcelo Munos, Investor Relations officers. We are pleased to present Engie Chile 2026 Q1 results. I'll leave you with Juan who will describe our performance during the first quarter of 2026.

Good afternoon, everybody. On Page 2, we show we have organized this presentation into two sections. In the first part, I will briefly go through our first quarter 2026 performance and then the second part, Vincent will provide an updated vision of our financial results and guidance. We can start directly on Page 3 where we share the main highlight for this first quarter of 2026. First, I want to highlight our strong operating results supported by a higher electricity margin. Our results show the resilience of our portfolio to spit the volatility in international markets and challenging market conditions faced by the industry. Same of the drivers of this excellent results were, on the one hand, we leveraged the high availability of our thermal fleet during this period which provided us with stability to our generation portfolio, especially in nonsolar hours, continuing to reduce our exposure to the spot market. On the regulated demand, we saw greater physical sales to regulated clients. This is strategically important because regulated contracts provide revenues predictability and long-term cash flow visibility. The strong operating performance helped by these factors rendered a solid start to the year with the guidance provided during our previous call confirmed for 2026. Another highlight of this quarter is that our best Tocopilla project the first stand-alone battery project and the first of the 8 renewable project we have under construction, a shift 100% energization last year and reached COD in February this year. This was key to the result we've obtained. Finally, in our April 29 Shareholders meeting, a dividend equivalent to 30% of 2025 net income was approved, and it will be paid in May 27 of 2026. So in summary, a very strong first quarter across all dimensions, operational, financial and strategic. On Page 4, we give you a summary of all the projects and activities we have deployed related to our thermal asset in Tocopilla and Misiones. In Tocopilla, we continue advancing in giving new life of our coal-based former Unit 15, which was closed in 2022, converting it into a synchronous condenser that will provide ancillary services to the system. We also improved extended the life and increased the capacity by 25 megawatts of our gas-fired combined cycle plant Unit to ensure flexibility in our generation and energy supply. on the other hand, we continue in the process of converting our EAM coal-fired plant to natural gas. EAM stopped its operations and planned in December 2025. And is still a schedule to finish its compression and initiate operation with Gas Natural by the second half of 2026. Also, as we already mentioned in our full year meeting, two of our remaining coal plants in genes, CTM1 and CTM2 were decommissioned on December 21, 2025, while CTA and CTH were required by the authority to continue their operation until May of 2027 in order to secure supply and services to the system until such date. CTM1 and 2 will be kept under preservation maintenance, while the company decides if and how this asset could be used in the future. And the same will occur with CTA/CTH once disconnected in 2027. With this, 1.1 gigawatts of coal capacity are already disconnected or under conversion as of December of 2025, and the remaining 0.4 gigawatt will be disconnected by May of 2027. Our thermal asset in operation continued to show higher availability and operational excellence, providing the generation to secure the 24/7 supply or PPA contract and at the same time, reducing our exposure to the spot market. This continues to be true during the first quarter of 2026, dispute or EAM plant being closed during its conversion. If we go to the Page 5, we show a graph of the complete generation portfolio transformation of Engie has embarked on since 2019. when coal generation represented 61% of our generation capacity, while renewable represented only 3% of total generation capacity, which reached 2.2 gigawatt at the end of that year. In December of 2025, we showed that our generation capacity had reached 2.9 gigawatts, of which coal represented only 25%, after the disconnection of CTM1 and CTM2, Natural gas represented another 25%, and renewable plus batteries represented 50%, a significant increase during this period. Today, as of March '26, our generation capacity increased to 3 gigawatts, which now includes the 0.1 gigawatt extra capacity of Bestop. Our expectation for 2027, considering the renewable and best project currently under construction as well as the conversion of EAM and retirement of the remaining coal plants is to reach a total installed capacity of approximately 3.6 gigawatts, of which 71% were renewable and batteries, and the remaining 29% will be natural gas. On Page 6, we can see that we continue to show additional progress in the execution plan of our renewable capacity under construction. As of today, we already have 1.5 gigawatts of renewable install capacity, including the recent addition of Bestocopillia. Our first stand-alone batteries which was built in the same site where called units 12 and 13 used to operate and which added 119 megawatts of capacity to our portfolio in February of 2026. Additionally, during the first quarter of 2026, Besos Loros and Best Arica reached 100% energization. All these projects continue to be developed on time and on budget. As such, during the first quarter of 2026, we generated 522 gigawatt hour with all renewable assets. Next, on Slide 7, we show the 7 renewable and battery projects still under construction, which are deployed over 5 different regions of Chile. -- including the already mentioned Vesa Rica and be Los Loros which reached already 100% amortization. But additionally, our other 5 projects under construction started their energization during this period, most of which should reach COD by the second half of 2026, while the two wind projects are expected to reach COD in the first half of '27. Notably, this project include our first greenfield project metropolitan region, [indiscernible] as well as the first wind project built in the Nela region in the south of Chile wind Tekane. We expect this project to continue adding megawatt hour of generation as they progress with their energization. On Slide 8, we give an overview of our existing transmission network which is an integral part of our energy transition and growth strategy. We seek to continue strengthening our transmission network currently made up of over 2,600 kilometers of transmission lines, more than 30% of which correspond to national and Sona regulated transmission assets. We own and operate 28 transmission station and 12 generation station. Finally, we hold a 50% ownership share in the 600 kilometers long transmission line 10, as we accelerate the growth of our renewable generation portfolio and intend to provide integrated energy services to our customers, the strength and reliability of the transmission system become critical. On Page 9, we show a little more about the transition process undergone by our Tocopilla site. A core pillar of our transmission and value creation where, as we mentioned before, the Besto Copia project reached COD during the first quarter of '26. Also, the site is undergoing a transformation process with the conversion of Unit 15 to a synchro condenser which will provide ancillary services to the system, while the expansion and life extension of Unit 16 or combinate cycle plant will continue providing resilience to our portfolio. Together with all that, we are extending the life of Engie Chile in Tocopilla itself by bringing social, environmental and security of supply benefit to the region. The work we are doing is also providing great flexibility and reliability to support our PPA contract and reduce our exposure to the spot market. And now I will leave you with Vincent, who will provide the detailed evolution of Engie Chile's financial and capital structure as well as the guidance for 2026.

Thank you, Juan. Hello, everyone. I'm now pleased to present the financial performance for the first quarter of 2026. As you can see on Slide 11, we present our key financial highlights for the first quarter, EBITDA reached EUR 216 million, up 35% year-on-year, reflecting strong operating performance, lower marginal cost, higher electricity margin and increase in our own generation due to high availability of our generation portfolio. Net income amounted to USD 118 million representing a 52% increase versus the same period last year. This improvement was mainly supported by stronger EBITDA, partially offset by higher depreciation and tax effect. Finally, Net financial debt stood at USD 2.4 billion, while the net debt to 12-month EBITDA ratio improved to 3.2x as of March 2026. This reflects both strong EBITDA generation and disciplined financial management, even as we continue executing our investment plan. On Slide 12, let me provide more detail on the drivers behind our EBITDA performance in the first quarter. EBITDA increased by USD 56 million from USD 160 million last quarter of '25 to USD 216 million for the first quarter of '26. The main driver was a USD 45 million increase in electricity margin, supported by a more balanced generation position that reduce energy purchase. Higher own generation and lower spot purchase explain most of this improvement as reflected in lower contracted and spot energy purchase volumes. In addition, EBITDA benefited from stronger PPA revenues and positive contribution from transmission business. Higher savings reflected in performance also contributed by USD 4 million to this EBITDA increase. These gains were partially offset by notably lower revenue from gas sales. You will note that one-off had only a slightly positive effect on EBITDA evolution. Overall, this chart shows the stronger and more balanced operating profile was the key factor behind EBITDA growth in 2026, confirming the benefits of our portfolio transformation and reduce exposure to spot market volatility. On Slide 13, you can see how the improvement in operating performance translated into bottom line growth. Net income increased by USD 40 million from EUR 78 million in the first quarter of EUR 25 million to EUR 118 million in the same period of this year. The main positive driver was a strong increase in EBITDA, partially offset by higher depreciation and amortization and higher income tax, mainly noncash. At the same time, the decrease in net interest expense added to a positive foreign exchange effect also supported net income during the quarter as compared to the same period last year. The decrease in net financial expense is mainly explained by a $7 million increase in capitalized interest, but also by lower interest rates. Tax expense increased by $15 million. On Slide 14, we show our investment program continue to be funded through internal cash generation despite a high level of capital expenditure in the quarter, net debt decreased by USD 97 million. This reflects strong cash from operation, which more than covered all of the CapEx deployed during the period. In addition, the company received $18 million in dividends from [ 10 million ] during the quarter. Slide 15 highlights the strength of our financial structure. Engie Chile continues to maintain investment-grade rating at both on the international and local scale, reflecting a solid credit profile and disciplined financial management, notably confirming this solid and risk profile alert, just announced the upgrade in its rating in national scale from AA- to AA stable. As of March 2026, Net debt stood at approximately $2.3 billion, while the net debt to 12-month EBITDA ratio improved to 3.2%, excluding IFRS 16 lease. At the same time, the company increased its cash position and continued reducing its average interest paid, which stood at around 5.1%. The debt maturity schedule also remains well spread over time with no material short-term refinancing pressure. Overall, this slide confirms that Engie Chile is preserving a strong and flexible balance sheet while continuing to execute its growth plan. In January, we continued taking action by explaining the maturity of a $50 million loan with Banco Estado by almost 3 years as well as lowering its interest rate. We were also able to reduce the total amount and the interest rate of our long-term loan with IFC and DEG. Additionally, during the first quarter, we made a second draw of $200 million from our cash loan closed in 2025, there is still $100 million outstanding to be drawn within the next 5 months. These initiatives contribute to further improve our debt profile lower the average cost of debt going forward as well as strengthening our liquidity. Slide 16 shows the evolution of our capital expenditure program with a clear shift towards renewable and battery storage. In 2025, as you remember, total CapEx reached over USD 1 billion, which the vast majority was allocated to renewable generation and best projects. For 2026, estimated CapEx ranges between $640 million and $710 million. This reflects the continued execution of projects currently under construction, particularly in storage and renewables while maintaining selective investment in thermal assets and transmission, but also recurring maintenance. This CapEx profile is fully aligned with our strategy, accelerating profitable growth in renewable and storage while supporting system flexibility and maintaining the reliability of our broader asset base. They are expected to reduce our exposure to the spot market. And thanks to the deployment of batteries also mitigate interment and curtailment risk associated with renewable generation. And in parallel, we continue to invest in our thermal fleet as well in transmission projects that are necessary to support and optimize our overall portfolio. Finally, on Slide 17, we confirm our 2026 guidance. After our first strong quarter -- the company remains on track to deliver an EBITDA in the range of $690 million to $760 million. While CapEx, as mentioned, is expected to range between $640 million and $710 million. At the same time, we expect net debt-to-EBITDA to remain below 3.5%, excluding IFRS 16 leases. The first quarter result, EBITDA of $216 million, Net income of $118 million, CapEx of $196 million and net debt to EBITDA of 3.2% support our confidence in meeting this target. While capital expenditure will remain high, this represents a decrease compared to the record level of 2025 and will reduce our financing needs. Overall, in this slide, reflects a strong start of the year and reinforce our confidence in the outlook for 2026. Thank you for your attention, and we are now open to any questions you may have.

[Operator Instructions] Our first question comes from Andrew McCarthy.

I've got three questions. The first one is, given the company's power generation fleet, how are you feeling about your ability to compete in forthcoming PPA auctions to be held in particular, by sort of larger mining companies? And my second question is, I just wanted to check, CTA has been out of operation for the last few days according to what we've been seeing on the coordinator website. Just wondering if that's going to be maybe a sort of longer-term outage and what impact that could have on your guidance for 2026. And then finally, I just wanted to check with you, what's your sort of initial take on the government's reconstruction bill, especially with respect to tax changes. And are you seeing any potential onetime effect on net income for this year, perhaps related to deferred tax assets or liabilities? That's it for me.

Thank you, Andrew. I think these are all very good questions. And that underpin, I think, that can illustrate the strength of our portfolio. On the first question, we strongly believe that ECL will be able to compete in the forthcoming PPA auction. And this will be performed with the support of our new asset that we are being developing. However, of course, this will be a competitive process, and there will be many so we will see. On the second question on CTA. Well, CTA, we invested a lot in maintenance, preventive maintenance over the last year. And you might remember that before the extension was announced we put ACTH offline. And CTA has been out of operation only for a few days, and we expect it, thanks to this preventive program that we did in 2025, we expect to be back online very soon in the coming days. And last but not least, regarding the reconstruction bill. We welcome all initiatives from the government to help Chile industry and economy to develop. And I think this is 1 of the very good sign. However, it's -- nothing is enacted yet. And at this stage, we can only highlight the potential change in the corporate income tax rate would have indeed an impact on deferred taxes, noncash. However, we are not yet in a position to quantify this as greater clarity is needed regarding the final scope of the reform and its approval.

Our next question comes from Fernan Gonzalez.

Just a couple of questions on gas. I would like to know if you have or will you use the price discount that was embedded in the compensation agreement with Total energies this year. And if you could also comment on the gas strategy that you will pursue for the coming years as the contract with total expires this year. So will you try to renew that contract? Will you try to diversify with another supplier. It would be interesting to know that. My second question is on the regulated segment. If you can comment on the outlook that you see for regulated tariffs for the rest of the year given the recent indication that we already saw.

Thank you. So Indeed, one of our long-term gas contracts and -- I mean, will end this year. However, our projections show that less gas would be needed for asset due to the increase of BeSense in the system. So we are following up the situation. We are looking at potential purchases to complete our gas supply, but this will depend on the economics. SP-7 On the second point, I mean, I cannot comment regulation, of course, and our guidance is established a stable regulation.

Our next question comes from

Can you all hear me well?

Yes.

I have three. I think one of them was partially answered, but I'll say it anyways. And the first one is related to the regulated prices that came at 160 per megawatt hour during the quarter. And I mean we understand this was mainly attributed to the fuel price dynamics, particularly the Henry Hub prices. However, the average entry hub prices during 1Q '26 were actually below both 4Q '25 and 1Q '25 average level. So could you please provide some additional color on the drivers behind this increase in the regulated prices? And the second one is regarding the U.S. $26 million insurance recovery related to CT unit and Could you provide more details on the nature of this recovery? And should we expect more additional recoveries going forward? And the last one is also related to regulated auctions. -- in the following years between 2026 and 2027. I think there are around 15 terawatt hour expected to be tendered. And if you provide some more color on your strategy regarding these upcoming auctions. Thank you.

Thank you. I will start with the insurance. I think this is an old incident that we had around 3 years ago on 1 of our power plant was fully baked in, in the guidance because -- we were expecting the file to eventually close. And I would say, in March, we received the final agreement with the insurers about the amount that we disclosed. Is there anything else major coming in? No. And I would say this is, I would say, a good news because you should note that since more than 2 years. We haven't had any significant incident on our ore fleet a good result of our maintenance program that we discipline and strongly apply since 2023. Regarding the prices, well, there are various mechanism of indexation, notably the Henry Hub indeed, but not only -- and I would say that precurated tariff should indeed be impacted downwards due to the decrease of the finer prices. However, the indexation of the price has some delay. And so this is effect that you should see in the next semester or maybe early 2027, depending on the contract. Regarding the auctions, you might -- I mean, Engie's first priority is to stabilize the portfolio, right, and to avoid being unreasonably short in terms of power position as we have been in the past. So -- in that respect, our intention is we are competitive. We have the pipeline, but we will follow up in coming auction, and we will participate, but we will not be able to win all of those, of course. This will be supported by the new development of the asset. And so it's a process, I would say, that is going on in parallel. If there are no more questions, maybe some -- it's time to close the call. I would say the Q1 has been very, very strong. And on a side note, I think that you might note that EBITDA of the Q1 2026 in the context of a war is higher than the total EBITDA for the full year 2022 that we had in the past. This is not to is not a key point in itself, but I think it really highlights illustrate, demonstrate the transformation of the portfolio, both from an exposure to the short market, but also to the exposure on the fuel price and the international tension that we can have on the market. We are very confident for 2026 in the current state of the geopolitics and we ensure that all efforts of the company is to monitor the risk and to deliver 2026 objectives. With that, I wish you a very good weekend, and I hope to see you and talk to you in the coming for the next quarter.

Thank you. This does conclude today's presentation. You may disconnect your line at this time, and have a nice day.