Enel Chile S.A. (NYSE:ENIC) Q3 2024 Earnings Call Transcript

Enel Chile S.A. (NYSE:ENIC) Q3 2024 Earnings Call Transcript October 30, 2024

Enel Chile S.A. misses on earnings expectations. Reported EPS is $0.13 EPS, expectations were $75.75.

Operator: Good afternoon, ladies and gentlemen, and welcome to Enel Chile Nine Months and Third Quarter 2024 Results Conference Call. My name is Carmen, and I will be your host for today. [Operator Instructions]. Please be advised that today’s conference is being recorded. During this conference call, we may make statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect only our current expectations, are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those anticipated in the forward-looking statements as a result of various factors. These factors are described in Enel Chile’s press release reporting its nine months and third quarter 2024 results.

The presentation accompanying this conference call and Enel Chile’s annual report on Form 20-F, included on the risk factors. You may access our Nine Months and Third Quarter 2024 results press release and presentation on our website www.enel.cl, and our 20-F on the SEC’s website, www.sec.gov. Readers are cautioned not to place undue reliance on those forward-looking statements, which speak only as of their dates. Enel Chile undertakes no obligation to update these forward-looking statements or to disclose any development as a result of which these forward-looking statements become inaccurate, except as required by law. I would now like to turn the presentation over to Ms. Isabela Klemes, Head of Investor Relations of Enel Chile. Please proceed.

Isabela Klemes: [Foreign Language]. Good afternoon, and welcome to Enel Chile 2024 third quarter and nine months results presentation. Thanks to all joining us today. My name is Isabela Klemes. I’m the Head of Investor Relations. Joining me today our CEO, Giuseppe Turchiarelli; and our new CFO, Simone Conticelli. Simone is a nuclear physicist and holds an MBA from Luiss University of Rome. He joined the Enel Group in 2006, working in the administration, finance and control of Enel S.A. From 2018 to 2022, he worked in Chile as the CFO of Enel Generacion Chile. Before becoming CFO of Enel Chile, he held the position of CFO at Slovenské elektrárne another company within Enel Group. Our presentation and related financial information are available on our website, www.enel.cl in the Investors section and our app investors.

In addition, a replay of the call will soon be available. At the end of this presentation, there will be an opportunity to ask questions via phone or webcast chat through the link ask a question. Media participants are connected only in listening mode. In the following slides Giuseppe will start the presentation with our key highlights of this period. He will then cover updates on our portfolio and regulatory contexts. Finally, Simone will provide an overview of our business economic and financial performance. Thank you all. And now let me hand over the call to Giuseppe.

Giuseppe Turchiarelli: Thank you, Isabela. Good afternoon, and thanks for joining us. Let’s start the presentation with our main highlights of the period on Slide 2. During the first nine months, our hydro portfolio performance was very robust with hydro generation increasing by 20% compared to last year. This improvement was due to higher reservoir level at the beginning of the year, influenced by the El Nino phenomenon observing the previous year and a solid rainy season this year. This resulted in an efficient generation portfolio mix for the period. We are pleased to announce that the Los Condores project is nearing completion. After several years of construction, the project has reached the pre-commissioning tests. We expect Los Condores to be connected to the grid by the end of the year.

As everyone knows, an extreme climate eventually impacted the Central and Southern part of the country, including our construction area in the metropolitan region. Further in the presentation, I will give you more detail to you regarding the unforeseeable and predictable climatic events that affected our distribution segment. On the regulatory side, we have some important news to share. The factoring related to the PEC 3 receivable was successfully executed last week. We have carried out a factoring totaling $630 million. The PNP Decree for the second semester was published on October 5, which will result in a lower PEC accumulation for the year end. And the draft bill for the electricity subsidies for vulnerable customers is still under discussion.

Today, the Energy Commission is renewed to evaluate government proposal. I will give you more color on these topics during the presentation. Regarding profitability, and let’s announce that our EBITDA and net income results were better than last year’s figures, fully confirming our guidance for the year. We achieved a positive FFO, even though during the first nine months of this year, we recovered only a small portion of receivables related to the PEC. As I mentioned before, much of the recovery of the PEC 3 receivable was made through the factoring executed the last week. So we will see them in the presentation of the full year results. And finally, for the 2024 nine-month results, we present a strong and sound level of liquidity, I will provide more details on this later.

Now let’s look at some updates on the hydrological situation on Slide 3. In addition to the positive hydrological conditions during 2023 that allow us to have greater water availability this year higher-than-expected rainfall recorded during 2024 has allowed us to increase our hydro production, exceeding 20% in the same period of 2023. Therefore, during the first nine months of 2024, we have accumulated 1.6 terawatt hour of additional hydro generation compared to last year. The hydrological situation in our reservoir is also very positive year to date compared to the last year’s figures, particularly in the South. In fact, with the water accumulation in our reservoir to date, we have sufficient availability to supply our energy demand until the end of this year, even with the possibility of La Nina phenomenon in November and December.

It is worth mentioning that there’s no melting season has already started. Unfortunately, there has been a rainfall and a rapid increase in December during the south, generating increases in the affluent flows of the river. In fact, we had to carry out these charges in Penta power plants a few days ago and on October 24 in the Ralco in the Pangue power plants as well. Of course, this manual were coordinated and previously informed to the competent authority and the communities. Based on this fact, we have updated our hydro generation estimate to approximately 15 terawatt hours for 2024 and 3.3 terawatt hours for the fourth quarter of which we have already produced 1.3 terawatt hour. Let’s move to the next slide to review how we continue improving our portfolio on generation assets.

We continue consolidating our renewable capacity through a diverse portfolio of projects distributed across various country regions. This year, we increased our exposure to battery energy storage, the best system. In recent months, we received authorization from the national electricity coordinator to begin conventional operation of 101 megawatts associated with the two projects El Manzano BESS located in the metropolitan region of Santiago, and La Cabana BESS, located in the south of Chile. Considering this latest authorization from the coordinator in 2024, we initiated the commercial operation of a portfolio equivalent to 511 megawatts and 1,735 mega since 2023. In this 9-month period, we reached a total net installed capacity of 8.7 gigawatts, of which 6.8 gigawatt renewable, representing 77% of the total.

A good news, the Los Condores hydropower plants had significant updates in this period. We have concluded the filling of the tunnels and started the pre-commissioning test. We expect to be connected by the end of the year. Now on the next slide, we will review the performance of our generation KPIs. Net electricity generation totaled 18.6 terawatt hour as of September 2024, exceeding by 6% of the production during the first nine months of 2024, mainly due to higher hydro and renewable generation, resulting from the improved hydrology this year and the operation of new projects. During the third quarter of 2024, net generation decreased 8% to 6.5 terawatt hour, mainly due to better hydrology recording during the same period of 2023 and lower thermal dispatch during the third quarter of 2024, partially offset by greater wind generation.

Our energy sales totaled 25.3 terawatt hours as of September 2024, 9% higher than the level recording in the first nine months last year resulting from higher sales to both regulated customers and free customers. Our commitment with our clients were fulfilled with a higher portion of our renewable generation, which also led us to lower energy purchases in the stock market. During the third quarter of 2024, physical energy sales grew by 8% to 8.4 terawatt hour, mainly due to higher sales to regulated customers. In terms of our balance, during the first nine months of the year, we increased our purchases from third parties by 2 terawatt hours as part of our continued effort to diversify and optimize our energy sources. Now I would like to take a few minutes to talk about the extraordinary weather events of the last August.

I would like to present this slide to discuss the extreme weather events that impacted the country and not just our concession area, which impact was higher than the earth quake occurred in 2010. On August 1 and 2, the metropolitan region of Santiago was severely hit by an extraordinary and unpredictable storm, with winds of up to 124 kilometers per hour. Significantly exceeding the forecast and warnings issued by authority and technical expert. This storm caused the fall of more than 2,000 trees, over 1,000 utility poles and large ranges, which destroyed part of our electricity distribution network, causing widespread power outages. The damage is comparable only to death caused by the earthquake already mentioned. And [indiscernible] Chile deployed all available resourcing going much further than required by Chilean electrical legislation.

And it adopted extraordinary special measures to restore power to its customers as quick as possible. Reaching this amount of queue was only possible as part of Enel Group. We have requested support and received more than 100 technicians in this type of event coming from different parts of Latin America and Europe. Furthermore, it is worth noting that for this weather event, we spare no expense to recover and normalize the power supply which made possible. This is reflected in the number of field crews, 383 crew at the peak of the event versus 100 is considered in the reference model company of the current tariffs. Establishing the system was extremely difficult. And we have already submitted to the local regulator and the core debt resistibility and unpredictability of this event.

Therefore, we really faced a major climatic event, the severity of which exceeded all the possible measures to be adopted under the Chilean legislation and will appear clear to all the different stakeholders in Chile once the pertinent data will be disseminated. As Enel, we have been working on proposing different kinds of regulatory model to meet the regulatory and physical system more relating to future weather event. We clearly understand the diffusion to modernize and digitalize the Chilean electrical for the solutions. Now I would like to talk about some regulatory framework, milestone in the next slide. As you may recall, during last call, we indicated that in January this year, the Ministry of Energy presented the bill related to the energy stabilization mechanism, which the power of continuing the PEC mechanism in mitigating the projected sales increase for Enel customers.

At the same time, they also aim to improve the client protection mechanism known as the MPC mechanism to allow gradual repayment and accumulated debt to the degenerator and establish a transitory subsidy for the most vulnerable client. This new law was discussed and approved by the Chilean Congress in April. It came into force at the end of April. Following this, the first half and the second half PNP decrease were published and the regular — regulated tariff was updated. After the communication of the second half Decree, all clients, including that, with the consumption of less than 350-kilowatt hour which are basically households, are paying the regulated PPA real price. The consequence of this is that no further debt will be accumulated during the tariff stabilization.

An outcome that has not been achieved since 2019. This shift map a critical step towards financial stability, reflecting a significant change in managing tariff-related obligation. After the issuance of the sovereign guarantee decree as well as the complementary set of rules and regulation to the new law, the factoring was executed. We were able to factor $630 million last October 2024. As of September 2024, we had an account receivable related to the fact already net of factory and including readjustment and interest of around $1.1 billion approximately. So taking into this new factory realized in October, we are expecting to the end of the year with accruals in the range of $500 up to $550 million. Let me go to the right side of the slide, where we will recall the main topic related to the proposed law the government is introducing to increase the subsidies, which currently cover 1.2 million families to reach approximately 4.9 million families, representing the 40% most vulnerable families in Chile.

Now Congress is discussing with executive authorities, potentially increasing this benefit to increase the number of the family, supported by these subsidies. Currently, the Energy and Mining Committee of the [indiscernible] is deliberating on the matter, which including general terms doubling the green tax emission from the current $5 per ton of CO2 emitted, for reference last year, we paid around $15 million related to it, allocating the additional VAT revenue that the treasury is collecting due to the increase in the tariffs, doubling the fines imposed by regulator and allocating them to support the subsidy fund, applying new charges to the small and medium distributed energy units known as PMGDs. As Enel, we support the government efforts to find alternatives to assist the most vulnerable family in the country, especially in light of potential economic change.

However, we have observed that over the year, government solution have often disrupted the market. The same company that has been impacted by various regulatory measures since 2019 are once again being called APAB to support these subsidies mechanism. To maintain Chile reputation as a quality marketplace, it is crucial that such measures are reconsidered. Otherwise, we risk severally impacting long-term investments, competitiveness, and the health of energy sector. Among the proposal measure, we believe that allocating the additional VAT revenue is the most viable and sustainable option. To conclude, regarding distribution EBIT 2024-2028, there have been no significant developments since our last call. Our perspective on the next steps. In the process is detailed in the annex of our presentation.

Now I will hand over to our CFO, Simone Conticelli.

Simone Conticelli: Many thanks Giuseppe and good afternoon, everybody. First of all, I would like to tell you that it’s a pleasure for me to join Enel Chile. And now let’s move to economic and financial performance. During this nine-month period and the third quarter of 2024, our results continue to demonstrate a solid economic and financial performance. Let me begin with a quick summary of the main figures which I will detail in the following slides. Both nine months ’24 and third quarter ’24 EBITDA and net income recorded important improvement when compared to last year’s indicator. This is mainly explained by a more efficient generation mix, thanks to better hydrological situation, coupled with an increase in our energy sales and better pricing.

Regarding the FFO the nine-month 2024 figure show a slight reduction versus last year, particularly in the third quarter, mainly explained by a temporary negative effect from tax factoring operations and higher tax payments in 2024, primarily related this to Arcadia transaction in October 2023. This trend is expected to deliver during the last quarter of this year. Now on the next slide, let’s review the progress on CapEx. Total CapEx reached $406 million during the first nine months, 16% lower than last year considering the conclusion of several renewable and storage projects over the year 2023 at beginning of 2024. 62% of the total CapEx amounting to [$253] million was related mainly to renewable and storage CapEx deployment and 22% equivalent to $92 million was related to grids.

Asset management CapEx reached $133 million, which represent 33% of our total CapEx. It increased by around 50% compared to the last year figure. The reason for this increase can be found both in the generation and distribution business. In the generation business, this increase of $29 million is mostly related to maintenance activities in the Atacama CCGT power plant and in solar and wind assets. In the distribution business, the increased approx $16 million is due to climate events, emergencies and maintenance related to fall in the low and medium voltage lines. Looking about development CapEx, they reached $227 million a decrease of 32% compared to the last year figure, mainly due to the conclusion of renewable projects. And now let’s move to the next slide, where we have a summary of the second quarter EBITDA breakdown.

In third quarter 2024, our EBITDA was $405 million, which is $63 million higher than the same period in 2023. Referring to generation business, we have an increase of $68 million, thanks to a significant contribution from PPA sales. This is mainly due to higher volume, especially in the regulated markets, as mentioned by Giuseppe and pricing effects mainly related to contract indexation. Going to gas trading. We had a $11 million margin increase coming from additional trading activities in third quarter 2024. Particularly the sale of LNG cargo to Europe. Referring to the margin is higher by $5 million, mainly due to the increase of remuneration linked to publication of the VAD 2020, 2024 regulatory report. This margin was totally offset by the extreme weather events, including the force majeure events of August 1st and 2nd that affected our distribution segment.

This generated $16 million of additional OpEx and other expenses mainly related to an increase in dispatch for center facilities and generators rent and operation. Let’s move now on the next slide to review the main impact on EBITDA during the nine month figures. Our EBITDA reached $1 billion, an increase of $300 million, representing a 46% improvement compared to the last year. I will start explaining the positive effects. First, we had a great contribution of $250 million in PPA sales, mainly related to higher volumes, particularly in the regulated market and PPA pricing in the free markets, mainly due to indexation in line with the assets explained previously in the quarter. Second, industrial sourcing had a positive impact of $123 million, this is mainly explained by lower variable production cost due to lower thermal generation because of the remarkable hydrology of the deal.

Then, that’s a positive contribution of $70 million related to commercial sourcing mainly explained by lower prices associated with purchases in the stock market. This effect was partially offset by higher purchases from third parties and the impact of PPA renegotiation that benefited us in 2023. Then we have another positive effect of $23 million loan from grid margin. This is mainly due to the grid remuneration linked the publication of VAD 2024 regulatory report. As we have seen in the quarterly analysis, this positive effect was offset by the impact of the weather events. The aforementioned that positive that were partially offset by a negative impact of $115 million associated with the notable gas trading activities carried out during the first nine months of 2023, amounting to approximately 29 terabytes and a negative net effect of $16 billion, mainly due to higher OpEx associated with new renewable projects.

recognition of Transantiago business in buses in 2023 for NLX. Negative impact of inflection across all the businesses. Let’s move on to the next slide where we will review the net income evolution. Nine months 2024 net income amounted to $446 million, 62% higher than the last year’s figure, mainly explained by the EBITDA improvement. Let me drive you through the additional aspects for this nine-month period. Returning to the depreciation, amortization and bad debt we have a higher cost for $47 million, mainly resulting from higher depreciation in green power due to the new renewable capacity coming into operation and Chilean peso devaluation in the period. Higher bad debt accrual increase due to the rise in credit losses associated to the higher tariffs.

Regarding financial results and equity investments, we reported a $63 million negative variation versus last year, mainly explained by positive exchange rate differences in 2023, higher financial expenses, mainly due to FX variation and lower financial income linked to lower average interest rates, partially offset by higher interest related to the tax receivables. Talking about the income taxes, we recorded an increase of $42 million, mainly due to the better results in the period. This was partially offset by a lower cost related to representation of Arcadia assets held for sale in 2023.. Focusing on the quarter, our net income increased by 3%. This is mainly explained at high pricing EBITDA contribution, lower tax expenses of $50 million, mainly due to lower cost for the electrification of Arcadia assets held for sale in 2023 and lower cost due to monetary production.

These positive effects were partially offset by, first, an increase in D&A and bad debt of $12 million due to higher depreciation mainly linked to operation of new renewable capacity in EGP. And an increase in bad debt mainly due to a rise in credit losses associated to the higher Second, highest financial expenses of $60 million, mainly due to positive exchange rate differences in 2023 and lower interest recognition related to PEC 2.0 in third quarter 2024 versus third quarter 2023. And now let’s move to the FFO analysis on the next slide. Let’s review the composition of our FFO for the period and the main effect versus 2023. First, let me highlight that the 2023 FFO figure has been adjusted by $310 million due to tax paid on capital gains for the sale of Enel transmission in 2022.

Our FFO in this nine-month period of 2024 reached $366 million, nearly align in the same period of 2023. Excluding the 2024 tax payment for the sale of Arcadia asset last year, an FFO would have shown an improvement versus last year. EBITDA in this nine-month year amounted to more than $1 billion, showing a variation of $380 million compared to the last year’s figure. This is mainly due to higher PPF sales and positive performance in commercial and industrial sourcing as I previous explained. We have also already talked about the cumulative impact of the stabilization mechanism, which amounted to $313 million. This negative effect was partially offset by the execution of the IEB factor related to PEC 2, PEC 3, which amounted to $83 million in the nine months period.

When we compare the total aspect of PEC net of factoring for the nine months of 2024 versus 2023, we see an increase of $270 million this year. However, this is only a temporary aspect as we have already received an additional USD 630 million. Working capital in the nine-month period showed a negative balance of $74 million, mostly due to CapEx payments related to 2023 renewable. Compared to the last year’s season, working capital impact on FFO was positive for $84 million, mainly due to the higher cumulation of VAT tax credit in 2023. Income taxes negatively impacted our FFO by $169 million this period, primarily due to tax payment in the generational business in 2024 and taxes paid on the sale of Arcadias. Comparing income taxes paid in the first nine months of 2024 to 2023, we see a negative effect of $163 million.

This difference is mainly due to the tax payment of our value operation in 2024, higher tax payment in generation business and lower recovery from previous years. To conclude the financial expenses as a net negative impact of $166 million on the nine-month 2024 FFO, mainly due to the debt related to expenses. Once compared to last year, our financial expenses decreased by $12 million in the first nine months of 2024 compared to 2023. This decrease, it may be due to the financial strength related to PEC 1 in 2024. Now let’s take a look at our liquidity and leverage position. Our gross debt increased by 8% to $4.8 billion by the end of September 2024 compared to December 2023. This higher debt was mainly due to accumulation effect and seasonality of generation business.

This increase in gross debt should reverse during the last quarter of 2024, considering the factor under the PEC 3 mechanics, which took place on the last October 24 allowing us to pay an important amount in short-term credit lines, taking advantage of our debt flexibility. The average sale of our debt activity slightly decreased to 5.7 years by the end of September 2024 versus the 6.1 years that’s seen in December 2023. And the portion at the fixed rate was 75% of total debt. The average cost of our debt reached 5.0% as of September 2023, slightly above a 4.9% recovered in December 2023. Mainly due to the energy generation reactive bond maturity in April 2024 for $400 million at 4.25%. All in all, we can see a significant improvement in our leverage generations.

In this September, our net debt-to-EBITDA ratio was 2.9, demonstrating solid decreases versus last quarter figure. Regarding liquidity, we are in a comfortable position to support our capital needs for the upcoming months and cope with the next year. Thank you all for your attention. And now I pass the floor to Giuseppe Turchiarelli for closing remarks.

Giuseppe Turchiarelli: Thank you, Simone. To conclude this presentation, I would like to give you the following closing remarks. Better hydrology and incorporating new technology such as optimization in hydro facility and the development of battery in our portfolio have helped us to improve our margin. Also, our trading capabilities were also important in adjusting our sales portfolio, contributing to important margin in the period. As a result, we have delivered a more than solid operating and financial performance during the year. We received around $713 million through various factoring activities related to the fact. Larger part of which came from the last week operation, which reached $630 million. The proceeds will primarily repay short-term debt, strengthening our balance sheet.

As I mentioned, taking this new factor in realizing in October, we expect to end the year with accrual in the range of $500 million up to $550 million. Finally, to conclude, we want to embark you to the event of November 21, where we will present the new strategic plan for 2025, 2027 to the financial community. More information will be provided in the coming year. Let me now hand over to Isabela.

Isabela Klemes: Thank you, Giuseppe. Let’s now begin with our Q&A session. We will receive questions via phone and chat in the webcast. The Q&A session is open Carmen, please, you may start.

Operator: [Operator Instructions] One moment for the first question. And it comes from the line of Javier Suarez with Mediobanca. Please proceed.

Q&A Session

Javier Suarez: Hi. Many thanks for the presentation and for taking my questions as well. I have three questions. The first one is on the guidance. If you can elaborate on the latest guidance that you provided to the market in terms of EBITDA net income and also net debt, we should consider this guidance confirmed and the implications of the fact that the company is increasing their higher guidance to 13 terawatt hour this year, when previous guidance were 12 terawatts hour. So any light on existing guidance could be appreciated. Second question is on the recovery of regulatory receivables under the destabilization mechanism. So the question is, can you update us on your latest expectation for the timing for the recovery of the pending amount.

I think that on the previous conference call, you mentioned something like $200 million in 2025 and the remaining portion in 2026 and ’27. Is that guidance is still a good one. And the final question is on the — your latest expectations on the publication of the new distribution tariff. I think that you mentioned during the conference call that there is no significant update. So if you can give us a latest thought on when the final report should be unveiled.

Isabela Klemes: Okay. Thank you, Javier, for your questions. I will hand over to Giuseppe.

Giuseppe Turchiarelli: Yes. Okay. Let me say that for what concerns the guidance, as you probably remind last year, we present a range of EBITDA between 1.3, 1.5, and we confirm it. Of course, we’re going to be in the upper side of the range, but we are confirming our guidance. Same confirmation for concern, the net debt-to-EBITDA ratio, we’re going to be below 3x, that is basically our target. We feel comfortable with this duration. And for work content hydro, as you see in the presentation, we are expecting to close the year with approximately 13 terawatt hours of hydro production. Let me say that already in October, we had 1.2, 1.3. So we are in line — everything is in line with our forecast that people send in the call.

So this should be the production that we’re going to have at the end of the year. For what concern back with Simone. Well, okay, maybe just to find — to finalize my part for what concern there in 2024, 2028 distribution tariff process. We don’t have any kind of update. We expect to have some news at the beginning of the next year, when the CNA, the regulatory model will show the feedback for the technical consult record. So we are waiting for this report.

Simone Conticelli: Okay. Thanks for the question. Let’s talk a little bit about PEC. As you know, at the beginning of the year, the debt was quite high, $750 million. And then this increased first three quarters, of course, each quarter, we accumulate something like $100 million of new debt. And in the first three quarters, we received a factoring process, just more or less $80 million. And so at the end of September, the situation is that we have debt about [$1.1] billion. The important message that already Giuseppe gave you is that, in any case, the increase in time change the situation. starting from a few weeks ago with the PPD of second half. So we are not accumulating more or less any other tax receivable. And so from now on, the PEC amount should decrease each month.

Now as we have already commented, we received a cashing of $630 million, so the 24th of October. And given this cashing at the end of the year, our position should be in a range around $500 million and $550 million. This amount should be cashed mainly in the next two years. The larger amount, more or less [$200] million in the first year, plus in ’25. And the most of the remaining in 2026. We expect just a small part to be cashed in 2027. And particularly, we are talking about the sector one mechanism. As you know, these mechanics consider that as part of the total debt will be cashed in through the tariffs. And so we had to wait before the end of 2027.

Isabela Klemes: Thank you, Simone. Operator, do you have more questions on line? .

Operator: We do not have any other questions. Back to you for webcast.

Isabela Klemes: Okay. So Giuseppe and Simone, I will start with some questions that we have received from the analysts and investors connected. So the first one is coming from Francisco Paz from Santander. Francisco is saying thanks for the presentation. The question is the following. We have observed a positive water availability during this year and the previous one, which has helped the company to reduce cost pressures and increase hydro generation. Going forward and in the context of uncertainty for water availability in the long term. What do you assume is the reasonable estimate of hydro generation in the medium to long term for the company in an motor?

Giuseppe Turchiarelli: Well, let me say that we are clearly happy to have this two year with a very good hydrological condition. We do not consider this 3-year as a proxy for the following year. So we used to project in terms of hydro condition the last 10, 11 year average. So in general, we are soon to have around 10, 11 terawatt hour per year. These are our estimation as soon as we’re going to see a different kind of path in terms of hydrology, we are going to change our estimation. But as of today, we keep our estimation around 10, 11 terawatt hours per year.

Isabela Klemes: Okay. Thank you, Giuseppe. So we have some questions now from Andrew McCarthy from LarrainVial. So the first question is also related to the hydro generation, but I think we have covered now the question. So the second one relating to the fact, the factory, now so when do you expect to sell more factory receivables? And how much do you expect to receive?

Simone Conticelli: So I think that we have answered also in the previous question, but I will focus on the specific questions. Thank you. We are keep on selling the PEC debt going with the new decreases that we, and we are expecting to have cash for around $200 million or something more by the end of 2025. This is the first block of the effect that we are going to cash in.

Isabela Klemes: Okay. Thank you, Simone. So we have another question from Andrew that also their investors analysts have sent to us. So do you see more gas commercialization opportunities for the first quarter?

Giuseppe Turchiarelli: Well, at this moment, we don’t expect any additional sales of cargo for the rest of the year. Clearly, we are always looking at mainly opportunity to increase our profitability but as of today, we don’t have any in front of us in [indiscernible] in front of us.

Isabela Klemes: Okay. So the last question from Andrew is, do we expect the distribution business to return to normalized operating profit in the fourth quarter of this year or should there be more negative impacts from fines or compensation to clients for services interruption that occurred in 2024.

Giuseppe Turchiarelli: For what concern, the distribution business, of course, we are still evaluating all the period that we need in order to put our grid to the original status. We are waiting also in discussion for what concern the possible fines or compensation, and we’re going to give you more detail during our Investor Day.

Isabela Klemes: Okay. Thank you. We have some questions from Ignacio Sabella from Itau. So the question is also very similar to the ones that we have already answered. But just to focus on the PEC 2. Now so how much we expect the receivable accumulation regarding the factory going forward. Simone, just to rephrase as we have several questions on this.

Simone Conticelli: Yes. As we have commented on this one, that the two segment of customer with the consumption below 350 and with the consumption higher of 650 are started to pay. Basic the sales price we call the cost of the system and then also a component that is needed to recover. So from now on, we expect no significant increase or accumulation of debt.

Isabela Klemes: Okay. So a question from now coming from Martin Arancet from Balanz. Also on PEC, but he is asking more details about the usage of the funds from the factory that we received in October.

Simone Conticelli: Okay. Thank you for the question. As we have commented, the 24th of October, we received a payment of more or less [630]. This cash in was received by Enel Chile. And Enel Chile used the money to reduce the debt position in the short term. And part of the mine was invested also in the short term as the market interest rate. Clear, we keep on looking ahead to have further opportunity to optimize also the long-term debt. And on the other side, you know that the financial stability is one of our core growth for our strategy while, of course, we can leverage on that to graph eventual proximity that can come up in the market. And so this increase of our financial stability is a very positive effect that can enable us to do more in the future.

Isabela Klemes: Okay. Thank you, Simone. So we have one more from Martin. He’s asking, if I’m not mistaken, the government is preparing a technical report to evaluate if a non-distribution has taken the proper steps to return service to clients after the extreme weather event conditions. Could you give us any color on the time line of this report, your expectations? And also your options if it has a negative outcome.

Giuseppe Turchiarelli: Okay. So let me first mention the fact that the process of revoking the concession has not yet started. The Minister of Energy tasked the sector is preparing a stemming report on energy distribution concession. According to the authority, the study should take between 6 and 18 months. And once it’s going to be ready, it will be delivered to the President of the Republic for review and only the President of the Republic of Chile through a decree can start the process. So we are waiting for the record that should be issued by the SEC or let’s understand whether this technical mode see any possibility or any suggestions in order to revoke or to suggest the blocking of the concession. Just to be clear, below the current law exclude any possible revocation of the concession in case of force majeure.

This is the reason because we believe that any record from the SEC should give this kind of suggestion because it is clear from the situation that has been occurred in August that the force majeure is clearly part of the bank, let me say. And what we’re going to do in case of negative outcome. Well clearly, we’re going to start with all the legal action locally and international. So we’re going to start really defending our interest in terms of concession.

Isabela Klemes: Okay. Thank you Giuseppe. We received all the questions also from [Rodrigo Mora], but were the same on distribution and also on gas commercialization. So Tomas Gonzales from Scotiabank. Some questions we have answered, but I go to the dividend. And also, he is asking regarding the dividend, do you plan to pay our interim dividend before the year-end? Any possibility to increase the payout in the future is mentioned because of the funds of the PEC.

Giuseppe Turchiarelli: Okay. Talking about Enel, soon, the business policy of Enel [indiscernible] to increase to the year the dividend. In this moment, this cash in is in line with the possibility to stay in the policy. And in the very short term, so we will reach in the future until the 70% of the dividend. And so this money are very good news. No, will permit stay with our in policy. But in my opinion, and this is a matter for the Board of Directors and for the assembly of owners of the company. But in my opinion, there will be no big changes regarding the dividend policy.

Isabela Klemes: Okay. So let me check here. We have other questions. Okay. So we have one from Martin [Poso]. So he’s asking us. Can you give more detail about the impact the company might have with the increase of the green taxes in case the new project law is approved. Can you give you more details Simone.

Simone Conticelli: Well, let me remind you that last year, we paid $50 million in green taxes. And we have a very good mix in terms of plant fleet. Our CCGT is tied with a very competitive contract. And the green tax at the end of the day, represents a very low percentage of our thermal power plant. We have several options in order to compensate this taxes. But at the end of the day, as I said before, we are — the law is under discussion is at the beginning of the discussion, actually. And the amount of the taxes are almost. Yes, very, very low.

Isabela Klemes: Okay. Thank you, Giuseppe. So one more from Rodrigo Mora from Moneda. He’s asking about Los Condores project, okay? So he’s asking if we could give more color about the status of testing of Los Condores. And the energy generated expected to this plant. So just if you can give more on how we are in Los Condores, and then Simone the generation of Los Condores?

Giuseppe Turchiarelli: Okay. Well, Los Condores project is in a very good shape right now because we already started the pre-commissioning test. We are going ahead and we are pretty sure to have the first synchronization in the following month. It should be before the end of the year, we expect we could have a very good surprise in the following weeks. But let me say just to be conservative by the end of the year.

Isabela Klemes: Okay. Thank you. Simone, on the generation, please.

Simone Conticelli: Talking about generation of this new plant, we can give a range of production expected for the next year and should be on 150 and 200 gigawatt hour for one year.

Isabela Klemes: Okay. Thank you. So we have one from [Andres Barberis]. So the question is on Andres. Thank you for the presentation. I have a question regarding the regulated sales. We observed a year-over-year increase of 606 gigawatt, is this increase driven by higher demand in your current CPAs? Or is due to a start of a new regulated contract?

Giuseppe Turchiarelli: Basically, increase in sales are connected to a new cons that start recently this year actually. And it was a regulated standard that we won in 2017. So it’s a matter of perimeter. So we have a new PPA entering our portfolio.

Isabela Klemes: Okay. Thank you, Giuseppe. So Carmen operator, do we have any more questions online.

Operator: Yes, we do. We have a follow-up or moment, please. Okay. Thank you from the line of Javier Suarez with Mediobanca.

Javier Suarez: Sorry for coming back again. Is on the guidance, you mentioned that the guidance for the EBITDA in 2024, is now seen at the upper end of the range, the previous range, $1.3 billion to $1.5 billion. If you can confirm that if you can share with us also on the guidance for the net income.

Giuseppe Turchiarelli: Okay. I confirm you on that if you’re going to be at the upper range. So around closer to 1.3 rather than 1.3. So upper range. And for what concern the net income similar situation, I mean, we are going to confirm the guidance at the upper range that we presented last year.

Isabela Klemes: Okay. Thank you. If there is no more questions, I would like to conclude our conference call. The Investor Relations team is available to answer any questions you may have. Many thanks for your attention. Have a great rest of the week and see you soon at our Investor Day. Thank you.

Operator: Thank you. And with that, we conclude today’s conference. You may now disconnect.