Enel Chile S.A. (NYSE:ENIC) Q4 2024 Earnings Call Transcript

Enel Chile S.A. (NYSE:ENIC) Q4 2024 Earnings Call Transcript February 27, 2025

Enel Chile S.A. beats earnings expectations. Reported EPS is $-0.00396, expectations were $-0.025.

Operator: Good morning, ladies and gentlemen, and welcome to Enel Chile Full Year and Fourth Quarter 2024 Results Conference Call. My name is Carmen, and I’ll be your operator 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 and reporting its full year and fourth quarter 2024 results, the presentation accompanying this conference call and Enel Chile’s annual report on Form 20-F, included under Risk Factors.

You may access our full year and fourth quarter 2024 results press release and presentation on our website at 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 date. 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 becomes 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.

Isabela Klemes: Good morning, and welcome to Enel Chile’s 2024 fourth quarter and full year results presentation. Thanks to you all for joining us today. My name is Isabela Klemes. I am the Head of Investor Relations team. Joining me today are CEO, Giuseppe Turchiarelli; and our CFO, Simone Conticelli. Our presentation and related financial information are available on our website, www.enel.cl in the Investors section and on our app Investors. In addition, a replay of the call will be soon available. At the end of this, 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. Giuseppe will start the presentation by covering key highlights of the period.

He will then discuss our portfolio management actions, provide updates on regulatory context and share our guidance achievements. Following that, Simone will offer an overview of our business economics and financial performance. Thank you for your attention. Giuseppe will now take over the call.

Giuseppe Turchiarelli: Thank you, Isabela. Good morning, and thanks for joining us. Let’s start the presentation with our main highlights of the period on Slide 2. Our hydro portfolio performed exceptionally well with hydro generation increasing by 12% compared to last year. This performance was a result of a higher reservoir level at the beginning of the year, influenced by El Nino phenomenon observed in 2023 and a solid rainy season during 2024. Also on hydro, we are pleased to announce that the Los Condores hydro power project has finally been connected to the system. The plant is already in full capacity mode generation. All the tests were concluded and we are now expecting to receive the COD in the next weeks. As we reviewed last quarter, the force majeure climatic event on August severely impacted our distribution concession area.

In this presentation, I would like to provide you with some updates on the additional measures we have been taking to prepare for the future climate events, while we do not see changes in distribution regulations. Regarding the August event, I would like to emphasize that Enel Distribucion was the first distribution company to request and agree on a voluntary compensation plan for its clients impacted by the force majeure event in August. Also, I will give you more color on how we are in terms of VAD 2024-2028 process and the tax situation, considering the publication of PNP the regulated consumer tariff during January this year. Regarding the business profitability, I’d like to remind you that we changed the company’s functional currency during the fourth quarter.

This led to a non-cash impact of $657 million at the EBITDA level. As we have emphasized before, this will not affect the dividend distribution for our shareholders. Throughout the presentation, we will discuss adjusted EBITDA and net income, excluding this impact. Taking the adjustment, I’m pleased to announce that our adjusted EBITDA and net income results were fully in line with the 2024 guidance, reaffirming the confidence in our strategic plan. In terms of FFO, we see an important improvement versus last year, coming mainly from our EBITDA and the PEC factoring executed in the fourth quarter. I will provide more detail on this later. Now let’s review some updates regarding our generation sourcing, beginning with the hydro and natural gas situation, as outlined on Slide 3.

The positive hydrological condition during 2023, which led to a greater water availability from the beginning of 2024, coupled with the higher than expected rainfall recorded in 2024, allowed us to increase our hydro production. This resulted in a 12% increase compared to the 2023 period, equivalent to 1.5 terawatt hour of additional hydro generation. The hydrological situation in our reservoir continued to be comfortable year-to-date compared to the last year figures despite experiencing a La Nina phenomenon. However, for the year, we have chosen to adopt a conservative strategy and set our hydro condition target for our hydro fleet close to the average of the last 10 years, equivalent to 10.7 terawatt hour. To strengthen and diversify our portfolio, we have strategically secured contracts with a variety of Argentinean natural gas provider for 2025.

Unlike previous years, this agreement covered the entire year, not just the winter and summer period. This approach enhanced our visibility of both prices and quantities, providing us with a more stable and predictable supply for the year. Furthermore, while Argentinean gas remain highly competitive, our strategy continue to be anchored to our long-term and firm LNG contract with Shell. This dual sourcing strategy ensure the security of our required volumes and offer the flexibility to explore trading opportunity in both internal and external market. This proactive measure position us strongly to navigate market and climate fluctuation and capitalize on opportunity. Let’s continue discussing our generation sourcing with a focus on the development of our portfolio on generation assets now on Slide 5.

I would like to start emphasizing that in 2024, we successfully completed the expansion of our renewable portfolio across the country, increasing our exposure to battery energy storage. This milestone represents a crucial step in our strategy to diversify and make our portfolio more flexible. Our ongoing efforts to advance battery regulation for ancillary services are vital for boosting market competitiveness and reducing system costs. In 2024, we received authorization from the National Electricity Coordinator to begin commercial operation of a total of 693 megawatts. This includes 385 megawatts of solar, 202 megawatts of battery storage and 106 megawatts of wind capacity. Additionally, we successfully connected 404 megawatts of renewable capacity in 2024, bringing our total capacity to 8.9 gigawatts.

Today, almost 80% of our total capacity is renewable and BESS. As anticipated in the fourth quarter, we connected Los Condores hydro power plant into the grid. The plant is already operating in a testing mode until we receive approval for the coordination to commence commercial operation. The good news is that we are generating at high levels. To date, we have received approval for the 11 testing procedure requested by the system coordinator and have sent a letter formally requesting approval for commercial operation last week. Therefore, it is reasonable to anticipate authorization by March this year. Now on the next slide, we will review the performance of our generation KPI. Net electricity generation totaled 24.6 terawatt hour as of December 2024, exceeding by 2% the production during 2023, mainly due to higher hydro and renewable generation resulting from the improved hydrology this year and the operation of new projects.

During the fourth quarter of 2024, net generation decreased 8% to 6.1 terawatt hour, mainly due to lower thermal dispatch during the fourth quarter 2024, lower other renewable production and slightly better hydrology recorded during 2023. Our energy sales totaled 33.4 terawatt hours during 2024, 8% higher than the level recorded in the previous year, resulting from higher sales to both regulated customers and free clients. Our commitments with our clients were fulfilled with a higher portion of our renewable generation, coupled with an efficient portfolio of purchases to third-parties. Regarding the latter, in terms of our balance during 2024, we increased our purchases from third-parties by 2.3 terawatt hours as part of our continued efforts to diversify and optimize our energy sourcing.

During the fourth quarter 2024, physical energy sales grew by 6% to 8.1 terawatt hours, mainly due to higher sales to regulated customers. Now I would like to take a few minutes to talk about the extraordinary weather events of last August. I would like to provide updates on the extreme weather events that impacted our concession area in August 2024 and discuss our preparation for future events. Just to recall, on August 1 and 2, an extraordinary and unpredictable storm with winds of up to 124 kilometers per hour impacted the metropolitan region, causing extensive damages. This storm severely affected our electricity distribution network, resulting in widespread power outages and making system restoration extremely challenging. We requested the local regulator to declare the August 2024 storm as a force majeure event, but it was rejected.

In response, we filed a reclamation remedy with the Santiago Court of Appeals to overturn the Superintendencia de Electricidad y Combustibles’ decision, SEC. On September 30, 2024, the Santiago Court of Appeals accepted our reclamation remedy requiring the SEC to provide substantial information about our claims. As anticipated on November 2024, the SEC report recommended rejecting our claim. We are now awaiting the court’s file resolution, which remains pending and we stand confident in our position. Still related to the event in August, last January, the SEC imposed a $20 million fine on Enel Distribucion. This fine is the largest ever imposed on electricity provider in Chile for service disruption, among other issues identified by the SEC.

Enel Distribucion booked 100% in December 2024 of the fine, but filed an administration remedy, reiterating that August climate event was an unforeseen and resistible force majeure under Chile current legal and regulatory framework. We are awaiting the SEC formal response to our appeal. On February 4, 2025, Enel Distribucion as part of a voluntary collective procedure became the first distribution company in Chile to reach a voluntary agreement with the National Consumer Services, SERNAC, to establish an extraordinary compensation mechanism for residential customer affected by the prolonged power outages. The agreement includes a total voluntary agreement of approximately $80 million, benefiting around 800,000 customers. This amount is divided into first, compensation of interruption; second, compensation for claims; and third, compensation for the loss of food, medicine and similar items.

This agreement is separated from the legal compensation that are pending the resolution of the force majeure and aggravated abnormal state reclamation remedies. The impact of this voluntary agreement program was also recorded in our 2024 financial results, as Simone will show you later. Despite several regulatory and legal discussions surrounding the August event, we have introduced many initiatives to improve the response of all parties involved in the future climate event. We believe that climate changes will make such events always more present. Therefore, it is essential for all parties to act promptly and effectively to ensure the proper functioning of the networks. Let me provide you with some examples. We agreed on operational emergency guidelines with the municipality to better coordinate with our operational teams during climate events.

We signed a collaboration agreement with the electro-dependent group to ensure back-up for medical devices and to provide training on the correct use of the KIP. We accelerated the rollout of the smart meter program for electro-dependent clients. And we conducted through preventive aerial inspection of the grid in preparation for the upcoming winter, particularly to identify any potential additional damage from the August events and to address any further needs for preventive training. Part of these actions were already included and presented as part of Enel Distribucion 2025 autumn and winter season plan, which was submitted to the SEC on February 19, 2025. In the distribution sector, we remain committed to promoting reform and modernizing the regulatory framework to enhance asset resilience.

This effort will enable us to optimize the value of our distribution network, fully meet our clients’ needs and ensure long-term sustainability. Talking about regulation, let’s take a look at the main update on the next slide. A supportive regulatory framework is crucial for attracting investments necessary for the energy transition and providing resilience against increasingly extreme frequent events to climate change. Therefore, we continue to advocate for a new model based on real assets that addresses factors such as proper remuneration rates and incentives mechanisms for resilience, quality and performance improvement. We appreciate the consensus among academia, the electrical industry and the Congress on the urgency of the distribution reform and hope it will soon be part of the legislative agenda once the legislative member return in March.

The process for the 2024-2028 VAD has started using the same methodology applied for the 2020-2024 cycles, the reference model company. The delivery and official publication of the consultant final report are expected by the end of March. And we estimate that by the second quarter of 2025, the regulator will publish the preliminary technical report on this new cycle. We expect an improvement in remuneration for this new process, considering the newly approved Valor Nuevo de Reemplazo, VNR, and all the economic and technical assumption of the December 2022 included in the report. We believe that this factor will be confirmed in the various stages of this process. Regarding the PEC, since October of the last year, we have not accumulated additional receivables as the client tariff now reflect the real contract price.

In December 2024, the decree for the first half of 2025 PNP was published and the regulated tariff was updated. In this process, the average residential consumer in the metropolitan region of Santiago experienced an average increase of around 12%, mainly due to the integration of the client protection mechanism MPC into their tariff. This mechanism allows for the gradual repayment of accumulated debt to the generator and establish a transitional subsidy for the most vulnerable clients. On the other hand, clients with consumption higher than 350 kilowatt hour per month that have been paying for this mechanism since last year saw a decrease of approximately 3% compared to the tariff from the last year. Related to the PEC accrual as of December 2024, we had an account receivable related to the PEC already net of factoring and including the adjustment and interest of around $500 million, showing a reduction of around 40% versus 2023.

This reduction is mainly due to the factoring executed last October 2024. We expect to execute a new factoring during the second quarter of 2025 of around $250 million. Let’s move to the right side of the slide where we will review the key points of the government’s proposed law to expand subsidies, which currently benefit around 1.8 million families. The new proposal aims to extend coverage to approximately 4.7 million families, targeting the 40% most vulnerable households in Chile. In January 2025, the Chamber of Deputies approved the government’s proposed tax with some changes. The proposal, which will now move to the Senate for its second legislative stage includes various instruments to fund the subsidies. The key instruments to fund the subsidy are as follows; allocating the additional VAT revenue that the treasury is collecting due to the increase in the tariff, implementing a temporary surcharge on the green tax emissions, increasing it from the current $5 per ton of CO2 emitted.

Also in this project, the Chamber of Deputies has approved the following; increasing the amount of compensation that the distribution company must pay to clients in case of distribution power outages and for what concerns the small and medium companies replacing the price of electricity currently provided through the regulated contract with a price that includes a reduction coming from the electricity prices of PMGD in order to offer a tariff discount to this client limited to 500 gigawatt hour per year. At Enel, we support the government efforts to assist the most vulnerable families amid potential economic challenges. While this solution aims to provide necessary support, it is important to ensure that they do not disrupt the market as occurred since 2019.

For a sustainable approach, it is essential to consider a measure that preserve long-term investment, competitiveness in the energy sector. We believe that allocating additional VAT revenue could be a viable and sustainable option among the proposed measures. I will now conclude with our commitment and deliverable on Slide 9. Let me point out that we have reached our main financial targets for the year 2024. Our results adjusted for the non-cash effect of the change in functional currency show an EBITDA of $1.4 billion and a net income of $0.6 billion. These achievements reflect our ability to generate value in a resilient and flexible manner. Even in a challenging environment, a more efficient portfolio mix driven by improved hydrology condition allowed us to meet our EBITDA and net income commitments of our guidance announced during 2024 Investor Day.

Simone will provide details on our performance on EBITDA and net income in the following slides. The action taken during 2024 have ensured the fulfillment of our leverage and net debt to EBITDA commitment, allowing us to recommend maintaining the committed payout in our guidance. This recommendation was also endorsed by the company Board of Directors and will be submitted for approval at the 2025 Annual Shareholder Meeting. Now I will hand over to our CFO, Simone Conticelli. Simone, the floor is yours.

Simone Conticelli: Many thanks, Giuseppe, and good morning, everyone. I will start my presentation with a summary of our main results for the period. First, to better evaluate our company’s earnings performance, we present the 2023 and 2024 figures adjusted by the following one-time effects. For 2024, full year and fourth quarter EBITDA and net income have been adjusted by the non-cash effect of the change in the functional currency, respectively amounting to $657 million and $468 million. For 2023, the full year and fourth quarter net income exclude the capital gains obtained from the sale of Arcadia executed last year and amounting to $163 million. And the full year FFO exclude the taxes paid on capital gains obtained from the sale of Enel Transmision amounting to $310 million.

Considering this adjustment, let’s pass through the analysis of economic and financial performance, starting with a quick overview of the key figures, which I will detail in the following slides. Adjusted full year 2024 EBITDA and net income recorded significant improvements when compared to the previous year indicators despite the negative impact of the force majeure event of August 2024. This is mainly explained by a more efficient sourcing mix boosted by a better hydrological situation and an increase in our energy sales and better pricing. These results demonstrate the resilience of our business and the solidity of our strategy. Furthermore, the full year 2024 figure show an important FFO increase versus previous year, mainly due to a better EBITDA and the PEC’s factoring operation with a significant impact on the fourth quarter.

And now on the next slide, let’s review the progress on CapEx. Our total CapEx reached $583 million during 2024, 19% lower than the previous year, considering the conclusion of several renewables and storage projects over the 2023-2024 period. 61% of the total CapEx amounting to $355 million was mainly related to renewable and storage deployment CapEx and 22% equivalent to $130 million was related to grids. Asset management CapEx reached $203 million, which represents 35% of our total CapEx. It increased around 77% compared to 2023 figures, mostly due to the following facts in both businesses. In the generation business, an increase of $58 million was mostly related to maintenance activity in the Atacama CCGT power plant and also in the solar and wind assets.

In the distribution business, an increase of $30 million due to climate event emergency and maintenance activities related to the line failures. Finally, the development CapEx reached $318 million, a decrease of 40% compared to 2023 figures, mainly due to the conclusion of renewable and BESS projects. So let’s move to the next slide where we have a summary of the fourth quarter EBITDA breakdown. During the fourth quarter 2024, our adjusted EBITDA reached $424 million, excluding, as anticipated, the one-time and non-cash effects of the change of functional currency. The $5 million increase compared to the same period of 2023 is primarily due to the following effect. In the generation business, we recorded a $71 million increase due to a significant contribution from PPA sales.

This growth is mainly related to pricing FX, primarily due to contract indexation in the free market and higher volumes, especially in the regulated market. Additionally, we recorded an increase of $33 million due to positive performance in our generation. This is mainly explained by lower production costs resulting from reduced thermal generation dispatch, partially offset by higher commercial costs. The positive performance of generation business was reduced by $68 million, mainly due to the reduction of gas trading margin given the 2023 outstanding results. Regarding grids, we recorded a $9 million positive impact mainly due to an increase in remuneration associated with the rise in the Valor Nuevo de Reemplazo, VNR. However, this margin was more than offset by the impact of last year extreme weather events, including the force majeure event on August.

The impact amounted to $41 million, including fines and clients voluntary compensation program. So let’s move to the next slide to review the full year EBITDA breakdown. In the full year 2024, our adjusted EBITDA reached $1,421 million, not considering the impact of functional currency change. The increase versus 2023 amounts to $320 million, primarily due to a significant contribution of $321 million from PPA sales in the generation segment, mainly explained by higher volume, especially in the regulated market and pricing effect related to the contract indexation in the free market. The positive impact of $227 million from the generation sourcing activity, mostly due to lower variable production costs resulting from lower thermal generation, thanks to the remarkable hydrology during the year.

And lower price in spot market purchases, partially offset by higher purchases from the third-parties. The reduction of gas trading margin compared to 2023 outstanding performance amounting approx to $0.2 billion. Finally, regarding grids, we recorded a $31 million positive effect for the full year, primarily due to the increase in the remuneration linked to the publication of VAD 2024 regulatory report, the increase in the Valor Nuevo de Reemplazo and the tariff indexation, partially offset by higher technical losses and the negative impact of inflation on our costs. These results were more than offset by the impact of extreme weather events that amounted to $62 million for the full year, including fines and clients’ voluntary compensation program.

And now let’s move to the next slide where we will review the net income evolution. Our full year 2024 net income amounted to $622 million, 22% higher than last year figure, mainly explained by the already commented EBITDA improvement. So now let’s comment the additional effects for this year. Referring to depreciation, amortization, impairment and bad debt, we recorded higher cost for $81 million, mainly resulting from higher depreciation in Enel Green Power due to new added renewable capacity and Chilean peso devaluation in the period. An impairment made in December 2024 related to Las Salinas expansion projects, higher bad debt accrual in grids due to a worsening in clients’ payments behavior and higher tariffs. Regarding financial results and equity investment, we recorded a $75 million negative variation versus last year, mainly explained by positive exchange rate differences in 2023 and higher financial expenses, mainly due to FX variation and higher amount of PEC receivable also in 2023.

Finally, on income taxes, we recorded a $39 million increase mainly due to better results in the period. Focusing on the quarter, our adjusted net income decreased by $37 million. This is mainly explained by, first, the difference of impairment accounted in the period for $29 million; second, the higher financial expenses for $10 million, mainly due to lower interest recognition related to PEC 2 in the fourth quarter 2024, partially offset by positive exchange rate differences in 2023. These effects were partially offset by lower tax expenses of $2 million, mainly due to lower EBITDA in the fourth quarter 2024. And now let’s move to the FFO analysis on the next slide. Let’s analyze the FFO composition for 2024 period and the main effects when compared to 2023.

It is worth mentioning that the 2023 FFO figures have been adjusted by $310 million related to taxes paid on capital gains from the sale of Enel Transmision Chile in December 2022. 2024 FFO reached $1,209 million. It means an improvement of $332 million versus 2023 as a result of the following factors. First, the adjusted EBITDA amounted to $1.4 billion with the already explained positive variation of $320 million versus 2023 result. Second, the cumulative negative impact of the stabilization mechanism amounted to $310 million, which was more than offset by the execution of the IDB factoring related to PEC 2 and PEC 3 amounting to $697 million. If we compare the 2024 total FX of the PEC net of factoring versus 2023, we see an increase of $393 million.

Third, the increase of net working capital equal to $153 million, mostly due to CapEx payment related to renewable development in the second half of 2023. Compared to the last year figures, the impact of working capital on FFO was negative for $233 million, mainly due to CapEx payment related to 2023 renewables, collection impact from distribution business and cash in from the sale of Santa Rosa building received in 2023. Fourth, the income taxes that negatively impacted our FFO by $205 million, primarily due to tax payments related to generation business and to the sales of Arcadia asset. Comparing income taxes paid in 2024 versus paid in 2023, we see a negative effect of $174 million. The difference is mainly due to the tax payment of Arcadia transaction in 2024, higher tax payment in the generation business and lower recovery from previous periods.

And finally, the financial expenses amounting to $241 million, mainly due to the debt-related expenses. Compared to the last year, our financial expenses decreased by $25 million in 2024. This decrease was mainly due to the financial expenses related to PEC 1 in 2023. So now let’s take a look at our liquidity and leverage position. Our gross debt decreased by 11% to $3.9 billion as of December 2024 compared to December 2023. This decrease was mainly due to the optimization on the use of cash from the PEC 3 factoring, which took place in October 2024 and the operational cash generation during the year. The average term of our debt maturities slightly increased to 6.2 years as of December 2024 versus 6.1 years in December 2023 and the portion of gross debt at fixed rate was 89% of the total debt in December 2024.

The average cost of our debt reached 5.0 as of December 2024, slightly above the 4.9% recorded in December 2023, primarily due to the Enel Generacion Yankee Bond maturity in April 2024 for $400 million at 4.25%. And finally, regarding liquidity, we are in the comfortable position to support our capital needs for the upcoming months and cope with 2025 maturities. As of December 2024, we had available committed credit lines for $690 million and cash and cash equivalents for $385 million. With the financial debt analysis, we close our comment on the company figures. So thanks, everybody, for the attention. And now I will leave the floor to Giuseppe for the final remarks.

Giuseppe Turchiarelli: Thank you, Simone. To conclude my presentation, I would like to give you the following closing remarks. Despite the very challenging context related to the crisis events registered in August, Enel Chile resilient business model allowed us to obtain robust results for the year, enabling us to fulfill our commitment to all our shareholders. This year, we have delivered a robust economic and financial performance, aligned with the target and strategic pillar presented on our last Investor Day. This gives us confidence that Enel Chile is more than preferred to operate in a volatile environment and to take advantage of a new opportunity. For 2025, we will continue to advocate for utilities reform and the modernization of the regulatory framework to enhance asset resilience.

This will help us optimize the value of our assets across both businesses and ensure long-term sustainability. Finally, to conclude, on April 28, we will hold our Annual Shareholder Meeting, during which the final and extraordinary dividend to be paid in May 2025 will be proposed, including the interim and eventual dividend, the total amount will be CLP 4.24 per share. Now let me hand over to Isabela for the Q&A session.

Isabela Klemes: Thank you, Giuseppe. Thank you all for your attention here. We will now begin with our Q&A session. We receive questions via phone and chat in the webcast. The Q&A session is open. Operator, please. You may start.

Q&A Session

Operator: [Operator instructions] Our first question is from Alessandro Di Vito with Mediobanca.

Alessandro Di Vito: I have 3 or 4. First one is we saw a couple of days ago that you had a big blackout in Chile and it looked like it was a systemic event. So I wanted to understand whether distribution companies like yourselves will be liable for potential penalties or it was more like a systemic event. So no fault on networks. This is the first question. Second question, I was looking at the hydro output. Your assumption for 2025 of 10.7%. I understand that we come from that the estimate is based on our 10 years average, but we come from 2 exceptionally wet years. So would you argue that this estimate could be conservative? And maybe it would be interesting to understand if you had moved some — maybe a portion of the extra 2024 hydro resources for production in ’25.

The third question is more related to batteries because we saw that you started operation of 200 megawatts of batteries. I wanted to understand whether these were standalone batteries or they were part of a hybridized renewable plant? And if they are standalone batteries, I wanted to understand which IRR do you see on battery projects in the country? And in general, how do you see the ramp up in standalone battery capacity in the country for the coming years? And the last one, last question is if you confirm 25 gallons that was included in the latest DV.

Isabela Klemes: Thank you, Alessandro, for your question. I will pass to Giuseppe.

Giuseppe Turchiarelli: Okay. Well, let’s start from the blackout for what’s concerned is massive interruption of the electricity supply that has been caused by the transmission system and disconnection, which unfortunately affected also our distribution company. We are not liable for any penalty because we are not responsible as distribution company for this interruption. Of course, there will be several analysis that has to be made by the coordinator and the SEC. So we’re going to see, which will be the results. But as of today, our information is that everything is coming from an interaction in the transmission line. So we don’t foresee right now any kind of penalty for our distribution cost. For what concern the hydro output for 2025.

As you see in the presentation, we made maybe conservative assumption using the 10 year average historical data. This is our current approach since several years because we believe that the hydrology is pretty volatile. So we prefer to take this kind of conservative approach. Is too early to understand whether there will be an extraordinary — rainy season or weather condition we’re going to see in the following month as soon as the winter season will start so basically in May. We are confident to match this hydro production we’re going to see and we’re going to give you more information in the following months, not before May or June. Talking about the battery, the battery that we have already in operation and the battery that has been presented in the last Capital Market Day are hybrid so basically we are going to build up together with solar or wind project.

And for what’s concerned, the IRR is double-digit of course, the IRR depends on each project and the characteristics that the project has and the location that the project have in the system. And finally the guidance, yes, we confirmed the 2025 guidance that we present in the last Capital Market Day.

Isabela Klemes: Operator, do we have more questions coming from the line?

Operator: Yes, let me bring the next one to our stage and it’s from Martin Arancet with Balanz Capital.

Martin Arancet: I have three questions. First, regarding the distribution business, you mentioned a fine of almost $20 million and the voluntary compensation program. If I’m not mistaken, the government was also assessing the possibility of revoking the concession. I was wondering if that’s off the table or if the government is still working on assessing that possibility. My second question, well, regarding CapEx, if you can share with us possibly the CapEx plan for this year and my third question, probably a follow up of a recent question. I was wondering, what is your strategy, your commercial strategy with batteries? Is it just to take advantage of arbitrage opportunities due to low marginal cost during solar hours or if you think that you could add the cost of batteries to new PPA prices to give a 24/7 solution.

Isabela Klemes: Thank you, Martin. I will pass over to Giuseppe and then to Simone.

Giuseppe Turchiarelli: Okay. Well, talking about the concession. Well, first of all, let me remind that the revoking of the process of the concession has not yet started. What happened is that the Minister of Energy tasked the SEC, the Superintendent, with preparing a technical report on Enel Distribucion concession and according to the authority, this study could take between 6 and 18 months. As of today, I would like to point out that we have not received any notification or communication in this regard. So no administrative process is pending for the forfeiture of any distribution electricity concession and under the local laws, the President of the Republic must declare the forfeiture of the electricity distribution concession through an administrative act and the SEC, the Superintendent is mandated by law to carry out all necessary steps regarding the expiry of the operational concession.

But again, it’s really important to underline that the law excludes the forfeiture of the electricity distribution concession in case of force majeure duly verified by the Superintendence. And as of today we don’t have, as I said, any further update on that. Talking about CapEx and, the BESS — the business model, I mean the BESS we used to have in terms of business model. Let me remind you the business model first of all, as of today we have 2 revenue stream in our business model for the BESS. The first one is the energy shifting. So basically we charge the BESS during the solar hour and we discharge during the night. So we take advantage of the spread that we have in terms of prices. You probably know that in Chile there are in general in all the countries, but specifically in the North there is a very important variances between solar and non-solar power.

And the second revenue stream for the BESS is the capacity payment. Capacity payment foreseen by the regulation that guarantee a certain percentage of the revenue for the base. Let me say in general, I would say that is around 30% capacity payment, 70% energy shifting. Important point for what concerns the BESS is that this year is supposed to be issued a change in the regulation. We hope it’s going to be issued by the end of this year, probably in the mid, we hope based on which there will be a new regulatory stream for the BESS because they are going to be entitled to receive ancillary services remuneration. So I believe that the BESS business model is very, very good as of today in Chile. And by the way, the system requires this kind of technology so everything is going well.

Martin Arancet: Yes, just a small follow up on that. Well, you shared that arbitrage is currently like the most important revenue stream, I was wondering if you have, I don’t know, an estimate on how that could change with these ancillary service charge if that will be relevant close to arbitrage revenues or what’s your expectation there?

Giuseppe Turchiarelli: Well, the ancillary services remuneration is a very good complement to remuneration of the battery because of course there will be a moment during the year or in the following year in which the arbitrage is less convenient than what we see right now. And having the 3 states is a very good complement in order to guarantee the remuneration of the battery. Clearly it’s not going to be a third — it’s going to be a third remuneration, but not in the same moment.

Isabela Klemes: And now from the CapEx, I will pass over to Simone.

Simone Conticelli: Thanks for the question. Talking about 2025 CapEx. As we commented during the presentation of the plan, we are focused on obtaining the BESS mix in terms of generation, just to reduce the cost of generation. So we expect a very intense year in terms of CapEx in general, we are going to invest something less than $800 million and more or less $0.5 billions are related to development CapEx in new power plant. We are going to focus on new BESS project, 3 BESS projects with a total of more or less 450 megawatt. This kind of base that Giuseppe described. Hybrid projects and the investment are more or less all in this year, in 2025, but the BESS will arrive at beginning of next year. So improving our mix of Production starting from 2026.

Isabela Klemes: Operator, do you have more questions to the line?

Operator: [Operator Instructions] All right, It’s from Emanuele Oggioni with Kepler.

Emanuele Oggioni: I have two left. One is on the regulatory framework you mentioned in a very detailed slide. The next steps as expected, my question is about the related to your target of roughly USD 150 million of EBITDA for 20 — along the plan basically yearly in ’26-’27 if the current expectation based on the regulatory framework the evolution of the regulatory framework could confirm or not or improve or not the current targets including the business plan? This is my first question. And the second one is on the renewable side and the additional capacity. If you remind us the expected additional capacity in ’25 if there is some delay or something to flag?

Isabela Klemes: Thank you very much. Giuseppe?

Giuseppe Turchiarelli: Okay. Well the Enel Distribucion Industrial Plan 2025 to 2027 has been made according to the view that we had at the end of last year. That is supposed to be confirmed in this preliminary report that is going to be issued at the end of November by the consultant. So everything is in line. There could be some smaller improvement and that we are going to see in the next month, but I mean it’s really to say whether we are going to have any upside. But the amount that we put in terms of EBITDA for distribution companies in line with the most conservative expectation that we have about the new regulatory cycle and for what concern the renewable capacity, all the CapEx, I will give you the floor to Simone. All the CapEx are devoted to capacity that is going to be in operation next year. But Simone, please.

Simone Conticelli: So talking about the CapEx and complementing about the CapEx, the new project will involve the company basically for the larger part in the second half of 2025 and the plants are expected to reach the COD just in the first half of 2026. As of today, we don’t see any specific reason for a delay. In any case, the impact of these plans I want to highlight that are not for this year. it will improve the EBITDA for 2026.

Isabela Klemes: Operator, if you don’t have more questions come from the line I go to the to the chat questions that we received. We received several questions. So a lot of the questions coming from the outages from Chile from last February ’25, so received questions related to it from Francisco Paz, Santander; Andrew McCarthy, LarrainVial; Fernan Gonzalez, BTG. So the questions are all more or less all the same. Okay. So I will read one of these. Regarding the massive power outages in Chile the Minister of Energy puts Enel Chile as one of the companies pointing out in the problem in this case for the delay connected some power plants in the system in order to establish the electricity service in the country, particularly the hydro power plant Rapel.

Do you think you can see fines for the delay in connecting your plants? How long did it take to activate the plants versus what was requested from the authorities? And we also received questions about potential impacts on the distribution business related to the breakout. So if you see an impact on the distribution as well. So Giuseppe.

Giuseppe Turchiarelli: Okay, so in response to the failure of the National Enel system, NLH and Green Power immediately mobilize all its things procedure and protocol to control and restore the operation of generator across the country. Specifically for what concerned one of our plants, Rapel at our plant which had several attempts to connect to the nationalistic system. We emphasized that there was no technical unavailability of the plan. External factor on conditions that prevented regular start-up are being analyzed. Additionally NL team immediately mobilized all teams procedure protocol to control and restore the operation for all the country in particular our generation control room center was operational for corresponding communication with the national electricity coordinator.

And talking about I saw other questions and talk about the possible findings. As I said before is too soon to foresee any impact related to it. The incident is under investigation by the system operator and there are a lot of issues regarding the system operation that must be clarified before assigning any accountability to any company.

Isabela Klemes: And on distribution you have…

Giuseppe Turchiarelli: As I said before, distribution is not involved in terms of responsibility. Actually we made a lot of effort in order to restore the electricity to the final customer but not having any kind of responsibility, we don’t believe there will be any kind of liability for the company.

Isabela Klemes: Okay, thank you, Giuseppe. And now changing the subject, received some questions on the extraordinary effect the one-off effect on the functional currency. So questions coming also from Francisco Paz, Santander; and [Indiscernible] from HSBC. So regarding the change of currency in the reporting of results going forward we will see any additional adjustments to the one observed in ENEL generation in the next period. Also please could you give further details on the impact on the effect no change the function of Corinth to USD what are the mechanisms behind this move? Simone?

Simone Conticelli: So thanks for the question. I will give some detail about this change of currency. First of all, highlighting that given the international financial reporting standards, the change of currency is not like a choice of the management it’s something that we have to do. I mean what I have said that the currency should reflect relevant transaction, event and condition of the company. So what happened between 2024 and 2025 to the 3 companies that changed the currency? It’s important starting from Enel Generacion cause the impact on Chile is related to the change in Enel Generacion Chile, Enel Generacion Chile has 2 main forms of revenues and flows. One, the regulated contracts and the other one is the contract on a free market.

The first, the regulated contracts are exposed to the exchange rate among between the U.S. dollar and the CLP. On the other side, the free contracts are strictly linked to U.S. dollar. So which was the trigger for the change? On one side the regulated contract volume decrease at the end of 2024, of course, some old bid from the past expired. On the other side, linked to our policy to keep on selling on the free market. We increase the volume in the free market contracts. And so as a result the volume for 2025 is now higher. Looking at the free market contract and this is the reason why we had to change the currency. Talking briefly about Pehuenche is similar Pehuenche had in the past until 2024 a contract that was a big contract with same condition as regulators contracts and now changed a little bit strategy because it’s going to sell energy to spot price.

And this kind of contract are basically strictly linked to U.S. dollar. Talking about Enel Chile. Enel Chile receives the dividends from its affiliate company and so the change in Enel Chile changed the flow and so we had to change also in Enel Chile. And this is the story. Now the impact until 2024 we have to make some research related to exchange rate risks. To hedge this exchange rate, we denominated some liability in dollar and following the IFRS principle you had to create this reserve that was negative reserve. Given the trend of the exchange rate in the moment in which in the last quarter of 2024 we decided to change the currency in this very moment we have to discontinue this kind of activities and so take this reserve and bring them to the P&L and this is the impact that you see in the P&L at level of EBITDA at level of net income.

And finally, to finally answer the question, all the changes were recorded on 2024 and so we will not have any other impact starting from 2025.

Isabela Klemes: Thank you, Simone. So moving on to the questions now we have question in terms of the gas trading. So the following question is coming from Andrew McCarthy, LarrainVial; and also Andres Navarrete from BTG. So the question is where and when do you see the most likely gas commercialization opportunities this year? And could you give us some color regarding the gas contracts from Argentina? Size, price range, take or pay agreement and also why will there be an extraordinary shareholder meeting on April and end of April for the Enel Chile?

Giuseppe Turchiarelli: Okay. So during February we have already traded a star plus volume for 2025 around 6 terabtu taking advantage of the current market condition and we are always looking for new opportunity to improve our financial results. This trading opportunity was already included in our guidance figures. However, at the moment we cannot share more detailed information due to the confidential conventional strategic nature of this operation. About Argentina gas, we have contracted about 30 terabtu distributed in the year 2025 with a competitive price lower than GNL prices due to competitiveness, what I can say is that is lower than 2024 prices of USD8 per million terabtu. Extraordinary meeting, the extraordinary shareholder meeting will be held to amend the bylaw in order to reflect the new function and regarding the currency changing the capital currently expressing in pesos to move to dollar to implement the functionality currency changes from a statutory perspective, it is necessary to amend the company’s bylaw to redenominate the share capital from China based on 2 years.

Isabela Klemes: Okay. Thank you, Giuseppe. So moving on the questions, we have questions coming from Fernan Gonzalez from BTG; and also Felipe Flores from i3 Capital. The first one is about the fines. So if the $20 million fines were already booked in 2024 numbers. Then Fernan have some questions regarding distribution. What makes you think that the debate around the distribution reform can begin in March? The Minister has said that some of your this is already have been said. Then he’s asking about if our plans in terms of a strategic plan, the guidance in CapEx and also EBITDA would be changed considering the last updates in terms of the distribution segment. And now so if we keep our plan to invest the free cash flow in the distribution segment in this period or if we’re seeing any change to regulatory restrictions.

Giuseppe Turchiarelli: Okay, well, first of all, as I said in the presentation, all the fines, all the other extraordinary items like the compensation to the client are already booked then the closing 2024. As I said in the past, the distribution business is very important for our strategy. We believe that there is a lot of value in the company. So we confirm our CapEx and our strategy in this segment. There is no reason as of today to change our strategic plan for Watcoms and the distribution company. So we are focused to spend most part of our cash flow in order to improve our grids in terms of resilience and quality.

Isabela Klemes: Okay, thank you. Giuseppe. Simone, Just another question came in regarding the CapEx and EBITDA for Enel Distribucion. We have already said, but just to complement according to the guidance that we gave to the market.

Simone Conticelli: Yes. So we can confirm the guidelines given to the market. You have seen that we expect an increase in terms of EBITDA in 2025 compared to 2024 and the reason of this delta is mainly related to the very negative impact of the climate event on 2024 that amount for more than $60 million impact. On the other side, as you know, the evolution of the regulation is giving us a little bit more space. And so these are the 2 reasons. This plan, in our opinion, as of today is quite solid and so can be confirmed.

Isabela Klemes: Okay. Thank you, Simone. Thank you, Giuseppe. Just checking if there is any more question. As we do not have any more question, I conclude the results conference call. Let me remind you that the investor relations team is available for any doubts that you may have. Many thanks for your attention and see you soon. Bye-bye.

Operator: And thank you all for participating and you may now disconnect.