Enel Chile S.A.

Good day, ladies and gentlemen, and welcome to the MLTLA 9M 2020 Results Conference Call. My name is Tanya, and I will be your operator for today. At this time, our participants are in a listen-only mode. After this week's presentation, there will be a question and answer session. To ask a question via the telephone, you will need to press star 1. Please be advised that today's conference is being recorded. During this conference call, we may make statements that consist 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 guaranteed of future performance, and involve risks and uncertainties. Extra results may differ materially from those anticipated in the forward-looking statements as a result of various factors. These factors are described in NL Chile press release reporting in 9M 2020 results. The presentation accompanying these conference call and the NL Chile annual report on Form 20F including under risk factors. You may access our 9M 2020 results press release and presentation on our website at www.nlchile.org. and our 20F on the SEC's website, www.sec.gov. Readers are cautioned not to place under reliance on those forward-looking statements which speak only as our dates. A NEO-Chalet undertakes no obligations to update those forward-looking statements or to disclose any developments as a result of which forward-looking statements become inaccurate, except as required by law. I would now like to turn the presentation over to Ms. Isabella Clemes, Head of Investor Relations of Enel Chile. Please proceed.

Good morning, ladies and gentlemen, and welcome to Enel Chile's Q4 2020 results presentation. Thanks to all joining us today. I hope this finds you and your families doing well and stay healthy. I am Isabella Clemes, Head of Investor Relations. Our presentation and related financial information are available on our website, www.nl.cl, at the investor section. A replay of the call will also be available. There will be an opportunity to ask questions after the presentation. via phone or via the chat through the link, Ask a Question. Joining us today, our CEO, Paolo Palotti, and our CFO, Giuseppe Turchiarelli. Paolo, we will open the presentation with the main highlights and will give us an update on the global situation that we are facing, how the company is actively reporting, responding to it, and we'll present some updates in the execution of our strategy. Then Giuseppe will walk you through our financial results and our operational performance. Let me remind you that media participants are connected only on listening mode. As always, our IR team will continue to be available to provide you with any detailed information we may need with respect to the included information in this presentation. Thank you all for your presence and let me hand over now to Paolo. Paolo?

Thank you, Isabella. Good morning to you all. Let's start by mentioning the highlights of the period on slide two. Over the third quarter, our market context continued to be under pressure due to the downturn. Despite this unprecedented extreme scenario, our operation resilience and continued support our clients maintained. On the decarbonization of our matrix, in developing the new renewable project after industrial . We have recently announced the start of construction of the 204 megawatt solar plant, and we are going to disconnect the one by . Within the next days, we will give you more details on the new project. Aiming at decreasing city contamination and improving the switch into cleaner use of energy, we continue to boost the country's electrification and support our key clients on the new and efficient use of electricity. Consequently, during this quarter, we have developed new alliances in public transportation areas and in gas service station companies to enhance the development of our plan on electromobility to cover the route from Arica to Punta Arenas. with 1,200 charges, it means a charging point every six kilometers. On that, let me mention our initiative on hydrogen. We have recently announced our participation with Allen and the prospect partners, ENAP, Siemens Energy, and Porsche. We stole a pilot plan for a green hydrogen production through an electrolyzer fueled by electricity generated by a wind plant. This pilot project, which would be one of the largest of its kind in Latin America, will be located in the Magallanes region in the south of the country. Let's move to page three. We know the situation of COM19 is not over yet. Still, we would like to give you, in a nutshell, of how our company performed and is performing during the sanitary crisis, especially when the Chile metropolitan region was locked down. 74% of our employees continue to work from home, minimizing the contagion risk and preventing the virus from spreading. The ones that are in the field are working with extreme safety measures. 100% of our plants, and network are fully operational, which ensure our services continue. These results derive from the combination of technology, procedures, and our people and suppliers' strong commitment. Finally, but not least, we extended our compromise with our clients. Over the year, we have made available more options to access our company services, and increase the numbers of digital payment platforms available to give our clients more flexibility in remote payment. Moving to slide four, you can see our effort to support the economic recovery. We strongly believe that an acceleration of the decarbonization process and the development of renewable projects will improve country economic recovery. Since the beginning of the pandemic, We have been advocating the importance of the green economy in our current context, by renewable capacity development of the new kind of energy services, providing at the same time competitive electricity price. During this year, we have created around 3,600 new jobs in different zones of the country where our projects are in construction, promoting local hiring. Over the next month, we will see an increase in this amount, considering our construction timeline, which might add additional temporary new jobs from the beginning of 2021. In addition, as a consequence of the conversion to a cleaner matrix, we are working on job reconversion programs, providing all the required training. Besides that, let me remind you that we continue our engagement with the local communities to promote shared value, education and diversity where we are developing our new renewable projects by the execution of different social programs to exploit entrepreneur and proactive culture. The country's lockdown has impacted electricity demand in many economic sectors related to the industrial period and commerce. Several companies have reduced their operation to minimum levels and, to some extent, shut down their operation, which resulted in a significant decrease in demand impacting both generation and distribution business. This effect started in March 2020. went lower during the lockdown, and is easing with a gradual opening of the regions that started in September. Regulated demand continues to be the most effective segment in the country, despite the easing of the lockdown measures. We expect to see some improvements with the next months, considering the commercial and business sector's gradual opening. In terms of distribution, households continue to have flat performance, being primarily affected by temperatures. In our generation business, we still see an increase in our non-regulated clients' electricity demand versus last year figures. This is primarily driven by our free market existing portfolio decisions, as for example the mining companies, and by the new EPA secured by our company in the first nine months of 2020. On page 6, let's review our distribution business collection. Our efforts on digitalization continue to assure the continuity of our business without compromising our clients, employees, and supplier safety. Since the beginning of this outbreak, we have improved our customers' experience by adding new digital channels. As a result, we are one of the distribution companies with more digital options available. The number of payments made through digital channels continue to be impressive. If compared to the present ones, 77% in the third quarter of this year and 85% of September collection was derived from these channels. By September 2020, we have executed almost 62,000 agreements with clients to modulate their payments and mitigate the impact on our collection, of which 100,000 voluntary deals with the most vulnerable clients since March 2020 and 12.6 thousand under basic service built at Vubla's source. On average, we have executed more than 1 million contacts with our clients during this quarter, through target calls, SMS and other communication channels. Our collection during 2020 reached 96% and 92.4% respectively, with an accumulated and a quarter figure versus the historical level around 99%. This is mainly due to the current economic and regulatory situation, which reduced the client's payment ability and suspended the cut option for best payers. Let's go through slide 9 with a summary of our market May regulatory discussions. Starting with distribution, on the contingency front, last August the Senate and Congress have approved a new law known Basic Service Bill to benefit the most vulnerable clients of a set of services. The law identifies a cluster of vulnerable clients that have the option to postpone under request the payment of their bill for 90 days from the approval of the loan, to be repaid in full extent and through down interest. Moreover, the low state of the knock-up of service could be allowed to the cluster of clients, including the whole household sector. Let me remind that, before the rule of this law, we have already offered, on a voluntary basis, The same kind of agreement to our most vulnerable clients. Today, we have almost 13,000 clients that adopt this scheme under the Basic Server Law and 11,000 under our voluntary program. A few days ago, some centers presented a new project to modify the Basic Server Law. in order to extend the benefits until April 2021 and to give 36 installments for unpaid balances. The project is under discussion. Still on distribution, last Wednesday, Enel Distribuzione announced to the market that it would call for a national ratio order meeting to execute all the reorganizational measures to comply with the unbounding mechanism known as Giro Exclusivo. Under this extraordinary meeting, energy distribution shareholders will vote to approve the spread of energy distribution into two categories, one exclusively for distribution assets and the other solely for transmission assets. Finally, on distribution with regards to the new regulatory cycle, the government has already hired an external consultant to carry out studies on the new regulatory reference model for the new distribution regulatory cycle. We will share more details on the current framework in the next quarter as expected to release the first appraised report by first half. On slide A, let's move on the main updates on generation. On tariff stabilization mechanism, according to the clinical report published this month of October by the Chilean Energy Commission, the total balance accrued under the stabilization mechanism totals $842 million of the entire Chilean market on August 2020. At the end of September, the Chile balance totaled $320 million. In this study, the CNA also published a new estimate of balance of the stabilization mechanism for June 2021, using an average exchange rate of 800 Chilean pesos for $1.00. According to this estimate, on June 2021, the balance would reach $1,169 million. During this quarter, Chilean government presented the more details on markets gradually opening. On the document presented to the Energy Commission at this chamber, some messages were stated. All clients shall be able to choose the supplier, and the market stabilization shall be done by geographical Grado of Pays. Regulated option rules shall be revised by, for instance, including take-or-pay contracts. Two new agents shall be created, the traders and the information agents. As I mentioned, we believe that the Grado opening of the market is a natural revolution of the sector. and of the energy transition, and therefore an important step for the country that needs to be designed properly and implemented in a clear timely manner. I expect to have more updates for our next call. Now, let me recall some key elements of our decarbonization process on chart 10. We have a strong commitment to the fight against climate change and have carried out different initiatives in line with this commitment. The voluntary full disconnection of our coal power plants is part of this plan. On that, we are two months close to the disconnection of Bocamina 1 and 128 megawatt coal power plants. As I mentioned before, our coal facility commission will be finalized without accessing to the energy strategic reserve. With these achievements, we will become the first electric company to phase out our coal fleet by 2022, reaffirming our sustainable strategy, just transition policy, and promoting a circular economy perspective to contribute to the areas where the units are located. On page 11, let's see more details on our discovery strategy. This quarter, we have reached 1.3 gigawatts of renewable capacity under construction and .7 gigawatts ready to start construction in the following months. In addition to that, we are approximately 3.7 gigawatts of renewable capacity in different phases of development and other opportunities in the market that represent optionality for the future. to continue de-risking our generation portfolio from commodities and hydrology. I will give you more color on our future portfolio on our investor day planned for early December. Now, let's focus on page 12 on the two new projects announced during this quarter. As part of our strategy to de-risk our energy matrix, We have started the construction of a 204-megawatt domenico-portable type park located in the Antofagasta region. The solar plant is due to be completed by 2021. The plant will use cutting-edge technology that allows greater efficiency in capturing solar radiation. Once operational, it will produce around 589 gigawatt-hours per year, avoiding the emission 539,000 tons of CO2 into the atmosphere. On October 2, our subsidiary, Enel Green Power Chile, announced a plan to execute the first project for green hydrogen production in Chile. Together with our prospective partners, ANE, the Andes Mining and Energy Corporation, ENAM, the Chilean Oil and Gas Company, Siemens Energy and Porsche, We will install a pilot plant for green nitrogen production. This project will be located in the south of the country in the region of Magallanes, known internationally for its wind potential. Our part in this partnership will be, together with AME, supply clean energy through a wind farm to the electrolyzer for the green nitrogen production. The downstream activities and the exportation of the green fuels will be in charge of the remaining partners. This pilot project, which is subject to the local authorities' approval and the conclusion of the financial structure, is expected to be in operation by 2022. This pilot project will be the first of its kind to produce green hydrogen in Chile, and potentially one of the largest in Latin America. Now, on page 13, let's take an outlook on the other projects under construction. Today we have under construction 1.3 gigawatts of solar capacity that will be completed between 2021 and 2022. We have different projects in different stages of construction. Still in north of Chile, Cerro Palo Llano continues the expansion with 28 megawatts of additional capacity that we completed on 2021, consolidating as the only geothermal plant operating in South America. Today, we are developing an Ambition Growth Plan that will consolidate our position as the main renewable player, contributing to the fight against the climate change and supporting the economy recovery. In this vista, the Stamford Recession process might be reviewed to cope with the country's ambition under the Paris Agreement and the climate change goals. On slide 14, with reference to our generation business, we are presenting the accumulated rainfall for the most significant river basins, Maule, Biobio, Lata, and Rapel. As you can see on the right side of the slide, we recorded the recovery rainfall in the second half of June and July. reaching normal levels in most of our basins. Nevertheless, during August and September rainfall decreased notably in the country. On the other hand, there was an improvement in the levels of snow accumulated in the mountains since rains during June and July were accompanied by a colder condition once compared to 2019 figures at the lower altitude. Therefore, the accumulated NO levels are higher than those observed last year, as we can see in the image on the slide left side. Considering the current conditions, we expect the hydro generation of the second semester 2020 to range between 5.8 and 6 terawatt-hours approximately. We expect the probability of exceedance of 70% for the melting season between October and December. So, the year 2020 would be similar to the 2019. Let me remind you that regeneration with LNG is currently a natural edge of energy in the portfolio to cope with the draft, as you will see in the following slides. Still on generation, let me go through our main industrial KPIs. The total net production for the nine month period decreased by 12.1%, amounting to 14 terawatt hour. In the period, 61% of our generation came from renewable sources. The variance between nine month 20, the last year figures, came from minus one terawatt hour of a lower generation in our hydropower plants, reflecting the hydrologic performance. Minus 0.9 terawatt-hours of lower thermal production, mainly in our coal-fired plants, due to the closure of Tarapacá power plant in December 31st, 2019, and the impact of a lower system marginal cost. In terms of our energy balance, we remain a spot buyer in the market. with a purchase of 2.9 terawatt-hours in nine months, 2020, plus one terawatt-hour higher than nine months, 2018, due to low hydrology and marginal costs. On the other hand, our physical energy sales decreased 5.5% or one terawatt-hour, mainly explained by minus 1.6 terawatt-hours of a lower demand from distribution companies primarily relating to the termination of regulated PPAs with SAESA and ML, secured in 2006 auction, and the lower energy demand in connection to lockdowns established until August-September in different cities of the country, partially offset by plus 0.8 TWh of higher free market sales as part of our strategy to capture new clients and the ones that recently migrated to the free market. Finally, it's worth mentioning that during the first quarter 2020, our physical sales increased by 7.3% or 0.4 TWh when compared to the second quarter 2020. partially reflecting the gradual easing of the lockdowns started by the end of August. Slide 16 on distribution. The lockdown in our concession area in social hours mostly explains the decrease in the energy distributed in the period once compared to the last year's figures, and the performance of the energy losses that moved to 5.2%. Our customer base continues to expand. In this period, we have got an increase of 53,000 new clients, reaching almost 2 million clients. On the quality of our services, our interruption index, SAIDI, performed very well with 26 million, better in the period reflecting the investment done in our concession area. despite logistic restrictions coming from the social unrest and lastly from the pandemic situation. As of September 2020, we have reached more than 2,000 tele-control equipment in our grid. Moving to slide 17 on NLX and digitalization. We have executed two important strategic agreements to continue to boost Chile electric mobility during this quarter. The first one was with NP Capital, in which we have created an SPV focused on massive electric public transportation, in which we own the stake of 20%. and Chile contributed with the acquired 435 buses for Transantiago Red. The second one was with Shell, known in the country as NX, to add an NX electric charging station on Shell facilities. This agreement comes to cope with our goal to add 1,200 charging points in the country. Our company is responsible not only for the salvation and maintenance of all charging units, but also to the customer experience. During the period, we have also signed an agreement with important manufacturer brands, such as Nissan, Volvo, BMW, to supply an integrated vehicle charging solution in both the domestic and public sphere. Let's recall that during the first half of this year, we secured new projects on public lighting, aiming to upgrade the lighting infrastructure and other services as security and connection, bringing more efficient systems and favor to the local communities and municipalities. Finally, we continue promoting efficiency improvement technology for the mining industry to produce electric buses combined with solar energy and solar charging systems. I will now hand over to Giuseppe for the analysis of the results.

Thanks, Paolo. Let me start with the summary of our financial highlights, which will go through details in the following slides. Let me explain which adjustments we made in our figures, both for 2019 and 2020. For what concerns 2019, we have adjusted the BIDA excluding the PPA early termination effect and the net impact of impairment of Bocaina 1 in Tarapaca. For the 2020 figures, we have adjusted the EBITDA and net income by the fact coming from the anticipation of the closing of Bocamina 1 and Bocamina 2, which details are described in the bottom of the slide. Now, moving to the slide 20, I will explain with more details how would have been the performance of our EBITDA and Boconline, excluding the COVID effect. Net of COVID impact, our adjusted EBITDA would have been slightly higher versus last year, reaching $866 million, $15 million higher. The factor associated with the power. $49 million related to the reduction of demand impacting our sales and distribution and generation, net of energy passes in the period. $9 million mainly associated with higher energy losses, customer care and other objects needed to face the contingency and enter lower activities. Moving down, the P&L will record a negative impact related to bad debt provision of $13 million, driven by temporary extension of the historical collection period. Therefore, in the event of COVID, our adjusted net income would have reached $377 million. Now let's go to our capex on slide 21. In the third quarter of 2020, our CAPEX reached $264 million, mainly due to the increase of the CAPEX allocated for our development activities. Therefore, our development CAPEX totaled $216 million, 94% out of it assigned to the construction of our new renewable facility. Consequently, our total capex for the 9 months 2020 amounted to $586 million, allocated as follows. Customer capex total for the $9 million, 63% higher than September 2018, with significant investment allocated to build connections for new customers. This investment results from the increase in our client base, particularly in the first quarter, and improving our commercial system to guarantee a better interface with our clients. As Paolo mentioned before, the continued digitalization of our customer interface and internal commercial processes will continue to be a key factor for our industry. Asset management capex reached $62 million in line with the 2019 figures. Alphavit was allocated to our distribution activities, mainly focused on our low-voltage line and repairs in some facilities because of the social unrest damages. The main impact was allocated to our generation unit, focusing on maintaining the availability level and investing in digitalization. As of September 2020, development capex reached $476 million, a $324 million higher than 2019, driven by renewable projects in line with our decarbonization strategy. We have also allocated additional $11 million to the development of our distribution business to contain the digitalization of our network. Now, slide 22. Let's start with the third Q adjusted EBITDA breakdown. As you can see, the third Q adjusted EBITDA was impacted by $24 million by the demand net of energy purchases, mainly due to the COVID-19 lockdown measures and migration of clients. Worst hydrological condition in the quarter affected our hydro generation by 0.2 TWh or $8 million. TPA matching effect that includes the impact of commodity, CPI and effects on TPA and spot price totaled a positive effect of $20 million. minus $11 million coming from NLX that was affected by leasing of 290 buses accounting in 2019 and lower activity in the public lighting business. Because of the higher depreciation of local currency versus US dollars, we booked a no-cash item of $7 million associated to the translation of loans denominated in US dollars in our book. as of our functional current is in business. Negative impact of $4 million coming from energy losses mainly explained by logistic restriction and gas suspension. Let's now move to accumulated figures analyzed on page 23. As you can see in the slide, we have isolated two non-recurring aspects related to the early termination of PPA agreements in 2019 and the previously mentioned cold stock impairment in 2020. Excluding these effects, our adjusted EBITDA reduced by 6% due to lockdown measures that affect the demand net of purchases of both generation and distribution businesses, by $54 million, mainly related to the COVID-19. Lower hydro generation, impacting our adjusted design for $8 million. Sales of two LNG cargoes during first half 2019 that wasn't executed this year due to the lower price of commodity in the international market, with an impact of $22 million. net commodity negative impact of $9 million, mainly due to the unexpected volatility of commodities in the international market. Because of higher depreciation of local currency versus US dollar, we booked a no-cash item of $30 million associated to the translation of loan denominated in US dollar in our books. All these effects were offset by the following items. EPA matching positive effect of $80 million coming from commodities, CPI and effects, tariff amortization of $23 million, and OPEX and others with a positive effect of $24 million may lead to lower transmission costs and insurance reimbursement in 2020. In slide 24, we have a summary of the performance of our generation businesses, including Enel Generacion and Enel Green Power. I have already explained the main variation in the quarter and accumulated figures between the billions. So my message here is to highlight that our generation adjusted EBITDA margin, despite all the before-mentioned headwinds, sustained in a high level reaching 54% in the third quarter 2020 and 46% in the ninth month 2020, in line with the 2019 figures. Now, on distribution, this is NLX page 25. The third quarter 2020 we downreached 44%. or 35% compared with the third Q2 2019 EBITDA. Mainly due to, on NLX, mainly due to Transantiago through leasing as much lightning accrued in 2019. On networks, mainly due to lower energy consumption in both regulated and free market clients. as a result of the lockdown measures applied by the government to contain the spread of COVID-19 and higher energy losses due to the cutting of logistic restrictions. On the accumulated figures, EBITDA was low by $42 million, mainly due to on NLX, a negative impact of $10 million, mainly due to the impact already mentioned in the quarter. On networks, reduction of 32 million dollars coming through lower demand because of the lockdown restriction and higher energy losses and 2019 energy settlement of this year now on slide 26 let's go through the main drivers of group net income DNA and bed death reached $243 million, a variance of $20 million, mainly related to $17 million due to the higher bed death provision, mainly due to the COVID-19 outbreak. $13 million higher depreciation in EGP Chile due to the devaluation of Chilean pesos against the dollar in 9 months 2020, $7 million higher depreciation of distribution business due to higher investments in the last year, partially offset by the closure of Tarapacá on 31st December last year, and the freeze-out of Bocabina 1 and Bocabina 2. The impairment increased by $520 million, mainly due to the Pocahontas II impairment booked in June 2020 related to the power plant air enclosure planned for May 2022. Financial results totaled an expense of $111 million, a decrease of $24 million, mainly due to Lower average cost of our debt as a result of the renegotiation of EGP debt with EGP. Financial income dollar coming from the counting impact of the energy stabilization mechanism law. Foreign exchange rate appreciation in 9 months 2020 impacting positively in financial receivables in US dollars. Income tax and minorities reflect the lower results mainly related to the Procaminas II impairment effect and reorganization and regeneration on gas and tarmac. As a consequence, the reported 9 months 2020 net income results reached minus 282 million dollars. The 9 months 2020 adjusted figures totaled $324 million, at 16% lower than the 9 months 2019 adjusted net income. Moving to cash flow slide 27. Our 9 months 2020 FSO reached $566 million. strongly impacted by lower collection of $99 million in our distribution business, mainly because of COVID, lower EBITDA in the period, and energy stabilization mechanism balance account of $153 million, partially offset by e-business. sales to the AMP capital, which totalled among almost $100 million and other networking capital initiatives. Despite this challenging situation, our 9-month training FFO was $181 million higher than 2019 adjusted figures, mainly due to lowering contacts paid in 9-month training mostly due to the tax credit reimbursement from previous years and lower monthly interim payments postponed to 2021, better working capital as a result of the sales of NLX e-passes, higher LNG payments last year and our cash initiative in the period Let's now take a look at the net and gross debt on slide 28. Our gross debt increased by $570.7 million versus December 2019, amounting to $4.15 billion as of September 2020. As a result of an initially new funding with EFI of $600 million during the first half of the year, to cope with our capex plan and cash needs related to the price stabilization mechanism, partially used as by energy and subsidiary debt amortization. As a result of our constant efforts to optimize our financial expense, our cost of gross debt decreased by 60 basis points with compared figures of December 2018. As a result of the liability management executed during 2019, a new emission during the first half of this year. All in all, our net debt of September 2020 compared to January 1st, 2020, increased by $375 million, mainly explained by our CapEx plan. Finally, on our debt amortization on slide 29, in terms of liquidity, we maintain the level of $1 billion, making us able to finance our CapEx plan and be comfortable to face the current economic scenario. Our debt amortization schedule has a $170 million payment forecasted to December 2020 and a very smooth third-party debt profile for the following year. Our debt average term is over six years. Now, I will pass the word to Paolo.

Thank you, Giuseppe. As we saw in the presentation, the current situation represents a challenging scenario for the sector and our clients. Despite that, with our growth plan, we will consolidate our position as the leading renewable player, contributing to the fight against climate change and supporting economic recovery. As you saw today, during our presentation, we continue strongly pushing for our matrix descarbonization, incentivizing the electrification of the country, and providing a different solution to our clients. All of this is based on self-wording our people, business reliability, digitalization, and quick reaction to external conditions. This week, I'm pleased to mention that we have been awarded an important recognition from the Latin Trade and Inter-American Development Bank. and El Chile and other four companies in Latin from different sectors were recognized by its sustainable standards, work on community development, providing affordable electricity to the weakest areas of the country, and reacting rapidly to propose solutions to our clients since the start of social unrest. To respond and anticipate our clients' needs is the best way to ensure the quality and reliability of our services tied to continuous improvement of our digital platform. Finally, the resilience of our business and sustainable strategy is supported by the strength of our balance sheet and by eventual additional liquidity measures to support eventual headwind from external environments. Thank you for your attention and let's now open the Q&A section. I will hand over to Isabella.

Thank you, you, for your attention. As we have anticipated, we will receive questions via phone and chat in the webcast on this occasion. The Q&A section is open. Operator, please, you may start.

As a reminder, if you would like to ask a question via the telephone, please press star 1 on your telephone keypad at this time, please. Your first question is from Sarah Vicini with Mediovenka.

Hello, good morning and thanks for taking my questions. I have three. The first one is on the slide where you show the working capital of 160 million. Could you please explain if this is a figure that has been expanded by the bad debt due to the current situation. And if you see this $160 million to increase through the year-end or can be eventually partly reabsorbed. Then the second question is on the guidance. You provided a new guidance during the The first half that was at EBITDA, $1.2, $1.3 billion. Do you feel comfortable with these numbers or do you see any potential upside or downside, any color on these? And then the last question is on the renewable projects that you have. You have a very interesting pipeline and obviously you will provide an update with the new business plan. But just on these current projects that you announced, could you please explain the strategy behind them? Are these contracted projects with long-term prices? Are these integrated with your client's portfolio so you see the pricing risk on these projects to be very limited? Yes. So this is on the price side. And on the CapEx side, how much is the CapEx per megawatt that you are spending for this new project? Many thanks.

Okay. Thank you very much for your question, Sara. I will take the second and the third questions, and I leave Giuseppe the first one working capital. Clearly, our review of the numbers was based on the, let's say, main events that affected these 2020s, the company. And we think that we can stick to the figures that we released by last July, maybe in the lower end, depending on the evolution of the last month, and also depending on how some external effect may evolve in the last two months. But we stick in the numbers that we announced last July. Regarding renewables and especially the item of price, what we are doing is trying to and we are pushing the recommendation to have more and more renewable assets. This is because of also the economicity of the asset, the generated asset. and also because of the demand that we are receiving from the clients. especially large liberal clients are requesting more and more to have contracts with renewable energy. We don't have a single asset linked to a single client. We go through a logical portfolio. We have a portfolio of contracts that Each amount is a range of 24, 25 terawatt hours per year. And we serve this portfolio of clients optimizing the generation of our fleets and in some cases buying the stock market when convenient. So we don't see, we don't need, we don't have a single link between one plant and one client. In terms of CAPEX, we are using, as we mentioned, the cutting edge technology for the solar plant and the large size wind turbines in our project. If we look at the cost of the investment, it is in the range between 0.7, 0.8 for the solar plant and 0.1, 0.2 million per megawatt for the wind turbine.

Sorry, you mean 0.1, 0.2 for wind?

No, 1.1 or between 1.1 and 1.2 for the wind turbines, wind access, and 0.7, 0.8 million per megawatts in the solar plant.

Perfect. Many thanks.

You said before the working capital.

Yes. Talking about the working capital, I mean, the big impact that we had during these nine months are related to the lower collection in distribution business because of COVID that is amounting in $99 million and the energy stabilization mechanism. that will worth $153 million.

Thank you. Sorry. Do you expect this figure to increase or be reabsorbed by the year-end?

For what concerns the energy stabilization mechanism, I mean, we expect that we're going to increase in the following quarter because of the the mechanism that it works in this way. And for what concerns the collection, we believe that as soon as we are able to start again the cutting process, we believe to recover in a significant part this amount. Of course, it's difficult to understand how much, but I mean, the projection is positive.

Many thanks.

Thank you. Your next question is from Marilo Ricchini with Santander.

Hi, good morning, guys. Hi, Paolo, Giuseppe, and Isabella. Thanks for the call. This is Marilo Ricchini from Santander. I have a couple of questions, if I may. First of all, in talking about the portability bill that is being discussed in the lower house. In this case, this bill is approved in 2021 or 22. How are you seeing the migration movement going forward and what levels of demand do you expect for your regulated PPAs in the coming years? Which kind of mechanism could be implemented in order to ensure the financial balance of the current regulated contracts? And if you see major impacts on your regulated PPAs. The second one is regarding gas activities. Could you provide more color on the gas sales and how do you expect this activity to perform going forward, please? And the last one is regarding CapEx. How do you expect to end the year compared to the industrial plan released last year? This is all. Thank you.

Thank you for your question. I will answer to the first and the third and leave the second one. Again, the importability is a good question. Maybe it's too early to be celebrated and mentioned because what we see today is a general proposal for opening of the market. whose let's say process should be quite large because for the time being at Congress they are discussing the possibility of going through this law. So we expect that if such a decision will be taken it will take some time for the discussion at the Congress level, then for the approval of the government, and then for the definition of the decrease for the opening of the market. So we see for the time being, the information that has been provided to the sector, a quite a long process that should land between 2022 and 2023. At the same time, also the rules of the opening are not clear yet. because there is a main object of opening of the market, to have a full opening of the market, but there is still the option of going through geographical area. starting from the most affected from the, let's say, pollution or from certain, let's say, living conditions of the country. And so this is quite, quite honestly, it's difficult to, let's say, to evaluate in terms of impact. What we see is that, we can say is that the opening of the market is a natural evolution of the sector, so we expect that it will take place. The important element here is to implement it properly and in a timely manner. I mean, rather than going through opening full for geographical area, we see more of the transitional period where the pressures could go lower. So, assure at the same time the gradual transition of the client from the regulator to the free market. Clear rules on how the client could be moved, could take the decision from the regulator to the free market. How the new player, because there are new players that are entering, can operate and which are the conditions to be a player in the market. And so to make also a private protection for the existing contract for the regulated market that could have different conditions. So taking all into consideration to tell you which could be the impact in terms of margin, it is quite early. What we think that is something that is going to happen. And it could be, let's say, for sure positive for the client. I think it could be positive also for the player that can act in the sector in a proper manner, in a competitive way. But today, I cannot tell you which could be the quantitative impact. The point of attention, for sure, is timing from implementation and the mechanism for the definition of how the concept will be managed. Regarding CAPEX, as you have seen, we are going, pushing on the, let's say, implementation of our new project on renewables. Clearly, the 2020 is not a regular standard year. We have been affected from one side, from the, let's say, the pandemic that in some period of the last month, especially between July end of June and July, some areas where most of the erosion has been affected by stronger heat of the pandemic. And so we have to manage also successfully the continuity of the construction together with the very, very strong measure and permit to go on. And we think that we can, let's say, maybe that we will not reach the full amount of the year, but we don't see a strong gap. We have continued to invest and going forward in all the projects that we are in the plan. Giuseppe, for the guest side.

Let me say that the margin that we got last year was raised to the The margin that was possible because of the price in the international market. I mean, this year, the market is completely different with the decrease of the price of commodity. Of course, we don't have such an opportunity. So, for this year, we don't see possibility to have such a margin. Next year, of course, different stories depend on the market.

Great, thanks. And a follow-up question, if I may. Are you still negotiating the monetization of both receivables, the one that is being accumulated in the generation unit and also the other one regarding distribution unit?

Well, for what concerns the receivable coming from the stabilization mechanism, price mechanism, yes. We are negotiating with the some banks together with the FBID. And we believe that we're able to close the deal by the end of the year. And basically, same story for what concerns the distribution. We're going to see how we're going to handle in the following month. Both factoring will be done at the beginning of December, in the first half of December, let me say, at the end. we are going to do it. Thank you, Giuseppe.

You're welcome. At this time, there are no further questions via the telephone. I would like to turn the call back over to Isabella Clemes.

Hi, thank you. So we have here on the chat, we have some questions. So the first one is coming from Andrew McCartney from Credit Corp. He asking, how are you reviewing dividend payouts on 2020 net income during very much paying provisional dividends in January as you did last year? Please follow, Giuseppe.

Yeah, regarding this dividend policy, we think clearly this year is based on... capability of the company to generate cash. And we think the same approach that we had last year can be applied. Last year as well we had an impact in terms of accounting and let's say the nominal level of net income, but we decide to distribute dividends on a pro forma basis, on a pro forma net income basis. So, we think that we will apply the same approach and we decide during the next month. And consequently, we will distribute the provision on January based on the approach.

Perfect. Thank you, Paulo. So we have a second question coming from . He's asking, could you please share details about the reason what explains the drop in generation by source, hydro, thermal, and conventional renewables? Should we expect the same for next quarters?

Okay, let me say that considering the current condition, we expect the hydro generation of the second semester in the range of 5.86 TWh approximately. And we expect the probability of an exceedance of 70% for the mating season between October and December. In the year 2020, the total amount of hydro-production will be similar to 2019. Usually, the port queue is always the best one due to the melting season.

Perfect. Thank you. Thank you, Giuseppe. So, we have another question also from the crowd, please. on the effects of this year. If you can give more details about the increasing on other fixed operating cost items in the current statement. Should we expect to be a new level for coming quarters or it's only a one-timer?

Well, let me say that, you know, basically it's one-timer. But, of course, you have to consider that we are increasing part of our capacity. But as of today, we believe that in the third quarter we'll be again at the regular level. Yeah.

Okay, thank you, Giuseppe. So let me check if we have any more questions here on the webcast. So we don't have any other questions now. So I would like to thank you all for your presence today. And let me say that our team, Investor Relations team, will be available for any other further questions you may have, okay? Thank you. Have a nice day.

Ladies and gentlemen this concludes today's conference call. Thank you for participating. You may now disconnect.