Enel Chile S.A.

Today, ladies and gentlemen, and welcome to NL Chile fiscal year 2020 results conference call. My name is Carmen, and I'll be your operator for today. After the speaker's presentation, there will be a question and answer session. To ask the question during that session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star and zero. During this conference call, we may make statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect only our current expectations, are not guarantees of future performance, and involve risks and uncertainties. Actual results may differ materially from those anticipated in the forward-looking statements as a result of various factors. These factors are described in Enel Chile's press release reporting its fiscal year 2020 results. The presentation accompanying this conference call and Enel Chile's annual report on Form 20F, including under-risk factors. You may access our fiscal year 2020 results press release and presentation on our website, www.enel.cl. and Hour 20F on the SEC's website, www.sec.gov. Readers are cautioned not to place undue reliance on those forward-looking statements, which speak only as of their dates. NL Chile undertakes no obligation to update these forward-looking statements or to disclose any development as a result of which these forward-looking statements become inaccurate, except as required by law. I would now like to turn the presentation over to Ms. Isabella Clements, Head of Investor Relations of Enel Chile. Please proceed.

Good morning, ladies and gentlemen, and welcome to Enel Chile's Four Years 2020 Results Presentation. Thanks to you all for joining us today. I hope this finds you and your families doing well and you stay healthy. Our presentation-related financial information are available on our website, www.nl.cl, in the Investors Relations section. A replay of the call will be also available. There will be an opportunity to ask questions after the presentation via phone or the chat through the link Ask a Question. Joining me this morning are our CEO, Paolo Palotti, and our CFO, Giuseppe Trucchiarelli. In the following slides, Paolo will open the presentation with the main highlights on business and targets, then Giuseppe will walk you through our financial results and operational performance. Let me remind you that media participants are connected only in this remote. As always, our RR team will continue to be available to provide you with any detailed information you may need concerning the figures included in this presentation. Thank you all for your attention. And now let me hand over the call to Paolo.

Thank you, Isabella. Good morning and thanks for joining us. Let me start with the main highlights of the period on slide number two. Last year was a challenging one at the global level as a consequence of the COVID outbreak. With reference to Chile, according to the last estimates, Chilean GDP decreased by 6% during 2020. Electricity demand at country level was almost flat, having been supported by certain sectors like the mining industry, while in certain areas of the country, in certain cities and some sectors, the decrease was double-digit. Despite this unprecedented extreme scenario, our operations have shown a larger resilience and a continuous support a continuous support to our clients. Last July, we have decided to review our guidance for 2020, adjusting it to the new market conditions, commodities volatility, implementation of lockdown measures, and several other regulatory adjustments that were in price in our estimates. With a consistent effort of all our companies, we have achieved our target on adjusted EBITDA net income. reaching amounts of $1.2 billion and $0.6 billion in spectra. We continue to be frontrunners on decarbonization, advancing in the discontinuity of our core facility, accelerating at the same time the renewable capacity additions. Today, we have more than 1.3 gigawatts in generation projection projects under construction. We continue to focus our action to fight climate change, We have already announced one of our ambition targets to reach a 64% reduction in our direct CO2 emissions by 2023 compared to our electricity generation business in 2017, meaning that Enel Chile is committed in having roughly 90% of its electricity generation carbon-free. Our effort is reflected in our ranking in several ESG indexes. we have been recognized as one of the best performers in LG in Latin America. Finally, regarding our yield and policy, our board of directors will propose at annual shareholder meetings an eventual dividend of approximately $3.9 per thousand shares to comply with our strategic plan and to avoid that accounting effects of the decarbonization process will affect our shareholder remuneration. Let's now have a look at our main 2020 results. I already mentioned our adjusted EBITDA and net income were in line with our 2020 revised guidance. On CAPEX deployment, despite the effects of the lockdown that have affected several areas where our projects are located and the delays produced by the processes for the ecological permits, We have been able to advance in the construction works in our working sites, doubling our capex of 2020 versus 2019, guaranteeing at the same time the safety of our people in construction on the field. Finally, on decarbonization, we successfully disconnect the first unit of Bocamina, contributing to the minus 1.5 centigrade scenario targets and making El Chile the most advanced company in the decarbonization process of the country. Let's now move to some data that shows the consistency of our strategy. Sustainability is the backbone of our strategy, aimed at decarbonization and electrification of the final consumption. Our plan is accelerating the energy transition. showing our compromise to our stakeholders and aiming at delivering sustainable value for all. During 2020, our company improved its score in all the main ESG ratings, maintaining the positive trend of the previous year. As you can see, this approach has been reflected in most of the main sustainability indexes, as well as in Chile, as being distinguished as prime by the ISS ESG. and has received a Silver Plus rating in the Sustainability Yearbook from Standard & Poor's Global, meaning that our company is within 1% and 5% of the industry's most sustainable companies worldwide, and Chile is the only Latin American utility located in that position. Let's now have some more details on our descarbonization strategy on page six. During 2021, we will consolidate our position in the Chilean market, reaching 72% of renewable capacity within our portfolio generation asset. Our team is focused not only on the execution of this project, but also on sizing new opportunities, targeting the best regions, developing new projects, and seeking higher sustainable returns. As a reference, today, We have more than 14 gigawatts in our pipeline, in different stages of development, which gives us enough flexibility to continue our decarbonization goal and risking our generation portfolio from commodities and hydrology. As an example of that, we have been recently confirmed that after a competitive bid process organized by the Ministry of National Assets, We were awarded over 2.5 thousand hectares for use in the development of new solar plants and storage systems, expected to contribute with more than 1,700 megawatts of clean energy to the country. As we have seen during this year, we continue to strive new opportunities in the market, coping with our target to reach net zero emissions by 2050. On page 7, you can see more details on the status of each project under construction. Today, we have more than 1.3 gigawatts in renewable capacity under construction. On average, the overall process of our project totals more than 50%. A large part of our project already has the equipment on site, which reduces significantly the risks of material supply. I would like to give more details on the first hydride project in Chile, a 61 megawatt solar project located in the same site of the wind farm of Valles de los Vientos. We have analyzed the connection of part of the solar panels during December. The city works and balance of plans are expected to be completed during the third quarter of this year. Azabache is an example of an idealization project in which we are increasing the efficiency of our land usage, bringing more competitiveness to our portfolio. The solar projects Sol de Lila, Domeico, and Campo del Sol are expected to be into operation during the third quarter of this year. During the next quarter, I will continue to keep you updated on the status of the construction of our projects. Still on generation, let me go through our main fourth quarter industrial KPI on page eight. The total net production for the fourth quarter increased a 4%, amounting to 5.3 terawatt hour, mainly due to hydro generation, reflecting the positive melting season of the last quarter of 2020. In terms of energy balance, As a consequence of lower spot price, we remain an export buyers in the market, with a purchase of plus 0.2 terawatt hour, higher than fourth quarter 2019. On physical energy sales, we increased 80% or 0.5 terawatt hour, mainly displayed by 0.7 terawatt hour of higher free market sales, including spot sales, as part of our strategy to capture new clients and the ones that recently immigrated to the pre-market. Partially offset by minus 0.3 TWh or lower demand from distribution companies primarily related to the termination of the regulated PPH with Saez and ML, secured in 2006 auction, and the lower energy demand related to the lockdown measures established in different cities in the country. Now, the full year figures on slide 9. Net production for the full year 2020 decreased 80%, amounting to 19.3 terawatt-hours. The variance between year 2020 and 2019 came mainly from minus 0.9 terawatt-hours of a lower generation in our hydropower plants, reflecting the very broad first half of 2020. minus 0.8 TWh or lower thermal production mainly in our core fire plants due to the closure of Tarapacapa oil plant in December 31st 2019 and the impact of the lower system marginal costs. In the year we remain a net spot buyer in the market with a total purchase of 3.6 TWh during 2020. equivalent to plus 1.2 terawatt-hours, higher than 2019, mainly due to low hydrology and lower marginal costs. On the other hand, our physical sales decreased 2 percent, or 0.6 terawatt-hours, mainly by minus 1.9 terawatt-hours or lower demand from distribution companies, primarily related to the determination of regulated PPAs with size and amount. and the lower national energy demand associated to lockdown and economic restrictions. This was partially offset by plus 1.3 terawatt hour of higher free market sales, including sport as part of our strategy in the free market. Now on hydrology, slide 10. With reference to our hydro generation business, We are presenting the accumulated rainfall for our most significant river basins, Maule, Biopio, Laja, and Rappel. In the chart, you can find the new metric, the green line, that highlights the average accumulated rainfall over the last 10 years. Since now, we will include this new reference under our materials. With regards to 2020 performance, having recorded a recovery in rainfall in June and July, Hydrology was rather poor during 2020. Methane season during the fourth quarter of 2020 was likely above the same quarter of 2019, explaining better performance in the period. Therefore, our hydro generation was 5% higher in the fourth quarter of 2020, which led us to reach six terawatt hour of hydro generation during the second half of 2020, meeting the expectation we have anticipated during the nine-month 2020 Result Conference call. For 2021, based on information available today, modest rainfall are expected considering the current conditions according to the La Niña phenomenon that will remain until the second quarter. Nevertheless, Pacific temperature should move to a natural condition during southern winter. which should imply an improvement in rainfall for the second semester of 2021. During the last weeks, a review of the regulation on the importation of the LNG in the country is under discussion. In our view, considering the volatility of the hydrology that has been experienced during the recent years, and the low predictability of the Argentina gas as an internal source, it is important to avoid strict limitation in the current availability of gas. This may create a situation where the overall cost of generation will increase with the dispatching of less efficient and high-contaminating plants. That is the opposite of the country's goals on decarbonization. Now, network business line on slide 11. Energy distributed in the period reflects the lockdown measures in our concession area. slightly offset by the increase in the household segment consumption. Our customer base continued to expand. During 2020, we had an increase around 36,000 new clients, 33.3,000 are residential, 2,000 commercial, exceeding the 2 million clients by year-end. On the quality of our services, we continue to improve our SAIDI and SAIFI indexes, performances associated with investment made in our concession area, despite of logistic restriction that we have faced, and with the decentralization of our networks. The effect of the social unrest at the end of 2019 and the pandemic explained the point-to-basis points increase in the total losses. We continue working to recover this KPI to historical level. We continue to improve the digitalization of our services. To provide more efficiency and agility, we have improved our customer hub, which supported the rise of digital interaction from 16% in 2019 to 52% in 2020. As of December, any distribution app reached approximately 450,000 downloads, 72% higher than in December 2019 accumulated figures. We are feeling that digital channels are the main way to communicate with our clients. In 2020, we also saw extraordinary growth in digital payment, as we show in slide 12. The increase of digital channels and the new payments agreement executed in 2020 supported the collection levels maintained at 97% versus historical levels of higher than 100%. By December 2020, we have executed almost 83,000 agreements with clients, which has been supported the decrease in bad debt, as Giuseppe will show later. On average, we executed more than 1 million contacts with our clients during the last quarter through direct calls, SMS, and other communication channels. Moving to analytics and electrification on slide 13. Despite the COVID-19 pandemic outbreaks in the country, we continue to consolidate our leadership on electric mobility and electrification. In 2020, we secured new contracts on public lighting, upgrading the lighting infrastructure we led, bringing more efficient systems in favor of the local municipalities. On e-mobility, in 2020, Analix assigned partnerships with McDonald's, with Enex, Sabah, Concessionaire Interveal, ESA, among others, to continue the development of the Electrolux project. Today, more than 22 partners have joined us in this initiative. Additionally, as analytics, we are developing the first project with the retail sector to attend the last mile logistics, boosting ePracs in Chile, reaffirming our commitment to the energy transition toward the use of clean energy in transportation. In 2020, we also secured new contracts with large real estate groups to provide energy efficiency solutions based on industrial hot water, industrial services, and new charging infrastructure for their projects. During this year, we are promoting several projects with mining industry, such as the use of electric buses combined with solar energy and storage charging systems. The first project with the mining sector developed with Anglo-American will begin operation in the next few days. Finally, and thanks to the agreement with other public and private partners, 40 companies have participated with Enel, we continue our effort to promote efficient heating, substitute the use of wood for electric heating, and reduce electrical emissions. 8,000 devices have been installed since 2017, and we estimate that this is avoiding 27,000 tons of CO2 equivalent per year. Now, to conclude this part of the presentation, a quick view on the main regulatory discussion ongoing on slide 15. On COVID contingent front, in January 2021, the basic service bill has been extended from its original timelines to support the most vulnerable clients for a more extended period. The law intends to support the vulnerable clients that have the option to postpone, under request, the payment of their bills with up to 36 installments without interest. The law, valid until May 15, including benefits to vulnerable clients, which our company already voluntarily offered before the law approval. Moreover, the law keeps the suspension of service cutting to small companies, other institutions, and all households. As of today, we have almost 21.9 thousand agreements under the Basic Service Law and an additional 20.9 thousand under our voluntary programs. On network tariff, on distribution, the government shall present its final report during second quarter 21, followed by final regulatory report on the VAD, which can be challenged in the expert panel instance. Consequently, we expect the release of the final distribution tariff retroactive to November 20, to be released in early 2022. On transmission, according to the transmission tariff cycle 2020-2023, by the second quarter we are expecting the regulator's report, which can also be challenged in the expert panel instance. Transmission tariff decrees are expected to be published by the fourth quarter in the year 2021. Moving to slide 16, other recent updates. On tariff stabilization mechanism during December 2020, the report published by the Chilean Energy Commission showed that the total balance accrual under the stabilization mechanism totals $856 million for the entire Chilean market as of September 2020. By the end of December 2020, the Chilean balance totals around $360 million. Early this year, the sales of accounts receivable generated by this mechanism were executed with Goldman Sachs and IBD, totaling around $290 million nominal value. The first tranche of around $90 million was already cashed in during February this year. A new rule on energy efficiency has been recently published. in which the government defined the regulatory framework for the rational and efficient use of the energy. In this new role, the government established certain goals on energy efficiency, like the implementation of a management energy system for large clients, or requirements for all the new buildings to tag their levels of energy consumption, as we currently have in the RFP quality map. In our view, this is an important initiative that Chile is giving towards the energy transition, and as I said, we are prepared to support our clients and their needs to comply with this new law. We are now in an open public hearing phase for the process, and the expectation is that the regulation related to the implementation of this law shall be published during this year. Now, I will hand it over to Giuseppe.

Ladies and gentlemen, please stand by. Your conference call will resume momentarily. Ladies and gentlemen, please stand by. Your conference call will resume momentarily.

Okay, thanks Paolo. Let me start with a summary of our financial highlights, which we will go through in detail in the following slides. But first, let me explain the adjustment we made in our figures for both 2019 and 2020 periods. As Paolo mentioned before, we accomplished the goal of EBITDA and income committed in our last strategic plan. For 2019, we have adjusted the bid-dime net income excluding the PPA early termination effect at the net impact of the impairment of Bocamina 1 and Terapaka power plants. For 2020, we have adjusted the bid-dime net income considering the effect arising from the impairment of Bocamina 2 power plant assets and common consumption associated to both units of Bocamina and rehabilitation of personal costs. All the details are described in the bottom of the slide. In the following slide, I will address in more detail each of these figures. But let me start giving you some detail about the beta and bottom line net of COVID impact on slide 19. Net of COVID-19 impact, our adjusted EBITDA would have been around $100 million higher than the 2020 adjusted figures, reaching a total of $1,282 million. Factors behind these are $89 million related to the reduction of demand impacting our sales in both distribution and generation business, net of energy purchases in the period, $12 million, mainly related to the higher energy losses, extraordinary customer care costs, other effects needed to face the contingency and analytics lower activities. Moving down the profit and loss, we recorded a negative impact related to the bad debt provision of $9 million, mainly driven by temporary extension of historical collection period. Therefore, net of COVID-19 our 2020 adjusted net income would have reached $640 million. Now, let's go to our capex on slide 20. In the 4Q20, our capex reached almost $380 million, mainly due to development capex that reached around $300 million in the period. Consequently, our total capex for 2020 amounted to $971 million allocated as follows. Customer capex for a total of $61 million, a 24% increase with significant investments allocated to build connection to new customers associated to the increase in our client base. and improvement of our commercial system to guarantee a better interface with our clients and efficiency in our internal commercial processes. Asset management capex reached $111 million, 10% lower than 2018, due to lower maintenance activities in coal-fired units of Boccamia and Terapaca, and lower purchases of spare parts for maintenance activities in San Isidro in 2020. and reschedule activity in our distribution business. As of December 2020, development capital reached almost $800 million, $544 million higher than 2019, largely driven by renewable expansion and development of our distribution business to contain the digitalization of our network. Let's start with the Q4 adjusted breakdown on slide 21. Adjusted to 421 EBITDA is 17% better than last year's figures, mainly due to improvement on hydrological conditions due to a better melting season, which increased our hydro generation by 0.1 TWh equivalent, to a positive impact of $4 million. Positive PPA margin effects of $24 million that include the impact of commodities, CPI, and effects on the PPA transmission costs and lower spot price, higher revenue from auxiliary services for $10 million in order to provide system quality and safety, other positive effects of $16 million mainly explained by $6 million of lower OPEX in our generation business, $3 million coming from higher depreciation of local currency versus U.S. dollar related to the translation of U.S. dollar demoneted loans As our functional currency is in pesos, settlement on spot and transmission accounts of previous years booked in the port is partially offset by higher losses in our distribution business. Let's now move to accumulated figures analysis on page 22. Our EBITDA adjusted was stable when compared to 2019 and included the following main effects. PPA margin positive effect of $125 million that include the impact of commodities, CPI, and effects on the PPA, transmission costs, and lower spot prices. Higher ancillary services revenue for $30 million and tax harmonization with a positive impact of $26 million. All these effects were offset by the following items. Lockdown measures. that affect the energy demand net of purchases of both generation and distribution business by $53 million, mainly related to the COVID-19 pandemic effect. Lower hydro generation impacting our adjusted design for $2 million. Sales of six LNG cargos during first half 2018 that wasn't executed this year due to the low lower price of commodities in the international market with an impact of $23 million, lower EBITDA of $10 million in NRIs due to the electric buses incorporated in the public system during 2019, higher depreciation of local currency versus U.S. dollar of $34 million related to the translation of U.S. dollar donated loan in our books, and lower $17 million mainly due to higher energy losses in distribution business and provision of effect of the new distribution tariffs. In slide 23, I show a summary of the performance of our generation businesses, including Enel Generación Chile and Enel Green Power Chile. The main variances between the periods were already detailed in the previous slide. Let me remind you that 2020 adjusted EBITDA versus 2019 adjusted EBITDA by the PPA early termination increased by 8%. Moreover, I would like to highlight that our generation adjusted EBITDA margin reached 65% in 4 June 2020 and 52% in the full year, still higher than 2019 figures adjusted by the yearly termination of PPAs. Now, on distribution network and LS business on page 24. Q4 2020 adjusted EBITDA reached $52 million or 29% lower compared to the same period 2019. due to $5 million of lower energy consumption in both regulated and clean market clients as a result of lockdown measures applied by the government to contain the spread of COVID-19, $4 million of higher energy losses as a result of cutting of district restrictions and COVID-19 effects on economy, Higher OPEX in order to maintain the safety measure in the distribution activity, which amounted to $8 million in the quarter. And provision of effects of the new distribution of the target quarter. And finally, analyzed higher activity that offset the previous effect. On the accumulated figures, EBITDA was low by $64 million, mainly due to on LRX, a negative impact of $8 million mainly due to the recognition of 183 e-buses from Transantiago II, which were incorporated in the public persuasion system. On network, reduction of $56 million coming through lower demand, higher energy losses, higher OPEX in order to maintain the safety measures and activity, and provision of of the effect of the new distribution tariff. Now, on slide 25, let's go through the main driver of our group meeting. DNA and BED-BEC reached $310 million, a variance of $2 million related to lower DNA in a new generation. mainly due to Trapaca and Bocamina power plant impairment in 2019 and in 2020 for what concerns Bocamina 2. Partial offset by higher depreciation in EGB Chile due to the devaluation of Chilean pesos, higher debt provision mainly due to COVID outbreak, higher depreciation of the distribution business due to the higher investments. The impairment increased by $527 million, mainly due to Boccamina 2 booked in June 2020, related to the power plant early closure scheduled for May 2022. Financial results total an expense of $142 million, a decrease of $49 million, mainly due to Lower average cost of our debt as a result of a negotiation of EGP debt with AFI, Energy Finance International. Lower net financial expense coming from the accounting impacts of energy stabilization making in duration profile and higher capitalized interest primarily related to the development of renewable energy projects. offset by the exchange difference due to the depreciation of foreign exchange rates in 2020. Results from equity investments increased mainly due to the sale of Quintero-San Luis transmission line in December 2020. Income taxes and minority reflect the impact related to the Bocamina II impairment and the merger of Casa Catana Chile into Enel Henerson Chile in 2019. The adjusted year 2020 net income results reached $560 million, 9% higher than last year's adjusted net income. Moving to cash flow on slide 26, 2020 FFO reached $1. $1,067,000,000 higher than previous year, mostly due to higher networking capital mainly explained by cash management action of around $150,000,000 in the last quarter, e-buses sales to MMP capital, which total around $100,000,000 and other networking capital initiatives, Higher LNG payment in 2019 versus 2020 of $69 million, partial offset by lower receivables due to COVID-19 of around $100 million. Lower income tax during 2020 explained by the lower results of the company due to the decarbonization in terms of Paracapac power plants and tax payment postponement as a consequence of government COVID. program and lower financial expense mainly explained by reduction in the interest rate of intercompany loan between EGP and EFI and lower derivatives compensation in EGP. Let me now go through our debt on slide 22. Our gross debt increased approximately by $400 million versus 2018 due to the NLCNU funding with the AFI to finance our decarbonization plan, partially offset by the amortization of NLCNU and EGP debt. As a result of our net debt, as of December 2020 compared to 2018, increased $254 million, Average cost of our debt was reduced from 5.2% in December 2018 to 4.6% as of December 2020, showing an important improvement in our financial condition as a result of our constant efforts to optimize our financial expenses. The average term of our debt is over 6 million euros. on our debt amortization of slide 28. In terms of liquidity, we maintain the level of $1 billion, enabling us to finance our CapEx plan and have a comfortable position to cope with the current economic scenario. Our debt amortization, as you can see in the slide, remains very small. Now I will hand over to Paolo.

Thank you Giuseppe. Let's go to the closing remarks. Despite the challenging circumstances, Enel Chile confirmed its resilience and the strength of its strategy. Continue to push for fleet and client decarbonization. the leading position in electrification and renewables in Chile, contributing to the five agronistic climate change. Our clients will remain at the center of our strategy, and new business lines will continue to focus on client needs and support them in the path towards the energy transition. Our business resilience and sustainable strategy is supported by our balance sheet strength and long-term vision promoting value creation to all. Thank you for your attention, and let's now open the Q&A session. I will hand over to Isabella.

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

Thank you so much. And as a reminder, ladies and gentlemen, that is star one to get in the telephone queue. Our first question is from Javier Suarez with Mediobanca. Your question, please.

Hi. Good morning, and many thanks for the presentation. I have several questions. The first one is on the regulatory review and recent regulatory changes. So I'm interested on the basic service law that is basically changing the capacity of the company to deal with unpaid bills. So the question here is how do you see this new law affecting your profitability in 2021 and 2022? How significant do you think that that is going to be in the management of your cash flows and working capital and in general the profitability of your business? Thanks. On the energy efficiency law that is trying to promote the rational utilization of energy sources, I have seen in the presentation that hydrogen has been declared as a fuel. So the question for you is that if you can update us on how do you see hydrogen, the hydrogen opportunity affecting the NLC-less business model in the next year to come. So any update on that would be appreciated. The third question is on the... the free market, the service to the free market. So this is part of your clients that are on the free market. So how do you expect that free market evolving in 2021? How should be the expectation of free market evolution in 2021 and impact on your profitability? And the fourth and final question is on the working capital. So there has been a positive impact during the fourth quarter. If you can please explain to us why this positive impact has happened during the fourth quarter of the year. Many thanks.

Thank you, Javier, for your question. Let's say very interesting and covering lots of things. Let me start on regulatory aspects, and then I will hand over to Giuseppe for some clarification on numbers. Regarding the basic service law, I would say that it is not, let's say, a regulatory measure. It's more, let's say, a law that has been issued during the emergency period, the economic crisis due to the pandemic, to support certain category of clients, the most vulnerable clients. This is something that we have, let's say, approached since the beginning as a company with offering more or less the same approach of letting people ask for, let's say, an agreement for the extension of the payment terms. What means the last decision? This was a decision taken early January, but honestly, it was expected, considering that the previous law issued in August was, let's say, designed to cover the energy that was expected to end by year-end. In this situation, clearly, the likely change that has been introduced is to enlarge the number of installments for the payment. The first row defined 12, but now the client can choose up to 36. And this is clearly, is quite reasonable because if we're talking about small and vulnerable clients, having one year of debt, the extension of the payment should help them to cover their exposure. The element that we honestly, as we often say, we do not agree on this law is that the limit in our code, the exclusion of our capability to cut off all the, let's say, domestic bad payers, also the largest consumer in the sectors. So this is clearly, as let's say, they have an influence of the attitude of the client that may pay their bills because they have resources also during this, let's say, contingency period, not to pay the bill and waiting until the end of the law. The law will expire by the 5th of May. So this is the situation we have, let's say, published and we push for having as much agreement as possible in order, let's say, to have a direct contact with the client in order to start to recover our exposure stuff when the law will expire. So this is the situation Giuseppe can give you later, let's say, how it is reflected in our numbers. Regarding the energy efficiency law, we think that this is an important step in achieving the country. Clearly, as sometimes to be, let's say, developed because it refers to a five-year plan in order to present that now we are in the process, we expect that This, let's say, will be a real exploit by doing the next couple of years. Regarding hydrogen, you know that we are part of the consortium that is developing the first pilot project in the south of Chile. regarding the production of green hydrogen using wind turbine generation plant. And this is, let's say, is a part of our strategy in evaluating and monitoring the evolution of these opportunities. Clear for us is an opportunity because we are a renewable player and could be a very important upside in any part of this green economy. Clearly we are focusing what are, let's say, the use of hydrogen in the industry sectors in the sense that we think that it may give a strong upside changing the industrial process and adopting as much as possible the green hydrogen as a vector for the energy. And we can be available in, let's say, producing to our generation for this scope. We have a very large pipeline. We have 2.4 gigawatts that we plan to construct by 2023. But we have a large pipeline, so we can have all the flexibility in order to go to a potential increase in demand each year for the green nitrogen. Regarding the free market evolution, this is, let's say, a question that's touch base, let's say, a process that is still in the middle because you know that the portability law has been presented to Commission of the Senate. This is under discussion in the sense that there is an earring room going. They are debating about this. And this law has a certain condition for opening of the market. For the timing, what we're seeing is that for one side, Clients that have the possibility to degrade from the regulated to the free market due to the conditions, being in a connection capacity between 500 kilowatts and 5 megawatts. are moving and so there is a client that are moving from regulated to the free market. And the other trend is free clients that are switching into a full renewable subscription in the sense that they are required to be provided with green energy. And we see these two elements for the time being a good upside for us. because you know that we have signed recent contracts with very large clients based on green energy. Some clients are requested to switch the furniture into green energy, and we are, let's say, targeting the clients that are moving from regulated markets to the free market in our concession area as well as outside our concession area. Ali, Giuseppe, the answer regarding the details on the basic service law and on the working capital.

Well, let me say that for what concerns the networking capital, the action that we put in place in the last quarter, as I said in the slide on 26, are around 100 million dollars. and are basically putting some action in terms of factoring and reverse factoring, especially the second one, taking into account the fact that we perform a very important amount of coverage in the last quarter. So these are basically the issue for what concerns the net working capital. I would say that we believe that considering the projection that we have in terms of the We shouldn't have any additional impact in the following months, but of course, it's really early to say, you know, now. We're going to see in the following months how it could be the impact of the forced-born in Austria-Herzegovina.

Yes, and also the impact and the evolution of the pandemia here in Chile, you know, that but the process for the vaccine is going at high speed, so we hope that in the following months there could be, let's say, a recovery from the sanitary point of view.

Interesting. Many thanks.

Thank you. Our next question comes from Enrico Bartoli with Stifel. Your question, please.

Hi, good afternoon, and first for taking my questions. I have also a few. The first one is on the outlook for 2021. We saw a recovery of electricity production in the power generation business, of demand on the distribution business. You are indicating an expected improvement of the hydrology. So can you elaborate a bit on more in detail the scenario that you see for this year, and if possible, if you can give us some indication of the level of EBDA that you expect for 2021. And related to this, you're also expecting 1.3 gigawatts of additional renewable capacity, so if you can give us an indication of the EBDA that you expect for at fully a level from that capacity. Then I have a question regarding the regulatory environment as well. You highlighted some deadlines for the presentation of the new regulatory framework for distribution and transmission. If you can update us on the impact that you expect from these two new models for your distribution business. And the last one is related to the PPA. You highlighted the impact from PPAs from the indexation to Forex, commodities, CPI. If you can remind us how these mechanisms work and if you can provide some details on this positive impact that you had in 2020. Thank you.

Okay. Thank you, Enrico, for your question. Regarding the outlook of 2021, let's say I may confirm what we have discussed during our, let's say, business plan with some details regarding, let's say, I would say that the key issue here is how the country is evolving from the 2021. So the wealth measure and the possibility of having not strong limitation in the lockdown in the movement of people is a very key indicator on how the country, and so as a consequence, the demand, the ability for payment and to have new contracts, can, let's say, support the recovery in the economy. On our side, what we are doing is, first of all, supporting our clients in any case we can do. I mean, I'm referring to the small, medium clients We are targeting them with agreement in order to help them to coming out from this situation. On the other side, the large clients confirm their resilience, so we don't see any negative impact on this. Regarding the hydrology, and we, let's say, confirm our estimation based on, as usual, the number of years of average and the analysis of the evolution. So we can be more specific during the next month, during the next course, in order to see effectively how the country and the weather and the condition may change or can sustain the numbers. Regarding project, I would say that during 2020, that from the point of view of working on sites, movement of people, the impact of pandemic was very tough. And I will appreciate very much the work made by our teams to manage this very difficult situation. We have advanced in all the projects that we have on site. We have opened new working sites and we managed to have people working also doing the lockdown that affected our areas for the new project, especially in the north of Chile. So at the end, We have advanced, I think, in 2020, due to the conditions, but also the lengthy process that arrived from, let's say, the authority like the Consejo Nacional de Monumentos, where the timing for receiving any kind of approval were enlarged so much due to the availability of people, the office, the remote working, all that stuff. In this situation, we have today, as you mentioned, 1.3 gigawatts of projects under construction. We are advancing and we are managing this year, but also especially the last year, also some, let's say, very small outbreaks of COVID that arrived during the contractors, but we managed very well. And so today we have a very, very, very limited number of people infected in the company. And what we expect is to advance clearly without our effort in time with the construction of the plant. Also, in this case, we will keep updated for any step ahead on our plans. There are clearly different stages of advancing, but we are, let's say, quite positive on the work that we are doing on site. regarding the impact of distribution tariffs on regulatory. Yes, I see that. What I can say is, first, the process may have some months of delay in terms of the very final tariff definition because of the work is doing the regulator with its consultants. We do not expect, according to the information that we receive until now, we do not expect a difference from the number that we have projected in our business plan. So we don't see neither in distribution as well as in transmission. so at this stage it is a lengthy problem but it is let's say it's going on online with all the parameters parameters and analysis data has been shared and defined at the beginning regarding the pta in this section i will just have to give you some more flavor of this yeah well the the pta are strictly linked to several variables like

or the exchange rate and other commodities. So, depending on the evolution of the commodity, you know, we have the change in our PPA. Of course, it's not so easy to explain the link between the the trend of the commodity and the impact of the PPA because, for example, for some commodity, we have the reference for the indexation is coming to, for example, six months previous the trend of the commodity. So we have a different kind of indexation and reference period for each of the variables. But basically, these are the driver of our PPAs.

Okay, thank you very much.

Thank you. And ladies and gentlemen, if you have a question, just press star then one to get in the queue. Our next question is from Murillo Rizzini with Santander. Your question, please.

Hi, good morning, guys. Hi, Paolo, Giuseppe, Isabella. This is Murilo Riccini from Santander. Thanks for the call. Could you provide us more details on the gas supply situation in Chile and specifically the dynamic for NL Chile? We know that you have been negotiating gas supply during the pandemic, and now you are benefiting from that. How long can we expect availability of gas for NL Chile and what are you expecting for the winter in terms of gas availability and spot prices? This is the first one. My next one is regarding CAPEX and we would like to understand how could you handle CAPEX in order to avoid renewable energy oversupply in the system? Could that be a strategy more focused on storage systems than renewable capacity? And finally, could you share with us more your expectations about collections and provisions? Should provisions increase during the first half of 2021 in your bill? That's all from my side. Thanks. Hi, Maurizio.

Thank you for your question. Let's start from gas supply. It is a very interesting question, this time being. Let's say, first of all, let's have a look on gas supply in Chile, because you know that it is not, let's say, a very easy country to supply with, in the sense that the gas is coming from LNG facility, especially in the center, Quintero in the north. And then there are the interconnection with Argentina. And the manner of managing the two, let's say, the two elements, the two areas for providing of gases is quite different, also in terms of seasonality. Because you know that Argentinian gas is interruptible in the sense that we can use that gas in certain periods of the year, but can be interrupted by the cell, especially with action managed by the government agencies. On the other hand, to manage the import and the dispatching of LNG, it's a quite important exercise because it requires quite clear planning in order to manage the boat that is coming to discharge the gas. Usually, the mechanism is that during the During the springtime and until, let's say, January, February, the gas is coming from Argentina. There is availability, and the system often uses gas coming from Argentina. During wintertime, it is very difficult to have gas from Argentina. there is, we especially, we have planning, we are planning every year to receive gas from energy. So, in this scenario, we do not see, let's say, a problem for us in having availability of gas because we can plan the boat, the required boat available for wintertime and at the same time using gas coming from Argentina in spring and summer. What can happen here, as will happen during, let's say, January and February, is that there is some lack of gas from general, let's say, deriving from general condition of the country. certain drops in water availability and gas unavailability for other players. On our side, we also plan, we always plan to have gas mixing the region from Argentina and Argentina. So we don't see a problem, especially we don't see a problem also this year, starting from March, because the plan of receiving energy is clear. During January and February, we have to manage a certain action in order to cover our needs, especially due to the lack of gas coming from Argentina that has been blocked during the recent months. In terms of our position, we don't see a problem because our LNG contract is a long-term contract, and so we can cover our needs. We can plan to cover our needs in an easy way. And we have also several contracts. in place with Argentinian operators, and so we can also benefit from the availability from Argentina. Regarding next question on CAPEX, and especially regarding, you mentioned the oversupply in terms of other, let's say, oversupply of renewables. We have some elements here to share. First, you know that we are, let's say, quite in the sector in the sense that we have a project ongoing that we have connected to the grid starting from this year. The second element is that there is also the carbonization process ongoing. that is limiting the availability of thermal most contaminating capacity. The third aspect that is very important is also, let's say, the client's demand, in the sense that they are switching more and more in the requiring green energy. At the same time, considering our portfolio of contracts, We have clients located also in the north of Chile. So, we may avoid also bottlenecks, so the great in order to provide them with our energy is a very important element also considering the impact on price. The point of adding renewable plants with storage is a very interesting element. We are developing our plan based also on this strategy. We are in discussion also with, let's say, with the regulator, with the authority, in order to manage the best way to, let's say, to remunerate these investments in order to have the possibility to start planning the installation of batteries, especially together with our solar plants. But it is an element that we are, let's say, when we are working on, we are, let's say, developing very closely. Regarding the collection, I'll leave the, let's say, the answer to what you said.

Yes, as I said before, it's really difficult to understand how it could be the impact. I believe that it's going to be lower than what we had in 2020 for several reasons. First of all, because I believe that the situation in Chile is going to be better than last year. Also linked to the last... vaccine plan that the companies, the governments do in these days. And also because, you know, the layer of Silicio Baltico is excluding some clients with a high consumption where we can, you know, manage in order to get the payment. So definitely better, but as of today, it's really difficult to understand how it could be.

All right, thank you. And I will now turn the call back to Isabella Clemens for the webcast question.

Okay, thank you. So we have some questions on our chat here. So the first one is from Andrew McCartney, so his first question is, We have been seeing higher spot market prices in Chile in early 2021. Should we expect that to translate into higher energy purchase expenses for an energy reduction business? And the second question is, authorities in Chile appear to be reviewing the way gas costs are declared by power generators. What is Enel's opinion on this and what the implications could be for the company? So Enel, you're up for follow-up.

Thank you, Angela, for the questions. And in answer to your question, I will recollect to the previous one made by Murillo, in the sense that the starting point is here the way in which the gas is imported in Chile. And clearly, one of the most important, or I would say the most important channel for importing Chile, protect gas in Chile, is the LNG. Because, as I mentioned, the gas supply coming from Argentina is interoperable, and it is not a stable source for providing gas. And the LNG gas requires some planning because the chain is based on both coming from the sea, timing for discharging, and occupation of the storage facility in the regasification. In this situation, the discussion that is ongoing with the regulator that is reviewing what is called Norma Technical LNG is regarding the flexibility of the system for providing gas in Chile. And our view, honestly, is that we have to defined as the first goal is to have the economicity of the system in order to have the less costly system overall. And second, to avoid any kind of use of the most contaminating, the most polluting generation assets. And if we go through some request or some discussion that we're having where it imposes some rigidity in the system also in importing gas through LNG, the consequence of this is to have, let's say, a system that cannot have the flexibility in optimizing the availability of gas. And 12, the system where it is forced to burn, to produce with the most contaminating and the less economic, but the most expensive fuel. And so coming back to your first question, on our position, we have a very large mix of technology and capacity. We can use hydro, renewables, and gas. And just for one year, coal in Bucamina. In this situation, we can be buyer of the spot If the, let's say, the cost of energy is below our cost of production, or we are backstopped by our cost of production, and we are importing gas to our long-term contract LNG, so we are also the backup of the benefit of gas. So on our side, we have... the backstop in any condition of higher spot price. And regarding the norma technica, we are pushing in having the flexibility that allow to have availability of gas in the system. Because it is important for us, but also for all other players that are managing gas facilities. That is, in case you do not have a long-term contract, but they are going to go spot on the LNG. And so, to include some constraint, or to base all the Let's say planning of the system based on a yearly basis by the Coordinador del Red, this may have, let's say, an impact on the amount of gas in certain periods of the year. So we should avoid to have this situation, but to look at the economicity of the overall system.

Thank you, Paulo. So now we have some questions also from Rodrigo Moura from Moneda. So the first question is, could you explain the factorization agreement with Goldman Sachs and IDB? How much do you expect to receive for the French tranche? Then the second question that I believe was already answered that is related to the ability that we have with LNG to face the drop season in the countries. The third one is related to repairing projects that are now in action. So Rodrigo is asking if the project was concluded. And the second one related is about Los Condores project. So Rodrigo is asking about how much it was expensed in the project at the end of 2020 and how much is the company forecasting to invest to conclude this project. Then the other one is related to Bocamina 2. So Rodrigo is asking that considering the hydro conditions that we are facing now and the lack of Argentinian gas, there is a possibility of the company to evaluate the postponement of the closure of Bocamina 2 in May 2022. And then this final question, It's for details on the postponement of the COD of Los Condores project to 2023. So this is the question.

Let's start from the end so we can cover the plans. So let's start from the first one. What about Los Condores? Yes. Okay, Los Congres, what the expenses made by, accumulated until 2020 was in the range of 880 million US dollars. This is the total amount, considering that what has been announced during the HSMTA published at the end of July, we announced a range of $1,150 million as a total amount of capex. Where we stand today? In a very difficult situation, let me say this, not because of the project, but because of the management of the pandemic effect in any working area, we have advanced in our analysis, in our works, and so we have, let's say, going ahead with, let's say, the element that has, let's say, create a requirement for deeper studies during the recent time. So we have overcome these elements, and so we are advancing the construction. Clearly managing also the all the elements of safety regarding the people that are working on the sites, particularly on the safety of work and safety on work regarding the pandemic.

The other one is about the reporting projects that are now in action, if this is correct, concluded.

Yes.

And then let's go to the LNG question then. So it's really our ability to face the drought season in the country considering the LNG contract. I think you have already mentioned that.

Yeah, I already mentioned this. So you have to consider that starting from March, we are going through the, let's say, the receiving of the ship that will deliver the required gas for all the winter period. So we don't have any kind of dependency from Argentina for all the period arriving to spring and summertime. So we don't see a problem starting from today to have this kind of let's say lack of gas coming from Argentina.

And then the last one, Giuseppe, is about the selling of the credits with Goldman Sachs and IGB.

Yeah. We have already performed the first tranche in February, and as a matter of fact, we have already cashed in $58 million. You're going to see, reflecting the first quarter results where we presented it. And everything is going well in the meaning that if the regulator will issue the decrees that are the base for the factory, we're going to expect to have another $100 million along the year.

Okay. Thank you, Giuseppe. So we have a question from Medecastro from Credit Corp. So the first one, if we could share guidance for revenues EBITDA and CAPEX for 2021. And then the second question is, are you planning to pay the intercompany loan that you have with NLSPA in the short term? Giuseppe?

Yeah. Well, for what concerns the guidance, we're going to confirm what we have been presented in during our 30 days. So just to recap, EBITDA, is going to be in a range of $1.4, $1.5 billion. And the same for what concerns the CAPEX, so we're going to spend, or at least we expect to spend, $1.2 billion. And for what concerns the intercompany loan, we don't have any intercompany loan expiration by the end of this year. We have just a a credit line that is going to be a spike in June and we are evaluating whether it makes sense to renew in total or just a part of it. We have the only inspiration that we have on top of the amortization of some loan is a loan versus a bank and an EGP loan that is going to expire in December. And so we're going to decide how to end it.

Okay, thank you Giuseppe. So we have the last question now from Tomas Gonzales, Scotiabank. Thomas is asking more details on the leverage of the company on 2020 and what we are expecting in order to leverage it. And also if phasing CapEx would be an alternative, so if you can give more details on this. and then the last question is uh tomas is asking uh caller on the ancillary services that we registered the 10 million dollars uh recognition this year so he's asking what we are expecting for 2021 uh and for our company okay so i'm going to do that well for what goes down then that's the visa that we are around

3.1 times. And of course, we're gonna see how the year is going to be, but also in this case, we're gonna confirm what we said during our capital market day. For what's considered a very steady shift, I mean, the situation is going to be a little bit different because the rules changed a little bit. So we don't believe that we are going to have exactly the same amount that we had in 2020. It's going to be a little bit lower. And as of today, we believe it is going to be $3 million.

Perfect. Thank you, Giuseppe. Now, so we do not have any other questions, so I would like to thank you all for joining us today and also to mention that our team, the investor relations team, is going to be available for any other questions you may have. Okay? Many thanks to you all for your attention. Stay safe, you all.

Thank you. Thank you.

And thank you, ladies and gentlemen, for your participation in today's program. You may now disconnect. Have a wonderful day.