Enel Chile S.A.

Good day, ladies and gentlemen, and welcome to the NL Chili's Q1 2021 Results Conference Call. My name is Buena, and I will be your operator for today. At this time, all participants lying are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. 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 the NL Chili's press release reporting in its Q1 2021 results. The presentation accompanying this conference call and NL Chili's annual report form 20-F, including under risk factors. You may access our Q1 2021 results press release and presentation on our website, www.nl.clnr20-f. on the SEC's website, www.sec.gov. Readers are cautioned not to place undue reliance on those forward-looking statements, which speak only as of their dates. MLGD undertakes no obligation to update these forward-looking statements or to disclose any development as such result of which these looking forward statements become accurate except as required by law. I would now like to turn the presentation over to Ms. Isabella Kunis, Head of Investor Relations of NLGID. Please proceed.

Thank you. Good morning to you all, and welcome to NLGID's first quarter 2021 results presentation. Thank you all for joining us today. I hope this finds you well and your family as well. I am Isabella Clemens, Head of Investor Relations. Our presentation and related financial information are available in our website in the Investors 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, our CEO, Paolo Palocchi, and our CFO, Giuseppe Ticchiarelli. In the following slides, Paolo will open the presentation with the main highlights on business and operational performance. Then, Giuseppe will walk you through our financial results. Let me remind you that media participants are connected only in listening mode. As always, our ad team will continue to be available to provide you with any detailed information we may need concerning the figures included in this presentation. Thank you all for your attention, and let me now hand over to Paulo. Paulo?

Thank you, Isabella. Good morning, and thanks for joining us. Let me start with the main highlights of the period on slide two. We continue to reinforce our leadership in the newborn market, growing with the newborn capacity addition. We are adding 1.3 gigawatts of renewable projects under construction on an installed base of 1.2 gigawatts already in operation. We recently announced agreement with IM2 Solar to develop 10 distributed small-scale projects adding 75 megawatts by 2022. During the first quarter, we have closed the transaction for the factoring of accounts receivable related to the application of the transitory mechanism for stabilizing electricity prices, totaling 180 million dollars in nominal terms. For the first time since the creation of Enel Chile, the AGM held on the past 28th of March delivery appointed two women for the position of director tackling the diversity at board level. We continue to advance in our commitment to promote inclusion and diversity within our organization. Lastly, the AGM has also approved the dividend proposal to be paid on May 28th, reaching an amount of 3,077 trillion pesos per share, not affecting our shareholder remuneration, with accounting effect related to the impairment made during 2020. Let's now have a look on our decarbonization and renewables developments. We constantly seek new ways to boost the energy transition, generate business opportunities, and push efficiency and innovation in all our business lines. Under this approach, we have developed different projects and initiatives as part of our action to tackle the climate change and to continue promoting the energy transition and the circular economy. As an example, we have connected the first 3 out of 10 small solar plants known in Chile as PMGD as part of the agreement signed with IM2. In the first phase of this project, during 2021 and early 2022, we will secure 75 MW of solar restored capacity directly connected to medium voltage network in the central region of the county, close to high consumption areas. Finally, as we already announced, we are currently developing different innovative projects, always embracing the opportunities of energy transition and the efficiency of our operations, as, for instance, the third scaled wave energy converter in Chile. Now, on our capacity under construction, on page 4. We are finalizing 1.3 gigawatts of capacity under construction. Most of those projects will enter into operation during this year, contributing to the country decarbonization process. This will be a milestone for the energy transition, both for us and for the country. Regarding our solar facilities, during the second half of the year, we will finish the construction of Campo del Sol, Azabache, Domenico, Sol de Lila, Finisterre, and the and part of the first phase of the PNGD project previously mentioned. The construction of those projects has been and continues to be very challenging, considering all the headwinds we are facing since the pandemic outbreak, including lockdown restrictions, delays in environmental licenses, delays on archaeological permits, and most recently, the closure of the country's borders, that prevent specialized technicians from the renewable industry to commission some plants. Now let me give some data on market conditions that drove the price volatility during the first quarter, go on page 5. During the first months of this year, we saw a combinational factor that led to a very unusual situation for the Chilean electricity system. On one hand, the system had less water availability at the beginning of the year, with 25% less potential energy stored in reservoirs. On the other hand, since October 2020, the Chilean market showed a deficiency in natural gas availability due to the interruption of Argentine gas supply, which became more critical at the beginning of 2021. Since the first month of 2021, we put in place an action to improve the availability of gas and started buying additional LNG cargos, first of all, to supply our plants in the center of the country, and then negotiating access to Mequijones LNG terminal to supply our natural gas power plant in the north. During the second half of March, we have started selling natural gas to other generators. Within this framework, we were the generator that maintained the supply of energy for its plants during that period and, at the same time, we operate our agro-facility, achieving a degeneration of 2.1 TWh, contributing to half of the national hydroelectric generation. All these actions allow us to generate with our CGT plants in the country's central areas and to reduce the pressure on marginal prices during that period. Let's move to the next slide where I can explain why we believe that this is not a structural imbalance on the Chilean system and the challenge that we need to push. As you can see on the left side, marginal costs strongly increased during the first quarter, moving from an average of $50 per MWh during first quarter 2020 to $75 per megawatt hour in first quarter 2021. This reflects the condition already presented, primarily the result of hydrological condition and the lower LNG and Argentine gas availability in the market, which led to the system to generate . In this regard, it is believed that renewable growth based on solar and wind is a key to continue to reduce the exposure to win to hydroavailability and commodities. We also believe that the situation we have seen in recent months is not an unusual situation, but rather a short-term one-off condition of the market. In addition, we think that natural gas will continue to play a leading role during the energy transition to maintain and guarantee supply and price stability. In this regard, and that Chile will continue to be a player in this technology. We firmly believe that, as a transitional decision, any new proposal on technical rules should guarantee system security and price stability, since this technology is the enabler of the energy transition which complements the viability of renewable sources. Finally, we have 1.2 gigawatts portfolio of DESS projects in pipeline in different stage for development, ready to be executed. Asudante regulation will be ready for this technology. Battery energy storage systems are the additional option to reach more stability and diversification for the Chilean energy system. Now let's move to electrification. on page 7. During the first quarter of the year, we have signed a partnership with Solimac to develop an infrastructure plan and install charging points in their store throughout the country. It's worth highlighting that we have already installed charging points in its corporate building and distribution center to supply its new last-mile electric trucks. On the same line, thanks to an alliance with Anglo-American, we have finished our first electric charging public station. It features 12 high-power charging points for public and private use under the charging-as-a-service model. This agreement allows Anglo-American to use the terminal for 8 years and supply their fleet of 17 buses that the company uses to transport their staff. Continuing the electrification sustainability strategy along with the Municipality of Peñarolén, the Energy Sustainability Agency and the Ministry of Energy, we have inaugurated five sustainable sports centers using a mix of technology, which not only reduce the carbon footprint, but also generate savings to the municipality. Regarding the smart cities initiatives, with the support of the Secretary of Telecommunications, we are developing the first smart park in the La Florida district, which integrates smart lighting, analytical cameras, Wi-Fi, USB chargers, panic buckles, among other solutions. Now network, page 8. The distributed energy reflects the impact from the extenders of down, which was partially offset by residential consumption. Our investment in visualization and action plans have allowed us to provide more efficiency in the quality of our service and recovery the total loss rate to 5% despite all the logistics restrictions we have faced. Any distribution app reached more than 470,000 downloads, 81% higher than March 2020 cumulative figures. will confirm the improvement of our digital channels to stay in contact with our clients. On the lower left side, the final report on distribution reference model is expected to be published during the second quarter of this year. As a consequence, the regulator technical report that will fix the new tariff definitions should be presented in November. Any discrepancy between the regulator and the company's positions can be challenged in the panel of expert instance. Consequently, we expect the release of the final distribution tariff decree during the first half of 2022. Regarding transmission tariff cycle 2020-2023, we expect the regulator's report fixing the new tariff cycle to be issued in the second quarter, which can also be challenged in the panel of expert instance. Transmission Jarrett's decree is expected to be published between the end of 2021 and early 2022. Let's move to slide 9. Our efforts on digitalization have also allowed us to maintain our collection level at 98%. In that sense, today, 80% of interactions with our clients are made by digital channels. Considering the negative economic effects of the COVID-19 pandemic to support the most vulnerable clients, we have already promoted a DOC payment agreement before the approval of the basic service law. Today, Congress is discussing the condition for the extension of the second version of that law. In our view, the problem was being allowed to grow without looking for long-term impacts on clients. It's time to look for a comprehensive and stable solution that would prevent the most vulnerable families from accumulating an increasingly heavy backpack of debt. The state's participation became fundamental to develop a recovery scheme, with the state itself becoming part of it to help to recover the debts of people who need it most. Thank you, and now I'll hand over to Giuseppe.

First of all, let me start with a summary of our financial highlights on slide 11, which we will go through in detail in the following slides. But first, I will explain the adjustments we made in our first quarter of 2021. For the first quarter of 2021, we have adjusted the EBITDA and net income considering the effect arising from the coal stocking permits associated to Boccamino II, our last coal-fired power plant. The coal stocking permits had an effect of $15 million in Milvida and $10 million at the bottom line. 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. Now, we will start reviewing the details of our CAPEX allocation on slide 12. In the first Q2021, our CAPEX reached $272 million, mainly dedicated to the construction of our new renewable capacity. Customer CAPEX reached a total of $15 million in line with the first Q2020. The CAPEX was mainly allocated to build new connections and maintain the supply continuity. Asset management CAPEX reached $24 million, 42.32% higher than the CERCQ 2020, mainly due to higher maintenance activity in distribution, work in the low and middle extension grid, and digitalization projects in renewables. As of March 2021, Development capex reached almost $235 million, a $134 million higher than last year's period, largely driven by renewable expansion and development of our distribution business to continue the digitalization of our network. Let's now start with the Q-first adjusted EBITDA breakdown on slide 13. that accounted for $220 million, 18% lower versus 2020 figures, mainly due to challenging hydrological conditions related to a more intensive generation in the 4Q23 during the wetting season, decreasing the hydro-dump reservoir. Combined with the lack of gas in the system resulted in higher stock price which increased the cost of energy purchases required to supply our contracted demand. Negative EPA margin effect mainly associated with lower price of our regulated EPA due to the commodity taxation. New agreements starting the period as Anglo-Americans and new contracts coming from the energy distribution free customer portfolio at the beginning of the year. And lastly, around 50% of the negative variance is explained by the appreciation of CHP in the period versus last year period, considering that our book currency is in CHP and our DBA are US denominated. Network business variances are coming from lower demand, mainly in regulated customers, due to the continuity of the lockdown restrictions, provision of lower remuneration on distribution tariffs, which should be retroactive to November 2020. All these effects were partially offset by $29 million of the positive effects from the next commodity coverage, $8 million of lower depreciation of GMT versus USD related to our USD loans and $8 million due to the lower effect of the stabilization mechanism counter-re-adjustment and efficiency in office in generation business. Let me now give you more detail about the generation KPI on page 14. quarter generation reflects a less efficient mix as a result of lower availability compared to the first quarter of last year, which was partially offset by other renewables and thermal production. Our energy sale shows a reduction in the regulated energy due to lower demand and termination of PPA on the 26th auction. more than offset by the increase in the free market because of the new contracts as an anglo maker and retail clients coming from the annual distribution as a part of the unbundling regulation. For what concerns our sourcing, on top of the already mentioned production variances, we accounted for an increase of 0.3 of subsidies coming from post-market and 0.6 related to the portfolio contracts coming from distribution retail business. In the next slide, we present a summary of the performance of our generation business, including Enel Generación Chile and Enel Green Power Chile, and of our network business, including Enel Distribución and Enel Transición. between the fields were already explained in the slide number 13. Now, on slide 16, let's go through the main driver of our group meeting. DNA embed decks reached $76 million, a variance of $16 million, mainly related to the lower DNA in energy generation, mainly due to the impairment made in Boccamina Next, financial results totaled an expense of $52 million and an increase of $16 million, mainly due to higher costs related to the factoring executed in generation business on destabilization accounting accounts. This effect was partially offset by the higher financial expense capitalized in the first and lower financial cost of debt due to the trillion pesos appreciation versus the US dollar. In contrast, the minority reflects the impact related to the lower EBITDA and higher financial expense. Moving to the cash flow from slide 17. First June 2021, FFO reached $213 million, higher than the previous year figures, mostly due to highest net working capital mainly explained by the cash received from the factoring of stabilization mechanism accounts and client receivables in this solution totaling the amount of almost $200 million. The transmission line sales in 2020 with a cash impact this year of $29 million, purchases of e-buses during the first quarter of last year and lower new accounts of the stabilization mechanism. Higher income tax during first year 2021, mainly explained by higher income tax payment this year in generation business. And higher financial expenses, mainly explained by the cost of factory of the stabilization mechanism account. Let me now go through our desk on slide 18. Our growth debt of March 2021 is in line with December 2020, amounting to $399 billion. Our net debt in the period compared with January 1, 2021, increased $79 million, directly associated with our Intense CapEx plan. associated to the 1.3 Gb under construction that will start bringing a disaster in the second half of the year. The average cost of our debt is quite stable, reaching 4.7% in Q3 2021. The cost of debt should remain stable during 2021. Let me highlight that we have just issued our first SDG Intercompany Debt of $300 million with maturity of 10 years. and 2.5% rate, a very competitive interest rate, demonstrating the recognition of our de-risking strategy. The new SDG loan considers as KPI the CO2 emission of our generation fleet by 2023. In terms of debt customization, our schedule remains very smooth, with an average of 6 years and around $300 million annually maturing in the next years. In terms of liquidity, we maintain the level of $0.9 billion, giving us flexibility to face potential headwinds in the market. Now I will hand over to Paolo.

Thank you Giuseppe. Let's go to closing remarks. Despite the challenging circumstances, Enchile is taking all the necessary action to mitigate the impact of the drought that is affecting the country and the effect that COVID-19 has caused to achieve the guidance for 2021. Our clients will remain at the center of our strategy and will be the focus of our efforts in improving service, including the customer experience, based on our digital operations. This year, our decarbonization plan We'll be focused on the execution of our renewable projects to achieve our 2.4 GWh capacity as target proposed in our 2021-2022 plan. Our business resilience and sustainable strategy are supported by our balance sheet strength and long-term vision, especially against the sector handling that we were facing. Thank you for your attention. And let me now open the Q&A session. I will hand over to Isabella.

Thank you. As an anticipation, we will receive questions via phone, chat, and chat in the webcast on this occasion. The Q&A session is open. Buena, operator, please, you may start.

As a reminder, to ask a question, you will need to press part one on your telephone. To withdraw a question and press the pad key. Please stand by and we'll compile the Q&A roster. Your first question is from . Your line is open.

Hello, Paolo, Giuseppe, and Isabella. Thanks for the call. My first question, do you expect higher provisions in the coming quarters due to the expansion of the pandemic? Could you give us an update on the last talks and developments on the basic service law? The second one, if you are expecting to review your guidance during the coming months. And the last one, if you could elaborate a bit more on the storage plan. Are the batteries you will be installing related to the arbitrage of marginal prices or are more focused on providing complimentary services. How are you seeing the investment costs in these technologies that you have access to? And when do you expect the installation of these type of technologies to accelerate into them? Thank you.

Thank you, Murilo, for your question. Let's start with the answer on basic service law. Okay, you see, you know that it is a long debate here in Chile about this law. It has been extended the first time on the first days of January. Now, let's say the deadline is the 5th of May and the discussion is to, let's say, the current situation is that there are two project or law coming from Cameron, coming from the Senate that will be collapsed into one and will be voted soon. And the content of this project law is quite easy in the sense that the content is just to extend the deadline until the end of this year and to extend the number of payments that could be allowed to the client up to 48 quotas. And the last change is to enlarge the perimeter of clients that are allowed to access to a special agreement for such repayment to 80% of the clients that are in the social register in Chile. This is the current situation. Then the evolution is, let's say, could be approved in very, very soon. At the same time, there was a debate ongoing that introduced for the first time a different approach in the sense that there is, let's say, a growing understanding of the impact that this simple extension may have on clients. And Bill could be subject to, let's say, a technical analysis, a technical table between the Senate and the government in order to fix certain rules to, let's say, to involve also the state of Chile in order to, let's say, define a scheme to recover the debt that in a different solution, may grow too much. And then, at the end of the, let's say, the law, at the end, the lapse of the law, maybe early 2022, could be too big for the family that should have to pay the current, let's say, bill, plus the amortization of the debt. So this is a parallel discussion ongoing that may drive to approve a different scheme for the recovering of the debt. And this is an important element because for the first time there is, let's say, on the table the discussion involvement to say that we think is essential for this problem. The same time there is another element that should be addressed, that is, to give to the companies, the distribution companies, the availability to cut certain segments of clients that are not vulnerable according to the definition of the law, but today they are not paying their bills because they cannot be cut off for their unpaid bills. So this development that should help a lot to recover a situation that for the time being is going forward according to the rules fixed from the first basic service law issue on August. So this is the current situation. Clearly we are very interested in looking at the evolution and we are, let's say, eager to understand what could be the outcome of this technical table that will take place. In the guidance, clearly we do not issue any change today. Clearly we are working to recover the gap that we have at the first quarter, and then we have an action plan in order to rely on our results. We'll see the next month what could be the outcome of the action plan. Regarding the storage, clearly, we think that storage is an essential element in the system. And we see storage together with renewable facilities, especially with solar facilities. This is a clear explanation regarding that because it clearly can stabilize the flow of the energy, can, let's say, provide the most stable capacity availability to the system, and should help also the flow of the energy from the north to the center, that is the higher consumption area. So these are only part of the, let's say, additional services that the storage can provide to the system. And we think that, and we are waiting for, let's say, a clear regulation that can give us the possibility to start with the selection of our partners that we have already Let's say we have already some project, we can go on and install as soon as the regulation will be clearly. Our position, we see the position in between the point of power, but the focus on providing additional services to the system.

Many thanks Paolo.

Your next question comes from the line of Andrew McCarthy of Credit Corp Capital. Your line is open.

Good morning, Paolo, Giuseppe, Isabella. Thank you very much for the presentation and the questions. I have three questions. The first one, just on the guidance and the likelihood of hitting the 1.5 to 1.5%, the $1.4 to $1.5 billion target for this year. Just trying to think through what needs to now go right for that to be achievable. Could you talk a little bit about what needs to happen in terms of the hydrology, the availability of gas, the proper operation of coal plants in the system on the generation side of the business? and what you see maybe today on those fronts and whether that's maybe going to help in the coming weeks drive down a little bit the spot market prices. That's my first question. My second question is I was wondering if you could provide a bit more colour on what sort of the margin is you might be expecting to make on this PMGB business And, you know, you talk there about, you know, 75 megawatts between 2021 and 2022. You know, how much scale maybe that business could have, you know, more longer term. And then the final question, a more specific question, just trying to understand the saving you saw in the net commodities coverage of $29 million in the quarter, whether that was a one-time effect or not. Those are my three questions. Thanks very much.

Okay, I will take the first two, and I'll leave the last two to Giuseppe. Okay, regarding guidance, let's say, a question where I can answer, let's say, as a general element to share with you guys. So, clearly, our numbers are affected by hydrogen, as you correctly mentioned. We have our current forecast based on what happened during the first four months and clearly this can have a positive or negative effect depending on the evolution. There is the contribution of our project that is important in reaching our guidance. And we are, let's say, focused on the development of the project in order to meet the deadline. Clearly, as I mentioned, the situation is not very easy because the impact of the pandemic is still strong. And so, as I also mentioned, the possibility of having people coming, entering the country in order to let's say support our operation on site. So this is a matter of timing, it's not a matter of possibility. But in any case has an effect on this. Regarding gas availability, we are entering into a season where our plan and our, let's say, Deadlines regarding the delivery of the ship, the shipping of the LNG according to our contract is in time and is online. So we do not expect any external event on this. Clearly, the bottom effect could ever in the last part of the year regarding the availability of Argentinian gas. You know, there is, let's say, messages, information regarding the new availability. So the export from Argentina will start again according to the previous agreement. But we will see on September or October that everything is working well. So this could be an external event that today we can already, we expect that we will come online on a regular basis, but we cannot, let's say, strongly commit on this for the time being. So these are, as I mentioned, and clearly we are also working internally in order to find internal action to recover certain elements to, let's say, recover the gap. This is what I can comment. Regarding your second question is the merging of the APMDG. This is reflecting on our numbers. What I can mention is that the starting point, so we need an agreement, an important agreement that we see in order to have solar facility in the central area of the country. This is something that could help to, let's say, support our generation and to provide electricity according to our contract. And this is a competitive generation based on solar. Regarding the third element, I leave the point to Giuseppe.

Well, in general, of course, the quality we use to cover our exclusion to the commodities. So actually, you know, which will be the effect in the following month, we're going to have depend on the trend of the commodity. As of today, we got this positive impact in comparison with the last year. Let's see how the trend is going and how the commodity is going to be.

Operator, I don't know, Andrew, if you have any other questions.

Oh, yes, we still have another question. It's from Sarah Cuccinini of Media Blanca. Your line is open. Sarah, your line is open. Can you hear me?

Yes, Sara, we can hear you. Okay, thank you. Thank you so much. And thanks for taking my questions. The first question is on working capital evolution. We see the positive effect on working capital in this first quarter. If you can comment to the dynamics behind that and how do you see the evolution during 2021? The second question is on the impact that we – the negative impact that you have – in the first quarter related to the PPA margin. Do you see this to continue also in the coming quarters? And if yes, what are the dynamics behind that? And third question is on the regulatory review on networks. If you had any contact with the regulator and what do you expect from this review? And last one is on the, if you can update on the evolution of the free market and the impact that you see on the company's marketing. Many thanks.

Okay, thank you Sara for your question. I will take the last two and leave the first two to you, Sergio. Regarding networks, the two types are ongoing. There is clearly a contact, a formal contact with the regulator because there is a committee composed by a representative of the company that has a regular meeting with the regulator. They're working for the timing regarding distribution. the activity is in the end of the regulator, especially in the end of the consultant to the regulator in order to receive, to have the report on the reference model. And then based on this report, the regulator will issue his report, his internal report. So this is the moment when we will see the way in which the regulator will fix the tariff and then clearly there will be a debate on this and if the case if there are there will be discrepancy between the position of the companies and the position of the regulator there will be let's say discussion in the panel of experts. This requires time for the time being what we think is that This discussion will take place in the second half of this year. So the issuing at the end of this year and the, let's say, the decree for distribution will be fixed by the, within the first half of 2022. The process on distribution, the transmission is more advanced And we see that we think that can be fixed by the end of this year, early next one, next 2022. But clearly, there are event of, say, meeting with a regulator, let's say, formal, and then there will be the formal review of the report issued by the regulator. Regarding the second question, the solution of the free market, for the time being, there is no step ahead in terms of the portability law. This is the reference of your question. The sense that after the presentation of the project at Congress level, There was an initial debate about the scope of this law, and then everything has been freezed. You see that today the focus of the Congress with reference to the energy sector is more on the technical service law than other changes in the sector. Regarding the current situation, clearly there are some activities that the residual client that can opt to go to the free market are moving about the same. It's very residual compared to the size that we have, the overall size of the free market. I think you said that. Yeah.

So, for what's concerned with net working capital, as I said when I talked about this in 2017, this variation is coming, first of all, because of the factoring of the stabilization mechanism account and the factoring that we are doing for some receivables in our discipline company. And clearly, We are going ahead with this factoring. We believe that during the first quarter we are going to go ahead with the factoring of the stabilization mechanism around $3 million between the second two and the third quarter. and the other impact that could be affected the networking capital in the future of course are the implementation of the basic status law and because of that we need to understand a little bit better how it's going to be designed and of course we have a significant amount of cut expense so these are This is the third impact that could have in our net working capital for the following month. For what concerns the negative PPA margin, I will repeat again which are the reasons for the variation. First of all, I said the Commodity Indexation and Regulated PPA. Now, the Commodity reference, the Commodity has a time length of six months. So basically the index are related to the previous six months. And again, if I think about the future months, we need to understand how will be the evolution of the Commodity. the basis for the PPA, regulated PPA. For what's concerned, the second reason that is this new contrast with Anglo-America and the contrasts that are coming from energy distribution, this kind of impact should be removed because basically, you know, our portfolio, the generation portfolio is going to change according to this new contrast. And for what concerns the last impact that was around 50% of this negative variance, this is just a result of the fact that our book is in pesos. So, considering the fact that we got an appreciation of the Schrodinger pesos this year and think the following year is going to be according to the same trend, really, when you compare dollar versus dollar, you're gonna have such a negative impact. Just to let you know, last year, the average exchange rate, pesos per dollar, was above 800 pesos per dollar, and this year, the first cube had 720 pesos per dollar averaging the last you know so considering this different exchange rate also in the following month according to the explanation within the market we're going to have a certain level of impact thank you many thanks for this

Your next question is from Rodrigo Mora of Moneda. Your line is open.

Hi, good morning. Thank you for the presentation. I don't know if you, can you hear me, please?

Yes, yes, Rodrigo.

Ah, okay, okay. Well, thank you for the presentation. I have a couple of questions. Please let me share with this. The first one is, I would like to understand why is the reason that the company is making an impairment of cold stockpile? The second question is related to distribution business. I would like to know if as today, NL Distribution can cut the service to customers that have high consumer, high consumption. I mean, I read an interview of CEO of that mentioned that some customers that consume around 500 kilowatt hours per month, which means is a huge consume, more than 2.9, five times the average of consumption didn't pay the bill. So I would like to understand why the company cannot cut or if the company is able to cut the service to those kinds of consumers. And finally, I would like to understand the impact of the EBITDA of the free customer business that Enel Generación bought to Enel Distribución last year. I think there is a translate of it is that from Enel Distribución to Enel Generación. Thank you.

Hi, Rodrigo. I will take the second question and leave the number to Giuseppe. So, let me give you some colors on this because your question is very interesting. I like it very much because you see that if you look at the concession area of Santiago and we look at residential, We have an average consumption in the range of 220-230 kWh per month. This is the average consumption. And what you are referring to are domestic clients. I'm referring to domestic clients. that has a consumption higher than 1,000 kilowatt-hours per month. Or you can also talk about clients that are consumption higher than 750 kilowatt-hours per month. So our domestic clients that are this kind of consumption that is supposed to be domestic clients, residential clients, with a nice regime of life, let me say. And we have an interesting number of these clients that today are not paying. And the point is that according to also the second issue in the law, we cannot cut the service to them. because we are not allowed to cut service to any residential clients. So this is the situation. What we are asking in this review is also to focus the help, the support, and also the action of not cutting off to the clients that are defined as vulnerable. that today is 60% of the clients that are in the list of sharing the concept, the Chilean concept, plus other clients that are hospitals, and clients that are lost their job or clients with an age higher than if i'm correctly 65 or 70 years so these are the clients that today are defined as vulnerable that can access to certain agreements with certain conditions with no interest with no anticipation the number of votes that can go up to 36 according to the current rule but we cannot allow to cut other residential domestic clients that's the law and this is what we are asking to change among others because there are some other elements where we can live with it okay uh

The point is that we are following the same accounting treatment that we made at the end of last year when we made the impairment of the asset. So, considering that the call's activity is going to be used in a very unique way, And the value of the facility is only the land. Every time that we provide the services to the system, we need to be called. And every quarter, we look at the stock that we have in our book and we need the impairment. This is just an accounting statement that is in line with what we made last year. For what concerns the impact of the pre-customer move from distribution to generation, clearly at the level of, in Chile, no effect, because it's just moving from one side to the other side. What I can tell you is that last year, the margin of this contrast was, last year in the first few, was around $16.

Sorry, Giuseppe, if I understood, the impairment of coal stockpile is not the coal itself, it's the coal facility, right?

No, no, the coal stock, the inventory.

But the company is going to use this stock burning during all this year until May of the next year. Why the company should make an impairment?

I will explain. Basically, you know, the facility, you know, the Boccamina plant has to provide the stability. So every time that the system is going to call Boccamina, Boccamina has to produce, okay? Of course, in order to be ready to produce, we need to have the coal. And so we buy the coal in order to be ready to provide the service. Now, this is the point. Every quarter, we see how much inventory we have in terms of coal. And considering the fact that Boccamina has a value equal to zero, because we have already impaired the full amount of the assets, The remaining, what is remaining in terms of stock has to be inferred. Okay? So we need to bring to zero the amount, the stock of the coal. The following month, again, if needed, we're going to buy other coal. Okay? We provide the services if we have been called by the system. And at the end of June, we repeat the exercise. So we look at how much is the remaining coal in our stock and we make the payment. And this is important because the treatment and the assumption is that Boccamina is the facility that is there waiting for being called by the system. So basically, no value, Boccamina as the asset doesn't have any kind of value right now, except for the land, as we said, right? This is the reason.

Okay. Okay. Sorry. And the second answer, respect to the free customer business, from distribution to generation, you said that last year the EBITDA margin was $6 million?

Yes. Or this first quarter? No, no. Last year was $6 million.

Okay, okay, okay, okay. Look, I have another question is related to the, all the process of the transmission, the evaluation of the transmission asset of now, in the transmission. I would like to know what is the current situation of the preliminary report released by the National Commission of Energy and what are the following steps that the company could you give us some idea about this process and the impact that could have over NL transmission?

The comments that we can provide comments to this preliminary report and the deadline for these comments is the 18th of May. So by that time we are providing our comments because we have comments on this report. Then the regulator will collect comments from any parts that are involved in the process and then we will publish the definitive report. Once we have analyzed the reports, we make our, let's say, considerations, and if the case, in case of discrepancy, we go to the panel of the experts. So this is the process. Clearly, today we cannot, this is the process, this is what we are acting according to the deadline that was in front of us.

Okay, please, just two short questions. One is if you could give us some idea of the evolution of the electricity demand and energy distribution during last April, last month. And second question is related to the volatility of availability of natural gas from Argentina during the first quarter. said to me that cameza used all the natural gas and instead of export use all the natural gas to produce electricity and export to brazil so i did i didn't know if some contracts there were subcontracts between an El Generacion and some Argentinian gas producers that maybe were not accomplished during the first quarter?

As I mentioned in my speech, the situation with the Argentinian gas was very complex. The end of last year and the first month of this year. The problem was and is that This is the season when Chile usually imports gas from Argentina. And this lack required to use different sources during this period and so created this imbalance also in Reservoir at the beginning of 2021. The availability during the first quarter was very, very low. I would say negligible. So we cannot support the generation or the use of CTGP that we have in the central areas. So we have to act in a different way. So we have to act in the stock market in order to have certain supply through shipping of LNG. You know, because then we have our plan regarding the delivery or the ship through our agreement with Shell that started already so we are receiving regularly the gas that we need for our flight. So the problem was the Argentina gas. You mentioned correctly one event that the use of gas has been, let's say, to produce an electricity to be sold to Brazil. That's correct. That's the same information that we had. And there was also some other problems regarding the So at the very end, the availability of gas was negligible for . I would say zero. The expectation for the next season is that this availability should start again. That's it. This is what the information that we have . Regarding the first place, honestly, I wouldn't comment. We are focusing on the first quarter, and then we'll see the resume of this evolution in the next quarter.

Thank you for that.

Okay, thank you very much.

Thank you. Operator, do we have more questions on the line?

Yes, we still have one more from Sebastian Ramirez of Manchili. Your line is open.

Hi, guys. Many thanks for the presentation. I got two questions. One is that I was keen to understand what are you expecting in terms of difference between injections and withdrawal within generation? Given the large amount of renewables that is entering into the system, do you see that any congestion that could be meaningful in terms of results going forward? and where do we, we will see those congestions being manifested the most within your full operations. And then I got another one.

You can say that they're both Sebastian.

Okay, no worries. The other one is in regards kind of a midterms, expectations for CAPEX going forward rather than what we are observing within the plan? What should be mid to long term sustainable CAPEX and what should we think in terms of growth going forward ahead of what we already have as a projection on the numbers and industrial plan? Should we think that that level of capex should be maintained for longer than what the investor plan suggests, or then should we converge to the maintenance capex level? That would be from my side.

Okay, thank you, Sebastian. Pablo?

Okay, regarding the injection, what I would like to comment is that the position of our clients and the generation and supply of our electricity, because the position of our client is spread, not only all concentrated in the center, it is all, we have also important control in the north, close to the generation, our generation facility, especially the solar and renewable generation facility. We do not expect, we do not see a strong effect of bottlenecks in the injection and so the difference between the injection and the withdrawal of price, especially considering that we have large control in my sector in the north. Regarding mid-term expectation, honestly, what we see, we are going on with our investment plan. We, let's say, finalize the first tranche, let me say, of our projects. within the next months. Hopefully, by the end of this year, maybe some models can go further around the next early months of 2022, and we continue to invest in order to, let's say, get our target, that is 2.4 gigawatts of renewable capacity by 2023, and so in line with the expectation of CapEx. We do not see any change in terms of, let's say, investment in our time.

Perfect. Very clear.

Many thanks. Thank you, Sebastian. Operator, do we have more questions on the line? Otherwise, I go through the chat now.

Another question at this time, and I would like to turn it back to Isabella Clemens. Ma'am, please continue.

Okay, so we have several questions here in the chat. I will try to read them here because some of them, they are similar. So thank you all, Tomas, Alex, and Edith as well. So the first question here is to elaborate a little more on the consumption with some realization and commercial segments in the distribution business. I think here we have already touched this basis and now also the other question is why we saw an increase in the customer base on the line of tools, what we call here the peages on the NL distribution. Also on distribution, we have some questions on latest services that we have a researcher here. So, from Tomas Gonzalez. And Tomas is asking here, regarding the latest services, if all the uncollectables were direct provision and giving the political noise to reduce the debt exposure to low-income customers, is there a risk of another distribution to be forced to make a return of part of or totality of the uncollectible. If the National Energy Commission released its preliminary report on transmission tariff process with a negative impact on the transmission business, and what is this impact? So transmission, I think we also have covered this. I think just to conclude here, Paolo and Giuseppe on the distribution side on the demand, why we have a decrease on the demand during the quarter and about the or the tools in distribution.

Regarding the demand in the quarter, let's say that clearly there is the impact Having the concession area of Santiago and considering, let's say, the way in which the situation of Korea has been managed and considering also that certain areas have been put in lockdown or with limited activity, we had less recovery in the commercial sector. That has been sustained partially by the residential consumption. So this is what we had seen in the first quarter. Clearly compared to the first quarter of 2020, that figure has been only limited affected by the pandemic. Regarding the other question was again related to the rise of Clearly today we are acting and we are following the evolution of the basic service load according to what we have been informed. So we go through the common discussion and the available discussion and available information that we have seen. So the information is based on the renewal with new deadlines. of the current basic service law. And so then we have expectation in terms of state participation in recovering this situation. So this is what I can comment. I don't have any further information to comment on.

Okay. Thank you, Paolo. And to conclude here, we have less questions related to the guidance. The investor is asking if we could give more color on the plan to cut in cost the offset headwinds that we have seen during the first quarter. And if you can comment on this. Thank you Paolo. And so this is the last question.

Yeah, what I can comment is that we are reviewing the clearly all the let's say efficiencies that we, the efficiency plan that we put in place, because it is under our control. So this is something that we, when we act on, clearly there are other external elements that are, let's say, we can control, like as I mentioned before, the and also the evolution of the demand, the shape of the recovery that we can expect in terms of Chilean economy. Regarding the internal activity, on top of efficiency, in the broad sense, in the sense that we are looking at each business line, each activity that can be optimized in order to recover the situation that has been complex in the first quarter and we try to rebalance with this kind of internal action.

Okay, so thank you, Paolo. So I'd like to thank you all for joining us today. So any other remaining questions you may have, so the investor relations team will be at your disposal. Thank you very much and have a nice week. Thank you.

Thank you. Bye-bye. Bye-bye.

This concludes today's conference call. Thank you for participating. You may now disconnect.